8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 23, 2009

NEUROGEN CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	0-18311	22-2845714
(State or other jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

45 Northeast Industrial Road

Branford, Connecticut 06405

(Address of principal executive offices) (Zip Code)

(203) 488-8201

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement

The information set forth under Item 2.01 below regarding the CVR Agreements (as defined below) is incorporated herein by reference.

The summary therein of the material terms of the CVR Agreements does not purport to be complete and is qualified in its entirety by reference to the CVR Agreements, copies of which are filed as Exhibits 10.1, 10.2, 10.3 and 10.4 hereto and incorporated herein by reference.

Item 2.01 Completion of Acquisition or Disposition of Assets.

As previously announced, on August 23, 2009, Ligand Pharmaceuticals Incorporated (“Ligand”) entered into an Agreement and Plan of Merger (the “Merger Agreement”), with Neurogen Corporation, a Delaware corporation (“Neurogen”) and Neon Signal, LLC, a direct wholly-owned subsidiary of Ligand (“Merger Sub”). The Merger Agreement called for Ligand to acquire Neurogen pursuant to a reverse triangular merger, whereby Merger Sub would merge with and into Neurogen, with Neurogen as the surviving corporation (the “Merger”).

As previously announced, the Merger Agreement was amended on September 18, 2009 by an Amendment to Agreement and Plan of Merger to clarify the definition of the defined term “Target Net Cash Amount,” and on November 2, 2009 by an Amendment No. 2 to Agreement and Plan of Merger to change the defined term “Outside Date” to mean December 24, 2009, and on December 17, 2009 by an Amendment No. 3 to Agreement and Plan of Merger to add $600,000 cash as additional merger consideration for the Neurogen stockholders and to eliminate Neurogen’s right to terminate the Merger Agreement if the indicated aggregate value of the shares of Ligand common stock to be issued in the merger, after giving effect to the 4,200,000-share cap, would be less than the Adjusted Reference Amount. Amendment No. 3 also specified the Determination Date to be December 15, 2009 and changed the Outside Date to December 31, 2009.

On December 23, 2009, Neurogen completed the previously announced Merger and was acquired by Ligand pursuant to the Merger Agreement. The Merger was approved by the stockholders of Neurogen at a special meeting held on December 23, 2009 (see Item 8.01 below) and became effective upon the filing of the certificate of merger with the Delaware Secretary of State on December 23, 2009.

Under the terms of the Merger Agreement, each share of Neurogen’s common stock issued and outstanding immediately before the effective time of the Merger (other than any dissenting shares) was converted into the right to receive 0.0608355 of a share of Ligand common stock and $0.00869 in cash, without interest, plus cash in lieu of any fractional share of Ligand common stock. In addition, Neurogen’s stockholders will receive one Aplindore CVR, one H3 CVR, one Merck CVR and one Real Estate CVR for each share of Neurogen’s common stock held by such stockholder immediately before the effective time of the Merger, which rights are subject to the terms and conditions of the four Contingent Value Rights Agreements contemplated by the Merger Agreement and which Neurogen and Ligand entered into on December 23, 2009 with Registrar and Transfer Company as Rights Agent (the “CVR Agreements”). The respective CVR Agreements set forth the rights that former Neurogen stockholders will have with respect to each contingent value right (“CVR”) to be held by them after the closing of the Merger. The CVRs will not be marketable by the former Neurogen stockholders.

Aplindore CVR. The Aplindore CVR Agreement provides for the payment of a pro rata portion of either (i) if the Aplindore drug development program is sold before the six month anniversary of the Merger, a pro-rata share of the cash and/or number of shares of third-party stock received by Ligand from the buyer of the Aplindore drug development program less the costs and expenses of sale; plus any amount remaining in an operating expense reserve account (estimated to be approximately $100,000); or (ii) if the Aplindore Program is not sold before the six month anniversary of the Merger, any amount remaining in the operating expense reserve account.

H3 CVR. The H3 CVR Agreement provides for the payment of a pro rata portion of either (i) $4,000,000 in cash if Ligand licenses the Neurogen antagonist program intended to create an H3 receptor drug (the “H3 Antagonist Program”) on or before the third anniversary of the Merger, (ii) 50% of the net cash proceeds from a sale of such program if Ligand sells the program before the third anniversary of the Merger and before licensing the program and/or (iii) 50% of the net cash proceeds if an option agreement to either license or sell the H3 Antagonist Program is entered into, before the third anniversary of the Merger. If any such option to license is exercised, the three-year cutoff would be extended for the duration of the option and the $4,000,000, if payable, would be reduced by the option proceeds previously received by the H3 CVR holders.

Merck CVR. The Merck CVR Agreement provides for the payment of a pro rata portion of either (i) $3,000,000 in cash promptly after receipt by Ligand of the milestone payment from Merck Sharpe & Dohme Limited upon Merck’s initiation of a Phase III clinical trial of a vanilloid receptor subtype 1 (“VR1”) antagonist drug for the treatment of pain, as specified in a 2003 partnering agreement between Merck and Neurogen, or (ii) in the event Ligand sells to Merck the VR1 program before the initiation of any such Phase III trial, 50% of the net cash proceeds from such sale.

Real Estate CVR. The Real Estate CVR Agreement provides for the payment of a pro rata portion of the cash paid by any buyer of Neurogen’s real estate and received by Ligand on or before the six month anniversary of the Merger, less any costs and expenses reasonably incurred by Ligand in connection with such sale.

Ligand is now the sole stockholder of Neurogen. All Neurogen stock will be deregistered and delisted.

Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing.

On December 23, 2009, in connection with the Merger, Neurogen received notice from NASDAQ Stock Market, LLC that NASDAQ Stock Market, LLC has submitted to the SEC a Form 25 to delist Neurogen’s common stock.

Item 3.03 Material Modification to Rights of Security Holders.

The information set forth under Item 2.01 above is incorporated herein by reference.

Item 5.01 Changes in Control of Registrant.

The information set forth under Item 2.01 above is incorporated herein by reference.

Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers

On December 22 and 23, 2009, in connection with the Merger, all of Neurogen’s incumbent directors and officers resigned or were removed. Ligand elected John Higgins, John Sharp and Charles Berkman as the new directors. The new Board of Directors elected John Higgins as President and Chief Executive Officer of Neurogen and John Sharp as Vice President and Chief Financial Officer of Neurogen; they hold the same offices for Ligand.

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

On December 23, 2009, in connection with the Merger, Section 2.01 of Neurogen’s By-Laws was amended to change the number of authorized directors to three.

Item 8.01 Other Events

On December 23, 2009, at a special meeting of Neurogen stockholders, the stockholders of Neurogen approved the Merger and adopted the Merger Agreement, with 59.5% of the outstanding shares of Neurogen’s common stock being voted in favor of approval of the Merger and adoption of the Merger Agreement.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits.

The following exhibits are attached to this Current Report on Form 8-K:

Exhibit No.	Description
2.1	Certificate of Merger, dated and filed December 23, 2009
3.1	By-Laws Amendment, effected December 23, 2009
10.1	Aplindore Contingent Value Rights Agreement, by and among Ligand Pharmaceuticals Incorporated, Neurogen Corporation and Registrar and Transfer Company as Rights Agent, dated December 23, 2009
10.2	H3 Contingent Value Rights Agreement, by and among Ligand Pharmaceuticals Incorporated, Neurogen Corporation and Registrar and Transfer Company as Rights Agent, dated December 23, 2009
10.3	Merck Contingent Value Rights Agreement, by and among Ligand Pharmaceuticals Incorporated, Neurogen Corporation and Registrar and Transfer Company as Rights Agent, dated December 23, 2009
10.4	Real Estate Contingent Value Rights Agreement, by and among Ligand Pharmaceuticals Incorporated, Neurogen Corporation and Registrar and Transfer Company as Rights Agent, dated December 23, 2009

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	NEUROGEN CORPORATION
Date: December 24, 2009
	By:	/s/    CHARLES S. BERKMAN
	Name:	Charles S. Berkman
	Title:	Vice President, General Counsel and Secretary

EXHIBIT INDEX

Exhibit No.	Description
2.1	Certificate of Merger, dated and filed December 23, 2009
3.1	By-Laws Amendment, effected December 23, 2009
10.1	Aplindore Contingent Value Rights Agreement, by and among Ligand Pharmaceuticals Incorporated, Neurogen Corporation and Registrar and Transfer Company as Rights Agent, dated December 23, 2009
10.2	H3 Contingent Value Rights Agreement, by and among Ligand Pharmaceuticals Incorporated, Neurogen Corporation and Registrar and Transfer Company as Rights Agent, dated December 23, 2009
10.3	Merck Contingent Value Rights Agreement, by and among Ligand Pharmaceuticals Incorporated, Neurogen Corporation and Registrar and Transfer Company as Rights Agent, dated December 23, 2009
10.4	Real Estate Contingent Value Rights Agreement, by and among Ligand Pharmaceuticals Incorporated, Neurogen Corporation and Registrar and Transfer Company as Rights Agent, dated December 23, 2009

EX-2.1

Exhibit 2.1

CERTIFICATE OF MERGER

OF

NEON SIGNAL, LLC

(a Delaware limited liability company)

WITH AND INTO

NEUROGEN CORPORATION

(a Delaware corporation)

Pursuant to Section 264 of the

General Corporation Law of the State of Delaware

Neurogen Corporation, a Delaware corporation (“Neurogen”), which desires to merge with Neon Signal, LLC, a Delaware limited liability company (“Merger Sub”), pursuant to the provisions of Section 264 of the General Corporation Law of the State of Delaware, does hereby certify as follows:

1. The name and the state of incorporation of each of the constituent entities (the “Constituent Entities”) are as follows:

Name	State of Incorporation	State of Formation
Neon Signal, LLC	n/a	Delaware
Neurogen Corporation	Delaware	n/a

2. An Agreement and Plan of Merger, dated as of August 23, 2009, as amended by amendments dated September 18, 2009, November 2, 2009 and December 17, 2009 (as so amended, the “Merger Agreement”), by and among Ligand Pharmaceuticals Incorporated, a Delaware corporation, Merger Sub and Neurogen has been approved, adopted, certified, executed, and acknowledged by both of the Constituent Entities in accordance with the requirements of Section 264 of the General Corporation Law of the State of Delaware and also by Ligand Pharmaceuticals Incorporated to the extent so required by law.

3. Neurogen shall be the surviving corporation in the merger (the “Surviving Corporation”). The name of the Surviving Corporation shall be Neurogen Corporation.

4. The current certificate of incorporation of Neurogen shall be the certificate of incorporation of the Surviving Corporation.

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5. The executed Merger Agreement is on file at the office of the Surviving Corporation at 45 NE Industrial Road, Branford, Connecticut 06405.

6. A copy of the Merger Agreement will be furnished by the Surviving Corporation, on request and without cost, to any stockholder or member of either Constituent Entity.

7. This Certificate of Merger, and the merger provided for herein, shall become effective at the time this Certificate of Merger is filed with the Secretary of State of the State of Delaware.

IN WITNESS WHEREOF, Neurogen Corporation has caused this Certificate of Merger to be executed by the undersigned, its authorized officer, as of this 23^rd day of December, 2009.

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

EX-3.1

Exhibit 3.1

On December 23, 2009, Section 2.1 of the By-Laws of Neurogen Corporation was amended to read in full as follows:

“The number of directors which constitutes the whole Board of Directors shall be three.”

EX-10.1

Exhibit 10.1

CONTINGENT VALUE RIGHTS AGREEMENT

THIS CONTINGENT VALUE RIGHTS AGREEMENT, dated as of December 23, 2009 (this “Agreement”, is entered into by and among Ligand Pharmaceuticals Incorporated, a Delaware corporation (“Buyer”), Neurogen Corporation, a Delaware corporation (“Target”), and Registrar and Transfer Company, a New Jersey corporation, as Rights Agent (the “Rights Agent”) and as initial Aplindore CVR Registrar (as defined herein).

Preamble

Buyer, Neon Signal, LLC, a Delaware limited liability company and wholly-owned subsidiary of Buyer (“Sub”), and Target have entered into an Agreement and Plan of Merger dated as of August 23, 2009 (the “Merger Agreement”), pursuant to which Sub will merge with and into Target (the “Merger”), with Target surviving the Merger as a subsidiary of Buyer.

Pursuant to the Merger Agreement, Buyer agreed to create and issue to Target’s stockholders of record immediately before the effective time of the Merger, contingent value rights as hereinafter described.

The parties have done all things necessary to make the contingent value rights, when issued pursuant to the Merger Agreement and hereunder, the valid obligations of Buyer and to make this Agreement a valid and binding agreement of Buyer, in accordance with its terms.

NOW, THEREFORE, for and in consideration of the premises and the consummation of the transactions referred to above, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders (as hereinafter defined), as follows:

ARTICLE I

DEFINITIONS

Section 1.1. Definitions.

(a) For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:

(i) the terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular;

(ii) all accounting terms used herein and not expressly defined herein shall have the meanings assigned to such terms in accordance with United States generally accepted accounting principles, as in effect on the date hereof;

(iii) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision;

(iv) unless the context otherwise requires, words describing the singular number shall include the plural and vice versa, words denoting any gender shall include all genders and words denoting natural Persons shall include corporations, partnerships and other Persons and vice versa; and

(v) all references to “including” shall be deemed to mean including without limitation.

(b) Capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Merger Agreement. The following terms shall have the meanings ascribed to them as follows:

“Achievement Certificate” has the meaning set forth in Section 2.4(a).

“Aplindore Expense Reserve Balance” means the balance, if any, as of the CVR Outside Date of funds not paid or payable from the Expense Reserve Amount received by Buyer as provided in Section 5.15(a) of the Merger Agreement.

“Aplindore CVR Payment Amount” means an amount equal to (x) the aggregate cash proceeds and/or (to the extent such shares of stock received are listed for trading on a U.S. national securities exchange) shares of stock received by Buyer, or any of its subsidiaries, after the effective time of the Merger and before the CVR Outside Date, from any purchaser (other than Buyer) of all or substantially all of the assets and property of the Aplindore Program, with respect to a purchase thereof which closed or closes on or before the CVR Outside Date, plus (y) any Aplindore Expense Reserve Balance, less (i) any costs and expenses reasonably incurred by the Buyer, or any of its subsidiaries, in connection with the sale of all or substantially all of the assets and property of the Aplindore Program (including commissions and amounts paid to the Consulting Committee as contemplated by Section 5.15(c) of the Merger Agreement) and (ii) any amounts previously paid to the Holders pursuant to the Aplindore CVRs. For the avoidance of doubt, any amounts deducted from Net Cash Amount as accounts payable relating to the Aplindore Program and any amounts paid by Buyer from the Expense Reserve Amount shall not be considered “costs and expenses” incurred by Buyer hereunder.

“Aplindore CVR Payment Date” means the date (if any and if ever) that an Aplindore CVR Payment Amount is payable by Buyer to the Holders, which date shall be established pursuant to Section 2.4.

“Aplindore CVR Payment Event” means the receipt by Buyer of cash proceeds and/or (to the extent such shares of stock received are listed for trading on a U.S. national securities exchange) shares of stock of any purchaser (other than Buyer) from the sale of all or substantially all of the assets and property of the Aplindore Program.

“Aplindore CVR Register” has the meaning set forth in Section 2.3(b).

“Aplindore CVR Registrar” has the meaning set forth in Section 2.3(b).

“Aplindore CVRs” means the Aplindore Contingent Value Rights issued by Buyer pursuant to the Merger Agreement and this Agreement.

“Aplindore Sale” means the sale of all or substantially all of the assets and property of the Aplindore Program to a Person other than Buyer.

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“Board of Directors” means the board of directors of Buyer.

“Board Resolution” means a copy of a resolution certified by the secretary or an assistant secretary of Buyer to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Rights Agent.

“Business Day” means any day other than a Saturday, Sunday or a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to remain closed.

“CVR Outside Date” means June 23, 2010.

“Holder” means a Person in whose name an Aplindore CVR is registered in the Aplindore CVR Register.

“Non-Achievement Certificate” has the meaning set forth in Section 2.4(b).

“Notice of Objection” has the meaning set forth in Section 2.4(d).

“Objection Period” has the meaning set forth in Section 2.4(d).

“Officer’s Certificate” means a certificate signed by the chief executive officer, president, chief financial officer, any vice president, the controller, the treasurer or the secretary, in each case, of Buyer, in his or her capacity as such an officer, and delivered to the Rights Agent.

“Permitted Transfer” means: (i) the transfer of any or all of the Aplindore CVRs (upon the death of the Holder) by will or intestacy; (ii) transfer by instrument to an inter vivos or testamentary trust in which the Aplindore CVRs are to be passed to beneficiaries upon the death of the trustee; (iii) transfers made pursuant to a court order of a court of competent jurisdiction (such as in connection with divorce, bankruptcy or liquidation); (iv) if the Holder is a partnership or limited liability company, a distribution by the transferring partnership or limited liability company to its partners or members, as applicable; (v) a transfer made by operation of law (including a consolidation or merger) or in connection with the dissolution, liquidation or termination of any corporation, limited liability company, partnership or other entity; (vi) a transfer from a participant’s account in a tax-qualified employee benefit plan to the participant or to such participant’s account in a different tax-qualified employee benefit plan or to a tax-qualified individual retirement account for the benefit of such participant; or (vii) a transfer from a participant in a tax-qualified employee benefit plan, who received the Aplindore CVRs from such participant’s account in such tax-qualified employee benefit plan, to such participant’s account in a different tax-qualified employee benefit plan or to a tax-qualified individual retirement account for the benefit of such participant.

“Person” means any natural person, corporation, partnership, limited liability company, trust, estate, other firm or entity, or governmental body.

