SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [x]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
[ x ] Definitive proxy statement Commission Only (as permitted
[ ] Definitive additional materials by Rule 14a-6(e) (2) )
[ ] Soliciting material pursuant to
Rule 14a-11(c) or Rule 14a-12
NEUROGEN CORPORATION
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than registrant)
Payment of filing fee. (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: N/A
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(2) Aggregate number of securities to which transactions applies: N/A
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: N/A
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction: N/A
- --------------------------------------------------------------------------------
(5) Total fee paid: N/A
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date filed:
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<PAGE>
NEUROGEN CORPORATION
April 26, 1999
To the Stockholders of Neurogen Corporation:
On behalf of the Board of Directors, I cordially invite you to attend the
1999 Annual Meeting of Stockholders of Neurogen Corporation. The Annual Meeting
will be held on Wednesday, May 26, 1999, at 9:00 a.m., local time, at the New
York Palace Hotel at 455 Madison Avenue, New York, New York 10022.
A description of business to be conducted at the Annual Meeting is set
forth in the attached Notice of Annual Meeting and Proxy Statement. Also
enclosed is a copy of our 1998 Annual Report to Stockholders.
It is important that your views be represented whether or not you are able
to be present at the Annual Meeting. Please mark, sign, date and return the
enclosed proxy card promptly in the accompanying postage-paid envelope. By
returning the proxy, you can help the Company avoid the expense of duplicate
proxy solicitations and possibly having to reschedule the Annual Meeting if a
quorum of outstanding shares is not present or represented by proxy. If you
attend the Annual Meeting and wish to change your proxy vote, you may do so
simply by voting in person at the Annual Meeting.
<PAGE>
NEUROGEN CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 26, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Neurogen
Corporation will be held on Wednesday, May 26, 1999, at 9:00 a.m., local time,
at the New York Palace Hotel at 455 Madison Avenue, New York, New York 10022,
for the following purposes:
1. To elect eleven directors to the Board of Directors, each to hold office
until the next Annual Meeting of Stockholders of the Company and until such
director's respective successor shall have been duly elected and qualified.
2. To ratify the appointment by the Board of Directors of
PricewaterhouseCoopers LLP as the independent auditors for the Company for the
fiscal year ending December 31, 1999.
3. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
This Notice is accompanied by a form of proxy, a Proxy Statement and the
Company's 1998 Annual Report to Stockholders. The foregoing items of business
are more fully described in the Proxy Statement.
In accordance with the Company's By-laws, the close of business on April
15, 1999 has been fixed as the Record Date for the determination of the
stockholders entitled to notice of and to vote at the Annual Meeting and any
adjournment thereof.
Branford, Connecticut
April 26, 1999
IMPORTANT
To ensure your representation at the meeting, you are urged to mark, sign,
date and return the enclosed proxy as promptly as possible in the postage-paid
envelope enclosed for that purpose. If you attend the meeting, you may vote in
person even if you returned a proxy.
<PAGE>
NEUROGEN CORPORATION
PROXY STATEMENT
General
The enclosed proxy is solicited on behalf of the Board of Directors of
Neurogen Corporation (the "Company" or "Neurogen") for use at the Annual Meeting
of Stockholders to be held on May 26, 1999, at 9:00 a.m., local time, or at any
adjournment thereof (the "Annual Meeting"). The Annual Meeting will be held at
the New York Palace Hotel at 455 Madison Avenue, New York, New York 10022. The
purposes of the Annual Meeting are set forth in the attached Notice of Annual
Meeting of Stockholders.
This Proxy Statement, the Notice of Annual Meeting of Stockholders, the
form of proxy and Neurogen's Annual Report to Stockholders are being mailed to
stockholders on or about April 28, 1999.
Record Date and Share Ownership
Stockholders of record on the Company's books at the close of business on
April 15, 1999 (the "Record Date") are entitled to vote at the Annual Meeting.
At the Record Date, 14,706,840 shares of the Company's Common Stock, par value
$.025 per share (the "Common Stock"), were issued and outstanding. For
information concerning stock ownership by certain stockholders, see "Principal
Stockholders".
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company a written
notice of revocation prior to the voting of the proxy or a duly executed proxy
bearing a later date or by attending the Annual Meeting and voting in person.
Voting and Solicitation
Each stockholder is entitled to one vote for each share of the Common Stock
held of record in his or her name on the Record Date on each matter submitted to
a vote at the Annual Meeting. Cumulative voting is not permitted with respect to
any proposal to be acted upon at the Annual Meeting.
If properly executed and received by the Company before the Annual Meeting,
any proxy representing shares of Common Stock entitled to be voted at the Annual
Meeting and specifying how it is to be voted will be voted accordingly. Any such
proxy, however, which fails to specify how it is to be voted on a proposal for
which a specification may be made will be voted on such proposal in accordance
with the recommendation of the Board of Directors. Abstentions are counted in
tabulations of the votes cast on proposals presented to stockholders, but broker
non-votes are not counted for purposes of determining whether a proposal has
been approved.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting,
excluding any shares owned by the Company, is necessary to constitute a quorum.
Abstentions and broker non-votes are counted for purposes of determining the
presence or absence of a quorum for the transaction of business.
The cost of soliciting proxies will be borne by the Company. In addition,
the Company expects to reimburse brokerage firms and other persons representing
beneficial owners of Common Stock for their expenses in forwarding solicitation
material to such beneficial owners. Proxies may be solicited by certain of the
Company's directors, officers and regular employees, without additional
compensation, in person or by mail, telephone, facsimile or telegram.
Pursuant to Delaware law, the Board of Directors has appointed an inspector
to act at the Annual Meeting. The inspector shall carry out the duties imposed
pursuant to Section 231 of the Delaware General Corporation Law, including the
counting of votes.
<PAGE>
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
Eleven directors are to be elected to the Board of Directors at the Annual
Meeting. Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the eleven nominees of the Board of Directors named below,
all of whom are presently directors of the Company and have served continuously
since the month and year indicated opposite each such director's name in the
following table, each to hold office for a term expiring at the next Annual
Meeting of Stockholders of the Company and until such director's successor shall
have been duly elected and qualified. In the event that any nominee of the
Company is unable or declines to serve as a director at the time of the Annual
Meeting, the proxies will be voted for any nominee who shall be designated by
the present Board of Directors to fill the vacancy. It is not expected that any
nominee will be unable or will decline to serve as a director. In the event that
additional persons are nominated for election as directors, the proxy holders
intend to vote all proxies received by them in such a manner as will assure the
election of as many of the nominees listed below as possible, with any required
selection among such nominees to be determined by the proxy holders. The eleven
persons receiving the highest vote totals shall be elected as directors of the
Company.
