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Terms Doc

    CITIBANK
      CREDIT CARD ISSUANCE TRUST

    

    Citiseries

    Class
      2006-A8 Notes

    

    Issuer
      Certificate

    Pursuant
      to Sections 202 and 301(h) of the Indenture

    

    Reference
      is made to the Indenture, dated as of September 26, 2000, as amended by
      Amendment No. 1 thereto dated as of November 14, 2001, each between Citibank
      Credit Card Issuance Trust (the "Issuer") and Deutsche Bank Trust Company
      Americas, as trustee (the "Indenture"). Capitalized terms used herein that
      are
      not otherwise defined have the meanings set forth in the Indenture. All
      references herein to designated Sections are to the designated Sections of
      the
      Indenture.

    

    Section
      301(h) provides that the Issuer may from time to time create a tranche of Notes
      either by or pursuant to an Issuer Certificate setting forth the principal
      terms
      thereof. Pursuant to this Issuer Certificate, there is hereby created a tranche
      of Notes having the following terms: 

    

    Series
      Designation:
      Citiseries. This series is included in Group 1.

    

    Tranche
      Designation:
      $500,000,000 Floating Rate Class 2006-A8 Notes of December 2016 (Legal Maturity
      Date December 2018) (hereinafter, the "Class 2006-A8 Notes")

    

    Currency:
      The
      Class 2006-A8 Notes will be payable, and denominated, in Dollars. 

    

    Denominations:
      The
      Class 2006-A8 Notes will be issuable in minimum denominations of $100,000 and
      multiples of $1,000 in excess of that amount.

    

    Issuance
      Date:
      December 19, 2006

    

    Initial
      Principal Amount:
      $500,000,000

    

    Issue
      Price:
      100%

    

    Interest
      Rate:
      The
      Class 2006-A8 Notes will accrue interest with respect to any interest period
      at
      a per annum rate equal to the Class 2006-A8 Note Rate for such interest period,
      calculated on the basis of the actual number of days in such interest period
      divided by 360. The "Class 2006-A8 Note Rate" means,
      with
      respect to the first interest period, 5.40952%
      per
      annum
      and, with respect to each interest period thereafter, a
      per
      annum rate equal to LIBOR for such interest period plus 0.04%.

    

    The
      Issuer will determine LIBOR for each applicable interest period on the second
      business day before the beginning of that interest period. For purposes of
      calculating LIBOR, a business day is any day on which dealings in deposits
      in
      U.S. Dollars are transacted in the London interbank market.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    "LIBOR"
      means,
      as of any date of determination, the rate for deposits in U.S. Dollars for
      the
      Designated Maturity (commencing on the first day of the relevant interest
      period) which appears on Telerate Page 3750 as of 11:00 a.m., London time,
      on
      such date. If such rate does not appear on Telerate Page 3750, the rate for
      that
      day will be determined on the basis of the rates at which deposits in U.S.
      Dollars are offered by the Reference Banks at approximately 11:00 a.m., London
      time, on that day to prime banks in the London interbank market for the
      Designated Maturity (commencing on the first day of the relevant interest
      period). The Issuer will request the principal London office of each of the
      Reference Banks to provide a quotation of its rate. If at least two such
      quotations are provided, the rate for that day will be the arithmetic mean
      of
      the quotations. If fewer than two quotations are provided as requested, the
      rate
      for that day will be the arithmetic mean of the rates quoted by major banks
      in
      New York City, selected by the Issuer, at approximately 11:00 a.m., New York
      City time, on that day for loans in U.S. Dollars to leading European banks
      for a
      period of the Designated Maturity (commencing on the first day of the relevant
      interest period).

    

    "Telerate
      Page 3750"
      means
      the display page currently so designated on the Moneyline Telerate Service
      (or
      such other page as may replace that page on that service for the purpose of
      displaying comparable rates or prices).

    

    "Designated
      Maturity"
      means
      three months, however,
      in the
      absence of an Event of Default or an Early Redemption Event with respect to
      the
      Class 2006-A8 Notes, "Designated Maturity" means, with respect to the interest
      period ending on the Expected Principal Payment Date, two months, and upon
      the
      occurrence of an Event of Default or an Early Redemption Event with respect
      to
      the Class 2006-A8 Notes, or if the Class 2006-A8 Notes are not paid in full
      on
      their Expected Principal Payment Date, "Designated Maturity" means one
      month.

    

    "Reference
      Banks"
      means
      four major banks in the London interbank market selected by the
      Issuer.

    

    Scheduled
      Interest Payment Dates:
      The
      15th
      day of
      each January, April, July and October, beginning April 2007, and December 15,
      2016.

    

    Each
      payment of interest on the Class 2006-A8 Notes will include all interest accrued
      from and including the preceding Interest Payment Date -- or, for the first
      interest period, from and including the Issuance Date -- to and including the
      day preceding the current Interest Payment Date, plus any interest accrued
      but
      not previously paid.

    

    Expected
      Principal Payment Date:
      December 15, 2016

    

    Legal
      Maturity Date:
      December 17, 2018

    

    Monthly
      Principal Date: For
      the
      month in which the Expected Principal Payment Date occurs, December 15, 2016,
      and for each other month, the 15th
      day of
      such month, or if such day is not a Business Day, the next following Business
      Day.

    

    Required
      Subordinated Amount of Class B Notes:
      $29,914,550.

    

    Required
      Subordinated Amount of Class C Notes:
      $39,886,050.

    

    Controlled
      Accumulation Amount:
      $41,666,667.

    
      
        
           

          

          

          

          2

        

        
          
          

          
            

          

        

        
          
          

        

      

    Form
      of Notes:
      The
      Class 2006-A8 Notes will be issued as Global Notes. The Global Notes will
      initially be registered in the name of Cede & Co., as nominee of The
      Depository Trust Company, and will be exchangeable for individual Notes only
      in
      accordance with the provisions of Section 204(c).

    

    Additional
      Issuances of Class 2006-A8 Notes:
      The
      Issuer may at any time and from time to time issue additional Class 2006-A8
      Notes, subject to the satisfaction of (i) the conditions precedent set forth
      in
      Section 311(a) and (ii) the following conditions:

    

    (a)
      the
      Issuer has obtained written confirmation from each Rating Agency that there
      will
      be no Ratings Effect with respect to the then outstanding Class 2006-A8 Notes
      as
      a result of the issuance of such additional Class 2006-A8 Notes;

    

    (b)
      as of
      the date of issuance of the additional Class 2006-A8 Notes, all amounts due
      and
      owing to the Holders of the then outstanding Class 2006-A8 Notes have been
      paid
      and there is no Nominal Liquidation Amount Deficit with respect to the then
      outstanding Class 2006-A8 Notes;

    

    (c)
      the
      additional Class 2006-A8 Notes will be fungible with the original Class 2006-A8
      Notes for federal income tax purposes; 

    

    (d)
      if
      Holders of the then outstanding Class 2006-A8 Notes have benefit of a Derivative
      Agreement, the Issuer will have obtained a Derivative Agreement for the benefit
      of the Holders of the additional Class 2006-A8 Notes; and

    

    (e)
      the
      ratio of the Controlled Accumulation Amount to the Initial Dollar Principal
      Amount of the Class 2006-A8 Notes, including the additional Class 2006-A8 Notes,
      will be equal to the ratio of the Controlled Accumulation Amount (before giving
      effect to the additional issuance) to the Initial Dollar Principal Amount of
      the
      Class 2006-A8 Notes, excluding the additional Class 2006-A8 Notes.

    

    As
      of the
      date of issuance of additional Class 2006-A8 Notes, the Outstanding Dollar
      Principal Amount and Nominal Liquidation Amount of the Class 2006-A8 Notes
      will
      be increased to reflect the Initial Dollar Principal Amount of the additional
      Class 2006-A8 Notes. 

    

    Any
      outstanding Class 2006-A8 Notes and any additional Class 2006-A8 Notes will
      be
      equally and ratably entitled to the benefits of the Indenture without
      preference, priority or distinction.

    

    Optional
      Redemption Provisions other than Section 1202 "Clean-Up
      Call":
      None

    

    Additional
      Early Redemption Events or changes to Early Redemption
      Events:
      None

    

    Additional
      Events of Default or changes to Events of Default:
      None

    

    
      
         

        

        

        

        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    Interest
      Rate Swap:
      The
      Issuer hereby represents that it has obtained an interest rate swap agreement
      (the "Swap") for the benefit of the Holders of the Class 2006-A8 Notes, a copy
      of which is attached hereto as Exhibit B. Monthly payments between the Issuer
      and the swap counterparty pursuant to the Swap will be netted. Net swap receipts
      received by the Issuer will be deposited into the Interest Funding sub-Account
      for the Class 2006-A8 Notes on the date of receipt as provided in Section 504(a)
      and net swap payments to be made by the Issuer will be made from withdrawals
      from the Interest Funding sub-Account for the Class 2006-A8 Notes as provided
      in
      Section 507(c).

    

    None
      of a
      ratings downgrade of or payment default by the counterparty to the Swap or
      a
      termination of the Swap will constitute an Early Redemption Event or Event
      of
      Default nor will any such event obligate the Issuer to replace the
      Swap.

    

    Subject
      to Section 522, so long as the Swap is a Performing Derivative Agreement,
      targeted deposits of Finance Charge Collections to the Interest Funding
      sub-Account for the Class 2006-A8 Notes will be made on the Business Day
      preceding the 15th
      calendar
      day of each month, beginning January 2007. The deposit targeted to be made
      to
      the Interest Funding sub-Account for the Class 2006-A8 Notes on January 12,
      2007
      will be $1,807,722.22. If the Swap becomes a non-Performing Derivative
      Agreement, (i) targeted deposits of Finance Charge Collections to the Interest
      Funding sub-Account for the Class 2006-A8 Notes will be made as provided in
      Section 503(d) and (ii) withdrawals will be made from the Interest Funding
      sub-Account for the Class 2006-A8 Notes as provided in Section
      507(d).

    

    Business
      Day:
      means
      any day other than (a) a Saturday or Sunday or (b) any other day on which
      national banking associations or state banking institutions in New York, New
      York or South Dakota, or any other state in which the principal executive
      offices of any Additional Seller are located, are authorized or obligated by
      law, executive order or governmental decree to be closed.

    

    Securities
      Exchange Listing:
      Application will be made to list the Class 2006-A8 Notes on the Irish Stock
      Exchange.

    
      
         

        

        

        

        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    The
      Class
      2006-A8 Notes shall have such other terms as are set forth in the form of Note
      attached hereto as Exhibit A. Pursuant to Section 202, the form of Note attached
      hereto has been approved by the Issuer.

    

    

    
      	 	
              CITIBANK
                CREDIT CARD ISSUANCE TRUST

            
	 	
              By
                 Citibank
                (South Dakota), National Association,

            
	 	
              as
                Managing Beneficiary

            
	 	 
	 	 
	 	 
	 	
              /s/
                Douglas C. Morrison

            
	 	
              Douglas
                C. Morrison

            
	 	
              Vice
                President

            

    

    

    Dated:
      December 19, 2006

    

    
      
         

        

        

        

        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    Citiseries

     

    Class
      2006-A8 Notes

    

    Reference
      is made to the resolutions adopted by the Board of Directors of Citibank (South
      Dakota), National Association ("Citibank (South Dakota)") on April 26, 2000,
      as
      amended on September 25, 2001 and October 25, 2006. The resolutions authorize
      Citibank (South Dakota) from time to time to issue and sell, or to arrange
      for
      or participate in the issuance and sale of, one or more series and/or classes
      of
      pass-through certificates, participation certificates, commercial paper, notes
      or other securities representing ownership interests in, or backed by, pools
      of
      credit card receivables or interests therein ("Receivables") in an aggregate
      principal amount such that up to $125,000,000,000 of such certificates,
      commercial paper, notes or securities are outstanding at any one time and to
      sell, transfer, convey or assign Receivables to trusts or other special purpose
      entities in connection therewith on such terms as to be determined by the
      Citibank (South Dakota) Pricing and Loan Committee (the "Pricing and Loan
      Committee").

