-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WzlyW0KVKMi/h4kTQC469Oi/RcK2xfHtjNXOuNvrW9allhEyqNkUgztpG/lpQ8Pp 503JiKsdmLmOF54BQYwrog== 0001104659-08-024210.txt : 20080414 0001104659-08-024210.hdr.sgml : 20080414 20080414165225 ACCESSION NUMBER: 0001104659-08-024210 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20080414 DATE AS OF CHANGE: 20080414 GROUP MEMBERS: CHARLES R. KAYE GROUP MEMBERS: JOSEPH P. LANDY GROUP MEMBERS: WARBURG PINCUS & CO. GROUP MEMBERS: WARBURG PINCUS LLC GROUP MEMBERS: WARBURG PINCUS PARTNERS LLC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: NEUROGEN CORP CENTRAL INDEX KEY: 0000849043 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 222845714 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-41776 FILM NUMBER: 08755049 BUSINESS ADDRESS: STREET 1: 35 NORTHEAST INDUSTRIAL RD CITY: BRANFORD STATE: CT ZIP: 06405 BUSINESS PHONE: 2034888201 MAIL ADDRESS: STREET 1: 35 NORTHEAST INDUSTRIAL RD CITY: BRANFORD STATE: CT ZIP: 06405 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: WARBURG PINCUS PRIVATE EQUITY VIII L P CENTRAL INDEX KEY: 0001157334 IRS NUMBER: 134161869 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 466 LEXINGTON AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2128780600 MAIL ADDRESS: STREET 1: 466 LEXINGTON AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 SC 13D/A 1 a08-10550_1sc13da.htm SC 13D/A

	UNITED STATES
	SECURITIES AND EXCHANGE COMMISSION
	Washington, D.C. 20549

	SCHEDULE 13D/A

Under the Securities Exchange Act of 1934*
(Amendment No. 1)*

NEUROGEN CORPORATION

(Name of Issuer)

Common Stock, $0.025 Par Value

(Title of Class of Securities)

64124E106

(CUSIP Number)

Scott A. Arenare, Esq.

Managing Director and General Counsel

Warburg Pincus LLC

466 Lexington Avenue

New York, New York 10017

(212) 878-0600

(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

Copies to:

Steven J. Gartner, Esq.

Mark A. Cognetti, Esq.

Willkie Farr & Gallagher LLP

787 Seventh Avenue

New York, NY 10019-6099

(212) 728-8000

April 11, 2008

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.

^* The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

CUSIP No. 64124E106

	1.	Names of Reporting Persons Warburg Pincus Private Equity VIII, L.P. I.R.S. #13-4161869

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			o
		(b)			x

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) WC

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization Delaware

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 0

			8.	Shared Voting Power 16,071,402 (See Items 4 and 5)

			9.	Sole Dispositive Power 0

			10.	Shared Dispositive Power 16,071,402 (See Items 4 and 5)

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 16,071,402 (See Items 4 and 5)

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o

	13.	Percent of Class Represented by Amount in Row (11) 32.4% (See Items 4 and 5)

	14.	Type of Reporting Person (See Instructions) PN

CUSIP No. 64124E106

	1.	Names of Reporting Persons Warburg Pincus & Co. I.R.S. #13-6358475

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			o
		(b)			x

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) N/A

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization New York

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 0

			8.	Shared Voting Power 16,071,402 (See Items 4 and 5)

			9.	Sole Dispositive Power 0

			10.	Shared Dispositive Power 16,071,402 (See Items 4 and 5)

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 16,071,402 (See Items 4 and 5)

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o

	13.	Percent of Class Represented by Amount in Row (11) 32.4% (See Items 4 and 5)

	14.	Type of Reporting Person (See Instructions) PN

CUSIP No. 64124E106

	1.	Names of Reporting Persons Warburg Pincus LLC I.R.S. #13-3536050

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			o
		(b)			x

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) N/A

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization New York

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 0

			8.	Shared Voting Power 16,071,402 (See Items 4 and 5)

			9.	Sole Dispositive Power 0

			10.	Shared Dispositive Power 16,071,402 (See Items 4 and 5)

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 16,071,402 (See Items 4 and 5)

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o

	13.	Percent of Class Represented by Amount in Row (11) 32.4% (See Items 4 and 5)

	14.	Type of Reporting Person (See Instructions) OO

CUSIP No. 64124E106

	1.	Names of Reporting Persons Warburg Pincus Partners LLC I.R.S. #13-4069737

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			o
		(b)			x

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) N/A

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization New York

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 0

			8.	Shared Voting Power 16,071,402 (See Items 4 and 5)

			9.	Sole Dispositive Power 0

			10.	Shared Dispositive Power 16,071,402 (See Items 4 and 5)

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 16,071,402 (See Items 4 and 5)

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o

	13.	Percent of Class Represented by Amount in Row (11) 32.4% (See Items 4 and 5)

	14.	Type of Reporting Person (See Instructions) OO

CUSIP No. 64124E106

	1.	Names of Reporting Persons Charles R. Kaye

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			o
		(b)			x

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) N/A

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization United States of America

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 0

			8.	Shared Voting Power 16,071,402 (See Items 4 and 5)

			9.	Sole Dispositive Power 0

			10.	Shared Dispositive Power 16,071,402 (See Items 4 and 5)

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 16,071,402 (See Items 4 and 5)

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o

	13.	Percent of Class Represented by Amount in Row (11) 32.4% (See Items 4 and 5)

	14.	Type of Reporting Person (See Instructions) IN

CUSIP No. 64124E106

	1.	Names of Reporting Persons Joseph P. Landy

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			o
		(b)			x

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) N/A

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization United States of America

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 0

			8.	Shared Voting Power 16,071,402 (See Items 4 and 5)

			9.	Sole Dispositive Power 0

			10.	Shared Dispositive Power 16,071,402 (See Items 4 and 5)

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 16,071,402 (See Items 4 and 5)

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o

	13.	Percent of Class Represented by Amount in Row (11) 32.4% (See Items 4 and 5)

	14.	Type of Reporting Person (See Instructions) IN

This Amendment No. 1 to Schedule 13D (this “Amendment No. 1”) amends the Schedule 13D originally filed with the United States Securities and Exchange Commission (the “SEC”) on April 19, 2004 (the “Original Schedule 13D”). This Amendment No. 1 is being filed on behalf of Warburg Pincus Private Equity VIII, L.P., a Delaware limited partnership (“WP VIII”), Warburg Pincus LLC, a New York limited liability company (“WP LLC”), Warburg Pincus & Co., a New York general partnership (“WP”), Warburg Pincus Partners, LLC, a New York limited liability company (“WP Partners”), and Messrs. Charles R. Kaye and Joseph P. Landy, each a Managing General Partner of WP and Co-President and Managing Member of WP LLC. Messrs. Kaye and Landy, together with WP VIII, WP LLC, WP and WP Partners are hereinafter referred to as the “Warburg Pincus Reporting Persons”). The holdings of the Warburg Pincus Reporting Persons indicated in this Amendment No. 1 include the holdings of Warburg Pincus Netherlands Private Equity VIII C.V. I, a company originated under the laws of the Netherlands (“WPNPE VIII I”) and WP-WPVIII Investors L.P., a Delaware limited partnership (“WP-WPVIIII”, and together with WP VIII and WPNPE VIII I, the “Investors”), which shares the Warburg Pincus Reporting Persons may be deemed to beneficially own.

The Warburg Pincus Reporting Persons are making this single, joint filing because they may be deemed to constitute a “group” within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The agreement among the Warburg Pincus Reporting Persons to file jointly (the “Joint Filing Agreement”) is attached hereto as Exhibit 1. This Amendment No. 1 relates to the common stock, par value $0.025 per share (the “Common Stock”), Common Stock

issuable upon exchange of the Series A Exchangeable Preferred Stock, par value $0.025 per share (the “Exchangeable Preferred Stock”), and a warrant exercisable for shares of Common Stock (the “Warrant”) of Neurogen Corporation, a Delaware corporation (the “Company”).

Capitalized terms used herein which are not defined herein have the meanings ascribed to them in the Original Schedule 13D. Each Warburg Pincus Reporting Person disclaims beneficial ownership of all shares of Common Stock (including shares issuable upon exchange of the Exchangeable Preferred Stock and exercise of the Warrant), Exchangeable Preferred Stock and the Warrant except to the extent of any pecuniary interest therein.

Item 1. Security and Issuer.

Item 1 of the Original Schedule 13D is hereby amended by replacing it in its entirety with the following:

This Amendment No. 1 relates to the Common Stock, Exchangeable Preferred Stock and the Warrant and is being filed pursuant to Rule 13d-1 of the Exchange Act. The address of the principal executive offices of the Company is 35 Northeast Industrial Road, Branford, Connecticut 06405.

Item 2. Identity and Background

Item 2 of the Original Schedule 13D is hereby amended by replacing it in its entirety with the following:

(a) This statement is filed by the Warburg Pincus Reporting Persons. The Warburg Pincus Reporting Persons may be deemed to be a group within the meaning of Rule 13d-5. WP Partners is the sole general partner of WP VIII. WP is the sole

managing member of WP Partners. WP LLC manages each Investor. The general partners of WP and the members and managing directors of WP LLC, and their respective business addresses and principal occupations, are set forth on Schedule I hereto.