The Company's Board of Directors recommends a vote FOR the nominees listed
below:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name of Nominees Age Principal Occupation Director Since
- ----------------- ---- -------------------- --------------
Barry M. Bloom, Ph.D. 70 Former Executive Vice President, Pfizer Inc December 1993
Robert N. Butler, M.D. 72 CEO and President, International Longevity Center. July 1989
Professor of Geriatrics, Mount Sinai School of
Medicine
Frank C. Carlucci 68 Chairman of the Board, Neurogen Corporation; February 1989
Chairman, The Carlyle Group
Jeffrey J. Collinson 57 President, Collinson Howe Venture Partners, Inc. May 1989
Robert M. Gardiner 76 Senior Advisor, Morgan Stanley Dean Witter June 1989
Mark Novitch, M.D. 66 Former Vice Chairman of the Board, The Upjohn December 1993
Company; Adjunct Professor of Health Care
Sciences, George Washington University Medical
Center
Harry H. Penner, Jr. 53 President and Chief Executive Officer, Neurogen December 1993
Corporation
Robert H. Roth, Ph.D. 59 Professor of Psychiatry and Pharmacology, Yale December 1988
University; member of the Scientific Advisory
Board, Neurogen Corporation
John Simon 56 Managing Director, Allen & Company Inc. May 1989
John F. Tallman, Ph.D. 52 Executive Vice President, Secretary, Scientific July 1988
Director, and Chairman of the Scientific Advisory
Board, Neurogen Corporation
Suzanne H. Woolsey, Ph.D. 57 Chief Operating Officer, National Academy of January 1998
Sciences/National Research Council
</TABLE>
<PAGE>
Except as otherwise noted below, the primary form of compensation for
directors of the Company is the grant of stock options pursuant to the Program
(as defined below). Dr. Roth also receives a fee of $1,500 per month for his
services as a director and an additional $1,250 per month for service on the
Company's Scientific Advisory Board. Mr. Carlucci also receives an annual fee of
$50,000 for his services as Chairman of the Board. Dr. Bloom also receives an
annual fee of $20,000 for consulting services provided to the Company. Each
director of the Company receives out-of-pocket travel expenses in connection
with his or her attendance at Board meetings. Pursuant to the Neurogen
Corporation 1993 Non-Employee Directors Stock Option Program (the "Program"),
every non-employee director receives an option to acquire 20,000 shares of
Common Stock at its then-current fair market value upon the date of grant (an
"Initial Grant"). The current non-employee directors other than Dr. Woolsey were
granted such options on December 30, 1993, (the effective date of the adoption
of the Program), with an exercise price of $6.50 per share, the fair market
value of the Common Stock on that date. Dr. Woolsey's Initial Grant was made on
January 2, 1998, the effective date of her election to the Board, with an
exercise price of $14.00 per share, the fair market value of the Common Stock on
that date. Every future non-employee director will receive an Initial Grant as
of the effective date of such director's election to the board. Under the
Program, each non-employee director is granted annually an option to acquire
5,000 shares of Common Stock on each anniversary of such director's Initial
Grant, each with an exercise price equal to the fair market value of the Common
Stock on such anniversary. The current non-employee directors other than Dr.
Woolsey were granted such options on December 30, 1994, December 29, 1995,
December 31, 1996, and December 31, 1997 with exercise prices of $6.50, $26.875,
$19.25 and $13.50, respectively, the fair market value of the Common Stock on
such dates. The current non-employee directors, including Dr. Woolsey, were
granted such options on December 31, 1998 with an exercise price of $17.50, the
fair market value of the common stock on that date. There is no family
relationship between any director, executive officer or person nominated or
chosen by the Company to become a director or executive officer of the Company.
Based solely on its review of the forms required by Section 16(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), that have been
received by the Company, the Company believes that all filing requirements for
1998 applicable to its officers, directors and beneficial owners of greater than
ten percent of its Common Stock have been complied with.
Harry H. Penner, Jr., has been President, Chief Executive Officer and a
director of Neurogen since December 1993. Mr. Penner was employed by Novo
Nordisk A/S from 1981 to 1993, most recently serving as an Executive Vice
President of Novo Nordisk A/S and as President of Novo Nordisk of North America
Inc. Mr. Penner holds an L.L.M. in International Law from New York University
and a J.D. from Fordham University. Mr. Penner also serves on the Board of
Directors of Avant Immunotherapeutics, Inc. (Needham, MA), a publicly traded
biotechnology company, and PRA International, Inc. (a privately held clinical
research organization), and Genaissance Pharmaceuticals, a privately held
genomics company. Mr. Penner is currently Co-Chairman of CURE, Connecticut's
Bioscience Cluster, and chaired the Board of Directors of the Connecticut
Technology Council (CTC) from 1996 - 1998. In addition, Mr. Penner serves as a
member of the Board of Directors of the Connecticut Business and Industry
Association (CBIA) and the Emerging Companies Section of the Biotechnology
Industry Organization (BIO).
Frank C. Carlucci has served as a director and Chairman of the Board of
Neurogen since February 1989. Mr. Carlucci is principally employed as Chairman
of The Carlyle Group, a private merchant bank. Mr. Carlucci served as Secretary
of Defense of the United States from November 1987 through January 1989. Prior
to his appointment as Secretary of Defense, Mr. Carlucci was assistant to the
President of the United States for National Security Affairs. Mr. Carlucci had
been Chairman and Chief Executive Officer of Sears World Trade Inc. from 1984 to
1986, after having served as President and Chief Operating Officer since 1983.
Mr. Carlucci is also a director of Ashland Oil, Inc., Kaman Corporation,
Northern Telecom Limited, The Quaker Oats Company, Sun Resorts, Pharmacia and
Upjohn Inc., Texas Biotech Inc. and IRI International.
Barry M. Bloom, Ph.D., has served as a director of Neurogen since December
1993. Dr. Bloom retired in 1993 from Pfizer where he had been Executive Vice
President, Research and Development and a member of the board of directors. Dr.
Bloom is a director of Vertex Pharmaceuticals, Inc., Incyte Pharmaceuticals,
Inc. and Cubist Pharmaceuticals, Inc.