    

    The
      undersigned, a duly authorized member of the Pricing and Loan Committee, on
      behalf of such Pricing and Loan Committee, does hereby certify that the terms
      of
      the tranche of Notes set forth in and to be created by the preceding Issuer
      Certificate and the increase in the Invested Amount of the Collateral
      Certificate resulting from the issuance of such Notes have been approved by
      such
      Pricing and Loan Committee. In addition, the following underwriting/selling
      agent terms with respect to this tranche of Notes have been approved by such
      Pricing and Loan Committee:

    

    Issue
      Price: 100%

    

    Underwriting
      Commission: 0.375%

    

    Proceeds
      to Issuer: 99.625%

    

    Representative
      of the Underwriters: Citigroup Global Markets Inc.

    

    

    The
      preceding Issuer Certificate and this certification of Pricing and Loan
      Committee approval shall be, continuously from the time of their execution,
      official records of Citibank (South Dakota).

    

    

    

    
      	
              /s/
                Douglas C. Morrison___

            
	
              Douglas
                C. Morrison

            
	
              Member
                of the Pricing and Loan Committee

            
	
              Citibank
                (South Dakota), National
                Association

            

    

    

    

    Dated:
      December 19, 2006

    

    
      
        
          

          

          

        

        
        

      

      
        6

        
          

        

      

      
        
        

        
        

      

    

    Exhibit
      A

    

    FORM
      OF

    

    CITISERIES

    

    FLOATING
      RATE CLASS 2006-A8 NOTES OF DECEMBER 2016

    (Legal
      Maturity Date December 2018)

    

    

    
      	
              $500,000,000

            	 	
              REGISTERED

            
	
              CUSIP
                No. 17305E DL 6

            	 	
              No.
                R-1

            

    

    

    UNLESS
      THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
      COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
      REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED
      IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
      AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR
      TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
      ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
      PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
      AN INTEREST HEREIN.

    

    THE
      PRINCIPAL OF THIS NOTE IS PAYABLE AS SET FORTH HEREIN AND IN THE INDENTURE
      REFERRED TO BELOW. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE
      AT
      ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.

    

    

    CITIBANK
      CREDIT CARD ISSUANCE TRUST

    

    CITISERIES

    

    FLOATING
      RATE CLASS 2006-A8 NOTES OF DECEMBER 2016

    (Legal
      Maturity Date December 2018)

    

    

    CITIBANK
      CREDIT CARD ISSUANCE TRUST, a trust formed and existing under the laws of the
      State of Delaware (including any successor, the "Issuer"), for value received,
      hereby promises to pay to CEDE & CO., or its registered assigns, the
      principal amount of FIVE HUNDRED MILLION DOLLARS ($500,000,000). The Expected
      Principal Payment Date for this Note is December 15, 2016. The Legal Maturity
      Date for this Note is December 17, 2018.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    The
      Issuer hereby promises to pay interest on this Note on the 15th
      day of
      each January, April, July and October, beginning April 2007, and on December
      15,
      2016, until the principal of this Note is paid or made available for payment,
      subject to certain limitations set forth in the Indenture. Interest will accrue
      on the outstanding principal amount of this Note for each interest period in
      an
      amount equal to the product of (i) the actual number of days in such interest
      period divided by 360, (ii) a rate per annum equal to the Class 2006-A8 Note
      Rate for such interest period, and (iii) the outstanding principal amount of
      this Note as of the preceding Interest Payment Date (after giving effect to
      any
      payments of principal made on the preceding Interest Payment Date)
      or, in
      the case of the first Interest Payment Date, the initial principal amount of
      this Note.
      The
      Class 2006-A8 Note Rate will be determined as provided in the
      Indenture.

    

    If
      any
      Interest Payment Date or Principal Payment Date of this Note falls on a day
      that
      is not a Business Day, the required payment of interest or principal will be
      made on the following Business Day.

    

    This
      Note
      is one of the Citiseries, Class 2006-A8 Notes issued pursuant to the Indenture,
      dated as of September 26, 2000 (as amended and otherwise modified from time
      to
      time, the "Indenture") between the Issuer and Deutsche Bank Trust Company
      Americas, as Trustee. For purposes of this Note, the term "Indenture" includes
      any supplemental indenture or Issuer Certificate relating to the Citiseries,
      Class 2006-A8 Notes. This Note is subject to all of the terms of the Indenture.
      All terms used in this Note that are not otherwise defined herein and that
      are
      defined in the Indenture will have the meanings assigned to them
      therein.

    

    The
      principal of and interest on this Note are payable in such coin or currency
      of
      the United States of America as at the time of payment is legal tender for
      payment of public and private debts.

    

    Each
      Holder by acceptance of this Note, and each owner of a beneficial interest
      in
      this Note by acceptance of a beneficial interest in this Note, is deemed to
      have
      consented to such amendments to the Pooling and Servicing Agreement and other
      operative documents as are necessary to permit the Seller to retain sale
      treatment for accounting purposes of the transfer of assets to the Master Trust,
      in accordance with the provisions of Financial Accounting Standards Board SFAS
      No. 140.

    

    Reference
      is made to the further provisions of this Note set forth on the reverse hereof,
      which will have the same effect as though fully set forth on the face of this
      Note.

    

    Unless
      the certificate of authentication hereon has been executed by the Trustee whose
      name appears below by manual signature, this Note will not 

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    be
      entitled to any benefit under the Indenture, or be valid or obligatory for
      any
      purpose.

    

    IN
      WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually
      or
      in facsimile, by an Issuer Authorized Officer.

    

    
      	 	
              CITIBANK
                CREDIT CARD ISSUANCE TRUST

            
	 	 
	 	
              By: CITIBANK
                (SOUTH DAKOTA),

            
	 	
              NATIONAL
                ASSOCIATION,

            
	 	
              as
                Managing Beneficiary of

            
	 	
              Citibank
                Credit Card Issuance Trust

            
	 	 
	 	 
	 	
              By:
                __________________________________

            
	 	
              Douglas
                C. Morrison

            
	 	
              Vice
                President

            

    

    

    Dated:
      December 19, 2006

    

    

    

    

    TRUSTEE'S
      CERTIFICATE OF AUTHENTICATION

    

    

    This
      is
      one of the Notes designated above and referred to in the within mentioned
      Indenture.

    

    

    
      	 	
              DEUTSCHE
                BANK TRUST COMPANY AMERICAS,

            
	 	
              as
                Trustee under the Indenture

            
	 	 
	 	 
	 	
              By:
                _________________________________

            
	 	
              Authorized
                Signatory

            
	 	 
	 	 
	 	
              By:
                _________________________________

            
	 	
              Authorized
                Signatory

            

    

    

    

    Dated:
      December 19, 2006

    

    

    

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    REVERSE
      OF NOTE

    

    This
      Note
      is one of a duly authorized issue of Notes of the Issuer, designated as its
      Citiseries Floating Rate Class 2006-A8 Notes of December 2016 (Legal Maturity
      Date December 2018) (herein called the "Notes"), all issued under an Indenture,
      to which Indenture reference is hereby made for a statement of the respective
      rights and obligations thereunder of the Issuer, the Trustee and the Holders
      of
      the Notes.

    

    This
      Note
      ranks pari passu with all other Class A Notes of the same series, as set forth
      in the Indenture. This Note is secured to the extent, and by the collateral,
      described in the Indenture.

    

    The
      Issuer will pay interest on overdue interest as set forth in the Indenture
      to
      the extent lawful.

    

    Each
      Holder by acceptance of this Note, and each owner of a beneficial interest
      in
      this Note by acceptance of a beneficial interest in this Note, agrees that
      no
      recourse may be taken, directly or indirectly, with respect to the obligations
      of the Issuer or the Trustee on the Notes, against the Issuer, the Issuer
      Trustee, Citibank (South Dakota), the Trustee or any affiliate, officer,
      employee or director of any of them, and the obligation of the Issuer to pay
      principal of or interest on this Note or any other amount payable to the Holder
      of this Note will be subject to Article V of the Indenture.

    

    Each
      Holder by acceptance of this Note, and each owner of a beneficial interest
      in
      this Note by acceptance of a beneficial interest in this Note, agrees that
      this
      Note is intended to be debt of Citibank (South Dakota) for federal, state and
      local income and franchise tax purposes, and agrees to treat this Note
      accordingly for all such purposes, unless otherwise required by a taxing
      authority.

    

    Each
      Holder by acceptance of this Note, and each owner of a beneficial interest
      in
      this Note by acceptance of a beneficial interest in this Note, agrees that
      it
      will not at any time institute against the Issuer, or join in any institution
      against the Issuer of, any bankruptcy, reorganization, arrangement, insolvency
      or liquidation proceeding, or other proceedings under any United States federal
      or state bankruptcy or similar law in connection with any obligations relating
      to this Note, the Indenture or any Derivative Agreement.

    

    This
      Note
      and the Indenture will be construed in accordance with and governed by the
      laws
      of the State of New York.

    

    No
      reference herein to the Indenture and no provision of this Note or of the
      Indenture will alter or impair the obligation of the Issuer, which is absolute
      and unconditional, to pay the principal of and interest on this Note at the
      times, place and rate, and in the coin or currency, herein
      prescribed.

    

    Certain
      amendments may be made to the Indenture without the consent of the Holder of
      this Note. This Note must be surrendered for final payment of principal and
      interest.

    

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    ASSIGNMENT

    

    

    Social
      Security or taxpayer I.D. or other identifying number of
      assignee:____________________

    

    FOR
      VALUE
      RECEIVED, the undersigned hereby sells, assigns and transfers unto

    

    ___________________________________________________________________

    

    ___________________________________________________________________

    (name
      and
      address of assignee)

    

    the
      within Note and all rights thereunder, and hereby irrevocably constitutes and
      appoints __________________________________________________________, attorney,
      to transfer said Note on the books kept for registration thereof, with full
      power of substitution in the premises.

    

    Dated:
      ____________________________

    

    _________________________*

    Signature
      Guaranteed:

    

    

    

    

    ----------------

    *
      NOTE:
      The signature to this assignment must correspond with the name of the registered
      owner as it appears on the face of the within Note in every particular without
      alteration, enlargement or any change whatsoever.

    

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    

    

    

      Exhibit
        B

      

      $500,000,000
        Floating Rate Class 2006-A8 Notes of December 2016

      (Legal
        Maturity Date December 2018)

      Citiseries

       

      CONFIRMATION

       

      Deal
        Reference Number M066724

      

      
        	
                To:

              	
                CITIBANK
                  CREDIT CARD ISSUANCE TRUST, as Issuer (the “Issuer”)
                  of the $500,000,000 Floating Rate Class 2006-A8 Notes of December
                  2016
                  (Legal Maturity Date December 2018) of the
                  Citiseries

              

      

       

      From: CITIBANK,
        N.A. (“Counterparty”)

       

      Date: December 19,
        2006

       

      The
        purpose of this agreement is to set forth the terms and conditions of the
        Swap
        Transaction entered into between us on the Trade Date specified below (the
        “Swap
        Transaction”).
        This
        letter constitutes a “Confirmation” relating to an ISDA Master Agreement, as
        defined below.

       

      
        	
                1.

              	
                Confirmation.
                  This Confirmation will be governed by and subject to the terms
                  and
                  conditions which would be applicable if, prior to the Trade Date,
                  the
                  parties had executed and delivered an ISDA Master Agreement
                  (Multicurrency-Cross Border), in the form published by ISDA in
                  1992 (the
                  “Master
                  Agreement”)
                  between the Issuer and Counterparty with the Schedule attached
                  hereto
                  representing the Schedule to the Master Agreement and the modifications
                  provided below, and relating to the above-referenced notes (the
                  “Class
                  2006-A8 Notes”).
                  All provisions that would be contained or incorporated by reference
                  in the
                  Master Agreement will govern this Confirmation except as expressly
                  modified below. In the event of any inconsistency between provisions
                  in
                  the Master Agreement and provisions in this Confirmation, this
                  Confirmation will govern.

