Document:

exhibit41.htm

    

     

    NEUROGEN
CORPORATION

     

    REGISTRATION RIGHTS
AGREEMENT

     

    This
REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made
as of April 7, 2008, by and among Neurogen Corporation, a Delaware corporation
(the “Company”)
and  each person listed on Exhibit A
attached hereto (collectively, the “Investors” and each
individually, an “Investor”).
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to them in Section 9(q) herein.

     

    BACKGROUND

     

    The
Company has agreed to issue and sell to the Investors, and the Investors have
agreed to purchase from the Company:  (i) up to an aggregate of
981,411 shares of the Company’s Series A Exchangeable Preferred Stock, par value
$0.025 per share (the “Exchangeable Preferred
Stock”) and (ii) warrants (the “Warrants”) initially
exercisable to purchase up to an aggregate of 12,758,343 shares of the Company’s
common stock, par value $0.025 per share (the “Common Stock”), all
upon the terms and conditions set forth in that certain Securities Purchase
Agreement, dated of even date herewith, by and among the Company and the
Investors (the “Purchase Agreement”).
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.”

     

    AGREEMENT

     

    1. Common Shelf
Registration.  So long as any Registrable Shares are
outstanding, the Company shall take the following actions:

     

    (a) The
Company shall, as soon as practicable but in any event by the Filing Deadline,
file with the Securities and Exchange Commission (the “Commission”), and
thereafter use its best efforts to cause to be declared effective as soon as
practicable but in any event no later than the Effectiveness Deadline a
registration statement (the “Common Shelf Registration
Statement”) on an appropriate form under the Securities Act relating to
the offer and sale of the Registrable Common Shares by the Holders thereof from
time to time in accordance with the methods of distribution set forth in the
Common Shelf Registration Statement and Rule 415 under the Securities Act
(hereinafter, the “Common Shelf
Registration”).

     

    Notwithstanding
the foregoing, if the Commission prevents the Company from including any or all
of the Registrable Common Shares on the Common Shelf Registration Statement due
to limitations on the use of Rule 415 of the Securities Act for the resale of
the Registrable Common Shares by the Holders (a “Rule 415
Limitation”), the Common Shelf Registration Statement shall register the
resale of a number of shares of Common Stock which is equal to the maximum
number of shares as is permitted by the Commission, and, subject to the
provisions of this Section 1(a), the Company shall continue to its use
reasonable best efforts to register all remaining Registrable Common
Shares as
set forth in this Section 1.  In such event, the number of shares of
Common Stock to be registered for each Holder in the Common Shelf Registration
Statement shall be reduced pro rata among all Holders.  The Company
shall continue to use its reasonable best efforts to register all remaining
Registrable Common Shares as promptly as practicable in accordance with the
applicable rules, regulations and guidance of the Commission, but in no event
will the Company file a subsequent Common Shelf Registration Statement with
respect to the registration of the resale of Registrable Common Shares held by
the Holders earlier than 180 calendar days following the effective date of the
initial Common Shelf Registration Statement.  Notwithstanding anything
herein to the contrary, if the Commission, by written or oral comment or
otherwise, limits the Company’s ability to file, or prohibits or delays the
filing of, a Common Shelf Registration Statement with respect to any or all the
Registrable Common Shares which were not included in the initial Common Shelf
Registration Statement (a “Subsequent Shelf
Limitation”), it shall not be a breach or default by the Company under
this Agreement, shall not be deemed a failure by the Company to use “reasonable
efforts,” “reasonable best efforts” or “best efforts” as set forth above or
elsewhere in this Agreement and shall not require the payment of any liquidated
damages by the Company under this Agreement (including pursuant to Section
1(e)).

     

    (b) The
Company shall use its reasonable best efforts to keep the Common Shelf
Registration Statement continuously effective, in order to permit the prospectus
included therein to be lawfully delivered by the Holders of the Registrable
Common Shares included therein, until the date on which all Registrable Common
Shares cease to be Registrable Common Shares (such period being called the
“Common Shelf
Registration Period”).  The Company shall be deemed not to have
used its reasonable best efforts to keep the Common Shelf Registration Statement
effective during the Common Shelf Registration Period if it voluntarily takes
any action that would directly result in Holders of Registrable Common Shares
covered thereby not being able to offer and sell such Registrable Common Shares
during such period, unless such action is required by applicable law or except
as provided in Section 3(h).

     

    (c) Notwithstanding
any other provisions of this Agreement to the contrary, the Company shall cause
(i) the Common Shelf Registration Statement (as of the effective date of the
Common Shelf Registration Statement), any amendment thereof (as of the effective
date thereof) or supplement thereto (as of its date), (A) to comply in all
material respects with the applicable requirements of the Securities Act and the
rules and regulations of the Commission and (B) not to contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, and (ii) any related prospectus, preliminary prospectus or Free
Writing Prospectus and any amendment thereof or supplement thereto, as of its
date, (A) to comply in
all material respects with the applicable requirements of the Securities Act and
the rules and regulations of the Commission and (B) not to contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided, however,
the Company shall have no such obligations or liabilities with respect to any
written

     

    (d) information
pertaining to any Holder and furnished to the Company by or on behalf of such
Holder specifically for inclusion therein.

     

    (e) The
Company shall use its reasonable best efforts to cause the Registrable Common
Shares included in the Common Shelf Registration Statement to be, upon resale
thereunder, listed on the NASDAQ Global Market (“NASDAQ Stock Market”)
or, if the Common Stock is not then listed on the NASDAQ Stock Market, on the
principal national securities exchange on which the Common Stock is then listed,
or if the Common Stock is not then listed on a national securities exchange,
authorized for quotation on any automated quotation system on which the Common
Stock is then quoted.

     

    (f) If (i)
the Common Shelf Registration Statement is not filed by the Filing Deadline or
declared effective by the Commission by the Effectiveness Deadline for any reason, including by reason of Section 3(h)
hereof, or (ii) following effectiveness, the Common Shelf Registration Statement
is unavailable for any reason, including by reason of Section 3(h) hereof, for
use in the sale of Registrable Common Shares, then in each such case the Company will make pro rata payments to each
Investor that continues to hold Registrable Common Shares, as liquidated damages
and not as a penalty, in an amount equal to 1.5% of the aggregate purchase price
paid by such Investor to acquire the Registrable Common Shares then held by such
Investor (taking into account the amounts paid by the Investor to acquire the
Exchangeable Preferred Stock or Warrants pursuant to which such Registrable
Common Shares were issued) for each 30-calendar day period (or pro rata portion thereof)
following the Filing Deadline or Effectiveness Deadline or during which the
Common Shelf Registration Statement is unavailable, as applicable, (for the
purposes of this paragraph, each such period shall be referred to as a “Blackout Period” for
such Registration Statement); provided, however that in no event
shall the aggregate liquidated damages payable by the Company to any Investor
exceed 7.5% of the aggregate purchase price paid by such Investor for all
Exchangeable Preferred Stock and Warrants acquired by such Investor pursuant to
the Purchase Agreement. The amounts payable as liquidated damages pursuant to
this paragraph shall be paid in lawful money of the United States within three
Business Days of the last day of each 30-calendar day period following the
commencement of a Blackout Period until the termination of such Blackout
Period.

     

    2. Exchangeable Shelf
Registration.  If any Registrable Exchangeable Shares are
outstanding on the one-year anniversary of this Agreement (the “Outside Date”), the
Company shall take the following actions:

     

    (a) The
Company shall, on the Outside Date, file with the Commission, and thereafter use
its reasonable best efforts to cause to be declared effective as soon as
practicable but in any event no later than ninety (90) days after the Outside
Date, a registration statement (the “Exchangeable Shelf
Registration Statement”) on an appropriate form under the Securities Act
relating to the offer and sale of the Registrable Exchangeable Shares by the
Holders thereof from time to time in accordance with the methods of distribution
set forth in the Exchangeable Shelf Registration Statement and Rule 415 under
the Securities Act (hereinafter, the “Exchangeable Shelf
Registration”).

     

    (b) The
Company’s obligation under this Section 2 shall be subject to any Rule 415
Limitation and Subsequent Shelf Limitation.

     

    (c) The
Company shall use its reasonable best efforts to keep the Exchangeable Shelf
Registration Statement continuously effective, in order to permit the prospectus
included therein to be lawfully delivered by the Holders of the Registrable
Exchangeable Shares included therein, until the date on which all Registrable
Exchangeable Shares covered by the Exchangeable Shelf Registration Statement
cease to be Registrable Exchangeable Shares (such period being called the “Exchangeable Shelf
Registration Period”).  The Company shall be deemed not to have
used its reasonable best efforts to keep the Exchangeable Shelf Registration
Statement effective during the Exchangeable Shelf Registration Period if it
voluntarily takes any action that would directly result in Holders of
Registrable Exchangeable Shares covered thereby not being able to offer and sell
such Registrable Exchangeable Shares during such period, unless such action is
required by applicable law or except as provided in Section 3(h).

     

    (d) Notwithstanding
any other provisions of this Agreement to the contrary, the Company shall cause
(i) the Exchangeable Shelf Registration Statement (as of the effective date of
the Exchangeable Shelf Registration Statement), any amendment thereof (as of the
effective date thereof) or supplement thereto (as of its date), (A) to comply in
all material respects with the applicable requirements of the Securities Act and
the rules and regulations of the Commission and (B) not to contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, and (ii) any related prospectus, preliminary prospectus or Free
Writing Prospectus and any amendment thereof or supplement thereto, as of its
date, (A) to comply in all material respects with the applicable requirements of
the Securities Act and the rules and regulations of the Commission and (B) not
to contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, the Company shall have no such obligations or
liabilities with respect to any written information pertaining to any Holder and
furnished to the Company by or on behalf of such Holder specifically for
inclusion therein.

     

    3. Registration
Procedures.  In connection with a Shelf Registration
contemplated by Section 1 or Section 2 hereof, the following provisions shall
apply:

     

    (a) At the
time the Commission declares such Shelf Registration Statement effective, each
Holder shall be named as a selling security holder in such Shelf Registration
Statement and the related prospectus in such a manner as to permit such Holder
to deliver such prospectus to purchasers of Registrable Shares included in the
Shelf Registration Statement in accordance with applicable law, subject to the
terms and conditions hereof.  From and after the date a Shelf
Registration Statement is declared effective, the Company shall, as promptly as
practicable and in any event upon the later of (x) five (5) Business Days after
such date or (y) five (5) Business Days after the expiration of any Deferral
Period (as defined in Section 3(h)) that is either in effect or put into effect
within five (5) Business Days of such date:

     

    (b) if
required by applicable law, prepare and file with the Commission a
post-effective amendment to the Shelf Registration Statement or prepare and, if
required by applicable law, file a supplement to the related prospectus or a
supplement or amendment to any document incorporated therein by reference or
file with the Commission any other required document so that the Holder is named
as a selling security holder in the Shelf Registration Statement and the related
prospectus in such a manner as to permit such Holder to deliver such prospectus
to purchasers of such Holder’s Registrable Shares included in the Shelf
Registration Statement in accordance with applicable law and, if the Company
shall file a post-effective amendment to the Shelf Registration Statement, use
its reasonable best efforts to cause such post-effective amendment to be
declared effective under the Securities Act as promptly as is practicable, but
in any event by the date (the “Amendment Effectiveness
Deadline Date”) that is sixty (60) days after the date such
post-effective amendment is required by this clause to be filed;

     

    (i) provide
such Holder copies of any documents filed pursuant to Section 3(a)(i);
and

     

    (ii) notify
such Holder as promptly as practicable after the effectiveness under the
Securities Act of any post-effective amendment filed pursuant to Section
3(a)(i);

     

    provided, that if the request
by such Holder is delivered during a Deferral Period, the Company shall so
inform the Holder making such request and shall take the actions set forth in
clauses (i), (ii) and (iii) above upon expiration of the Deferral Period in
accordance with this Section 3(a) and Section 3(h) of this
Agreement.  Notwithstanding anything contained herein to the contrary,
the Amendment Effectiveness Deadline Date shall be extended by five (5) Business
Days from the expiration of a Deferral Period if such Deferral Period shall be
in effect on the Amendment Effectiveness Deadline Date; and provided, further, that in no event
shall the Company be required to file pursuant to this Section 3(a) in the case
where a post-effective amendment is required, more than one post-effective
amendment to the Shelf Registration Statement in any 120-day
period.

