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

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(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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