              

      

       

      The
        definitions and provisions contained in the 2000 ISDA Definitions (including
        the
        Annex thereto) and the 1998 ISDA Currency Option Definitions are incorporated
        into this Confirmation. In the event of any inconsistency between those
        definitions and provisions and this Confirmation, this Confirmation will
        govern.

       

      This
        Confirmation will be governed by and construed in accordance with the laws
        of
        the State of New York, without reference to choice of law doctrine.

       

      Each
        party represents to the other that it has entered into this Transaction in
        reliance upon such tax, accounting, regulatory, legal and financial advice
        as it
        deems necessary and not upon any view expressed by the other.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
        	
                2.

              	
                Terms.
                  The
                  terms of the particular Swap Transaction to which this Confirmation
                  relates are as follows:

              

      

       

      

      
        	
                Transaction
                  Type:

                 

              	
                Rate
                  Swap Transaction

              
	 
	
                Notional
                  Amount:

                 

              	
                With
                  respect to each Calculation Period, the Outstanding Dollar Principal
                  Amount of the Class 2006-A8 Notes as of the first day of such Calculation
                  Period (after giving effect to any distribution of principal to
                  Class
                  2006-A8 Noteholders on such day); provided,
                  however,
                  if additional Notes of Class 2006-A8 are issued, the amount of
                  the
                  Outstanding Dollar Principal Amount used to compute the Notional
                  Amount
                  will be adjusted proportionately to reflect the Outstanding Dollar
                  Principal Amount of such additional Notes. Without limiting the
                  foregoing,
                  the Notional Amount of this Swap Transaction will not at any time
                  be
                  greater than the Outstanding Dollar Principal Amount of the Class
                  2006-A8
                  Notes on the date of this Confirmation.

                 

              
	
                Trade
                  Date:

                 

              	
                December 12,
                  2006

                 

              
	
                Effective
                  Date:

                 

              	
                December
                  19, 2006

                 

              
	
                Termination
                  Date:

                 

              	
                The
                  earlier of (a) the Expected Principal Payment Date (as defined
                  in the
                  Terms Document) and (b) the Distribution Date on which the Outstanding
                  Dollar Principal Amount of the Class 2006-A8 Notes is paid in
                  full.

                 

              
	
                Distribution
                  Date:   

                 

              	
                The
                  15th day of each calendar month, or if such day is not a Business
                  Day, the
                  next following Business Day, commencing January 2007.

                 

              
	
                Fixed
                  Amounts:

                 

              
	
                Fixed
                  Rate Payer:

                 

              	
                Issuer

              

      

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      

      
        	
                Fixed
                  Rate Payer Payment Date:

                 

              	
                One
                  Business Day before each Distribution Date, commencing January
                  2007

                 

              
	
                Fixed
                  Rate Payer Period End Date:

                 

              	
                The
                  15th day of each calendar month commencing January 2007 determined
                  with no
                  adjustment

                 

              
	
                Fixed
                  Amount:

                 

              	
                For
                  the first Distribution Date, $1,807,722.22 and for all other Distribution
                  Dates, the product of:

                 

              
	 	
                 

                 

                 

                 

                1
                  /12

                 

              	
                x

              	
                5.0060%
                  per annum

              	
                x

              	
                the
                  Notional Amount with respect to the applicable Calculation
                  Period

              
	 
	
                Floating
                  Amounts:

                 

              	 
	
                Floating
                  Rate Payer:

                 

              	
                Counterparty
                  

                 

              
	
                Floating
                  Rate Payer Payment Date:

                 

              	
                One
                  Business Day before each Distribution Date, commencing January
                  2007

                 

              
	
                Floating
                  Rate Payer Period End Date:

                 

              	
                The
                  15th day of each calendar month, commencing January 2007, and subject
                  to
                  adjustment in accordance with the Following Business Day
                  Convention

                 

              
	
                Floating
                  Rate Option:

                 

              	
                USD-LIBOR-BBA

                 

              
	
                Designated
                  Maturity:

                 

              	
                Three
                  months for every Reset Date except the
                  Reset Date occurring in October 2016, for which the “Designated Maturity”
                  will be two months; however, if
                  there is an
                  Event of Default or Early Redemption Event, one month

                 

              
	
                Spread:

                 

              	
                Plus
                  0.04%; provided,
                  however,
                  that the per annum rate (Floating Rate plus Spread) for the Initial
                  Calculation Period will be 5.40952% (which is an interpolated rate
                  between
                  three-month and four-month LIBOR of 5.36952% plus a spread of
                  0.04%)

                 

              
	
                Initial
                  Calculation Period:

                 

              	
                From
                  and including December 19, 2006 to but excluding January 16,
                  2007

                 

              
	
                Floating
                  Rate Day Count Fraction:

                 

              	
                Actual/360

                 

                 

              

      

    

    
      
         

        
          
          

          
            3

            
              

            

          

          
          

      

    

    

    
      	
              Reset
                Dates:

               

            	
              Two
                London Business Days before the Distribution Date occurring in each
                of
                January, April, July and October of each year

               

            
	
              Business
                Days:

               

            	
              New
                York and South Dakota 

               

            
	 	 
	 	 

    

    

    

    3. Account
      Details.

    
      	
              Payments
                to the Issuer:

               

            	
              Citibank,
                N.A., Corporate Trust

              ABA:
                021 0000 89

              Ref:
                CCCIT 2006-A8

              Attention:
                John Byrnes

              A/C:
                 36114325

               

              Or
                to such other account as to which the Issuer gives reasonable prior
                notice
                from time to time

               

            
	
              Payments
                to Counterparty:

               

            	
              Citibank,
                N.A., New York

              ABA: 021
                0000 89

              A/C: 00167679

              Financial
                Futures Reference: M066724

               

              Or
                to such other account as to which Counterparty gives reasonable prior
                notice from time to time

               

            
	 

    

    

    Each
      amount payable with respect to this Swap Transaction will be paid by 12:00
      p.m.,
      New York City time, on a best efforts basis, on the relevant Scheduled Payment
      Date.

     

    4. Notices 

     

    Address
      and telephone number for notices or communications to Counterparty (for all
       purposes)
      shall be as specified in Part 4 of the Schedule to the Master
      Agreement.

     

    
      
      

      
        4

        
          

        

      

      
      

      Please
        confirm that the foregoing correctly sets forth the terms of our agreement
        by
        executing the copy of this Confirmation enclosed for that purpose and returning
        it to us.

       

      Very
        truly yours,

       

      CITIBANK,
        N.A.

       

      By:
        /s/
        Frank A. Licciardello

      Frank
        A.
        Licciardello

      Authorized
        Signatory

       

      Accepted
        and confirmed as of

      the
        date
        first above written:

       

      CITIBANK
        CREDIT CARD ISSUANCE TRUST, as issuer of the Floating Rate Class 2006-A8
        Notes
        of December 2016 (Legal Maturity Date December 2018) of the
        Citiseries

       

      
        	
                By:

              	
                Citibank
                  (South Dakota), National Association,

                 as
                  Managing Beneficiary

              

      

       

      /s/
        Douglas C. Morrison 

      Douglas
        C. Morrison

      Vice
        President

       

      
        
        

        
          5

          
            

          

        

        
        

      

    

    $500,000,000
      Floating Rate Class 2006-A8 Notes of December 2016

    (Legal
      Maturity Date December 2018)

    Citiseries

     

    SCHEDULE

     

    

    to
      the

    Master
      Agreement referred to in the

    

    CONFIRMATION
      dated as of December 19, 2006

    (Deal
      Reference Number: M066724)

    

     

    between

     

    CITIBANK
      CREDIT CARD ISSUANCE TRUST (the “Issuer”),
      as
      issuer of the Floating Rate Class 2006-A8 Notes of December 2016 (Legal Maturity
      Date December 2018) of the Citiseries

    and

    CITIBANK,
      N.A. (“Counterparty”).

     

    Part
      1. Termination Provisions.

     

    
      	
              (a)

            	
              “Specified
                Entity”
                means in relation to the Issuer for the purpose
                of:

            

    

     

    Section
      5(a)(v),  None

    Section
      5(a)(vi), None

    Section
      5(a)(vii), None

    Section
      5(b)(iv), None

     

    and
      in
      relation to Counterparty for the purpose of:

     

    Section
      5(a)(v), None

    Section
      5(a)(vi), None

    Section
      5(a)(vii), None

    Section
      5(b)(iv), None

     

    
      	
              (b)

            	
              “Specified
                Transaction”
                will have the meaning specified in Section
                14.

            

    

     

    
      	
              (c)

            	
              “Events
                of Default”.
                The following Events of Default will not apply to the Issuer or any
                Credit
                Support Provider of the Issuer and the definition of “Event
                of Default”
                in Section 14 is deemed to be modified
                accordingly:

            

    

     

    Section
      5(a)(ii), (Breach of Agreement)

    Section
      5(a)(iii), (Credit Support Default)

    Section
      5(a)(iv), (Misrepresentation)

    Section
      5(a)(v), (Default under Specified Transaction)

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

      

      Section
        5(a)(vi), (Cross Default)

      Section
        5(a)(vii), (Bankruptcy)

       

       

       

      
        	
                (d)

              	
                “Termination
                  Events”.
                  The following Termination Events, to the extent Counterparty would
                  have
                  been the Affected Party or the Burdened Party, as the case may
                  be, will
                  not apply and the definition of “Termination
                  Event”
                  in Section 14 is deemed to be modified
                  accordingly:

              

      

       

      Section
        5(b)(ii), (Tax Event)

      Section
        5(b)(iii), (Tax Event Upon Merger)

      Section
        5(b)(iv), (Credit Event Upon Merger)

       

      
        	
                (e)

              	
                The
                  “Automatic
                  Early Termination”
                  provision of Section 6(a) will not apply to the Issuer or
                  Counterparty.

              

      

       

      
        	
                (f)

              	
                Payments
                  on Early Termination, Unpaid Amounts
                  Notwithstanding any provision to the contrary in this Agreement,
                  upon the
                  occurrence of an Early Termination Date in respect of one or more
                  outstanding Transactions, the provisions of Sections 6(d)(i) (to
                  the
                  extent they relate to obtaining Market Quotations) and 6(e)(i),
                  (ii) and
                  (iv) will not apply, but Unpaid Amounts will still be
                  owed.

              

      

       

      Part
        2. Tax Representations.

       

      
        	
                (a)

              	
                Payer
                  Representations.
                  For the purpose of Section 3(e), each of the Issuer and Counterparty
                  represents that it is not required by any applicable law, as modified
                  by
                  the practice of any relevant governmental revenue authority, of
                  any
                  Relevant Jurisdiction to make any deduction or withholding for
                  or on
                  account of any Tax from any payment (other than interest under
                  Section
                  2(e), 6(d)(ii) or 6(e)) to be made by it to the other party under
                  this
                  Agreement. In making this representation, it may rely on (i) the
                  accuracy
                  of any representation made by the other party pursuant to Section
                  3(f),
                  (ii) the satisfaction of the agreement contained in Section 4(a)(i)
                  or
                  4(a)(iii) and the accuracy and effectiveness of any document provided
                  by
                  the other party pursuant to Section 4(a)(i) or 4(a)(iii) and (iii)
                  the
                  satisfaction of the agreement of the other party contained in Section
                  4(d), provided,
                  however,
                  that it will not be a breach of this representation where reliance
                  is
                  placed on clause (ii) and the other party does not deliver a form
                  or
                  document under Section 4(a)(iii) by reason of material prejudice
                  to its
                  legal or commercial position.

                 

                 

              

      

      
        
          
          

          
            2

            
              

            

          

          
          

        

      

    

    
      	
              (b)

            	
              Payee
                Representations.

            

    

     

    
      	 	
              (i)

            	
              Issuer
                Representation.
                For the purpose of Section 3(f), the Issuer makes no
                representations.

            

    

     

    
      	 	
              (ii)

            	
              Counterparty
                Representation.
                For the purpose of Section 3(f), Counterparty makes no
                representations.

            

    

     

    Part
      3. Agreement to Deliver Documents.