     

    (c) The
Company shall notify the Holders of the Registrable Shares included within the
coverage of the Shelf Registration Statement (which notice may, at the
discretion of the Company (or as required pursuant to Section 3(h)), state that
it constitutes a Deferral Notice, in which event the provisions of Section 3(h)
shall apply):

     

    (i) when the
Shelf Registration Statement or any amendment thereto has been filed with the
Commission and when the Shelf Registration Statement or any post-effective
amendment thereto has become effective;

     

    (ii) of any
request by the Commission for amendments or supplements to the Shelf
Registration Statement or the prospectus included therein or for additional
information;

     

    (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Shelf Registration Statement or the initiation of any proceedings for that
purpose and of any other action, event or failure to act that would cause the
Shelf Registration Statement not to remain effective;

     

    (iv) of the
receipt by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any Registrable Shares for sale
in any jurisdiction or the initiation of any proceeding for such purpose;
and

     

    (v) of the
occurrence of any Material Event (as defined in Section 3(h)).

     

    (d) The
Company shall use its reasonable best efforts to obtain the withdrawal at the
earliest possible time of any stop order suspending the effectiveness of the
Shelf Registration Statement and the elimination of any other impediment to the
continued effectiveness of the Shelf Registration Statement.

     

    (e) The
Company shall promptly furnish to each Holder of Registrable Shares included
within the coverage of the Shelf Registration, without charge, if the Holder so
requests in writing, at least one conformed copy of the Shelf Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules and all exhibits thereto (including those, if any,
incorporated by reference).

     

    (f) The
Company shall promptly deliver to each Holder of Registrable Shares included
within the coverage of the Shelf Registration Statement, without charge, ten
(10) copies of the prospectus (including each preliminary prospectus) included
in the Shelf Registration Statement and any amendment thereof or supplement
thereto and any Free Writing Prospectus used in connection therewith as such
Holder may reasonably request.   The Company consents, subject to
the provisions of this Agreement and except during such periods that a Deferral
Notice is outstanding and has not been revoked, to the use of the prospectus and
each amendment or supplement thereto and any Free Writing Prospectus used in
connection therewith by each of the selling Holders in connection with the
offering and sale of the Registrable Shares covered by the prospectus, or any
amendment or supplement thereto, included in the Shelf Registration
Statement.

     

    (g) The
Company shall use reasonable best efforts to register or qualify, or cooperate
with the Holders of the Registrable Shares included in the Shelf Registration
Statement and their respective counsel in connection with the registration or
qualification of, the resale of the Registrable Shares under the securities or
“blue sky” laws of such states of the United States as any Holder requests in
writing and to do any and all other acts or things necessary or advisable to
enable the offer and sale in such jurisdictions of the Registrable Shares
covered by the Shelf Registration Statement; provided, however, that the
Company shall not be required to (i) qualify generally to do business in any
jurisdiction where it is not then so qualified or (ii) take any action that
would subject it to general service of process or to taxation in any
jurisdiction to which it is not then so subject.

     

    (h) The
Company shall cooperate with the Holders of the Registrable Shares to facilitate
the timely preparation and delivery of certificates representing the Registrable
Shares to be delivered to a transferee pursuant to the Shelf
Registration

     

    (i) Statement,
which certificates shall be free of any restrictive legends and in such
denominations and registered in such names as the Holders may
request.

     

    (j) Upon (i)
the issuance by the Commission of a stop order suspending the effectiveness of
the Shelf Registration Statement or the initiation of proceedings with respect
to the Shelf Registration Statement under Section 8(d) or 8(e) of the Securities
Act, (ii) the occurrence of any event or the existence of any fact (a “Material Event”) as a
result of which (x) the Shelf Registration Statement shall contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading or (y)
any prospectus included in the Shelf Registration Statement shall contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or (iii) the
occurrence or existence of any pending corporate development that, in the
reasonable judgment of the Company, makes it necessary to suspend the
availability of the Shelf Registration Statement and the related prospectus for
a period of time:

     

    (A) in the
case of clause (ii) above, subject to clause (B) below, as promptly as
practicable, the Company shall prepare and file, if necessary pursuant to
applicable law, a post-effective amendment to such Shelf Registration Statement
or a supplement to the related prospectus or any document incorporated therein
by reference or file any other required document that would be incorporated by
reference into such Shelf Registration Statement and related prospectus so that
(1) such Shelf Registration Statement does not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and (2) such
prospectus does not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, as thereafter delivered to the purchasers of the Registrable
Shares being sold thereunder, and, in the case of a post-effective amendment to
the Shelf Registration Statement, subject to the next sentence, use reasonable
best efforts to cause it to be declared effective as promptly as is practicable;
and

     

    (B) the
Company shall give notice to the Holders with respect to such Shelf Registration
Statement, that the availability of the Shelf Registration Statement is
suspended (a “Deferral
Notice”) and, upon receipt of any Deferral Notice, each Holder agrees not
to sell any Registrable Shares pursuant to the Shelf Registration Statement
until such Holder’s receipt of copies of the supplemented or amended prospectus
provided for in clause (A) above, or until it is advised in writing by the
Company that the prospectus may be used, and has received copies of any
additional or supplemental filings that are incorporated or deemed incorporated
by reference in such prospectus.

     

    The
Company will use its reasonable best efforts to ensure that the use of the
prospectus with respect to such Shelf Registration Statement may be resumed (x)
in the case of clause (i) above, as promptly as is practicable, (y) in the case
of clause (ii) above, as soon as, in
the reasonable judgment of the Company, public disclosure of such Material Event
would not be prejudicial to or contrary to the interests of the Company or, as
soon as practicable thereafter and (z) in the case of clause (iii) above, as
soon as, in the reasonable judgment of the Company, such suspension is no longer
necessary; provided,
that in no event shall (A) the aggregate duration of any such suspension arising
from an event described in clause (iii) above exceed 45 days, (B) the aggregate
duration of all such suspensions arising from events described in clause (iii)
above exceed 60 days in any 12-month period or (C) a suspension arising from an
event described in clause (ii) or clause (iii) above be invoked more than once
in any 12-month period.  Any such period during which the availability
of the Shelf Registration Statement and any related prospectus is suspended is
referred to as the “Deferral
Period.”

     

    (k) Not later
than the effective date of the Shelf Registration Statement, the Company will
provide CUSIP numbers for the Registrable Shares registered for resale under
such Shelf Registration Statement and provide the transfer agent for the
Registrable Shares one or more certificates for such Registrable Shares, in a
form eligible for deposit with The Depository Trust Company.

     

    (l) The
Company will comply with all rules and regulations of the Commission to the
extent and so long as they are applicable to the Shelf Registration and will
make generally available to its security holders (or otherwise provide in
accordance with Section 11(a) of the Securities Act) an earnings statement
(which need not be audited) satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder, no later than 45 days after the end of a
12-month period (or 90 days, if such period is a fiscal year) beginning with the
first month of the Company’s first fiscal quarter commencing after the effective
date of the Shelf Registration Statement, which statement shall cover such
12-month period.

     

    (m) If
requested in writing in connection with a disposition of Registrable Shares
pursuant to a Shelf Registration Statement, the Company shall make reasonably
available for inspection during normal business hours by a representative for
the holders of a majority of the number of such Registrable Shares, any
broker-dealers, attorneys and accountants retained by such holders, and any
attorneys or other agents retained by a broker-dealer engaged by such holders,
all relevant financial and other records and pertinent corporate documents and
properties of the Company and its subsidiaries, and cause the appropriate
officers, directors and employees of the Company and its subsidiaries to make
reasonably available for inspection during normal business hours on reasonable
notice all relevant information reasonably requested by such representative for
the Holders, or any such broker-dealers, attorneys or accountants in connection
with such disposition, in each case as is customary for similar “due diligence”
examinations; provided,
that such persons shall first agree in writing with the Company that any
information that is reasonably and in good faith designated by the Company in
writing as confidential at the time of delivery of such information shall be
kept confidential by such persons and shall be used solely for the purposes of
exercising rights under this Agreement, unless (i) disclosure of such
information is required by court or administrative order or is necessary to
respond to inquiries of regulatory authorities, (ii) disclosure of such
information is required by law (including any disclosure
requirements

     

    (n) pursuant
to federal securities laws in connection with the filing of the Shelf
Registration Statement or the use of any prospectus or Free Writing Prospectus
referred to in this Agreement) or (iii) such information becomes generally
available to the public other than as a result of a disclosure or failure to
safeguard by any such person, and provided further that the foregoing inspection
and information gathering shall, to the greatest extent possible, be coordinated
on behalf of all the Holders and the other parties entitled thereto by one legal
counsel (“Holders
Counsel”) designated by the Holders of a majority of the number of
Registrable Shares with respect to such Shelf Registration
Statement.

     

    (o) The
Company shall (i) permit such Holders Counsel to review and comment upon (A) a
Shelf Registration Statement at least five (5) Business Days prior to its filing
with the Commission and (B) all Free Writing Prospectuses and all amendments and
supplements to all Shelf Registration Statements within a reasonable number of
days prior to their filing with the Commission, and (ii) not file any Shelf
Registration Statement or amendment thereof or supplement thereto or any Free
Writing Prospectus in a form to which such Holders Counsel reasonably
objects.  The Company shall furnish to such Holders Counsel, without
charge, (x) copies of any correspondence from the Commission or the staff of the
Commission to the Company or its representatives relating to any Shelf
Registration Statement or any document incorporated by reference therein, (y)
promptly after the same is prepared and filed with the Commission, one copy of
any Shelf Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by
reference, if requested by a Holder, and all exhibits; and (z) promptly upon the
effectiveness of any Shelf Registration Statement, one copy of the prospectus
included in such Shelf Registration Statement and all amendments and supplements
thereto.  The Company shall reasonably cooperate with such Holders
Counsel in performing the Company’s obligations pursuant to this Section
3.

     

    (p) The
Company shall make such representations and warranties to any underwriters in
connection with such disposition in form, substance and scope as are customarily
made by issuers to underwriters in primary underwritten
offerings.  The Company will enter into and perform customary
agreements (including underwriting and indemnification and contribution
agreements in customary form with the managing underwriter or underwriters, as
applicable) and take such other commercially reasonable actions as are required
in order to expedite or facilitate each disposition of Registrable Shares and
shall provide all reasonable cooperation, including causing appropriate officers
to attend and participate in “road shows” and other information meetings
organized by the managing underwriter or underwriters, if
applicable.