“Rights Agent” means the Rights Agent named in the first paragraph of this Agreement, until a successor Rights Agent shall have become such pursuant to the applicable provisions of this Agreement, and thereafter “Rights Agent” shall mean such successor Rights Agent.

“Rights Agent Fee” means the agreed-upon fee of the Rights Agent to act in such capacity pursuant to the terms of this Agreement.

“Surviving Person” has the meaning set forth in Section 6.1(a)(i).

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ARTICLE II

CONTINGENT VALUE RIGHTS

Section 2.1. Issuance of Aplindore CVRs; Appointment of Rights Agent.

(a) The Aplindore CVRs shall be issued pursuant to the Merger Agreement at the time and in the manner set forth in the Merger Agreement.

(b) Buyer hereby appoints Registrar and Transfer Company as the Rights Agent to act as rights agent for Buyer in accordance with the instructions hereinafter set forth in this Agreement, and the Rights Agent hereby accepts such appointment.

Section 2.2. Nontransferable.

The Aplindore CVRs shall not be sold, assigned, transferred, pledged, encumbered or in any other manner transferred or disposed of, in whole or in part, other than through a Permitted Transfer.

Section 2.3. No Certificate; Registration; Registration of Transfer; Change of Address.

(a) The Aplindore CVRs shall not be evidenced by a certificate or other instrument.

(b) The Rights Agent shall keep a register (the “Aplindore CVR Register”) for the registration of Aplindore CVRs. The Rights Agent is hereby initially appointed “Aplindore CVR Registrar” for the purpose of registering Aplindore CVRs and transfers of Aplindore CVRs as herein provided. Upon any change to the identity of the Rights Agent, the successor Rights Agent shall automatically also become the successor Aplindore CVR Registrar.

(c) Subject to the restriction on transferability set forth in Section 2.2, every request made to transfer an Aplindore CVR must be in writing and accompanied by a written instrument or instruments of transfer and any other requested documentation in a form reasonably satisfactory to Buyer and the Aplindore CVR Registrar, duly executed by the registered Holder or Holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney, such signature to be guaranteed by a participant in a recognized Signature Guarantee Medallion Program. A request for a transfer of an Aplindore CVR shall be accompanied by such documentation establishing that the transfer is a Permitted Transfer as may be reasonably requested by Buyer and/or the Aplindore CVR Registrar (including opinions of counsel), if appropriate. Upon receipt of such written request and materials, the Aplindore CVR Registrar shall, subject to its reasonable determination that the transfer instrument is in proper form and the transfer otherwise complies with the other terms and conditions herein, register the transfer of the Aplindore CVRs in the Aplindore CVR Register. All duly transferred Aplindore CVRs registered in the Aplindore CVR Register shall be the valid obligations of Buyer, evidencing the same right and shall entitle the transferee to the same benefits and rights under this Agreement, as those previously held by the transferor. No transfer of an Aplindore CVR shall be valid until registered in the Aplindore CVR Register, and any transfer not duly registered in the Aplindore CVR Register will be void ab initio. Any transfer or assignment of the Aplindore CVRs shall be without charge (other than the cost of any transfer tax which shall be the responsibility of the transferor) to the Holder.

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(d) A Holder may make a written request to the Aplindore CVR Registrar to change such Holder’s address of record in the Aplindore CVR Register. The written request must be duly executed by the Holder. Upon receipt of such written notice, the Aplindore CVR Registrar shall promptly record the change of address in the Aplindore CVR Register.

Section 2.4. Payment Procedures.

(a) Promptly following the occurrence of any Aplindore CVR Payment Event, but in no event later than five Business Days after the occurrence of such Aplindore CVR Payment Event, Buyer shall deliver to the Rights Agent a certificate (the “Achievement Certificate”), certifying that the Holders are entitled to receive such Aplindore CVR Payment Amount. No transaction described in Section 6.1(a) hereof shall give the Holders the right to receive an Aplindore CVR Payment Amount.

(b) If the Aplindore Sale has not occurred on or before the CVR Outside Date, then, within five Business Days after the CVR Outside Date, Buyer shall deliver to the Rights Agent a certificate (the “Non-Achievement Certificate”), stating that the Aplindore Sale has not occurred on or before the CVR Outside Date and no Aplindore CVR Payment Event can occur.

(c) Except as otherwise requested by any Holder, the Rights Agent shall promptly (and in no event later than five Business Days after receipt thereof) send each Holder a copy of any Achievement Certificate or Non-Achievement Certificate at its registered address.

(d) Upon demand by any Holder or Holders of at least 20% in the aggregate of the outstanding Aplindore CVRs within 45 calendar days after distribution by the Rights Agent of a Non-Achievement Certificate (the “Objection Period”), the Rights Agent shall deliver a written notice to Buyer prepared by such Holder or Holders specifying that such Holder or Holders object to the determination of Buyer that the Aplindore Sale did not timely occur (a “Notice of Objection”) and stating the reason upon which such Holder or Holders have determined that the Aplindore Sale occurred on or before the CVR Outside Date. Any dispute arising from a Notice of Objection shall be resolved in accordance with the procedure set forth in Section 7.12, which decision shall be binding on the parties hereto and every Holder (including Holders not participating therein).

(e) If a Notice of Objection has not been delivered to Buyer within the Objection Period, then the Holders shall have no right to receive any Aplindore CVR Payment Amount, and Buyer and the Rights Agent shall have no further obligations with respect to the Aplindore CVR Payment Amount(s).

(f) If (i) Buyer delivers an Achievement Certificate to the Rights Agent or (ii) an Aplindore CVR Payment Amount is determined to be payable pursuant to Section 2.4(d) above or (iii) an Aplindore Expense Reserve Balance exists at the CVR Outside Date, then Buyer shall establish an Aplindore CVR Payment Date that is within 15 calendar days after the date of the Achievement Certificate or the date of final determination pursuant to Section 2.4(d) above, as applicable. At least five Business Days before such Aplindore CVR Payment Date, Buyer shall cause the Aplindore CVR Payment Amount to be delivered to the Rights Agent, who will in turn, on the Aplindore CVR Payment Date, distribute the Aplindore CVR Payment Amount to the Holders (each Holder being

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entitled to receive its pro rata share of the Aplindore CVR Payment Amount based on the number of Aplindore CVRs held (as of the date of the Achievement Certificate or the date of final determination pursuant to Section 2.4(d) above, as applicable) by such Holder as reflected on the Aplindore CVR Register) (i) by check mailed to the address of each such respective Holder as reflected in the Aplindore CVR Register as of the close of business on the last Business Day before such Aplindore CVR Payment Date, or, (ii) with respect to any Holder that is due payment pursuant to this Agreement in excess of $1,000,000 who has provided the Rights Agent with wire transfer instructions, by wire transfer of immediately available funds to such account.

(g) Buyer shall be entitled to deduct and withhold, or cause to be deducted or withheld, from each Aplindore CVR Payment Amount otherwise payable pursuant to this Agreement, such amounts as Buyer or the applicable subsidiary of Buyer is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld or paid over to or deposited with the relevant governmental entity, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Holder in respect of which such deduction and withholding was made.

(h) Subject to prior execution and delivery by the Rights Agent of a reasonable and customary confidentiality/nonuse agreement, Buyer shall promptly furnish to the Rights Agent all information and documentation in connection with this Agreement and the Aplindore CVRs that the Rights Agent or any Holder or Holders of at least 20% in the aggregate of the outstanding Aplindore CVRs may reasonably request in connection with the determination of whether an Aplindore CVR Payment Event has occurred. Subject to prior execution and delivery by the applicable Holders of a reasonable and customary confidentiality/nonuse agreement, the Rights Agent shall forward any information and documentation it receives to the Holders who request such information.

Section 2.5. No Voting, Dividends or Interest; No Equity or Ownership Interest in Buyer.

(a) The Aplindore CVRs shall not have any voting or dividend rights, and interest shall not accrue on any amounts payable on the Aplindore CVRs to any Holder.

(b) The Aplindore CVRs shall not represent any equity or ownership interest in Buyer or in any constituent company to the Merger.

Section 2.6. Sole Discretion and Decision Making Authority; No Fiduciary Duty.

(a)(a) Notwithstanding anything else in this Agreement to the contrary, Buyer shall attempt to sell the Aplindore Program for the benefit of the Holders of the Aplindore CVRs, but shall have sole discretion and decision making authority, which shall be exercised in good faith and with commercial reasonableness, over (a) any continued operation of, development of or investment in the Aplindore Program and (b) when (if ever) to consummate the sale of all or any portion of the Aplindore Program to any purchaser, and upon what terms and conditions; provided, however, that before the CVR Outside Date Buyer shall not sell all or any portion of the Aplindore Program for any consideration other than cash or shares of stock listed for trading on a U.S. national securities exchange. If Buyer, after engaging in the efforts described above in this paragraph, is unable to sell the Aplindore Program at any price by the CVR Outside Date, then Buyer shall deliver to the Rights Agent a certificate of an executive officer of Buyer to that effect on the CVR Outside Date.

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ARTICLE III

THE RIGHTS AGENT

Section 3.1. Certain Duties and Responsibilities.

(a) The Rights Agent shall not have any liability for any actions taken or not taken in connection with this Agreement, except to the extent of its willful misconduct, bad faith or gross negligence. No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers.

(b) Any Holder or Holders of at least 20% in the aggregate of the outstanding Aplindore CVRs may direct the Rights Agent to act on behalf of the Holders in enforcing any of its or their rights hereunder, including, without limitation, the delivery of any Notice of Objection and negotiation or arbitration pursuant to Section 7.12. The Rights Agent shall be under no obligation to institute any action, suit or legal proceeding or to take any other action likely to involve material expense unless such Holder or Holders shall furnish the Rights Agent with reasonable security and indemnity for any costs and expenses which may be incurred. All rights of action under this Agreement may be enforced by the Rights Agent, and any action, suit or proceeding instituted by the Rights Agent shall be brought in its name as Rights Agent, and any recovery of judgment shall be for the ratable benefit of all the Holders, as their respective rights or interests may appear.

Section 3.2. Certain Rights of Rights Agent.

The Rights Agent undertakes to perform such duties and only such duties as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Rights Agent. In addition:

(a) the Rights Agent may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;

(b) whenever the Rights Agent shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Rights Agent may, in the absence of willful misconduct, bad faith or gross negligence on its part, rely upon an Officer’s Certificate;

(c) the Rights Agent may engage and consult with counsel of its selection and the written advice of such counsel or any opinion of counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;

(d) in the event of arbitration, the Rights Agent may engage and consult with tax experts, valuation firms and other experts and third parties that it, in its sole and absolute discretion, deems appropriate or necessary to enable it to discharge its duties hereunder;

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(e) the permissive rights of the Rights Agent to do things enumerated in this Agreement shall not be construed as a duty;

(f) the Rights Agent shall not be required to give any note or surety in respect of the execution of such powers or otherwise in respect of the premises;

(g) Buyer agrees to indemnify the Rights Agent for, and hold the Rights Agent harmless against, any loss, liability, claim, demands, suits or expense (in each case pertaining to the Rights Agent’s own account only) arising out of or in connection with the Rights Agent’s duties under this Agreement, including the costs and expenses of defending the Rights Agent against any claims, charges, demands, suits or loss, unless such loss shall have been determined by a court of competent jurisdiction to be a result of the Rights Agent’s willful misconduct, bad faith or gross negligence; and

(h) Buyer agrees (i) to pay the fees and expenses of the Rights Agent in connection with this Agreement, as set forth on Schedule 1 hereto, and (ii) to reimburse the Rights Agent for all taxes and governmental charges, reasonable expenses and other charges of any kind and nature incurred by the Rights Agent in the execution of this Agreement (other than taxes measured by the Rights Agent’s net income). The Rights Agent shall also be entitled to reimbursement from Buyer for all reasonable and necessary out-of-pocket expenses (including reasonable fees and expenses of the Rights Agent’s counsel and agent) paid or incurred by it in connection with the administration by the Rights Agent of its duties hereunder. An invoice for the Rights Agent Fee will be rendered a reasonable time before, and paid on, the effective date of the applicable transaction. An invoice for any out-of-pocket expenses and per item fees realized will be rendered and payable within 30 calendar days after receipt by Buyer. Buyer agrees to pay to Rights Agent any amounts, including fees and expenses, payable in favor of the Rights Agent in connection with any dispute, resolution or arbitration arising under or in connection with the Agreement; provided, however, that in the event of a resolution in favor of Buyer, any amounts, including fees and expenses, payable by Buyer in favor of the Rights Agent or payable in favor of Buyer related to such dispute, resolution or arbitration shall be offset against the Aplindore CVR Payment Amount, if any, or any payment to be made thereafter under any of the other CVR Agreements.

Section 3.3. Resignation and Removal; Appointment of Successor.

(a) The Rights Agent may resign at any time by giving written notice thereof to Buyer specifying a date when such resignation shall take effect, which notice shall be sent at least 30 days before the date so specified.

(b) If the Rights Agent shall resign, be removed or become incapable of acting, Buyer, by way of a Board Resolution, shall promptly appoint a qualified successor Rights Agent who may (but need not) be a Holder but shall not be an officer of Buyer. The successor Rights Agent so appointed shall, forthwith upon its acceptance of such appointment in accordance with this Section 3.3(b), become the successor Rights Agent.

(c) Buyer shall give notice of each resignation and each removal of a Rights Agent and each appointment of a successor Rights Agent by mailing written notice of such event by first-class mail, postage prepaid, to the Holders as their names and addresses appear in the Aplindore CVR Register. Each notice shall include the name and address of the successor Rights Agent. If Buyer fails to send such notice within ten days after acceptance of appointment by a successor Rights Agent, the successor Rights Agent shall cause such notice to be mailed at the expense of Buyer.

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Section 3.4. Acceptance of Appointment by Successor.

Every successor Rights Agent appointed hereunder shall execute, acknowledge and deliver to Buyer and to the retiring Rights Agent an instrument accepting such appointment and a counterpart of this Agreement, and thereupon such successor Rights Agent, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Rights Agent; provided, that upon the request of Buyer or the successor Rights Agent, such retiring Rights Agent shall execute and deliver an instrument transferring to such successor Rights Agent all the rights, powers and trusts of the retiring Rights Agent and shall cooperate in the transfer of all relevant data, including the Aplindore CVR Register, to the successor Rights Agent.

ARTICLE IV

COVENANTS

Section 4.1. List of Holders.

Buyer shall furnish or cause to be furnished to the Rights Agent in such form as Buyer receives from its transfer agent (or other agent performing similar services for Buyer), the names, addresses and shareholdings of the Holders, within five Business Days after the effective time of the Merger.

Section 4.2. Payment of Aplindore CVR Payment Amount.

Buyer shall duly and promptly pay each Aplindore CVR Payment Amount, if any, in immediately available funds, to the Rights Agent to be distributed to the Holders in the manner provided for in Section 2.4 and in accordance with the terms of this Agreement.

Section 4.3. Assignments

Buyer shall not, in whole or in part, assign any of its obligations under this Agreement other than in accordance with the terms of Section 6.1 hereof.

ARTICLE V

AMENDMENTS

Section 5.1. Amendments Without Consent of Holders.

(a) Without the consent of any Holders or the Rights Agent, Buyer, when authorized by a Board Resolution, at any time and from time to time, may enter into one or more amendments hereto, for any of the following purposes:

(i) to evidence the succession of another Person to Buyer and the assumption by any such successor of the covenants of Buyer herein in a transaction contemplated by Section 6.1 hereof; or

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(ii) to evidence the termination of the Aplindore CVR Registrar and the succession of another Person as a successor Aplindore CVR Registrar and the assumption by any successor of the obligations of the Aplindore CVR Registrar herein.

(b) Without the consent of any Holders, Buyer, when authorized by a Board Resolution, and the Rights Agent, in the Rights Agent’s sole and absolute discretion, at any time and from time to time, may enter into one or more amendments hereto, for any of the following purposes:

(i) to evidence the succession of another Person as a successor Rights Agent and the assumption by any successor of the covenants and obligations of the Rights Agent herein;

(ii) to add to the covenants of Buyer such further covenants, restrictions, conditions or provisions as the Board of Directors and the Rights Agent shall consider to be for the protection of the Holders; provided, that in each case, such provisions shall not adversely affect the interests of the Holders;

(iii) to cure any ambiguity, to correct or supplement any provision herein that may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Agreement; provided, that in each case, such provisions shall not adversely affect the interests of the Holders; or

(iv) to add, eliminate or change any provision of this Agreement unless such addition, elimination or change is adverse to the interests of the Holders.

(c) Promptly after the execution by Buyer and the Rights Agent of any amendment pursuant to the provisions of this Section 5.1, Buyer shall mail a notice thereof by first-class mail to each of the Holders at their addresses as they shall appear on the Aplindore CVR Register, setting forth in general terms the substance of such amendment.

Section 5.2. Amendments With Consent of Holders.

(a) Subject to Section 5.1 (which amendments pursuant to Section 5.1 may be made without the consent of the Holders), with the consent of the Holders of not less than a majority of the outstanding Aplindore CVRs, whether evidenced in writing or taken at a meeting of the Holders, Buyer, when authorized by a Board Resolution, and the Rights Agent may enter into one or more amendments hereto for the purpose of adding, eliminating or changing any provisions of this Agreement, even if such addition, elimination or change is in any way adverse to the interests of the Holders.

(b) Promptly after the execution by Buyer and the Rights Agent of any amendment pursuant to the provisions of this Section 5.2, Buyer shall mail a notice thereof by first-class mail to the Holders at their addresses as they shall appear on the Aplindore CVR Register, setting forth in general terms the substance of such amendment.