     

    For
      the
      purpose of Sections 4(a)(i) and (ii):

     

    
      	
              (a)

            	
              Tax
                forms, documents or certificates to be delivered
                are:

            

    

     

    Each
      party agrees to complete, accurately and in a manner reasonably satisfactory
      to
      the other party, and to execute, arrange for any required certification of,
      and
      deliver to the other party (or to such government or taxing authority as the
      other party reasonably directs), any form or document that may be required
      or
      reasonably requested in order to allow the other party to make a payment under
      this Agreement without any deduction or withholding for or on account of any
      Tax
      or with such deduction or withholding at a reduced rate, promptly upon
      reasonable demand by the other party.

     

    
      	
              (b)

            	
              Other
                documents to be delivered are:

            

    

     

    

    
      	
              Party
                Required to Deliver Document

               

            	 	
              Form/Document/Certificate

               

            	 	
              Date
                by Which

              to
                Be Delivered

               

            	 	
              Covered
                by

              Section
                3(d)

              Representation

               

            
	
              Issuer
                and Counterparty.

               

            	 	
              Copies
                of all documents evidencing necessary corporate and other authorizations
                and approvals with respect to the execution, delivery and performance
                by
                the party of this Agreement, each Confirmation and any applicable
                Credit
                Support Document.

               

            	 	
              Upon
                execution of this Agreement.

               

            	 	
              Yes.

               

            
	
              Issuer
                and Counterparty.

               

            	 	
              A
                certificate of an authorized officer of the party certifying the
                names,
                true signatures and authority of the officers of the party signing
                this
                Agreement and any applicable Credit Support Document.

               

            	 	
              Upon
                execution of this Agreement.

               

            	 	
              Yes.

               

            

    

    
    

    
      3

      
        

      

    

    
    

    

    
      	
              Issuer.

               

            	 	
              Copies
                of Pooling and Servicing Agreement, Series 2000 Supplement, closing
                documents delivered in connection with the issuance of the Collateral
                Certificate, Indenture, Terms Document and closing documents delivered
                in
                connection with the Class 2006-A8 Notes, to the extent not previously
                delivered to Counterparty.

               

            	 	
              As
                promptly as practicable after the Trade Date. 

               

            	 	
              No.

               

            

    

    

    Part
      4. Miscellaneous.

     

    
      	
              (a)

            	
              Addresses
                for Notices.
                For the purpose of Section 12(a):

            

    

     

    Address
      for notices or communications to the Issuer:

     

    Address: Citibank
      Credit Card Issuance Trust

    c/o
      Citibank (South Dakota), National Association, as Managing
      Beneficiary

    701
      East
      60th Street, North

    Mail
      Code
      1251

    Sioux
      Falls, South Dakota 57117

    Attention:
       General
      Counsel

    
      	 	
              Fax:

            	 	
              605-330-6745

            

    

    Telephone:
       605-331-1567

     

    Address
      for notices or communications to Counterparty (for all purposes):

     

    Linda
      Cooke

    Telephone:
      (212) 675 - 1627

    Citibank,
      N.A. New York

    111
      Wall
      Street

    4th
      Floor

    New
      York,
      New York 10005

    

     

      In
      addition, in the case of notices or communications relating to

      Section
      5, 6, 11 or 13 of this Agreement, a copy of any such notice or

      communication
      shall be addressed to the attention of Counterparty’s legal

      department
      as follows:

     

      Address: Capital
      Markets Legal Department

    250
      West
      Street, 10th Floor,

    New
      York,
      New York 10013

    Attention:
       Derivative
      Department Head

    
      
      

      
        4

        
          

        

      

      
      

    

    

     

    
      	
              (b)

            	
              Process
                Agent.
                For the purpose of Section 13(c), the Issuer appoints Citigroup Inc.
                as
                its Process Agent.

            

    

     

    
      	
              (c)

            	
              Offices.
                The provisions of Section 10(a) will apply to the Issuer and
                Counterparty.

            

    

     

    
      	
              (d)

            	
              Multibranch
                Party.
                For the purpose of Section 10(c), the Issuer is not a Multibranch
                Party,
                and Counterparty is not a Multibranch
                Party.

            

    

     

    
      	
              (e)

            	
              Calculation
                Agent.
                The Issuer will be the Calculation Agent (it being understood that
                the
                Issuer has appointed Citibank (South Dakota), National Association,
                to
                perform the duties of Calculation Agent hereunder). All calculations
                by
                the Calculation Agent will be made in good faith and through the
                exercise
                of the Calculation Agent’s commercially reasonable judgment. All such
                calculations will be final and binding on Counterparty absent manifest
                error.

            

    

     

    
      	
              (f)

            	
              Credit
                Support Document and Credit Support Provider.
                None.

            

    

     

    
      	
              (g)

            	
              Governing
                Law.
                This Agreement will be governed by and construed in accordance with
                the
                internal laws of the State of New York without reference to its choice
                of
                law doctrine.

            

    

     

    
      	
              (h)

            	
              “Affiliate”
                will have the meaning specified in Section
                14.

            

    

     

    Part
      5. Other
      Provisions.

     

    
      	
              (a)

            	
              Tax
                Treatment.
                For purposes of Federal income taxes, the parties agree (to the extent
                permitted by applicable law) to treat this Agreement as being entered
                into
                between Counterparty, on the one hand, and Citibank (South Dakota),
                National Association on the other hand; provided
                that Counterparty’s compliance with the terms of this Agreement and any
                Confirmation shall not be deemed to violate this
                provision.

            

    

     

    
      	
              (b)

            	
              Definitions.
                The applicability of the 2000 ISDA Definitions (including the Annex
                thereto) and the 1998 ISDA FX and Currency Option Definitions to
                any
                Transaction will be specified in the Confirmation for such
                Transaction.

            

    

     

    
      	
              (c)

            	
              Waiver
                of Jury Trial.
                The following paragraph will be added to this Agreement as a new
                Section
                15:

            

    

     

    “15.
      Jury
      Trial.
      Each
      party hereby waives its respective right to jury trial with respect to any
      litigation arising under, or in connection with, this Agreement or any
      Transaction.”

     

    
      	
              (d)

            	
              Waiver
                of Setoff.
                Notwithstanding any provision of this Agreement or any other existing
                or
                future agreement, each of the Issuer and Counterparty irrevocably
                waives
                any and all rights it may have to set off, net, recoup or otherwise
                withhold or suspend or condition payment or performance of any obligation
                between the Issuer and Counterparty

            

    

    
      
      

      
        5

        
          

        

      

      
      

    

    hereunder
      against any obligations between the Issuer and Counterparty under any other
      agreements or otherwise; provided,
      however,
      that
      nothing herein will affect the netting provisions of
      Section 2(c).

     

    
      	
              (e)

            	
              Consent
                to Recording.
                Each party consents to the monitoring or recording, at any time and
                from
                time to time, by the other party of any and all communications between
                officers or employees of the parties, waives any further notice of
                such
                monitoring or recording and agrees to notify its officers and employees
                of
                such monitoring or recording.

            

    

     

    
      	
              (f)

            	
              No
                Personal Liability.
                The obligations of the Issuer under this Agreement are not personal
                obligations of the Issuer Trustee or the Beneficiaries and, consequently,
                neither the Issuer Trustee nor the Beneficiaries will have any personal
                liability for any amounts required to be paid by the Issuer under
                this
                Agreement.

            

    

     

    
      	
              (g)

            	
              No
                Petition.
                Counterparty hereby agrees that it will not, prior to the date which
                is
                one year and one day after the date on which all notes or securities
                issued by the Issuer have been paid in full, acquiesce, petition
                or
                otherwise invoke or cause the Issuer to invoke the process of any
                governmental authority for the purpose of commencing or sustaining
                a case
                against the Issuer under any United States Federal or state bankruptcy,
                insolvency or similar law or appointing a receiver, liquidator, assignee,
                trustee, custodian, sequestrator or other similar official of the
                Issuer
                or any substantial part of its property or ordering the winding-up
                or
                liquidation of the Issuer.

            

    

     

    
      	
              (h)

            	
              Amendment.
                No
                amendment, modification or waiver in respect of this Agreement will
                be
                effective unless (a) it is made in accordance with Section 9(b) and
                (b)
                each Rating Agency will have notified Counterparty and the Issuer
                that
                such amendment, modification or waiver will not result in a reduction
                or
                withdrawal of the rating of the obligations represented by any
                Notes.

            

    

     

    
      	
              (i)

            	
              Capitalized
                Terms.
                Capitalized terms not otherwise defined herein will, where used herein
                or
                in any Confirmation, have the meanings assigned to them in the Indenture
                and the Terms Document.

            

    

     

    
      	
              (j)

            	
              Third-Party
                Beneficiary and Secured Party.
                Counterparty is a third-party beneficiary of the Indenture and the
                Terms
                Document as a “Derivative Counterparty”. Counterparty is a Secured Party
                that is entitled to the benefit of the Collateral, subject to the
                terms of
                the Indenture.

            

    

     

    
      	
              (k)

            	
              Reports.
                The Issuer will deliver to Counterparty a copy of each report or
                notice
                that it delivers to the holders of the Class 2006-A8 Notes substantially
                concurrently with the delivery of such report or notice to such
                holders.

            

    

     

    
      	
              (l)
                

            	
              Consent
                to Amendment of the Program Documents.
                Before the Issuer makes any amendment or supplement to the Indenture
                or
                the Terms Document, or consents to any amendment or supplement to
                the
                Pooling and Servicing Agreement or the Series 2000 Supplement that
                requires its consent, if such amendment or supplement
                would:

            

    

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    

      

       

      (i)
        adversely affect in any material respect any of Counterparty’s rights or
        obligations under this Agreement or the Transaction, or

       

      (ii)
        modify the obligations of the Issuer, which modification would impair in
        any
        material respect the ability of the Issuer to perform any of its obligations
        under this Agreement or the Transaction,

       

      the
        Issuer shall provide Counterparty with a copy of the proposed amendment or
        supplement and shall obtain the consent of Counterparty to such amendment
        or
        supplement prior to its adoption, which consent shall not be unreasonably
        delayed or withheld; provided,
        however,
        that
        nothing in this section shall require the consent of Counterparty to the
        following actions:

       

      (a)
        the
        issuance of Notes of a new series, class or tranche, or the issuance of
        additional Notes of any outstanding series, class or tranche;

       

      (b)
        any
        amendment or supplement that affects only Notes of a tranche other than the
        Class 2006-A8 Notes;

       

      (c)
        any
        amendment or supplement to evidence the succession of another entity to the
        Issuer, and the assumption by any such successor of the covenants of the
        Issuer
        herein and therein and in the Notes; and

       

      (d)
        any
        amendment or supplement to cure any ambiguity, or to correct or supplement
        any
        provision therein which may be inconsistent with any other provision
        therein.

       

      
        	
                (m)

              	
                Transfer.
                  Section 7 is hereby amended to read in its entirety as
                  follows:

              

      

       

      
        	 	
                (i)
                  

              	
                a
                  party may make such a transfer of this Agreement pursuant to a
                  consolidation or amalgamation with, or merger with or into, or
                  transfer of
                  substantially all of its assets to, another entity, or an incorporation,
                  reincorporation or reconstitution (but without prejudice to any
                  other
                  right or remedy under this Agreement);
                  and

              

      

       

      
        	 	
                (ii)

              	
                in
                  addition to clause (i) above, Counterparty may transfer this Agreement
                  to
                  any other of Counterparty’s offices, branches or affiliates (“Transferee”);
                  provided,
                  however,
                  that, (i) as of the date of such transfer neither the Transferee
                  nor
                  Issuer will be required to withhold or deduct on account of Tax
                  from any
                  payments under this Agreement; (ii) a Termination Event or Event
                  of
                  Default does not occur under this Agreement as a result of such
                  transfer;
                  (iii) Counterparty (at its expense) will have delivered to the
                  Issuer, the
                  Trustee and the Rating Agencies a Master Trust Tax Opinion and
                  an Issuer
                  Tax Opinion with respect to such transfer, (iv) such Transferee has a
                  rating of at least “AA” from at least one

              

      

       

      
        
        

        
          7

          
            

          

        

        
        

      

      nationally
        recognized rating agency, (v) the Issuer has received written confirmation
        from
        the applicable Rating Agencies that such transfer will not have a Ratings
        Effect
        on any Outstanding Notes, and (vi) the Transferee executes an Assumption
        Agreement and such other documentation as shall be required by
        Counterparty.

