**EXHIBIT 10.43**

**RESEARCH COLLABORATION AND LICENSE AGREEMENT**

**THIS RESEARCH    COLLABORATION AND LICENSE AGREEMENT** (the "**Agreement**")    is effective as of November 24, 2003 (the "**Execution Date**"),    between MERCK SHARP & DOHME LIMITED, whose registered office is at Hertford    Road, Hoddesdon, Hertfordshire, EN11 9BU, United Kingdom ("**MSD**"),    NEUROGEN CORPORATION, a Delaware corporation with offices located at 35 NE    Industrial Rd., Branford, CT ("**NEUROGEN**"), and,    for purposes of Section 11.16, Merck & Co., Inc., a New Jersey corporation    with offices located at One Merck Drive, Whitehouse Station, NJ ("**MERCK**").    

**Background:**

- Both MSD and NEUROGEN    have ongoing research programs whose primary purpose is to research the physiology,    pharmacology, chemistry and potential therapeutic applications and potential    clinical utilities relating to Vanilloid Receptors, subtype 1, also known    as TRPV1 ("**VR1**"), and have developed certain    intellectual property in this field.

- MSD and NEUROGEN    desire to combine their efforts and engage in a collaborative program to discover,    research and develop drugs which work through modulating VR1.

-  It is expected that    the resulting compounds from such collaborative research may have a broad    range of applications, including, but not limited to, the therapeutic treatment    and prevention of certain disorders and diseases, such as pain and urinary    incontinence.

-  The Parties desire    for MSD and its Affiliates to develop and commercialize compounds from such    collaborative research that modulate VR1.

NOW, THEREFORE, MSD and  NEUROGEN (hereafter "**Party**," if singular or "Parties,"  if plural) agree as follows:

**Article I DEFINITIONS**

The following terms shall  have the respective meanings set forth below: **1.1 "Active Compound"** means any VR1 Modulator that:  (a) is Controlled by a Party or its Affiliate, and (b) either: (i) exists as  of the Effective Date, or (ii) is synthesized, conceived, invented or identified  as having the activity referred to in subsection (c) below, during the Program  Term or within the twelve (12) month period thereafter, and (c) meets the criteria  for selectivity, activity and potency in functional or pharmacological assays  as set out in Attachment 1.1 (the "**Active Compound Criteria**").  The Active Compound Criteria may be modified in writing by the JRC. If an Active  Compound is determined to be an Unavailable Compound it shall cease to be an  Active Compound.

**1.2 "Active  Program"** means a program to which a Party has allocated chemistry,  high throughput screening or development resources specifically for the purpose  of identifying inhibitors or modulators for the research and development of  drug targets other than VR1 and which the Party continues to pursue with such  research or development resources.

**1.3 "Adverse  Event"** means any adverse event or experience as defined in the  then current edition of ICH Guidelines, 21 C.F.R. §301.305, 21 C.F.R. §314.80  and any other applicable regulations or regulatory guidelines.**1.4 "Affiliate"** means (a) any corporation or business  entity of which more than fifty percent (50%) or more of the securities or other  ownership interests representing the equity or voting interest are owned, controlled  or held, directly or indirectly, by MSD or NEUROGEN; or (b) any corporation  or business entity which, directly or indirectly, owns, controls or holds more  than fifty percent (50%) (or the maximum ownership interest permitted by law)  or more of the securities or other ownership interests representing the equity  or voting interest of MSD or NEUROGEN; or (c) any corporation or business entity  of which more than fifty percent (50%) or more of the securities or other ownership  interests representing the equity or voting interest are owned, controlled or  held, directly or indirectly, by a corporation or business entity described  in (a) or (b). 

**1.5 "Annual  FTE Rate"** means the amount MSD will pay NEUROGEN over a consecutive  twelve (12) month period during the Program Term to support one (1) FTE performing  work under the Program. The Annual FTE Rate will be [           ]*.

**1.6 "Change  of Control"** means with respect to a Party: (i) a sale of all  or substantially all of such Party’s assets, voting stock or securities  or business relating to this Agreement; (ii) a merger, reorganization or consolidation  involving a Party in which the stockholders of such Party immediately prior  to such transaction cease to own collectively a majority of the voting equity  securities of a successor entity; or (iii) the acquisition by a person or group  of persons acting in concert of fifty percent (50%) or more of the voting equity  securities of such Party. 

**1.7 "Collaboration  Compound**" means any VR1 Modulator (including Active Compounds  and PCCs) and all solvates, prodrugs, salts, crystal forms, polymorphs, chelates,  non-covalent complexes, hydrates, enantiomers, racemates, stereoisomers and  esters thereof, the research, development, manufacture, import, marketing, offer  for sale, sale or use of which, if done by an unlicensed Third Party, would  infringe any VR1 Compound Patent Rights. 

**1.8 "Combination  Product"** means either a single pharmaceutical formulation containing  as its active ingredients both a Collaboration Compound and one or more other  therapeutically or prophylactically active ingredients, or a combination therapy  comprised of a Product and one or more other therapeutically or prophylactically  active products priced and sold in a single package containing such multiple  products, in each case, in all dosage forms, formulations, presentations, line  extensions, and package configurations. All references to Product in this Agreement  shall be deemed to include Combination Product.

**1.9 "Commercially  Reasonable Efforts"** means, [          ]* 

**1.10 "Control"  or "Controlled"** means with respect to any item of or right  under Know-How and/or Patents, the possession of (whether by ownership or license,  other than pursuant to this Agreement) the ability of a Party or its Affiliate  to grant access to, or licenses or sublicenses of, such items or right as provided  for herein without violating the terms of any agreement or other arrangement  with, or the enforceable rights of, any Third Party existing at the time such  Party would be required hereunder to grant the other Party such access or license  or sublicense.

**1.11 "Effective  Date"** means the HSR Clearance Date or, if each Party determines  that an HSR Filing is not required, then the Execution Date.

**1.12 "EMEA"**  means the European Medicines Evaluation Agency and the Committee for Proprietary  Medicinal Products or any successor agency thereof or, to the extent the mutual  recognition procedure is used for the Product in the EU, any governmental authority  having the authority to regulate the sale of medicinal or pharmaceutical products  in any country in the EU.

**1.13 "EU"**  means all countries that are member states of the European Union as of the Effective  Date of this Agreement.

**1.14 "FDA"**  means the Food and Drug Administration of the United States Department of Health  and Human Services or any successor agency thereof performing similar functions.

**1.15 "FDC  Act"** means the United States Food, Drug and Cosmetic Act, as  amended from time to time.**1.16 "Field"** means [          ]* relating to VR1 Modulators.

**1.17 "Filing"**  of an NDA shall mean the acceptance by a Regulatory Authority of an NDA for  filing. **1.18 "First Commercial Sale"** means, with respect  to any Product, the first sale by MSD, its Affiliates, or Sublicensees for end  use or consumption of such Product in a country after all required approvals,  including Regulatory Approvals, have been granted by the Regulatory Authority  of such country.

**1.19 "FTE"**  means a full-time equivalent person year (consisting of a total of [          ]* hours  per year, or [          ]* hours per quarter) of scientific, technical or managerial  work on the Program.

**1.20 "GLP"**  means Good Laboratory Practices, as set forth in 21 C.F.R. Part 58 et seq.,  and the rules in force in the EU relating to GLP, including EC Directives 87/18  EEC, 88/320/EEC, and 1999/11/EC.

**1.21 "GMP"**  means Good Manufacturing Practices, as set forth in 21 C.F.R. Part 210, et seq.,  and the Rules Governing Medicinal Products in the European Union volume 4.

**1.22 "Hatch-Waxman  Act"** means the United States Drug Price Competition and Patent  Term Restoration Act of 1984 (Pub. Law 98-471), or any successor thereto, and  any equivalent legal requirements in other countries, as in effect from time  to time during the term of this Agreement.

**1.23 "HSR  Act"** means the Hart-Scott-Rodino Antitrust Improvements Act of  1976, as amended from time to time.

**1.24 "HSR  Clearance Date"** means the earliest date on which both Parties  or their Affiliates have actual knowledge that all applicable waiting periods  under the HSR Act with respect to the transactions contemplated hereunder have  expired or have been terminated.

**1.25 "HSR  Filing"** means filings by MSD or its Affiliates and NEUROGEN with  the United States Federal Trade Commission and the Antitrust Division of the  United States Department of Justice of a Notification and Report Form for Certain  Mergers and Acquisitions (as that term is defined in the HSR Act) with respect  to the matters set forth in this Agreement, together with all required documentary  attachments thereto.**1.26 "IND"** means an Investigational New Drug application  (together with all subsequent submissions, supplements and amendments thereto)  filed with the FDA in conformance with applicable laws and regulations, for  approval to conduct human clinical investigations, and the equivalent thereof,  as applicable, in jurisdictions outside the United States.

**1.27 "IND-Enabling  GLP Toxicology Studies"** means any genotoxicity, acute toxicology,  safety pharmacology, or sub-chronic toxicology study in appropriate species  using GLP which meet the standard necessary for submission as part of an IND  filing for obtaining approval from a Regulatory Authority for administration  to a human. 

**1.28 "Indication"**  means a separate and distinct disease or medical condition in humans: (a) which  a Product is intended to treat, prevent or diagnose as evidenced by a Phase  I, Phase II and/or Phase III Clinical Trial; or (b) for which a Product has  received Regulatory Approval, meaning that such Indication is contained in the  Product’s labeling approved by a Regulatory Authority as part of the Regulatory  Approval for such Product. The Parties agree that: (i) prevention of a disease  or medical condition shall not be a separate indication from treatment of the  same disease or medical condition; (ii) the treatment and prevention of separate  varieties of the same disease or medical condition shall not be a separate indication  (e.g., osteoarthritic pain and post-operative pain); and (iii) the treatment  or prevention of the same disease or medical condition in a different population  shall not be a separate indication (e.g., adult and pediatric). With respect  to this Agreement, Pain, urinary incontinence and asthma/allergies will be considered  separate Indications, and asthma/allergies will be considered a single Indication.

**1.29 "Information"**  means all information, materials and data, including MSD Know-How, NEUROGEN  Know-How, and all other scientific, preclinical, gene sequence, chemical structure,  clinical, regulatory, manufacturing, marketing, financial, or patent information,  and commercial information and data, whether communicated in writing or orally  or by any other method, which is provided by one Party to the other Party in  connection with this Agreement.

**1.30 "Invention"**  means any process, method, composition of matter, article of manufacture, discovery  or finding that is conceived, generated or reduced to practice in the course  of performing work under the Program.

**1.31 "Joint  Patents"** means all Patents that claim Inventions made in the  course of performing the Program that have inventors from both NEUROGEN and  MSD (including their respective employees, agents or consultants). **1.32 "JRC"** means the Joint Research Committee described  in Section 2.5 of this Agreement.

**1.33 "Know-How"**  means all proprietary methods, devices, materials, technology, trade secrets,  Inventions (including MSD Inventions and NEUROGEN Inventions), compositions,  designs, formulae, know-how, discoveries, improvements, data, and documentation  and other information, as well as processes, protocols and analytical methodologies,  patentable or otherwise. 

**1.34 "Marketing  Exclusivity Right"** means a marketing exclusivity right conferred  as a result of (a) a designation as a drug for rare diseases or conditions under  Sections 525 et seq. of the FDC Act or EU Regulation No. 141/2000, or (b) the  completion of pediatric studies requested by the FDA under Section 505A(a) of  the FDC Act and, in each of the foregoing, the equivalent rights in any other  country which confer marketing exclusivity rights.

**1.35** "[            ]*" means MSD’s proprietary VR1 Modulator designated as [          ]*.**1.36 "MSD Know-How"** means all Know-How (including  MSD’s Inventions, its Information and its interest in Joint Inventions)  that was conceived, generated or reduced to practice before or during the Program  Term or within the twelve (12) month period following the Program Term and which  is in MSD’s or its Affiliates’ Control during the Program Term or  within the twelve (12) month period following the Program Term, and is either  (a) related to VR1 and its modulation or the identification and discovery of  VR1 Modulators, or (b) necessary to NEUROGEN to conduct its activities under  the Program. Notwithstanding any other provision of this Agreement, it is understood  and agreed to by the Parties that the MSD Know-How does not include any of MSD’s  proprietary screening, combinatorial chemistry or computational chemistry technologies  that are not specific to VR1, including MSD’s and MERCK’s chemical  libraries. **1.37 "MSD Patents"** means any and all Patents in  the Field Controlled by MSD or its Affiliates that claim a priority date prior  to the expiration of the twelve (12) month period following the expiration of  the Program Term, including MSD’s interests in (a) Joint Patents, (b)  VR1 Compound Patent Rights and (c) VR1 Related Patent Rights. For clarity, MSD  Patents include those listed on Attachment 1.37.

**1.38 "MSD  Technology"** means MSD Patents and MSD Know-How.

**1.39 "NDA"**  means a New Drug Application, Biologic License Application, Worldwide Marketing  Application, Marketing Application Authorization, or similar application or  submission for Regulatory Approval of a Product filed with a Regulatory Authority  to obtain approval to sell commercially a biological, pharmaceutical or diagnostic  product in that country or in that group of countries, together with all subsequent  submissions, supplements and amendments thereto.

**1.40 "NDA  Approval"** means approval of an NDA by the FDA, EMEA or other  applicable Regulatory Authority.**1.41 "Net Sales"** means the gross invoiced amount  on sales of the Product(s) by MSD, its Affiliates or Sublicensees to unrelated  Third Parties less, to the extent included in the gross invoice amount [          ]*,  deductions for the following: 

- trade, cash and quantity    discounts actually allowed (including early pay cash discounts);

-  returns, rebates and    allowances actually allowed; 

-  all chargebacks, including    those paid on sale or dispensing of Product, which have the effect of retroactively    adjusting the sales price paid by such Third Party to MSD, its Affiliates    or Sublicensees;

- retroactive price reductions    that are actually allowed or granted; 

-  excise, sales or use    taxes, customs duties and other tariffs or duties levied on the sale, transportation    or delivery of a Product but only to the extent such taxes, tariffs or duties    are remitted to the applicable taxing authorities and are not subject to any    future rebate, credit or other offset; and

- actual transportation    and insurance charges to the extent separately identified on the invoice or    other documentation maintained in the ordinary course of business.

Any and all such discounts,  allowances, credits, rebates and other deductions shall be fairly and equitably  allocated to the Product and other products of MSD, its Affiliates or Sublicensees,  such that the Product does not bear a disproportionate portion of such deductions.  The sale or other transfer of a Product among MSD or its Affiliate or Sublicensee  shall not be considered a sale, but in such cases the royalty shall be due and  calculated upon MSD’s or its Affiliate’s or its Sublicensee’s  Net Sales to the first independent Third Party. In addition, royalties shall  not accrue on the disposition of Product in reasonable quantities by MSD, its  Affiliates or Sublicensees as samples (promotion or otherwise) or as donations  (for example, to non-profit institutions or government agencies for a non-commercial  purpose). Every other commercial use or disposition of the Product by MSD, its  Affiliates and Sublicensees in barter or other transactions (other than dispensing  of reasonable and customary quantities of promotional samples) shall be considered  a sale of such Product at the weighted average Net Sales price for such Product  during the preceding quarter.   With respect to sales of a Combination Product for the purpose of determining  royalty and milestone payments, Net Sales shall be calculated by multiplying  the total Net Sales of such Combination Product by the fraction A/A+B where  A is the actual invoice price of the Product in the same dosage amount in the  applicable country if sold separately and B is the sum of the actual invoice  prices of all other active ingredients or products in the same dosage amount  in the Combination Product in the applicable country if sold separately during  the applicable quarter. If A or B cannot be determined because values for the  Product or the other active ingredients sold alone are not available in a particular  country then MSD and NEUROGEN will discuss an appropriate allocation for the  fair market value of the Product and other active ingredients in the Combination  Product to determine Net Sales for such Combination Product. The deductions  set out in subparagraphs (a) through (f) will be applied in calculating Net  Sales for a Combination Product.

