Untitled Document



  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.