       

      
        	
                (n)
                  

              	
                Relationship
                  Between Parties.
                  Each party will be deemed to represent to the other party on the
                  date on
                  which it entered into a Transaction
                  that:

              

      

       

      
        	 	
                (i)

              	
                Non-Reliance.
                  It is acting for its own account, and it made its own independent
                  decisions to enter into that Transaction and as to whether that
                  Transaction is appropriate or proper for it based upon its own
                  judgment
                  and upon advice from such advisers as it has deemed necessary.
                  It is not
                  relying on any communication (written or oral) of the other party
                  as
                  investment advice or as a recommendation to enter into that Transaction;
                  it being understood that information and explanations related to
                  the terms
                  and conditions of a Transaction shall not be considered investment
                  advice
                  or a recommendation to enter into that Transaction. No communication
                  (written or oral) received from the other party shall be deemed
                  to be an
                  assurance or guarantee as to the expected results of that
                  Transaction.

              

      

       

      
        	 	
                (ii)

              	
                Assessment
                  and Understanding.
                  It is capable of assessing the merits of and understanding (on
                  its own
                  behalf or through independent professional advice), and understands
                  and
                  accepts, the terms, conditions and risks of that Transaction. It
                  is also
                  capable of assuming, and assumes, the risks of that
                  Transaction.

              

      

       

      
        	 	
                (iii)

              	
                Status
                  of Parties.
                  The other party is not acting as a fiduciary for or an adviser
                  to it in
                  respect of that Transaction.

              

      

       

      
        	
                (o)

              	
                Eligible
                  Contract Participant.
                  Each party hereto represents to the other party on and as of the
                  date
                  hereof and on each date on which a Transaction is entered into
                  between
                  them, that: (a) it is an “eligible contract participant” within the
                  meaning of Section 1a(12) of the Commodity Exchange Act, as amended;
                  (b)
                  this Agreement and each Transaction is subject to individual negotiation
                  by each party hereto; and (c) neither this Agreement nor any Transaction
                  will be executed or traded on a “trading facility” within the meaning of
                  Section 1a(33) of the Commodity Exchange Act, as
                  amended.

              

      

       

      
        	
                (p)

              	
                Severability.
                  In the event that any one or more of the provisions contained in
                  this
                  Agreement should be held invalid, illegal, or unenforceable in
                  any
                  jurisdiction, the validity, legality and enforceability of the
                  remaining
                  provisions contained herein shall not in any way be affected or
                  impaired
                  thereby. The parties shall endeavor, in good faith negotiations,
                  to
                  replace such invalid, illegal or unenforceable provisions with
                  valid
                  provisions, the economic effect of which comes as close as possible
                  to
                  that of such invalid, illegal or unenforceable
                  provisions.

              

      

      

       

      8Placement Agency Agreement

    Exhibit
      10.1

     

    

      

      NEUROGEN
        CORPORATION

      (a
        Delaware Corporation)

      6,993,000
        Shares of Common Stock

      (Par
        Value $0.025 Per Share)

      

      

      PLACEMENT
        AGENCY AGREEMENT

      

      December
        18, 2006

      

      Pacific
        Growth Equities, LLC

      CIBC
        World Markets Corp.

      Leerink
        Swann & Company

      Merriman
        Curhan Ford & Co.

      c/o
        Pacific Growth Equities, LLC

      One
        Bush
        Street, Suite 1700

      San
        Francisco, CA 94104

      Attn:
        Richard Osgood

      

      Ladies
        and Gentlemen:

       

      Neurogen
        Corporation, a Delaware corporation (the “Company”), proposes, subject to the
        terms and conditions contained herein, to issue and sell 6,993,000 shares
        of
        common stock, par value $0.025 per share, of the Company (the “Securities”)
        directly to certain investors (collectively, the “Investors”).

      

      The
        Company desires to engage Pacific Growth Equities, LLC (“PGE”),
        CIBC
        World Markets Corp. (“CIBC”), Leerink Swann & Company (“Leerink”) and
        Merriman Curhan Ford & Co. (“Merriman”) as its placement agents (each, a
“Placement Agent” and, collectively, the “Placement Agents”), for whom PGE
is
        acting
        as representative (in such capacity, the “Representative”), in connection with
        the issuance and sale of the Securities and hereby
        confirms its agreement with respect to the placement of the Securities.

       

      The
        Company has prepared and filed in conformity with the requirements of the
        Securities Act of 1933, as amended (the “Act”), and the published rules and
        regulations thereunder (the “Rules and Regulations”) adopted by the Securities
        and Exchange Commission (the “Commission”) a Registration Statement (as
        hereinafter defined)
        on Form S-3, initially filed on August 16, 2002, as amended (No. 333-98237),
        relating
        to the Securities and the offering thereof from time to time in accordance
        with
        Rule 415 of the Rules and Regulations, and such amendments thereof as may
        have
        been required. The Registration Statement includes a prospectus dated February
        13, 2003 (the “Base Prospectus”). The Company has filed the Base Prospectus with
        the Commission and has filed with, or transmitted for filing to, or shall
        promptly hereafter file with or transmit for filing to the Commission, a
        prospectus supplement relating to the Securities in accordance with Rule
        424(b)
        under the Act (the “Final Prospectus Supplement”). The term “Registration
        Statement” as used in this Agreement means the initial registration statement
        (including all exhibits, financial schedules and all documents and information
        deemed to be a part of the Registration
        Statement (through incorporation by reference or otherwise)), as amended,
        at the
        time and on the date it became effective (the “Effective Date”), including the
        information (if any) contained in the form of final prospectus filed with
        the
        Commission pursuant to Rule 424(b) of the Rules and Regulations and deemed
        to be
        part thereof at the time of effectiveness pursuant to Rule 430A of the Rules
        and
        Regulations. The term “Prospectus” as used in this Agreement means the Base
        Prospectus together with the Final Prospectus Supplement. As used herein,
        the
        terms “Base Prospectus,” “Prospectus,” “Registration Statement,” and “Final
        Prospectus Supplement” shall include any documents incorporated by reference
        therein and any reference to any amendment or supplement to the Registration
        Statement or the Prospectus shall be deemed to refer to and include any document
        filed under the Securities Exchange Act of 1934, as amended (the “Exchange
        Act”), after the date of the Base Prospectus by the Company with the Commission
        and on or before the Closing Date (as defined herein), that is deemed to
        be
        incorporated by reference in the Registration Statement or the Prospectus.
        The
        Company hereby confirms
        that each of the Placement Agents, in connection with its duties in such
        capacity, is authorized to distribute or cause to be distributed the Prospectus
        (as from time to time amended or supplemented if the Company furnishes
        amendments or supplements thereto to such Placement Agent).

       

      All
        references in this Agreement to financial statements and schedules and other
        information which is “contained,” “included” or “stated” in the Registration
        Statement or the Prospectus (or other references of like import) shall be
        deemed
        to mean and include all such financial statements and schedules and other
        information which is incorporated by reference in the Registration Statement
        or
        the Prospectus, as the case may be; and all references in this Agreement
        to
        amendments or supplements to the Registration Statement or the Prospectus
        shall
        be deemed to mean and include the filing of any document under the Exchange
        Act
        on or before the Closing Date (as defined herein), which is incorporated
        by
        reference in the Registration Statement or the Prospectus, as the case may
        be.

       

      SECTION
        1.  Agreement
        to Act
        as
        Placement Agents; Delivery and Payment.

       

      On
        the
        basis of the representations, warranties and agreements contained in, and
        subject to the terms and conditions of, this Agreement:

       

      (a)  Each
        Placement
        Agent agrees to act, on a reasonable efforts basis, as the Company’s placement
        agent in connection with the issuance and sale by the Company of the Securities
        to the Investors. The Placement Agents shall have no authority to bind the
        Company. The Company acknowledges and agrees that each Placement Agent’s
        engagement hereunder is not an agreement by such Placement Agent or any of
        its
        affiliates to underwrite or purchase any securities or otherwise provide
        any
        financing.

       

      (b)  Concurrently
        with the execution and delivery of this Agreement, the Company, the Placement
        Agents, and American Stock Transfer & Trust Company, as escrow agent (the
“Escrow Agent”), shall enter into an Escrow Agreement substantially in the form
        of Exhibit
        A
        attached
        hereto (the “Escrow Agreement”), pursuant to which an escrow account will be
        established, at the Company’s expense, for the benefit of the Company and the
        Investors (the “Escrow Account”). Concurrently with the execution of the
        Purchase Agreements (as defined below), (i) each of the Investors will deposit
        in the Escrow Account an amount equal to $5.72 per share multiplied by the
        number of Securities to be purchased by such Investor, and (ii) the Escrow
        Agent
        will notify the Company and the Placement Agents in writing of the amount
        of
        funds deposited in the Escrow Account. As compensation for their services
        hereunder, the Company agrees to pay the Placement Agents, on the Closing
        Date
        (as defined herein), a commission of six percent (6%) of the gross proceeds
        received by the Company from the sale of the Securities, thirty-four
        percent (34%) of which will be paid to PGE, thirty percent (30%) of which
        will
        be paid to CIBC, thirty percent (30%) of which will be paid to Leerink, and
        six
        percent (6%) of which will be paid to Merriman (regardless of the actual
        amount
        of Securities placed by each Placement Agent);notwithstanding
        the foregoing,
        the
        Placement Agents and the Company agree that
        commissions on sales of Securities to
        investors identified in Schedule
        A
        will be
limited
        to
        one and
        one half percent (1.5%)
        of
        gross proceeds raised from such investors. In addition, the Company agrees
        to
        pay PGE a fee of $75,000 for capital markets expenses. 

       

      (c)  At
        9:00
        a.m., New York City time, on December 21, 2006, or at such other time and
        date
        as the Representative and the Company determine pursuant to Rule 15c6-1(a)
        under
        the Exchange Act (such time and date of delivery being herein referred to
        as the
“Closing Date”), and upon satisfaction of the conditions set forth in this
        Agreement and the Purchase Agreements, the Company shall deliver the Securities,
        which shall be registered in name or names and shall be in such denominations
        as
        the Placement Agents may request at least one business day before the Closing
        Date, to the Investors, which delivery may be made through the facilities
        of the
        Depository Trust Company, and the Escrow Agent will disburse the funds from
        the
        Escrow Account to the Company and the Placement Agents, by wire in federal
        (same
        day) funds, as provided in the Escrow Agreement. The closing of the sale
        of the
        Securities to the Investors (the “Closing”) shall take place at the offices of
        Latham & Watkins LLP, 885 Third Avenue, Suite 1000, New York, New York
        10022. All actions taken at the Closing shall be deemed to have occurred
        simultaneously.

       

      (d)  The
        several purchases of the Securities by the Investors shall be evidenced by
        the
        execution of one or more purchase agreements substantially in the form attached
        hereto as Exhibit
        B
        (the
“Purchase Agreements”).

       

      (e)  Prior
        to
        the earlier of (i) the date on which this Agreement is terminated and (ii)
        the
        Closing Date, the Company shall not, without the prior consent of the
        Representative, solicit or accept offers to purchase shares of its Common
        Stock
        (other than pursuant to the exercise of stock options and warrants to purchase
        Common Stock outstanding on the date hereof), otherwise than through the
        Placement Agents.

       

      SECTION
        2.  Representations
        and Warranties.