Robert N. Butler, M.D., has served as a director of Neurogen since July
1989. Dr. Butler has served as the Brookdale Professor and Chairman of the
Department of Geriatrics and Adult Development at Mount Sinai Medical Center
since 1982. From 1976 until 1982, Dr. Butler was the founding director of the
National Institute of Aging of the National Institutes of Health. Dr. Butler won
the 1976 Pulitzer Prize for his book, "Why Survive? Being Old in America". He is
the editor-in-chief of Geriatrics, a journal for primary care physicians, and
serves on the editorial board of several other professional publications. Dr.
Butler is presently Chief Executive Officer and President of the International
Longevity Center-USA. He is also a member of the Institute of Medicine of the
National Academy of Sciences and a founding Fellow of the American Geriatrics
Society. He has served as a consultant to the United States Special Committee on
Aging, the National Institute of Mental Health, the Commonwealth Fund, the
Brookdale Foundation and numerous other foundations and corporations.
Jeffrey J. Collinson has served as a director of Neurogen since May 1989.
Mr. Collinson has served as President of Collinson Howe Venture Partners Inc., a
venture capital firm, since 1990 and was President of Schroder Venture Managers,
Inc., a venture capital firm, from 1981 to 1990. Mr. Collinson is chairman of
the board of Incyte Pharmaceuticals, Inc.
Robert M. Gardiner has served as a director of Neurogen since June 1989.
Mr. Gardiner is currently a Senior Advisor to Morgan Stanley Dean Witter, having
retired as Chairman and Chief Executive Officer of Dean Witter Financial
Services Group Inc. in August 1986. Prior to becoming Chairman and Chief
Executive Officer in 1982, Mr. Gardiner served as President of Dean Witter
Reynolds Inc., the predecessor of Dean Witter Financial Services Group Inc. Mr.
Gardiner has served as Chairman and President of the National Association of
Securities Dealers, Inc., as Chairman of the Securities Industry Association and
of its governing council, as Chairman of the National Securities Processing
Committee and as Vice Chairman of the New York Stock Exchange, Inc. He is also a
former governor or officer of the Association of Stock Exchange Firms, the
Investment Bankers Association of America, the National Clearing Corporation,
the Central Market System Advisory Committee of the Securities and Exchange
Commission, and the Securities Industry Association. He is a former director of
Dean Witter, Discover & Co.
Mark Novitch, M.D., has served as a director of Neurogen since December
1993. Dr. Novitch was appointed Professor of Health Care Sciences at The George
Washington University in 1994 and since 1997 has served as Adjunct Professor. He
worked in senior executive positions at The Upjohn Company from 1985 until his
retirement as Vice Chairman of the Board in 1993. Dr. Novitch served at the
United States Food and Drug Administration as Deputy Commissioner and as Acting
Commissioner from 1983-1984. Dr. Novitch is a director of Alteon, Inc., Calypte
Biomedical, Inc., Guidant Corporation and KOS Pharmaceuticals, Inc.
Robert H. Roth, Ph.D., has served as a director of Neurogen since December
1988 and as a member of the Company's Scientific Advisory Board since July 1988.
Dr. Roth has been a Professor of Psychiatry and Pharmacology at Yale University
since 1974. Dr. Roth has a Ph.D. in Pharmacology from Yale University and has
published over 450 papers in the field of Neuropharmacology.
John Simon has served as a director of Neurogen since May 1989. Mr. Simon
is a Managing Director of the investment banking firm of Allen & Company
Incorporated. Mr. Simon is a director of Immune Response Corporation, Realty
Information Group and Advanced Technical Products, Inc.
John F. Tallman, Ph.D., has been Executive Vice President, Scientific
Director, Chairman of the Scientific Advisory Board and a director of Neurogen
since July 1988. Dr. Tallman has served as Secretary of the Company since August
1994. Prior to joining Neurogen, Dr. Tallman was an Associate Professor of
Psychiatry and Pharmacology at Yale University and currently serves as an
Adjunct Professor in such departments. Dr. Tallman had previously served in
research director positions at the National Institute of Mental Health in
Bethesda, Maryland. Dr. Tallman received his Ph.D. in Biology from Georgetown
University.
Suzanne H. Woolsey, Ph.D., has served as a director of Neurogen since
January 1998. Since 1993, Dr. Woolsey has served as Chief Operating Officer of
the National Academy of Sciences/National Research Council, an independent,
federally chartered policy institution. Prior to serving as Chief Operating
Officer, Dr. Woolsey served as the Executive Director of the Commission on
Behavioral and Social Sciences and Education at the National Academy of
Sciences/National Research Council. From 1980 to 1989, Dr. Woolsey served as a
Consulting Partner at Coopers and Lybrand, an accounting firm, where she
developed and directed the firm's consulting practice with healthcare
institutions, research organizations, major research universities and corporate
general counsels. Dr. Woolsey holds a Ph.D. in clinical and social psychology
from Harvard University.
Board Meetings and Committees
The Board of Directors of the Company held five meetings during the fiscal
year ended December 31, 1998, including one special meeting conducted by
telephone. The Board of Directors has an Audit Committee, a Compensation
Committee and a Finance Committee. During the fiscal year ended December 31,
1998, the Company did not have a nominating committee or a committee performing
the functions of a nominating committee.
The Audit Committee, which consists of Messrs. Carlucci, Novitch and Simon,
held one meeting in the last fiscal year. The Audit Committee recommends
appointment of the Company's independent auditors and is primarily responsible
for approving the services performed by the Company's independent auditors and
for reviewing and evaluating the Company's accounting principles and its system
of internal accounting controls.
The Compensation Committee, which consists of Messrs. Gardiner, Carlucci
and Collinson, held four meetings during the last fiscal year. The Compensation
Committee reviews and makes recommendations to the Board concerning the
Company's executive and employee compensation and stock option policy, reviews
benefit programs and determines salaries for the executive officers of the
Company.
The Finance Committee, which consists of Messrs. Gardiner, Collinson, Bloom
and Simon, did not hold any meetings in the last fiscal year. The Finance
Committee reviews and makes recommendations to the Board concerning major
finance issues, considers possible finance ventures with third parties and
monitors the Company's existing financial condition.
Certain Relationships and Related Transactions
Pfizer Inc ("Pfizer"), a beneficial owner of more than five percent of the
Common Stock, paid $9.1 million in research funding and made certain
reimbursements to the Company in the last fiscal year pursuant to the terms of
various collaborative agreements between Pfizer and the Company which govern
their research and development collaborations with respect to anxiolytics,
hypnotics and cognition enhancers which act through the GABA family of receptors
and with respect to drugs which act through the neuropeptide Y receptor system
for the treatment of obesity. These amounts constituted payments in excess of
five percent of Neurogen's consolidated gross revenues for the last fiscal year.