**1.42 "NEUROGEN  Know-How"** means all Know-How (including NEUROGEN’s Inventions,  its Information and its interest in Joint Inventions) that was conceived, generated  or reduced to practice before or during the Program Term or within the twelve  (12) month period following the Program Term and which is in NEUROGEN’s  or its Affiliates’ Control during the Program Term or within the twelve  (12) month period following the Program Term, and is either (a) related to VR1  and its modulation or the identification and discovery of VR1 Modulators, or  (b) necessary to MSD to conduct its activities under the Program or to research,  develop, manufacture, market, use or sell Collaboration Compounds or Products.  Notwithstanding any other provision of this Agreement, it is understood and  agreed to by the Parties that the NEUROGEN Know-How does not include any of  NEUROGEN’s proprietary screening, combinatorial chemistry or computational  chemistry technologies that are not specific to VR1, including NEUROGEN’s  chemical libraries and NEUROGEN’s AIDDTM technology. **1.43 "NEUROGEN Patents"** means any and all Patents  in the Field Controlled by NEUROGEN or its Affiliates that claim a priority  date prior to the expiration of the twelve (12) month period following the expiration  of the Program Term including NEUROGEN’s interests in (a) Joint Patents,  (b) VR1 Compound Patent Rights and (c) VR1 Related Patent Rights. For clarity,  NEUROGEN Patents include those listed on Attachment 1.43.

**1.44 "NEUROGEN  Technology"** means NEUROGEN Patents and NEUROGEN Know-How.

**1.45** "[            ]*" means NEUROGEN’s proprietary VR1 Modulator designated [          ]*.

**1.46 "Pain"**  means an unpleasant sensory experience resulting from actual or potential tissue  injury, inflammation, ischemia or following nerve injury, and associated with  a wide range of clinical conditions including acute pain resulting from tendonitis,  bursitis, fractures, sprains, tears and other joint disorders, dental pain,  headache, sinusitis, post-operative pain, and menstrual pain, and chronic pain  associated with osteoarthritis, rheumatoid arthritis, post-herpetic neuralgia,  diabetic neuropathy, neuropathic pain, fibromyalgia and back pain, and acute  and visceral pain conditions including prostatitis, interstitial cystitis, inflammatory  bowel disease and irritable bowel syndrome.

**1.47 "Patents"**  means patents and patent applications (including provisional applications, certificates  of invention and applications for certificates of invention, continuations,  divisionals and continuations-in-part), and all patents issuing therefrom (and  all substitutions, reissues, renewals, reexaminations, supplementary protection  certificates, extensions, registrations and confirmations of any of the foregoing  patents and foreign equivalents thereof).

**1.48 "PCC"**  (preclinical candidate) means any Collaboration Compound that has been nominated  by the JRC and accepted for further pre-clinical or clinical development by  the PDRC pursuant to PDRC’s standards for designating PCCs (or any successor  designation thereof).

**1.49 "PDRC"**  means MERCK’s Preclinical Development Review Committee or any successor  committee that performs the same functions.**1.50 "Phase I Clinical Trial"** means a human clinical  trial that is intended to initially evaluate the safety and/or pharmacological  or antigenic effect of a Product in human subjects including a trial that would  satisfy the requirements of 21 C.F.R. 312.21(a), as may be amended or the foreign  equivalent thereof. **1.51 "Phase II Clinical Trial"** means a human clinical  trial that is intended to gain evidence of the efficacy of a Product for a particular  Indication or Indications in human subjects with the disease or Indication under  study including a trial that would satisfy the requirements of 21 C.F.R. 312.21(b),  as may be amended or the foreign equivalent thereof. **1.52 "Phase III Clinical Trial"** means a pivotal  human clinical trial that is intended to gain evidence to establish the efficacy  and safety of a Product as a basis for an NDA including a trial that would satisfy  the requirements of 21 C.F.R. 312.21(c), as may be amended or the foreign equivalent  thereof. 

**1.53 "Phase  IV Clinical Trials"** means post-registrational studies or other  clinical studies required as a condition to, or for the maintenance of, Regulatory  Approval of a Product in the Territory, including a trial that would satisfy  the requirements of 21 C.F.R. 312.85, as may be amended or the foreign equivalent  thereof.**1.54 "Product"** means a product or preparation in  final form for sale by prescription, over-the-counter or any other method, for  any and all uses and by any route of administration, containing one or more  Collaboration Compounds as a pharmaceutically active ingredient(s), including  any Combination Product.**1.55 "Program"** means the collaborative research  program conducted by the Parties under the Research Plan as set forth in Attachment  2.1 and during the Program Term to discover, identify and develop Active Compounds,  PCCs and Collaboration Compounds and to better understand the physiology, pharmacology,  chemistry, potential clinical utility and potential therapeutic applications  of VR1 Modulators, all as further described in Article II.

**1.56 "Regulatory  Approval"** means any NDA Approvals and other approvals, licenses,  registrations, or authorizations granted or issued by any national, regional,  state or local governmental entities and agencies, necessary for the development,  registration, manufacture, packaging, labeling, use, storage, transport, export,  import, clinical testing, promotion or sale of the Products in a country, including  pricing and reimbursement approvals to the extent the applicable Regulatory  Authorities in such country require a pricing or reimbursement approval prior  to commercialization of a product in such country.

**1.57 "Regulatory  Authority"** means any applicable government regulatory authority  involved in granting approvals for the manufacturing, marketing, reimbursement  and/or pricing of a Product in the Territory, including, in the United States,  the FDA.

**1.58 "Sublicensee"**  means a Third Party to whom MSD grants a license or sublicense to develop, make,  use, or sell the Products, or otherwise grants rights to promote or sell the  Collaboration Compounds or Products.**1.59 "Territory"** means all of the countries in  the world, and their territories and possessions. 

**1.60 "Third  Party**" means an entity other than MSD and its Affiliates, or  NEUROGEN and its Affiliates.

**1.61 "Unavailable  Compound"** means one or more compounds designated by one Party  to the other as not being available for research and development in the Program,  as supported by documentary evidence, because (a) such compound is subject to  rights granted to a Third Party by either MSD (or any Affiliate of MSD) or NEUROGEN  (or any Affiliate of NEUROGEN), that would be violated by such research or development  and [          ]*, or (b) the compound: (i) [          ]* of MSD (or any Affiliate of MSD) or  NEUROGEN (or any Affiliate of NEUROGEN) [           ]* and (ii) [           ]*, as supported by  documentary evidence. [          ]*.

**1.62 "U.S.  GAAP"** means generally-accepted accounting principles in the United  States. 

**1.63 "Valid  Claim"** means an issued claim within the scope of the VR1 Compound  Patent Rights or the VR1 Related Patent Rights, including any extensions thereof  and supplemental protection certificates, to the extent such claims have not  been disclaimed, revoked or held invalid by a final unappealable decision of  a court or governmental agency of competent jurisdiction, and which claims are  otherwise enforceable. "**Valid Claim**" also means  any claim within a pending application for a patent included within the scope  of the VR1 Compound Patent Rights or the VR1 Related Patent Rights to the extent  the invention(s) described in the claims of such application have not been abandoned  without being refiled in another application or finally rejected by an administrative  agency action from which no appeal can be taken, such that the claim at issue  has been pending for [          ]*. If a claim of a patent application that ceased to  be a Valid Claim due to the passage of time set forth in the preceding sentence  later issues as a part of a patent described above, then it will again be considered  a Valid Claim effective as of the issuance of such patent.

**1.64** [             ]*. 

**1.65 "VR1  Compound Patent Rights"** means any and all Patents in the Territory  which a Party or any of its Affiliates Controls during the term of this Agreement  that assert an earliest priority date [          ]*, *provided however*, that  the term VR1 Compound Patent Rights shall not include VR1 Related Patent Rights.  

**1.66 "VR1  Related Patent Rights"** means (a) [          ]*, (b) [          ]*, (c) [          ]*, and  (d) [          ].* From time to time during the course of this Agreement, the Parties  may choose to mutually agree (with each Party exercising its sole discretion  in such matters) to amend this definition of VR1 Related Patent Rights to include  additional Patents or patent claims including those which assert an earliest  priority date no later than twelve (12) months after the expiration of the Program  Term and are limited to research tools used in and specific to VR1 research  or uses of VR1 Modulators generally (i.e., research tools or uses that would  be applicable to all VR1 Modulators rather than to particular structural classes  of, groups of, or individual chemical compounds). Any such amendment shall be  only by a written instrument duly-executed by both Parties.

**1.67**The  following terms have the meanings set forth in the corresponding Sections of  this Agreement:

| **TERM**                                          | **SECTION**      |
|---------------------------------------------------|------------------|
| **"AAA"**                               | **11.9(c)**      |
| **"Average        Full Royalty Rate'**       | **6.7(b)**       |
| **"Claim"**                             | **10.1**         |
| **"Development        Plan"**           | **4.2(c)**       |
| **"Exclusivity        Period"**         | **3.5(a)**       |
| **"Indemnified        Party"**          | **10.4**         |
| **"Indemnifying        Party"**         | **10.4**         |
| **"Initital        Term"**              | **2.1(c)**       |
| **"Joint        Inventions"**           | **8.1**          |
| **"Loss"**                              | **10.1**         |
| **"MERCK"**                             | **Introduction** |
| **"MSD        Group"**                  | **10.2**         |
| **"MSD        Inventions"**             | **8.1**          |
| **MSD        Series"**                       | **2.8(a)**       |
| **"NEUROGEN        Group"**             | **10.3**         |
| **"NEUROGEN        Inventions"**        | **8.1**          |
| **"NEUROGEN        Series"**            | **2.8(a)**       |
| **"New        MSD VR1 Modulator"**      | **3.5(b)**       |
| **"New        NEUROGEN VR1 Modulator"** | **3.5(c)**       |
| **"Patent        Term Extensions"**     | **8.6**          |
| **"Payment        Report"**             | **6.6**          |
| **"PDT"**                               | **4.3**          |
| **"Program        Term"**               | **2.1(c)**       |
| **"Provider        Lock-Up Period"**    | **2.8(c)(ii)**   |
| **"Providing        Party"**            | **2.8(a)**       |
| **"Receiver        Lock-Up Period"**    | **2.8(c)(i)**    |
| **"Receiving        Party"**            | **2.8(a)**       |
| **"Research        Milestone"**         | **6.4(a)**       |
| **"Research        Plan"**              | **2.1(d)**       |
| **"Retained        Compound"**          | **9.2(b)(i)(A)** |
| **"Royalties"**                         | **6.5(a)**       |
| **"Royalty        Term"**               | **6.5(b)**       |

**1.68 Interpretation.**

- Whenever any provision    of this Agreement uses the term "including" (or "includes"),    such term shall be deemed to mean "including without limitation"    and "including but not limited to" (or "includes without    limitations" and "includes but is not limited to") regardless    of whether the words "without limitation" or "but not limited    to" actually follow the term "including" (or "includes");

- "Herein,"    "hereby," "hereunder," "hereof" and other    equivalent words shall refer to this Agreement in its entirety and not solely    to the particular portion of this Agreement in which any such word is used;

-  All definitions set    forth herein shall be deemed applicable whether the words defined are used    herein in the singular or the plural;

- Wherever used herein,    any pronoun or pronouns shall be deemed to include both the singular and plural    and to cover all genders;

- The recitals set forth    at the start of this Agreement, along with the Attachments to this Agreement,    and the terms and conditions incorporated in such recitals and Attachments    shall be deemed integral parts of this Agreement and all references in this    Agreement to this Agreement shall encompass such recitals and Attachments    and the terms and conditions incorporated in such recitals and Attachments;    *provided*, that in the event of any conflict between the terms and    conditions of this Agreement and any terms and conditions set forth in the    recitals or Attachments, the terms of this Agreement shall control;

- In the event of any    conflict between the terms and conditions of this Agreement and any terms    and conditions that may be set forth on any order, invoice, verbal agreement    or otherwise, the terms and conditions of this Agreement shall govern;

- The Agreement shall    be construed as if both Parties drafted it jointly, and shall not be construed    against either Party as principal drafter;

- Unless otherwise provided,    all references to Sections, Articles and Attachments in this Agreement are    to Sections, Articles and Attachments of and to this Agreement;

- All references to days,    months, quarters or years are references to calendar days, calendar months,    calendar quarters or calendar years;

-  Any reference to any    federal, national, state, local or foreign statute or law shall be deemed    to also refer to all rules and regulations promulgated thereunder, unless    the context requires otherwise; and

-  Wherever used, the    word "shall" and the word "will" are each understood    to be imperative or mandatory in nature and are interchangeable with one another.

**Article II RESEARCH PROGRAM**

**2.1 General.**

- The Parties hereby agree    to establish and conduct the Program in accordance with the Research Plan    and with the terms of this Agreement with the goal of identifying and discovering    VR1 Modulators that meet the Active Compound Criteria and can be developed    into Products.

- NEUROGEN and MSD shall    conduct the Program in good scientific manner, and in compliance in all material    respects of applicable laws, rules and regulations and, where useful or necessary,    GLP. 

- The Program shall commence    on the Effective Date, and continue until the date that is [          ]* from the Effective    Date (the "**Initial Term**"), unless earlier terminated    in accordance with Article IX hereof, and may be extended by MSD for up to    [          ]* upon at least ninety (90) days prior written notice (the Initial Term    and any extensions thereof referred to as the "**Program Term**");    *provided* that the Parties have, within forty-five (45) days of such    notice, finalized a written Research Plan that is reasonably agreeable to    each Party, and *provided further*that MSD shall fund all FTEs during    such extension, including no fewer than [          ]* FTEs in any year and no greater    than the maximum number of NEUROGEN FTEs funded by MSD during any year of    the Initial Term. 

-  Set forth on Attachment    2.1 is an initial overview of the Program, which includes the goals and objectives    for the Program during the Initial Term (the "**Research Plan**").    Within thirty (30) days of the Execution Date, the Parties shall prepare a    more detailed research plan setting forth the objectives, planned tasks and    resource allocations to be undertaken during the twelve (12) months following    the Effective Date and such shall be incorporated into the Research Plan.    The JRC may amend the Research Plan from time to time; *provided*,    that such amended Research Plan must be in writing and signed by an authorized    representative of each Party.

- NEUROGEN and MSD shall    be entitled to utilize the services of Third Parties to perform their respective    Program activities only upon the prior written consent of the other Party    or as specifically set forth in Attachment 2.1. Notwithstanding any    such consent, each Party shall remain at all times fully liable for its respective    responsibilities under the Program.