       

      (a)  Representations
        and Warranties by the Company.
        The
        Company represents and warrants to each Placement Agent as of the date hereof,
        and as of the Closing Date referred to in Section 1(c) hereof, and agrees
        with
        each Placement Agent, as follows:

       

      (i)  Registration
        Statement, Prospectus and Disclosure at Time of Sale.
        The
        Company meets the requirements for use of Form S-3 under the Act and has
        complied with the requirements of Rule 415 with respect to the Registration
        Statement. Each
        of
        the Registration Statement and any post-effective amendment thereto has become
        effective under the Act and no stop order preventing or suspending the use
        of
        the Prospectus or suspending the effectiveness of the Registration Statement
        has
        been issued under the Act and no proceedings for that purpose have been
        instituted or are pending or, to the knowledge of the Company, are contemplated
        by the Commission, and any request received by the Company on the part of
        the
        Commission for additional information has been complied with.

       

      On
        the
        Effective Date and on the Closing Date, the Registration Statement complied
        in
        all material respects, and on the date of the Prospectus, the date any
        Prospectus Supplement or amendment to the Prospectus is filed with the
        Commission and the Closing Date, the Prospectus will comply, in all material
        respects, with the requirements of the Act and the Rules and Regulations
        and the
        Exchange Act and the published rules and regulations of the Commission
        thereunder. The Registration Statement, as of the Effective Date, contained
        no
        untrue statement of a material fact or omitted to state a material fact required
        to be stated therein or necessary in order

      to
        make
        the statements therein not misleading. As
        of the
        Applicable Time and at the Closing Date, neither (x) any Issuer-Represented
        General Free Writing Prospectus(es) (as defined below) issued at or prior
        to the
        Applicable Time (as defined below), the Base Prospectus and the information
        included on Exhibit
        E
        hereto,
        all considered together (collectively, the “General Disclosure Package”), nor
        (y) any individual Issuer-Represented Limited Use Free Writing Prospectus,
        when
        considered together with the General Disclosure Package, contained an untrue
        statement of a material fact or omitted to state a material fact required
        to be
        stated therein or necessary in order to make the statements therein, in the
        light of the circumstances under which they were made, not
        misleading.
        On the
        date of the filing of the Prospectus with the Commission, the first delivery
        of
        the Prospectus to the Investors, the date hereof, and the Closing Date, neither
        the Prospectus nor any amendment thereof or supplement thereto, contained
        or
        will contain any untrue statement of a material fact or omitted or will omit
        to
        state any material fact required to be stated therein or necessary in order
        to
        make the statements therein, in light of the circumstances under which they
        were
        made, not misleading. Notwithstanding the foregoing, none of the representations
        and warranties in this Section 2(a)(i) shall apply to statements in, or
        omissions from, the Registration Statement or the Prospectus made in reliance
        upon, and in conformity with, information furnished in writing to the Company
        by
        any Placement Agent through the Representative expressly for use in the
        Registration Statement or the Prospectus. 

      

      The
        Prospectus delivered to the Placement Agents for use in connection with this
        offering was identical to the electronically transmitted copies thereof filed
        with the Commission pursuant to EDGAR, except to the extent permitted by
        Regulation S-T. The Company has not distributed any offering material in
        connection with the offering and sale of the Securities, other than the
        Registration Statement, the Prospectus and the General Disclosure Package.
        

       

      As
        used
        in this subsection and elsewhere in this Agreement:

      “Applicable
        Time” means 9:00
        a.m.
        (New York City time) on December 19, 2006. 

      “Issuer-Represented
        Free Writing Prospectus” means any “issuer free writing prospectus,” as defined
        in Rule 433 of the Rules and Regulations (“Rule 433”), relating to the
        Securities that (i) is required to be filed with the Commission by the Company
        or (ii) is a “road show that is a written communication” within the meaning of
        Rule 433(d)(8)(i), whether or not required to be filed with the
        Commission
        or is
        exempt from filing pursuant to Rule 433(d)(5)(i) because it contains a
        description of the Securities or of the offering that does not reflect the
        final
        terms, in each case in the form filed or required to be filed with the
        Commission or, if not required to be filed, in the form retained in the
        Company’s records pursuant to Rule 433(g).

      “Issuer-Represented
        General Free Writing Prospectus” means any Issuer-Represented Free Writing
        Prospectus that is intended for general distribution to prospective investors,
        as evidenced by its being specified in Schedule
        C
        hereto. 

      “Issuer-Represented
        Limited Use Free Writing Prospectus” means any Issuer-Represented Free Writing
        Prospectus that is not an Issuer-Represented General Free Writing Prospectus.
        

      Each
        Issuer-Represented Free Writing Prospectus, as of its issue date and at all
        subsequent times through the Closing Date or until any earlier date that
        the
        issuer notified or notifies the Representative, did not, does not and will
        not
        include any information that conflicted, conflicts or will conflict with
        the
        information contained in the Registration Statement or the Prospectus,
        including any document incorporated by reference therein and any preliminary
        or
        other prospectus deemed to be a part thereof that has not been superseded
        or
        modified.

      

      The
        documents incorporated by reference in the Registration Statement and the
        Prospectus, at the time they became effective or were filed with the Commission,
        as the case may be, complied in all material respects with the requirements
        of
        the Act or the Exchange Act, as applicable, and the rules and regulations
        of the
        Commission thereunder, and at the time they became effective or were filed
        with
        the Commission, as the case may be, none of such documents contained an untrue
        statement of a material fact or omitted to state a material fact required
        to be
        stated therein or necessary in order to make the statements therein, in the
        light of the circumstances under which they were made, not misleading, and
        any
        further documents so filed and incorporated by reference in the Registration
        Statement and the Prospectus, when such documents become effective or are
        filed
        with the Commission, as the case may be, will conform in all material respects
        to the requirements of the Act or the Exchange Act, as applicable, and the
        rules
        and regulations of the Commission thereunder and will not contain an untrue
        statement of a material fact or omit to state a material fact required to
        be
        stated therein or necessary to make the statements therein, in light of the
        circumstances under which they are made, not misleading. Notwithstanding
        anything to the contrary contained in this subsection, the representations
        and
        warranties contained in this subsection do not apply to statements or omissions
        made in reliance upon and in conformity with information furnished in writing
        to
        the Company by any Placement Agent or any of its agents or representatives
        through the Representative expressly for use in the Registration Statement,
        the
        Prospectus or any amendment or supplement thereto.

       

      (ii)  Independent
        Accountants.
        PricewaterhouseCoopers LLP, which certified the financial statements and
        supporting schedules included in the Registration Statement or incorporated
        by
        reference in the Registration Statement or the Prospectus, is an independent
        public accountant as required by the Act and the Rules and Regulations.

       

      (iii)  Financial
        Statements.
        The
        financial statements of the Company included or incorporated by reference
        in the
        Registration Statement, the General Disclosure Package and the Prospectus,
        together with the related schedules and notes, present fairly the financial
        position of the Company and its consolidated subsidiaries at
        the
        dates indicated and the statement of operations, stockholders’ equity and cash
        flows of the Company and its consolidated subsidiaries for the periods
        specified; said financial statements have been prepared in conformity with
        generally accepted accounting principles (“GAAP”) applied on a consistent basis
        throughout the periods involved. The supporting schedules included in the
        Registration Statement present fairly in accordance with GAAP the information
        required to be stated therein, unless otherwise noted therein. The selected
        financial data and the summary financial information included or incorporated
        by
        reference in the Prospectus present fairly the information shown therein
        and
        have been compiled on a basis consistent with that of the audited financial
        statements included or incorporated by reference in the Registration Statement.
        No other financial statements or schedules are required to be included in
        the
        Registration Statement or Prospectus. Any disclosures contained in the
        Registration Statement, the General Disclosure Package or the Prospectus
        regarding “non-GAAP financial measures” (as such term is defined by the rules
        and regulations of the Commission) comply with Regulation G of the Exchange
        Act
        and Item 10 of Regulation S-K under the Act, to the extent applicable. Except
        as
        described in the Prospectus or Registration Statement, there are no material
        off-balance sheet transactions, arrangements, obligations (including contingent
        obligations), or any other relationships with unconsolidated entities or
        other
        persons, that may have a material effect on the Company’s financial condition,
        changes in financial condition, results of operations, liquidity, capital
        expenditures, capital resources or significant components of revenue or
        expenses.No
        Material Adverse Change in Business.
        Since
        the respective dates as of which information is given in the Registration
        Statement,
        the
        General Disclosure Package
        and the
        Prospectus, except as otherwise stated therein, (A) there has been no
        material adverse change, or any development that would be reasonably expected
        to
        result in a material adverse change, in the condition, financial or otherwise,
        or in the earnings or business affairs of the Company and its subsidiaries
        taken
        as a whole, whether or not arising in the ordinary course of business (a
        “Material Adverse Effect”), (B) there have been no transactions entered
        into by the Company or any of its subsidiaries, other than those in the ordinary
        course of business, which are material with respect to the Company and its
        subsidiaries taken as a whole, and (C) there
        has
        been no dividend or distribution of any kind declared, paid or made by the
        Company on any class of its capital stock.

       

      (iv)  Good
        Standing of the Company.
        The
        Company has been duly organized and is validly existing as a corporation
        in good
        standing under the laws of the State of Delaware and has full corporate power
        and authority to own, lease and operate its properties and to conduct its
        business as described in the Prospectus and
        the
        General Disclosure Package
        and to
        enter into and perform its obligations under this Agreement, the Escrow
        Agreement, and the Purchase Agreements; and the Company is duly qualified
        as a
        foreign corporation to transact business and is in good standing in each
        other
        jurisdiction in which such qualification is required, whether by reason of
        the
        ownership or leasing of property or the conduct of business, except where
        the
        failure so to qualify or to be in good standing would not reasonably be expected
        to result in a Material Adverse Effect.

       

      (v)  Good
        Standing of Subsidiary.
        Neurogen
        Properties, LLC
        (the
“Subsidiary”) has been duly formed and is validly existing as a limited
        liability company in good standing under the laws of the jurisdiction of
        its
        formation, has limited liability company power and authority to own, lease
        and
        operate its properties and to conduct its business as described in the
        Prospectus and the
        General Disclosure Package,
        and is
        duly qualified as a foreign limited liability company to transact business
        and
        is in good standing in each jurisdiction in which such qualification is
        required, whether by reason of the ownership or leasing of property or the
        conduct of business, except where the failure so to qualify or to be in good
        standing would not reasonably be expected to result in a Material Adverse
        Effect; except as otherwise disclosed in the Registration Statement,
the
        General Disclosure Package and the Prospectus,
        all of
        the issued and outstanding membership interests of the Subsidiary have been
        duly
        authorized and validly issued, is fully paid and non-assessable and is owned
        by
        the Company, directly or through subsidiaries, free and clear of any security
        interest, mortgage, pledge, lien, encumbrance, claim or equity; none of the
        outstanding membership interests of the Subsidiary were issued in violation
        of
        the preemptive or similar rights of any securityholder of the Subsidiary.
        The
        only subsidiary of the Company is the subsidiary listed on Exhibit 21.1 to
        the
        Company’s Annual Report on Form 10-K for the year ended December 31,
        2005.

       

      (vi)  Capitalization.
        The
        authorized capital stock of the Company consists of 50,000,000 shares of
        common
        stock, par value $0.025 per share (the “Common Stock”), and 2,000,000 shares of
        preferred stock, par value $0.025 per share (the “Preferred Stock”). After
        giving effect to the transactions contemplated by this Agreement, as of the
        date
        hereof:

       

      (A)  The
        issued
        and outstanding capital stock of the Company will consist of 41,773,465 shares
        of Common Stock and zero (0) shares of Preferred Stock; and

       

      (B)  The
        Company will have (x) an aggregate of 5,276,367 shares of Common Stock reserved
        for issuance upon the exercise of outstanding options granted under the
        Company’s outstanding option plans and employee stock purchase programs
        (collectively, the “Option Plans”), (y) zero (0) shares of Common Stock reserved
        for issuance upon the exercise of outstanding warrants, and (z) zero (0)
        shares
        of Common Stock reserved for issuance upon conversion of its convertible
        indebtedness. 

       

      All
        of
        the shares of issued and outstanding capital stock of the Company have been
        duly
        authorized and validly issued and are fully paid and non-assessable; none
        of the
        outstanding shares of capital stock of the Company was issued in violation
        of
        the preemptive or other similar rights of any securityholder of the
        Company.