Neurogen expects to receive amounts in excess of five percent of its
consolidated gross revenues from Pfizer in fiscal year 1999. In connection with
these collaborations with Pfizer, the Company has granted Pfizer registration
rights with respect to shares of the Company's Common Stock purchased in
connection with the collaborations as well as the right to maintain its level of
investment in the Company in future public offerings of Common Stock.
In 1995, the Company made unsecured, non-interest bearing loans to Harry H.
Penner, Jr., its President and Chief Executive Officer, and to John F. Tallman,
its Executive Vice President and Scientific Director, of $200,000 and $150,000,
respectively. In 1994, the Company made an unsecured, non-interest bearing loan
to Alan J. Hutchison, its Vice President-Drug Discovery, of $150,000. In 1997,
the Company made unsecured, non-interest bearing loans to Stephen R. Davis, its
Vice President-Finance and Chief Financial Officer, to Kenneth R. Shaw, Senior
Vice President - Chemistry and Pre-Clinical Development, and to James V.
Cassella, Vice President - Clinical Development of $75,000 each. The largest
aggregate amount of indebtedness outstanding at any time during 1998 with
respect to each of Mr. Penner, Dr. Tallman, Dr. Hutchison, Mr. Davis, Dr. Shaw
and Dr. Cassella was $143,000, $107,000, $86,000, $75,000, $75,000 and $75,000,
respectively. See "Executive Officers - Summary Compensation Table" below for
information regarding forgiveness of indebtedness and forgiveness of interest on
indebtedness.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of March 1, 1999, certain information
with respect to the beneficial ownership of Common Stock by each person known by
Neurogen to own beneficially more than five percent of its outstanding Common
Stock, by each director and officer of Neurogen and by all directors and
officers as a group:
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Address Amount and Nature of Approximate Percent
of Beneficial Owner Beneficial Ownership(1) Owned(2)
- -------------------- ----------------------- ---------------------
Pfizer Inc................................... 2,846,000 19.4%
235 East 42nd Street
New York, NY 10017
Biotechnology Value Fund..................... 1,626,706 11.1%
One Sansone Street
San Francisco, CA 94104
Four Partners................................ 1,638,500 11.1%
867 Madison Ave.
New York, NY 10021
Franklin Resources Inc....................... 793,000 5.4%
777 Mariners Island Blvd. 6th Floor
San Mateo, CA 94404
Harry H. Penner, Jr. (3)..................... 468,327 3.1%
John F. Tallman, Ph.D. (4)................... 347,883 2.3%
Alan J. Hutchison, Ph.D.(5).................. 137,443 *
Stephen R. Davis (6)......................... 88,257 *
Kenneth R. Shaw (7).......................... 71,850 *
James V. Cassella(8)......................... 89,318 *
Barry M. Bloom, Ph.D (9)..................... 38,089 *
Robert N. Butler, M.D.(10)................... 19,297 *
Frank C. Carlucci(11)(13).................... 146,414 1.0%
Jeffrey J. Collinson(9)(12).................. 72,101 *
Robert M. Gardiner(9)........................ 72,089 *
Mark Novitch, M.D.(13)....................... 41,089 *
Robert H. Roth, Ph.D.(14).................... 86,089 *
John Simon(13)(15)........................... 70,593 *
Suzanne Woolsey(16).......................... 9,591 *
All directors and officers
as a group (15 persons)(17)............... 1,758,430 11.1%
</TABLE>
- -----------------------
* Less than one percent (1%).
(1) Share ownership in each case includes shares issuable upon exercise of
outstanding common stock options exercisable within 60 days of March 1,
1999.
(2) Percentage of the outstanding shares of Common Stock, treating as
outstanding for each beneficial owner all shares of Common Stock which such
beneficial owner has indicated are issuable under stock options exercisable
within 60 days of March 1, 1999.
(3) Includes 422,000 shares of Common Stock that Harry H. Penner, Jr. has the
right to acquire under stock options exercisable within 60 days of March
1,1999, and 30,000 restricted shares subject to certain vesting
requirements relating to the performance of the Company's shares of Common
Stock.
(4) Includes 169,000 shares of Common Stock that John F. Tallman, Ph.D. has the
right to acquire under stock options exercisable within 60 days of March 1,
1999, and 22,500 restricted shares subject to certain vesting requirements
relating to the performance of the Company's shares of Common Stock. Does
not include 2,000 shares of Common Stock owned by Kathleen Person, Dr.
Tallman's spouse. Kathleen Person and Dr. Tallman disclaim beneficial
ownership of each other's shares.
(5) Includes 118,000 shares of Common Stock that Alan J. Hutchison, Ph.D., has
the right to acquire under stock options exercisable within 60 days of
March 1, 1999 and 18,750 restricted shares subject to certain vesting
requirements relating to the performance of the Company's shares of Common
Stock.
(6) Includes 71,250 shares of Common Stock that Stephen R. Davis has the right
to acquire under stock options exercisable within 60 days of March 1, 1999,
and 15,750 restricted shares subject to certain vesting requirements
relating to the performance of the Company's shares of Common Stock.
(7) Includes 56,850 shares of Common Stock that Kenneth R. Shaw, Ph.D., has the
right to acquire under stock options exercisable within 60 days of March 1,
1999, and 15,000 restricted shares subject to certain vesting requirements
relating to the performance of the Company's shares of Common Stock.
(8) Includes 79,350 shares of Common Stock that James V. Cassella, Ph.D. has
the right to acquire under stock options exercisable within 60 days of
March 1, 1999 and 9,375 restricted shares subject to certain vesting
requirements relating to the performance of the Company's shares of Common
Stock.
(9) Includes 17,089 shares of Common Stock subject to stock options exercisable
within 60 days of March 1, 1999.
(10) Includes 19,297 shares of Common Stock subject to stock options exercisable
by Robert N. Butler, M.D., within 60 days of March 1, 1999.
(11) Does not include 40,000 shares of Common Stock owned by Mr. Carlucci's
wife. Mr. Carlucci and his wife disclaim beneficial ownership of each
other's shares.
(12) Includes 23,500 shares of Common Stock held by Schroder's Incorporated, for
which Mr. Collinson acts as attorney-in-fact and shares investment and
voting power, and 3,880 shares of Common Stock held by a corporation which
Mr. Collinson controls.
(13) Includes 37,089 shares of Common Stock subject to stock options exercisable
within 60 days of March 1, 1999.
(14) Includes 44,089 shares of Common Stock subject to stock options exercisable
by Robert H. Roth, Ph.D. within 60 days of March 1, 1999.