(b) The address of the principal business and principal office of each of the Warburg Pincus Reporting Persons is 466 Lexington Avenue, New York, New York 10017.

The principal business of each Investor is that of making private equity and related investments. The principal business of WP Partners is acting as general partner of each of the Investors and certain other private equity funds. The principal business of WP is acting as the sole managing member of WP Partners and acting as general partner to certain other private equity funds. The principal business of WP LLC is acting as manager of each of the Investors and certain other private equity funds.

(c) None of the Warburg Pincus Reporting Persons, nor, to the best of their knowledge, any of the directors, executive officers, control persons, general partners or members referred to in paragraph (a) above has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors).

(d) None of the Warburg Pincus Reporting Persons, nor, to the best of their knowledge, any of the directors, executive officers, control persons, general partners or members referred to in paragraphs (a) and (d) above has, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order

enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

(e) Except as otherwise indicated above or on Schedule I hereto, each of the individuals referred to in paragraphs (a) and (d) above is a United States citizen.

Item 3. Source and Amount of Funds or Other Consideration.

Item 3 of the Original Schedule 13D is hereby amended and supplemented by adding the following at the end thereof:

Pursuant to the Securities Purchase Agreement, dated as of April 7, 2008, by and among WP VIII, the other purchasers listed on the signature pages thereto and the Company (a copy of which is attached hereto as Exhibit 2 and is hereinafter referred to as the “Securities Purchase Agreement”), WP VIII agreed to purchase 192,307 units, each consisting of one share of Exchangeable Preferred Stock and one Warrant. At the closing of the transaction on April 11, 2008 (the “Closing Date”), the Company sold WP VIII the shares of Exchangeable Preferred Stock and issued the Warrant to WP VIII for an aggregate purchase price of $5,999,978.40. The terms and conditions of the Exchangeable Preferred Stock and the Warrant, including with respect to the exchange and exercise thereof, are described in greater detail in Items 4 and 5 below.

The total amount of funds required to purchase the shares of Exchangeable Preferred Stock and the Warrant pursuant to the Securities Purchase Agreement was furnished from the working capital of the Warburg Pincus Reporting Persons. No additional funds were required to purchase the Exchangeable Preferred Stock and the Warrant reported on this Amendment No. 1.

Item 4. Purpose of Transaction.

Item 4 of the Original Schedule 13D is hereby amended and supplemented by adding the following at the end thereof:

The purchase by WP VIII of the Exchangeable Preferred Stock and the Warrant as described herein was effected because of the Warburg Pincus Reporting Persons’ belief that the Company represents an attractive investment based on the Company’s business prospects and strategy. Depending on prevailing market, economic and other conditions, the Warburg Pincus Reporting Persons may from time to time acquire additional shares of the Company or engage in discussions with the Company concerning future acquisitions of shares of capital stock of the Company or further investments by them in the Company. The Warburg Pincus Reporting Persons intend to review their investment in the Company on a continuing basis and, depending upon the price and availability of shares of the Company’s capital stock, subsequent developments affecting the Company, the Company’s business and prospects, other investment and business opportunities available to the Warburg Pincus Reporting Persons, general stock market and economic conditions, tax considerations and other factors considered relevant, may decide at any time to increase or to decrease the size of their investment in the Company.

As discussed in Item 3 above, WP VIII entered into the Securities Purchase Agreement pursuant to which the Company agreed to issue and sell and WP VIII agreed to purchase shares of Exchangeable Preferred Stock and the Warrant on the Closing Date. A copy of the Securities Purchase Agreement is attached hereto as Exhibit 2 and incorporated herein by reference; a copy of the Certificate of Designations, Number, Voting Powers, Preferences and Rights of Series A Exchangeable Preferred Stock of Neurogen Corporation (the “Certificate of Designations”) is attached hereto as Exhibit 3

and incorporated herein by reference; a copy of the Registration Rights Agreement, dated as of April 7, 2008, by and among WP VIII, the investors from time to time signatories thereto and the Company (the “Registration Rights Agreement”) is attached hereto as Exhibit 4 and incorporated herein by reference; and a form of the Warrant to Purchase Shares of Common Stock, issued by the Company to WP VIII (the “Warrant Form”), is attached hereto as Exhibit 5 and incorporated herein by reference. Set forth below is a summary of certain terms of the Securities Purchase Agreement, the Certificate of Designations, the Registration Rights Agreement and the Warrant Form. Such summary is qualified in its entirety by reference to the Securities Purchase Agreement, the Certificate of Designations, the Registration Rights Agreement and the Warrant Form.

Terms of the Securities Purchase Agreement

Pursuant to Section 7.4 of the Securities Purchase Agreement, the Company has agreed to call a meeting of its stockholders (the “Stockholders Meeting”) within 120 days after the Closing Date to approve (such approval being hereinafter referred to as the “Stockholder Approval”): (1) an amendment to the Company’s certificate of incorporation to increase of the number of shares of the Company’s Common Stock authorized for issuance by the Company to not less than 100,000,000 shares, (2) the exchange of the Exchangeable Preferred Stock for shares of Common Stock, pursuant to the terms of the Certificate of Designations, and (3) any stockholder approvals required by the listing standards of the Nasdaq Global Market (together, the “Proposals”). Subject to fiduciary obligations under applicable law, the Company’s Board of Directors has agreed to recommend to the Company’s stockholders that they approve the Proposals. As described, in Section 7 of the Certificate of Designations, upon the later to occur of (i) receipt of the Stockholder Approval, 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 Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), that are applicable to the exchange of the Exchangeable Preferred Stock for Common Stock (“HSR Approval”), each outstanding share of Exchangeable Preferred Stock shall automatically be exchanged for such number of shares of Common Stock determined by dividing (x) the Stated Value of the Exchangeable Preferred Stock (as defined below) then in effect by (y) the Exchange Price (as defined below) of the Exchangeable Preferred Stock then in effect (the “Exchange Rate”). The Stated Value of the Exchangeable Preferred Stock is initially $31.20 per share and the Exchange Price is initially $1.20. Each of the Stated Value and the Exchange Price are subject to the appropriate adjustment in the event of any stock dividend, stock split, stock distribution or combination, subdivision, reclassification or other corporate actions having the similar effect with respect to the Exchangeable Preferred Stock and Common Stock, respectively. Each share of Exchangeable Preferred Stock is initially exchangeable for 26 shares of Common Stock prior to any adjustment of the Stated Value or Exercise Price (the “Initial Exchange Rate”). Accordingly, the 192,307 shares of Exchangeable Preferred Stock purchased by WP VIII are exchangeable, at the Initial Exchange Rate, for 4,999,982 shares of Common Stock in the aggregate.

Terms of Exchangeable Preferred Stock

As discussed above, the Exchangeable Preferred Stock is initially exchangeable into shares of Common Stock upon receipt of HSR Approval and Stockholder Approval at the Initial Exchange Rate, subject to adjustment pursuant to the terms of the Certificate

of Designations. The Exchangeable Preferred Stock is non-voting stock, except as otherwise required by Delaware law and subject to a right of its holders to consent to (i) any amendment of its terms, (ii) the creation or issuance by the Company of certain types of debt securities or capital stock and (iii) the incurrence of any indebtedness by the Company (excluding accrued expenses and trade payables) for borrowed money.

Pursuant to Section 4 of the Certificate of Designations, beginning on the Closing Date and for so long as the Exchangeable Preferred Stock remains outstanding, cumulative dividends on the Exchangeable Preferred Stock shall accrue at an annual rate of 20%, compounded monthly, of the Stated Value. In accordance with the terms of the Certificate of Designations, all accrued dividends on the Exchangeable Preferred Stock shall be paid, to the extent not previously 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 Closing Date; provided, however, that any dividends which have accrued prior to the four month anniversary of the Closing Date shall not be payable if the Stockholder Approval is obtained on or prior to the four month anniversary of the Closing Date. If the Company fails to pay dividends in accordance with the terms of the Certificate of Designations when it is lawfully permitted to do so, or fails to redeem all shares of Exchangeable Preferred Stock within 30 days after receipt of a Redemption Demand Notice (as defined in the Certificate of Designations), the dividend rate is automatically increased to 30% per annum (the “Default Dividends”). Dividends on the Exchangeable Preferred Stock shall be paid in cash or additional shares of Exchangeable Preferred Stock at the election of each holder thereof.

Pursuant to Section 8 of the Certificate of Designations, for so long as the Exchangeable Preferred Stock remains outstanding on or after the earlier of (i) the first anniversary of the Closing Date and (ii) the issuance by the Company of any capital stock or debt securities (other than the issuance of Common Stock pursuant to the Company’s equity incentive plans or in accordance with the terms of the Certificate of Designations), the Company and the holders of a majority of the outstanding shares of Exchangeable Preferred Stock will each have the option to cause the Company to redeem the outstanding shares of Exchangeable Preferred Stock for cash in a per share amount equal to the greater of: (a) 120% of the Stated Value of a share of Exchangeable Preferred Stock plus all accrued but unpaid dividends (whether or not declared) through the date of such redemption or (b) the Fair Market Value (as defined in the Certificate of Designations) of one share of Common Stock on the date on which the Company exercises such right multiplied by the then current Exchange Rate (the “Redemption Price”).