       

      (vii)  Authorization
        of Agreement.
        The
        Company has full corporate power and authority to (a) enter into this Agreement,
        the Escrow Agreement and the Purchase Agreements and to consummate the
        transactions contemplated hereby and thereby, and (b) authorize, execute,
        issue,
        and deliver the Securities as contemplated by this Agreement, the Escrow
        Agreement and the Purchase Agreements. This
        Agreement, the Escrow Agreement, and
        the
        Purchase Agreements have been duly authorized, executed and delivered by
        the
        Company, and constitute legal and binding obligations of the Company,
        enforceable in accordance with their terms, except to the extent that rights
        to
        indemnity hereunder may be limited by federal or state securities laws and
        except as such enforceability may be limited by bankruptcy, fraudulent
        conveyance, insolvency, reorganization or similar laws affecting the rights
        of
        creditors generally and subject to general principles of equity. 

       

      (viii)  Authorization
        and Description of Securities.
        The
        Securities to be purchased by the Investors from the Company have been duly
        authorized for issuance and sale to the Investors pursuant to this Agreement
        and, when issued and delivered by the Company pursuant to this Agreement
        against
        payment of the consideration set forth in the Purchase Agreements, will be
        validly issued and fully paid and non-assessable; the Common Stock conforms
        in
        all material respects to all statements relating thereto contained in the
        Prospectus and the
        General Disclosure Package
        and such
        description conforms in all material respects to the rights set forth in
        the
        instruments defining the same; no holder of the Securities will be subject
        to
        personal liability by reason of being such a holder; and the issuance of
        the
        Securities is not subject to the preemptive or other similar rights of any
        securityholder of the Company, with the exception of any such rights which
        have
        been waived by the holder thereof.

       

      (ix)  Absence
        of Defaults and Conflicts.
        Neither
        the Company nor any of its subsidiaries is (A) in violation of its charter
        or
        by-laws, or (B) except
        for such defaults that would not, individually or in the aggregate, reasonably
        be expected to result in a Material Adverse Effect,
        in
        default in the performance or observance of any obligation, agreement, covenant
        or condition contained in any material contract, indenture, mortgage, deed
        of
        trust, loan or credit agreement, note, lease or other agreement or instrument
        to
        which the Company or any of its subsidiaries is a party or by which it or
        any of
        them may be bound, or to which any of the property or assets of the Company
        or
        any subsidiary is subject (collectively, “Agreements and Instruments”) and the
        execution, delivery and performance of this Agreement and the consummation
        of
        the transactions contemplated herein and in the Registration Statement,
the
        General Disclosure Package and the Prospectus
        (including the issuance and sale of the Securities and the use of the proceeds
        from the sale of the Securities as described in the Prospectus under the
        caption
“Use of Proceeds”) and compliance by the Company with its obligations hereunder,
        have been duly authorized by all necessary corporate action and do not and
        will
        not, whether with or without the giving of notice or passage of time or both,
        conflict with or constitute a breach of,or
        default or Repayment Event (as defined below) under, or result in the creation
        or imposition of any lien, charge or encumbrance upon any property or assets
        of
        the Company or any subsidiary pursuant to, the Agreements and Instruments
        (except for such conflicts, breaches, defaults or Repayment Events or liens,
        charges or encumbrances that would not be reasonably likely to result in
        a
        Material Adverse Effect), nor will such action result in (C) any violation
        of
        the provisions of the charter or by-laws of the Company or any subsidiary
        or (D)
        except for such violations that would not, individually or in the aggregate,
        reasonably be expected to result in a Material Adverse Effect, a violation
        of
        any applicable law, statute, rule, regulation, judgment, order, writ or decree
        of any government, government instrumentality or court, domestic or foreign,
        having jurisdiction over the Company or any subsidiary or any of their assets,
        properties or operations. As used herein, a “Repayment Event” means any event or
        condition which gives the holder of any note, debenture or other evidence
        of
        indebtedness (or any person acting on such holder’s behalf) the right to require
        the repurchase, redemption or repayment of all or a portion of such indebtedness
        by the Company or any subsidiary of the Company.

       

      (x)  Absence
        of Labor Dispute.
        No
        material labor dispute with the employees of the Company or any subsidiary
        exists or, to the knowledge of the Company, is imminent, and the Company
        is not
        aware of any existing or imminent labor disturbance by the employees of any
        of
        its or any of its subsidiaries’ principal suppliers, manufacturers, customers or
        contractors, which, in either case, would result in a Material Adverse
        Effect.

       

      (xi)  Absence
        of Proceedings.
        There
        is no claim, action, suit, proceeding, inquiry, audit, review or investigation
        before or brought by any court or governmental agency or body, domestic or
        foreign, now pending, or, to the knowledge of the Company, threatened against
        the Company or any subsidiary of the Company, or, to the knowledge of the
        Company, otherwise involving the Company or any subsidiary of the Company
        which
        is required to be disclosed in the Registration Statement (other than as
        disclosed therein), or which would be
        reasonably likely to
        result
        in a Material Adverse Effect, or which would be reasonably likely to materially
        and adversely affect the consummation of the transactions contemplated in
        this
        Agreement or the performance by the Company of its obligations hereunder;
        the
        aggregate of all pending legal or governmental proceedings to which the Company
        or any subsidiary is a party or of which any of their respective property
        or
        assets is the subject which are not described in the Registration Statement,
        including ordinary routine litigation incidental to the Company’s conduct of its
        business, would not be reasonably
        likely to result
        in
        a Material Adverse Effect.

       

      (xii)  Absence
        of Rulemaking or Similar Proceedings.
        To the
        Company’s knowledge, there are no rulemaking or similar proceedings before the
        Food and Drug Administration, the Department of Health and Human Services,
        the
        Centers for Medicare and Medicaid Services or any other federal, state, local
        or
        foreign governmental bodies that regulate the Company’s or any of its
        subsidiaries’ activities, which would reasonably be expected to have a Material
        Adverse Effect.

       

      (xiii)  Accuracy
        of Descriptions and Exhibits.
        There
        are no statutes, regulations, contracts or documents which are required to
        be
        described in the Registration Statement or the Prospectus or to be filed
        as
        exhibits thereto which have not been so described and filed as
        required.

       

      (xiv)  Possession
        of Intellectual Property.
        The Company
        and its subsidiaries own or license or have rights to use, make, sell, and
        otherwise exploit, all Intellectual Property necessary for the conduct of
        the
        Company’s business as now conducted except as such failure to own or license
        such rights would not have a Material Adverse Effect. To the knowledge of
        theCompany,
        there is no infringement, misappropriation or violation by other parties
        of any
        Intellectual Property described in the preceding sentence, except as such
        infringement, misappropriation or violation would not reasonably be expected
        to
        have a Material Adverse Effect. There is no pending,
        or,
        to
        the knowledge of the Company, threatened action, suit, proceeding or claim
        by
        others to which the Company or any of its subsidiaries is a party, or to
        the
        knowledge of the Company, otherwise challenging the Company’s or its
        subsidiaries’ rights in or to, or exploitation of, any such Intellectual
        Property, and the Company has
        no
        knowledge
        of any
        facts which would form a reasonable basis for any such claim. The Intellectual
        Property owned by the Company and, to the knowledge of the Company, the
        Intellectual Property licensed to the Company have not been adjudged invalid
        or
        unenforceable, in whole or in part, and there is no pending or, to
        the
        knowledge of the Company, threatened
        action, suit, proceeding or claim by others challenging the validity or scope
        of
        any Intellectual Property, and the Company has
        no
        knowledge of
        any
        facts which would form a reasonable basis for any such claim. There is no
        pending or to
        the
        knowledge of the Company, threatened
        action, suit, proceeding or claim by others that the Company infringes,
        misappropriates or otherwise violates any Intellectual Property or other
        proprietary rights of others, and the Company has not received any written
        notice of such claim and has no
        knowledge
        of any
        other fact which would form a reasonable basis for any such claim. To the
        Company’s knowledge, no employee or independent contractor of the Company is in
or
        has
        ever been in violation of any term
        of
        any employment contract, patent disclosure agreement, invention assignment
        agreement, non-competition agreement, non-solicitation agreement, nondisclosure
        agreement or any restrictive covenant to or with a former employer or
        independent contractor where the basis of such violation relates to such
        employee’s employment or independent contractor’s engagement with the Company or
        actions undertaken while employed or engaged with the Company, except as
        such
        violation would not reasonably be expected to have a Material Adverse Effect.
        “Intellectual
        Property” shall mean all patents, patent rights, patent applications, trade and
        service marks, trade and service mark registrations, trade names, copyrights,
        licenses, inventions, trade secrets, technology, know-how and other unpatented
        and/or unpatentable proprietary or confidential information, systems or
        procedures owned, licensed or used by the Company.

       

      (xv)  Absence
        of Further Requirements.
        No
        filing with, or authorization, approval, consent, license, order, registration,
        qualification or decree of, any court or governmental authority or agency
        is
        necessary or required for the performance by the Company of its obligations
        hereunder, in connection with the offering, issuance or sale of the Securities
        hereunder or the consummation of the transactions contemplated by this
        Agreement, except such as (i) have been already obtained or made, (ii) as
        may be
        required under the Act or the Rules and Regulations or state securities laws,
        or
        (iii) with respect to the listing of the Securities on the Nasdaq Global
        Market
        which will be made prior to the Closing.

       

      (xvi)  Absence
        of Manipulation.
        Neither
        the Company nor, to the knowledge of the Company any affiliate of the Company
        has taken, nor will the Company or, to the knowledge of the Company, any
        affiliate take, directly or indirectly, any action which is designed to or
        which
        has constituted or which would be expected to cause or result in stabilization
        or manipulation of the price of any security of the Company to facilitate
        the
        sale or resale of the Securities.

       

      (xvii)  Possession
        of Licenses and Permits.
        The
        Company and its subsidiaries possess such regulatory and quasi-regulatory
        permits, licenses, approvals, consents and other authorizations (collectively,
        “Governmental Licenses”) issued by the appropriate federal, state, local or
        foreign regulatory agencies or bodies necessary to conduct the business now
        operated by them, except where the failure so to possess would not, singly
        or in
        the aggregate, reasonably
        be expected to result
        in
        a Material Adverse Effect; the Company and its subsidiaries are incompliance
        with the terms and conditions of all such Governmental Licenses, except where
        the failure so to comply would not, singly or in the aggregate, reasonably
        be expected to result
        in
        a Material Adverse Effect; all of the Governmental Licenses are valid and
        in
        full force and effect, except when the invalidity of such Governmental Licenses
        or the failure of such Governmental Licenses to be in full force and effect
        would not, singly or in the aggregate, reasonably
        be expected to result
        in
        a Material Adverse Effect; and neither the Company nor any of its subsidiaries
        has received notice of any proceedings relating to the revocation or
        modification of any such Governmental Licenses which, singly or in the
        aggregate, if the subject of an unfavorable decision, ruling or finding,
        would
reasonably
        be expected to result
        in
        a Material Adverse Effect.