     

    (q) If
reasonably requested by a Holder, the Company shall as soon as practicable (i)
incorporate in a prospectus supplement or post-effective amendment such
information as such Holder reasonably requests to be included therein relating
to the sale and distribution of Registrable Shares, including, without
limitation, information with respect to the number of Registrable Shares being
offered or sold, the purchase price being paid therefor and any other terms of
the offering of the Registrable Shares to be sold in such offering; (ii) make
all required filings of such prospectus supplement or post

     

    (r) effective
amendment after being notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment; and (iii) supplement or make
amendments to any Shelf Registration Statement if reasonably requested by a
Holder holding any Registrable Shares.

     

    (s) The
Company shall obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriters, if any) addressed to the
underwriters, if any, covering such matters as are customarily covered in
opinions requested in underwritten offerings.

     

    (t) The
Company shall obtain “comfort” letters and updates thereof from the independent
certified public accountants of the Company (and, if necessary, any other
independent certified public accountants of any subsidiary of the Company or of
any business acquired by the Company for which financial statements and
financial data are, or are required to be, included in, or incorporated by
reference into, the Shelf Registration Statement), addressed to the
underwriters, if any, in customary form and covering matters of the type
customarily covered in “comfort” letters in connection with underwritten
offerings.

     

    (u) If any Holder is deemed to be, alleged
to be or reasonably believes it may be deemed or alleged to be, an underwriter
or is required under applicable securities laws to be described in the Shelf
Registration Statement as an underwriter, at the reasonable request of such
Holder, the Company shall use reasonable efforts to cause to be furnished to
such Holder, on the date of the effectiveness of the Shelf Registration
Statement and thereafter from time to time on such dates as such Holder may
reasonably request (i) a letter, dated such date, from the Company’s independent
certified public accountants (and, if necessary, any other independent certified
public accountants of any subsidiary of the Company or of any business acquired
by the Company for which financial statements and financial data are, or are
required to be, included in, or incorporated by reference into, the Shelf
Registration Statement) in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to such Holder, and (ii) a legal opinion, dated as of
such date, in form, scope and substance as is customarily given in an
underwritten public offering, addressed to such Holder.

     

    4. Holder’s
Obligations.  Each Holder agrees promptly to furnish to the
Company all information required to be disclosed under Item 507 of Regulation
S-K under the Securities Act and any other material information regarding such
Holder and the distribution of such Registrable Shares as the Company may from
time to time reasonably request.  Any sale of any Registrable Shares
by any Holder shall constitute a representation and warranty by such Holder that
the information relating to such Holder and its plan of distribution is as set
forth in the prospectus delivered by such Holder in connection with such
disposition, that such prospectus does not as of the time of such sale contain
any untrue statement of a material fact provided in writing by such Holder and
that such prospectus does not as of the time of such sale omit to state any
material fact relating to or provided in writing by such Holder necessary to
make the

     

    5. statements
in such Prospectus, in light of the circumstances under which they were made,
not misleading.

     

    6. Registration
Expenses.

     

    (a) All fees
and expenses incident to the Company’s performance of and compliance with this
Agreement will be borne by the Company, regardless of whether the applicable
Shelf Registration Statement or Requested Underwritten Offering is ever filed or
becomes effective, including without limitation:

     

    (i) all
registration and filing fees and expenses;

     

    (ii) all fees
and expenses of compliance with federal securities and state “blue sky” or
securities laws;

     

    (iii) all
expenses of printing (including, without limitation, printing certificates and
prospectuses), messenger and delivery services and telephone;

     

    (iv) all fees
and disbursements of counsel for the Company;

     

    (v) all
application and filing fees in connection with listing on a national securities
exchange or automated quotation system pursuant to the requirements hereof;
and

     

    (vi) all fees
and disbursements of independent certified public accountants of the Company
(including, without limitation, the expenses of any special audit required by or
incident to such performance).

     

    The
Company will bear its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expenses of any annual audit and “comfort” letters and
the fees and expenses of any person, including special experts, retained by the
Company.

     

    (b) In
connection with a Shelf Registration Statement, the Company will reimburse the
Holders of Registrable Shares who are selling or reselling Registrable Shares
pursuant to the “Plan of Distribution” contained in such Shelf Registration
Statement for the reasonable fees and disbursements of not more than one
counsel, which shall be chosen by the Holders of a majority in number of shares
of the Registrable Shares for whose benefit such Shelf Registration Statement is
being prepared, such amount not to exceed $25,000.

     

    7. Indemnification.

     

    (a) The
Company agrees to indemnify and hold harmless each Holder of the Registrable
Shares included within the coverage of the applicable Shelf Registration
Statement, the directors, officers, employees, Affiliates and agents of each
such Holder and each person who controls any such Holder within the meaning of
the Securities Act or the Exchange Act (collectively, the “Holder Indemnified
Parties”) from and against

     

    (b) any
losses, claims, damages or liabilities, joint or several, or any actions in
respect thereof (including, but not limited to, any losses, claims, damages,
liabilities or actions relating to purchases and sales of the Registrable
Shares) to which each Holder Indemnified Party may become subject under the
Securities Act, the Exchange Act or otherwise and shall reimburse, as incurred,
the Holder Indemnified Parties for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action in respect thereof; provided, however, that the Company
shall not be liable in any such case to the extent that such loss, claim, damage
or liability arises out of or is based upon any untrue statement or omission
made in the Shelf Registration Statement, the Disclosure Package, any prospectus
or in any amendment thereof or supplement thereto in reliance upon and in
conformity with written information pertaining to such Holder and furnished to
the Company by or on behalf of such Holder Indemnified Party specifically for
inclusion therein; provided
further, however, that this indemnity
agreement will be in addition to any liability that the Company may otherwise
have to such Holder Indemnified Party.  The Company shall also
indemnify underwriters (including, without limitation, any Holder Indemnified
Party deemed or alleged to be an underwriter or required under applicable
securities laws to be described in the applicable Shelf Registration Statement
as an underwriter), their officers and directors and each person who controls
such underwriters within the meaning of the Securities Act or the Exchange Act
to the same extent as provided above with respect to the indemnification of the
Holders of the Registrable Shares if requested by such Holders.  Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of any Holder Indemnified Parties and shall survive the transfer of the
Registrable Shares by any Holder.

     

    (c) Each
Holder of the Registrable Shares covered by a Shelf Registration Statement
severally, and not jointly, agrees to indemnify and hold harmless the Company,
each of its directors, each of its officers who signs the Shelf Registration
Statement, as well as any officers, employees, Affiliates and agents of the
Company, and each person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act (a “Company Indemnified
Party”) from and against any losses, claims, damages or liabilities or
any actions in respect thereof, to which a Company Indemnified Party may become
subject under the Securities Act, the Exchange Act or otherwise, insofar as such
losses, claims, damages, liabilities or actions arise out of or are based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained in a Shelf Registration Statement or in any amendment thereof, in each
case at the time such became effective under the Securities Act, or in any
Disclosure Package, prospectus or in any amendment thereof or supplement
thereto, or (ii) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
(in the case of the Disclosure Package or any prospectus, in the light of the
circumstances under which they were made) not misleading, but in each case only
to the extent that the untrue statement or omission or alleged untrue statement
or omission was made in reliance upon and in conformity with written information
pertaining to such Holder and furnished to the Company by or on behalf of such
Holder specifically for inclusion therein; and, subject to the limitation set
forth immediately preceding this clause, shall reimburse, as incurred, the
Company Indemnified Parties for

     

    (d) any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any loss, claim, damage, liability or action in respect
thereof.  This indemnity agreement will be in addition to any
liability that such Holder may otherwise have to the Company Indemnified
Parties.  Notwithstanding any other provision of this Section 6(b), no
Holder shall be required to indemnify or hold harmless any Company Indemnified
Party in an amount in excess of the amount by which the net proceeds received by
such Holder from the sale of the Registrable Shares pursuant to the Shelf
Registration Statement exceeds the amount of damages that such Holder has
otherwise been required to pay by reason of such untrue statement or
omission.

     

    (e) Promptly
after receipt by a Holder Indemnified Party or a Company Indemnified Party
(each, an “Indemnified
Party”) of notice of the commencement of any action or proceeding
(including a governmental investigation), such Indemnified Party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 6, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party (i) will not relieve the
indemnifying party from liability under paragraph (a) or (b) above unless and to
the extent it did not otherwise learn of such action and the indemnifying party
has been materially prejudiced by such failure and (ii) will not, in any event,
relieve the indemnifying party from any obligations to any Indemnified Party
other than the indemnification obligation provided in paragraph (a) or (b)
above.  In case any such action is brought against any Indemnified
Party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel reasonably satisfactory to such
Indemnified Party (who shall not, except with the consent of the Indemnified
Party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such Indemnified Party of its election so to assume the
defense thereof the indemnifying party will not be liable to such Indemnified
Party under this Section 6 for any legal or other expenses, other than
reasonable costs of investigation, subsequently incurred by such Indemnified
Party in connection with the defense thereof; provided, however, if such Indemnified
Party shall have been advised by counsel that there are one or more defenses
available to it that are in conflict with those available to the indemnifying
party (in which case the indemnifying party shall not have the right to direct
the defense of such action on behalf of the Indemnified Party), the reasonable
fees and expenses of such Indemnified Party’s counsel shall be borne by the
indemnifying party.  In no event shall the indemnifying party be
liable for the fees and expenses of more than one counsel (together with
appropriate local counsel) at any time for any Indemnified Party in connection
with any one action or separate but substantially similar or related actions
arising in the same jurisdiction out of the same general allegations or
circumstances.  No indemnifying party shall, without the prior written
consent of the Indemnified Party (not to be unreasonably withheld or delayed),
effect any settlement of any pending or threatened action in respect of which
any Indemnified Party is or could have been a party and indemnity could have
been sought hereunder by such Indemnified Party unless such settlement (i)
includes an unconditional release of such Indemnified Party from all liability
on any claims that are the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act by or on behalf of any Indemnified Party.

     

    (f) If the
indemnification provided for in this Section 6 is unavailable or insufficient to
hold harmless an Indemnified Party under subsections (a) or (b) above, then each
indemnifying party shall contribute to the amount paid or payable by such
Indemnified Party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to in subsection (a) or (b) above in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party or parties on the one hand and the Indemnified Party on the other in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof) as well as any
other relevant equitable considerations.  The relative fault of the
parties shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or the Holder or Holder Indemnified Party, as the case may be,
on the other, and the parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.  The
amount paid by an Indemnified Party as a result of the losses, claims, damages
or liabilities referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any action or
claim that is the subject of this subsection (d).  The parties agree
that it would not be just and equitable if contributions were determined by pro
rata allocation (even if the Holders were treated as one entity for such
purpose) or any other method of allocation that does not take account of the
equitable considerations referred to above.  Notwithstanding any other
provision of this Section 6(d), no Holder shall be required to contribute any
amount in excess of the amount by which the net proceeds received by such Holder
from the sale of the Registrable Shares pursuant to the Shelf Registration
Statement exceeds the amount of damages that such Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission.  No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.

     

    (g) The
agreements contained in this Section 6 shall survive the sale of the Registrable
Shares pursuant to the Shelf Registration Statement and shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any Indemnified
Party.