Section 5.3. Execution of Amendments.

In executing any amendment permitted by this Article V, the Rights Agent shall be entitled to receive, and shall be fully protected in relying upon, an opinion of counsel stating that the execution of such amendment is authorized or permitted by this Agreement. The Rights Agent may, but is not obligated to, enter into any such amendment that affects the Rights Agent’s own rights, privileges, covenants or duties under this Agreement or otherwise.

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Section 5.4. Effect of Amendments.

Upon the execution of any amendment under this Article V, this Agreement shall be modified in accordance therewith, such amendment shall form a part of this Agreement for all purposes and every Holder shall be bound thereby.

ARTICLE VI

CONSOLIDATION, MERGER, SALE OR CONVEYANCE

Section 6.1. Buyer May Consolidate, Etc.

(a) Buyer shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, unless:

(i) the Person formed by such consolidation or into which Buyer is merged or the Person that acquires by conveyance or transfer, or that leases, the properties and assets of Buyer substantially as an entirety (the “Surviving Person”) shall expressly assume payment (if and to the extent required hereunder) of amounts on all the Aplindore CVRs and the performance of every duty and covenant of this Agreement on the part of Buyer to be performed or observed; and

(ii) Buyer has delivered to the Rights Agent an Officer’s Certificate, stating that such consolidation, merger, conveyance, transfer or lease complies with this Article VI and that all conditions precedent herein provided for relating to such transaction have been complied with.

(b) In the event Buyer conveys, transfers or leases its properties and assets substantially as an entirety in accordance with the terms and conditions of this Section 6.1, Buyer and the Surviving Person shall be jointly and severally liable for the payment of the Aplindore CVR Payment Amount and the performance of every duty and covenant of this Agreement on the part of the Buyer to be performed or observed.

Section 6.2. Successor Substituted.

Upon any consolidation of or merger by Buyer with or into any other Person, or any conveyance, transfer or lease of the properties and assets substantially as an entirety to any Person in accordance with Section 6.1, the Surviving Person shall succeed to, and be substituted for, and may exercise every right and power of, Buyer under this Agreement with the same effect as if the Surviving Person had been named as Buyer herein, and thereafter the predecessor Person shall be relieved of all obligations and covenants under this Agreement and the Aplindore CVRs.

ARTICLE VII

OTHER PROVISIONS OF GENERAL APPLICATION

Section 7.1. Notices to Rights Agent and Buyer.

Any request, demand, authorization, direction, notice, consent, waiver or other document provided or permitted by this Agreement shall be sufficient for every purpose hereunder if in writing and sent by facsimile transmission, delivered personally, or by

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certified or registered mail (return receipt requested and first-class postage prepaid) or sent by a nationally recognized overnight courier (with proof of service), addressed as follows, and shall be deemed to have been given upon receipt:

(a) if to the Rights Agent, addressed to it at 10 Commerce Drive, Cranford, New Jersey 07016, facsimile at (908) 497-2314, or at any other address previously furnished in writing to the Holders and Buyer by the Rights Agent in accordance with this Section 7.1; or

(b) if to Buyer, addressed to it at 11085 North Torrey Pines Road, Suite 300, La Jolla, California 92037, facsimile at (858) 550-7272, or at any other address previously furnished in writing to the Rights Agent and the Holders by Buyer in accordance with this Section 7.1.

Section 7.2. Notice to Holders.

Where this Agreement provides for notice to Holders, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his, her or its address as it appears in the Aplindore CVR Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders.

Section 7.3. Effect of Headings.

The Article and Section headings herein are for convenience only and shall not affect the construction hereof.

Section 7.4. Successors and Assigns.

All covenants and agreements in this Agreement by Buyer shall bind its successors and assigns, whether so expressed or not.

Section 7.5. Benefits of Agreement.

Nothing in this Agreement, express or implied, shall give to any Person (other than the parties hereto, the Holders and their permitted successors and assigns hereunder) any benefit or any legal or equitable right, remedy or claim under this Agreement or under any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the parties hereto, the Holders and their permitted successors and assigns. The Holders shall have no rights or remedies hereunder except as expressly set forth herein.

Section 7.6. Governing Law.

This Agreement and the Aplindore CVRs shall be governed by and construed in accordance with the laws of the State of Delaware without regards to its rules of conflicts of laws.

Section 7.7. Legal Holidays.

In the event that an Aplindore CVR Payment Date shall not be a Business Day, then, notwithstanding any provision of this Agreement to the contrary, any payment required to be made in respect of the Aplindore CVRs on such date need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Aplindore CVR Payment Date.

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Section 7.8. Severability Clause.

In case any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, but this Agreement shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the court or other tribunal making such determination is authorized and instructed to modify this Agreement so as to effect the original intent of the parties as closely as possible so that the transactions and agreements contemplated herein are consummated as originally contemplated to the fullest extent possible.

Section 7.9. Counterparts.

This Agreement may be signed in any number of counterparts (which may be effectively delivered by facsimile or other electronic means), each of which shall be deemed to constitute but one and the same instrument.

Section 7.10. Termination.

This Agreement shall terminate and be of no further force or effect, and the parties hereto shall have no liability hereunder, upon the earliest to occur of (a) the payment of the last possible Aplindore CVR Payment Amount, (b) in the event that a Notice of Objection is not delivered within the Objection Period, the expiration of the Objection Period or (c) in the event of the delivery of a Notice of Objection, either (i) the final determination in accordance with this Agreement that the Aplindore Sale was not closed on or before the CVR Outside Date or (ii) the fulfillment of the last possible payment or other obligation required pursuant to a final determination made in accordance with this Agreement.

Section 7.11. Entire Agreement.

This Agreement and the Merger Agreement represent the entire understanding of the parties hereto with reference to the Aplindore CVRs and this Agreement supersedes any and all other oral or written agreements made with respect to the Aplindore CVRs, except for the Merger Agreement. If and to the extent that any provision of this Agreement is inconsistent or conflicts with the Merger Agreement, this Agreement shall govern and be controlling.

Section 7.12. Negotiation; Arbitration.

(a) Before any arbitration pursuant to Section 7.12(b), Buyer, the Rights Agent and, if available, any Holder or Holders of at least 20% in the aggregate of the outstanding Aplindore CVRs shall negotiate in good faith for a period of 30 days to resolve any controversy or claim arising out of or relating to this Agreement or the breach thereof.

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(b) After expiration of the 30-day period contemplated by Section 7.12(a), such controversy or claim, including any claims for breach of this Agreement, shall be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. Buyer, the Rights Agent and/or any Holder or Holders of at least 20% in the aggregate of the outstanding Aplindore CVRs may initiate an arbitration for any matter relating to this Agreement. However, in the event of a dispute arising from the delivery of a Notice of Objection, the sole matter to be settled by arbitration shall be whether an Aplindore Sale was closed on or before the CVR Outside Date. The number of arbitrators shall be three. Within 15 days after the commencement of arbitration, each party shall select one person to act as arbitrator, and the two selected shall select a third arbitrator within 15 days of their appointment. If the arbitrators selected by the parties are unable or fail to agree upon the third arbitrator, the third arbitrator shall be selected by the American Arbitration Association. The place of the arbitration shall be San Diego, California. The arbitrators shall be lawyers or retired judges with experience in the life sciences industry and with mergers and acquisitions. Except as may be required by law, neither a party nor an arbitrator may disclose the existence, content or results of any arbitration hereunder without the prior written consent of both parties (provided that the Rights Agent may disclose to the Holders any such information without the consent of Buyer). Any award payable in favor of the Holders or the Rights Agent as a result of arbitration shall be distributed to the Holders on a pro rata basis, based on the number of Aplindore CVRs held by each Holder. Buyer shall pay all fees and expenses of the arbitration forum, including the costs and expenses billed by the arbitrators in connection with the performance of their duties described herein; provided, however, that if the arbitrator rules in favor of Buyer, the Arbitrator’s fees and expenses shall be offset against the current or any future Aplindore CVR Payment Amount, if any, or any payment to be made thereafter under any of the other CVR Agreements. Each party shall be responsible for its own attorney fees, expenses and costs of investigation.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its duly authorized officers as of the day and year first above written.

LIGAND PHARMACEUTICALS INCORPORATED
By:	/s/ Charles Berkman
Name:	Charles Berkman
Title:	Vice President, General Counsel and Secretary
NEUROGEN CORPORATION
By:	/s/ Steve Davis
Name:	Steve Davis
Title:	President & CEO
REGISTRAR AND TRANSFER COMPANY
By:	/s/ William P. Tatler
Name:	William P. Tatler
Title:	Vice President

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EX-10.2

Exhibit 10.2

CONTINGENT VALUE RIGHTS AGREEMENT

THIS CONTINGENT VALUE RIGHTS AGREEMENT, dated as of December 23, 2009 (this “Agreement”, is entered into by and among Ligand Pharmaceuticals Incorporated, a Delaware corporation (“Buyer”), Neurogen Corporation, a Delaware corporation (“Target”), and Registrar and Transfer Company, a New Jersey corporation, as Rights Agent (the “Rights Agent”) and as initial H3 CVR Registrar (as defined herein).

Preamble

Buyer, Neon Signal, LLC, a Delaware limited liability company and wholly-owned subsidiary of Buyer (“Sub”), and Target have entered into an Agreement and Plan of Merger dated as of August 23, 2009 (the “Merger Agreement”), pursuant to which Sub will merge with and into Target (the “Merger”), with Target surviving the Merger as a subsidiary of Buyer.

Pursuant to the Merger Agreement, Buyer agreed to create and issue to Target’s stockholders of record immediately before the effective time of the Merger, contingent value rights as hereinafter described.

The parties have done all things necessary to make the contingent value rights, when issued pursuant to the Merger Agreement and hereunder, the valid obligations of Buyer and to make this Agreement a valid and binding agreement of Buyer, in accordance with its terms.

NOW, THEREFORE, for and in consideration of the premises and the consummation of the transactions referred to above, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders (as hereinafter defined), as follows:

ARTICLE I

DEFINITIONS

Section 1.1. Definitions.

(a) For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:

(i) the terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular;

(ii) all accounting terms used herein and not expressly defined herein shall have the meanings assigned to such terms in accordance with United States generally accepted accounting principles, as in effect on the date hereof;

(iii) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision;

(iv) unless the context otherwise requires, words describing the singular number shall include the plural and vice versa, words denoting any gender shall include all genders and words denoting natural Persons shall include corporations, partnerships and other Persons and vice versa; and

(v) all references to “including” shall be deemed to mean including without limitation.

(b) Capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Merger Agreement. The following terms shall have the meanings ascribed to them as follows:

“Achievement Certificate” has the meaning set forth in Section 2.4(a).

“Board of Directors” means the board of directors of Buyer.

“Board Resolution” means a copy of a resolution certified by the secretary or an assistant secretary of Buyer to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Rights Agent.

“Business Day” means any day other than a Saturday, Sunday or a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to remain closed.

“Holder” means a Person in whose name a H3 CVR is registered in the H3 CVR Register.

“H3 Antagonist Program” means the antagonist program conducted before the Merger by Target intended to create an H3 receptor drug, and as may be continued after the Merger by Buyer.

“H3 CVR Payment Amount” means, as applicable, an H3 Licensing Option Payment Amount, an H3 Sale Option Payment Amount, the H3 Licensing Payment or the H3 Sale Payment Amount (together with any H3 Licensing Option Payment Amount). For purposes of clarity, the Holders shall only be entitled to either the H3 Licensing Payment or the H3 Sale Payment Amount (together with any H3 Licensing Option Payment Amount), or neither of them, but in no circumstances both.

“H3 CVR Payment Date” means the date (if any and if ever) that an H3 CVR Payment Amount is payable by Buyer to the Holders, which date shall be established pursuant to Section 2.4.

“H3 CVR Payment Event” means, as applicable, an H3 Licensing Option Event, an H3 Licensing Event, an H3 Sale Option Event or an H3 Sale Event.

“H3 CVR Register” has the meaning set forth in Section 2.3(b).

“H3 CVR Registrar” has the meaning set forth in Section 2.3(b).

“H3 CVRs” means the H3 Contingent Value Rights issued by Buyer pursuant to the Merger Agreement and this Agreement.

“H3 Licensing Event” means the licensing (but not to include a license in a transaction which includes no royalty nor milestone payments) by Buyer to any Person (other than to Buyer) of a drug candidate or technology or Intellectual Property from the H3 Antagonist Program.

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“H3 Licensing Option Event” means the grant of an option by Buyer to any Person (other than Buyer) to enter into an H3 Licensing Event.

“H3 Licensing Option Payment Amount” means an amount equal to 50% of the aggregate cash proceeds actually received by Buyer, or any of its subsidiaries or Affiliates, after the Effective Time and prior to the Outside Date, in connection with an H3 Licensing Option Event, less any costs and expenses reasonably incurred by Buyer, or any of its subsidiaries or Affiliates, in connection with the H3 Licensing Option Event (including attorneys fees and brokers commissions).

“H3 Licensing Payment” means, in the event of an H3 Licensing Event, an aggregate amount equal to $4,000,000 in cash less any H3 Licensing Option Payment Amount.

“H3 Sale Event” means the consummation of the sale or other similar transfer (that does not qualify as a H3 Licensing Event) by Buyer to any Person (other than Buyer) of a drug candidate or technology or Intellectual Property from the H3 Antagonist Program.

“H3 Sale Option Event” means the grant of an option by Buyer to any Person (other than Buyer) to enter into a H3 Sale Event.

“H3 Sale Option Payment Amount” means an amount equal to 50% of the aggregate cash proceeds actually received by Buyer, or any of its subsidiaries or Affiliates, after the Effective Time and prior to the Outside Date, in connection with an H3 Sale Option Event, less any costs and expenses reasonably incurred by Buyer, or any of its subsidiaries or Affiliates, in connection with the H3 Sale Option Event (including attorneys fees and brokers commissions).

“H3 Sale Payment Amount” means an amount equal to 50% of the aggregate cash proceeds actually received by Buyer, or any of its subsidiaries or Affiliates, after the Effective Time and prior to the Outside Date, in connection with an H3 Sale Event, less any costs and expenses reasonably incurred by Buyer, or any of its subsidiaries or Affiliates, in connection with the H3 Sale Event (including attorneys fees and brokers commissions).

“Non-Achievement Certificate” has the meaning set forth in Section 2.4(b).

“Notice of Objection” has the meaning set forth in Section 2.4(d).

“Objection Period” has the meaning set forth in Section 2.4(d).

“Officer’s Certificate” means a certificate signed by the chief executive officer, president, chief financial officer, any vice president, the controller, the treasurer or the secretary, in each case, of Buyer, in his or her capacity as such an officer, and delivered to the Rights Agent.

“Outside Date” means December 23, 2012; provided, that if pursuant to the preceding subsections the Outside Date has not already occurred by the H3 Licensing Event, then the Outside Date shall mean immediately after the H3 Licensing Event; and provided further, that in the event of an H3 Licensing Option Event or an H3 Sale Option Event, the Outside Date shall not occur before the earliest of the exercise, expiration or termination of such option.

“Permitted Transfer” means: (i) the transfer of any or all of the H3 CVRs (upon the death of the Holder) by will or intestacy; (ii) transfer by instrument to an inter vivos or testamentary trust in which the H3 CVRs are to be passed to beneficiaries upon the death of the trustee; (iii) transfers made pursuant to a court order of a court of competent jurisdiction (such as in connection with

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divorce, bankruptcy or liquidation); (iv) if the Holder is a partnership or limited liability company, a pro-rata distribution by the transferring partnership or limited liability company to its partners or members, as applicable; (v) a transfer made by operation of law (including a consolidation or merger) or in connection with the dissolution, liquidation or termination of any corporation, limited liability company, partnership or other entity; (vi) a transfer from a participant’s account in a tax-qualified employee benefit plan to the participant or to such participant’s account in a different tax-qualified employee benefit plan or to a tax-qualified individual retirement account for the benefit of such participant; or (vii) a transfer from a participant in a tax-qualified employee benefit plan, who received the H3 CVRs from such participant’s account in such tax-qualified employee benefit plan, to such participant’s account in a different tax-qualified employee benefit plan or to a tax-qualified individual retirement account for the benefit of such participant.

“Person” means any natural person, corporation, partnership, limited liability company, trust, estate, other firm or entity, or governmental body.

“Rights Agent” means the Rights Agent named in the first paragraph of this Agreement, until a successor Rights Agent shall have become such pursuant to the applicable provisions of this Agreement, and thereafter “Rights Agent” shall mean such successor Rights Agent.

“Rights Agent Fee” means the agreed-upon fee of the Rights Agent to act in such capacity pursuant to the terms of this Agreement.

“Surviving Person” has the meaning set forth in Section 6.1(a)(i).

ARTICLE II

CONTINGENT VALUE RIGHTS

Section 2.1. Issuance of H3 CVRs; Appointment of Rights Agent.

(a) The H3 CVRs shall be issued pursuant to the Merger Agreement at the time and in the manner set forth in the Merger Agreement.

(b) Buyer hereby appoints Registrar and Transfer Company as the Rights Agent to act as rights agent for Buyer in accordance with the instructions hereinafter set forth in this Agreement, and the Rights Agent hereby accepts such appointment.

Section 2.2. Nontransferable.

The H3 CVRs shall not be sold, assigned, transferred, pledged, encumbered or in any other manner transferred or disposed of, in whole or in part, other than through a Permitted Transfer.

Section 2.3. No Certificate; Registration; Registration of Transfer; Change of Address.

(a) The H3 CVRs shall not be evidenced by a certificate or other instrument.