(15) Does not include shares of Common Stock held by Allen & Company
Incorporated and by persons and entities which may be deemed to be
affiliated with Allen & Company Incorporated, of which shares Mr. Simon
disclaims beneficial ownership.
(16) Includes 9,591 shares of Common Stock subject to stock options exercisable
within 60 days of March 1, 1999.
(17) Includes 1,151,961 shares of Common Stock subject to stock options
exercisable within 60 days of March 1, 1999.
<PAGE>
EXECUTIVE OFFICERS
In addition to Mr. Penner and Dr. Tallman (See "Election of Directors"),
the other executive officers of the Company who are elected by and serve at the
discretion of the Board of Directors, are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name Age Position Officer Since
- ------- ---- ------------ -------------
James V. Cassella......... 44 Vice President - Clinical Development April 1999
Stephen R. Davis.......... 38 Vice President-Finance, CFO, Treasurer July 1994
and General Counsel
Alan J. Hutchison......... 45 Senior Vice President-Drug Discovery June 1994
Kenneth R. Shaw .......... 42 Senior Vice President - Chemistry and April 1999
Pre-Clinical Development
</TABLE>
James V.Cassella joined Neurogen in 1989 and has served in various roles
including his current position of Vice President of Clinical Development and
Director of Behavioral Biology. Prior to joining Neurogen, Dr. Cassella was an
Assistant Professor of Neuroscience at Oberlin College. Dr. Cassella received
his Ph.D. in Psychology from Dartmouth College in 1983 and subsequently held a
Postdoctoral Fellowship in the Department of Psychiatry at Yale University's
School of Medicine.
Stephen R. Davis has been Vice President-Finance, Chief Financial Officer
and Treasurer of Neurogen since July 1994. In 1998 Mr. Davis assumed the
additional role of General Counsel. Prior to joining Neurogen, Mr. Davis was
employed by Milbank, Tweed, Hadley & McCloy as a corporate and securities
attorney. Previously, Mr. Davis practiced as a Certified Public Accountant with
Arthur Andersen & Co. Mr. Davis received his B.S. in Accounting from Southern
Nazarene University and a J.D. degree from Vanderbilt University.
Alan J. Hutchison, Ph.D., has been Vice President-Drug Discovery since 1992
and a member of Neurogen's Scientific Advisory Board since 1989. Dr. Hutchison
joined Neurogen in 1989 as Director of Chemistry. From 1981 through 1989, Dr.
Hutchison was employed by Ciba Giegy, most recently as a Distinguished Research
Fellow. Dr. Hutchison received his B.S. in Chemistry from Stevens Institute of
Technology and received his Ph.D. from Harvard University.
Kenneth R. Shaw joined Neurogen in 1989 and has served in various roles
including his current position of Senior Vice President of Chemistry and
Pre-Clinical Development. Dr. Shaw began his career in 1983 at Ciba-Geigy as a
Senior Scientist and also spent 2 years as Scientific Director at Franklin
Diagnostics. Dr. Shaw received a B.S. in Chemistry from the University of
Rochester in 1979, and a Ph.D. in Organic Chemistry from Columbia University in
1983.
Compensation of Executive Officers 1
Compensation Committee Report:
The Compensation Committee of the Board of Directors consists entirely of
outside directors. The Committee is responsible for establishing and
administering the policies which govern both annual compensation and stock
ownership programs of the Company. On an annual basis, the Committee evaluates
the performance of management and determines the compensation of Mr. Penner and
the other executive officers of the Company. The Committee's policies and
programs are designed to further the Company's goal of increasing shareholder
value by motivating and retaining executive officers. These policies include the
following objectives:
o Providing base salaries that take into consideration executive
compensation paid by other similar biotechnology companies.
Peer companies generally are at a comparable stage of
development, are pursuing R&D programs of comparable nature and
complexity and have similar potential risks and rewards, market
capitalization, size and financial condition. This objective
also takes into account the competitive demand for quality
personnel in the pharmaceutical and biotechnology industries,
individual experience and specific issues particular to the
Company.
o Providing periodic bonus awards for completion of significant
achievements or attainment of significant objectives.
o Providing equity participation in the form of grants of stock
options and restricted stock for the purpose of aligning
executive officers' longer term interests with those of the
shareholders.
In the biotechnology industry traditional measures of corporate performance,
such as earnings per share or sales growth, may not readily apply in reviewing
performance of executives. Rather, at the Company's current stage of
development, in determining the compensation of the Company's executives the
Compensation Committee looks to other measures of performance, such as the
progress of the Company's research and development programs and corporate
development activities, the establishment and maintenance of strategic corporate
alliances and the Company's success in securing capital sufficient to assist the
Company in advancing and expanding its product development, including the
funding of clinical trials. The Committee believes that outstanding performance
in these areas will contribute to the long-term success of the Company and the
growth of shareholder value. The Committee specifically considers the
achievement of milestones related to expansion of the Company's portfolio of
drug development programs, the development of multiple drug candidates within
individual programs and the progress of individual candidates in each such
program. In addition, the Committee considers the extent to which the Company's
shares have changed in value. However, the Compensation Committee recognizes
that, in the short-term, the market price of the Company's shares may be
affected by the inherently unpredictable nature of drug development and industry
events and market conditions which are transient in nature and beyond the
control of management. This is especially true in the biotechnology industry,
which is characterized by long product lead times, the iterative trial and error
nature of drug development, highly volatile stock prices and fluctuating
availability of capital. Accordingly, the Compensation Committee attempts to
retain and appropriately motivate the Company's executives by balancing the
consideration of shorter-term strategic goals with longer-term objectives which
are essential in creating maximum shareholder value.
In many instances the qualitative factors by which the Compensation
Committee judges corporate performance necessarily involve a subjective
assessment by the Committee of management's performance. Moreover, the Committee
does not base its considerations on any single performance factor nor does it
specifically assign relative weights to factors, but rather considers a mix of
factors and evaluates Company and individual performance against that mix.
Compensation paid by the Company to its executive officers is designed to be
competitive with compensation packages paid to the management of comparable
companies in the biotechnology industry. Toward that end, the Compensation
Committee may review independent survey data as well as data gathered
internally, and may obtain the counsel of expert compensation consultants. Total
compensation for the Company's executive officers includes a base salary
component and may also include other forms of incentives. Incentive compensation
may consist of cash incentive bonuses based on satisfying corporate goals
established for the year as well as on meeting individual performance
objectives. In addition, executive officers of the Company may receive incentive
compensation under the Neurogen Corporation 1993 Omnibus Incentive Plan (the
"Incentive Plan") such as grants of options to purchase shares of the Company's
Common Stock, with exercise prices typically set at fair market value on the
date of grant or grants of restricted stock which may have certain performance
criteria. Executive compensation may also include loans, which are typically
forgiven over a period of five to seven years, provided the recipient remains
employed by the Company during such period.