     

    8. Information
Requirements.  The Company covenants that, if at any time
before the end of the applicable Effectiveness Period, the Company is not
subject to the reporting requirements of the Exchange Act, it will take such
further action as any Holder of Registrable Shares may reasonably request, all
to the extent required from time to time to enable such Holder to sell
Registrable Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rules 144 and 144A (including the
requirements of Rule 144A(d)(4)) under the Securities Act.  Upon the
request of any Holder of Registrable Shares, the Company shall deliver to such
Holder a written statement as to whether it has complied with such
requirements.

     

    9. Underwritten
Registrations.

     

    (a) Request for Underwritten
Offering.  Upon written request, a Holder or Holders (the
“Initiating
Holders”) may sell all or a portion of its Registrable Shares in an
underwritten offering, subject to the terms of this Section 8.  From
time to time, upon written request by the Initiating Holders, which request
shall specify the amount of the Initiating Holders’ Registrable Shares to be
sold (the “Requested
Registrable Shares”), the Company shall use reasonable efforts to cause
the sale of such Requested Registrable Shares to be in the form of a firm
commitment underwritten public offering if the anticipated aggregate offering
price (calculated based upon the market price of the Registrable Shares on the
date of such written request) to the public equals or exceeds $20,000,000 (a
“Requested
Underwritten Offering”) (including causing to be produced and filed any
necessary prospectuses or prospectus supplements with respect to such
offering).  The managing underwriter or underwriters for a Requested
Underwritten Offering shall be an investment banking firm or firms of national
reputation selected by the Holders holding a majority of the Registrable Shares
(the “Approved
Underwriters”); provided, however, that the Approved
Underwriters shall, in any case, also be reasonably acceptable to the
Company.  The Company’s obligations under this Section 8 shall be
limited to one Requested Underwritten Offering in any eighteen (18) month
period; provided,
however, that in the event that the Holders participating in a Requested
Underwritten Offering are unable to include at least fifty percent (50%) of the
Requested Registrable Shares in such offering as a result of the cutback of an
Approved Underwriter or the participation of the Company in accordance with
Section 8(c), such offering shall not constitute an offering for purposes of
this limitation.

     

    (b) Participation in Requested
Underwritten Offering.  The Company shall (i) as promptly as
practicable but in no event later than five (5) Business Days after the receipt
of a request for a Requested Underwritten Offering from any Initiating Holders,
give written notice thereof to all of the Holders (other than such Initiating
Holders), which notice shall specify the number of Requested Registrable Shares,
the names and notice information of the Initiating Holders and the intended
disposition of such Registrable Shares through an underwritten public offering
and (ii) subject to Section 8(c), include in the Requested Underwritten Offering
all of the Registrable Shares requested by such Holders for inclusion in such
Requested Underwritten Offering from whom the Company has received a written
request for inclusion therein within ten (10) Business Days after the receipt by
such Holders of such written notice referred to in clause (i)
above.  Each such request by such Holders shall specify the number of
Registrable Shares proposed to be included in the Requested Underwritten
Offering and such Holder shall send a copy of such written request to the
Company and the Initiating Holders.  The failure of any Holder to
respond within such ten (10) Business Day period referred to in clause (ii)
above shall be deemed to be a waiver of such Holder’s rights under this Section
8 with respect to such Requested Underwritten Offering.  Any Holder
may waive its rights under this Section 8 prior to the expiration of such ten
(10) Business Day period by giving written notice to the Company, with a copy to
the Initiating Holders.  Notwithstanding anything to the contrary
herein, no equity securities of the Company held by any person other than a
Holder or the Company may be included in

     

    (c) such
Requested Underwritten Offering without the prior written consent of the Holders
holding a majority of the Registrable Shares.

     

    (d) Limitation on Requested Underwritten
Offering.  In connection with any Requested Underwritten
Offering, none of the Registrable Shares held by any Holder (including the
Initiating Holders) shall be included in such Requested Underwritten Offering
unless such Holder (i) agrees to sell such Holder’s Registrable Shares on the
basis reasonably provided in any underwriting arrangements approved by the
Holders holding a majority of the Registrable Shares to be included in such
Requested Underwritten Offering and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and then only in such aggregate amount as, in the opinion of the
Approved Underwriters, can be sold in such offering within a price range
acceptable to the Holders holding a majority of the Registrable Shares to be
included in such Requested Underwritten Offering.  If the Approved
Underwriters advise the Company in writing that the aggregate amount of such
Registrable Shares requested to be included in such offering exceeds the amount
which can be sold in such offering within such acceptable price range, then the
Approved Underwriters shall include in such Requested Underwritten Offering only
the aggregate amount of shares that the Approved Underwriters believe may be
sold within such acceptable price range consisting of, first, the
Registrable Shares of the Holders (including the Initiating Holders)
participating in such Requested Underwritten Offering, as a group, and any
equity securities offered by the Company for its own account on up to a 50/50
basis (i.e., at least fifty percent (50%) of the shares to be sold shall be sold
on behalf of the Holders as a group and up to a maximum of 50% of the shares to
be sold may be securities offered by the Company for its own account); and,
second, any
other equity securities requested to be in such Requested Underwritten Offering,
as a group, pro rata
within each group based on the amount of Registrable Shares or equity
securities, as applicable, owned by each such party.

     

    (e) Company Lock-up
Agreement.  With respect to any Requested Underwritten
Offering, if requested by the managing underwriter, the Company shall not effect
any sale or transfer of any Registrable Shares or any securities convertible
into or exchangeable or exercisable for such Registrable Shares during the
period beginning on the date it is provided written notice of the Requested
Underwritten Offering and ending on the date that is ninety (90) days after the
date of the final prospectus relating to the Requested Underwritten Offering,
except as part of such Requested Underwritten Offering or pursuant to a
registration on Form S-4 or Form S-8 or any successor forms thereto; provided, that in no event
shall the Company be prohibited from effecting any sale or transfer of
Registrable Shares or any securities convertible into or exchangeable or
exercisable for Registrable Shares pursuant to this Section 8(d) more than once
in any 12-month period.

     

    (f) Additional Lock-up
Agreements.  With respect to each Requested Underwritten
Offering, the Company shall use reasonable efforts to cause all of its directors
and officers who are not otherwise Holders to execute lock-up agreements that
cover the period beginning on the date such holder is provided written notice of
the

     

    (g) Requested
Underwritten Offering and ending on the date that is ninety (90) days after the
date of the final prospectus relating to the Requested Underwritten
Offering.

     

    10. Miscellaneous.

     

    (a) Recapitalizations, Exchanges,
Etc.  The provisions of this Agreement shall apply to the full
extent set forth herein with respect to (i) the shares of Common Stock, (ii) any
and all shares of voting Common Stock of the Company into which the shares of
Common Stock are converted, exchanged or substituted in any recapitalization or
other capital reorganization by the Company and (iii) any and all equity
securities of the Company or any successor or assign of the Company (whether by
merger, consolidation, sale of assets or otherwise) which may be issued in
respect of, in conversion of, in exchange for or in substitution of, the shares
of Common Stock and shall be appropriately adjusted for any stock dividends,
splits, reverse splits, combinations, recapitalizations and the like occurring
after the date hereof.  The Company shall cause any successor or
assign (whether by merger, consolidation, sale of assets or otherwise) to assume
this Agreement or enter into a new registration rights agreement with the
Holders on terms substantially the same as this Agreement as a condition of any
such transaction.

     

    (b) No Inconsistent
Agreements.  The Company will not on or after the date of this
Agreement enter into any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof or
grants to any other person rights to cause securities of the Company held by
such person to be registered prior to the registration of the Registrable Common
Shares.  The rights granted to the Holders hereunder do not in
any way conflict with and are not inconsistent with the rights granted to the
holders of the Company’s securities under any agreement in effect on the date
hereof.

     

    (c) Interpretation.  Article,
Section and Annex references are to this Agreement, unless otherwise
specified.  All references to instruments, documents, contracts, and
agreements are references to such instruments, documents, contracts and
agreements as the same may be amended, supplemented and otherwise modified from
time to time, unless otherwise specified.  The word “including” shall
mean “including, without limitation.”

     

    (d) Amendments and
Waivers.  The provisions of this Agreement may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, except by the written consent of the Company
and the Holders of a majority in number of then outstanding Registrable Shares;
provided, however, that, notwithstanding the foregoing, any amendment or
modification of or supplement to this Agreement which would materially and
adversely affect any Investor in a manner that is disproportionate to the other
Investors will be binding upon and enforceable against such Investor only with
its prior written consent.  Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders whose securities are being sold
pursuant to a Shelf Registration Statement and that does not directly or
indirectly affect

     

    (e) the
rights of other Holders may be given by Holders of at least a majority of the
Registrable Shares being sold by such Holders pursuant to such Shelf
Registration Statement; provided, that the provisions
of this sentence may not be amended, modified, or supplemented except in
accordance with the provisions of the immediately preceding
sentence.  Each Holder of Registrable Shares outstanding at the time
of any such amendment, modification, supplement, waiver or consent or thereafter
shall be bound by any such amendment, modification, supplement, waiver or
consent effected pursuant to this Section 9(d), whether or not any notice,
writing or marking indicating such amendment, modification, supplement, waiver
or consent appears on the Registrable Shares.  Any amendment,
supplement or modification of or to any provision of this Agreement, any waiver
of any provision of this Agreement, and any consent to any departure from the
terms of any provision of this Agreement shall be effective only in the specific
instance and for the specific purpose for which made or given.  No
failure or delay on the part of any party in exercising any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any right, power or
remedy.  The remedies provided for herein are cumulative and are not
exclusive of any remedies that may be available to a party at law or in equity
or otherwise.  A copy of each amendment, modification or supplement to
this Agreement shall be delivered by the Company to each Holder.

     

    (f) Notices.  All
notices and other communications provided for or permitted hereunder shall be
made in writing and shall be given by registered or certified mail, return
receipt requested, telecopy, air courier guaranteeing overnight delivery or
personal delivery to the following addresses:

     

    (i) if to the
Company, at its address as follows:

     

    Neurogen
Corporation

     

    35
Northeast Industrial Road

     

    Branford,
CT 06405

     

    Attention:  Stephen
Davis

     

    Telephone:  (203)
488-8201

     

    Facsimile:  (203)
481-8683

     

    with a
copy to (which shall not constitute notice):

     

    Latham
& Watkins LLP

     

    650 Town
Center Drive, 20th  Floor

     

    Costa
Mesa, CA 92626

     

    Attention:  Shayne
Kennedy

     

    Telephone:  (714)
755-8181

     

    Facsimile:  (714)
755-8290

     

    (ii) if to a
Holder, at the most current address shown for such Holder in the records of the
Company;

     

    (iii) or to
such other address as the Company or such Holder may designate in
writing.  All notices and communications shall be deemed to have been
duly given:  at the time delivered by hand, if personally delivered;
upon actual receipt if sent by certified mail, return receipt requested, or
regular mail, if mailed; when receipt acknowledged, if sent via facsimile; and
upon actual receipt when delivered to an air courier guaranteeing overnight
delivery.

     

    (g) Successors and
Assigns.  This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of the parties hereto as
hereinafter provided. The rights of the Holders contained in this Agreement
shall be automatically transferred to the transferee of any Registrable Shares,
provided, that (i) such transferee agrees to become a party to this Agreement
and be fully bound by, and subject to, all of the terms and conditions of the
Agreement as though an original party hereto; (ii) the Company is, within a
reasonable time after such transfer, furnished with written notice of (a) the
name and address of such transferee, and (b) the securities with respect to
which such registration rights are being transferred; (iii) immediately
following such transfer the further disposition of such securities by the
transferee is restricted under the Securities Act or applicable state securities
laws if so required; and (iv) such transfer shall have been conducted in
accordance with all applicable federal and state securities laws. All of the
obligations of the Company hereunder shall survive any such
transfer.