**2.2 FTE Commitments and Funding.**

- During the Initial Term,    the Parties shall commit such of their resources as may be required to diligently    achieve the objectives set forth in the Research Plan; *provided* that    NEUROGEN shall not be required to commit more FTE resources than that number    MSD is funding as described in this Section 2.2.
- For the first year in    the Program Term, NEUROGEN shall commit [          ]* FTEs to the Program. The JRC    may modify the number of FTEs performing work under the Program in the [          ]*    of the Initial Term;*provided*that (i) the Parties agree to such    modification in writing sixty (60) days prior to the end of the then current    year, and (ii) the number of NEUROGEN FTEs assigned to the Program shall under    no circumstance be less than [          ]* per year. MSD may request an increase in    the number of NEUROGEN FTEs above [          ]* per year in any year; *provided*,    that any increase above [          ]* FTEs requires NEUROGEN’s prior consent.    During the Program Term, the JRC may amend the Research Plan to adjust the    scientific mix of NEUROGEN FTEs, subject to the following: (A) [          ]*, and (B)    [          ]*.
- MSD will reimburse NEUROGEN    for any payments made during the Program Term to Third Party vendors for goods    or services other than routine laboratory materials and related supplies required    by the Research Plan; *provided* that MSD has approved such payments    in writing in advance of any such payments.
- During the Program Term,    MSD shall fund each NEUROGEN FTE at the Annual FTE Rate in equal installments    in advance of each quarter; *provided* that the payments for the first    quarter and the last quarter of the Program Term shall be made on a pro rata    basis and payment for the first quarter shall be made within thirty (30) days    of the Effective Date. Each quarter NEUROGEN shall provide MSD with a report    of the hours worked and the work performed on the Program by each NEUROGEN    FTE on a monthly basis. If for any month during the Program Term the number    of NEUROGEN FTEs performing work in the Program falls below the number established    by the JRC pursuant to the terms of this Agreement, NEUROGEN will, within    fifteen (15) days of the end of such month notify MSD in writing of such discrepancy.    NEUROGEN will attempt to correct for any such shortfalls during the following    month. If NEUROGEN fails, in any quarter, to provide the specified aggregate    number of FTEs, NEUROGEN will, within fifteen (15) days of the end of such    quarter notify MSD in writing of such discrepancy and MSD will be entitled    to elect, within twenty (20) days of such notice from NEUROGEN, in addition    to any other rights that it has under this Agreement, to reduce the Program    funding payment for the next quarter as appropriate. The Parties shall ensure:    (i) by confidentiality agreement that all FTEs and all other of their personnel,    employees, and agents involved in the Program comply with the confidentiality    provisions of this Agreement; and (ii) that each FTE that works on the Program    is qualified by appropriate experience and qualifications to perform the Program    work assigned to such FTE in a capable and professional manner. 
- During the Program Term,    each Party may arrange for its employees to visit (at such visiting Party’s    sole expense) the other Party at such other Party’s offices and laboratories    during normal business hours and upon reasonable advance notice to discuss    Program activities. Each Party shall reasonably cooperate in making arrangements    for the other Party to conduct such visits.
- All NEUROGEN FTEs funded    by MSD under this Agreement and all NEUROGEN employees, agents and representatives    working on the Program shall carry out Program activities in accordance with    Attachment 2.1 and the terms and conditions of this Agreement.

**2.3 Program Commitment.**  During the Program Term, each Party shall apply Commercially Reasonable Efforts  in the performance of its activities under the Program as specified in the Research  Plan. MSD shall be responsible for all its costs incurred in connection with  its activities under the Research Plan. If MSD elects, pursuant to Section 2.2(d),  to reduce payment to NEUROGEN in a quarter based upon NEUROGEN’s failure  in a previous quarter to provide the number of FTEs established by the JRC,  then such reduction shall in no way imply any waiver of or reduction in NEUROGEN’s  obligations to exert Commercially Reasonable Efforts.

**2.4 Project Leaders.**  The project leaders for the Program (the "Project Leaders") shall  be designated in the Research Plan; *provided*, that each Party shall  have the right to designate its respective replacement Project Leader upon prior  written notice to the other Party. All Project Leaders shall have appropriate  credentials, technical skills and expertise to direct and supervise the Program  and all work assignments to be performed by NEUROGEN and MSD shall be carried  out under the direction and supervision of the Project Leaders noted above.  The Project Leaders shall communicate on a regular basis regarding the Program  and shall promptly notify the other Party upon identification of any and all  VR1 Modulators or Active Compounds; *provided*, that the Project Leaders  shall disclose Information with respect to VR1 Modulators that do not meet the  Active Compound Criteria as set forth in Section 2.7(c). 

**2.5 Joint Research  Committee.**

- The Program shall be    conducted under the direction of a Joint Research Committee ("JRC"),    which shall consist of six (6) voting members, with each Party having the    right to designate three (3) of such JRC members. Each Party shall appoint    its respective representatives to the JRC from time to time, and may substitute    one or more of its representatives, in its sole discretion, effective upon    notice to the other Party of such change. Each of these representatives shall    have appropriate technical credentials, experience and knowledge, and shall    maintain ongoing familiarity with the Program. The JRC shall be chaired on    a yearly alternating basis, with one voting member of MSD serving as the JRC    chair for the first twelve (12) months of the Program Term. The JRC chair    shall have no voting rights or decision-making authority over that vested    in any JRC member. The JRC chair shall have responsibility for calling JRC    meetings, circulating agendas, and performing administrative tasks required    to assure efficient operation of the JRC. 
- Each Party is entitled,    subject to the prior written consent of the other Party, such consent not    to be unreasonably withheld, to invite non-voting representatives or consultants    to attend JRC meetings, subject to compliance by such representatives with    the confidentiality safeguards of Article V, and any additional confidentiality    or other requirements as the JRC may reasonably require for attendance. 
- The JRC shall perform    the following functions:     (i) determine the overall strategy for the Program;     (ii) formulate and adjust the Research Plan, and the Active Compound Criteria    (the initial form of which appears in Attachment 1.1) as needed, including    but not limited to allocation of FTEs and other Program resources;     (iii) monitor and assess the progress of the Program, the Program’s    research results, and oversee the exchange of Information between the Parties;        (iv) determine the number of NEUROGEN FTEs dedicated to the Program, and how    such FTEs will be allocated, consistent with the provisions of Section 2.2;        (v) consider issues of priority in the Program, and review and advise on any    budgetary and economic matters relating to the Program;     (vi) arrange for the screening of compounds to determine if they are VR1 Modulators;  (vii) evaluate whether      VR1 Modulators meet the Active Compound Criteria;  (viii) establish criteria      for Active Compounds to advance into the primary in vivo assays;      (ix) as appropriate, nominate Active Compounds for consideration by the      PDRC as a PCC; and      (x) record the achievement of the Research Milestone set forth in Section      6.4(a). 

Decisions of the JRC shall  be by unanimous consent. If the JRC cannot or does not, after good faith efforts,  reach agreement on an issue, then the disputed matter shall be referred to the  Chief Executive Officer of NEUROGEN and to an Executive Vice President of MSD  or MERCK, who shall promptly meet and endeavor to come to an agreement in a  timely manner. If such executive mediation does not resolve the issue in dispute,  and the issue is not excluded under subsections (i) through (v) of the last  sentence of this paragraph, then the final decision shall be made by the President  of Research & Development for MERCK. In making such final decision, the  President of Research & Development for MERCK shall consider any comments  from NEUROGEN, and such decision shall be consistent with the general goals  of the Program. Notwithstanding the foregoing, the President of Research &  Development for MERCK is not entitled to [          ]*. 

**2.6 Meetings, Expenses,  Minutes and JRC Term.**

- During the Program Term,    the JRC shall meet at least quarterly to monitor progress and provide direction    to the Program, with the location for such meetings alternating between NEUROGEN    and MSD facilities (or such other locations as is determined by the JRC).    Alternatively, the JRC may meet by means of teleconference, videoconference    or other similar communications equipment. The first JRC meeting will occur    no later than forty-five (45) days after the Effective Date. 
- Each Party shall bear    its own expenses related to JRC meeting attendance. 
- The JRC chair shall    designate a recording secretary to prepare written minutes of each JRC meeting    and written records of all JRC decisions, whether made at a JRC meeting or    otherwise. Such minutes shall provide a description, in reasonable detail,    of the discussions at the meeting and a list of any actions, decisions, or    determinations approved by the JRC. The JRC chair will distribute draft minutes    to all JRC members within ten (10) business days after each meeting for comments    and revisions. Minutes will be finalized no later than twenty (20) business    days after the meeting to which the minutes pertain. Finalized minutes will    be distributed to the Parties after approval of the drafts by the JRC chair.    
- The JRC shall exist    until the expiration of the twelve (12) month period following the termination    or expiration of the Program Term; *provided however*, that, during    the twelve (12) month period following the termination or expiration of the    Program Term, the JRC shall only exist to assess the Program’s research    results and nominate Active Compounds for designation as PCCs pursuant to    this Agreement.

**2.7 Research Reports  and Records.**

- **Records**.    NEUROGEN and MSD and their Affiliates each shall maintain records that shall    be complete and accurate and shall fully and properly reflect all work done    and results achieved in the performance of the Program in sufficient detail    and in good scientific manner appropriate for patent and regulatory purposes.    
- **Inspection    of Records.** During the Program Term, each Party shall have the right,    during normal business hours and upon reasonable notice no more than once    every six (6) months, to inspect the records of the other party referenced    in Section 2.7(a). The inspecting party shall maintain such records and the    Information disclosed therein in confidence in accordance with Article V.    All inspections and visits hereunder shall be conducted in a manner so as    not to disrupt such other party’s business or cause any disclosure of    its Information other than as provided for in this Agreement. 
- **Research Reports.**    Each Party will keep the other Party reasonably apprised of its and its Affiliate’s    activities performed under the Program. In particular, prior to each JRC meeting,    each Party will prepare and distribute to all members of the JRC (no later    than five (5) business days prior to each such JRC meeting) a brief written    summary report setting forth the results and the progress of performance of    the Program since the last report. Nothing herein shall require either Party    to disclose Information received from a Third Party that remains subject to    bona fide confidentiality obligations to such Third Party. Subject to Section    2.8, with respect to compounds which are not Unavailable Compounds and which    are synthesized and/or invented by either Party outside of the course of performing    the Program, the synthesizing/inventing Party shall disclose to the other    Party the chemical structure and VR1 activity of all such compounds which    are Active Compounds. Subject to Section 2.8, with respect to compounds which    are not Unavailable Compounds and which are synthesized and/or invented by    either Party in the course of performing the Program or by MSD-funded NEUROGEN    FTEs, the synthesizing/inventing Party shall disclose to the other Party the    chemical structure and VR1 activity of all such compounds regardless of whether    they are VR1 Modulators or meet the Active Compound Criteria. Notwithstanding    the foregoing, in no event shall either Party be required to disclose to the    other Party any Information related to (i) any VR1 Modulator that is an Unavailable    Compound or (ii) any other compound that is synthesized and/or invented by    either Party outside of the course of performing the Program and is not a    VR1 Modulator, *provided, however*, that if the Parties have a dispute    as to whether or not a compound is a VR1 Modulator or whether a VR1 Modulator    is an Unavailable Compound, then the issue shall be submitted promptly to    a neutral Third Party, agreeable to both Parties, who shall make a final,    binding determination as to whether or not the compound is a VR1 Modulator    or whether the VR1 Modulator is an Unavailable Compound. 

**2.8 Rights to  Compounds.**The Parties have each identified compounds outside of the  Program and contemplate that each of them [          ]*. In addition, all compounds which  are invented and/or synthesized by a Party in the course of performing the Program  or by MSD-funded NEUROGEN FTEs shall be made available for testing for purposes  of this Agreement to determine whether they are VR1 Modulators. In respect of  such compounds described in the prior two (2) sentences, the Parties agree as  follows: 

- In the event that one    Party [          ]* discloses Information [          ]*, the other Party [          ]* will use such    Information [          ]* required by the Research Plan and within the scope of a [              ]*. All compounds synthesized by the [          ]* shall be referred to herein as a    [          ]* or a [          ]*.
- Should the [          ]* that    proposed or ongoing synthesis by the Receiving Party is likely to result in    the [          ]* may so inform the JRC and such [          ]* shall then be transferred to    the [          ]* If the Parties do not agree on the issue of whether the [          ]*, then    the issue shall be submitted promptly to a [          ]*. 
- [          ]*, then:  (i) With regard to      the [          ]*, during the Program Term and for [          ]*, without regard to any early      termination of the Program [          ]* may not use any compound within the [          ]*      in either case for any purpose whatsoever other than:  
(A) for [          ]*, or

(B) for [          ]*, or

(C) for other [          ]*,        but then only if the [          ]*, other than as a result of a breach of confidentiality        by the [          ]*. In particular, except to the extent agreed to in writing        by the [          ]*.
   (ii) With regard to      the [          ]*, during a period that is the [          ]*, in either case for any purpose      whatsoever other than:  
(A) for [          ]*, or

(B) for [          ]*, or

(C) for any other        [          ]* but only if the [          ]*, other than as a result of a breach of confidentiality        by the [          ]*.
 

To the extent that a Party  designates compounds as [          ]*.**2.9 Use of Compounds Outside the Program and Development Plan.**

-  Subject to Section    2.9(b) below, with respect to compound(s) within the scope of [          ]*. 
- During the term of this    Agreement, [          ]* shall not be used for any purpose other than those activities    permitted under the terms of this Agreement;*provided that*, [          ]*.

**2.10 Confidential  Information and Non-VR1 Programs.** Each of the Parties further agree  that it will not use any Information provided to it by the other Party for any  purpose other than as permitted under the terms of this Agreement.

**Article III LICENSES, EXCLUSIVITY AND DILIGENCE****3.1 Reciprocal Research License.**

- For the duration of    the Program Term, NEUROGEN hereby grants to MSD the exclusive (except as to    NEUROGEN) worldwide license, with the right to sublicense to Affiliates, under    the NEUROGEN Technology, to conduct the Program in accordance with the Research    Plan.
- For the duration of    the Program Term, MSD grants to NEUROGEN the exclusive (except as to MSD)    worldwide license, with the right to sublicense to Affiliates, under the MSD    Technology, to conduct the Program in accordance with the Research Plan.
- The licenses granted    pursuant to this Section 3.1 include the right of each licensee to use its    Affiliates in exercising such rights and carrying out its obligations under    this Agreement; *provided* that in the event any such Affiliate ceases    to meet the definition of an Affiliate (whether due to the transfer or sale    of all or substantially all of the assets or stock of such Affiliate or otherwise)    then such right with respect to such Affiliate shall terminate.

**3.2 Development  and Commercialization License Grant to MSD.**Subject to the obligations,  conditions, and termination rights set forth herein, NEUROGEN hereby grants  to MSD the sole and exclusive worldwide license under the NEUROGEN Technology  to develop, make, have made, use, import, offer for sale and sell Collaboration  Compounds and Products in the Territory. MSD may grant sublicenses under this  Section 3.2 in accordance with Section 4.8.

**3.3 Non-Exclusive  License Grant**. In the event the developing, making, having made, use,  offer for sale, sale or import by MSD, or MSD’s Affiliates or Sublicensees  of Collaboration Compound(s) or Product(s) would infringe, during the term of  this Agreement, a claim of an issued patent which NEUROGEN owns or has the rights  to license and which patent is not covered by the grant in Sections 3.1 or 3.2,  NEUROGEN hereby grants to MSD, to the extent NEUROGEN is legally able to do  so, a non-exclusive, sublicensable, royalty-free license in the Territory under  such issued patent solely for MSD to develop, make, have made, use, sell, offer  for sale or import Collaboration Compound(s) or Product(s) in the Territory.

**3.4 Retained Rights.**  For the avoidance of doubt and subject to the provisions of Section 2.8, the  Parties understand and agree that each of NEUROGEN, MSD and MERCK retains the  right to [          ]*. 