Executive officers are eligible for grants of stock options and restricted
stock as an element of their total annual compensation package. This component
is intended to motivate and retain executive officers to improve long-term stock
performance. Stock option and restricted stock awards are granted at the
discretion of the Compensation Committee. Generally, stock options vest in equal
amounts over four or five years, have a ten year term and are exercisable during
the term of the option at the fair market value of the underlying Common Stock
on the date of grant. As with cash bonuses, the number of options to be granted
to each executive officer is based on the degree of attainment of predetermined
Company and individual objectives, with emphasis, in certain cases, on those
which have long-term strategic value. The Company generally grants stock options
to all employees and uses stock options as a bonus vehicle. The Compensation
Committee administers the Incentive Plan. For 1998, all six of the Company's
executive officers received under the Incentive Plan stock option awards and
grants of restricted stock ("Earned Restricted Stock") which will vest only if
the Company's common stock achieves the performance criteria described below.
Earned Restricted Stock is non-transferable unless and until the Company's
common stock reaches a market price of $45 per share within four (4) years of
the date of grant. If the common stock fails to reach the target price within
this time frame the shares of Earned Restricted Stock will be automatically
forfeited.
The Company made significant progress in meeting most of it's goals during
the fiscal year ended December 31, 1998. The Compensation Committee considered
the following developments in 1998 in establishing the base salaries of the
executive officers for fiscal year 1999 and in awarding incentive compensation
based on the Company's performance in 1998: the progress of human clinical
trials for the Company's anti-anxiety drug candidate, NGD 91-2, the
identification and advancement of an additional candidate for human trials, NGD
91-3; the pre-clinical development of the Company's anti-insomnia drug
candidate, NGD 96-1, in preparation for human clinical trials and the
identification and advancement of additional drug candidates, including NGD
96-2, in the Company's anti-insomnia collaboration with Pfizer; the pre-clinical
development of the Company's cognition enhancement drug candidate, NGD 97-1, in
preparation for human clinical trials; the identification and advancement of
pre-clinical candidates in the Company's NPY program to develop drugs to treat
obesity and the extension of the Company's joint research collaboration with
Pfizer for this program; the advancement of a new series of compounds in the
Company's CRF stress disorder program and the development of the Company's lead
compound in this program, NGD 98-1; and the further advancement of the Company's
proprietary AIDD drug discovery program and the application of this technology
to discover drug candidates in new areas, thereby expanding the Company's
portfolio of drug development programs. The Compensation Committee believes that
the commitment and leadership of the Company's executive officers were important
factors in the Company's achievements in fiscal 1998.
The Compensation Committee reviewed the Company's performance and the
performance of the Company's executive officers during fiscal 1998, to determine
cash incentive bonuses and stock option grants to such executive officers and to
set base salary levels for fiscal 1999. The Compensation Committee also retained
the services of a compensation consulting firm to assist it in its review. Mr.
Penner was not present during the Compensation Committee's discussion and
determination of his compensation. In recognition of the achievement of Company
and individual performance criteria outlined above and after reviewing the
compensation levels of officers at peer companies, the Compensation Committee
approved increases in the base salaries of, and awarded cash incentive bonuses,
stock option and Earned Restricted Stock to each executive officer including Mr.
Penner whose compensation is further described below. The 1999 base salaries of
the named executive officers as a group have been increased by an average of
15.6 percent over 1998 base salaries. These increases were made in January 1999
and reflected the Committee's review, aided by the compensation consultant
retained by the Committee, of the compensation levels of the Company's officers
in relation to the compensation levels of officers at peer companies.
In evaluating the compensation of Harry H. Penner, Jr., the Committee
considered the significant role Mr. Penner played in each of the above noted
accomplishments. The Compensation Committee raised Mr. Penner's base salary from
$357,000 to $394,000, effective December 1, 1998, and awarded Mr. Penner a cash
bonus of $116,000 or 32 percent of his base salary. As additional recognition of
Mr. Penner's efforts in 1998, and in furtherance of the Committee's belief that
a substantial portion of Mr. Penner's total compensation should be dependent on
the long-term appreciation of the Company's stock price, in December the
Committee granted Mr. Penner 30,000 shares of Earned Restricted Stock and an
option to purchase 45,000 shares of Neurogen Common Stock pursuant to the
Incentive Plan. Mr. Penner's salary increase and awards reflect the Compensation
Committee's assessment of his very favorable performance and his contribution to
the Company's achievement of significant milestones.
By the Compensation Committee: Frank C. Carlucci, and Jeffrey J. Collinson,
Robert M. Gardiner and John Simon.
- -------------------
1 This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the Company
under the Securities Act of 1933, as amended (the "Securities Act"), or the
Exchange Act, whether made before or after the date hereof and irrespective
of any general incorporation language in any such filing.
<PAGE>
For the three years ended December 31, 1998, 1997, and 1996, the Company
paid the amounts shown in the following table with respect to each of the
executive officers of the Company:
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation Awards
----------------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
Other Securities All Other
Annual Underlying Compen-
Name and Principal Salary Year Bonus Compensation Options (a) sation
Position ($) ($) ($) (#) ($)
- ------------------ ------- ---- ------- ------------ ------------- -----------
Harry H. Penner, Jr. 358,417 1998 116,000 41,939 (b) 45,000 8,672(c)
President and Chief 340,000 1997 136,000 45,206 (d) 80,000(m) 8,636(c)
Executive Officer 311,583 1996 122,000 41,605 (e) 80,000 9,586(c)
John F. Tallman 226,917 1998 60,000 31,455 (f) 22,500 5,792(c)
Executive Vice-President 215,000 1997 80,000 33,904 (g) 60,000 5,752(c)
President, Scientific 201,250 1996 70,000 31,205 (h) 60,000(m) 5,772(c)
Director and Secretary
Alan J. Hutchison 216,792 1998 54,000 28,926 (i) 18,750 4,418(c)
Vice President-Drug 193,500 1997 70,000 31,493 (j) 50,000 3,877(c)
Discovery 180,000 1996 40,000 47,387 (k) 40,000(m) 3,029(c)
Stephen R. Davis 181,025 1998 40,000 18,148 (l) 15,750 3,741(c)
Vice President-Finance, 167,700 1997 45,000 7,639 (n) 25,000 3,705(c)
CFO, Treasurer, and 156,000 1996 39,000 6,222 (o) 25,000(m) 3,796(c)
General Counsel
Kenneth R. Shaw 158,250 1998 40,000 18,148 (p) 15,000 714(c)
Senior Vice President 150,625 1997 40,000 1,528 (q) 25,000(m) 714(c)
Chemistry and Pre- 136,500 1996 39,000 - 25,000 714(c)
Clinical Development
James V. Cassella 158,250 1998 35,000 18,148 (p) 9,375 3,914(c)
Vice-President - 150,625 1997 40,000 1,528 (q) 25,000 3,877(c)
Clinical Development 136,500 1996 39,000 - 25,000(m) 3,714(c)
</TABLE>
- --------------------
(a) References to SARs in the Summary Compensation Table and all other tables
in this Proxy Statement have been omitted, since the Company has never
issued SARs, although under the Neurogen Corporation 1993 Omnibus Incentive
Plan it has the ability to do so.