(b) The Rights Agent shall keep a register (the “H3 CVR Register”) for the registration of H3 CVRs. The Rights Agent is hereby initially appointed “H3 CVR Registrar” for the purpose of registering H3 CVRs and transfers of H3 CVRs as herein provided. Upon any change in the identity of the Rights Agent, the successor Rights Agent shall automatically also become the successor H3 CVR Registrar.

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(c) Subject to the restriction on transferability set forth in Section 2.2, every request made to transfer a H3 CVR must be in writing and accompanied by a written instrument or instruments of transfer and any other requested documentation in a form reasonably satisfactory to Buyer and the H3 CVR Registrar, duly executed by the registered Holder or Holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney, such signature to be guaranteed by a participant in a recognized Signature Guarantee Medallion Program. A request for a transfer of a H3 CVR shall be accompanied by such documentation establishing that the transfer is a Permitted Transfer as may be reasonably requested by Buyer and/or the H3 CVR Registrar (including opinions of counsel), if appropriate. Upon receipt of such written request and materials, the H3 CVR Registrar shall, subject to its reasonable determination that the transfer instrument is in proper form and the transfer otherwise complies with the other terms and conditions herein, register the transfer of the H3 CVRs in the H3 CVR Register. All duly transferred H3 CVRs registered in the H3 CVR Register shall be the valid obligations of Buyer, evidencing the same right and shall entitle the transferee to the same benefits and rights under this Agreement, as those previously held by the transferor. No transfer of a H3 CVR shall be valid until registered in the H3 CVR Register, and any transfer not duly registered in the H3 CVR Register will be void ab initio. Any transfer or assignment of the H3 CVRs shall be without charge (other than the cost of any transfer tax which shall be the responsibility of the transferor) to the Holder.

(d) A Holder may make a written request to the H3 CVR Registrar to change such Holder’s address of record in the H3 CVR Register. The written request must be duly executed by the Holder. Upon receipt of such written notice, the H3 CVR Registrar shall promptly record the change of address in the H3 CVR Register.

Section 2.4. Payment Procedures.

(a) Promptly following the occurrence of an H3 CVR Payment Event, but in no event later than five Business Days after the occurrence of an H3 CVR Payment Event, Buyer shall deliver to the Rights Agent a certificate (the “Achievement Certificate”), certifying that the Holders are entitled to receive an H3 CVR Payment Amount. No transaction described in Section 6.1(a) hereof shall give the Holders the right to receive an H3 CVR Payment Amount.

(b) If any H3 CVR Payment Event has not occurred on or before the Outside Date, then, within five Business Days after the Outside Date, Buyer shall deliver to the Rights Agent a certificate (the “Non-Achievement Certificate”), stating that the H3 CVR Payment Event did not occur.

(c) Except as otherwise requested by any Holder, the Rights Agent shall promptly (and in no event later than five Business Days after receipt thereof) send each Holder a copy of any Achievement Certificate or Non-Achievement Certificate at its registered address.

(d) Upon demand by any Holder or Holders of at least 20% in the aggregate of the outstanding H3 CVRs within 45 calendar days after distribution by the Rights Agent of a Non-Achievement Certificate (the “Objection Period”), the Rights Agent shall deliver a written notice to Buyer prepared by such Holder or Holders specifying that such Holder or Holders object to the determination of Buyer that the H3 CVR Payment Event did not occur (a “Notice of Objection”) and stating the reason upon which

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such Holder or Holders have determined that the H3 CVR Payment Event has occurred on or before the Outside Date. Any dispute arising from a Notice of Objection shall be resolved in accordance with the procedure set forth in Section 7.12, which decision shall be binding on the parties hereto and every Holder (including the Holders not participating therein).

(e) If a Notice of Objection has not been delivered to Buyer within the Objection Period, then the Holders shall have no right to receive the H3 CVR Payment Amount, and Buyer and the Rights Agent shall have no further obligations with respect to the H3 CVR Payment Amount.

(f) If Buyer delivers an Achievement Certificate to the Rights Agent or if the H3 CVR Payment Amount is determined to be payable pursuant to Section 2.4(d) above, Buyer shall establish a H3 CVR Payment Date that is within 15 calendar days after the date of the Achievement Certificate or the date of final determination pursuant to Section 2.4(d) above, as applicable. At least five Business Days before such H3 CVR Payment Date, Buyer shall cause the H3 CVR Payment Amount to be delivered to the Rights Agent, who will in turn, on the H3 CVR Payment Date, distribute the H3 CVR Payment Amount to the Holders (each Holder being entitled to receive its pro rata share of the H3 CVR Payment Amount based on the number of H3 CVRs held (as of the date of the Achievement Certificate or the date of final determination pursuant to Section 2.4(d) above, as applicable) by such Holder as reflected on the H3 CVR Register) (i) by check mailed to the address of each such respective Holder as reflected in the H3 CVR Register as of the close of business on the last Business Day before such H3 CVR Payment Date, or, (ii) with respect to any Holder that is due payment pursuant to this Agreement in excess of $1,000,000 who has provided the Rights Agent with wire transfer instructions, by wire transfer of immediately available funds to such account.

(g) Buyer shall be entitled to deduct and withhold, or cause to be deducted or withheld, from each H3 CVR Payment Amount otherwise payable pursuant to this Agreement, such amounts as Buyer or the applicable subsidiary of Buyer is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld or paid over to or deposited with the relevant governmental entity, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Holder in respect of which such deduction and withholding was made.

(h) Subject to prior execution and delivery by the Rights Agent of a reasonable and customary confidentiality/nonuse agreement, Buyer shall promptly furnish to the Rights Agent all information and documentation in connection with this Agreement and the H3 CVRs that the Rights Agent or any Holder or Holders of at least 20% in the aggregate of the outstanding H3 CVRs may reasonably request in connection with the determination of whether the H3 CVR Payment Event has occurred. Subject to prior execution and delivery by the applicable Holders of a reasonable and customary confidentiality/nonuse agreement, the Rights Agent shall forward any information and documentation it receives to the Holders who request such information.

Section 2.5. No Voting, Dividends or Interest; No Equity or Ownership Interest in Buyer.

(a) The H3 CVRs shall not have any voting or dividend rights, and interest shall not accrue on any amounts payable on the H3 CVRs to any Holder.

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(b) The H3 CVRs shall not represent any equity or ownership interest in Buyer or in any constituent company to the Merger.

Section 2.6. Sole Discretion and Decision Making Authority; No Fiduciary Duty.

(a) Notwithstanding anything contained herein to the contrary, Buyer shall have sole discretion and decision making authority, which shall be exercised in good faith, over any continued operation of, development of or investment in the H3 Antagonist Program and over when (if ever) and whether to pursue, or enter into, a licensing agreement and/or sale agreement and/or similar transfer agreement and/or agreement for the grant of an option to enter into any such transaction with respect to a drug candidate or technology or Intellectual Property from the H3 Antagonist Program, and upon what terms and conditions.

ARTICLE III

THE RIGHTS AGENT

Section 3.1. Certain Duties and Responsibilities.

(a) The Rights Agent shall not have any liability for any actions taken or not taken in connection with this Agreement, except to the extent of its willful misconduct, bad faith or gross negligence. No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers.

(b) Any Holder or Holders of at least 20% in the aggregate of the outstanding H3 CVRs may direct the Rights Agent to act on behalf of the Holders in enforcing any of its or their rights hereunder, including, without limitation, the delivery of any Notice of Objection and negotiation or arbitration pursuant to Section 7.12. The Rights Agent shall be under no obligation to institute any action, suit or legal proceeding or to take any other action likely to involve material expense unless such Holder or Holders shall furnish the Rights Agent with reasonable security and indemnity for any costs and expenses which may be incurred. All rights of action under this Agreement may be enforced by the Rights Agent, and any action, suit or proceeding instituted by the Rights Agent shall be brought in its name as Rights Agent, and any recovery of judgment shall be for the ratable benefit of all the Holders, as their respective rights or interests may appear.

Section 3.2. Certain Rights of Rights Agent.

The Rights Agent undertakes to perform such duties and only such duties as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Rights Agent. In addition:

(a) the Rights Agent may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;

(b) whenever the Rights Agent shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Rights Agent may, in the absence of willful misconduct, bad faith or gross negligence on its part, rely upon an Officer’s Certificate;

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(c) the Rights Agent may engage and consult with counsel of its selection and the written advice of such counsel or any opinion of counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;

(d) in the event of arbitration, the Rights Agent may engage and consult with tax experts, valuation firms and other experts and third parties that it, in its sole and absolute discretion, deems appropriate or necessary to enable it to discharge its duties hereunder;

(e) the permissive rights of the Rights Agent to do things enumerated in this Agreement shall not be construed as a duty;

(f) the Rights Agent shall not be required to give any note or surety in respect of the execution of such powers or otherwise in respect of the premises;

(g) Buyer agrees to indemnify the Rights Agent for, and hold the Rights Agent harmless against, any loss, liability, claim, demands, suits or expense (in each case pertaining to the Rights Agent’s own account only) arising out of or in connection with the Rights Agent’s duties under this Agreement, including the costs and expenses of defending the Rights Agent against any claims, charges, demands, suits or loss, unless such loss shall have been determined by a court of competent jurisdiction to be a result of the Rights Agent’s willful misconduct, bad faith or gross negligence; and

(h) Buyer agrees (i) to pay the fees and expenses of the Rights Agent in connection with this Agreement, as set forth on Schedule 1 hereto, and (ii) to reimburse the Rights Agent for all taxes and governmental charges, reasonable expenses and other charges of any kind and nature incurred by the Rights Agent in the execution of this Agreement (other than taxes measured by the Rights Agent’s net income). The Rights Agent shall also be entitled to reimbursement from Buyer for all reasonable and necessary out-of-pocket expenses (including reasonable fees and expenses of the Rights Agent’s counsel and agent) paid or incurred by it in connection with the administration by the Rights Agent of its duties hereunder. An invoice for the Rights Agent Fee will be rendered a reasonable time before, and paid on, the effective date of the applicable transaction. An invoice for any out-of-pocket expenses and per item fees realized will be rendered and payable within 30 calendar days after receipt by Buyer. Buyer agrees to pay to Rights Agent any amounts, including fees and expenses, payable in favor of the Rights Agent in connection with any dispute, resolution or arbitration arising under or in connection with the Agreement; provided, however, that in the event of a resolution in favor of Buyer, any amounts, including fees and expenses, payable by Buyer in favor of the Rights Agent or payable in favor of Buyer related to such dispute, resolution or arbitration shall be offset against the H3 CVR Payment Amount, if any, or any payment to be made thereafter under any of the other CVR Agreements.

Section 3.3. Resignation and Removal; Appointment of Successor.

(a) The Rights Agent may resign at any time by giving written notice thereof to Buyer specifying a date when such resignation shall take effect, which notice shall be sent at least 30 days before the date so specified.

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(b) If the Rights Agent shall resign, be removed or become incapable of acting, Buyer, by way of a Board Resolution, shall promptly appoint a qualified successor Rights Agent who may (but need not) be a Holder but shall not be an officer of Buyer. The successor Rights Agent so appointed shall, forthwith upon its acceptance of such appointment in accordance with this Section 3.3(b), become the successor Rights Agent.

(c) Buyer shall give notice of each resignation and each removal of a Rights Agent and each appointment of a successor Rights Agent by mailing written notice of such event by first-class mail, postage prepaid, to the Holders as their names and addresses appear in the H3 CVR Register. Each notice shall include the name and address of the successor Rights Agent. If Buyer fails to send such notice within ten days after acceptance of appointment by a successor Rights Agent, the successor Rights Agent shall cause such notice to be mailed at the expense of Buyer.

Section 3.4. Acceptance of Appointment by Successor.

Every successor Rights Agent appointed hereunder shall execute, acknowledge and deliver to Buyer and to the retiring Rights Agent an instrument accepting such appointment and a counterpart of this Agreement, and thereupon such successor Rights Agent, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Rights Agent; provided, that upon the request of Buyer or the successor Rights Agent, such retiring Rights Agent shall execute and deliver an instrument transferring to such successor Rights Agent all the rights, powers and trusts of the retiring Rights Agent and shall cooperate in the transfer of all relevant data, including the H3 CVR Register, to the successor Rights Agent.

ARTICLE IV

COVENANTS

Section 4.1. List of Holders.

Buyer shall furnish or cause to be furnished to the Rights Agent in such form as Buyer receives from its transfer agent (or other agent performing similar services for Buyer), the names, addresses and shareholdings of the Holders, within five Business Days after the effective time of the Merger.

Section 4.2. Payment of H3 CVR Payment Amount.

Buyer shall duly and promptly pay the H3 CVR Payment Amount, if any, in immediately available funds, to the Rights Agent to be distributed to the Holders in the manner provided for in Section 2.4 and in accordance with the terms of this Agreement.

Section 4.3. Assignments.

Buyer shall not, in whole or in part, assign any of its obligations under this Agreement other than in accordance with the terms of Section 6.1 hereof.

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ARTICLE V

AMENDMENTS

Section 5.1. Amendments Without Consent of Holders.

(a) Without the consent of any Holders or the Rights Agent, Buyer, when authorized by a Board Resolution, at any time and from time to time, may enter into one or more amendments hereto, for any of the following purposes:

(i) to evidence the succession of another Person to Buyer and the assumption by any such successor of the covenants of Buyer herein in a transaction contemplated by Section 6.1 hereof; or

(ii) to evidence the termination of the H3 CVR Registrar and the succession of another Person as a successor H3 CVR Registrar and the assumption by any successor of the obligations of the H3 CVR Registrar herein.

(b) Without the consent of any Holders, Buyer, when authorized by a Board Resolution, and the Rights Agent, in the Rights Agent’s sole and absolute discretion, at any time and from time to time, may enter into one or more amendments hereto, for any of the following purposes:

(i) to evidence the succession of another Person as a successor Rights Agent and the assumption by any successor of the covenants and obligations of the Rights Agent herein;

(ii) to add to the covenants of Buyer such further covenants, restrictions, conditions or provisions as the Board of Directors and the Rights Agent shall consider to be for the protection of the Holders; provided, that in each case, such provisions shall not adversely affect the interests of the Holders;

(iii) to cure any ambiguity, to correct or supplement any provision herein that may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Agreement; provided, that in each case, such provisions shall not adversely affect the interests of the Holders; or

(iv) to add, eliminate or change any provision of this Agreement unless such addition, elimination or change is adverse to the interests of the Holders.

(c) Promptly after the execution by Buyer and the Rights Agent of any amendment pursuant to the provisions of this Section 5.1, Buyer shall mail a notice thereof by first-class mail to each of the Holders at their addresses as they shall appear on the H3 CVR Register, setting forth in general terms the substance of such amendment.

Section 5.2. Amendments With Consent of Holders.

(a) Subject to Section 5.1 (which amendments pursuant to Section 5.1 may be made without the consent of the Holders), with the consent of the Holders of not less than a majority of the outstanding H3 CVRs, whether evidenced in writing or taken at a meeting of the Holders, Buyer, when authorized by a Board Resolution, and the Rights Agent may enter into one or more amendments hereto for the purpose of adding, eliminating or changing any provisions of this Agreement, even if such addition, elimination or change is in any way adverse to the interests of the Holders.

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(b) Promptly after the execution by Buyer and the Rights Agent of any amendment pursuant to the provisions of this Section 5.2, Buyer shall mail a notice thereof by first-class mail to the Holders at their addresses as they shall appear on the H3 CVR Register, setting forth in general terms the substance of such amendment.

Section 5.3. Execution of Amendments.

In executing any amendment permitted by this Article V, the Rights Agent shall be entitled to receive, and shall be fully protected in relying upon, an opinion of counsel stating that the execution of such amendment is authorized or permitted by this Agreement. The Rights Agent may, but is not obligated to, enter into any such amendment that affects the Rights Agent’s own rights, privileges, covenants or duties under this Agreement or otherwise.

Section 5.4. Effect of Amendments.

Upon the execution of any amendment under this Article V, this Agreement shall be modified in accordance therewith, such amendment shall form a part of this Agreement for all purposes and every Holder shall be bound thereby.

ARTICLE VI

CONSOLIDATION, MERGER, SALE OR CONVEYANCE

Section 6.1. Buyer May Consolidate, Etc.

(a) Buyer shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, unless:

(i) the Person formed by such consolidation or into which Buyer is merged or the Person that acquires by conveyance or transfer, or that leases, the properties and assets of Buyer substantially as an entirety (the “Surviving Person”) shall expressly assume payment (if and to the extent required hereunder) of amounts on all the H3 CVRs and the performance of every duty and covenant of this Agreement on the part of Buyer to be performed or observed; and

(ii) Buyer has delivered to the Rights Agent an Officer’s Certificate, stating that such consolidation, merger, conveyance, transfer or lease complies with this Article VI and that all conditions precedent herein provided for relating to such transaction have been complied with.

(b) In the event Buyer conveys, transfers or leases its properties and assets substantially as an entirety in accordance with the terms and conditions of this Section 6.1, Buyer and the Surviving Person shall be jointly and severally liable for the payment of the H3 CVR Payment Amount and the performance of every duty and covenant of this Agreement on the part of the Buyer to be performed or observed.

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Section 6.2. Successor Substituted.

Upon any consolidation of or merger by Buyer with or into any other Person, or any conveyance, transfer or lease of the properties and assets substantially as an entirety to any Person in accordance with Section 6.1, the Surviving Person shall succeed to, and be substituted for, and may exercise every right and power of, Buyer under this Agreement with the same effect as if the Surviving Person had been named as Buyer herein, and thereafter the predecessor Person shall be relieved of all obligations and covenants under this Agreement and the H3 CVRs.

ARTICLE VII

OTHER PROVISIONS OF GENERAL APPLICATION

Section 7.1. Notices to Rights Agent and Buyer.