**3.5 Exclusivity.**

- During the Program Term,    neither Party nor its Affiliates shall conduct any research, development,    manufacturing or commercialization activities, alone or with Third Parties,    within the Field other than those activities specified by this Agreement or    by the JRC in writing pursuant hereto (as extended pursuant to the next sentence,    the "Exclusivity Period"). MSD may extend the Exclusivity Period    for two [          ]*: (i) within [          ]* days of the conclusion of the Program Term [              ]*, and (ii) within thirty (30) days of the one-year anniversary of the conclusion    of the Program Term with regard to the second twelve-month extension. For    the avoidance of doubt, the restrictions on the activities of the Parties    in the first sentence shall continue to apply to both Parties and their Affiliates    for the duration of the Exclusivity Period, including any extensions.
- During the period commencing    on the Effective Date and concluding on the later of: (1) the expiration or    termination of the Exclusivity Period or (2) [          ]*, or (ii) terminate this    Agreement without cause pursuant to Section 9.4.
- During the period commencing    on the Effective Date and concluding on the later of: (1) the expiration or    termination of the Exclusivity Period or (2) [          ]*.

**3.6 Commercially  Reasonable Efforts.** If either Party believes that the other Party has  failed to apply Commercially Reasonable Efforts with respect to any of its obligations  as required under this Agreement, it will notify such Party in writing. The  Parties shall then submit the matter to executive mediation under Section 11.9(a)  for resolution. 

**Article IV DEVELOPMENT, MANUFACTURING AND COMMERCIALIZATION**

**4.1 Selection of  Compounds as PCCs.** The JRC shall nominate Active Compounds for consideration  by the PDRC for further development. Subject to its responsibilities to use  Commercially Reasonable Efforts to develop and commercialize Collaboration Compounds  and Products, as further described in this Article IV below, MSD shall have  the exclusive right to select such compounds for further development as PCCs.  MSD shall notify NEUROGEN in writing of its acceptance of a compound as a PCC  within fifteen (15) business days of such acceptance or selection. 

**4.2 Development  and Regulatory Matters.**

- **Responsibility    for Development.** MSD shall have responsibility for the development    of Collaboration Compounds and Products within the scope of the rights granted    to it hereunder. MSD shall use Commercially Reasonable Efforts to develop    and commercialize Collaboration Compounds for each therapeutic Indication    which is scientifically and commercially reasonable, which shall include Pain    and urinary incontinence if such Indications are scientifically and commercially    reasonable.
- **NEUROGEN FTEs.**    Upon the mutual written agreement of both Parties, NEUROGEN may make available    FTEs to assist MSD in any development activities conducted pursuant to this    Agreement. If MSD elects to utilize NEUROGEN FTEs in development activities,    then MSD agrees to fund such FTE participation, quarterly in advance, at the    Annual FTE Rate, and shall reimburse NEUROGEN for any external costs incurred    by NEUROGEN in the performance of activities conducted pursuant to the Development    Plan and upon receipt of an invoice from NEUROGEN; *provided*, that    MSD has approved such costs in writing in advance of NEUROGEN incurring such    external costs. 
- **Development    Plan.**As soon as practicable following selection of a Collaboration    Compound for preclinical development by MSD, MSD shall, in accordance with    its regular business practices, develop a reasonably detailed master development    plan, which shall be attached hereto as Attachment 4.2 (as amended by MSD    from time to time, the "Development Plan"). MSD shall have the    right to amend the Development Plan so long as MSD uses Commercially Reasonable    Efforts in making such amendment. MSD shall promptly provide NEUROGEN with    a copy of any such amended Development Plan. MSD shall prepare and include    in the Development Plan a summary clinical development plan for significant    Indications, as applicable, suitable to produce a global registration package.    MSD shall conduct, at its sole expense, and as appropriate, activities relating    to the formulation, process and clinical development of the Product and obtaining    Regulatory Approvals in accordance with the Development Plan, including, as    appropriate, activities relating to preclinical testing, clinical studies,    manufacturing processes, formulation, quality assurance, quality control,    packaging and regulatory affairs in the Territory. 
- **Clinical Studies**.    Using Commercially Reasonable Efforts, MSD shall conduct the pre-clinical    and clinical studies, at its own cost and expense, necessary for Regulatory    Approval of the Products in the Territory (including any required Phase IV    Clinical Trials). MSD shall have the discretion and authority to make all    decisions with respect to all protocols and all other matters relating to    development of the Products. 
- **Regulatory Approvals.**    MSD shall use Commercially Reasonable Efforts to obtain Regulatory Approvals    for the Collaboration Compounds or Products in the Territory. If and when    Regulatory Approvals are secured, MSD shall use Commercially Reasonable Efforts    to maintain and renew the Regulatory Approvals in the Territory. To the extent    reasonably practicable, MSD shall notify NEUROGEN of any material meeting    with any Regulatory Authority for a Collaboration Compound or Product and,    at MSD’s discretion, [          ]*. MSD shall give NEUROGEN reasonable access    at MSD’s or MERCK’s premises to a copy of the NDA (other than    the Chemistry, Manufacturing and Controls section of the NDA and patient-identifiable    information) submitted by MSD to the FDA or EMEA and to Regulatory Approvals    received by MSD from the FDA or EMEA.
- **Adverse Event    Reporting.** MSD will be responsible for reporting Adverse Events to    the appropriate Regulatory Authorities in the countries in the Territory,    in accordance with the appropriate laws and regulations of the relevant countries.    MSD will ensure that its Affiliates and Sublicensees comply with all such    reporting obligations.

**4.3 MERCK Product  Development Team**. Only to the extent applicable to Collaboration Compounds  and Products: (a) [          ]*.

**4.4 Commercialization.**

- **Marketing Efforts    in the Territory.** Upon receipt of all Regulatory Approvals, MSD shall    have sole responsibility for and shall use Commercially Reasonable Efforts    to commence marketing of, and to promote, market, sell and commercialize thereafter,    the Products in the Territory. 
- **MSD Post-Registration    Studies.** To the extent that MSD performs Phase IV Clinical Trials    or other clinical studies of the Product following receipt of Regulatory Approval    for the Product ("**Post-Registration Studies**"),    MSD shall provide to NEUROGEN copies of final protocols for such studies in    a reasonably timely manner; *provided*, that NEUROGEN shall have no    right to comment on such protocols. MSD will bear the cost of all Post-Registration    Studies. For the avoidance of doubt, Post-Registration Studies shall include    any Phase IV or other clinical studies required as a condition to, or for    the maintenance of, Regulatory Approval of the Product in the Territory. 
- **Progress Reports.**    MSD shall provide to NEUROGEN, no less frequently than [          ]*, summary progress    reports prepared in accordance with MSD’s regular business practices    to keep NEUROGEN informed of the progress of commercialization activities    with respect to the Collaboration Compounds and Products. 

**4.5 Manufacturing.**

- **Responsibility    for Manufacturing Development.**MSD shall use Commercially Reasonable    Efforts to develop or have developed a suitable formulation of Products for    commercial sale worldwide and scale-up and validation procedures for the manufacture    of commercial quantities of Products and conduct such other manufacturing    development work as is reasonably necessary to manufacture and package commercial    quantities of Products, including formulation and stability development and    process validation. 
- **Supply in the    Territory.** MSD shall have sole responsibility to manufacture or have    manufactured by an Affiliate or a Third Party the Products for the sale in    the Territory and shall use Commercially Reasonable Efforts in doing so. 

**4.6 Final Decision-Making  Authority.** Subject to its obligation to use Commercially Reasonable  Efforts and compliance with all other terms of this Agreement, MSD shall have  final decision-making authority on all issues relating to the development, regulatory  approval, commercialization and manufacturing of Collaboration Compounds and  Products. In addition, nothing set forth in this Article IV shall limit MSD’s  ability to act in a timely fashion to ensure that the progress of development,  regulatory approval, commercialization and manufacturing of Collaboration Compounds  and Products is not impeded.

**4.7 Safety Issues.**  The Parties acknowledge that the obligations of MSD to use Commercially Reasonable  Efforts with respect to the development and/or commercialization of any Collaboration  Compound or Product under this Agreement may reflect the consideration of adverse  conditions or events relating to the safety of the Collaboration Compound or  Product in determining the scientific merit and commercial potential of such  compound. NEUROGEN acknowledges that, in circumstances where concerns arise  in relation to adverse conditions or events relating to the safety of the Collaboration  Compound or Product, [          ]*. If in MSD’s reasonable opinion such condition  or event arises, MSD shall inform NEUROGEN and will provide an explanation for  any decision to delay or to suspend the development or commercialization of  the Collaboration Compound or Product. 

**4.8 Licenses/Sublicenses.**  MSD may not license its responsibilities under this Article IV nor grant sublicenses  under the licenses granted under Section 3.2 without the prior written consent  of NEUROGEN, such consent not to be unreasonably withheld, except as follows:

- MSD may grant sublicenses    under any of its rights to any of its Affiliates for so long as such entity    remains an Affiliate of MSD;
- MSD may use CROs and    other Third Parties which it reasonably believes are competent to perform    portions of the pre-clinical and clinical development of the Products to the    extent consistent with its normal business practices;
- MSD may engage Third    Parties to assist in the physical distribution of the Products to the extent    consistent with its normal business practices;
- MSD may use Third Parties,    including contract manufacturers, which it reasonably believes are competent    to manufacture, label and package the Products;
- MSD may grant licenses    or sublicenses to sell the Products to local distributors in any country selling    its other pharmaceutical products in such country in accordance with MSD’s    normal business practices;

*provided*, that  in each such case, (i) MSD shall be liable to NEUROGEN as if MSD is exercising  such rights itself under this Agreement, (ii) the licensee or Sublicensee will  not be permitted to grant further sublicenses, (iii) MSD shall provide reasonable  assurances that its licensees or Sublicensees are obligated to comply with confidentiality,  indemnity, reporting, and audit rights comparable to those set forth in this  Agreement. MSD shall promptly provide notice of each right granted pursuant  to this Section 4.8 to NEUROGEN.

**Article V CONFIDENTIALITY AND PUBLICATION****5.1 Nondisclosure Obligations.** All Information disclosed by  one Party to the other under this Agreement shall be maintained in confidence  by the receiving Party and, without the prior written consent of the disclosing  Party, shall not be disclosed to any non-party or used for any purpose except  as expressly permitted in this Agreement including this Article V. This nondisclosure  and non-use obligation shall not apply to Information that: 

- is known by the receiving    Party at the time of its receipt, as documented by business records, and not    through a prior disclosure by the disclosing Party; 
- is properly in the public    domain; 
- is subsequently disclosed    to the receiving Party by a Third Party who may lawfully do so and is not    under an obligation of confidentiality to the disclosing Party; or 
- is developed by the    receiving Party independently of Information received from the disclosing    Party, as documented by business records. 

**5.2 Permitted Disclosure  of Information.** Notwithstanding anything to the contrary contained  in Section 5.1, a Party receiving Information of the other Party may disclose  such Information: 

- required to be submitted    by the recipient to governmental or other Regulatory Authorities to obtain    patents (including disclosure to U.S. and foreign patent offices and patent    counsel for purposes of patent prosecution) or to facilitate the issuance    of any necessary registrations or filings in connection with conducting clinical    trials for a Product, or developing, manufacturing or commercializing a Product,    *provided* that such disclosure may be only to the extent reasonably    necessary to obtain patents or authorizations and that reasonable steps shall    be taken to assure confidential treatment of such Information; 
- by either Party to its    permitted Sublicensees, agents, consultants, Affiliates and/or other Third    Parties to the extent reasonably necessary for the research and development,    manufacturing, registration and/or marketing of a Product (or for such parties    to determine their interest in performing such activities) in accordance with    this Agreement on the condition that such disclosure may be only to the extent    reasonably necessary for such activities and that such Third Parties agree    to be bound by the confidentiality and non-use obligations contained within    this Agreement; *provided* that the term of confidentiality for such    Third Parties shall be no less than seven (7) years; or 
- if required to be disclosed    by law or court order; *provided* that notice is promptly delivered    to the other Party in order to provide an opportunity to challenge or limit    the disclosure obligation; and*provided further* the Party required    to disclose cooperates with the other Party in limiting disclosure to the    extent so required. Information that is disclosed by judicial or administrative    process shall remain otherwise subject to the confidentiality and non-use    provisions of Sections 5.1 and 5.2 and the Party disclosing Information pursuant    to law or court order shall take all steps reasonably necessary, including    obtaining an order of confidentiality, to ensure the continued confidential    treatment of such Information. 

Any combination of features  or disclosures as set forth in Sections 5.1 and 5.2 shall not be deemed to fall  within the foregoing exclusions merely because individual features are published  or available to the general public or in the rightful possession of the receiving  Party unless the combination itself and principle of operation are published  or available to the general public or in the rightful possession of the receiving  Party.**5.3 Publication.** MSD and NEUROGEN each acknowledge the other’s  interest in publishing its results to obtain recognition within the scientific  community and to advance the state of scientific knowledge. Each Party also  recognizes the mutual interest in obtaining valid patent protection and in protecting  business interests and trade secret Information. Consequently, except for disclosures  permitted pursuant to Sections 5.1 and 5.2, either Party, its employees, agents  or consultants wishing to make a publication disclosing any of the MSD Know-How  or NEUROGEN Know-How shall deliver to the other Party a copy of the proposed  written publication at least sixty (60) days prior to submission for publication  and a copy of the proposed outline of an oral disclosure or presentation at  least forty-five (45) days prior to presentation. The reviewing Party shall  have the right to: 

- propose modifications    to the publication for patent reasons, trade secret reasons or business reasons;    or 
- request a reasonable    delay in publication or presentation in order to protect MSD Know-How and/or    NEUROGEN Know-How, as the case may be, and patentable Information. If the    reviewing Party requests a delay, the publishing Party shall delay submission    or presentation for a period of at least sixty (60) days to enable patent    applications protecting each Party’s rights in such MSD Know-How or    NEUROGEN Know-How, as the case may be, or Information to be filed in accordance    with Article VIII. Upon expiration of such sixty (60) day period, the publishing    or presenting Party shall be free to proceed with the publication or presentation.    If the reviewing Party requests modifications to the publication or presentation,    the publishing Party shall edit such publication to prevent disclosure of    trade secret or proprietary business Information prior to submission of the    publication or presentation. 

**5.4 Disclosure  of Financial and Other Terms and Matters.** Except as otherwise provided  in this Section 5.4, the Parties agree that the material terms of this Agreement  will be considered confidential Information of both Parties and neither Party  may disclose the terms of this Agreement. Notwithstanding the foregoing, (a)  either Party may disclose such terms as are required to be disclosed by applicable  laws, regulations or stock market or stock exchange rules of a governing authority  such as the U.S. Securities and Exchange Commission, the NASDAQ or the NYSE  [          ]*; *provided*, to the extent reasonably practicable, such Party shall  provide the other Party with a copy of the proposed text of such statements  or disclosure (including any exhibits containing this Agreement) sufficiently  in advance of the scheduled release or publication thereof to afford such other  Party a reasonable opportunity to review and comment upon the proposed text  (including redacted versions of this Agreement), (b) either Party shall have  the further right to disclose the material financial terms of this Agreement  under a confidentiality obligation no less protective than those set forth in  this Agreement, to any bona fide [          ]*, and (c) either Party shall have the right,  upon the prior written notice to the other Party (to the extent such prior notice  is reasonably practicable), to disclose Information regarding [          ]* or to matters  covered by the [          ]* to the extent, but only to the extent, such Party [          ]*;  *provided*, to the extent disclosure is otherwise permitted pursuant  to this Section 5.4(c), the Parties shall use good faith efforts to limit the  disclosure of Information that could reasonably be considered to be enabling  to Third Parties engaged in research, development or commercialization activities  which may be competitive with a Party’s activities. Each Party shall use  good faith efforts to have any disclosure made relating to the filing of this  Agreement, including the terms of this Agreement, treated as confidential by  the U.S. Securities and Exchange Commission, NASDAQ, NYSE, or any other stock  market or stock exchange on which securities issued by MERCK or NEUROGEN may  be issued. Promptly after the Execution Date, the Parties will release a mutually  agreeable press release. 