(b) Includes $28,571 of forgiveness of loan, forgiveness of interest of $7,279
on loan and income tax reimbursements of $6,089.
(c) Includes premiums for life insurance, and matching contribution received
from participation in the Company's 401(k) plan.
(d) Includes $28,571 of forgiveness of loan, forgiveness of interest of $9,058
on loan and income tax reimbursements of $7,577.
(e) Includes $28,571 of forgiveness of loan, forgiveness of interest of $7,097
on loan and income tax reimbursements of $5,937.
(f) Includes $21,429 of forgiveness of loan, forgiveness of interest of $5,459
on loan and income tax reimbursements of $4,567.
(g) Includes $21,429 of forgiveness of loan, forgiveness of interest of $6,793
and income tax reimbursements of $5,683.
(h) Includes $21,429 of forgiveness of loan, forgiveness of interest of $5,323
on loan and income tax reimbursements of $4,453.
(i) Includes $21,429 of forgiveness of loan, forgiveness of interest of $4,082
on loan and income tax reimbursements of $3,415.
(j) Includes $21,429 of forgiveness of loan, forgiveness of interest of $5,480
and income tax reimbursements of $4,584.
(k) Includes forgiveness of loan of $21,429, forgiveness of interest of $4,373
on loan and income tax reimbursement of $21,585.
(l) Includes $10,714 of forgiveness of loan, forgiveness of interest of $4,048
on loan and income tax reimbursements of $3,386.
(m) With respect to twenty-five percent of the year-end 1997 options granted to
the Company's executive officers, the exercise price for any unexercised
options may drop to zero at the end of the ten year term of the option, but
only if the officer has remained employed by the Company for a period of
seven years from the date of grant.
(n) Includes $5,000 of forgiveness of loan, forgiveness of interest of $1,437
and income tax reimbursement of $1,202.
(o) Includes forgiveness of loan of $5,000, forgiveness of interest of $665 on
loan and income tax reimbursements of $557.
(p) Includes $10,714 of forgiveness of loan, forgiveness of interest of $4,048
on loan and income tax reimbursement of $3,386.
(q) Includes forgiveness of interest of $832 on loan and income tax
reimbursement of $696.
<PAGE>
For the year ended December 31, 1998, the following tables summarize
incentive compensation paid to executive officers:
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Number of
Securities % of Total Potential Realizable Value at
Underlying Options Granted Exercise Assumed Annual Rates of Stock
Options to Employees in Price Expiration Price Appreciation for
Name Granted Fiscal Year ($/Share) Date Option Term
- ----------- ----------- --------------- ---------- ------------ ------------------------------
5%($) 10%($)
----- ------
Harry H. Penner, Jr. 45,000 * 10% 17.50 12/31/08 $495,255 $1,255,072
John F. Tallman 22,500 * 5% 17.50 12/31/08 247,627 627,536
Alan J. Hutchison 18,750 * 4% 17.50 12/31/08 206,356 522,947
Stephen R. Davis 15,750 * 3% 17.50 12/31/08 173,339 439,275
Kenneth R. Shaw 15,000 * 3% 17.50 12/31/08 165,085 418,357
James V. Cassella 9,375 * 2% 17.50 12/31/08 103,178 261,473
- --------------------
</TABLE>
* Stock options vest in equal amounts over four or five years, have a ten year
term and are exercisable during the term of the option at the fair market value
of the underlying Common Stock on the date of grant.
Long-Term Incentive Plans - Awards in Last Fiscal Year
<TABLE>
<CAPTION>
<S> <C> <C>
Number of Shares of
Restricted Stock Performance Period Until
Name (#) Maturation or Payout
- ----------- ------------------- --------------------------
Harry H. Penner, Jr. 30,000 * 12/31/03
John F. Tallman 22,500 * 12/31/03
Alan J. Hutchison 18,750 * 12/31/03
Stephen R. Davis 15,750 * 12/31/03
Kenneth R. Shaw 15,000 * 12/31/03
James V. Cassella 9,375 * 12/31/03
- --------------------
</TABLE>
* Restricted Stock is non-transferable unless and until the Company's common
stock reaches a market price of $45 per share within four (4) years of the date
of grant. If the common stock fails to reach the target price within this time
frame the shares of Restricted Stock will be automatically forfeited.
<PAGE>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Value Options at Fiscal In-the-Money Options at
Acquired on Realized Year-End Fiscal Year-End ($)(a)
Name Exercise (#) ($) (a) Exercisable/Unexercisable Exercisable/Unexercisable
- ------- ------------ --------- ------------------------- -------------------------
Harry H. Penner, Jr. - - 422,000/213,000 $3,502,000/$428,000
John F. Tallman - - 169,000/148,500 $1,009,850/$321,000
Alan J. Hutchison - - 118,000/110,750 $722,000/$248,000
Stephen R. Davis - - 71,250/75,750 $413,750/$211,250
Kenneth R. Shaw 7,500 89,063 56,850/67,500 $274,100/$135,000
James V. Cassella - - 79,350/61,875 $521,600/$135,000
- ---------------------
</TABLE>
(a) Difference between option price and fair market value of the shares at
year-end.
Terms and Conditions of Certain Employment and Severance Agreements
The compensation package for Harry H. Penner, Jr., as President and Chief
Executive Officer, includes a salary paid pursuant to an employment agreement
between Mr. Penner and the Company which was entered into in October 1993. The
agreement was scheduled to expire on November 30, 1997, but was automatically
extended for an additional two-years pursuant to the terms of the agreement.