     

    (h) Counterparts.  This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which counterpart, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute one and the same agreement.

     

    (i) Headings.  The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.

     

    (j) Governing
Law.  This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without regard to principles
of conflicts of laws.

     

    (k) Submission to
Jurisdiction.  The parties to this Agreement (i) irrevocably
submit to the exclusive jurisdiction of any state or federal courts located in
New York County, New York in connection with any disputes arising out of or
relating to this Agreement and (ii) waive any claim of improper venue or any
claim that those courts are an inconvenient forum.  The parties to
this Agreement agree that mailing of process or other papers in connection with
any such action or proceeding in the manner provided in Section 9(e) or in such
other manner as may be permitted by applicable laws, shall be valid and
sufficient service thereof.

     

    (l) Severability.  If
any term or other provision of this Agreement is invalid, illegal or incapable
of being enforced by virtue of any applicable law, or due to any public policy,
all other conditions and provisions of this Agreement shall nevertheless remain
in full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party.  Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this

     

    (m) Agreement
so as to effect the original intent of the parties as closely as possible in an
acceptable manner so that the transaction contemplated hereby are fulfilled to
the extent possible.

     

    (n) Entire
Agreement.  This Agreement is intended by the parties as a
final expression of their agreement and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein, superseding all prior agreements
and understandings among the parties with respect to such subject
matter.

     

    (o) Further
Assurances.  Each of the parties shall execute such documents
and perform such further acts as may be reasonably required or desirable to
carry out or to perform the provisions of this Agreement.

     

    (p) Termination.  This
Agreement and the obligations of the parties hereunder shall terminate upon the
end of the applicable Effectiveness Period, except for any liabilities or
obligations, each of which shall remain in effect in accordance with its
terms.

     

    (q) Securities Held by the
Company.  Whenever the consent or approval of Holders of a
specified number of Registrable Shares is required hereunder, shares of Common
Stock or Exchangeable Preferred Stock held by the Company or its subsidiaries
shall not be counted in determining whether such consent or approval was given
by the Holders of such required percentage.

     

    (r) Independent Nature of
Obligations.  The obligations of each Investor under this
Agreement are several and not joint with the obligations of any other Investor,
and no Investor shall be responsible in any way for the performance of the
obligations of any other Investor under this Agreement.  The failure
or waiver of performance under this Agreement by any Investor shall not excuse
performance by any other Investor.  Each Investor shall be entitled to
independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement, and it shall not be necessary for any
other Investor to be joined as an additional party in any proceeding for such
purpose.

     

    (s) Definitions.  The
following terms shall have the following meanings:

     

    “Affiliate” means,
with respect to any specified person, an “affiliate,” as defined in Rule
144(a)(1) of the Securities Act, of such person.

     

    “Agreement” shall have
the meaning set forth in the recitals hereto.

     

    “Amendment Effectiveness
Deadline Date” shall have the meaning set forth in Section
3(a)(i).

     

    “Approved
Underwriters” shall have the meaning set forth in Section
8(a).

     

    “Blackout Period”
shall have the meaning set forth in Section 1(e).

     

    “Business Day” shall
mean any day other than a Saturday, Sunday or other day on which banks in the
State of New York are required or authorized to close.

     

    “Capital Stock” means,
with respect to any Person, any and all securities (including equity linked
securities), interests, rights to purchase, warrants, options, participations or
other equivalents of or interests in (however designated) equity of such Person,
including any Preference Stock.

     

    “Certificate of
Designation” means the Certificate of Designations, Number, Voting Power,
Preferences and Rights of the Exchangeable Preferred Stock.

     

    “Commission” shall
have the meaning set forth in Section 1(a).

     

    “Common Shelf
Registration” shall have the meaning set forth in Section
1(a).

     

    “Common Shelf Registration
Period” shall have the meaning set forth in Section 1(b).

     

    “Common Shelf Registration
Statement” shall have the meaning set forth in Section 1(a).

     

    “Common Stock” shall
have the meaning set forth in the recitals hereto.

     

    “Company” shall have
the meaning set forth in the recitals hereto.

     

    “Company Indemnified
Party” shall have the meaning set forth in Section 6(b).

     

    “Controlled Affiliate”
shall mean with respect to any Person, any Person which, directly or indirectly,
is controlled by such Person, including without limitation any general partner,
officer or director of such Person and any investment fund now or hereafter
existing which is controlled by or under common control with one or more general
partners or shares the same management company with such Person; for the
purposes of this definition of Controlled Affiliate, “control” means direct or
indirect beneficial ownership of capital stock or other interests in an entity
or enterprise entitling the holder to cast more than 50% of the total number of
votes generally entitled to be cast in the election of directors (or persons
performing comparable functions) of such entity or enterprise, or any entity
with respect to which such Person has directly approved the entity’s investments
in the Company’s equity securities or trading of the Company’s equity securities
(it being understood that in no event shall solely the membership or
participation on an entity’s Board of Directors or similar governing body be
deemed to be control for the purposes hereof).

     

    “Deferral Notice”
shall have the meaning set forth in Section 3(h)(B).

     

    “Deferral Period”
shall have the meaning set forth in Section 3(h).

     

    “Disclosure Package”
means, with respect to any offering of securities, (i) the preliminary
prospectus, (ii) each Free Writing Prospectus and (iii) all other
information,

     

    in each
case, that is deemed, under Rule 159 promulgated under the Securities Act, to
have been conveyed to purchasers of securities at the time of sale of such
securities (including, without limitation, a contract of sale).

     

    “Effectiveness
Deadline” shall mean the date that is
the earlier of (A) fifteen (15) days after the
Stockholders Meeting or (B) the one year anniversary of the initial issuance
date of the Exchangeable Preferred Stock and the Warrants.

     

    “Effectiveness Period”
means, as the case may be, either the Common Shelf Registration Period or the
Exchangeable Shelf Registration Period.

     

    “Exchange” means the
exchange of the Exchangeable Preferred Stock for shares of Common Stock in
accordance with the terms of the Purchase Agreement.

     

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

     

    “Exchange Date” mean
the date on which the Exchange occurs.

     

    “Exchangeable Preferred
Stock” shall have the meaning set forth in the recitals
hereto.

     

    “Exchangeable Shelf
Registration” shall have the meaning set forth in Section
2(a).

     

    “Exchangeable Shelf
Registration Period” shall have the meaning set forth in Section
2(b).

     

    “Exchangeable Shelf
Registration Statement” shall have the meaning set forth in Section
2(a).

     

    “Filing Deadline” shall mean the date 20 days after the date the initial date of issuance
of the Exchangeable Preferred Stock and the Warrants.

     

    “Free Writing
Prospectus” means any “free writing prospectus” as defined in Rule 405
promulgated under the Securities Act.

     

    “Holder” means a
holder of record of Registrable Shares.

     

    “Holder Indemnified
Party” shall have the meaning set forth in Section 6(a).

     

    “Holders Counsel”
shall have the meaning set forth in Section 3(k).

     

    “Indemnified Party”
shall have the meaning set forth in Section 6(c).

     

    “Initiating Holders”
shall have the meaning set forth in Section 8(a).

     

    “Investor” shall have
the meaning set forth in the recitals hereto.

     

    “Material Event” shall
have the meaning set forth in Section 3(h).

     

    “NASDAQ Stock Market”
shall have the meaning set forth in Section 1(d).

     

    “Outside Date” shall
have the meaning set forth in Section 2.

     

    “Person” means any
individual, partnership, joint-stock company, corporation, limited liability
company, trust or unincorporated organization, and a government or agency or
political subdivision thereof.

     

    “Preference Stock”, as
applied to the Capital Stock of any Person, means Capital Stock of any series,
class or classes (however designated) which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other series or class of such Person.

     

    “Purchase Agreement”
shall have the meaning set forth in the recitals hereto.

     

    “Registrable Common
Shares” means (A) each share of Common Stock issued or issuable upon the
exchange of the Exchangeable Preferred Stock in accordance with the Certificate
of Designations, (B) each Warrant Share issued or issuable upon exercise of the
Warrants; (C) any other shares of Common Stock held by the Holders on the date
hereof and (D) any stock of the Company issued as a dividend, or other
distribution with respect to, the Common Stock referred to in clause (A) or (B);
until the earlier of (i) the date on which all of the Registrable Common Shares
then owned by such Holder have been effectively registered under the Securities
Act and disposed of in accordance with such registration statement and (ii) the
date on which all of the Registrable Common Shares then owned by such Holder may
be sold pursuant to Rule 144 without volume or manner of sale
restrictions.

     

    “Registrable Exchangeable
Shares” means (A) each share of Exchangeable Preferred Stock issued to a
Holder in accordance with the Purchase Agreement and (B) any stock of the
Company issued as a dividend or other distribution with respect to the
Exchangeable Preferred Stock referred to in clause (A); until the earlier of (i)
the date on which all of the Registrable Exchangeable Shares then owned by such
Holder have been effectively registered under the Securities Act and disposed of
in accordance with such registration statement and (ii) the date on which all of
the Registrable Exchangeable Shares then owned by such Holder may be sold
pursuant to Rule 144 without volume or manner of sale restrictions.

     

    “Registrable Shares”
means, as the case may be, either the Registrable Common Shares or the
Registrable Exchangeable Shares.

     

    “Requested Registrable
Shares” shall have the meaning set forth in Section 8(a).

     

    “Requested Underwritten
Offering” shall have the meaning set forth in Section 8(a).

     

    “Rule 415 Limitation”
shall have the meaning set forth in Section 1(a).

     

    “Securities Act” means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.

     

    “Shelf Registration”
means, as the case may be, either the Common Shelf Registration or the
Exchangeable Shelf Registration.

     

    “Shelf Registration
Statement” means, as the case may be, either the Common Shelf
Registration Statement or the Exchangeable Shelf Registration
Statement.

     

    “Stockholders Meeting”
shall have the meaning attributed to such term in the Securities Purchase
Agreement.

     

    “Subsequent Shelf
Limitation” shall have the meaning set forth in Section
1(a).

     

    “Warrant” shall have
the meaning set forth in the recitals hereto.

     

    “Warrant Shares” shall
have the meaning set forth in the recitals hereto.

     

    

     

    [The
remainder of this page is intentionally left blank.]

     

    If the
foregoing is in accordance with your understanding of our agreement, please sign
and return to the Company a counterpart hereof, whereupon this instrument, along
with all counterparts, will become a binding agreement among the Investor and
the Company in accordance with its terms.

     

    Very
truly yours,

     

    NEUROGEN
CORPORATION

     

    By:  /s/ STEPHEN R.
DAVIS         

     

    Name: 
Stephen Davis

     

    Title    
President and Chief Executive Officer

     

    

     

     

    EACH
INVESTOR'S SIGNATURE TO THE INVESTOR QUESTIONNAIRE DATED EVEN DATE HEREWITH
SHALL CONSTITUTE THE INVESTOR'S SIGNATURE TO THIS AGREEMENT.