**5.5 Return of Confidential  Information.**Upon termination of this Agreement by MSD pursuant to  Section 9.4 hereof, or upon termination of this Agreement by either Party pursuant  to Sections 9.2 or 9.3 hereof, each Party hereto and its Affiliates will return  all Information of the other Party in their possession to the other Party; *provided*,  that each Party may retain: (a) a single archival copy of the Information of  the other Party solely for the purpose of determining the extent of disclosure  of Information hereunder and assuring compliance with the surviving provisions  of this Agreement; (b) any portion of the Information of the other Party which  is contained in laboratory notebooks; and (c) any portion of the Information  of the other Party which a Party is required by applicable law to retain.

**Article VI EQUITY PURCHASE, PAYMENTS, ROYALTIES AND REPORTS****6.1 Equity Purchase.** Pursuant to the terms and conditions of  the Stock Purchase Agreement between MSD and NEUROGEN dated as of the Execution  Date, MSD shall purchase $15 million of NEUROGEN common stock. **6.2 License Fees.** In consideration for the licenses granted  upon the terms and conditions contained herein, (a) within fifteen (15) days  of the Effective Date, MSD shall pay to NEUROGEN $15 million, and (b) on the  first, second and third anniversaries of the Effective Date, MSD shall pay to  NEUROGEN [          ]*, [          ]* and [          ]*, respectively.

**6.3 Program Funding.**  In consideration for NEUROGEN’s performance of its obligations under the  Program, and subject to the terms and conditions contained in this Agreement,  MSD shall provide FTE funding as specified in Section 2.2. **6.4 Milestone Payments.**Subject to the terms and conditions  of this Agreement, MSD shall pay to NEUROGEN the non-refundable, non-creditable  milestone payments specified in this Section 6.4. 

- Research Milestone.    Within thirty (30) days of the earlier to occur of:   (i) the commencement      by MSD of IND-Enabling GLP Toxicology Studies with [          ]*, or   (ii) the designation      as a PCC by the PDRC of the first Collaboration Compound other than [          ]*      or [          ]*,  

MSD shall pay NEUROGEN  [          ]* (the "Research Milestone"). For clarity, MSD shall not owe  NEUROGEN any Research Milestone with respect to [          ]*.

-  Development Milestones.      (i) On a Collaboration      Compound-by-Collaboration Compound basis, within thirty (30) days following      the enrollment of the first subject in a Phase I Clinical Trial for any      Collaboration Compound, MSD shall pay to NEUROGEN [          ]*; *provided*      that the maximum aggregate amount MSD shall pay under this Section 6.4(b)(i)      shall be [          ]*.   (ii) On an Indication-by-Indication      basis and subject to the conditions described below, each of the following      amounts shall be payable by MSD to NEUROGEN within thirty (30) days following      the achievement of the specified event with respect to any Collaboration      Compound subject to the limitations set forth herein:   
(A) [          ]* upon enrollment        of the first subject in a Phase II Clinical Trial;

(B) [          ]* upon enrollment        of the first subject in a Phase III Clinical Trial;

(C) [          ]* upon Filing        of the first NDA with the FDA;

(D) [          ]* upon the        Filing with the EMEA if approval is sought via the centralized procedure;        or if filed pursuant to the mutual recognition procedure, then [          ]* upon        Filing in each of the United Kingdom, France, Germany, Italy and Spain;        and

(E) [          ]* upon Filing        in Japan.
  (iii) The milestones      payable under Section 6.4(b)(ii) shall be subject to the following conditions:  
(A) Each of the Section        6.4(b)(ii) milestones shall be payable for each of the following Indications,        but not for more than [          ]*, as reasonably determined by MSD in good faith.        Notwithstanding the foregoing, in the event that milestones are paid under        Section 6.4(b)(ii), if any of the [          ]*, then MSD shall pay the milestones        that were achieved for such Indications. For clarity, the maximum aggregate        amount of development milestones payable by MSD under this Section 6.4(b)        is [          ]*.

(B) If a Collaboration        Compound replaces another Collaboration Compound in development for the        same Indication, then the replacement Collaboration Compound shall be        subject to only those milestones not yet achieved by the replaced Collaboration        Compound.

(C) If the same Collaboration        Compound is developed for multiple Indications, then, so long as multiple        Indications are being pursued, the milestones payable under Section 6.4(b)(ii)        for subsequent Indications will be deferred and paid only if and when        such Collaboration Compound is approved by a Regulatory Authority for        sale as a Product in the subsequent Indication. If, during development,        a preceding Indication is abandoned but a subsequent Indication continues        to be developed, then (i) future milestones under the subsequent Indication        will no longer be subject to deferral and shall be paid when met, and        (ii) milestones previously deferred under the subsequent Indication will        revert to the status of unmet unpaid milestones within that subsequent        Indication.

(D) For the avoidance        of doubt, if an NDA Filing is made with respect to an Indication, without        conducting either a Phase II Clinical Trial or a Phase III Clinical Trial,        the milestones set forth in Sections 6.4(b)(ii)(A) and 6.4(b)(ii)(B) shall        be payable upon such NDA Filing in any country.
 
- **Approval Milestones.**  (i) **First Indication      Milestones.** Each of the following amounts will be payable by MSD      to NEUROGEN within thirty (30) days following the achievement of the event      specified below with respect to any Product:  
(A) Upon the first        NDA Approval in the US - [          ]*;

(B) Upon the first        NDA Approval in the EU if approval is sought via the centralized filing        procedure [          ]*; or, if approved independently by countries in the EU,        [          ]* for NDA Approval in each of the United Kingdom, France, Germany,        Italy and Spain; and

(C) Upon the first        NDA Approval in Japan - [          ]*.
  (ii) **Second      Indication Milestones.** In addition to the First Indication Milestones      described above, if any Product is approved for a second Indication and      such Product achieves annual Net Sales in the Territory in excess of [          ]*      (the "**Second Indication Sales Threshold**"),      then the following amounts will be payable by MSD to NEUROGEN within thirty      (30) days following the later of (x) the achievement of the Second Indication      Sales Threshold or (y) achievement of the event specified below:  
(A) Upon the Regulatory        Approval of a second Indication in the US - [          ]*;

(B) Upon the Regulatory        Approval of a second Indication in the EU if approval is sought via the        centralized filing procedure - [          ]*; or, if approved independently by        countries in the EU, [          ]* for NDA Approval in each of the United Kingdom,        France, Germany, Italy and Spain; and

(C) Upon the Regulatory        Approval of a second Indication in Japan -         [          ]*.
  (iii) Third Indication      Milestones. In addition to the First and Second Indication Milestones described      above, if any Product is approved for a third Indication and such Product      achieves annual Net Sales in the Territory in excess of [          ]* (the "Third      Indication Sales Threshold"), then the following amounts will be payable      by MSD to NEUROGEN within thirty (30) days following the later of (x) the      achievement of the Third Indication Sales Threshold or (y) achievement of      the event specified below:  
(A) Upon the Regulatory        Approval of a third Indication in the US - [          ]*;

(B) Upon the Regulatory        Approval of a third Indication in the EU if approval is sought via the        centralized filing procedure - [          ]*; or, if approved independently by        countries in the EU, [          ]* for NDA Approval in each of the United Kingdom,        France, Germany, Italy and Spain; and

(C) Upon the Regulatory        Approval of a third Indication in Japan -         [          ]*.
  (iv) For clarity, each      milestone payment under this Section 6.4(c) is payable only once and the      maximum aggregate amount of approval milestones payable by MSD under this      Section 6.4(c) is [          ]*. 
- **Sales Milestone**.    Within thirty (30) days of the first Product to achieve annual Net Sales in    the Territory in a year in excess of [          ]*, MSD will pay NEUROGEN a one-time    payment of [          ]*.

**6.5 Royalties Payable  by MSD.**

-  Subject to the terms    and conditions of this Agreement, MSD shall pay to NEUROGEN royalties based    on annual Net Sales by MSD, its Affiliates and Sublicensees of Products in    the Territory as follows (the "**Royalties**"): 

| **Annual Net Sales**                                 | **Royalty Rate          (% of applicable portion of Net Sales of such Products)** |
|------------------------------------------------------|-----------------------------------------------------------------------------------|
|                                                      |                                                                                   |
| Up to [                 ]*  | [    ]*                                                                 |
| Above [                  ]* | [    ]*                                                                 |

 

- Royalties shall be payable    on a Product-by-Product, country-by-country basis until the later of: (i)    the [          ]* (the "Royalty Term"). Upon the expiration of each Royalty    Term, MSD and its Affiliates will have a fully paid-up, perpetual, royalty-free    license to make, have made, use, import, promote, distribute, sell, offer    for sale and otherwise exploit such Product in such country. 
- **Royalty Reductions.**  (i)**Third Party      Licenses**. If, in any country, in order to develop, make, have made,      use, offer to sell, sell, or import a Collaboration Compound or Product,      it is necessary for MSD or its Affiliates to obtain a license from one or      more Third Parties (i.e., if there is no commercially reasonable alternative      that would allow development, manufacture, use or sale of a Product) ("**Third      Party Licenses**"), then [          ]* of any royalties paid by MSD,      its Affiliates or its Sublicensee under such Third Party Licenses shall      be creditable against Royalties due to NEUROGEN with respect to the sale      of such Collaboration Compound(s) or Product(s) in such country, but in      no case shall NEUROGEN’s Royalty be reduced in aggregate by more than      [          ]* on sales in any year up to [          ]* or [          ]* on sales in any year greater      than [          ]*. Notwithstanding the foregoing, (i) if a Third Party License is      utilized by MSD for products other than the Products, royalties payable      by MSD thereunder shall be fairly and equitably allocated to the Product      and the other products of MSD, such that the Royalties payable on Net Sales      of such Product are not disproportionately reduced and (ii) Royalties shall      not be reduced under this Section 6.5(c) with respect to any Third Party      License obtained by MSD prior to the Effective Date.  (ii)**Compulsory      Licenses.** If MSD is required as a condition of obtaining or maintaining      the right to commercialize a Product in any country in the Territory to      grant a compulsory license to a Third Party and such compulsory license      provides a royalty rate to MSD lower than the royalty rate provided for      in this Section 6.5, then the royalty rate to be paid to NEUROGEN by MSD      on Net Sales of such Product(s) by such Sublicensee (but only on the Net      Sales of such Third Party) in that country under this Section 6.5 shall      be reduced to the rate paid to MSD by such Sublicensee. 

**6.6 Royalty Reports.**  Royalty payments shall be paid within [          ]* after the first day of January, April,  July and October of each year following the First Commercial Sale of a Product.  Within [          ]* after the first day of January, April, July and October of each  year following the First Commercial Sale of a Product, MSD shall provide a written  report with respect to the preceding quarter (the "**Payment Report**")  stating: (a) the total gross sales and the total deductions used in arriving  at Net Sales of the Product sold by MSD, its Affiliates and Sublicensees, during  such quarter on a country-by-country basis; (b) the date of any First Commercial  Sale of the Product in each country during such quarter, and (c) a calculation  of the Royalties due to NEUROGEN.

**6.7 Calculation  of Royalties.** Royalties payable under Section 6.5(a), as adjusted by  Section 6.5(c), will be calculated as follows:

- In calculating the applicable    rates in each quarter, the weighted average royalty rate will first be calculated    based on the cumulative year-to-date aggregate Net Sales in the Territory;
- Such weighted average    royalty rate (the "Average Full Royalty Rate") will be applied    to the cumulative year-to-date Net Sales in any country in which none of the    reductions referred to in Section 6.5(c) apply;
- In respect of all other    countries, the Average Full Royalty Rate will then be adjusted for each country    after taking into account the reductions referred to in Section 6.5(c). Such    adjusted Average Full Royalty Rate will then be applied to the cumulative    year-to-date Net Sales in such countries; and
- The aggregate Royalties    payable in each quarter will be the sum of the amounts payable under paragraphs    (b) and (c) above, less the aggregate amount of Royalties previously paid    in respect of such year. 

**6.8 Audits.**

-  Upon the written request    of NEUROGEN and not more than once per year, MSD shall permit an independent    certified public accounting firm of nationally recognized standing selected    by NEUROGEN and reasonably acceptable to MSD, at NEUROGEN’s expense,    to have access during normal business hours to such of the records of MSD    as may be reasonably necessary to verify the accuracy of the Royalty Reports    hereunder for any year ending not more than thirty (30) months prior to the    date of such request, including currency exchange rates. The accounting firm    shall disclose to NEUROGEN, MSD and MERCK the details called for in Section    6.6 and whether the Royalty Reports are correct or incorrect and the specific    amount of any discrepancies. 
- If such accounting firm    correctly identifies a discrepancy during such period, MSD shall make a payment    to correct such discrepancy within thirty (30) days of the date NEUROGEN delivers    to MSD such accounting firm’s written report so correctly concluding.    The fees charged by such an accounting firm shall be paid by NEUROGEN, except    under the following circumstances: if the payments made or payable were at    least [          ]* of the amount that should have been paid during the period in question,    MSD shall reimburse NEUROGEN for the reasonable costs of such audit. 
- Upon the expiration    of [          ]* following the end of any year for which NEUROGEN has not contested,    pursuant to Section 6.8(a), the amount of Royalties due NEUROGEN, the calculation    of Royalties payable with respect to such year shall be binding and conclusive    upon NEUROGEN, and MSD, its Affiliates and its Sublicensees shall be released    from any liability or accountability with respect to Royalties for such year.
- NEUROGEN shall treat    all Information subject to review under this Section 6.8 or under any sublicense    agreement in accordance with the confidentiality and non-use provisions of    Article V of this Agreement, and shall cause its accounting firm to enter    into an acceptable confidentiality agreement with MSD (and its applicable    Affiliates and Sublicensees) obligating such firm to retain all such Information    in confidence pursuant to such confidentiality agreement.

**6.9 Payment Exchange  Rate**. All payments to be made by MSD to NEUROGEN under this Agreement  shall be made in United States dollars and may be paid by bank wire transfer  in immediately available funds to such bank account in the United States designated  in writing by NEUROGEN from time to time. In the case of sales invoiced in currencies  other than United States dollars, the exchange conversions of such sales into  United States dollars shall be made on a monthly basis at the rate of exchange  utilized by MERCK in its worldwide accounting system for external reporting  purposes, prevailing on the third to the last business day preceding the month  in which such sales are recorded by MSD, its Affiliates and Sublicensees. As  of the Execution Date of this Agreement, such exchange rates are provided by  Reuters Ltd.

**6.10 Income Tax  Withholding**. If laws, rules or regulations require withholding of income  taxes or other taxes imposed upon payments set forth in this Article VI, MSD  shall make such withholding payments as required and subtract such withholding  payments from the payments set forth in this Article VI. MSD shall submit appropriate  proof of payment of the withholding taxes to NEUROGEN within a reasonable period  of time. 