Any request, demand, authorization, direction, notice, consent, waiver or other document provided or permitted by this Agreement shall be sufficient for every purpose hereunder if in writing and sent by facsimile transmission, delivered personally, or by certified or registered mail (return receipt requested and first-class postage prepaid) or sent by a nationally recognized overnight courier (with proof of service), addressed as follows, and shall be deemed to have been given upon receipt:

(a) if to the Rights Agent, addressed to it at 10 Commerce Drive, Cranford, New Jersey 07016, facsimile at (908) 497-2314, or at any other address previously furnished in writing to the Holders and Buyer by the Rights Agent in accordance with this Section 7.1; or

(b) if to Buyer, addressed to it at 11085 North Torrey Pines Road, Suite 300, La Jolla, California 92037, facsimile at (858) 550-7272, or at any other address previously furnished in writing to the Rights Agent and the Holders by Buyer in accordance with this Section 7.1.

Section 7.2. Notice to Holders.

Where this Agreement provides for notice to Holders, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his, her or its address as it appears in the H3 CVR Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders.

Section 7.3. Effect of Headings.

The Article and Section headings herein are for convenience only and shall not affect the construction hereof.

Section 7.4. Successors and Assigns.

All covenants and agreements in this Agreement by Buyer shall bind its successors and assigns, whether so expressed or not.

Section 7.5. Benefits of Agreement.

Nothing in this Agreement, express or implied, shall give to any Person (other than the parties hereto, the Holders and their permitted successors and assigns hereunder) any benefit or any legal or equitable right, remedy or claim under this Agreement or

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under any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the parties hereto, the Holders and their permitted successors and assigns. The Holders shall have no rights or remedies hereunder except as expressly set forth herein.

Section 7.6. Governing Law.

This Agreement and the H3 CVRs shall be governed by and construed in accordance with the laws of the State of Delaware without regards to its rules of conflicts of laws.

Section 7.7. Legal Holidays.

In the event that a H3 CVR Payment Date shall not be a Business Day, then, notwithstanding any provision of this Agreement to the contrary, any payment required to be made in respect of the H3 CVRs on such date need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the H3 CVR Payment Date.

Section 7.8. Severability Clause.

In case any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, but this Agreement shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the court or other tribunal making such determination is authorized and instructed to modify this Agreement so as to effect the original intent of the parties as closely as possible so that the transactions and agreements contemplated herein are consummated as originally contemplated to the fullest extent possible.

Section 7.9. Counterparts.

This Agreement may be signed in any number of counterparts (which may be effectively delivered by facsimile or other electronic means), each of which shall be deemed to constitute but one and the same instrument

Section 7.10. Termination.

This Agreement shall terminate and be of no further force or effect, and the parties hereto shall have no liability hereunder, upon the earliest to occur of (a) the payment of the H3 CVR Payment Amount, (b) in the event that a Notice of Objection is not delivered within the Objection Period, the expiration of the Objection Period or (c) in the event of the delivery of a Notice of Objection, either (i) the final determination in accordance with this Agreement that a H3 CVR Payment Event has not been achieved or (ii) the fulfillment of any payment or other obligation required pursuant to a final determination made in accordance with this Agreement.

Section 7.11. Entire Agreement.

This Agreement and the Merger Agreement represent the entire understanding of the parties hereto with reference to the H3 CVRs and this Agreement supersedes any and all other oral or written agreements made with respect to the H3 CVRs, except for the Merger Agreement. If and to the extent that any provision of this Agreement is inconsistent or conflicts with the Merger Agreement, this Agreement shall govern and be controlling.

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Section 7.12. Negotiation; Arbitration.

(a) Before any arbitration pursuant to Section 7.12(b), Buyer, the Rights Agent and, if available, any Holder or Holders of at least 20% in the aggregate of the outstanding H3 CVRs shall negotiate in good faith for a period of 30 days to resolve any controversy or claim arising out of or relating to this Agreement or the breach thereof.

(b) After expiration of the 30-day period contemplated by Section 7.12(a), such controversy or claim, including any claims for breach of this Agreement, shall be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. Buyer, the Rights Agent and/or any Holder or Holders of at least 20% in the aggregate of the outstanding H3 CVRs may initiate an arbitration for any matter relating to this Agreement. However, in the event of a dispute arising from the delivery of a Notice of Objection, the sole matter to be settled by arbitration shall be whether a H3 CVR Payment Event has occurred on or before the Outside Date. The number of arbitrators shall be three. Within 15 days after the commencement of arbitration, each party shall select one person to act as arbitrator, and the two selected shall select a third arbitrator within 15 days of their appointment. If the arbitrators selected by the parties are unable or fail to agree upon the third arbitrator, the third arbitrator shall be selected by the American Arbitration Association. The place of the arbitration shall be San Diego, California. The arbitrators shall be lawyers or retired judges with experience in the life sciences industry and with mergers and acquisitions. Except as may be required by law, neither a party nor an arbitrator may disclose the existence, content or results of any arbitration hereunder without the prior written consent of both parties (provided that the Rights Agent may disclose to the Holders any such information without the consent of Buyer). Any award payable in favor of the Holders or the Rights Agent as a result of arbitration shall be distributed to the Holders on a pro rata basis, based on the number of H3 CVRs held by each Holder. Buyer shall pay all fees and expenses of the arbitration forum, including the costs and expenses billed by the arbitrators in connection with the performance of their duties described herein; provided, however, that if the arbitrator rules in favor of Buyer, the Arbitrator’s fees and expenses shall be offset against the H3 CVR Payment Amount, if any, or any payment to be made thereafter under any of the other CVR Agreements. Each party shall be responsible for its own attorney fees, expenses and costs of investigation.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its duly authorized officers as of the day and year first above written.

LIGAND PHARMACEUTICALS INCORPORATED
By:	/s/ Charles Berkman
Name:	Charles Berkman
Title:	Vice President, General Counsel and Secretary
NEUROGEN CORPORATION
By:	/s/ Steve Davis
Name:	Steve Davis
Title:	President & CEO
REGISTRAR AND TRANSFER COMPANY
By:	/s/ William P. Tatler
Name:	William P. Tatler
Title:	Vice President

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EX-10.3

Exhibit 10.3

CONTINGENT VALUE RIGHTS AGREEMENT

THIS CONTINGENT VALUE RIGHTS AGREEMENT, dated as of December 23, 2009 (this “Agreement”, is entered into by and among Ligand Pharmaceuticals Incorporated, a Delaware corporation (“Buyer”), Neurogen Corporation, a Delaware corporation (“Target”), and Registrar and Transfer Company, a New Jersey corporation, as Rights Agent (the “Rights Agent”) and as initial Merck CVR Registrar (as defined herein).

Preamble

Buyer, Neon Signal, LLC, a Delaware limited liability company and wholly-owned subsidiary of Buyer (“Sub”), and Target have entered into an Agreement and Plan of Merger dated as of August 23, 2009 (the “Merger Agreement”), pursuant to which Sub will merge with and into Target (the “Merger”), with Target surviving the Merger as a subsidiary of Buyer.

Pursuant to the Merger Agreement, Buyer agreed to create and issue to Target’s stockholders of record immediately before the effective time of the Merger, contingent value rights as hereinafter described.

The parties have done all things necessary to make the contingent value rights, when issued pursuant to the Merger Agreement and hereunder, the valid obligations of Buyer and to make this Agreement a valid and binding agreement of Buyer, in accordance with its terms.

NOW, THEREFORE, for and in consideration of the premises and the consummation of the transactions referred to above, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders (as hereinafter defined), as follows:

ARTICLE I

DEFINITIONS

Section 1.1. Definitions.

(a) For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:

(i) the terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular;

(ii) all accounting terms used herein and not expressly defined herein shall have the meanings assigned to such terms in accordance with United States generally accepted accounting principles, as in effect on the date hereof;

(iii) the words “herein,” “hereof’ and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision;

(iv) unless the context otherwise requires, words describing the singular number shall include the plural and vice versa, words denoting any gender shall include all genders and words denoting natural Persons shall include corporations, partnerships and other Persons and vice versa; and

(v) all references to “including” shall be deemed to mean including without limitation.

(b) Capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Merger Agreement. The following terms shall have the meanings ascribed to them as follows:

“Achievement Certificate” has the meaning set forth in Section 2.4(a).

“Board of Directors” means the board of directors of Buyer.

“Board Resolution” means a copy of a resolution certified by the secretary or an assistant secretary of Buyer to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Rights Agent.

“Business Day” means any day other than a Saturday, Sunday or a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to remain closed.

“Holder” means a Person in whose name a Merck CVR is registered in the Merck CVR Register.

“Merck” means Merck Sharp & Dohme Limited or any of its successors or Affiliates (as such term is defined in the Merck VR1 Agreement).

“Merck CVR Payment Amount” means either the Phase III VR1 Trial Initiation Payment or the VR1 Program Sales Payment. For purposes of clarity, the Holders shall only be entitled to either the Phase III VR1 Trial Initiation Payment or the VR1 Program Sales Payment (or neither of them), but in no circumstances both.

“Merck CVR Payment Event” means the first to occur of the Phase III VR1 Trial Initiation Payment Event or the VR1 Program Sales Event.

“Merck CVR Payment Date” means the date (if any and if ever) that the Merck CVR Payment Amount is payable by Buyer to the Holders, which date shall be established pursuant to Section 2.4.

“Merck CVR Register” has the meaning set forth in Section 2.3(b).

“Merck CVR Registrar” has the meaning set forth in Section 2.3(b).

“Merck CVRs” means the Merck Contingent Value Rights issued by Buyer pursuant to the Merger Agreement and this Agreement.

“Merck VR1 Agreement” means the Research Collaboration and License Agreement, effective as of November 24, 2003 between Merck and the Company.

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“Non-Achievement Certificate” has the meaning set forth in Section 2.4(b).

“Notice of Objection” has the meaning set forth in Section 2.4(d).

“Objection Period” has the meaning set forth in Section 2.4(d).

“Officer’s Certificate” means a certificate signed by the chief executive officer, president, chief financial officer, any vice president, the controller, the treasurer or the secretary, in each case, of Buyer, in his or her capacity as such an officer, and delivered to the Rights Agent.

“Outside Date” means the later of (i) the last day of the term of the Merck VR1 Agreement, and (ii) the last date on which Buyer receives any consideration from Merck pursuant to a sale, conveyance, relinquishment or other transfer of the VR1 Program Rights; provided, that if pursuant to the preceding subsections the Outside Date has not already occurred by Phase III VR1 Trial Initiation (as defined in the Merger Agreement), then the Outside Date shall mean immediately after Phase III VR1 Trial Initiation (as defined in the Merger Agreement).

“Permitted Transfer” means: (i) the transfer of any or all of the Merck CVRs (upon the death of the Holder) by will or intestacy; (ii) transfer by instrument to an inter vivos or testamentary trust in which the Merck CVRs are to be passed to beneficiaries upon the death of the trustee; (iii) transfers made pursuant to a court order of a court of competent jurisdiction (such as in connection with divorce, bankruptcy or liquidation); (iv) if the Holder is a partnership or limited liability company, a pro-rata distribution by the transferring partnership or limited liability company to its partners or members, as applicable; (v) a transfer made by operation of law (including a consolidation or merger) or in connection with the dissolution, liquidation or termination of any corporation, limited liability company, partnership or other entity; (vi) a transfer from a participant’s account in a tax-qualified employee benefit plan to the participant or to such participant’s account in a different tax-qualified employee benefit plan or to a tax-qualified individual retirement account for the benefit of such participant; or (vii) a transfer from a participant in a tax-qualified employee benefit plan, who received the Merck CVRs from such participant’s account in such tax-qualified employee benefit plan, to such participant’s account in a different tax-qualified employee benefit plan or to a tax-qualified individual retirement account for the benefit of such participant.

“Person” means any natural person, corporation, partnership, limited liability company, trust, estate, other firm or entity, or governmental body.

“Phase III VR1 Trial Initiation Payment” means an aggregate amount equal to $3,000,000 in cash.

“Phase III VR1 Trial Initiation Payment Event” means the receipt of the milestone payment from Merck for the Phase III VR1 Trial Initiation (as defined in the Merger Agreement).

“Rights Agent” means the Rights Agent named in the first paragraph of this Agreement, until a successor Rights Agent shall have become such pursuant to the applicable provisions of this Agreement, and thereafter “Rights Agent” shall mean such successor Rights Agent.

“Rights Agent Fee” means the agreed-upon fee of the Rights Agent to act in such capacity pursuant to the terms of this Agreement.

“Surviving Person” has the meaning set forth in Section 6.1(a)(i).

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“VR1 Program Rights” means the rights of the Company (and of Buyer as successor to the Company) under the Merck VR1 Agreement, including the Company’s Intellectual Property underlying the Merck VR1 Agreement.

“VR1 Program Sales Payment Amount” means an amount equal to 50% of the aggregate cash proceeds received by Buyer, or any of its subsidiaries or Affiliates, after the effective time of the Merger and prior to the Outside Date, from Merck in connection with the sale, conveyance, relinquishment or other transfer of the VR1 Program Rights, less any costs and expenses reasonably incurred by the Buyer, or any of its subsidiaries or Affiliates, in connection with the sale, conveyance, relinquishment or other transfer of the VR1 Program Rights (including attorneys fees and brokers commissions).

“VR1 Program Sales Payment Event” means the receipt of cash proceeds by Buyer from the consummation of the sale, conveyance, relinquishment or other transfer of the VR1 Program Rights to Merck.

ARTICLE II

CONTINGENT VALUE RIGHTS

Section 2.1. Issuance of Merck CVRs; Appointment of Rights Agent.

(a) The Merck CVRs shall be issued pursuant to the Merger Agreement at the time and in the manner set forth in the Merger Agreement.

(b) Buyer hereby appoints Registrar and Transfer Company as the Rights Agent to act as rights agent for Buyer in accordance with the instructions hereinafter set forth in this Agreement, and the Rights Agent hereby accepts such appointment.

Section 2.2. Nontransferable.

The Merck CVRs shall not be sold, assigned, transferred, pledged, encumbered or in any other manner transferred or disposed of, in whole or in part, other than through a Permitted Transfer.

Section 2.3. No Certificate; Registration; Registration of Transfer; Change of Address.

(a) The Merck CVRs shall not be evidenced by a certificate or other instrument.

(b) The Rights Agent shall keep a register (the “Merck CVR Register”) for the registration of Merck CVRs. The Rights Agent is hereby initially appointed “Merck CVR Registrar” for the purpose of registering Merck CVRs and transfers of Merck CVRs as herein provided. Upon any change to the identity of the Rights Agent, the successor Rights Agent shall automatically also become the successor Merck CVR Registrar.

(c) Subject to the restriction on transferability set forth in Section 2.2, every request made to transfer a Merck CVR must be in writing and accompanied by a written instrument or instruments of transfer and any other requested documentation in a form reasonably satisfactory to Buyer and the Merck CVR Registrar, duly executed by the registered Holder or Holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney, such signature to be guaranteed by a participant in a recognized Signature Guarantee Medallion Program. A request for a transfer of a Merck CVR shall be accompanied by such

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documentation establishing that the transfer is a Permitted Transfer as may be reasonably requested by Buyer and/or the Merck CVR Registrar (including opinions of counsel), if appropriate. Upon receipt of such written request and materials, the Merck CVR Registrar shall, subject to its reasonable determination that the transfer instrument is in proper form and the transfer otherwise complies with the other terms and conditions herein, register the transfer of the Merck CVRs in the Merck CVR Register. All duly transferred Merck CVRs registered in the Merck CVR Register shall be the valid obligations of Buyer, evidencing the same right and shall entitle the transferee to the same benefits and rights under this Agreement, as those previously held by the transferor. No transfer of a Merck CVR shall be valid until registered in the Merck CVR Register, and any transfer not duly registered in the Merck CVR Register will be void ab initio. Any transfer or assignment of the Merck CVRs shall be without charge (other than the cost of any transfer tax which shall be the responsibility of the transferor) to the Holder.

(d) A Holder may make a written request to the Merck CVR Registrar to change such Holder’s address of record in the Merck CVR Register. The written request must be duly executed by the Holder. Upon receipt of such written notice, the Merck CVR Registrar shall promptly record the change of address in the Merck CVR Register.

Section 2.4. Payment Procedures.

(a) Promptly following the occurrence of the Merck CVR Payment Event, but in no event later than five Business Days after the occurrence of the Merck CVR Payment Event, Buyer shall deliver to the Rights Agent a certificate (the “Achievement Certificate”), certifying that the Holders are entitled to receive the Merck CVR Payment Amount. No transaction described in Section 6.1(a) hereof shall give the Holders the right to receive the Merck CVR Payment Amount.

(b) If the Merck CVR Payment Event has not occurred on or before the Outside Date, then, within five Business Days after the Outside Date, Buyer shall deliver to the Rights Agent a certificate (the “Non-Achievement Certificate”), stating that the Merck CVR Payment Event did not occur.

(c) Except as otherwise requested by any Holder, the Rights Agent shall promptly (and in no event later than five Business Days after receipt thereof) send each Holder a copy of any Achievement Certificate or Non-Achievement Certificate at its registered address.

(d) Upon demand by any Holder or Holders of at least 20% in the aggregate of the outstanding Merck CVRs within 45 calendar days after distribution by the Rights Agent of a Non-Achievement Certificate (the “Objection Period”), the Rights Agent shall deliver a written notice to Buyer prepared by such Holder or Holders specifying that such Holder or Holders object to the determination of Buyer that the Merck CVR Payment Event did not occur (a “Notice of Objection”) and stating the reason upon which such Holder or Holders have determined that the Merck CVR Payment Event has occurred on or before the Outside Date. Any dispute arising from a Notice of Objection shall be resolved in accordance with the procedure set forth in Section 7.12, which decision shall be binding on the parties hereto and every Holder (including the Holders not participating therein).