Pursuant to Section 5 of the Certificate of Designations, for so long as the Exchangeable Preferred Stock remains outstanding, upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of the Exchangeable Preferred Stock will 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 the Redemption Price. In addition, pursuant to the terms of the Certificate of Designations, for so long as the Exchangeable Preferred Stock remains outstanding, upon a “change in control” of the Company (as defined in the Certificate of Designations), the holders will 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 the Acquisition Price (as defined in the Certificate of Designations).

For the purpose of this Amendment No. 1, it has been assumed that (i) the Exchangeable Preferred Stock will be exchanged into 4,999,982 shares of Common Stock on the date of the Stockholders Meeting at the Initial Exchange Rate, (ii) the Stockholders Meeting is held on or before the four month anniversary of the Closing Date and (iii) the Stockholder Approval is obtained and, accordingly, no dividends would be entitled to be paid on the Exchangeable Preferred Stock.

Terms of the Registration Rights Agreement

Pursuant to the Registration Rights Agreement, WP VIII has been granted certain registration rights. Pursuant to Section 1(a) of the Registration Rights Agreement, so long as any Registrable Shares (as defined in the Registration Rights Agreement) are outstanding, the Company will, within 20 days after the Closing Date, file and use its best efforts to cause to become and remain effective, no later than the earlier of (i) 15 days after the Stockholders Meeting or (ii) the one year anniversary of the Closing Date, a registration statement on an appropriate form under the Securities Act of 1933, as amended (the “Securities Act”), relating to the offer and sale of the Registrable Common Shares (as defined in the Registration Rights Agreement).

Pursuant to Section 2(a) of the Registration Rights Agreement, if the Registrable Exchangeable Shares (as defined in the Registration Rights Agreement) are outstanding on April 7, 2009 (the “Outside Date”), the Company will, on the Outside Date, file and use its best efforts to cause to become and remain effective, no later than 90 days from the Outside Date, a registration statement on an appropriate form under the Securities Act

relating to the offer and sale of the Registrable Exchangeable Shares (as defined in the Registration Rights Agreement).

Terms of the Warrant

Pursuant to the terms of the Warrant, beginning on the earlier of (i) the date on which the Stockholders Meeting has occurred and (ii) April 7, 2009, and ending at 5:00 p.m. on April 11, 2013 (the “Exercise Period”), WP VIII is entitled to purchase up to the number of shares of Common Stock equal to 50% of the number of shares of Common Stock into which the total number of shares of Exchangeable Preferred Stock then held by WP VIII is exchangeable, calculated as of the earliest to occur of (i) the date of the Stockholder Approval and (ii) on the earlier of (A) the date of the exercise of the Warrant and (B) the one year anniversary of the Closing Date, in the event that the Stockholders Meeting is held and the Stockholder Approval is not obtained. The exercise price of the Warrant is $2.30, subject to the appropriate adjustment in the event of any stock dividend, stock split, stock distribution or combination, subdivision, reclassification or other corporate actions having the similar effect with respect to the Common Stock. The Warrant may be exercised by cashless exercise. If at any time during the Exercise Period, the number of authorized but unissued shares of Common Stock is not sufficient to permit exercise of the Warrant, the Company will take such actions as may, in the opinion of counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes.

Pursuant to Section 4.3 of the Warrant Form, if prior to the exercise of the Warrant (i) the Company effects any merger or consolidation of the Company with or into another person, in which the shareholders of the Company as of immediately prior to

the transaction own less than a majority of the outstanding stock of the surviving entity; (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions; (iii) any tender offer or exchange offer (whether by the Company or another person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property; or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (each, a “Fundamental Transaction”), then WP VIII shall have the right thereafter to receive, upon exercise of the Warrant, the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of shares of Common Stock then issuable upon exercise in full of the Warrant (the “Alternate Consideration”). The Company shall not effect any such Fundamental Transaction unless prior to or simultaneously with the consummation thereof, any successor to the Company, surviving entity or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity shall assume the obligation to deliver to WP VIII, such Alternate Consideration as WP VIII may be entitled to purchase, and the other obligations under the Warrant.

In the event of a Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Securities Exchange Act of 1934, as amended, or (3) a Fundamental Transaction involving a person or entity not traded on a national securities exchange, the Nasdaq Global Select Market, the Nasdaq

Global Market, or the Nasdaq Capital Market, the Company or any successor entity shall pay, at the option of the holder, exercisable at any time concurrently with or within 30 days after the consummation of the Fundamental Transaction, and in lieu of any Alternate Consideration, an amount of cash equal to the value of the Warrant as determined in accordance with the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg Financial Markets.

For the purpose of this Amendment No. 1, it has been assumed that (i) the Warrant will be exercised in full by WP VIII on the date of the Stockholders Meeting, (ii) the Stockholders Meeting is held on or before the four month anniversary of the Closing Date, (iii) the Stockholder Approval is obtained and, accordingly, no dividends would be entitled to be paid on the Exchangeable Preferred Stock, and (iv) the Exchangeable Preferred Stock is exchanged for shares of Common Stock at the Initial Exchange Rate.

Additional Disclosure

Except as set forth above in this statement, none of the Warburg Pincus Reporting Persons nor, to the best of their knowledge, any persons set forth on Schedule I hereto has any plans or proposals that relate to or would result in: (a) the acquisition by any person of additional securities of the Company, or the disposition of securities of the Company; (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries; (c) a sale or transfer of a material amount of assets of the Company or any of its subsidiaries; (d) any change in the present Board or management of the Company, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the Board; (e) any material change in the present capitalization or dividend policy of the Company; (f)

any other material change in the Company’s business or corporate structure; (g) changes in the Company’s charter, by-laws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Company by any person; (h) causing a class of securities of the Company to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (i) a class of equity securities of the Company becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Exchange Act; or (j) any action similar to any of those enumerated above.

Item 5. Interest in Securities of the Issuer.

Item 5(a) of the Original Schedule 13D is hereby amended by replacing it in its entirety with the following:

As of April 11, 2008, by reason of their respective relationships with the Investors and each other, each of the Warburg Pincus Reporting Persons may be deemed under Rule 13d-3 under the Exchange Act to beneficially own 16,071,402 which represents: (i) 8,571,429 shares of Common Stock currently held of record by the Investors, (ii) 4,999,982 shares of Common Stock to be issued to WP VIII on the date of Stockholder Approval upon the exchange of the shares Exchangeable Preferred Stock (assuming that the exchange occurs on the date of the Stockholders Meeting at the Initial Exchange Rate, that the Stockholders Meeting is held on or before the four month anniversary of the Closing Date and that no dividends are entitled to be paid on the Exchangeable Preferred Stock) and (iii) 2,499,991 shares of Common Stock to be issued to WP VIII on the date of Stockholder Approval upon the full exercise of the Warrant (assuming that the Warrant is exercised in full on the date of the Stockholder’s Meeting, that the

Stockholders Meeting is held on or before the four month anniversary of the Closing Date, that no dividends are entitled to be paid on the Exchangeable Preferred Stock and that the Exchangeable Preferred Stock is exchanged for shares of Common Stock at the Initial Exchange Rate). Accordingly, based on the foregoing, the Warburg Pincus Reporting Persons’ beneficial ownership represents approximately 32.4% of the outstanding Common Stock, based on a total of 49,551,743 shares of Common Stock of the Company outstanding which is comprised of: (i) 42,051,770 shares of Common Stock outstanding as of March 7, 2008, as represented by the Company in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, filed with the SEC on March 17, 2007 and amended on April 4, 2008, (ii) 4,999,982 shares of Common Stock to be issued to WP VIII on the date of Stockholder Approval upon the exchange of the shares Exchangeable Preferred Stock (assuming that the exchange occurs on the date of the Stockholders Meeting at the Initial Exchange Rate, that the Stockholders Meeting is held on or before the four month anniversary of the Closing Date and that no dividends are entitled to be paid on the Exchangeable Preferred Stock) and (iii) 2,499,991 shares of Common Stock to be issued to WP VIII upon the full exercise of the Warrant (assuming that the Warrant is exercised in full on the date of the Stockholder’s Meeting, that the Stockholders Meeting is held on or before the four month anniversary of the Closing Date, that no dividends are entitled to be paid on the Exchangeable Preferred Stock and that the Exchangeable Preferred Stock is exchanged for shares of Common Stock at the Initial Exchange Rate).

The Warburg Pincus Reporting Persons are making this single, joint filing because they may be deemed to constitute a “group” within the meaning of

Section 13(d)(3) of the Exchange Act. Each Warburg Pincus Reporting Persons disclaims beneficial ownership of all shares of Common Stock except to the extent of any pecuniary interest therein.

Item 5(b) of the Original Schedule 13D is hereby amended by replacing it in its entirety with the following:

Each of the Investors shares the power to vote or to direct the vote and to dispose or to direct the disposition of the 16,071,402 shares of Common Stock it may be deemed to beneficially own upon the exchange of the Exchangeable Preferred Stock and the full exercise of the Warrant, as described herein. Each of the Warburg Pincus Reporting Persons shares with the Investors the power to vote or to direct the vote and to dispose or to direct the disposition of the 16,071,402 shares of Common Stock it may be deemed to beneficially own upon the exchange of the Exchangeable Preferred Stock and the full exercise of the Warrant, as described herein.

Item 5(c) of the Original Schedule 13D is hereby amended by replacing it in its entirety with the following:

Other than the acquisition of the Exchangeable Preferred Stock and the Warrant on the Closing Date, no transactions in securities of the Company were effected during the last 60 days by the Warburg Pincus Reporting Persons or any of the persons set forth on Schedule I.

Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to the Securities of the Issuer.

Item 6 of the Original Schedule 13D is hereby amended and supplemented by adding the following at the end thereof:

Pursuant to Rule 13d-1(k) promulgated under the Exchange Act, the Warburg Pincus Reporting Persons have entered into an agreement, attached hereto as Exhibit 1, with respect to the joint filing of this Amendment No. 1 or any subsequent amendments hereto.

The Securities Purchase Agreement is described in Item 3 and Item 4 above, such summary being incorporated in this Item 6 by reference. The summary of the Securities Purchase Agreement in this Amendment No. 1 is qualified in its entirety by reference to the Securities Purchase Agreement which is attached hereto as Exhibit 2.

The Certificate of Designations is described in Item 4 above, such summary being incorporated in this Item 6 by reference. The summary of the Certificate of Designations in this Amendment No. 1 is qualified in its entirety by reference to the Certificate of Designations which is attached hereto as Exhibit 3

The Registration Rights Agreement is described in Item 4 above, such summary being incorporated in this Item 6 by reference. The summary of the Registration Rights Agreement in this Amendment No. 1 is qualified in its entirety by reference to the Registration Rights Agreement which is attached hereto as Exhibit 4.

The Warrant Form is described in Item 4 above, such summary being incorporated in this Item 6 by reference. The summary of the Warrant Form in this Amendment No. 1 is qualified in its entirety by reference to the Warrant Form which is attached hereto as Exhibit 5.

Except as described herein and in the Original Schedule 13D, there are no contracts, arrangements, understandings or relationships (legal or otherwise) among the

Warburg Pincus Reporting Persons or between the Warburg Pincus Reporting Persons and any other person with respect to any securities of the Company.

Item 7. Material to be Filed as Exhibits

Item 7 of the Original Schedule 13D is hereby amended and supplemented by adding the following at the end thereof:

1. Joint Filing Agreement.

2. Securities Purchase Agreement, dated as of April 7, 2008, by and among the Company and the purchasers listed on the exhibit thereto.

3. Certificate of Designations, Number, Voting Powers, Preferences and Rights of Series A Exchangeable Preferred Stock of Neurogen Corporation.

4. Registration Rights Agreement, dated as of April 7, 2008, between the investors from time to time signatory thereto and Neurogen Corporation.

5. Form of Warrant to Purchase Shares of Common Stock.

SIGNATURES

After reasonable inquiry and to the best of our knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

Dated: April 14, 2008	WARBURG PINCUS PRIVATE EQUITY VIII, L.P.

	By:		Warburg Pincus Partners, LLC, its
			General Partner

	By:		Warburg Pincus & Co.,
			its Managing Member

	By:		/s/ Scott A. Arenare
			Name: Scott A. Arenare
			Title: Partner


Dated: April 14, 2008	WARBURG PINCUS & CO.

	By:		/s/ Scott A. Arenare
			Name: Scott A. Arenare
			Title: Partner


Dated: April 14, 2008	WARBURG PINCUS LLC

	By:		/s/ Scott A. Arenare
			Name: Scott A. Arenare
			Title: Member


Dated: April 14, 2008	WARBURG PINCUS PARTNERS, LLC

	By:		Warburg Pincus & Co.,
			its Managing Member

	By:		/s/ Scott A. Arenare
			Name: Scott A. Arenare
			Title: Partner


Dated: April 14, 2008

	By:	/s/ Scott A. Arenare
		Name: Charles R. Kaye
		By: Scott A. Arenare, Attorney-in- Fact(1)

Dated: April 14, 2008

	By:	/s/ Scott A. Arenare
		Name: Joseph P. Landy
		By: Scott A. Arenare, Attorney-in- Fact(2)

(1) Power of Attorney given by Mr. Kaye was previously filed with the SEC on March 2, 2006 as an exhibit to a Schedule 13D filed by Building Products, LLC with respect to Builders FirstSource, Inc.

(2) Power of Attorney given by Mr. Landy was previously filed with the SEC on March 2, 2006 as an exhibit to a Schedule 13D filed by Building Products, LLC with respect to Builders FirstSource, Inc.

SCHEDULE I

Set forth below is the name, position and present principal occupation of each of the general partners of Warburg Pincus & Co. (“WP”) and members of Warburg Pincus LLC (“WP LLC”). The sole general partner of Warburg Pincus Private Equity VIII, L.P. (“WP VIII”) is Warburg Pincus Partners, LLC (“WP Partners LLC”), a direct subsidiary of WP. WP VIII, WP Partners LLC and WP LLC are hereinafter collectively referred to as the “Reporting Entities”. Except as otherwise indicated, the business address of each of such persons is 466 Lexington Avenue, New York, New York 10017, and each of such persons is a citizen of the United States.

GENERAL PARTNERS OF WP

NAME		PRESENT PRINCIPAL OCCUPATION IN ADDITION TO POSITION WITH WP, AND POSITIONS WITH THE REPORTING ENTITIES
Joel Ackerman		Partner of WP; Member and Managing Director of WP LLC
Scott A. Arenare		Partner of WP; Member and Managing Director of WP LLC
David Barr		Partner of WP; Member and Managing Director of WP LLC
Sean D. Carney		Partner of WP; Member and Managing Director of WP LLC
Mark Colodny		Partner of WP; Member and Managing Director of WP LLC
David A. Coulter		Partner of WP; Member and Managing Director of WP LLC
Timothy J. Curt		Partner of WP; Member and Managing Director of WP LLC
W. Bowman Cutter		Partner of WP; Member and Managing Director of WP LLC
Cary J. Davis		Partner of WP; Member and Managing Director of WP LLC
David W. Dorman		Partner of WP; Member and Senior Advisor of WP LLC
Steven Glenn		Partner of WP; Member and Managing Director of WP LLC
Michael Graff		Partner of WP; Member and Managing Director of WP LLC
Patrick T. Hackett		Partner of WP; Member and Managing Director of WP LLC
E. Davisson Hardman		Partner of WP; Member and Managing Director of WP LLC
Jeffrey A. Harris		Partner of WP; Member and Managing Director of WP LLC
Stewart J. Hen		Partner of WP; Member and Managing Director of WP LLC
William H. Janeway		Partner of WP; Member and Senior Advisor of WP LLC
Chansoo Joung		Partner of WP; Member and Managing Director of WP LLC
Peter R. Kagan		Partner of WP; Member and Managing Director of WP LLC
Charles R. Kaye		Managing General Partner of WP; Managing Member and Co-President of WP LLC
Henry Kressel		Partner of WP; Member and Managing Director of WP LLC
David Krieger		Partner of WP; Member and Managing Director of WP LLC
Kevin Kruse		Partner of WP; Member and Managing Director of WP LLC
Joseph P. Landy		Managing General Partner of WP; Managing Member and Co-President of WP LLC
Kewsong Lee		Partner of WP; Member and Managing Director of WP LLC
Jonathan S. Leff		Partner of WP; Member and Managing Director of WP LLC
Philip Mintz		Partner of WP; Member and Managing Director of WP LLC
James Neary		Partner of WP; Member and Managing Director of WP LLC
Bilge Ogut		Partner of WP; Member and Managing Director of WP LLC
Dalip Pathak		Partner of WP; Member and Managing Director of WP LLC
Michael F. Profenius		Partner of WP; Member and Managing Director of WP LLC
Justin Sadrian		Partner of WP; Member and Managing Director of WP LLC
Henry B. Schacht		Partner of WP; Member and Senior Advisor of WP LLC
Steven G. Schneider		Partner of WP; Member and Managing Director of WP LLC
Patrick Severson		Partner of WP; Member and Managing Director of WP LLC
John Shearburn		Partner of WP; Member and Managing Director of WP LLC

Barry Taylor		Partner of WP; Member and Managing Director of WP LLC
Christopher H. Turner		Partner of WP; Member and Managing Director of WP LLC
John L. Vogelstein		Partner of WP; Member and Senior Advisor of WP LLC
Elizabeth H. Weatherman		Partner of WP; Member and Managing Director of WP LLC
Rosanne Zimmerman		Partner of WP; Member and Managing Director of WP LLC
Pincus & Company LLC*
WP & Co. Partners, L.P.**
Warburg Pincus Principal Partnership, L.P.***
Warburg Pincus Real Estate Principal Partnership, L.P.***
Warburg Pincus 2006 Limited Partnership***
Warburg Pincus 2007 Limited Partnership***

*	New York limited liability company; primary activity is ownership interest in WP and WP LLC
**	New York limited partnership; primary activity is ownership interest in WP
***	Delaware limited partnership; primary activity is ownership interest in WP