Under such agreement, Mr. Penner's base salary of $357,000 per annum in 1998 was
increased to $394,000 effective December 1, 1998. Such increase was, and any
future increases will be, at the discretion of the Board of Directors. The
employment agreement provides for the continuation of Mr. Penner's salary and
benefits under certain severance conditions and restricts Mr. Penner from
competing with the Company for the term of the agreement and for a period of one
year after termination of his employment with the Company.
The compensation package for John F. Tallman, as Executive Vice President
and Scientific Director of Neurogen, includes a salary paid pursuant to an
employment agreement between Dr. Tallman and the Company which was entered into
in June 1994. The agreement was scheduled to expire on November 30, 1997, but
was automatically extended for an additional two-years pursuant to the terms of
the agreement. Under such agreement, Dr. Tallman's base salary of $226,000 per
annum in 1998 was increased to $257,000 effective December 1, 1998. Such
increase was, and any future increases will be, at the discretion of the Board
of Directors. The employment agreement provides for the continuation of Dr.
Tallman's salary and benefits under certain severance conditions and restricts
Dr. Tallman from competing with the Company for the term of the agreement and
for a period of one year after termination of his employment with the Company.
The compensation package for Alan J. Hutchison, as Senior Vice President -
Drug Discovery of Neurogen, includes a salary paid pursuant to a two-year
renewable employment agreement between Dr. Hutchison and the Company effective
December 1, 1998. Under such agreement, Dr. Hutchison's base salary of $215,000
per annum in 1998 was increased to $244,000 effective December 1, 1998. Such
increase was, and any future increases will be, at the discretion of the Board
of Directors. The employment agreement provides for the continuation of Dr.
Hutchinson's salary and benefits under certain severance conditions and
restricts Dr. Hutchison from competing with the Company for the term of the
agreement and for a period of one year after termination of his employment with
the Company.
The compensation package for Stephen R. Davis, Vice President - Finance and
Chief Financial Officer of Neurogen, includes a salary paid pursuant to a
two-year renewable employment agreement between Mr. Davis and the Company
effective December 1, 1998. Under such agreement, Mr. Davis' base salary of
$180,000 per annum in 1998 was increased to $215,000 effective December 1, 1998.
Such increase was, and any future increases will be, at the discretion of the
Board of Directors. The employment agreement provides for the continuation of
Mr. Davis's salary and benefits under certain severance conditions and restricts
Mr. Davis from competing with the Company for the term of the agreement and for
a period of one year after termination of his employment with the Company.
<PAGE>
PERFORMANCE GRAPH 2
The following graph compares the yearly percentage in the Company's
cumulative total stockholder return on its Common Stock during a period
commencing on December 31, 1993 and ending December 31, 1998 (as measured by
dividing (i) the sum of (A) the cumulative amount of dividends for the
measurement period, assuming dividend reinvestment, and (B) the difference
between the Company's share price at the end and the beginning of the period; by
(ii) the share at the beginning of the period) with the cumulative return of the
NASDAQ Stock Market Index (U.S. and Foreign) and the Amex Biotechnology Index.
It should be noted that Neurogen has not paid dividends on Common Stock, and no
dividends are included in the representation of the Company's performance. The
stock price performance on the graph below is not necessarily indicative of
future price performance.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Nasdaq
Total Amex
Date Neurogen Market Biotech
- ------ ---------- -------- ---------
12/31/93 100.0 100.0 100.0
12/31/94 98.1 97.0 70.9
12/31/95 405.7 136.2 115.5
12/31/96 290.6 166.8 124.6
12/31/97 203.8 204.1 140.3
12/31/98 264.2 281.8 159.9
</TABLE>
- --------------
2 This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the Company
under the Securities Act of 1933, as amended (the "Securities Act"), or the
Exchange Act, whether made before or after the date hereof and irrespective
of any general incorporation language in any such filing.
<PAGE>
PROPOSAL NO. 2:
RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
The Board of Directors has selected PricewaterhouseCoopers LLP, independent
certified public accountants, as auditors to audit the financial statements of
the Company for the year ending December 31, 1999 and recommends that the
stockholders ratify such selection. PricewaterhouseCoopers LLP audited the
Company's annual financial statements for the fiscal year ended December 31,
1998.
Stockholder ratification of the selection of PricewaterhouseCoopers LLP as
the Company's independent auditor is not required by the Company's by-laws or
otherwise. However, the Board is submitting the selection of
PricewaterhouseCoopers LLP to the stockholders for ratification as a matter of
good corporate practice. If the stockholders fail to ratify the selection, the
Board will reconsider whether or not to retain the firm. Even if the selection
is ratified, the Board, or the Audit Committee acting on behalf of the Board, in
its discretion may direct the appointment of a different firm of independent
auditors at any time if the Board, or the Audit Committee, determines that such
a change would be in the best interests of the Company and its stockholders.
Representatives of PricewaterhouseCoopers LLP are expected to be present at
the Annual Meeting with the opportunity to make a statement if they desire to do
so, and are expected to be available to respond to appropriate questions.
The Board of Directors recommends a vote FOR approval of this proposal. If
not otherwise specified, proxies will be voted FOR approval.
SHAREHOLDER PROPOSALS AND OTHER MATTERS
The Board of Directors of the Company knows of no other matters to be
submitted to the Annual Meeting. If any other matters properly come before the
Annual Meeting, it is the intention of the persons named in the enclosed form of
proxy to vote the shares of Common Stock they represent as the Board of
Directors may recommend. Anyone desiring to address the stockholders at the
Annual Meeting, whether or not making a formal proposal, must so indicate this
intention to the Secretary of the Company prior to the Annual Meeting.
In order to be considered for inclusion in the Proxy Statement and form of
proxy relating to the 2000 Annual Meeting of Stockholders, any proposal by a
stockholder of record of the Company must be received by the Company at its
principal executive offices in Branford, CT on or before December 20, 1999.
THE COMPANY WILL MAIL WITHOUT CHARGE TO EACH STOCKHOLDER ENTITLED TO VOTE
AT THE ANNUAL MEETING UPON WRITTEN REQUEST, A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS, SCHEDULES AND A LIST OF
EXHIBITS, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. WRITTEN REQUESTS
SHOULD BE SENT TO: CORPORATE SECRETARY, NEUROGEN CORPORATION, 35 NORTHEAST
INDUSTRIAL ROAD, BRANFORD, CONNECTICUT 06405.
JOHN F. TALLMAN
Secretary
April 26, 1999
<PAGE>