**Article VII REPRESENTATIONS AND WARRANTIES****7.1 Mutual Representations and Warranties of MSD and NEUROGEN**.  Each of MSD and NEUROGEN hereby represents and warrants to the other Party as  of the Execution Date as follows:

- It is duly organized,    validly existing and in good standing under the laws of the jurisdiction of    incorporation. It has the requisite legal and company power and authority    to conduct its business as presently being conducted and as proposed to be    conducted by it and is duly qualified to do business in those jurisdictions    where its ownership of property or the conduct of its business requires.
- It has all requisite    legal and company power and authority to enter into this Agreement and to    perform its obligations hereunder. All company actions on its part, its boards    of directors or managers, or similar governing body and its equity holders    necessary for (i) the authorization, execution, delivery and performance by    it of this Agreement, and (ii) the consummation of the transactions contemplated    hereby, have been duly taken.
- This Agreement is a    legally valid and binding obligation of it, enforceable against it in accordance    with its terms (except in all cases as such enforceability may be limited    by applicable bankruptcy, insolvency, reorganization, moratorium, or similar    laws affecting the enforcement of creditors’ rights generally and except    that the availability of the equitable remedy of specific performance or injunctive    relief is subject to the discretion of the court or other tribunal before    which any proceeding may be brought).

**7.2 Additional  Representations, Warranties and Covenants of NEUROGEN**. NEUROGEN hereby  further represents, warrants and covenants to MSD that as of the Execution Date:

-  To NEUROGEN’s    knowledge, there are no existing or threatened actions, suits or other proceedings    pending against it with respect to the NEUROGEN Technology;
- NEUROGEN is not aware    of any facts from which it reasonably concludes that any of the issued NEUROGEN    Patents are invalid; 
- NEUROGEN has the right    to grant the licenses under NEUROGEN Technology to the extent set forth in    this Agreement; and
- NEUROGEN and its Affiliates    have taken reasonable measures to protect the confidentiality of the NEUROGEN    Know-How and will continue to take such measures during the term of the Agreement.    

**7.3 MSD Representations  and Warranties.** MSD represents and warrants to NEUROGEN that as of  the Effective Date: 

- To the knowledge of    MSD and MERCK, there are no existing or threatened actions, suits or other    proceedings pending against it with respect to the MSD Technology;
- MSD and MERCK are not    aware of any facts from which it reasonably concludes that any of the issued    MSD Patents are invalid;
- MSD has the right to    grant the licenses under MSD Technology to the extent set forth in this Agreement;    and
- MSD and its Affiliates    have taken reasonable measures to protect the confidentiality of the MSD Know-How    and will continue to take such measures during the term of the Agreement.

**7.4 Disclaimer  of Warranties.** EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT  OR MANDATED BY APPLICABLE LAW (WITHOUT THE RIGHT TO WAIVE OR DISCLAIM), NEITHER  PARTY MAKES ANY REPRESENTATION OR WARRANTY WITH RESPECT TO A COLLABORATION COMPOUND,  PRODUCT, ANY KNOW-HOW, GOODS, SERVICES, RIGHTS, OR OTHER SUBJECT MATTER OF THIS  AGREEMENT AND HEREBY DISCLAIMS ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED,  INCLUDING IMPLIED WARRANTIES OF PERFORMANCE, MERCHANTABILITY, FITNESS FOR A  PARTICULAR PURPOSE OR NON-INFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY  RIGHTS.

**7.5 Assignment  by Inventors.**Each Party shall cause and ensure that each and every  employee or agent working on the Program has assigned or will assign to the  Party his/her rights to Inventions.

**Article VIII INTELLECTUAL PROPERTY**

**8.1 Ownership of  Know-How and Patents.** Each of NEUROGEN and MSD shall respectively own  the entire right, title and interest in any Inventions made solely by its employees  or agents in the performance of such Party’s obligations under the Program  (respectively, "**NEUROGEN Inventions**" and "**MSD  Inventions**"). For purposes of determining ownership of NEUROGEN  Inventions and MSD Inventions, such ownership shall be determined on the basis  of inventorship and inventorship shall be determined in accordance with the  United States laws of inventorship. When made by inventors from both Parties  ("**Joint Inventions**") each Party’s employee  or agent inventors shall assign their rights in Joint Inventions to that Party.  In accordance with United States patent laws and this Agreement, the Parties  will thus jointly own any Joint Inventions, each holding an undivided half interest  in any Joint Inventions for which there are no Third Party inventors who are  not under an obligation of assignment of all right, title and interest in such  Joint Invention to one or both Parties. No rights or licenses are granted unless  expressly provided for in this Agreement and each Party shall retain all rights  and licenses not expressly granted to the other.

**8.2 Filing, Prosecution  and Maintenance of Patents**. NEUROGEN agrees, as it determines appropriate,  and subject to the further provisions of this Section 8.2, to file, prosecute  and maintain (including filing and/or defending interferences, oppositions,  reexaminations and reissues) in the Territory, Patents relating to the NEUROGEN  Know-How and the NEUROGEN Inventions, and MSD agrees, as it determines appropriate,  to file, prosecute and maintain (including filing and/or defending interferences,  oppositions, reexaminations and reissues) in the Territory, Patents relating  to the MSD Know-How, the MSD Inventions and the Joint Inventions. MSD shall  be responsible for all of its internal and external costs and expenses incurred  in filing, prosecuting and maintaining the MSD Patents and Joint Patents. All  applications for NEUROGEN Patents shall be filed, prosecuted, and maintained  (including filing and/or defending interferences, oppositions, reexaminations  and reissues) by NEUROGEN; *provided* that MERCK shall reimburse NEUROGEN  for [          ]* of all external costs associated with such filings, prosecutions, and  maintenance. With respect to each Patent filed in accordance with this Article  VIII, the filing Party shall give the non-filing Party an opportunity to review  the text of the application before filing where reasonably feasible, shall consult  with the non-filing Party with respect thereto where reasonably feasible, and  shall supply the non-filing Party with a copy of the application as filed, together  with notice of its filing date and serial number. Each Party shall keep the  other advised of the status of the Patent filings and upon the request of the  other Party, provide copies of any papers related to the filing, prosecution  and maintenance of such Patent filings. Each Party shall cooperate fully and  shall cause its employees to cooperate fully, on the filing and prosecution  of such Patents. Each Party shall promptly give notice to the other of the grant,  lapse, revocation, surrender, invalidation or abandonment of any Patents for  which the Party is responsible for the filing, prosecution and maintenance.

**8.3 Option to Prosecute  and Maintain Patents**. Each Party shall give timely notice to the other  Party of any decision to cease prosecution or maintenance of any Patents for  which it is responsible pursuant to Section 8.2. The Party giving such notice  shall furthermore permit the other Party at its sole discretion and expense,  to so file or to continue such prosecution or maintenance. 

- If MSD elects to continue    prosecution or maintenance, or to file in any country in the Territory based    on NEUROGEN’s election not to file, prosecute or maintain pursuant to    Section 8.2, NEUROGEN shall execute such documents and perform such acts at    its expense as may be reasonably necessary to allow MSD to continue prosecution    or maintenance, or to file in any country in the Territory, in a timely manner.    
- If NEUROGEN elects to    continue prosecution or maintenance, or to file in any country in the Territory    based on MSD’s election not to file, prosecute or maintain pursuant    to Section 8.2, MSD shall execute such documents and perform such acts at    its expense as may be reasonably necessary to allow NEUROGEN to continue prosecution    or maintenance, or to file in any country in the Territory, in a timely manner.
- For purposes of this    Section 8.3, the term "maintenance" shall include interferences,    oppositions, reexaminations and reissues.

**8.4 Interference, Opposition, Reexamination and Reissue.**

-  Each Party, within    ten (10) days of learning of such event, shall inform the other Party of any    request for, or filing or declaration of, any interference, opposition, or    reexamination relating to the NEUROGEN Patents, MSD Patents or Joint Patents.    NEUROGEN shall be the lead Party on any NEUROGEN Patents, MSD shall be the    lead Party on MSD Patents and Joint Patents. MSD and NEUROGEN thereafter shall    consult and cooperate fully to determine a course of action with respect to    any such proceedings. A non-lead Party shall have the right to review and    consult with the lead Party regarding any submission to be made in connection    with such proceeding. 
- Neither Party shall    initiate, deliberately provoke or participate in any interference, opposition,    reexamination or reissue proceeding relating to the NEUROGEN Patents, MSD    Patents, or Joint Patents without the prior written consent of the other Party,    which consent shall not be unreasonably withheld. 
- In connection with any    interference, opposition, reissue, or reexamination proceeding relating to    the NEUROGEN Patents, MSD Patents or Joint Patents, MSD and NEUROGEN will    cooperate fully and will provide each other with any information or assistance    that either reasonably requests. Each Party shall keep the other Party informed    of developments in any such action or proceeding, including, to the extent    permissible by law, consultation and approval of any settlement. The obligation    of a Party to cooperate and provide assistance in this Section 8.4(c) shall    not apply to any interference proceeding involving the other Party as an opponent    and shall not constitute "participation" for purposes of Section    8.4(d). 
- MSD shall bear all expenses    for any interference, opposition, reexamination, or reissue proceeding relating    to any NEUROGEN Patent, MSD Patent, or Joint Patent, for which it elects to    participate, except for any interference where NEUROGEN and MSD are opponents.

**8.5 Enforcement  and Defense.**

- If either Party learns    of any infringement of NEUROGEN Patents, MSD Patents or Joint Patents, such    Party shall promptly notify the other Party of such infringement. MSD and    NEUROGEN thereafter shall consult and cooperate fully to determine a course    of action including the commencement of legal action by either or both of    MSD and NEUROGEN, to terminate any infringement of such Patents. However,    NEUROGEN, upon notice to MSD, shall have the first right to initiate and prosecute    such legal action at its own expense and in the name of NEUROGEN (and, if    appropriate, MSD), or to control the defense of any declaratory judgment action    relating to NEUROGEN Patents other than as such NEUROGEN Patents include NEUROGEN’s    interest in Joint Patents. NEUROGEN promptly shall inform MSD if it elects    not to exercise such first right, and if such infringement materially adversely    affects MSD’s efforts under this Agreement, MSD thereafter shall have    the right either to initiate and prosecute such action or to control the defense    of such declaratory judgment action in the name of MSD and, if necessary,    NEUROGEN. Each Party shall be entitled to be represented by counsel of its    own choice. MSD shall have the first right to initiate and prosecute such    legal actions for MSD Patents and Joint Patents at its own expense. 
- If NEUROGEN elects not    to initiate and prosecute an action as provided in Section 8.5(a), and MSD    elects to do so, the cost of any agreed upon course of action to terminate    infringement of NEUROGEN Patents including the costs of any legal action commenced    or the defense of any declaratory judgment, shall be borne by MSD exclusively.    
- For any action to terminate    any infringement of Patents, if either Party is unable to initiate or prosecute    such action solely in its own name or if desired to obtain a more effective    remedy, the other Party will join such action voluntarily and will execute    all documents necessary to initiate litigation to prosecute and maintain such    action. In connection with any such action, MSD and NEUROGEN will cooperate    fully and will provide each other with any information or assistance that    either reasonably requests. Each Party shall keep the other informed of developments    in any such action or proceeding, including, to the extent permissible by    law, the consultation and approval of any offer related thereto. 
- Any recovery obtained    by either or both MSD and NEUROGEN in connection with or as a result of any    action contemplated by this Section, whether by settlement or otherwise, shall    be shared in order as follows:     (i) the Party which initiated and prosecuted the action shall recoup all of    its costs and expenses incurred in connection with the action;    (ii) the other Party shall then, to the extent possible, recover its costs    and expenses incurred in connection with the action; and  (iii) the amount of      any recovery remaining shall then be allocated between the Parties on a      pro rata basis taking into consideration the relative economic losses suffered      by each Party. Such pro rata basis shall be determined by the Parties through      good faith negotiations commenced at the initiation of the action. 
-   Each Party shall inform      the other Party of any certification regarding any NEUROGEN Patents, MSD      Patents, or Joint Patents it has received pursuant to either 21 U.S.C. §§      355(b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) or its successor provisions or any      similar provisions in a country in the Territory other than the United States.      NEUROGEN shall provide MSD with a copy of such certification within five      (5) days of receipt by NEUROGEN. NEUROGEN’s and MSD’s rights      with respect to the initiation and prosecution of any legal action as a      result of such certification or any recovery obtained as a result of such      legal action shall be as defined in Subsections 8.5(a) - (d); *provided*,      that NEUROGEN shall determine whether to exercise its first right to initiate      and prosecute any action regarding applicable NEUROGEN Patents and shall      inform MSD of such decision within ten (10) days of NEUROGEN’s receipt      of the certification, after which time MSD shall have the right to initiate      and prosecute such action. 

**8.6 Patent Term  Extensions**. The Parties shall notify each other of the issuance of  each patent included within the VR1 Compound Patent Rights and/or the VR1 Related  Patent Rights where a patent term extension, adjustment or restoration, or supplementary  protection certificate or their equivalents (together with patent term extensions,  adjustments and restorations, "**Patent Term Extensions**")  may be available, giving the date of issue and patent number for each such patent.  The Parties shall use reasonable efforts to obtain all available Patent Term  Extensions of such patents within the VR1 Compound Patent Rights and/or the  VR1 Related Patent Rights (including those available under the Hatch-Waxman  Act). NEUROGEN shall execute such authorizations and other documents and take  such other actions as may be reasonably requested by MSD to obtain such Patent  Term Extensions, including designating MSD as its agent for such purpose as  provided in 35 U.S.C. Section 156. The Parties shall cooperate with each other  in gaining Patent Term Extensions wherever applicable to such patents within  the VR1 Compound Patent Rights and/or the VR1 Related Patent Rights. The Party  first eligible to seek a Patent Term Extension of any such patent within the  VR1 Compound Patent Rights and/or the VR1 Related Patent Rights shall have the  right to do so; *provided*, that if in any country the first Party has  an option to extend the patent term for only one of several patents, the first  Party will consult with the other Party before making the election. If more  than one patent within the VR1 Compound Patent Rights and/or the VR1 Related  Patent Rights is eligible for Patent Term Extension, MSD shall select a strategy  that will maximize patent protection for the Products. All filings for such  Patent Term Extensions shall be made by MSD; *provided*, that in the  event that MSD elects not to file for a Patent Term Extension, MSD shall (a)  promptly inform NEUROGEN of its intention not to file and (b) grant NEUROGEN  the right to file for such Patent Term Extension.

**Article IX  TERM AND TERMINATION****9.1 Term and Expiration.** This Agreement shall be effective  as of the Effective Date and, unless terminated earlier under this Article IX,  shall continue in effect until expiration of the Program Term and all Royalty  Terms. Upon the expiration of this Agreement due to the expiration of the Program  Term and all applicable Royalty Terms, MSD’s licenses shall become fully  paid-up, royalty-free, perpetual licenses as provided in Section 6.5(b). **9.2 Termination for Cause by NEUROGEN.**

- **Termination    for Cause.** Subject to MSD’s right to cure set forth in this    Section 9.2(a) and the provisions of Section 9.2(b) below, upon any material    breach of this Agreement by MSD, NEUROGEN may terminate this Agreement by    providing written notice to MSD. Such notice shall describe the alleged breach    with sufficient particularity to allow MSD to remedy or otherwise respond,    and shall expressly state the intent to terminate under this Section 9.2(a).    The termination of the Agreement shall become effective ninety (90) days following    such written notice unless MSD cures such breach during such ninety (90) day    period.
- **Rights of the    Parties in the Event of MSD’s Breach**. Upon NEUROGEN’s    termination of the Agreement pursuant to Section 9.2(a), the following provisions    shall apply:   (i) **Retained      Compounds.**  
(A) If, on the date        that NEUROGEN provides MSD with written notice of a material breach, MSD        is [          ]* and MSD can reasonably demonstrate that its material breach does        not [          ]*, (x) MSD shall retain the rights and obligations to continue        the development and commercialization of such [          ]*, in accordance with        the terms and conditions of this Agreement (including the payment of any        license fees, milestones and Royalties), and (y) NEUROGEN shall not be        entitled to develop or commercialize such [          ]* and the provisions of Section        [          ]* shall not apply to such [          ]*. 