(e) If a Notice of Objection has not been delivered to Buyer within the Objection Period, then the Holders shall have no right to receive the Merck CVR Payment Amount, and Buyer and the Rights Agent shall have no further obligations with respect to the Merck CVR Payment Amount.

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(f) If Buyer delivers an Achievement Certificate to the Rights Agent or if the Merck CVR Payment Amount is determined to be payable pursuant to Section 2.4(d) above, Buyer shall establish a Merck CVR Payment Date that is within 15 calendar days after the date of the Achievement Certificate or the date of final determination pursuant to Section 2.4(d) above, as applicable. At least five Business Days before such Merck CVR Payment Date, Buyer shall cause the Merck CVR Payment Amount to be delivered to the Rights Agent, who will in turn, on the Merck CVR Payment Date, distribute the Merck CVR Payment Amount to the Holders (each Holder being entitled to receive its pro rata share of the Merck CVR Payment Amount based on the number of Merck CVRs held (as of the date of the Achievement Certificate or the date of final determination pursuant to Section 2.4(d) above, as applicable) by such Holder as reflected on the Merck CVR Register) (i) by check mailed to the address of each such respective Holder as reflected in the Merck CVR Register as of the close of business on the last Business Day before such Merck CVR Payment Date, or, (ii) with respect to any Holder that is due payment pursuant to this Agreement in excess of $1,000,000 who has provided the Rights Agent with wire transfer instructions, by wire transfer of immediately available funds to such account.

(g) Buyer shall be entitled to deduct and withhold, or cause to be deducted or withheld, from each Merck CVR Payment Amount otherwise payable pursuant to this Agreement, such amounts as Buyer or the applicable subsidiary of Buyer is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld or paid over to or deposited with the relevant governmental entity, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Holder in respect of which such deduction and withholding was made.

(h) Subject to prior execution and delivery by the Rights Agent of a reasonable and customary confidentiality/nonuse agreement, Buyer shall promptly furnish to the Rights Agent all information and documentation in connection with this Agreement and the Merck CVRs that the Rights Agent or any Holder or Holders of at least 20% in the aggregate of the outstanding Merck CVRs may reasonably request in connection with the determination of whether the Merck CVR Payment Event has occurred. Subject to prior execution and delivery by the applicable Holders of a reasonable and customary confidentiality/nonuse agreement, the Rights Agent shall forward any information and documentation it receives to the Holders who request such information.

Section 2.5. No Voting, Dividends or Interest; No Equity or Ownership Interest in Buyer.

(a) The Merck CVRs shall not have any voting or dividend rights, and interest shall not accrue on any amounts payable on the Merck CVRs to any Holder.

(b) The Merck CVRs shall not represent any equity or ownership interest in Buyer or in any constituent company to the Merger.

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Section 2.6. Sole Discretion and Decision Making Authority; No Fiduciary Duty.

Notwithstanding anything contained herein to the contrary, Buyer shall have sole discretion and decision making authority, which shall be exercised in good faith, over (a) any continuation by Buyer of operation of, development of or investment in the VR1 Program and over when (if ever) to initiate the Phase III VR1 Trial and (b) when (if ever) to consummate the sale, conveyance, relinquishment or other transfer of the VR1 Program Rights to Merck, and upon what terms and conditions; provided, however, that before the Outside Date (a) Buyer shall not sell, convey or otherwise transfer the VR1 Program Rights to anyone other than Merck and (b) Buyer shall not accept any consideration from Merck for the VR1 Program Rights other than cash to be paid in full within 90 days of the sale, conveyance, relinquishment or other transfer of the VR1 Program Rights.

ARTICLE III

THE RIGHTS AGENT

Section 3.1. Certain Duties and Responsibilities.

(a) The Rights Agent shall not have any liability for any actions taken or not taken in connection with this Agreement, except to the extent of its willful misconduct, bad faith or gross negligence. No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers.

(b) Any Holder or Holders of at least 20% in the aggregate of the outstanding Merck CVRs may direct the Rights Agent to act on behalf of the Holders in enforcing any of its or their rights hereunder, including, without limitation, the delivery of any Notice of Objection and negotiation or arbitration pursuant to Section 7.12. The Rights Agent shall be under no obligation to institute any action, suit or legal proceeding or to take any other action likely to involve material expense unless such Holder or Holders shall furnish the Rights Agent with reasonable security and indemnity for any costs and expenses which may be incurred. All rights of action under this Agreement may be enforced by the Rights Agent, and any action, suit or proceeding instituted by the Rights Agent shall be brought in its name as Rights Agent, and any recovery of judgment shall be for the ratable benefit of all the Holders, as their respective rights or interests may appear.

Section 3.2. Certain Rights of Rights Agent.

The Rights Agent undertakes to perform such duties and only such duties as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Rights Agent. In addition:

(a) the Rights Agent may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;

(b) whenever the Rights Agent shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Rights Agent may, in the absence of willful misconduct, bad faith or gross negligence on its part, rely upon an Officer’s Certificate;

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(c) the Rights Agent may engage and consult with counsel of its selection and the written advice of such counsel or any opinion of counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;

(d) in the event of arbitration, the Rights Agent may engage and consult with tax experts, valuation firms and other experts and third parties that it, in its sole and absolute discretion, deems appropriate or necessary to enable it to discharge its duties hereunder;

(e) the permissive rights of the Rights Agent to do things enumerated in this Agreement shall not be construed as a duty;

(f) the Rights Agent shall not be required to give any note or surety in respect of the execution of such powers or otherwise in respect of the premises;

(g) Buyer agrees to indemnify the Rights Agent for, and hold the Rights Agent harmless against, any loss, liability, claim, demands, suits or expense (in each case pertaining to the Rights Agent’s own account only) arising out of or in connection with the Rights Agent’s duties under this Agreement, including the costs and expenses of defending the Rights Agent against any claims, charges, demands, suits or loss, unless such loss shall have been determined by a court of competent jurisdiction to be a result of the Rights Agent’s willful misconduct, bad faith or gross negligence; and

(h) Buyer agrees (i) to pay the fees and expenses of the Rights Agent in connection with this Agreement, as set forth on Schedule 1 hereto, and (ii) to reimburse the Rights Agent for all taxes and governmental charges, reasonable expenses and other charges of any kind and nature incurred by the Rights Agent in the execution of this Agreement (other than taxes measured by the Rights Agent’s net income). The Rights Agent shall also be entitled to reimbursement from Buyer for all reasonable and necessary out-of-pocket expenses (including reasonable fees and expenses of the Rights Agent’s counsel and agent) paid or incurred by it in connection with the administration by the Rights Agent of its duties hereunder. An invoice for the Rights Agent Fee will be rendered a reasonable time before, and paid on, the effective date of the applicable transaction. An invoice for any out-of-pocket expenses and per item fees realized will be rendered and payable within 30 calendar days after receipt by Buyer. Buyer agrees to pay to Rights Agent any amounts, including fees and expenses, payable in favor of the Rights Agent in connection with any dispute, resolution or arbitration arising under or in connection with the Agreement; provided, however, that in the event of a resolution in favor of Buyer, any amounts, including fees and expenses, payable by Buyer in favor of the Rights Agent or payable in favor of Buyer related to such dispute, resolution or arbitration shall be offset against the Merck CVR Payment Amount, if any, or any payment to be made thereafter under any of the other CVR Agreements.

Section 3.3. Resignation and Removal; Appointment of Successor.

(a) The Rights Agent may resign at any time by giving written notice thereof to Buyer specifying a date when such resignation shall take effect, which notice shall be sent at least 30 days before the date so specified.

(b) If the Rights Agent shall resign, be removed or become incapable of acting, Buyer, by way of a Board Resolution, shall promptly appoint a qualified successor Rights Agent who may (but need not) be a Holder but shall not be an officer of Buyer. The successor Rights Agent so appointed shall, forthwith upon its acceptance of such appointment in accordance with this Section 3.3(b), become the successor Rights Agent.

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(c) Buyer shall give notice of each resignation and each removal of a Rights Agent and each appointment of a successor Rights Agent by mailing written notice of such event by first-class mail, postage prepaid, to the Holders as their names and addresses appear in the Merck CVR Register. Each notice shall include the name and address of the successor Rights Agent. If Buyer fails to send such notice within ten days after acceptance of appointment by a successor Rights Agent, the successor Rights Agent shall cause such notice to be mailed at the expense of Buyer.

Section 3.4. Acceptance of Appointment by Successor.

Every successor Rights Agent appointed hereunder shall execute, acknowledge and deliver to Buyer and to the retiring Rights Agent an instrument accepting such appointment and a counterpart of this Agreement, and thereupon such successor Rights Agent, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Rights Agent; provided, that upon the request of Buyer or the successor Rights Agent, such retiring Rights Agent shall execute and deliver an instrument transferring to such successor Rights Agent all the rights, powers and trusts of the retiring Rights Agent and shall cooperate in the transfer of all relevant data, including the Merck CVR Register, to the successor Rights Agent.

ARTICLE IV

COVENANTS

Section 4.1. List of Holders.

Buyer shall furnish or cause to be furnished to the Rights Agent in such form as Buyer receives from its transfer agent (or other agent performing similar services for Buyer), the names, addresses and shareholdings of the Holders, within five Business Days after the effective time of the Merger.

Section 4.2. Payment of Merck CVR Payment Amount.

Buyer shall duly and promptly pay the Merck CVR Payment Amount, if any, in immediately available funds, to the Rights Agent to be distributed to the Holders in the manner provided for in Section 2.4 and in accordance with the terms of this Agreement.

Section 4.3. Assignments.

Buyer shall not, in whole or in part, assign any of its obligations under this Agreement other than in accordance with the terms of Section 6.1 hereof.

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ARTICLE V

AMENDMENTS

Section 5.1. Amendments Without Consent of Holders.

(a) Without the consent of any Holders or the Rights Agent, Buyer, when authorized by a Board Resolution, at any time and from time to time, may enter into one or more amendments hereto, for any of the following purposes:

(i) to evidence the succession of another Person to Buyer and the assumption by any such successor of the covenants of Buyer herein in a transaction contemplated by Section 6.1 hereof; or

(ii) to evidence the termination of the Merck CVR Registrar and the succession of another Person as a successor Merck CVR Registrar and the assumption by any successor of the obligations of the Merck CVR Registrar herein.

(b) Without the consent of any Holders, Buyer, when authorized by a Board Resolution, and the Rights Agent, in the Rights Agent’s sole and absolute discretion, at any time and from time to time, may enter into one or more amendments hereto, for any of the following purposes:

(i) to evidence the succession of another Person as a successor Rights Agent and the assumption by any successor of the covenants and obligations of the Rights Agent herein;

(ii) to add to the covenants of Buyer such further covenants, restrictions, conditions or provisions as the Board of Directors and the Rights Agent shall consider to be for the protection of the Holders; provided, that in each case, such provisions shall not adversely affect the interests of the Holders;

(iii) to cure any ambiguity, to correct or supplement any provision herein that may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Agreement; provided, that in each case, such provisions shall not adversely affect the interests of the Holders; or

(iv) to add, eliminate or change any provision of this Agreement unless such addition, elimination or change is adverse to the interests of the Holders.

(c) Promptly after the execution by Buyer and the Rights Agent of any amendment pursuant to the provisions of this Section 5.1, Buyer shall mail a notice thereof by first-class mail to each of the Holders at their addresses as they shall appear on the Merck CVR Register, setting forth in general terms the substance of such amendment.

Section 5.2. Amendments With Consent of Holders.

(a) Subject to Section 5.1 (which amendments pursuant to Section 5.1 may be made without the consent of the Holders), with the consent of the Holders of not less than a majority of the outstanding Merck CVRs, whether evidenced in writing or taken at a meeting of the Holders, Buyer, when authorized by a Board Resolution, and the Rights Agent may enter into one or more amendments hereto for the purpose of adding, eliminating or changing any provisions of this Agreement, even if such addition, elimination or change is in any way adverse to the interests of the Holders.

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(b) Promptly after the execution by Buyer and the Rights Agent of any amendment pursuant to the provisions of this Section 5.2, Buyer shall mail a notice thereof by first-class mail to the Holders at their addresses as they shall appear on the Merck CVR Register, setting forth in general terms the substance of such amendment.

Section 5.3. Execution of Amendments.

In executing any amendment permitted by this Article V, the Rights Agent shall be entitled to receive, and shall be fully protected in relying upon, an opinion of counsel stating that the execution of such amendment is authorized or permitted by this Agreement. The Rights Agent may, but is not obligated to, enter into any such amendment that affects the Rights Agent’s own rights, privileges, covenants or duties under this Agreement or otherwise.

Section 5.4. Effect of Amendments.

Upon the execution of any amendment under this Article V, this Agreement shall be modified in accordance therewith, such amendment shall form a part of this Agreement for all purposes and every Holder shall be bound thereby.

ARTICLE VI

CONSOLIDATION, MERGER, SALE OR CONVEYANCE

Section 6.1. Buyer May Consolidate, Etc.

(a) Buyer shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, unless:

(i) the Person formed by such consolidation or into which Buyer is merged or the Person that acquires by conveyance or transfer, or that leases, the properties and assets of Buyer substantially as an entirety (the “Surviving Person”) shall expressly assume payment (if and to the extent required hereunder) of amounts on all the Merck CVRs and the performance of every duty and covenant of this Agreement on the part of Buyer to be performed or observed; and

(ii) Buyer has delivered to the Rights Agent an Officer’s Certificate, stating that such consolidation, merger, conveyance, transfer or lease complies with this Article VI and that all conditions precedent herein provided for relating to such transaction have been complied with.

(b) In the event Buyer conveys, transfers or leases its properties and assets substantially as an entirety in accordance with the terms and conditions of this Section 6.1, Buyer and the Surviving Person shall be jointly and severally liable for the payment of the Merck CVR Payment Amount and the performance of every duty and covenant of this Agreement on the part of the Buyer to be performed or observed.

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Section 6.2. Successor Substituted.

Upon any consolidation of or merger by Buyer with or into any other Person, or any conveyance, transfer or lease of the properties and assets substantially as an entirety to any Person in accordance with Section 6.1, the Surviving Person shall succeed to, and be substituted for, and may exercise every right and power of, Buyer under this Agreement with the same effect as if the Surviving Person had been named as Buyer herein, and thereafter the predecessor Person shall be relieved of all obligations and covenants under this Agreement and the Merck CVRs.

ARTICLE VII

OTHER PROVISIONS OF GENERAL APPLICATION

Section 7.1. Notices to Rights Agent and Buyer.

Any request, demand, authorization, direction, notice, consent, waiver or other document provided or permitted by this Agreement shall be sufficient for every purpose hereunder if in writing and sent by facsimile transmission, delivered personally, or by certified or registered mail (return receipt requested and first-class postage prepaid) or sent by a nationally recognized overnight courier (with proof of service), addressed as follows, and shall be deemed to have been given upon receipt:

(a) if to the Rights Agent, addressed to it at 10 Commerce Drive, Cranford, New Jersey 07016, facsimile at (908) 497-2314, or at any other address previously furnished in writing to the Holders and Buyer by the Rights Agent in accordance with this Section 7.1; or

(b) if to Buyer, addressed to it at 11085 North Torrey Pines Road, Suite 300, La Jolla, California 92037, facsimile at (858) 550-7272, or at any other address previously furnished in writing to the Rights Agent and the Holders by Buyer in accordance with this Section 7.1.

Section 7.2. Notice to Holders.

Where this Agreement provides for notice to Holders, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his, her or its address as it appears in the Merck CVR Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders.

Section 7.3. Effect of Headings.

The Article and Section headings herein are for convenience only and shall not affect the construction hereof.

Section 7.4. Successors and Assigns.

All covenants and agreements in this Agreement by Buyer shall bind its successors and assigns, whether so expressed or not.

Section 7.5. Benefits of Agreement.

Nothing in this Agreement, express or implied, shall give to any Person (other than the parties hereto, the Holders and their permitted successors and assigns hereunder) any benefit or any legal or equitable right, remedy or claim under this Agreement or

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under any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the parties hereto, the Holders and their permitted successors and assigns. The Holders shall have no rights or remedies hereunder except as expressly set forth herein.

Section 7.6. Governing Law.

This Agreement and the Merck CVRs shall be governed by and construed in accordance with the laws of the State of Delaware without regards to its rules of conflicts of laws.

Section 7.7. Legal Holidays.

In the event that a Merck CVR Payment Date shall not be a Business Day, then, notwithstanding any provision of this Agreement to the contrary, any payment required to be made in respect of the Merck CVRs on such date need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Merck CVR Payment Date.

Section 7.8. Severability Clause.

In case any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, but this Agreement shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the court or other tribunal making such determination is authorized and instructed to modify this Agreement so as to effect the original intent of the parties as closely as possible so that the transactions and agreements contemplated herein are consummated as originally contemplated to the fullest extent possible.

Section 7.9. Counterparts.

This Agreement may be signed in any number of counterparts (which may be effectively delivered by facsimile or other electronic means), each of which shall be deemed to constitute but one and the same instrument

Section 7.10. Termination.

This Agreement shall terminate and be of no further force or effect, and the parties hereto shall have no liability hereunder, upon the earliest to occur of (a) the payment of the Merck CVR Payment Amount, (b) in the event that a Notice of Objection is not delivered within the Objection Period, the expiration of the Objection Period or (c) in the event of the delivery of a Notice of Objection, either (i) the final determination in accordance with this Agreement that a Merck CVR Payment Event has not been achieved or (ii) the fulfillment of any payment or other obligation required pursuant to a final determination made in accordance with this Agreement.