MEMBERS OF WP LLC

NAME		PRESENT PRINCIPAL OCCUPATION IN ADDITION TO POSITION WITH WP LLC, AND POSITIONS WITH THE REPORTING ENTITIES
Joel Ackerman		Member and Managing Director of WP LLC; Partner of WP
Scott A. Arenare		Member and Managing Director of WP LLC; Partner of WP
Pedro Aznar (1)		Member and Managing Director of WP LLC
David Barr		Member and Managing Director of WP LLC; Partner of WP
Sean D. Carney		Member and Managing Director of WP LLC; Partner of WP
Julian Cheng (2)		Member and Managing Director of WP LLC
Stephen John Coates (3)		Member and Managing Director of WP LLC
Mark Colodny		Member and Managing Director of WP LLC; Partner of WP
David A. Coulter		Member and Managing Director of WP LLC; Partner of WP
Timothy J. Curt		Member and Managing Director of WP LLC; Partner of WP
W. Bowman Cutter		Member and Managing Director of WP LLC; Partner of WP
Cary J. Davis		Member and Managing Director of WP LLC; Partner of WP
David W. Dorman		Member and Senior Advisor of WP LLC; Partner of WP
Rajiv Ghatalia (2)		Member and Managing Director of WP LLC
Steven Glenn		Member and Managing Director of WP LLC; Partner of WP
Michael Graff		Member and Managing Director of WP LLC; Partner of WP
Patrick T. Hackett		Member and Managing Director of WP LLC; Partner of WP
E. Davisson Hardman		Member and Managing Director of WP LLC; Partner of WP
Jeffrey A. Harris		Member and Managing Director of WP LLC; Partner of WP
Stewart J. Hen		Member and Managing Director of WP LLC; Partner of WP
William H. Janeway		Member and Senior Advisor of WP LLC; Partner of WP
Chansoo Joung		Member and Managing Director of WP LLC; Partner of WP
Peter R. Kagan		Member and Managing Director of WP LLC; Partner of WP
Charles R. Kaye		Managing Member and Co-President of WP LLC; Managing General Partner of WP
Rajesh Khanna (4)		Member and Managing Director of WP LLC

Henry Kressel		Member and Managing Director of WP LLC; Partner of WP
David Krieger		Member and Managing Director of WP LLC; Partner of WP
Kevin Kruse		Member and Managing Director of WP LLC; Partner of WP
Joseph P. Landy		Managing Member and Co-President of WP LLC; Managing General Partner of WP
Kewsong Lee		Member and Managing Director of WP LLC; Partner of WP
Jonathan S. Leff		Member and Managing Director of WP LLC; Partner of WP
David Li (2)		Member and Managing Director of WP LLC
Niten Malhan (4)		Member and Managing Director of WP LLC
Philip Mintz		Member and Managing Director of WP LLC; Partner of WP
Luca Molinari (5)		Member and Managing Director of WP LLC
James Neary		Member and Managing Director of WP LLC; Partner of WP
Bilge Ogut		Member and Managing Director of WP LLC; Partner of WP
Dalip Pathak		Member and Managing Director of WP LLC; Partner of WP
Michael F. Profenius		Member and Managing Director of WP LLC; Partner of WP
Leo Puri (4)		Member and Managing Director of WP LLC
Justin Sadrian		Member and Managing Director of WP LLC; Partner of WP
Henry B. Schacht		Member and Senior Advisor of WP LLC; Partner of WP
Steven G. Schneider		Member and Managing Director of WP LLC; Partner of WP
Joseph C. Schull (6)		Member and Managing Director of WP LLC
Patrick Severson		Member and Managing Director of WP LLC; Partner of WP
John Shearburn		Member and Managing Director of WP LLC; Partner of WP
Chang Q. Sun (2)		Member and Managing Director of WP LLC
Barry Taylor		Member and Managing Director of WP LLC; Partner of WP
Christopher H. Turner		Member and Managing Director of WP LLC; Partner of WP
Simon Turton (3)		Member and Managing Director of WP LLC
John L. Vogelstein		Member and Senior Advisor of WP LLC; Partner of WP
Elizabeth H. Weatherman		Member and Managing Director of WP LLC; Partner of WP
Peter Wilson (3)		Member and Managing Director of WP LLC
Jeremy S. Young (3)		Member and Managing Director of WP LLC
Rosanne Zimmerman		Member and Managing Director of WP LLC; Partner of WP
Pincus & Company LLC*

Citizen of Germany

Citizen of Hong Kong

Citizen of United Kingdom

Citizen of India

Citizen of Italy

Citizen of Canada

* New York limited liability company; primary activity is ownership interest in WP and WP LLC

As of April 1, 2008

EXHIBIT INDEX

Exhibit 1.		Joint Filing Agreement.
Exhibit 2.		Securities Purchase Agreement, dated as of April 7, 2008, by and among the Company and the purchasers listed on the exhibit thereto.
Exhibit 3.		Certificate of Designations, Number, Voting Powers, Preferences and Rights of Series A Exchangeable Preferred Stock of Neurogen Corporation.
Exhibit 4.		Registration Rights Agreement, dated April 7, 2008, between the investors from time to time signatory thereto and Neurogen Corporation.
Exhibit 5.		Form of Warrant to Purchase Shares of Common Stock.

EX-1 2 a08-10550_1ex1.htm EX-1

Exhibit 1

Joint Filing Agreement

The undersigned hereby agree that the Amendment No. 1 to the statement on Schedule 13D filed by the undersigned with respect to the Common Stock, Exchangeable Preferred Stock and the Warrant of Neurogen Corporation is, and any subsequent amendment thereto signed by each of the undersigned shall be, filed on behalf of each undersigned pursuant to and in accordance with the provisions of Rule 13d-1(k) under the Securities Exchange Act of 1934, as amended.

Dated: April 14, 2008	WARBURG PINCUS PRIVATE EQUITY VIII, L.P.

	By:	Warburg Pincus Partners, LLC., its
		General Partner

	By:	Warburg Pincus & Co.,
		its Managing Member

	By:	/s/ Scott A. Arenare
		Name: Scott A. Arenare
		Title: Partner


Dated: April 14, 2008	WARBURG PINCUS & CO.

	By:	/s/ Scott A. Arenare
		Name: Scott A. Arenare
		Title: Partner


Dated: April 14, 2008	WARBURG PINCUS LLC

	By:	/s/ Scott A. Arenare
		Name: Scott A. Arenare
		Title: Member


Dated: April 14, 2008	WARBURG PINCUS PARTNERS, LLC

	By:	Warburg Pincus & Co.,
		its Managing Member

	By:	/s/ Scott A. Arenare
		Name: Scott A. Arenare
		Title: Partner


Dated: April 14, 2008

	By:		/s/ Scott A. Arenare
			Name: Charles R. Kaye
			By: Scott A. Arenare, Attorney-in-Fact(3)


Dated: April 14, 2008

	By:	/s/ Scott A. Arenare
		Name: Joseph P. Landy
		By: Scott A. Arenare, Attorney-in-Fact(4)

(3) Power of Attorney given by Mr. Kaye was previously filed with the SEC on March 2, 2006 as an exhibit to a Schedule 13D filed by Building Products, LLC with respect to Builders FirstSource, Inc.

(4) Power of Attorney given by Mr. Landy was previously filed with the SEC on March 2, 2006 as an exhibit to a Schedule 13D filed by Building Products, LLC with respect to Builders FirstSource, Inc.

EX-2 3 a08-10550_1ex2.htm EX-2

Exhibit 2

SECURITIES PURCHASE AGREEMENT

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

RECITALS

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

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

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

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

AGREEMENT

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

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

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

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

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

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

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

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

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

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

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

2. Authorization of Shares; Purchase and Sale of Units.

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

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

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

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

3. Representations and Warranties of the Company.

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

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

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

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

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

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

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

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

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

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

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

3.7 Authorization of the Securities.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

3.17 Regulatory Authorities.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

4. Representations and Warranties of the Purchasers.

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

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

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

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

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

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

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

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

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

5. Conditions Precedent.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(h) [intentionally omitted]

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

6. Transfer, Legends.

6.1 Securities Law Transfer Restrictions.

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

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

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

6.2 Legends.

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

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

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

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

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

7. Covenants and Agreements of the Company.

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

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

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

7.4 Proxy Statement; Stockholders Meeting.

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

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

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

7.5 Equal Treatment of Purchasers. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of the Transaction Agreements or in consideration of the exchange, redemption or repurchase of any Security unless the same consideration is also offered to all of the parties to the Transaction Agreements. For clarification purposes, this provision

constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.

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

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

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

8. Termination of Obligations to Effect the Closing.

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

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

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

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

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

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

8.2 In the event of termination by any Purchaser of its obligations to effect the Closing pursuant to this Section 8 (such Purchaser, a “Non-Participating Purchaser”), written notice thereof shall forthwith be given by the Non-Participating Purchaser to the Company and the other Purchasers, and

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

9. Miscellaneous Provisions.

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

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

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

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

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

(a) All correspondence to the Company shall be addressed as follows:

Neurogen Corporation

35 NE Industrial Road

Branford, CT 06405

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

with a copy (not constituting notice) addressed to:

Latham & Watkins LLP

650 Town Center Drive, 20th Floor

Costa Mesa, CA 92626-1925

ATTN: B. Shayne Kennedy, Esq.

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

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

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

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

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

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

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

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

9.12 Assignment. The rights and obligations of the parties hereto shall inure to the benefit of and shall be binding upon the authorized successors and permitted assigns of each party. No party may assign its rights or obligations under this Agreement or designate another person: (i) to perform all or part of its obligations under this Agreement; or (ii) to have all or part of its rights and benefits under this Agreement, in each case without the prior written consent of the other party, provided, however, that a Purchaser may assign its rights hereunder with respect to any Securities transferred to a “Qualified Holder” pursuant to and in compliance with Section 13 of the Registration Rights Agreement, and may

designate such Qualified Holder to perform the duties of the Purchaser hereunder with respect to such transferred Units; provided, further that irrespective of such transfer and designation the Purchaser shall remain obligated hereunder with respect to all of such Purchaser’s purchased Units. In the event of any assignment in accordance with the terms of this Agreement, the assignee shall specifically assume and be bound by the provisions of the Agreement by executing and agreeing to an assumption agreement reasonably acceptable to the other party.