     

    Exhibit
A

     

    SCHEDULE OF
PURCHASERS

     

    
      	
               

              Purchaser Name

            	
               

              Purchaser Address

               

            
	
              Warburg

            	 
      
	
              Tang
      Capital Mgmt

            	 
      
	
              Baker
      Brothers

            	 
      
	
              Orbimed

            	 
      
	
              Domain

            	 
      
	
              Tisch
      Family/Tommy Tisch

            	 
      
	
              Special
      Situations

            	 
      
	
              Chartwell

            	 
      
	
              Perceptive
      Life

            	 
      
	
              PGEM

            	 
      
	
              Griffin
      Capital

            	 
      
	
              Mr
      X Board Member

            	 
      
	
              Clarionexhibit42.htm

    

     

    CERTIFICATE
OF DESIGNATIONS, NUMBER, VOTING POWERS,

    PREFERENCES
AND RIGHTS OF

    SERIES
A EXCHANGEABLE PREFERRED STOCK

    OF

    NEUROGEN
CORPORATION

     

    Pursuant
to Section 151 of the

    General
Corporation Law of the State of Delaware

     

    The
undersigned DOES HEREBY CERTIFY that the following resolution was duly adopted
by the Board of Directors (the “Board”) of Neurogen
Corporation, a Delaware corporation (hereinafter called the “Company”), with the
preferences and rights set forth therein relating to dividends, exchange,
redemption, dissolution and distribution of assets of the Company having been
fixed by the Board pursuant to authority granted to it under Article IV of the
Company’s Restated Certificate of Incorporation, as amended (the “Certificate of
Incorporation”), and in accordance with the provisions of
Section 151 of the General Corporation Law of the State of
Delaware:

     

    RESOLVED:
That, pursuant to authority conferred upon the Board by the Certificate of
Incorporation, the Board hereby authorizes the issuance of 1,500,000 shares of
Series A Exchangeable Preferred Stock, par value $0.025 per share, of the
Company, and hereby fixes the designations, powers, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof, of such shares, in addition to those set
forth in the Certificate of Incorporation, as follows:

     

    SECTION
1. Designation.
The shares of such series shall be designated “Series A Exchangeable Preferred
Stock” (the “Exchangeable Preferred
Stock”) and the number of shares constituting such series shall be
1,500,000. Such number of shares may be increased or decreased by resolution of
the Board and the approval of the holders of a majority of the outstanding
shares of the Exchangeable Preferred Stock; provided, that no
decrease shall reduce the number of shares of Exchangeable Preferred Stock to a
number less than the number of shares then outstanding plus the number of shares
reserved for issuance upon the payment of dividends pursuant to Section 4
hereof.

     

    SECTION
2. Currency.
All Exchangeable Preferred Stock shall be denominated in United States currency,
and all payments and distributions thereon or with respect thereto shall be made
in United States currency. All references herein to “$” or “dollars” refer to
United States currency.

     

    SECTION
3. Ranking. The
Exchangeable Preferred Stock shall, with respect to dividend rights and rights
upon liquidation, winding up or dissolution, rank prior to each other class or
series of shares of the Company. For purposes hereof, “Junior Stock” shall
mean the Common Stock of the Company, par value $0.025 per share (the “Common Stock”) and
the shares of any other class or series of equity securities of the
Company.

    

    SECTION
4. Dividends.

    

    (a) The
holders of the Exchangeable Preferred Stock shall be entitled to receive, when
and as declared by the Board, out of the net profits or surplus of the Company
legally available for distribution, dividends on each outstanding share of
Exchangeable Preferred Stock at the rate of 20% per annum, compounded monthly,
of the Stated Value (as herein defined) of such share of Exchangeable Preferred
Stock (the “Original
Dividend Rate”) from and including the Initial Issuance Date of the
Exchangeable Preferred Stock to and including the first to occur of (i) the
date on which the Redemption Price (as defined below) of such share of
Exchangeable Preferred Stock is paid to the holder thereof in connection with a
Liquidation (as defined below) of the Company or the redemption of such share of
Exchangeable Preferred Stock by the Company, (ii) the date on which the
Acquisition Price (as defined in Section 11 below) of such share of
Exchangeable Preferred Stock is paid to the holder thereof in connection with a
Change in Control (as defined below), (iii) the date on which such share of
Exchangeable Preferred Stock is exchanged for shares of Common Stock as provided
herein, or (iv) the date on which such share of Exchangeable Preferred
Stock is otherwise acquired by the Company.  Such dividends shall
accrue daily and shall be computed on the basis of a 360-day year comprised of
twelve 30-day months.  For purposes hereof, the term “Stated Value” shall
mean $31.20 per share of Exchangeable Preferred Stock, subject to appropriate
adjustment in the event of any stock dividend, stock split, stock distribution,
recapitalization or combination with respect to the Exchangeable Preferred
Stock; provided, however, that there
shall be no adjustment to the Stated Value in respect of any
dividends paid in additional shares of Exchangeable Preferred Stock pursuant to
this Section 4. Dividends shall be paid by the Company on the Dividend
Reference Dates (as defined below) in cash (provided the Company may lawfully do
so) or additional shares of Exchangeable Preferred Stock at the election of each
holder of Exchangeable Preferred Stock (which additional shares of Exchangeable
Preferred Stock shall be deemed to accrue and accumulate dividends (whether or
not declared) as otherwise set forth herein from the Dividend Reference Date in
respect of which such dividends are paid); provided, however, that no
Dividends shall be payable prior to the four month anniversary of the Initial
Issuance Date, and then such Dividends shall be payable only so long as the
Exchange shall not have occurred as of the four month anniversary of the Initial
Issuance Date.  Notwithstanding the foregoing, the Original Dividend
Rate shall automatically be increased to 30% per annum (the “Default Dividend
Rate”) in the event that the Company fails for any reason to (A) pay
dividends in accordance with the terms of this Section 4, or
(B) redeem all shares of the Exchangeable Preferred Stock within thirty
(30) days after receipt of a Redemption Demand Notice (as defined below),
in which case, all accrued and unpaid dividends (whether or not declared) shall
be payable in cash (provided the Company may lawfully do so) or in additional
shares of Exchangeable Preferred Stock, at the election of each holder of
Exchangeable Preferred Stock (which additional shares of Exchangeable Preferred
Stock shall be deemed to accrue and accumulate dividends (whether or not
declared) as otherwise set forth herein from the Dividend Reference Date in
respect of which such dividends are paid). The Default Dividend Rate shall apply
to all shares of Exchangeable Preferred Stock then outstanding and shall remain
in effect until such time as the dividend is paid or the Exchangeable Preferred
Stock set forth in the applicable Redemption Demand Notice has been redeemed
pursuant to Section 8 hereof.

     

    (b) To
the extent not paid on the last day of each calendar month of each year,
beginning with the first calendar month following the four month anniversary of
the Initial Issuance Date (the “Dividend Reference
Dates”), all dividends that have accrued on each share of Exchangeable
Preferred Stock outstanding during the one-month period (or other period in the
case of the initial Dividend Reference Date) ending upon each such Dividend
Reference Date shall be accumulated and shall remain accumulated dividends with
respect to such share of Exchangeable Preferred Stock until paid to the holder
thereof.

     

    (c)
Dividends on the Exchangeable Preferred Stock shall be cumulative and shall
continue to accrue whether or not declared and whether or not in any fiscal year
there shall be net profits or surplus legally available for the payment of
dividends in such fiscal year, so that if in any fiscal year or years, dividends
in whole or in part are not paid upon the Exchangeable Preferred Stock, unpaid
dividends shall accumulate as against the holders of the Junior
Stock.

     

    (d)
Except as otherwise provided herein, if at any time the Company pays less than
the total amount of dividends then accrued with respect to the Exchangeable
Preferred Stock, such payment shall be distributed pro rata among the holders
thereof based upon the aggregate accrued but unpaid dividends on all shares of
Exchangeable Preferred Stock held by each such holder.

     

    (e) In
the event that dividends on the Exchangeable Preferred Stock are paid in
additional shares of Exchangeable Preferred Stock, the number of shares of
Exchangeable Preferred Stock to be issued in payment of the dividend with
respect to each outstanding share of Exchangeable Preferred Stock shall be
determined by dividing (i) the amount of the dividend that would have been
payable with respect to such share of Exchangeable Preferred Stock had such
dividend been paid in cash by (ii) the Stated Value per share of the
Exchangeable Preferred Stock being issued. To the extent that any such dividend
would result in the issuance of a fractional share of Exchangeable Preferred
Stock (which shall be determined with respect to the aggregate number of shares
of Exchangeable Preferred Stock held of record by each holder) then the amount
of such fraction multiplied by the Stated Value shall be paid in cash (unless
there are no legally available funds with which to make such cash payment, in
which event such cash payment shall be made as soon as possible). No fractional
shares of Exchangeable Preferred Stock will be issued in respect of accrued but
unpaid dividends on the Exchangeable Preferred Stock. All shares of Exchangeable
Preferred Stock (including fractions thereof) issuable in respect of accrued but
unpaid dividends of more than one share of Exchangeable Preferred Stock
(including accrued but unpaid dividends thereon) by a holder thereof shall be
aggregated for  purposes of determining whether the dividend would
result in the issuance of any fractional share. If, after the aforementioned
aggregation, the dividend would result in the issuance of any fractional share
of Exchangeable Preferred Stock, the Company shall, in lieu of issuing any such
fractional share, pay cash equal to the product of such fraction multiplied by
the Stated Value of per share of the Exchangeable Preferred Stock. In the event
that dividends on the Exchangeable Preferred Stock are to be paid in additional
shares of Exchangeable Preferred Stock, within five Business Days of the
applicable vote of the holders of a majority of the Exchangeable Preferred
Stock permitting the Company to do so, the Company shall cause to be issued and
delivered to each holder, a certificate or certificates for the number of full
shares of Exchangeable Preferred Stock issuable in respect of such accrued but
unpaid dividend and cash as provided in this Section 4(e) in respect of any
fraction of a share of Exchangeable Preferred Stock otherwise payable upon such
dividend.

     

    (f) For
so long as any shares of Exchangeable Preferred Stock remain outstanding, the
Company shall not, without the prior consent of the holders of a majority of the
outstanding shares of Exchangeable Preferred Stock, pay any dividend upon the
Junior Stock, whether in cash or other property (other than shares of Junior
Stock), or purchase, redeem or otherwise acquire any such Junior Stock.
Notwithstanding the provisions of this Section 4(f), without declaring or
paying dividends on the Exchangeable Preferred Stock, the Company may, subject
to applicable law, repurchase or redeem shares of capital stock of the Company
from current or former officers or employees of the Company pursuant to the
terms of repurchase or similar agreements in effect from time to time, provided
that such agreements (or the forms thereof) have been approved by the Board and
the terms of such agreements provide for a repurchase or redemption price not in
excess of the price per share paid by such current or former officers or
employee for such share.

     

    (g) For
so long as any shares of Exchangeable Preferred Stock remain outstanding, in
addition to the dividends referred to in Section 4(a), the Company shall
not declare, set aside for or pay any dividends or make any distributions on
shares of Junior Stock unless the holders of Exchangeable Preferred Stock then
outstanding shall simultaneously receive such dividend or distribution on a pro
rata basis as if the shares of Exchangeable Preferred Stock had been exchanged
into the greatest number of shares of Common Stock into which such shares of
Exchangeable Preferred Stock could exchange pursuant to Section 7
immediately prior to the record date for determining the stockholders eligible
to receive such dividends or distributions on Junior Stock.