Section 7.11. Entire Agreement.

This Agreement and the Merger Agreement represent the entire understanding of the parties hereto with reference to the Merck CVRs and this Agreement supersedes any and all other oral or written agreements made with respect to the Merck CVRs, except for the Merger Agreement. If and to the extent that any provision of this Agreement is inconsistent or conflicts with the Merger Agreement, this Agreement shall govern and be controlling.

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Section 7.12. Negotiation; Arbitration.

(a) Before any arbitration pursuant to Section 7.12(b), Buyer, the Rights Agent and, if available, any Holder or Holders of at least 20% in the aggregate of the outstanding Merck CVRs shall negotiate in good faith for a period of 30 days to resolve any controversy or claim arising out of or relating to this Agreement or the breach thereof.

(b) After expiration of the 30-day period contemplated by Section 7.12(a), such controversy or claim, including any claims for breach of this Agreement, shall be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. Buyer, the Rights Agent and/or any Holder or Holders of at least 20% in the aggregate of the outstanding Merck CVRs may initiate an arbitration for any matter relating to this Agreement. However, in the event of a dispute arising from the delivery of a Notice of Objection, the sole matter to be settled by arbitration shall be whether a Merck CVR Payment Event has occurred on or before the Outside Date. The number of arbitrators shall be three. Within 15 days after the commencement of arbitration, each party shall select one person to act as arbitrator, and the two selected shall select a third arbitrator within 15 days of their appointment. If the arbitrators selected by the parties are unable or fail to agree upon the third arbitrator, the third arbitrator shall be selected by the American Arbitration Association. The place of the arbitration shall be San Diego, California. The arbitrators shall be lawyers or retired judges with experience in the life sciences industry and with mergers and acquisitions. Except as may be required by law, neither a party nor an arbitrator may disclose the existence, content or results of any arbitration hereunder without the prior written consent of both parties (provided that the Rights Agent may disclose to the Holders any such information without the consent of Buyer). Any award payable in favor of the Holders or the Rights Agent as a result of arbitration shall be distributed to the Holders on a pro rata basis, based on the number of Merck CVRs held by each Holder. Buyer shall pay all fees and expenses of the arbitration forum, including the costs and expenses billed by the arbitrators in connection with the performance of their duties described herein; provided, however, that if the arbitrator rules in favor of Buyer, the Arbitrator’s fees and expenses shall be offset against the Merck CVR Payment Amount, if any, or any payment to be made thereafter under any of the other CVR Agreements. Each party shall be responsible for its own attorney fees, expenses and costs of investigation.

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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its duly authorized officers as of the day and year first above written.

LIGAND PHARMACEUTICALS INCORPORATED
By:	/s/ Charles Berkman
Name:	Charles Berkman
Title:	Vice President, General Counsel & Secretary
NEUROGEN CORPORATION
By:	/s/ Steve Davis
Name:	Steve Davis
Title:	President & CEO
REGISTRAR AND TRANSFER COMPANY
By:	/s/ William P. Tatler
Name:	William P. Tatler
Title:	Vice President

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EX-10.4

Exhibit 10.4

CONTINGENT VALUE RIGHTS AGREEMENT

THIS CONTINGENT VALUE RIGHTS AGREEMENT, dated as of December 23, 2009 (this “Agreement”, is entered into by and among Ligand Pharmaceuticals Incorporated, a Delaware corporation (“Buyer”), Neurogen Corporation, a Delaware corporation (“Target”), and Registrar and Transfer Company, a New Jersey corporation, as Rights Agent (the “Rights Agent”) and as initial Real Estate CVR Registrar (as defined herein).

Preamble

Buyer, Neon Signal, LLC, a Delaware limited liability company and wholly-owned subsidiary of Buyer (“Sub”), and Target have entered into an Agreement and Plan of Merger dated as of August 23, 2009 (the “Merger Agreement”), pursuant to which Sub will merge with and into Target (the “Merger”), with Target (or a successor entity) surviving the Merger as a subsidiary of Buyer.

Pursuant to the Merger Agreement, Buyer agreed to create and issue to Target’s stockholders of record immediately before the effective time of the Merger, contingent value rights as hereinafter described.

The parties have done all things necessary to make the contingent value rights, when issued pursuant to the Merger Agreement and hereunder, the valid obligations of Buyer and to make this Agreement a valid and binding agreement of Buyer, in accordance with its terms.

NOW, THEREFORE, for and in consideration of the premises and the consummation of the transactions referred to above, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders (as hereinafter defined), as follows:

ARTICLE I

DEFINITIONS

Section 1.1. Definitions.

(a) For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:

(i) the terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular;

(ii) all accounting terms used herein and not expressly defined herein shall have the meanings assigned to such terms in accordance with United States generally accepted accounting principles, as in effect on the date hereof;

(iii) the words “herein,” “hereof’ and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision;

(iv) unless the context otherwise requires, words describing the singular number shall include the plural and vice versa, words denoting any gender shall include all genders and words denoting natural Persons shall include corporations, partnerships and other Persons and vice versa; and

(v) all references to “including” shall be deemed to mean including without limitation.

(b) Capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Merger Agreement. The following terms shall have the meanings ascribed to them as follows:

“Achievement Certificate” has the meaning set forth in Section 2.4(a).

“Board of Directors” means the board of directors of Buyer.

“Board Resolution” means a copy of a resolution certified by the secretary or an assistant secretary of Buyer to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Rights Agent.

“Business Day” means any day other than a Saturday, Sunday or a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to remain closed.

“CVR Outside Date” means June 23, 2010.

“Holder” means a Person in whose name a Real Estate CVR is registered in the Real Estate CVR Register.

“Non-Achievement Certificate” has the meaning set forth in Section 2.4(b).

“Notice of Objection” has the meaning set forth in Section 2.4(d).

“Objection Period” has the meaning set forth in Section 2.4(d).

“Officer’s Certificate” means a certificate signed by the chief executive officer, president, chief financial officer, any vice president, the controller, the treasurer or the secretary, in each case, of Buyer, in his or her capacity as such an officer, and delivered to the Rights Agent.

“Permitted Transfer” means: (i) the transfer of any or all of the Real Estate CVRs (upon the death of the Holder) by will or intestacy; (ii) transfer by instrument to an inter vivos or testamentary trust in which the Real Estate CVRs are to be passed to beneficiaries upon the death of the trustee; (iii) transfers made pursuant to a court order of a court of competent jurisdiction (such as in connection with divorce, bankruptcy or liquidation); (iv) if the Holder is a partnership or limited liability company, a distribution by the transferring partnership or limited liability company to its partners or members, as applicable; (v) a transfer made by operation of law (including a consolidation or merger) or in connection with the dissolution, liquidation or termination of any corporation, limited liability company, partnership or other entity; (vi) a transfer from a participant’s account in a tax-qualified employee benefit plan to the participant or to such participant’s account in a different tax-qualified employee benefit plan or to a tax-qualified individual retirement account for the benefit of such participant; or (vii) a transfer from a participant in a tax-qualified employee benefit plan, who received the Real Estate CVRs from such participant’s account in such tax-qualified employee benefit plan, to such participant’s account in a different tax-qualified employee benefit plan or to a tax-qualified individual retirement account for the benefit of such participant.

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“Person” means any natural person, corporation, partnership, limited liability company, trust, estate, other firm or entity, or governmental body.

“Real Estate CVR Payment Amount” means an amount equal to the aggregate cash proceeds received by Buyer, or any of its subsidiaries, after the Effective Time and before the CVR Outside Date, from any purchaser (other than Buyer) of the Real Estate, less (i) any out-of-pocket costs and expenses reasonably incurred by the Buyer (taking into account any lease payments received by Buyer after the Effective Time), or any of its subsidiaries, in connection with the holding or the sale of the Real Estate (including the payment of the principal of and interest on any debt secured by the Real Estate at the Effective Time, commissions and amounts paid to the Consulting Committee in accordance with an arrangement entered into pursuant to Section 5.15(b) of the Merger Agreement, and incremental costs and expenses related to management of the risk of environmental liability pertaining to the Real Estate and/or assurance of potential buyers regarding the same, such as preparing an addendum to the environmental assessments which may include sampling, and revisions to Buyer’s environmental insurance policy), and (ii) any amounts previously paid to the Holders pursuant to the Real Estate CVRs. For the avoidance of doubt, any amounts deducted from Net Cash Amount as accounts payable relating to the Real Estate shall not be considered “costs and expenses” incurred by Buyer hereunder.

“Real Estate CVR Payment Date” means the date or dates (if any and if ever) that a Real Estate CVR Payment Amount is payable by Buyer to the Holders, which date shall be established pursuant to Section 2.4.

“Real Estate CVR Payment Event” means the receipt by Buyer of cash proceeds from any purchaser (other than Buyer) of all, or any parcel, of the Real Estate.

“Real Estate CVR Register” has the meaning set forth in Section 2.3(b).

“Real Estate CVR Registrar” has the meaning set forth in Section 2.3(b).

“Real Estate CVRs” means the Real Estate Contingent Value Rights issued by Buyer pursuant to the Merger Agreement and this Agreement.

“Real Estate Sale” means the sale of all, or any parcel, of the Real Estate to a Person other than Buyer.

“Rights Agent” means the Rights Agent named in the first paragraph of this Agreement, until a successor Rights Agent shall have become such pursuant to the applicable provisions of this Agreement, and thereafter “Rights Agent” shall mean such successor Rights Agent.

“Rights Agent Fee” means the agreed-upon fee of the Rights Agent to act in such capacity pursuant to the terms of this Agreement.

“Surviving Person” has the meaning set forth in Section 6.1(a)(i).

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ARTICLE II

CONTINGENT VALUE RIGHTS

Section 2.1. Issuance of Real Estate CVRs; Appointment of Rights Agent.

(a) The Real Estate CVRs shall be issued pursuant to the Merger Agreement at the time and in the manner set forth in the Merger Agreement.

(b) Buyer hereby appoints Registrar and Transfer Company as the Rights Agent to act as rights agent for Buyer in accordance with the instructions hereinafter set forth in this Agreement, and the Rights Agent hereby accepts such appointment.

Section 2.2. Nontransferable.

The Real Estate CVRs shall not be sold, assigned, transferred, pledged, encumbered or in any other manner transferred or disposed of, in whole or in part, other than through a Permitted Transfer.

Section 2.3. No Certificate; Registration; Registration of Transfer; Change of Address.

(a) The Real Estate CVRs shall not be evidenced by a certificate or other instrument.

(b) The Rights Agent shall keep a register (the “Real Estate CVR Register”) for the registration of Real Estate CVRs. The Rights Agent is hereby initially appointed “Real Estate CVR Registrar” for the purpose of registering Real Estate CVRs and transfers of Real Estate CVRs as herein provided. Upon any change to the identity of the Rights Agent, the successor Rights Agent shall automatically also become the successor Real Estate CVR Registrar.

(c) Subject to the restriction on transferability set forth in Section 2.2, every request made to transfer a Real Estate CVR must be in writing and accompanied by a written instrument or instruments of transfer and any other requested documentation in a form reasonably satisfactory to Buyer and the Real Estate CVR Registrar, duly executed by the registered Holder or Holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney, such signature to be guaranteed by a participant in a recognized Signature Guarantee Medallion Program. A request for a transfer of a Real Estate CVR shall be accompanied by such documentation establishing that the transfer is a Permitted Transfer as may be reasonably requested by Buyer and/or the Real Estate CVR Registrar (including opinions of counsel), if appropriate. Upon receipt of such written request and materials, the Real Estate CVR Registrar shall, subject to its reasonable determination that the transfer instrument is in proper form and the transfer otherwise complies with the other terms and conditions herein, register the transfer of the Real Estate CVRs in the Real Estate CVR Register. All duly transferred Real Estate CVRs registered in the Real Estate CVR Register shall be the valid obligations of Buyer, evidencing the same right and shall entitle the transferee to the same benefits and rights under this Agreement, as those previously held by the transferor. No transfer of a Real Estate CVR shall be valid until registered in the Real Estate CVR Register, and any transfer not duly registered in the Real Estate CVR Register will be void ab initio. Any transfer or assignment of the Real Estate CVRs shall be without charge (other than the cost of any transfer tax which shall be the responsibility of the transferor) to the Holder.

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(d) A Holder may make a written request to the Real Estate CVR Registrar to change such Holder’s address of record in the Real Estate CVR Register. The written request must be duly executed by the Holder. Upon receipt of such written notice, the Real Estate CVR Registrar shall promptly record the change of address in the Real Estate CVR Register.

Section 2.4. Payment Procedures.

(a) Promptly following the occurrence of any Real Estate CVR Payment Event, but in no event later than five Business Days after the occurrence of such Real Estate CVR Payment Event, Buyer shall deliver to the Rights Agent a certificate (the “Achievement Certificate”), certifying that the Holders are entitled to receive such Real Estate CVR Payment Amount. No transaction described in Section 6.1(a) hereof shall give the Holders the right to receive the Real Estate CVR Payment Amount.

(b) If a Real Estate Sale has not occurred on or before the CVR Outside Date, then, within five Business Days after the CVR Outside Date, Buyer shall deliver to the Rights Agent a certificate (the “Non-Achievement Certificate”), stating that a Real Estate Sale has not occurred on or before the CVR Outside Date and no Real Estate CVR Payment Event can occur.

(c) Except as otherwise requested by any Holder, the Rights Agent shall promptly (and in no event later than five Business Days after receipt thereof) send each Holder a copy of any Achievement Certificate or Non-Achievement Certificate at its registered address.

(d) Upon demand by any Holder or Holders of at least 20% in the aggregate of the outstanding Real Estate CVRs within 45 calendar days after distribution by the Rights Agent of a Non-Achievement Certificate (the “Objection Period”), the Rights Agent shall deliver a written notice to Buyer prepared by such Holder or Holders specifying that such Holder or Holders object to the determination of Buyer that a Real Estate Sale did not timely occur (a “Notice of Objection”) and stating the reason upon which such Holder or Holders have determined that a Real Estate Sale has occurred on or before the CVR Outside Date. Any dispute arising from a Notice of Objection shall be resolved in accordance with the procedure set forth in Section 7.12, which decision shall be binding on the parties hereto and every Holder (including Holders not participating therein).

(e) If a Notice of Objection has not been delivered to Buyer within the Objection Period, then the Holders shall have no right to receive the Real Estate CVR Payment Amount, and Buyer and the Rights Agent shall have no further obligations with respect to the Real Estate CVR Payment Amount.

(f) If Buyer delivers an Achievement Certificate to the Rights Agent or if the Real Estate CVR Payment Amount is determined to be payable pursuant to Section 2.4(d) above, Buyer shall establish a Real Estate CVR Payment Date that is within 15 calendar days of the date of the Achievement Certificate or the date of final determination pursuant to Section 2.4(d) above, as applicable. At least five Business Days before such Real Estate CVR Payment Date, Buyer shall cause the Real Estate CVR Payment Amount to be delivered to the Rights Agent, who will in turn, on the Real Estate CVR Payment Date, distribute the Real Estate CVR Payment Amount to the Holders (each Holder being entitled to receive its pro rata share of the Real Estate CVR Payment Amount based on the number of Real Estate CVRs held (as of the date of the Achievement Certificate or the date of final determination pursuant to Section 2.4(d) above, as applicable) by such Holder as reflected on the Real Estate CVR Register) (i) by check mailed to

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the address of each such respective Holder as reflected in the Real Estate CVR Register as of the close of business on the last Business Day before such Real Estate CVR Payment Date, or, (ii) with respect to any Holder that is due payment pursuant to this Agreement in excess of $1,000,000 who has provided the Rights Agent with wire transfer instructions, by wire transfer of immediately available funds to such account.

(g) Buyer shall be entitled to deduct and withhold, or cause to be deducted or withheld, from each Real Estate CVR Payment Amount otherwise payable pursuant to this Agreement, such amounts as Buyer or the applicable subsidiary of Buyer is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld or paid over to or deposited with the relevant governmental entity, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Holder in respect of which such deduction and withholding was made.

(h) Subject to prior execution and delivery by the Rights Agent of a reasonable and customary confidentiality/nonuse agreement, Buyer shall promptly furnish to the Rights Agent all information and documentation in connection with this Agreement and the Real Estate CVRs that the Rights Agent or any Holder or Holders of at least 5% in the aggregate of the outstanding Real Estate CVRs may reasonably request in connection with the determination of whether the Real Estate CVR Payment Event has occurred. Subject to prior execution and delivery by the applicable Holders of a reasonable and customary confidentiality/nonuse agreement, the Rights Agent shall forward any information and documentation it receives to the Holders who request such information.

Section 2.5. No Voting, Dividends or Interest; No Equity or Ownership Interest in Buyer.

(a) The Real Estate CVRs shall not have any voting or dividend rights, and interest shall not accrue on any amounts payable on the Real Estate CVRs to any Holder.

(b) The Real Estate CVRs shall not represent any equity or ownership interest in Buyer or in any constituent company to the Merger.

Section 2.6. Sole Discretion and Decision Making Authority; No Fiduciary Duty.

Notwithstanding anything else in this Agreement to the contrary, Buyer shall attempt to sell the Real Estate for the benefit of the Holders of the Real Estate CVRs, but shall have sole discretion and decision making authority, which shall be exercised in good faith and with commercial reasonableness, over when (if ever) to consummate the sale of all, or any parcel of the Real Estate, to any purchaser, and upon what terms and conditions. If Buyer, after engaging in the efforts describe above in this paragraph, is unable to sell the Real Estate, or any parcel thereof, at any price by the CVR Outside Date, then Buyer shall deliver to the Rights Agent a certificate of an executive officer of Buyer to that effect on the CVR Outside Date.