(B) If MSD has [                  ]* for any [          ]* in any [          ]* before NEUROGEN provides written notice of        a material breach and such breach does not relate to [          ]*, then MSD shall        retain its rights to develop and commercialize [          ]* in accordance with        the terms and conditions of this Agreement (including the payment of any        license fees, milestones and Royalties).

(B) [          ]*; and

(C) Subject to Section        [          ]*.
 

**Other Rights and  Obligations.** Except to the extent necessary for [          ]* to exercise its  rights in [          ]*. 

**9.3 Termination  for Cause by MSD.**

- **Termination    of Program**. MSD may elect to terminate the Program: (i) by providing    written notice to NEUROGEN, subject to NEUROGEN’s right to cure set    forth in this Section 9.3(a), upon any material breach of this Agreement by    NEUROGEN, or (ii) upon the filing or institution of bankruptcy, reorganization,    liquidation or receivership proceedings by NEUROGEN, or upon an assignment    of a substantial portion of NEUROGEN’s assets for the benefit of creditors;    provided, however, in the case of any involuntary bankruptcy    proceeding such right to terminate shall only become effective if NEUROGEN    consents to the involuntary bankruptcy or such proceeding is not dismissed    within ninety (90) days after the filing thereof. Such notice provided for    in Section 9.3(a)(i) shall describe the alleged breach with sufficient particularity    to allow NEUROGEN to remedy or otherwise respond, and shall expressly state    the intent to terminate the Program under Section 9.3(a)(i). The termination    of the Program pursuant to Section 9.3(a)(i) shall become effective ninety    (90) days following such written notice unless NEUROGEN cures such breach    during such ninety (90) day period. 
- **Rights of MSD    in the Event of NEUROGEN’s Breach or Bankruptcy**. In the event    MSD terminates the Program pursuant to Section 9.3(a), this Agreement shall    continue in full force and effect with respect to MSD’s further development    and commercialization (including the payment of any milestones and Royalties    and periodic reporting obligations to NEUROGEN under Article VI) of Collaboration    Compounds and Products. For purposes of clarity, if MSD elects to terminate    the Program in accordance with Section 9.3(a), then, upon such termination    (and subject to the provisions of Section 9.6 in the case of termination pursuant    to Section 9.3(a)(ii)):  (i) Use of Joint Inventions      and of Compounds.  
(A) Samples of compounds        synthesized or invented solely by MSD will be transferred to MSD for any        and all purposes;

(B) Samples of compounds        synthesized or invented solely by NEUROGEN other than Active Compounds        will be transferred to NEUROGEN for any and all purposes outside the Field,        and samples of compounds synthesized or invented solely by NEUROGEN (including        any Active Compound) will be transferred to MSD and MERCK solely for research,        drug discovery, development, manufacturing or commercialization in the        Field; and

(C) Subject to Section        2.8, each Party will be free to pursue Joint Inventions for activities        outside the Field.
  (ii) Other Rights and      Obligations. In addition to the provisions set forth in Section 9.3(b)(i):  
(A) NEUROGEN will        disclose to MSD all NEUROGEN Know-How in NEUROGEN’s possession that        NEUROGEN can rightfully disclose without violating any existing rights        of any Third Party, and that was not previously disclosed to MSD;

(B) MSD will have        no further funding or reporting obligations for, and NEUROGEN will have        no further obligations to perform, research with respect to the Program;

(C) all licenses        granted to NEUROGEN pursuant to Section 3.1 will terminate and the licenses        granted to MSD pursuant to Sections 3.1, 3.2 and 3.3 shall continue in        accordance with the terms of this Agreement;

(D) the provisions        of Section 2.8 will continue to apply as if the Program had not been terminated;        

(E) the provisions        of the Agreement providing for the participation of NEUROGEN in decision-making,        including through the JRC, shall be of no further force and effect;        (F) NEUROGEN shall continue to cooperate with MSD as provided in Article        VIII with regard to the prosecution of NEUROGEN Patents and Joint Patents        that are related to VR1 and its modulation, and which are necessary to        MSD to develop, manufacture, market, use or sell Collaboration Compounds        or Products;

(G) the provisions        of Section 3.5(b)and (c) shall no longer apply;

(H) MSD’s obligations        under Article IV of the Agreement which relate to (1) reporting and/or        notice requirements, and/or (2) document provision and/or review, shall        no longer apply;

(I) the provisions        of Section 4.3 shall no longer apply;

(J) NEUROGEN will        cooperate in any reasonable manner requested by MSD to achieve a smooth        transition of any and all research or other Program-related responsibilities        to MSD; and

(K) NEUROGEN and        its Affiliates agree not to pursue any research, drug discovery, development,        manufacturing or commercialization in the Field for a period of two (2)        years following the date of termination.
 

**9.4 Voluntary Termination  by MSD.**

-  Voluntary Termination    by MSD. Upon [          ]*to NEUROGEN, MSD may terminate this Agreement without cause,    said termination not to take effect before the second anniversary of the Effective    Date of the Agreement. 
- Rights of Parties upon    Voluntary Termination by MSD. Upon termination by MSD pursuant to Section    9.4(a), the following provisions shall apply:  (i) Use of Joint Inventions      and of Compounds.  
(A) [          ]*
  (ii) Other Rights and      Obligations. In addition to the provisions set forth in Section [         ]*:  [          ]*.  

**9.5 Effect of NEUROGEN  Change of Control.**

-  In the event of a Major    Pharma Change of Control, NEUROGEN shall provide written notice to MSD at    least thirty (30) days, to the extent practicable, prior to the completion    of such Major Pharma Change of Control. MSD shall have the right at its election    (such election to be made within sixty (60) days after notice of the Major    Pharma Change of Control) to implement some or all of the following revisions    to this Agreement:  (i) to the extent that      provisions of the Agreement require MSD to provide MSD Know-How and other      Information regarding the Program to NEUROGEN or to otherwise provide confidential      Information to NEUROGEN, such provisions (other than Sections 6.8 (as it      applies to provision of information to an independent certified public accounting      firm), 9.2 or 9.4) shall be automatically amended to no longer impose such      an obligation on MSD;  (ii) the provisions      of the Agreement providing for the participation of NEUROGEN in decision-making,      including through the JRC, shall be of no further force and effect;   (iii) MSD’s obligation      to provide royalty reports pursuant to Section 6.6. shall be limited to      MSD’s total worldwide royalty obligations; and  (iv) MSD shall be entitled      to terminate the Program as provided in Section 9.3. 
- During the 60-day period    in which MSD may elect to implement to provisions set forth in Section 9.5(a),    NEUROGEN shall take such protective measures as are reasonably necessary to    assure that MSD Technology is not disclosed to personnel within NEUROGEN’s    acquirer pursuant to a Major Pharma Change of Control who are involved in    competitive activities in the Field. If such Major Pharma Change of Control    occurs during the Program Term, then the JRC shall promptly meet to discuss    any concerns of MSD with respect to the protective measures to be implemented    by NEUROGEN as set forth above. NEUROGEN shall consider MSD’s input    in implementing protective measures.
- For purposes of this    Section 9.5: "Major Pharma Change of Control" means a Change of    Control in which a [          ]*.

**9.6 Effect of Termination  for Bankruptcy.** If this Agreement is terminated by or on behalf of  MSD due to the rejection of this Agreement under Section 365(n) of the Bankruptcy  Code, all licenses and rights to licenses granted under or pursuant to this  Agreement by NEUROGEN to MSD are, and shall otherwise be deemed to be, for purposes  of Section 365(n) of the Bankruptcy Code, licenses of rights to "**intellectual  property**" as defined under Section 101(35A) of the Bankruptcy  Code. The Parties agree that MSD, as a licensee of such rights under this Agreement,  shall retain and may fully exercise all of its rights and elections under the  Bankruptcy Code. The Parties further agree that, in the event of the commencement  of a bankruptcy proceeding by or against NEUROGEN under the Bankruptcy Code,  MSD shall be entitled to a complete duplicate of (or complete access to, as  appropriate) any such intellectual property and all embodiments of such intellectual  property upon written request therefor by MSD. Such intellectual property and  all embodiments thereof promptly shall be delivered to MSD (i) upon any such  commencement of a bankruptcy proceeding upon written request therefor by MSD,  unless NEUROGEN elects to continue to perform all of its obligations under this  Agreement or (ii) if not delivered under (i) above, upon the rejection of this  Agreement by or on behalf of NEUROGEN upon written request therefor by MSD.  The provisions of this Section 9.6 are without prejudice to any rights MSD may  have arising under the Bankruptcy Code or other applicable law.

**9.7 Effect of Expiration  or Termination**. Expiration or termination of this Agreement shall not  relieve the Parties of any obligations accruing prior to such expiration or  termination, including payment obligations. Except as otherwise specifically  provided above, all of the Parties’ rights and obligations under the provisions  of Articles I, VII, VIII (except that MSD shall not be responsible for costs  or expenses relating to NEUROGEN Patents, and except as otherwise provided in  Article IX), IX, X, XI and Sections 6.6, 6.7, 6.8 and 6.9 shall survive the  termination or expiration of the Agreement, with Article V continuing in effect  for ten (10) years thereafter. 

**9.8 Remedies**.  In the event of any breach of any provision of this Agreement, in addition to  the termination rights set forth herein, each Party shall have all other rights  and remedies at law or in equity to enforce this Agreement. 

**Article X INDEMNIFICATION**

**10.1 Mutual Indemnification**.  Each Party shall defend, indemnify and hold the other Party and its Affiliates,  and their respective directors, officers, employees and agents, harmless from  and against any and all liabilities, losses, damages, settlements, claims, actions,  suits, penalties, fines, costs or expenses (including reasonable attorneys’  fees and other expenses of litigation actually incurred) arising out of any  claim, lawsuit, demand, assessment, proceeding or action ("**Claim**")  brought by a Third Party (any of the foregoing, a "**Loss**")  arising out of or resulting from:

- the gross negligence,    recklessness or intentional acts or omissions of the indemnifying Party and    its Affiliates, and their respective directors, officers, employees and agents    with respect to this Agreement and the transactions contemplated hereby; and
- any breach of any representation,    warranty or covenant of the indemnifying Party hereunder.

**10.2 NEUROGEN.**  Except to the extent MSD is required to indemnify NEUROGEN under Section 10.1,  and in respect of Collaboration Compounds and/or Products to which NEUROGEN  acquires rights to develop or commercialize pursuant to Sections 9.2 or 9.4,  NEUROGEN shall defend, indemnify and hold MSD, its Affiliates, and their respective  directors, officers, employees and agents (the "**MSD Group**"),  harmless from and against any and all Losses arising out of development, pre-clinical  or clinical testing, manufacture, use or sale of the Collaboration Compounds  or Products by NEUROGEN, or its Affiliates or Sublicensees (including any patent  infringement or product liability claims, failure to comply with regulatory  and other legal requirements, failure to provide adequate warnings and misuse  of the Products).

**10.3 MSD**.  Except to the extent NEUROGEN is required to indemnify MSD under Section 10.1,  MSD shall defend, indemnify and hold NEUROGEN, its Affiliates, and their respective  directors, officers, employees and agents (the "**NEUROGEN Group**"),  harmless from and against any and all Losses arising out of development, pre-clinical  or clinical testing, manufacture, use or sale of the Collaboration Compounds  or Products by MSD, or its Affiliates or Sublicensees (including any patent  infringement or product liability claims including any manufacturing or other  product defects, failure to comply with regulatory and other legal requirements,  failure to provide adequate warnings and misuse of the Products). 

**10.4 Notice of  Claim**. Upon receipt of notice of any Claim which may give rise to a  right of indemnity from the other Party hereto, the Party seeking indemnification  (the "**Indemnified Party**") shall give written notice  thereof to the other Party (the "**Indemnifying Party**")  with a Claim for indemnity. Such Claim for indemnity shall indicate the nature  of the Claim and the basis therefor. Promptly after a claim is made for which  the Indemnified Party seeks indemnity, the Indemnified Party shall permit the  Indemnifying Party, at its option and expense, to assume the complete defense  of such Claim, *provided* that (i) the Indemnified Party will have the  right to participate in the defense of any such Claim at its own cost and expense,  (ii) the Indemnifying Party will conduct the defense of any such Claim with  due regard for the business interests and potential related liabilities of the  Indemnified Party, and (iii) the Indemnifying Party will not agree to any settlement  that would admit liability on the part of the Indemnified Party or involve relief  other than payment of money, without the approval of the Indemnified Party,  not to be unreasonably withheld; and *provided, further,* that if it  is reasonably likely that the Parties may have conflicting interests or if it  is otherwise not advisable under applicable legal and ethical requirements for  the Indemnifying Party’s defense counsel to represent both Parties, separate  independent counsel shall be retained for each Party at its own expense. The  Indemnified Party shall have the right, at its election, to release and hold  harmless the Indemnifying Party from its obligations hereunder with respect  to such Claim and assume the complete defense of the same in return for payment  by the Indemnifying Party to the Indemnified Party of the amount of the Indemnifying  Party’s settlement offer. The Indemnifying Party will not, in defense  of any such Claim, except with the consent of the Indemnified Party, consent  to the entry of any judgment or enter into any settlement which does not include,  as an unconditional term thereof, the giving by the claimant or plaintiff to  the Indemnified Party of a release from all liability in respect thereof. After  notice to the Indemnified Party of the Indemnifying Party’s election to  assume the defense of such Claim, the Indemnifying Party shall be liable to  the Indemnified Party for such legal or other expenses subsequently incurred  by the Indemnified Party in connection with the defense thereof at the request  of the Indemnifying Party. As to those Claims with respect to which the Indemnifying  Party does not elect to assume control of the defense, the Indemnified Party  will afford the Indemnifying Party an opportunity to participate in such defense  at the Indemnifying Party’s own cost and expense, and will not settle  or otherwise dispose of any of the same without the consent of the Indemnifying  Party.

**10.5 Insurance**.  Each Party agrees to obtain and maintain at its cost and expense, while this  Agreement is in effect, including any surviving obligations, (i) commercial  general liability insurance including contractual liability insurance; (ii)  products liability insurance; (iii) property damage insurance; (iv) professional  liability insurance; (v) workers compensation insurance; and (vi) automobile  insurance in amounts appropriate to the conduct of such Party’s activities  under this Agreement. Each Party agrees to name the other as an additional insured  under such insurance.

**Article XI MISCELLANEOUS**

**11.1 Consequential  Damages**. IN NO EVENT SHALL EITHER PARTY OR THEIR AFFILIATES BE LIABLE  FOR SPECIAL, PUNITIVE, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER  BASED ON CONTRACT, TORT OR ANY OTHER LEGAL THEORY AND IRRESPECTIVE OF WHETHER  SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF ANY SUCH LOSS OR DAMAGE; *PROVIDED*,  THAT THIS LIMITATION SHALL NOT LIMIT THE INDEMNIFICATION OBLIGATION OF SUCH  PARTY UNDER THE PROVISIONS OF ARTICLE X FOR SUCH DAMAGES CLAIMED BY A THIRD  PARTY AND NOTHING IN THIS SECTION 11.1 IS INTENDED TO LIMIT MSD’S PAYMENT  OBLIGATIONS UNDER ARTICLE 6.