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

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

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

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

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

[Signature Pages Follow]

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

	NEUROGEN CORPORATION


	By:	/s/ Stephen R. Davis
	Name:	Stephen R. Davis
	Title:	President and Chief Executive Officer

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

Exhibit A

SCHEDULE OF PURCHASERS

Purchaser Name and Address	Number of Units to be Purchased	Aggregate Purchase Price
Warburg Pincus Private Equity VIII, L.P.	192,307	$	5,999,978.40
Tang Capital Partners, LP	128,205	$	3,999,996.00
Baker Tisch Investments, L.P.	4,812	$	150,134.40
Baker Bros. Investments, L.P.	5,260	$	164,112.00
Baker Bros. Investments II, L.P.	4,370	$	136,344.00
Baker Bros. Investments II, LP	274	$	8,548.80
Baker Biotech Fund I, L.P.	50,175	$	1,565,460.00
Baker Brothers Life Sciences, L.P.	52,737	$	1,645,394.40
Caduceus Capital Master Fund Limited	30,770	$	3,000,004.80
Caduceus Capital II, LP	34,616	$	0
UBS Eucalyptus Fund, LLC	17,307	$	0
PW Eucalyptus Fund, LLC	1,923	$	0
Summer Street Life Sciences Hedge Fund Investors LLC	11,538	$	0
Domain Public Equity Partners, L.P.	96,154	$	3,000,004.80
Four-Fourteen Partners, LLC	96,154	$	3,000,004.80
Special Situations Life Sciences Fund, LP	15,625	$	487,500.00
Special Situations Life Sciences Fund III QP, LP	80,529	$	2,512,504.80
Zeke, LP	64,103	$	2,000,013.60
Perceptive Life Sciences Master Fund, Ltd.	38,462	$	1,200,014.40
PGE Partner Fund, LP	11,539	$	360,016.80
PGE Venture Fund, LLC	3,206	$	239,990.40
PGE Partner Fund II, LP	7,692	$	100,027.20
Cascade Capital Partners, L.P.	16,025	$	499,980.00
John Simon	9,615	$	299,988.00
Clarion Capital Corporation	8,013	$	250,005.60
Total	981,411	$	30,620,023.20

Exhibit B

FORM OF WARRANT

Exhibit C

REGISTRATION RIGHTS AGREEMENT

Exhibit D

CERTIFICATE OF DESIGNATIONS

Exhibit E

FORM OF LEGAL OPINION

EX-3 4 a08-10550_1ex3.htm EX-3

Exhibit 3

CERTIFICATE OF DESIGNATIONS, NUMBER, VOTING POWERS,

PREFERENCES AND RIGHTS OF

SERIES A EXCHANGEABLE PREFERRED STOCK

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 a 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 11, 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.

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

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 10^th day of April, 2008.

NEUROGEN CORPORATION


By:	/s/ Stephen R. Davis
Name:		Stephen R. Davis
Title:			President, Chief Executive Officer

EX-4 5 a08-10550_1ex4.htm EX-4

Exhibit 4

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

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

(d) 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.

(e) 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”).

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

(b) 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).

(c) 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:

(i) 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;

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

(iii) 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.

(b) 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)).

(c) 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.

(d) 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).

(e) 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.

(f) 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.

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

(h) 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.”

(i) 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.

(j) 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.

(k) 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 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.

(l) 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.

(m) 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.

(n) 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-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.

(o) 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.

(p) 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.

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

5. 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.

6. 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 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.

(b) 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 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.

(c) 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.

(d) 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.

(e) 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.

7. 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.

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

(c) 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.

(d) 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.

(e) 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 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.

9. 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 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.

(e) 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, 20^th 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;

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.

(f) 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.

(g) 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.

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

(i) 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.

(j) 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.

(k) 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 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.

(l) 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.

(m) 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.

(n) 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.

(o) 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.

(p) 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.

(q) 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 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 Pincus Private Equity VIII, L.P.		Warburg Pincus & Co. Davis Blair 466 Lexington Avenue New York, NY 10017
Tang Capital Partners, LP		Tang Capital Management, LLC John Lemkey 4401 Eastgate Mall San Diego, CA 92121
Baker Bros. Investments, L.P.		Baker Bros. Investments Leo Kirby 667 Madison Avenue, 17^th Floor New York, NY 10065
Baker Bros. Investments II, L.P.		Baker Bros. Investments Leo Kirby 667 Madison Avenue, 17^th Floor New York, NY 10065
Baker Bros. Investments II, L.P.		Baker Bros. Investments Leo Kirby 667 Madison Avenue, 17^th Floor New York, NY 10065
Baker Tisch Investments, L.P.		Baker Bros. Investments Leo Kirby 667 Madison Avenue, 17th Floor New York, NY 10065
Baker Biotech Fund I, L.P.		Baker Bros. Investments Leo Kirby 667 Madison Avenue, 17^th Floor New York, NY 10065
Baker Brothers Life Sciences, L.P.		Baker Bros. Investments Leo Kirby 667 Madison Avenue, 17^th Floor New York, NY 10065

Purchaser Name		Purchaser Address
Caduceus Capital Master Fund Limited		Orbimed Advisors Att: Andrew Kanarek 767 Third Ave, 30th Floor NY, NY 10017
Caduceus Capital II, LP		Orbimed Advisors Att: Andrew Kanarek 767 Third Ave, 30th Floor NY, NY 10017
UBS Eucalyptus Fund, L.L.C.		Orbimed Advisors Att: Andrew Kanarek 767 Third Ave, 30th Floor NY, NY 10017
PW Eucaplyptus Fund, Ltd.		Orbimed Advisors Att: Andrew Kanarek 767 Third Ave, 30th Floor NY, NY 10017
Summer Street Life Sciences Hedge Fund Investors LLC		Orbimed Advisors Att: Andrew Kanarek 767 Third Ave, 30th Floor NY, NY 10017
Domain Public Equity Partners, L.P.		Domain Associates Att: Nicole Vittulo One Palmer Square Suite 515 Princeton, NJ 08542
Four-Fourteen Partners, LLC		Four-Fourteen Partners, LLC Barry Bloom 655 Madison Avenue New York, NT 10065-8068
Special Situations Life Science Fund, LP		Lowenstein Sandler, PC Att: Jeff Shapiro 65 Livingston Avenue Roseland, NJ 07068-1791
Special Situations Fund III QP, LP		Lowenstein Sandler, PC Att: Jeff Shapiro 65 Livingston Avenue Roseland, NJ 07068-1791
Zeke LP		Chartwell Investment Partners Att: Filippa DePaolo 1235 Westlakes Drive Suite 400 Berwyn, PA 19312

Purchaser Name		Purchaser Address
Perceptive Life Sciences Master Fund, Ltd.		Perceptive Advisors LLC Att: Steven Berger 499 Park Ave., 25th Floor New York, NY 10022
PGE Partner Fund, LP		Merlin Securities Att: Phil Miner (a/c #70910120) 101 California Street, #2525 San Francisco, CA 94111
PGE Partner Fund II, LP		Merlin Securities Att: Phil Miner (a/c #70910120 101 California Street, #2525 San Francisco, CA 94111
PGE Venture Fund, LLC		Pacific Growth Att: Howard Bernstein a/c 3ZJ99085 One Bush Street, #1700 San Francisco, CA 94104
Cascade Capital Partners, L.P.		Morgan Stanley fao Cascade Capital Partners Att: Darren Davis 555 California St, Suite 2200 San Francisco, CA 94104
John Simon		Allen & Company, LLC Att: John Simon 711 Fifth Ave, 9th Floor NY, NY 10022
Clarion Capital Corporation		Clarion Management Ltd Att: Tom Niehaus 3690 Orange Place Suite 400 Beachwood, Ohio 44122

EX-5 6 a08-10550_1ex5.htm EX-5

Exhibit 5

NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT; OR (B) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

NEUROGEN CORPORATION

WARRANT TO PURCHASE OF SHARES OF COMMON STOCK

WARRANT NO. [ ]

CUSIP NO. 64124E 114

Issuance Date: April 11, 2008

Expiration Date: April 11, 2013

THIS CERTIFIES THAT, for value received, [ ], or its permitted assigns (the “Holder”), is entitled to subscribe for and purchase at the Exercise Price (defined below) from Neurogen Corporation, a Delaware corporation (the “Company”), that number of shares of the common stock of the Company, par value $0.025 per share (the “Common Stock”), equal to 50% of the number of shares of Common Stock into which the total number of shares of Series A Exchangeable Preferred Stock (“Preferred Stock”) then held by the original Holder hereof is exchangeable, calculated as of the earliest to occur of (i) the date of the Stockholders Meeting at which the Proposals are approved by the Company’s stockholders and (ii) on the earlier of (A) the date of the exercise of this warrant (this “Warrant”) and (B) the one year anniversary of the Issuance Date, in the event that the Stockholders Meeting is held and the Proposals are not approved by the Company’s stockholders. This warrant (this “Warrant”) is one of a series of warrants of like tenor originally issued by the Company as of the Issuance Date set forth above pursuant to that certain Securities Purchase Agreement by and among the Company and the several purchasers named therein (including the original Holder), dated as of April 7, 2008 (the “Securities Purchase Agreement”).