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ARTICLE III

THE RIGHTS AGENT

Section 3.1. Certain Duties and Responsibilities.

(a) The Rights Agent shall not have any liability for any actions taken or not taken in connection with this Agreement, except to the extent of its willful misconduct, bad faith or gross negligence. No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers.

(b) Any Holder or Holders of at least 20% in the aggregate of the outstanding Real Estate CVRs may direct the Rights Agent to act on behalf of the Holders in enforcing any of its or their rights hereunder, including, without limitation, the delivery of any Notice of Objection and negotiation or arbitration pursuant to Section 7.12. The Rights Agent shall be under no obligation to institute any action, suit or legal proceeding or to take any other action likely to involve material expense unless such Holder or Holders shall furnish the Rights Agent with reasonable security and indemnity for any costs and expenses which may be incurred. All rights of action under this Agreement may be enforced by the Rights Agent, and any action, suit or proceeding instituted by the Rights Agent shall be brought in its name as Rights Agent, and any recovery of judgment shall be for the ratable benefit of all the Holders, as their respective rights or interests may appear.

Section 3.2. Certain Rights of Rights Agent.

The Rights Agent undertakes to perform such duties and only such duties as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Rights Agent. In addition:

(a) the Rights Agent may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;

(b) whenever the Rights Agent shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Rights Agent may, in the absence of willful misconduct, bad faith or gross negligence on its part, rely upon an Officer’s Certificate;

(c) the Rights Agent may engage and consult with counsel of its selection and the written advice of such counsel or any opinion of counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;

(d) in the event of arbitration, the Rights Agent may engage and consult with tax experts, valuation firms and other experts and third parties that it, in its sole and absolute discretion, deems appropriate or necessary to enable it to discharge its duties hereunder;

(e) the permissive rights of the Rights Agent to do things enumerated in this Agreement shall not be construed as a duty;

(f) the Rights Agent shall not be required to give any note or surety in respect of the execution of such powers or otherwise in respect of the premises;

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(g) Buyer agrees to indemnify the Rights Agent for, and hold the Rights Agent harmless against, any loss, liability, claim, demands, suits or expense (in each case pertaining to the Rights Agent’s own account only) arising out of or in connection with the Rights Agent’s duties under this Agreement, including the costs and expenses of defending the Rights Agent against any claims, charges, demands, suits or loss, unless such loss shall have been determined by a court of competent jurisdiction to be a result of the Rights Agent’s willful misconduct, bad faith or gross negligence, provided, however, that the Rights Agent’s aggregate liability with respect to, arising from, or arising in connection with this Agreement, or from all services provided or omitted to be provided under this Agreement, whether in contract, in tort, or otherwise, is limited to, and shall not exceed, the amounts paid hereunder by Buyer to the Rights Agent as fees and charges, but not including reimbursable expenses; and

(h) Buyer agrees (i) to pay the fees and expenses of the Rights Agent in connection with this Agreement, as set forth on Schedule 1 hereto, and (ii) to reimburse the Rights Agent for all taxes and governmental charges, reasonable expenses and other charges of any kind and nature incurred by the Rights Agent in the execution of this Agreement (other than taxes measured by the Rights Agent’s net income). The Rights Agent shall also be entitled to reimbursement from Buyer for all reasonable and necessary out-of-pocket expenses (including reasonable fees and expenses of the Rights Agent’s counsel and agent) paid or incurred by it in connection with the administration by the Rights Agent of its duties hereunder. An invoice for the Rights Agent Fee will be rendered a reasonable time before, and paid on, the effective date of the applicable transaction. An invoice for any out-of-pocket expenses and per item fees realized will be rendered and payable within thirty (30) days after receipt by Buyer. Buyer agrees to pay to Rights Agent any amounts, including fees and expenses, payable in favor of the Rights Agent in connection with any dispute, resolution or arbitration arising under or in connection with the Agreement; provided, however, that in the event of a resolution in favor of Buyer, any amounts, including fees and expenses, payable by Buyer in favor of the Rights Agent or payable in favor of Buyer related to such dispute, resolution or arbitration shall be offset against the Real Estate CVR Payment Amount, if any, or any payment to be made thereafter under any of the other CVR Agreements.

Section 3.3. Resignation and Removal; Appointment of Successor.

(a) The Rights Agent may resign at any time by giving written notice thereof to Buyer specifying a date when such resignation shall take effect, which notice shall be sent at least 30 days before the date so specified.

(b) If the Rights Agent shall resign, be removed or become incapable of acting, Buyer, by way of a Board Resolution, shall promptly appoint a qualified successor Rights Agent who may (but need not) be a Holder but shall not be an officer of Buyer. The successor Rights Agent so appointed shall, forthwith upon its acceptance of such appointment in accordance with this Section 3.3(b), become the successor Rights Agent.

(c) Buyer shall give notice of each resignation and each removal of a Rights Agent and each appointment of a successor Rights Agent by mailing written notice of such event by first-class mail, postage prepaid, to the Holders as their names and addresses appear in the Real Estate CVR Register. Each notice shall include the name and address of the successor Rights Agent. If Buyer fails to send such notice within ten days after acceptance of appointment by a successor Rights Agent, the successor Rights Agent shall cause such notice to be mailed at the expense of Buyer.

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Section 3.4. Acceptance of Appointment by Successor.

Every successor Rights Agent appointed hereunder shall execute, acknowledge and deliver to Buyer and to the retiring Rights Agent an instrument accepting such appointment and a counterpart of this Agreement, and thereupon such successor Rights Agent, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Rights Agent; provided, that upon the request of Buyer or the successor Rights Agent, such retiring Rights Agent shall execute and deliver an instrument transferring to such successor Rights Agent all the rights, powers and trusts of the retiring Rights Agent and shall cooperate in the transfer of all relevant data, including the Real Estate CVR Register, to the successor Rights Agent.

ARTICLE IV

COVENANTS

Section 4.1. List of Holders.

Buyer shall furnish or cause to be furnished to the Rights Agent in such form as Buyer receives from its transfer agent (or other agent performing similar services for Buyer), the names, addresses and shareholdings of the Holders, within five Business Days after the effective time of the Merger.

Section 4.2. Payment of Real Estate CVR Payment Amount.

Buyer shall duly and promptly pay each Real Estate CVR Payment Amount, if any, in immediately available funds, to the Rights Agent to be distributed to the Holders in the manner provided for in Section 2.4 and in accordance with the terms of this Agreement.

Section 4.3. Assignments.

Buyer shall not, in whole or in part, assign any of its obligations under this Agreement other than in accordance with the terms of Section 6.1 hereof.

ARTICLE V

AMENDMENTS

Section 5.1. Amendments Without Consent of Holders.

(a) Without the consent of any Holders or the Rights Agent, Buyer, when authorized by a Board Resolution, at any time and from time to time, may enter into one or more amendments hereto, for any of the following purposes:

(i) to evidence the succession of another Person to Buyer and the assumption by any such successor of the covenants of Buyer herein in a transaction contemplated by Section 6.1 hereof; or

(ii) to evidence the termination of the Real Estate CVR Registrar and the succession of another Person as a successor Real Estate CVR Registrar and the assumption by any successor of the obligations of the Real Estate CVR Registrar herein.

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(b) Without the consent of any Holders, Buyer, when authorized by a Board Resolution, and the Rights Agent, in the Rights Agent’s sole and absolute discretion, at any time and from time to time, may enter into one or more amendments hereto, for any of the following purposes:

(i) to evidence the succession of another Person as a successor Rights Agent and the assumption by any successor of the covenants and obligations of the Rights Agent herein;

(ii) to add to the covenants of Buyer such further covenants, restrictions, conditions or provisions as the Board of Directors and the Rights Agent shall consider to be for the protection of the Holders; provided, that in each case, such provisions shall not adversely affect the interests of the Holders;

(iii) to cure any ambiguity, to correct or supplement any provision herein that may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Agreement; provided, that in each case, such provisions shall not adversely affect the interests of the Holders; or

(iv) to add, eliminate or change any provision of this Agreement unless such addition, elimination or change is adverse to the interests of the Holders.

(c) Promptly after the execution by Buyer and the Rights Agent of any amendment pursuant to the provisions of this Section 5.1, Buyer shall mail a notice thereof by first-class mail to each of the Holders at their addresses as they shall appear on the Real Estate CVR Register, setting forth in general terms the substance of such amendment.

Section 5.2. Amendments With Consent of Holders.

(a) Subject to Section 5.1 (which amendments pursuant to Section 5.1 may be made without the consent of the Holders), with the consent of the Holders of not less than a majority of the outstanding Real Estate CVRs, whether evidenced in writing or taken at a meeting of the Holders, Buyer, when authorized by a Board Resolution, and the Rights Agent may enter into one or more amendments hereto for the purpose of adding, eliminating or changing any provisions of this Agreement, even if such addition, elimination or change is in any way adverse to the interests of the Holders.

(b) Promptly after the execution by Buyer and the Rights Agent of any amendment pursuant to the provisions of this Section 5.2, Buyer shall mail a notice thereof by first-class mail to the Holders at their addresses as they shall appear on the Real Estate CVR Register, setting forth in general terms the substance of such amendment.

Section 5.3. Execution of Amendments.

In executing any amendment permitted by this Article V, the Rights Agent shall be entitled to receive, and shall be fully protected in relying upon, an opinion of counsel stating that the execution of such amendment is authorized or permitted by this Agreement. The Rights Agent may, but is not obligated to, enter into any such amendment that affects the Rights Agent’s own rights, privileges, covenants or duties under this Agreement or otherwise.

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Section 5.4. Effect of Amendments.

Upon the execution of any amendment under this Article V, this Agreement shall be modified in accordance therewith, such amendment shall form a part of this Agreement for all purposes and every Holder shall be bound thereby.

ARTICLE VI

CONSOLIDATION, MERGER, SALE OR CONVEYANCE

Section 6.1. Buyer May Consolidate, Etc.

(a) Buyer shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, unless:

(i) the Person formed by such consolidation or into which Buyer is merged or the Person that acquires by conveyance or transfer, or that leases, the properties and assets of Buyer substantially as an entirety (the “Surviving Person”) shall expressly assume payment (if and to the extent required hereunder) of amounts on all the Real Estate CVRs and the performance of every duty and covenant of this Agreement on the part of Buyer to be performed or observed; and

(ii) Buyer has delivered to the Rights Agent an Officer’s Certificate, stating that such consolidation, merger, conveyance, transfer or lease complies with this Article VI and that all conditions precedent herein provided for relating to such transaction have been complied with.

(b) In the event Buyer conveys, transfers or leases its properties and assets substantially as an entirety in accordance with the terms and conditions of this Section 6.1, Buyer and the Surviving Person shall be jointly and severally liable for the payment of the Real Estate CVR Payment Amount and the performance of every duty and covenant of this Agreement on the part of the Buyer to be performed or observed.

Section 6.2. Successor Substituted.

Upon any consolidation of or merger by Buyer with or into any other Person, or any conveyance, transfer or lease of the properties and assets substantially as an entirety to any Person in accordance with Section 6.1, the Surviving Person shall succeed to, and be substituted for, and may exercise every right and power of, Buyer under this Agreement with the same effect as if the Surviving Person had been named as Buyer herein, and thereafter the predecessor Person shall be relieved of all obligations and covenants under this Agreement and the Real Estate CVRs.

ARTICLE VII

OTHER PROVISIONS OF GENERAL APPLICATION

Section 7.1. Notices to Rights Agent and Buyer.

Any request, demand, authorization, direction, notice, consent, waiver or other document provided or permitted by this Agreement shall be sufficient for every purpose hereunder if in writing and sent by facsimile transmission, delivered personally, or by certified or registered mail (return receipt requested and first-class postage prepaid) or sent by a nationally recognized overnight courier (with proof of service), addressed as follows, and shall be deemed to have been given upon receipt:

(a) if to the Rights Agent, addressed to it at 10 Commerce Drive, Cranford, New Jersey 07016, facsimile at (908) 497-2314, or at any other address previously furnished in writing to the Holders and Buyer by the Rights Agent in accordance with this Section 7.1; or

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(b) if to Buyer, addressed to it at 11085 North Torrey Pines Road, Suite 300, La Jolla, California 92037, facsimile at (858) 550-7272, or at any other address previously furnished in writing to the Rights Agent and the Holders by Buyer in accordance with this Section 7.1.

Section 7.2. Notice to Holders.

Where this Agreement provides for notice to Holders, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his, her or its address as it appears in the Real Estate CVR Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders.

Section 7.3. Effect of Headings.

The Article and Section headings herein are for convenience only and shall not affect the construction hereof.

Section 7.4. Successors and Assigns.

All covenants and agreements in this Agreement by Buyer shall bind its successors and assigns, whether so expressed or not.

Section 7.5. Benefits of Agreement.

Nothing in this Agreement, express or implied, shall give to any Person (other than the parties hereto, the Holders and their permitted successors and assigns hereunder) any benefit or any legal or equitable right, remedy or claim under this Agreement or under any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the parties hereto, the Holders and their permitted successors and assigns. The Holders shall have no rights or remedies hereunder except as expressly set forth herein.

Section 7.6. Governing Law.

This Agreement and the Real Estate CVRs shall be governed by and construed in accordance with the laws of the State of Delaware without regards to its rules of conflicts of laws.

Section 7.7. Legal Holidays.

In the event that a Real Estate CVR Payment Date shall not be a Business Day, then, notwithstanding any provision of this Agreement to the contrary, any payment required to be made in respect of the Real Estate CVRs on such date need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Real Estate CVR Payment Date.

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Section 7.8. Severability Clause.

In case any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, but this Agreement shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the court or other tribunal making such determination is authorized and instructed to modify this Agreement so as to effect the original intent of the parties as closely as possible so that the transactions and agreements contemplated herein are consummated as originally contemplated to the fullest extent possible.

Section 7.9. Counterparts.

This Agreement may be signed in any number of counterparts (which may be effectively delivered by facsimile or other electronic means), each of which shall be deemed to constitute but one and the same instrument

Section 7.10. Termination.

This Agreement shall terminate and be of no further force or effect, and the parties hereto shall have no liability hereunder, upon the earliest to occur of (a) the payment of the last possible Real Estate CVR Payment Amount, (b) in the event that a Notice of Objection is not delivered within the Objection Period, the expiration of the Objection Period or (c) in the event of the delivery of a Notice of Objection, either (i) the final determination in accordance with this Agreement that a Real Estate Sale was not closed on or before the CVR Outside Date or (ii) the fulfillment of the last possible payment or other obligation required pursuant to a final determination made in accordance with this Agreement.

Section 7.11. Entire Agreement.

This Agreement and the Merger Agreement represent the entire understanding of the parties hereto with reference to the Real Estate CVRs and this Agreement supersedes any and all other oral or written agreements made with respect to the Real Estate CVRs, except for the Merger Agreement. If and to the extent that any provision of this Agreement is inconsistent or conflicts with the Merger Agreement, this Agreement shall govern and be controlling.

Section 7.12. Negotiation; Arbitration.

(a) Before any arbitration pursuant to Section 7.12(b), Buyer, the Rights Agent and, if available, any Holder or Holders of at least 20% in the aggregate of the outstanding Real Estate CVRs shall negotiate in good faith for a period of 30 days to resolve any controversy or claim arising out of or relating to this Agreement or the breach thereof.

(b) After expiration of the 30-day period contemplated by Section 7.12(a), such controversy or claim, including any claims for breach of this Agreement, shall be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. Buyer, the Rights Agent and/or any Holder or Holders of at least 20% in the aggregate of the outstanding Real Estate CVRs

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may initiate an arbitration for any matter relating to this Agreement. However, in the event of a dispute arising from the delivery of a Notice of Objection, the sole matter to be settled by arbitration shall be whether a Real Estate Sale has been closed on or before the CVR Outside Date. The number of arbitrators shall be three. Within 15 days after the commencement of arbitration, each party shall select one person to act as arbitrator, and the two selected shall select a third arbitrator within 15 days of their appointment. If the arbitrators selected by the parties are unable or fail to agree upon the third arbitrator, the third arbitrator shall be selected by the American Arbitration Association. The place of the arbitration shall be San Diego, California. The arbitrators shall be lawyers or retired judges with experience in the life sciences industry and with mergers and acquisitions. Except as may be required by law, neither a party nor an arbitrator may disclose the existence, content or results of any arbitration hereunder without the prior written consent of both parties (provided that the Rights Agent may disclose to the Holders any such information without the consent of Buyer). Any award payable in favor of the Holders or the Rights Agent as a result of arbitration shall be distributed to the Holders on a pro rata basis, based on the number of Real Estate CVRs held by each Holder. Buyer shall pay all fees and expenses of the arbitration forum, including the costs and expenses billed by the arbitrators in connection with the performance of their duties described herein; provided, however, that if the arbitrator rules in favor of Buyer, the Arbitrator’s fees and expenses shall be offset against the current or any future Real Estate CVR Payment Amount, if any, or any payment to be made thereafter under any of the other CVR Agreements. Each party shall be responsible for its own attorney fees, expenses and costs of investigation.

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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its duly authorized officers as of the day and year first above written.

LIGAND PHARMACEUTICALS INCORPORATED
By:	/s/ Charles Berkman
Name:	Charles Berkman
Title:	Vice President, General Counsel & Secretary
NEUROGEN CORPORATION
By:	/s/ Steve Davis
Name:	Steve Davis
Title:	President & CEO
REGISTRAR AND TRANSFER COMPANY
By:	/s/ William P. Tatler
Name:	William P. Tatler
Title:	Vice President

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