**11.2 Assignment.**

- Except as provided in    this Section 11.2, neither Party shall have the right to assign or otherwise    transfer this Agreement, nor any of its rights hereunder, nor delegate any    of its obligations hereunder, without the prior written consent of the other    Party.
- MSD may, upon the prior    written consent of NEUROGEN, such consent not to be unreasonably withheld,    assign this Agreement and its rights and obligations hereunder in connection    with a Change of Control. MSD may assign this Agreement and its rights and    obligations hereunder, in whole or in part, to an Affiliate of MSD. Notwithstanding    the foregoing, MSD shall not assign this Agreement to any Affiliate that,    separate from the activities of MSD and MSD’s other Affiliates, would    have annual global pharmaceutical sales of [          ]* without the prior written    consent of NEUROGEN, such consent not to be unreasonably withheld. MSD shall    remain liable to NEUROGEN as if it had not assigned the Agreement to an Affiliate,    and such assignment shall not diminish the applicability of Commercially Reasonable    Efforts in accordance with this Agreement. In addition, MSD may license or    sublicense its rights to the extent permitted in Section 4.8 or elsewhere    herein.
- NEUROGEN may, upon the    prior written consent of MSD, such consent not to be unreasonably withheld,    assign this Agreement and its rights and obligations hereunder to an Affiliate    of NEUROGEN or in connection with a Change of Control. NEUROGEN shall remain    liable to MSD as if it had not assigned the Agreement to an Affiliate, and    such assignment shall not diminish the applicability of Commercially Reasonable    Efforts in accordance with this Agreement. 
- This Agreement shall    be binding upon and inure to the benefit of the Parties hereto and each of    their successors and permitted assigns. Any attempted or purported assignment    in violation of this Section 11.2 shall be void.

**11.3 Force Majeure.**  Neither Party shall be held liable or responsible to the other Party nor be  deemed to have defaulted under or breached this Agreement for failure or delay  in fulfilling or performing any term of this Agreement when such failure or  delay is caused by or results from causes beyond the reasonable control of the  affected Party including, but not limited to, fire, floods, mudslides, earthquakes,  embargoes, war, acts of war (whether war be declared or not), insurrections,  riots, civil commotions, strikes, lockouts or other labor disturbances, acts  of God or acts, omissions or delays in acting by any governmental authority  or the other Party. The affected Party shall notify the other Party of such  force majeure circumstances as soon as reasonably practicable, and shall promptly  undertake all reasonable efforts necessary to cure such force majeure circumstances.  **11.4 Non-Solicitation.** During the Program Term, and for a period  of one (1) year thereafter, neither Party (which for purposes of this Section  11.4 includes a Party and its Affiliates) shall either directly or indirectly  solicit, recruit, induce, encourage or attempt to solicit, recruit, induce or  encourage any employee of the other Party to terminate his or her employment  relationship with such other Party and become employed by the other Party whether  or not such employee is a full-time employee of such other Party and whether  or not such employment relationship is pursuant to a written agreement or is  at-will.**11.5 Severability**. If one or more of the provisions contained  in this Agreement are held invalid, illegal or unenforceable in any respect,  the validity, legality and enforceability of the remaining provisions shall  not be affected or impaired, unless the absence of the invalidated provision(s)  adversely affects the substantive rights of the Parties. The Parties shall in  such case use their best efforts to replace the invalid, illegal or unenforceable  provision(s) with valid, legal and enforceable provision(s) which, insofar as  practical, implement the purposes of this Agreement. **11.6 Publicity/Use of Names**. Neither Party may use the names  of the other Party or those of its Affiliates, Sublicensees, employees, agents  or consultants or any of their trademarks, trade names, logos or symbols without  the prior written consent of the other Party. **11.7 Notices**. All notices or other communications which are  required or permitted hereunder shall be in writing and sufficient if delivered  personally, sent by telecopier (and promptly confirmed by personal delivery,  registered or certified mail or overnight courier), sent by nationally recognized  overnight courier or sent by registered or certified mail, postage prepaid,  return receipt requested, addressed as follows: 

| **if to**      |                                            |
|----------------|-------------------------------------------------|
| **NEUROGEN:**  |                                            |
|           | at the address set out for NEUROGEN on page 1   |
|           | **Attn:**President, Chief Executive Officer     |
|           |                                            |
|           | **Facsimile No.**: 203-488-8651                 |
|           |                                            |
| with copy to:  | Legal Department                                |
|           | **Facsimile No**: 203-488-4710                  |
|           |                                            |
| **if to MSD:** |                                            |
|           |                                            |
|           | at the address set out for MSD on page 1        |
|           | **Attn:** Vice President, Neuroscience Research |
|           | **Facsimile No.: 44 1279440178**                |
|           |                                            |
|           | Merck & Co., Inc.                           |
|           | One Merck Drive                                 |
|           | P.O. Box 100                                    |
|           | Whitehouse Station, NJ 08889-0100               |
|           | **Attn:**Office of Secretary                    |
|           | **Facsimile No:** (908) 735-1246                |
|           |                                            |
| with copy to:  | Chief Licensing Officer                         |
|           | **Facsimile No:**(908) 735-1214                 |

  or to such other address as the Party to whom notice is to be given may have  furnished to the other Party in writing in accordance herewith. Any such communication  shall be deemed to have been given when delivered if personally delivered or  sent by telecopier on a business day, on the business day after dispatch if  sent by nationally recognized overnight courier and on the third business day  following the date of mailing if sent by mail. **11.8 Applicable Law and Jurisdiction**. This Agreement shall  be governed by and construed in accordance with the laws of the State of New  York without reference to any rules of conflict of laws that would require the  application of the laws of a different jurisdiction. The Parties irrevocably  submit to the jurisdiction of any New York State or Federal Court sitting in  the City of New York over any suit, action or proceeding arising out of or relating  to this Agreement that are not otherwise covered by Section 11.9(c). The Parties  waive any objection which they may now or hereafter have to the venue of any  such suit, action or proceeding brought in such court and any claim that any  such suit, action or proceeding brought in such a court has been brought in  an inconvenient forum. The Parties agree that a final judgment in any such suit,  action, or proceeding brought in such a court shall be conclusive and binding  on the Parties, and may be enforced in any court of the jurisdiction of which  any Party is or may be subject by a suit upon such judgment; *provided*  that service or process is effected upon the Party as permitted by applicable  law. **11.9 Dispute Resolution and Arbitration.**

- The Parties recognize    that a bona fide dispute as to certain matters may from time to time arise    during the term of this Agreement that relate to any Party’s rights    or obligations hereunder. In the event of the occurrence of any dispute arising    out of or relating to this Agreement (other than an "**Excluded    Claim**" as such term is defined below), either Party may, by    written notice to the other, have such dispute referred to its respective    officer designated below or their successors, for attempted resolution by    good faith negotiations within sixty (60) days after such notice is received.    If either Party desires to pursue arbitration under paragraph (c) below to    resolve any such dispute, a referral to such executives under this paragraph    (a) shall be a mandatory condition precedent. Said designated officers are    as follows:  
For NEUROGEN: Chief        Executive Officer

For MSD: President        of MERCK, Research & Development
 
-  If they are unable    to resolve the dispute by executive mediation within such sixty (60) day period,    then the dispute shall be finally settled by binding arbitration as provided    below. 
-  If the Parties do not    fully settle, and a Party wishes to pursue the matter, each such dispute shall    be finally resolved by arbitration in accordance with the Commercial Arbitration    Rules of the American Arbitration Association ("**AAA**")    then pertaining, except where those rules conflict with this provision, in    which case this provision controls.  (i) The Parties hereby      consent to the jurisdiction of the Federal District Court for the Southern      District of New York for the enforcement of these provisions and the entry      of judgment on any award rendered under this Section 11.9. Should such court      for any reason lack jurisdiction, any court with jurisdiction shall enforce      this clause and enter judgment on any award.  (ii) The arbitration      shall be conducted by a panel of three neutral persons as follows: within      30 days after initiation of arbitration, each Party shall select one person      experienced in the pharmaceutical business to act as arbitrator and the      two Party-selected arbitrators shall select a third arbitrator, who shall      be an attorney or retired judge experienced in business matters, within      30 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 appointed by the AAA.      (iii) The arbitration shall be held in New York City and the arbitrators      shall apply the substantive law of New York, except that the interpretation      and enforcement of this arbitration provision shall be governed by the Federal      Arbitration Act.  (iv) Within thirty      (30) days of initiation of arbitration, the Parties shall reach agreement      upon and thereafter follow procedures seeking to assure that the arbitration      will be concluded and the award rendered within six (6) months from selection      of the arbitrators. Failing such agreement, the AAA will design and the      Parties will follow such procedures.   (v) Each Party has      the right before or during the arbitration to seek and obtain from the appropriate      court provisional remedies such as attachment, preliminary injunction, replevin,      etc., to avoid irreparable harm, maintain the status quo or preserve the      subject matter of the arbitration.  (vi) THE ARBITRATORS      SHALL NOT AWARD ANY PARTY PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES EXCLUDED      UNDER SECTION 11.1.  (vii) Except to the      extent necessary to confirm an award or as may be required by law, neither      a Party nor an arbitrator may disclose the existence, content, or results      of an arbitration without the prior written consent of both Parties.  (viii) In no event      shall an arbitration be initiated after the date when commencement of a      legal or equitable proceeding based on the dispute, controversy or claim      would be barred by the applicable New York statute of limitations.      (ix) The Parties agree that, in the event of a dispute over the nature or      quality of performance under this Agreement, neither Party may terminate      the Agreement until final resolution of the dispute through arbitration      or other judicial determination. The Parties further agree that any payments      made pursuant to this Agreement pending resolution of the dispute shall      be refunded if an arbitrator or court determines that such payments are      not due. 
-  As used in this Section,    the term "**Excluded Claim**" means a dispute, controversy    or claim that concerns (i) the validity or infringement of a patent, trademark    or copyright; or (ii) any antitrust, anti-monopoly or competition law or regulation,    whether or not statutory. 

**11.10 Entire Agreement.**  This Agreement contains the entire understanding of the Parties with respect  to the subject matter hereof. All express or implied agreements and understandings,  either oral or written, heretofore made relating to the subject matter hereof  are expressly superceded, except the confidentiality agreements continue in  full force and effect. This Agreement may be amended, or any term hereof modified,  only by a written instrument duly-executed by both Parties. **11.11 Headings.** The captions to the Articles, Sections and  Subsections of this Agreement are not a part of the Agreement, but are merely  guides or labels to assist in locating and reading the Articles, Sections and  Subsections. **11.12 Independent Contractors**. NEUROGEN and MSD shall be independent  contractors and the relationship between them shall not constitute a partnership,  joint venture or agency. Neither Party shall have the authority to make any  statements, representations or commitments of any kind, or to take any action,  which shall be binding on the other, without the prior written consent of the  other Party. **11.13 Waiver.** The waiver by a Party of any right under this  Agreement or of the other Party’s failure to perform or breach shall not  be a waiver of any other right, failure or breach whether of a similar nature  or otherwise. **11.14 Counterparts.** This Agreement may be executed in two or  more counterparts, each of which shall be deemed an original, but all of which  together shall constitute one and the same instrument.

**11.15 HSR Filing.**

- To the extent necessary,    each of MSD and NEUROGEN will, within fifteen (15) days after the Execution    Date, file with the United States Federal Trade Commission and the Antitrust    Division of the United States Department of Justice, any HSR Filing required    of it in the reasonable opinion of both Parties under the HSR Act with respect    to the transactions contemplated hereby. The Parties will cooperate with one    another to the extent necessary in the preparation of any such HSR Filing.    Each Party will be responsible for its own costs, expenses, and filing fees    associated with any HSR Filing.
-  In respect of any HSR    Filing, each of MSD and NEUROGEN will use its good faith efforts to eliminate    any concern on the part of any court or government authority regarding the    legality of the proposed transaction, including cooperating in good faith    with any government investigation and the prompt production of documents and    information demanded by a second request for documents and of witnesses if    requested.

**11.16 Guaranty**.  MERCK, as the parent company of MSD, hereby unconditionally and irrevocably  guarantees the prompt payment and full performance when due of all of MSD’s  obligations under this Agreement and all agreements executed in connection herewith,  including, without limitation, the payment of all amounts due NEUROGEN pursuant  to Articles II and VI of this Agreement (the "**Obligations**").  The foregoing guaranty shall be continuing until all Obligations now existing  or hereafter arising have been discharged in full, and shall be and continue  to be fully effective notwithstanding any written amendment to this Agreement  or any of the Obligations (but subject to any changes to the Obligations resulting  therefrom), any extensions of time for performance of any Obligations (but subject  to any changes to the Obligations resulting therefrom), any release or discharges  of any security for any Obligations, and shall be fully enforceable against  MERCK without first proceeding against, making demand upon, or exhausting any  remedy against MSD. 

***[Remainder of page intentionally left blank – signature pages  to follow]***

**IN WITNESS WHEREOF**, the parties have executed this Agreement  as of its Execution Date. 

|                                                                                                               | **MERCK      SHARP & DOHME LTD NEUROGEN CORPORATION** |   |   | **NEUROGEN CORPORATION**   |
|--------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------|--------|--------|----------------------------|
|                                                                                                               |                                                      |   |   |                       |
| By:                                                                                                                | /s/ Ruth M. McKernan                                      |   | By:    | /s/ William Koster         |
|                                                                                                               | ________________________                                  |   |   | ___________________        |
|                                                                                                               | Name: Dr. Ruth M. McKernan                                |   |   | Name: William Koster       |
|                                                                                                               |                                                      |   |   |                       |
|                                                                                                               | Title: Vice President                                     |   |   | Title: President and CEO   |
|                                                                                                               | Neuroscience Research                                     |   |   |                       |
|                                                                                                               |                                                      |   |   |                       |
|                                                                                                               | __________________________                                |   |   | __________________________ |
|                                                                                                               | Date                                                      |   |   | Date                       |
|                                                                                                               |                                                      |   |   |                       |
|                                                                                                               |                                                      |   |   |                       |
| Merck        & Co., Inc. executes this Agreement solely for purposes of Section        11.16 of the Agreement. |
|                                                                                                               |                                                      |   |   |                       |
|                                                                                                               |                                                      |   |   |                       |
|                                                                                                               | **MERCK &      CO., INC.**                            |   |   |                       |
|                                                                                                               |                                                      |   |   |                       |
| By:                                                                                                                | /s/ Richard N. Kender                                     |   |   |                       |
|                                                                                                               | ________________________                                  |   |   | _________________________  |
|                                                                                                               | Name: Mr. Richard N. Kender                               |   |   |                       |
|                                                                                                               |                                                      |   |   |                       |
|                                                                                                               | Title: Vice President -                                   |   |   |                       |
|                                                                                                               | Business Development &                                |   |   |                       |
|                                                                                                               | Corporate Licensing                                       |   |   |                       |
|                                                                                                               |                                                      |   |   |                       |
|                                                                                                               | _________________________                                 |   |   | __________________________ |
|                                                                                                               | Date                                                      |   |   |                       |

 

 

 

 

**ATTACHMENT 1.1***

**ATTACHMENT 1.37**

MSD Patents*

 

 

**ATTACHMENT  1.43**

NEUROGEN  Patents*

 

 

**ATTACHMENT  2.1**Research Plan *

* Confidential treatment of the omitted material  has been requested pursuant to the Confidential Treatment Request dated March  12, 2004.