1. CERTAIN DEFINITIONS. Capitalized but otherwise undefined terms used herein shall have the meanings set forth in the Securities Purchase Agreement. In addition, as used herein, the following terms shall have the following meanings:

(a) “Exercise Date” means the date on which this Warrant is exercised by delivery to the Company of the items described in Section 2.1(a) and (b) below.

(b) “Exercise Period” means the period commencing on the earlier of (i) the date the Stockholders Meeting is held and the vote of the stockholders on the Proposals has occurred and (ii) the one year anniversary of the Issuance Date and ending at 5:00 p.m., New York City time on the Expiration Date set forth above.

(d) “Trading Day” means: (i) any day on which the Common Stock is listed or quoted and traded on its primary trading market; (ii) if the Common Stock is not then listed or quoted and traded on any eligible market (meaning any of the NYSE, AMEX or NASDAQ), then a day on which trading occurs on the OTC Bulletin Board (or any successor thereto); or (iii) if trading does not occur on the OTC Bulletin Board (or any successor thereto), any business day.

(e) “Warrant Shares” means the shares of Common Stock issuable upon exercise of this Warrant.

2. EXERCISE OF WARRANT.

2.1 Subject to the limitations in Section 2.3 below, this Warrant may be exercised in whole or in part at any time during the Exercise Period, by delivery of the following to the Company:

(a) A duly completed and executed Exercise Notice in the form attached hereto; and

(b) Subject to the cashless exercise provisions set forth in Section 2.2 below, the aggregate Exercise Price of the Warrant Shares with respect to which this Warrant is being exercised, in lawful money of the United States, in cash, certified check or bank draft payable to the order of the Company (or as otherwise agreed to by the Company).

Execution and delivery of the Exercise Notice shall have the same effect as cancellation of the original Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant Shares, if any. If requested by the Company, the Holder agrees to provide this Warrant, or an affidavit of lost security, to the Company within a reasonable period after the delivery of the Exercise Notice. In such event, and upon any partial exercise of this Warrant, the Company, at its expense, will forthwith and, in any event within three Trading Days thereafter, issue and deliver to the Holder a new Warrant or Warrants of like tenor, registered in the name of the Holder and exercisable, in the aggregate, for the balance of the number of shares of Common Stock remaining available for purchase under this Warrant.

2.2 Cashless Exercise. Notwithstanding the foregoing, the Holder may, in its sole discretion, satisfy its obligation to pay the Exercise Price through a “cashless exercise”, in which case the Company shall issue to the Holder the number of Warrant Shares determined as follows:

X = Y [(A-B)/A]

where:

X = the number of Warrant Shares to be issued to the Holder;

Y = the total number of Warrant Shares with respect to which this Warrant is being exercised;

A = the Fair Market Value of one share of the Company’s Common Stock as of the Exercise Date; and

B = the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.

For purposes of the above calculation, the “Fair Market Value” of one share of Common Stock shall mean: (i) the last reported sales price of such security on the NASDAQ Global Market or other trading market where such security is listed or traded as reported by Bloomberg Financial Markets (or a comparable reporting service of national reputation selected by the Company and reasonably acceptable to the Holder if Bloomberg Financial Markets is not then reporting sales prices of such security) (collectively, “Bloomberg”) on the Trading Day prior to the Exercise Date; or (ii) if the NASDAQ Global Market is not the principal trading market for the shares of Common Stock, the last reported sales price of such security reported by Bloomberg on the principal trading market for the Common Stock on the Trading Day prior to the Exercise Date; or (iii) if neither of the foregoing applies, the last sales price of such security in the over-the-counter market on the pink sheets or bulletin board for such security as reported by Bloomberg, or if no sales price is so reported for such security, the last bid price of such security as reported by Bloomberg; or (iv) if Fair Market Value cannot be calculated as of such date on any of the foregoing bases, the Fair Market Value shall be as determined by the Board of Directors of the Company in the exercise of its good faith judgment.

2.3 EXERCISE LIMITATIONS. Notwithstanding anything to the contrary contained herein, the number of Warrant Shares that may be acquired by the Holder upon any exercise of this Warrant shall be limited to the extent necessary to ensure that, following such exercise, the total number of shares of Common Stock then beneficially owned by such Holder and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act, does not exceed 4.999% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. Each delivery of an Exercise Notice hereunder will constitute a representation by the Holder that it has evaluated the limitation set forth in this Section 2.3 and determined that issuance of the full number of Warrant Shares requested in such Exercise Notice is permitted hereunder, and nothing in this Warrant shall obligate the Company to determine the beneficial ownership of any Holder. This Section 2.3 shall not restrict the number of shares of Common Stock that a Holder may receive or beneficially own in order to determine the amount of securities or other consideration that such Holder may receive in the event of a Fundamental Transaction as contemplated in Section 4. By written notice to the Company, the Holder may waive the provisions of this Section 2.3, but any such waiver will not be effective until the 61st day after such notice is delivered to the Company, nor will any such waiver affect any other Holder. This provision shall not apply to Holders who, together with their affiliates, as of the Issuance Date beneficially own (as determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder) in excess of 5.00% of the total number of issued and outstanding shares of Common Stock.

2.4 Delivery of Warrant Shares, etc.

(a) Upon exercise of this Warrant, the Company shall promptly (but in no event later than three Trading Days after the Exercise Date) issue and deliver (or cause to be issued and delivered) to the Holder a certificate or certificates for the Warrant Shares issuable upon such exercise, subject to the electronic delivery provisions set forth in the last sentence of this Section 2.4(a). Unless the Warrant Shares are not freely transferable without volume or manner of sale

restrictions pursuant to Rule 144 under the Securities Act under the Securities Act or if the Warrant Shares may be sold pursuant to a Registration Statement filed under the Securities Act, such certificate(s) will be free of restrictive legends. The Holder, or any person permissibly designated by the Holder to receive Warrant Shares, shall be deemed to have become the holder of record of such Warrant Shares as of the Exercise Date. If the Warrant Shares may be issued without restrictive legends, the Company shall use its commercially reasonable best efforts to deliver, or cause to be delivered, Warrant Shares hereunder electronically through the Depository Trust and Clearing Corporation or another established clearing corporation performing similar functions, if available.

(b) If by the close of the third Trading Day after delivery of a Exercise Notice, the Company fails to either:

(i) deliver to the Holder a certificate or certificates representing the required number of Warrant Shares, or

(ii) to effect electronic delivery of such Warrant Shares in the manner required pursuant to Section 2.4(a),

and if (in either case) after such third Trading Day and prior to the receipt of such Warrant Shares, the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall, within three Trading Days after the Holder’s request and in the Holder’s sole discretion, either: (1) pay in cash to the Holder an amount equal to the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation to deliver such certificate (and to issue such Warrant Shares) shall terminate; or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Warrant Shares and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of: (A) such number of Warrant Shares; times (B) the closing bid price on the date of the event giving rise to the Company’s obligation to deliver such certificate.

(c) To the extent permitted by law, the Company’s obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other person, and irrespective of any other circumstance that might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Warrant Shares. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

3. COVENANTS OF THE COMPANY.

3.1 Covenants as to Warrant Shares. The Company covenants and agrees that all Warrant Shares that may be issued upon the exercise of the rights represented by this Warrant

will, upon issuance, be validly issued and outstanding, fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issuance thereof. The Company further covenants and agrees that the Company will at all times during the Exercise Period, have authorized and reserved, free from preemptive rights, a sufficient number of shares of Common Stock to provide for the exercise of the rights represented by this Warrant. If at any time during the Exercise Period the number of authorized but unissued shares of Common Stock shall not be sufficient to permit exercise of this Warrant, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes.

3.2 No Impairment. The Company will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may be necessary or appropriate in order to protect the exercise rights of the Holder against impairment. The Company will not increase the par value of the Common Stock in excess of the Exercise Price for the Warrant.

4. ADJUSTMENT OF EXERCISE PRICE AND SHARES. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time beginning on the day immediately following the date the Stockholders Meeting is held and the Company’s stockholders vote on the Proposals as set forth in this Section 4.

4.1 Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock; (ii) subdivides outstanding shares of Common Stock into a larger number of shares; or (iii) combines outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction, the numerator or which is equal to the number of shares of Common Stock outstanding immediately before such event, and the denominator of which is equal to the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination.

4.2 Pro Rata Distributions. If the Company, at any time while this Warrant is outstanding, distributes to all holders of Common Stock for no consideration: (i) evidences of its indebtedness; (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph); (iii) rights or warrants to subscribe for or purchase any security; or (iv) any other asset (in each case, “Distributed Property”), then, upon any exercise of this Warrant that occurs after the record date fixed for determination of stockholders entitled to receive such distribution, the Holder shall be entitled to receive, in addition to the Warrant Shares otherwise issuable upon such exercise (if applicable), the Distributed Property that such Holder would have been entitled to receive in respect of such number of Warrant Shares had the Holder been the record holder of such Warrant Shares immediately prior to such record date.