     

    SECTION
5. Liquidation
Preference; Change in Control. Upon any voluntary or involuntary
liquidation, dissolution or winding up of the Company (each, a “Liquidation”) or upon
any Change in Control (as defined below), before any distribution or payment
shall be made to holders of any Junior Stock, each holder of Exchangeable
Preferred Stock shall be entitled to payment in cash out of the assets of the
Company legally available for distribution an amount per share of Exchangeable
Preferred Stock equal to (i) in the event of a Liquidation, the Redemption
Price (as defined below) or (ii) in the event of a Change in Control, the
Acquisition Price (as defined in Section 11). If, upon any such Liquidation
or Change in Control, the assets of the Company shall be insufficient to make
payment in full to all holders of Exchangeable Preferred Stock of the amount of
the preference set forth in this Section 5, the holders of Exchangeable
Preferred Stock shall share equally and ratably in any distribution of such
assets in proportion to the full Redemption Price or Acquisition Price, as
applicable, to which each such holder would otherwise be entitled. Upon payment
of all amounts due under this Section 5, the holders of Exchangeable
Preferred Stock shall have no further rights in respect of such shares of
Exchangeable Preferred Stock and shall not be entitled to participate in any
further distributions of the Company’s assets distributed in such Liquidation or
Change in Control.

     

    SECTION
6. Voting Rights. For so long as any shares of Exchangeable Preferred Stock
remain outstanding, the Company shall not amend, alter or repeal the
preferences, special rights or other powers of the Exchangeable Preferred Stock
without the written consent or affirmative vote of the holders of at least a
majority of the then outstanding shares of Exchangeable Preferred Stock, given
in writing or by vote at a meeting, consenting or voting (as the case may be)
separately as a class. For so long as any shares of Exchangeable Preferred Stock
remain outstanding, the Company shall not (i) create, issue or approve for
creation or issuance any series or class of capital stock of the Company or
(ii) create, issue or approve for creation or issuance any debt security
convertible or exchangeable into any capital stock of the Company, in the case
of each (i) and (ii), which capital stock or debt security, as the case may
be, shall have preference or priority over, or be on par with, the Exchangeable
Preferred Stock, or (iii) incur any indebtedness (excluding accrued expenses and
trade payables) for money borrowed, without the written consent or affirmative
vote of the holders of at least a majority of the then outstanding shares of
Exchangeable Preferred Stock, given in writing or by vote at a meeting,
consenting or voting (as the case may be) separately as a class; provided however, that clause
(iii) of the this sentence will not prohibit the incurrence of any of the
following items of indebtedness: (a) the incurrence by the Company of
indebtedness of the Company in existence on the Initial Issuance Date and (b)
the incurrence by the Company of additional indebtedness in an aggregate
principal amount at any time outstanding, including all indebtedness incurred to
renew, refund, refinance, replace,
defease or discharge any indebtedness incurred pursuant to this clause (b), not
to exceed $1.0 million. Except as expressly provided in this Section 6 or
as required by applicable Delaware law, the holders of Exchangeable Preferred
Stock shall not be entitled to any voting rights as stockholders of the
Company.

     

    SECTION
7. Exchange.

    

    (a) Upon
the later to occur of (i) receipt of the Stockholder Approval (as defined
in Section 11 below), and (ii) to the extent required with respect to
the shares of Exchangeable Preferred Stock of any holder, the expiration or
termination of any waiting period under the HSR Act that are applicable to the
exchange of the Exchangeable Preferred Stock for Common Stock (“HSR Approval”) (the
“Exchange
Date”), each outstanding share of Exchangeable Preferred Stock shall
automatically be exchanged for such number of shares of Common Stock determined
by dividing (i) the Stated Value of the Exchangeable Preferred Stock then
in effect (determined as provided in Section 4(a) above) by (ii) the
Exchange Price (as defined below) of the Exchangeable Preferred Stock then in
effect (the “Exchange
Rate”). The initial exchange price of the Exchangeable Preferred Stock
shall be $1.20 per share, subject to appropriate adjustment in the event of any
stock dividend, stock split, stock distribution or combination, subdivision,
reclassification or other corporate action having the similar effect with
respect to the Common Stock (the “Exchange Price”). For
the avoidance of doubt, the Exchange Price will not be subject to adjustment for
any price-based anti-dilution. The initial Exchange Rate for the Exchangeable
Preferred Stock shall be twenty-six (26) shares of Common Stock for each one
(1) share of Exchangeable Preferred Stock. In addition, upon any such
exchange all accrued but unpaid dividends (whether or not declared) on the
Exchangeable Preferred Stock shall be paid in shares of Common Stock; provided, however, that if such
exchange shall have occurred on or prior to the four month anniversary of the
Initial Issuance Date, no accrued an unpaid dividends shall be due and payable
in connection with such exchange. The number of shares of Common Stock to be
issued in payment of the accrued but unpaid dividends (whether or not declared)
with respect to each outstanding share of Exchangeable Preferred Stock shall be
determined by dividing the amount of the dividend that would have been payable
had such dividend been paid in cash by an amount equal to the Exchange Price.
Notwithstanding the foregoing, the Exchangeable Preferred Stock shall not be exchangeable for Common Stock (i) at any
time following the receipt by the Company of a notice of delisting from the
Nasdaq Global Market (if, and only to the
extent that, such notice of delisting is issued by the Nasdaq Global Market as a
direct result of its review of the terms of the Exchangeable Preferred Stock)
and until the Company receives notification
from Nasdaq that it has regained compliance with the listing standards for the
Nasdaq Global Market, or (ii) at any time following the earlier of (A) a
meeting of the stockholders of the Company at which the stockholders vote on,
but do not approve, the actions that are the subject of the Stockholder
Approvals and (B) the one year anniversary of the Initial Issuance Date (as
defined in Section 11 below) (the “Exchange Termination
Date”). If the Stockholder Approval has not been obtained by the Exchange
Termination Date, then the Exchangeable Preferred Stock shall not be
exchangeable for shares of Common Stock and such Exchangeable Preferred Stock
shall remain outstanding pursuant to its terms. If the Stockholder Approval has
been obtained prior to the Exchange Termination Date and prior to any required
HSR Approval, then all outstanding shares of Exchangeable Preferred Stock
(whether or not held by a stockholder required to file for such HSR Approval)
will not be exchanged for shares of Common Stock until receipt of such HSR
Approval or until such time as no HSR Approval is required or the Exchange is
not otherwise prohibited by the provisions of the HSR Act, including, but not
limited to, in the event of a transfer by holder of Exchangeable Preferred Stock
to any other Person, whether or not such Person is an affiliate of the holder,
the result of which is that the exchange of such shares would not violate the
HSR Act. The
holder shall deliver written notice to the Company at least five (5) days
prior to the date on which such holder plans to take any action which such
holder intends to result in the removal of any restriction on the Exchange under
the HSR Act. On the Exchange Date, all rights with respect to the Exchangeable
Preferred Stock so exchanged will terminate, except only the rights of the
holders thereof, upon surrender of their certificate or certificates therefor,
to receive certificates for the number of shares of Common Stock into which such
Exchangeable Preferred Stock and any accrued but unpaid dividends thereon
(whether or not declared) have been exchanged. If so required by the Company,
certificates surrendered for exchange shall be endorsed or accompanied by
written instrument or instruments of transfer, in form satisfactory to the
Company, duly executed by the registered holder or by his attorneys duly
authorized in writing. All certificates evidencing shares of Exchangeable
Preferred Stock that are required to be surrendered for exchange in accordance
with the provisions hereof shall, from and after the Exchange Date, be deemed to
have been retired and canceled and the shares of Exchangeable Preferred Stock
represented thereby exchanged into Common Stock for all purposes,
notwithstanding the failure of the holder or holders thereof to surrender such
certificates on or prior to such date. As soon as practicable
after the Exchange Date and the surrender of the certificate or certificates for
Exchangeable Preferred Stock as aforesaid, the Company shall cause to be issued
and delivered to such holder, or on his or its written order, a certificate or
certificates for the number of full shares of Common Stock issuable on such
exchange in accordance with the provisions hereof and cash as provided in
Section 5(b) hereof in respect of any fraction of a share of Common Stock
otherwise issuable upon such exchange. Any shares of Exchangeable Preferred
Stock so exchanged shall be retired and canceled and shall not be reissued, and
the Company may from time to time take such appropriate action as may be
necessary to reduce the authorized Exchangeable Preferred Stock
accordingly.

    (b) No
fractional shares of Common Stock will be issued upon exchange of the
Exchangeable Preferred Stock or accrued but unpaid dividends thereon. All shares
of Common Stock (including fractions thereof) issuable upon conversion of more
than one share of Exchangeable Preferred Stock (including accrued but unpaid
dividends thereon) by a holder thereof shall be aggregated for purposes of
determining whether the exchange would result in the issuance of any fractional
share. If, after the aforementioned aggregation, the exchange would result in
the issuance of any fractional share of Common Stock, the Company shall, in lieu
of issuing any such fractional share, pay cash equal to the product of such
fraction multiplied by the Fair Market Value of one share of the Common
Stock.

     

    SECTION
8. Redemption.

     

    (a)
Subject to the limitations on the holders of Exchangeable Preferred Stock set
forth in this Section 8, for so long as the Exchangeable Preferred Stock remains
outstanding on or following the Optional Redemption Date (as defined below), the
Company and the holders of at least a majority of the outstanding shares of
Exchangeable Preferred Stock (the “Initiating Holders”)
shall each have the option to cause the Company, to the extent it may lawfully
do so, to redeem, from time to time, any or all of the outstanding shares of
Exchangeable Preferred Stock for cash in a per share amount equal to the greater
of: (i) the sum of 120% of the Stated Value of a share of Exchangeable
Preferred Stock plus all accrued but unpaid dividends thereon (whether or not
declared) through the date of such redemption and (ii) the Fair Market
Value (as defined in Section 11 below) of one share of Common Stock on the
date which the Company or the Initiating Holders exercise such right multiplied
by the then current Exchange Rate (the “Redemption Price”).
For purposes hereof, the “Optional Redemption
Date” shall mean the earliest of (i) the
first anniversary of the Initial Issuance Date and (ii) the date on which the Company issues any
capital stock or debt securities (other than issuances of Common Stock pursuant
to the Company’s equity incentive plans or
issuances in accordance with Sections 4 or 6 hereof).

    

    (b) The
Initiating Holders may exercise their option by delivering written notice
thereof (a “Redemption
Demand Notice”) to the Company, and the Company shall be required to
redeem the Exchangeable Preferred Stock with respect to which such option has
been exercised, to the extent it may lawfully do so, within thirty
(30) days after receipt of such Redemption Demand Notice. As promptly as
practicable following (i) the Company’s receipt of a Redemption Demand
Notice pursuant to this Section 8(b), or (ii) the Company’s election
to redeem the Exchangeable Preferred Stock pursuant to Section 8(a) above,
and in any event at least fifteen (15) days prior to the date on which such
redemption is to be made (the “Redemption Date”),
written notice shall be mailed, postage prepaid, to each holder of record of
Exchangeable Preferred Stock, at his or its post office address last shown on
the records of the Company, specifying the Redemption Date and calling upon such
holder to surrender to the Company, in the manner and at the place designated,
his or its certificate or certificates representing the shares of Exchangeable
Preferred Stock to be redeemed (such notice is hereinafter referred to as the
“Redemption
Notice”). Each holder of Exchangeable Preferred Stock shall surrender his
or its certificate or certificates representing such shares of Exchangeable
Preferred Stock to be redeemed to the Company, in the manner and at the place
designated in the Redemption Notice and in any event no later than the
Redemption Date, and thereupon the Redemption Price of such shares shall be
payable to the order of the person whose name appears on such certificate or
certificates as the owner thereof and each surrendered certificate shall be
canceled. In the event less than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares. In the event of any redemption of only a part of the then
outstanding Exchangeable Preferred Stock, the Company shall effect such
redemption pro rata among the holders of Exchangeable Preferred Stock based upon
the aggregate Redemption Price of all shares held by each such holder. If the
funds of the Company legally available for redemption of shares of Exchangeable
Preferred Stock to be redeemed on the Redemption Date are insufficient to redeem
such outstanding shares of Exchangeable Preferred Stock, those funds that are
legally available shall be used to redeem
the maximum number of shares pro rata among the holders of Exchangeable
Preferred Stock to be redeemed based upon the aggregate Redemption Price of all
shares held by each such holder. At any time thereafter when additional funds of
the Company are legally available for the redemption of additional shares of
Exchangeable Preferred Stock that were previously to have been redeemed, such
funds shall immediately be used to redeem such additional shares of Exchangeable
Preferred Stock that the Company has not previously redeemed. From and after the
Redemption Date, unless there shall have been a default in payment of the
Redemption Price, all rights of the holders of the Exchangeable Preferred Stock
that have been redeemed (except the right to receive the Redemption Price
without interest upon surrender of their certificate or certificates) shall
cease with respect to such shares, and such shares shall not thereafter be
transferred on the books of the Company or be deemed to be outstanding for any
purpose whatsoever. In the event that the Company fails for any reason to redeem
all shares of the Exchangeable Preferred Stock in accordance with this
Section 8, any and all proceeds received by, or on behalf or for the
benefit of, the Company in connection with any subsequent offering, issuance or
sale of capital stock of the Company (including in connection with any
securities convertible or exchangeable into, or rights to acquire, capital stock
of the Company or any arrangement or agreement to offer, issue or sell capital
stock of the Company or securities convertible or exchangeable into, or rights
to acquire, capital stock of the Company) shall be used to redeem the shares of
Exchangeable Preferred Stock then outstanding, including the payment of any
accrued and accumulated dividends (whether or not declared)
thereon.

     

    (c)
Except as provided in Section 8(a) hereof, the Company shall have no right
to redeem the shares of Exchangeable Preferred Stock and the holders of the
Exchangeable Preferred Stock shall have no right to cause the Company to redeem
the shares of Exchangeable Preferred Stock.  Any shares of
Exchangeable Preferred Stock redeemed pursuant hereto shall be permanently
retired, shall no longer be deemed outstanding and shall not under any
circumstances be reissued, and the Company may from time to time take such
appropriate corporate action as may be necessary to reduce the authorized
Exchangeable Preferred Stock accordingly. For the avoidance of doubt, nothing
herein shall prevent or restrict the purchase by the Company, from time to time,
either at public or private sale, of the whole or any part of the Exchangeable
Preferred Stock at such price or prices as the Company and the holders of
Exchangeable Preferred Stock subject to such sale may determine, subject to
applicable law; provided that the Company shall
not repurchase, acquire or repay any shares of Exchangeable Preferred Stock, or
exchange any shares of Exchangeable Preferred Stock for any other securities of
the Company or other property, or take any other action having a similar effect
as a repurchase, acquisition, repayment or exchange, unless such transaction is
offered on a pro-rata basis among to holders of then
outstanding Exchangeable Preferred Stock.

    

    SECTION
9. Issue Taxes.
The Company shall pay all issue taxes, if any, incurred in respect of the issue
of Common Stock on exchange. If a holder of shares surrendered for exchange
specifies that the Common Stock to be issued on exchange are to be issued in a
name or names other than the name or names in which such surrendered shares
stand, the Company shall not be required to pay any transfer or other taxes
incurred by reason of the issuance of such Common Stock to the name of
another.

     

    SECTION
10. Reservation of
Shares. The Company shall at all times reserve and keep available, free
from preemptive rights, for issuance upon the exchange of Exchangeable Preferred
Stock, such number of its authorized but unissued Common Stock as will from time
to time be sufficient to permit the exchange of all outstanding Exchangeable
Preferred Stock; provided, however, that prior
to obtaining Stockholder Approval, the Company shall not be required to reserve
and keep available shares of its authorized but unissued Common Stock. Prior to
the delivery of any securities which the Company shall be obligated to deliver
upon exchange of the Exchangeable Preferred Stock, the Company shall comply with
all applicable laws and regulations which require action to be taken by the
Company. All Common Stock delivered upon exchange of the Exchangeable Preferred
Stock will upon delivery be duly and validly issued and fully paid and
nonassessable, free of all liens and charges and not subject to any preemptive
rights.

     

    SECTION
11. Certain
Definitions. As used in this Certificate, the following terms shall have
the following meanings, unless the context otherwise requires:

     

    “Acquisition Fair Market
Value” shall mean the consideration per share of Common Stock received by
the holders thereof in a Change in Control; provided, that, if the
consideration is other than cash, its value will be deemed its fair market value
as determined in good faith by the Board and the holders of at least a majority
of the outstanding shares of Exchangeable Preferred Stock.

     

    “Acquisition Price”
shall mean the greater of: (i) the sum of 120% of the Stated Value of a
share of Exchangeable Preferred Stock plus all accrued but unpaid dividends
thereon (whether or not declared) through the date of such Change in Control and
(ii) the Acquisition Fair Market Value multiplied by the then current
Exchange Rate; provided, that, the Acquisition
Price, if based on the sum of 120% of the Stated Value of a share of
Exchangeable Preferred Stock plus accrued but unpaid dividends thereon (whether
or not declared) through the date of any Change in Control, shall be payable in
cash.

     

    “Board” shall have the
meaning set forth in the preamble hereto.

     

    “Business Day” shall
mean a day other than a Saturday, Sunday or other day on which banks in the
State of New York are required or authorized to close.

     

    “Certificate of
Designations” shall mean this Certificate of Designations, Number, Voting
Powers, Preferences, and Rights of Series A Exchangeable Preferred Stock of the
Company.

     

                           
 “Certificate of
Incorporation” shall have the meaning set forth in the preamble
hereto.

    

    “Change in Control”
shall mean (i) a consolidation, merger, share exchange, reorganization or
other form of acquisition of or by the Company in which the Company’s
stockholders immediately prior to the transaction retain less than 50% of the
voting power of or economic interest in the surviving or resulting entity (or
its parent) immediately after the transaction, (ii) a sale of the Company’s
assets in excess of a majority of the Company’s assets (valued at fair market
value as determined in good faith by the Board), (iii) the acquisition by
any person of 50% or more of the Company’s outstanding voting securities, or
(iv) during any period of 24 consecutive months, Continuing Directors cease
for any reason to constitute a majority of the directors on the Board or the
board of directors of the surviving or resulting entity (or its
parent).

     

    “Common Stock” shall
have the meaning set forth in Section 3 hereto.

     

    “Company” shall have
the meaning set forth in the preamble hereto.

     

    “Continuing Director”
means, as of any date, any member of the Board or the board of directors of any
entity (or its parent) surviving or resulting from any consolidation, merger,
reorganization or other acquisition with the Company, who: (i) was a member
of the Board on the date that was 24 months prior to such date; or (ii) was
nominated for election to the Board by a majority of the Continuing Directors
who were members of the Board at the time of such nomination.

     

    “Default Dividend
Rate” shall have the meaning set forth in Section 4(a)
hereto.

     

    “Dividend Reference
Dates” shall have the meaning set forth in Section 4(b)
hereto.

     

    “Exchange Date” shall
have the meaning set forth in Section 7(a) hereto.

     

    “Exchange Price” shall
have the meaning set forth in Section 7(a) hereto.

     

    “Exchange Rate” shall
have the meaning set forth in Section 7(a) hereto.

     

    “Exchange Termination
Date” shall have the meaning set forth in Section 7(a)
hereto.

     

    “Exchangeable Preferred
Stock” shall have the meaning set forth in Section 1.

     

    “Fair Market Value”
shall mean an amount equal to the average of the closing prices for the Common
Stock on NASDAQ for the twenty (20) trading days immediately preceding the
relevant date.

     

    “HSR Act” means the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

     

    “HSR Approval” shall
have the meaning set forth in Section 7(a) hereto.

     

    “Initial Issuance
Date” shall mean April __, 2008, or such other date on which the Company
first issues a share of Exchangeable Preferred Stock.

     

    “Initiating Holders”
shall have the meaning set forth in Section 8(a) hereto.

     

    “Junior Stock” shall
have the meaning set forth in Section 3 hereto.

     

    “Liquidation” shall
have the meaning set forth in Section 5 hereto.

     

    “Original Dividend
Rate” shall have the meaning set forth in Section 4(a)
hereto.

     

    “Optional Redemption
Date” shall have the meaning set forth in Section 8(a)
hereto.

     

    “Person” means an
individual, partnership, joint-stock company, corporation, limited liability
company, trust or unincorporated organization, and a government or agency or
political subdivision thereof.

     

    “Redemption Date”
shall have the meaning set forth in Section 8(b) hereto.

     

    “Redemption Demand
Notice” shall have the meaning set forth in Section 8(b)
hereto.

     

    “Redemption Notice”
shall have the meaning set forth in Section 8(b) hereto.

     

    “Redemption Price”
shall have the meaning set forth in Section 8(a) hereto.

     

    “Securities Purchase
Agreements” means the Securities Purchase Agreement, dated as of April 7,
2008, by and between the Company and each of the respective Purchasers named
therein, as amended from time to time in accordance with its terms.

     

    “Stated Value” shall
have the meaning set forth in Section 4(a) hereto.

     

    “Stockholder Approval”
means the approval by the holders of Common Stock of the Company of (i) the
exchange of all shares of Exchangeable Preferred Stock issued under the
Securities Purchase Agreements or issued as dividends thereon for shares of
Common Stock, as required by the applicable rules of the NASDAQ Global Market,
(ii) and amendment to the Certificate of Incorporation increasing the total
number of shares of Common Stock that the Company is authorized to issue to at
least 100,000,000 shares and (iii) any other stockholder proposals required by
the listing standards of the NASDAQ Global Market in connection with the
transaction, including the issuance and sale of the Exchangeable Preferred
Stock.

    

    “Subsequent Exchange”
shall have the meaning set forth in Section 7(a) hereto.

     

    “Subsequent Exchange
Date” shall have the meaning set forth in Section 7(a)
hereto.

     

    SECTION
12. Headings.
The headings of the paragraphs of this Schedule are for convenience of reference
only and shall not define, limit or affect any of the provisions
hereof.

     

    SECTION
13. Waivers.
Any of the rights of the holders of the Exchangeable Preferred Stock set forth
herein may be waived by any holder of the Exchangeable Preferred Stock with
respect to such holder and by the affirmative consent or vote of the holders of
a majority of the shares of the Exchangeable Preferred Stock then outstanding
with respect to all holders of the Exchangeable Preferred Stock.

     

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    IN
WITNESS WHEREOF, Neurogen Corporation has caused this Certificate of
Designations of Series A Exchangeable Preferred Stock to be duly executed by its
President and Chief Executive Officer this __ day of ____, 2008.

    

    

    

    NEUROGEN
CORPORATION

    

    

    By: /s/
STEPHEN R. DAVIS_____________________

    Name: Stephen R. Davis

    Title: President, Chief Executive
Officer

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