4.3 Fundamental Transactions.

(a) If, at any time while this Warrant is outstanding: (i) the Company effects any merger or consolidation of the Company with or into another person, in which the shareholders of the Company as of immediately prior to the transaction own less than a majority of the outstanding stock of the surviving entity; (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions; (iii) any tender offer or exchange offer (whether by the Company or another person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property; or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (each, a “Fundamental Transaction”), then the Holder shall have the right thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant (the “Alternate Consideration”). The Company shall not effect any such Fundamental Transaction unless prior to or simultaneously with the consummation thereof, any successor to the Company, surviving entity or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity shall assume the obligation to deliver to the Holder, such Alternate Consideration as, in accordance with the foregoing provisions, the Holder may be entitled to purchase, and the other obligations under this Warrant. The provisions of this paragraph 4.3 shall similarly apply to subsequent transactions analogous to a Fundamental Transaction.

(b) Notwithstanding anything to the contrary, in the event of a Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Securities Exchange Act of 1934, as amended, or (3) a Fundamental Transaction involving a person or entity not traded on a national securities exchange, the Nasdaq Global Select Market, the Nasdaq Global Market, or the Nasdaq Capital Market, the Company or any successor entity shall pay at the Holder’s option, exercisable at any time concurrently with or within 30 days after the consummation of the Fundamental Transaction, and in lieu of any Alternate Consideration, an amount of cash equal to the value of this Warrant as determined in accordance with the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg using (i) a price per share of Common Stock equal to the fair market value of the Common Stock for the Business Day immediately preceding the date of consummation of the applicable Fundamental Transaction, (ii) a risk-free interest rate equal to the 30 day LIBOR rate on the day immediately prior to the public announcement of such transaction, (iii) an expected volatility equal to 100% and (iv) a remaining option time equal to the time between the date of the public announcement of such transaction and the Expiration Date. For the avoidance of doubt, in the event the Holder exercises its right to receive the consideration set forth in this Section 4.3(b), this Warrant shall terminate and be of no further force and effect upon such Holder’s receipt of such consideration.

4.4 Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to Section 4.1, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment.

4.5 Calculations. All calculations under this Section 4 shall be made to the nearest 1/10th of one cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the

account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.

4.6 Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 4, the Company at its expense will promptly compute such adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price, the adjusted number or type of Warrant Shares and the Distributed Property or Alternate Consideration issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Company’s transfer agent.

4.7 Notice of Corporate Events. If, while this Warrant is outstanding, the Company: (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including without limitation any granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any subsidiary; (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction; or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company, then, except if such notice and the contents thereof shall be deemed to constitute material non-public information, the Company shall deliver to the Holder a notice describing the material terms and conditions of such transaction at least 10 Trading Days prior to the applicable record or effective date on which a person would need to hold Common Stock in order to participate in or vote with respect to such transaction, and the Company will take all reasonable steps to give Holder the practical opportunity to exercise this Warrant prior to such time; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice.

5. FRACTIONAL SHARES. No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant hereto. All Warrant Shares (including fractions) issuable upon exercise of this Warrant may be aggregated for purposes of determining whether the exercise would result in the issuance of any fractional share. If, after aggregation, the exercise would result in the issuance of a fractional share, the Company shall, in lieu of issuance of any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash equal to the product resulting from multiplying the then current Fair Market Value of a Warrant Share by such fraction.

6. NO STOCKHOLDER RIGHTS. This Warrant in and of itself shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company.

7. REGISTRATION AND TRANSFER.

7.1 The Company or its duly appointed agent (the “Warrant Agent”) shall register this Warrant, upon records to be maintained by the Company or the Warrant Agent for that purpose (the “Warrant Register”), in the name of the record Holder of this Warrant (which shall include the initial Holder and, as the case may be, any registered assignee to which this Warrant is permissibly assigned hereunder). The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

7.2 Subject to the transfer restrictions set forth in Section 6.1 of the Securities Purchase Agreement and compliance with all applicable securities laws, the Company or the

Warrant Agent shall register the transfer of all or any portion of this Warrant in the Warrant Register, upon: (i) surrender of this Warrant, with the Assignment Form attached hereto duly completed and signed; and (ii) if requested by the Company: (x) delivery of an opinion of counsel reasonably satisfactory to the Company to the effect that the transfer of such portion of this Warrant may be made pursuant to an available exemption from the registration requirements of the Securities Act and all applicable state securities or blue sky laws; and (y) delivery of a written statement by the transferee certifying that such transferee is an “accredited investor” as defined in Rule 501(a) under the Securities Act, to the Company; provided that the Company agrees that no such opinion of counsel shall be required in connection with a transaction pursuant to Rule 144 of the Securities Act. Upon any such registration or transfer, a new warrant to purchase Common Stock in substantially the form of this Warrant (any such new warrant, a “New Warrant”) evidencing the portion of this Warrant so transferred shall be issued to the transferee, and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations of a Holder of a Warrant.

8. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as this Warrant so lost, stolen, mutilated or destroyed. Any such new Warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by anyone.

9. NOTICES, ETC. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Company at the address listed on the signature page hereto and to Holder at the applicable address set forth on the applicable signature page to the Securities Purchase Agreement or on the Warrant Register, or at such other address as the Company or Holder may designate by 10 days advance written notice to the other parties hereto.

10. ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.

11. SPECIFIC PERFORMANCE. The Company hereby declares that it is impossible to measure, in money, the damages that will accrue to the Holder by reason of the failure of the Company to perform any of its obligations set forth in this Agreement. The Holder shall have the right to specific performance of such obligations, and if the Holder shall institute any action or proceeding to enforce the provisions hereof, the Company hereby waives the claim or defense that the party instituting such action or proceeding has an adequate remedy at law.

12. AMENDMENTS; WAIVERS. This Warrant may not be amended or modified except pursuant to an instrument in writing signed by the Company and the Holder. No waiver of any term, provision or condition of this Warrant, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a future

or continuing waiver of any such term, provision or condition or as a waiver of any other term, provision or condition of this Warrant.

13. GOVERNING LAW. This Warrant shall be governed by, and construed in accordance with, the laws of the State of New York. The Holder hereby submits to the non-exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated thereby. The Holder irrevocably and unconditionally waives any objection to the laying of venue of any suit or proceeding arising out of or relating to this Warrant in Federal and state courts in the Borough of Manhattan in The City of New York and irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such suit or proceeding in any such court has been brought in an inconvenient forum.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officer as of [date].

Neurogen Corporation

By:
Name:	Stephen R. Davis
Title:	President and Chief Executive Officer


Address:		Neurogen Corporation
		35 NE Industrial Road
		Branford, CT 06405
		Fax:
		Attn: Chief Executive Officer

EXERCISE NOTICE

TO: NEUROGEN CORPORATION

Ladies and Gentlemen:

(1) The undersigned is the Holder of warrant No. (the “Warrant”) issued by NEUROGEN CORPORATION, a Delaware corporation (the “Company”), which Warrant is exercisable for up to shares of the Company’s common stock, par value $0.025. Capitalized terms used herein and not otherwise defined herein have the respective meanings set forth in the Warrant.

(2) The undersigned hereby exercises the Warrant with respect to Warrant Shares (before giving effect to the cashless exercise provisions in Section 2.2 of the Warrant, if applicable).

(3) The Holder intends that payment of the Exercise Price shall be made as (check one):

Cash exercise

Cashless exercise under Section 2.2 of the Warrant

(4) If the Holder has elected a cash exercise, then the Holder shall pay the sum of $ in cash, and the Company shall deliver to the Holder Warrant Shares, in each case in accordance with the terms of the Warrant.

(5) If the Holder has elected a cashless exercise, then Company shall deliver to the Holder Warrant Shares calculated in accordance with Section 2.2 of the Warrant, based on a Fair Market Value of $ .

(6) If the Holder has elected a cash exercise, the Holder hereby certifies that such Holder is an “accredited investor” as defined in Rule 501(a) under the Securities Act.

Dated: ,

Name of Holder:

By:

Name:

Title:

ASSIGNMENT FORM

To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)

FOR VALUE RECEIVED, the attached Warrant and all rights evidenced thereby are hereby assigned to:

Transferee Name:

Transferee Address:

In connection with this assignment, the undersigned Transferor hereby represents, warrants, covenants and agrees to and with the Company that:

(a) the assignment of the Warrant contemplated hereby is being made in compliance with Section 4(1) of the United States Securities Act of 1933, as amended (the “Securities Act”) or another valid exemption from the registration requirements of Section 5 of the Securities Act and in compliance with all applicable securities laws of the states of the United States;

(b) the undersigned Transferor has not offered to sell the Warrant by any form of general solicitation or general advertising, including, but not limited to, any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, and any seminar or meeting whose attendees have been invited by any general solicitation or general advertising;

(c) the undersigned understands that the Company may condition the transfer of the Warrant contemplated hereby upon the delivery to the Company by the undersigned or the Transferee, as the case may be, of a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration under the Securities Act and under applicable securities laws of the states of the United States; provided that no such opinion of counsel shall be required in connection with a transaction pursuant to Rule 144 of the Securities Act.

Dated:

Holder/Transferor Name:

Holder/Transferor Address:

	Holder/Transferor Signature:

	By:
	Printed Name:
	Title:

NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER. OFFICERS OF CORPORATIONS AND THOSE ACTING IN A FIDUCIARY OR OTHER REPRESENTATIVE CAPACITY SHOULD DELIVER PROPER EVIDENCE OF AUTHORITY TO ASSIGN THE FOREGOING WARRANT.

Signature(s) Guaranteed:
	THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCK BROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.

-----END PRIVACY-ENHANCED MESSAGE-----