       

      (xviii)  Regulatory
        Authorities.
        Except
        as described in the Prospectus, the
        General Disclosure Package
        and the
        Registration Statement, each of the Company and its subsidiaries: (a) is
        and at
        all times has been in material compliance with all statutes, rules or
        regulations applicable to the ownership, testing, development, manufacture,
        packaging, processing, use, distribution, marketing, labeling, promotion,
        sale,
        offer for sale, storage, import, export or disposal of any product manufactured
        or distributed by the Company (“Applicable Laws”); (b) has not received any FDA
        Form 483, notice of adverse finding, warning letter, untitled letter or other
        correspondence or notice from the U.S. Food and Drug Administration or any
        other
        federal, state or foreign governmental authority having authority over the
        Company (“Governmental Authority”) alleging or asserting material noncompliance
        with any Applicable Laws or any licenses, certificates, approvals, clearances,
        authorizations, permits and supplements or amendments thereto required by
        any
        such Applicable Laws (“Authorizations”); (c) possesses all Authorizations
        (except
        as
        would not reasonably be expected to have a Material Adverse Effect)
        and such
        Authorizations are valid and in full force and effect and are not in material
        violation of any term of any such Authorizations (except
        as
        would not reasonably be expected to have a Material Adverse Effect);
        (d) has
        not received notice of any claim, action, suit, proceeding, hearing,
        enforcement, investigation, arbitration or other action from any Governmental
        Authority or third party alleging that any product, operation or activity
        is in
        violation of any Applicable Laws or Authorizations and have no knowledge
        that
        any such Governmental Authority or third party is considering any such claim,
        litigation, arbitration, action, suit, investigation or proceeding; (e) has
        not
        received notice that any Governmental Authority has taken, is taking or intends
        to take action to limit, suspend, modify or revoke any Authorizations and
        has no
        knowledge that any such Governmental Authority is considering such action;
        and
        (f) has filed, obtained, maintained or submitted all material reports,
        documents, forms, notices, applications, records, claims, submissions and
        supplements or amendments as required by any Applicable Laws or Authorizations
        and that all such reports, documents, forms, notices, applications, records,
        claims, submissions and supplements or amendments were materially complete
        and
        correct on the date filed (or were corrected or supplemented by a subsequent
        submission).

       

      The
        studies, tests and preclinical and clinical trials conducted by or on behalf
        of
        the Company and each of its subsidiaries were and, if still pending, are
        being
        conducted in all material respects in accordance with experimental protocols,
        procedures and controls pursuant to accepted professional scientific standards
        and all Applicable Laws and Authorizations, including, without limitation,
        the
        Federal Food, Drug and Cosmetic Act and implementing regulations at 21 C.F.R.
        Parts 50, 54, 56, 58 and 312; the descriptions of the results of such studies,
        tests and trials contained in the Prospectus, the
        General Disclosure Package
        and the
        Registration Statement are accurate and complete in all material respects
        and
        fairly present the data derived from such studies, tests and trials; except
        to
        the extent disclosed in the Prospectus, the
        General Disclosure Package
        and the
        Registration Statement, the Company is not aware of any studies, tests or
        trials
        the results of which the Company believes reasonably call into question the
        study, test, or trial results
        described or referred to in the Prospectus, the
        General Disclosure Package
        and the
        Registration Statement when viewed in the context in which such results are
        described and the clinical state of development; and neither the Company
        nor any
        of its subsidiaries has received any notices or correspondence from any
        Governmental Authority requiring the termination, suspension or material
        modification of any studies, tests or preclinical or clinical trials after
        they
        were initiated and which were conducted by or on behalf of the Company or
        any of
        its subsidiaries.

       

      (xix)  Compliance
        with Health Care Laws. Neither
        the Company or any subsidiary, nor their respective officers, directors,
        employees, agents and contractors (exercising their respective duties on
        behalf
        of the Company or any subsidiary), nor the Company’s or any subsidiary’s
        business operations, is, or at any time has been, in violation of any Health
        Care Laws, except where such violation would not reasonably be expected to
        result in a Material Adverse Effect. “Health Care Laws” shall mean (i) the
        federal Food, Drug and Cosmetic Act (21 U.S.C. § 321 et seq.), and the
        regulations promulgated thereunder, (ii) all federal and state fraud and
        abuse
        laws, including, without limitation, the federal Anti-Kickback Statute (42
        U.S.C. §1320a-7b(b)), the Stark Law (42 U.S.C. § 1395nn), the Civil False Claims
        Act (31 U.S.C. § 3729 et seq.), the Administrative False Claims Law (42 U.S.C. §
1320a-7b(a)), the Anti-Inducement Law (42 U.S.C. § 1320a-7a(a)(5)), Sections
        1320a-7 and 1320a-7a of Title 42 of the United States Code and the regulations
        promulgated pursuant to such statutes, (iii) the administrative simplification
        provisions of the Health Insurance Portability and Accountability Act of
        1996
        (42 U.S.C. §§ 1320d-1320d-8), the regulations promulgated thereunder and
        comparable state laws, (iv) the Controlled Substances Act (21 U.S.C. § 801 et
        seq.), (v) Titles XVIII (42 U.S.C. § 1395 et seq.) and XIX (42 U.S.C. § 1396 et
        seq.) of the Social Security Act and the regulations promulgated thereunder,
        (vi) quality, safety and accreditation standards and requirements of all
        applicable foreign or state laws or regulatory bodies, and (vii) any and
        all
        other applicable health care laws, regulations, manual provisions, policies
        and
        administrative guidance, each of (i) through (vii) as may be amended from
        time
        to time.

       

      (xx)  Title
        to Property.
        The
        Company and its Subsidiary have good and marketable title to all real property
        owned by the Company and its Subsidiary and good title to all other properties
        owned by them, in each case, free and clear of all mortgages, pledges, liens,
        security interests, claims, restrictions or encumbrances of any kind except
        such
        as (a) are described in the Prospectus and the
        General Disclosure Package
        or (b)
        would not, singly or in the aggregate, materially adversely affect the value
        of
        such property, and do not interfere with the use made and proposed to be
        made of
        such property by the Company or any of its subsidiaries; and, except as
        described in the Prospectus, all of the leases and subleases material to
        the
        business of the Company and its subsidiaries, taken as a whole, and under
        which
        the Company or any of its subsidiaries holds properties described in the
        Prospectus and the
        General Disclosure Package,
        are in
        full force and effect, and neither the Company nor any subsidiary has any
        notice
        of any material claim of any sort that has been asserted by anyone adverse
        to
        the rights of the Company or any subsidiary under any of the leases or subleases
        mentioned above, or affecting or questioning the rights of the Company or
        such
        subsidiary to the continued possession of the leased or subleased premises
        under
        any such lease or sublease.

       

      (xxi)  Investment
        Company Act.
        The
        Company is not required, and upon the issuance and sale of the Securities
        as
        herein contemplated and the application of the net proceeds therefrom as
        described in the Prospectus and the
        General Disclosure Package
        will not
        be required, to register as an “investment company” under the Investment Company
        Act of 1940, as amended (the “1940 Act”).

       

      (xxii)  Environmental
        Laws.
        Except
        as described in the Registration Statement, the
        General Disclosure Package and the Prospectus
        and
        except as would not, singly or in the aggregate, reasonably
        be expected to result
        in
        a Material Adverse Effect, (A) neither the Company nor any of its subsidiaries
        is in violation of any federal, state, local or foreign statute, law, rule,
        regulation, ordinance, code, policy or rule of common law or any judicial
        or
        administrative interpretation thereof, including any judicial or administrative
        order, consent, decree or judgment, relating to pollution or protection of
        human
        health, the environment (including, without limitation, ambient air, surface
        water, groundwater, land surface or subsurface strata) or wildlife, including,
        without limitation, laws and regulations relating to the release or threatened
        release of chemicals, pollutants, contaminants, wastes, toxic substances,
        hazardous substances, petroleum or petroleum products, asbestos-containing
        materials or mold (collectively, “Hazardous Materials”) or to the manufacture,
        processing, distribution, use, treatment, storage, disposal, transport or
        handling of Hazardous Materials (collectively, “Environmental Laws”), (B) the
        Company and its subsidiaries have all permits, authorizations and approvals
        required under any applicable Environmental Laws (except
        where the absence of such permits,
        authorizations and approvals would
        not
        reasonably be expected to have a Material Adverse Effect)
        and are
        each in compliance with their requirements in all material respects, (C)
        except
        as described in the Prospectus, there are no pending or, to the knowledge
        of the
        Company, threatened administrative, regulatory or judicial actions, suits,
        demands, demand letters, claims, liens, notices of noncompliance or violation,
        investigation or proceedings relating to any Environmental Law against the
        Company or any of its subsidiaries and (D) except as described in the
        Prospectus, and to the knowledge of the Company, there are no events or
        circumstances that would reasonably be expected to form the basis of an order
        for clean-up or remediation, or an action, suit or proceeding by any private
        party or governmental body or agency, against or affecting the Company or
        any of
        its subsidiaries relating to Hazardous Materials or any Environmental
        Laws.

       

      (xxiii)  Registration
        Rights.
        There
        are no persons with registration rights or other similar rights to have any
        securities registered pursuant to the Registration Statement or otherwise
        registered by the Company under the Act, except under the Securities Purchase
        Agreement by and between the Company and the Investors listed on the signature
        pages thereto dated as of March 19, 2004, which rights have been
        waived.

       

      (xxiv)  ERISA.
        Each
        employee benefit plan, within the meaning of Section 3(3) of the Employee
        Retirement Income Security Act of 1974, as amended (“ERISA”), that is or has
        been maintained, administered or contributed to by the Company or any
        member of
        any
        group that includes or has included the Company (as determined under Section
        414(b), (c), (m), or (o) of the Internal Revenue Code of 1986, as amended
        (the
“Code”)) (a “Company Affiliate”) for their employees or former employees has
        been maintained in compliance in all material respects with its terms and
        the
        requirements of any applicable statutes, orders, rules and regulations,
        including but not limited to ERISA and the Code to the knowledge of the Company;
        no prohibited transaction, within the meaning of Section 406 of ERISA or
        Section
        4975 of the Code, has occurred with respect to any such plan, excluding
        transactions effected pursuant to a statutory or administrative exemption;
        and
        for each such plan that is subject to the funding rules of Section 412 of
        the
        Code or Section 302 of ERISA, there has not occurred any “accumulated funding
        deficiency” within the meaning of Section 412 of the Code or Section 302 of
        ERISA, respectively, whether or not waived, and the fair market value of
        the
        assets of each such plan (excluding for these purposes accrued but unpaid
        contributions) exceeds the present value of all benefits accrued under such
        plan
        determined as of the plan’s most recent actuarial report using
        the
        actuarial assumptions set forth therein, and such actuarial assumptions are
        reasonable in the aggregate. Neither the Company nor any Company Affiliate
        has
        incurred or is reasonably expected to incur any liability to any “multiemployer
        plan” within the meaning of Section 3(37)or
        4001(a)(3) of ERISA. Neither the Company nor any Company Affiliate has incurred
        or is reasonably expected to incur any liability under any “welfare plan” within
        the meaning of Section 3(1) of ERISA that provides benefits to retired or
        terminated employees (other than as required by Section 4980B of the Code
        or
        Title I, Subtitle B, Part 6 of ERISA). 

       

      (xxv)  Accounting
        Controls.
        The
        Company and its subsidiaries maintain a system of internal accounting controls
        sufficient to provide reasonable assurances that (i) transactions are
        executed in accordance with management’s general or specific authorization;
        (ii) transactions are recorded as necessary to permit preparation of
        financial statements in conformity with generally accepted accounting principles
        and to maintain accountability for assets; (iii) access to assets is
        permitted only in accordance with management’s general or specific
        authorization; and (iv) the recorded value for assets is compared with
        existing assets at reasonable intervals and appropriate action is taken with
        respect to any differences.

       

      (xxvi)  Insurance.
        The
        Company and its subsidiaries carry, or are covered by, insurance issued by
        insurers in such amounts and covering such risks as the Company has determined
        is reasonably adequate for the conduct of its business and the value of its
        properties and as is customary for companies engaged in similar businesses
        in
        similar industries; and neither the Company nor any of its subsidiaries has
        (i)
        received written notice from any insurer or agent of such insurer that material
        capital improvements or other material expenditures are required or necessary
        to
        be made in order to continue such insurance or (ii) any reason to believe
        that
        it will not be able to renew its existing insurance coverage as and when
        such
        coverage expires or to obtain similar coverage at reasonable cost from similar
        insurers as may be necessary to continue its business. All such insurance
        is
        outstanding and duly in force on the date hereof (except
        where failure would not reasonably be expected to have a Material Adverse
        Effect).

       

      (xxvii)  Related
        Party Transactions.
        No
        relationship, direct or indirect, exists between or among the Company or
        any of
        its subsidiaries, on the one hand, and the directors, officers, stockholders,
        customers or suppliers of the Company or any of its subsidiaries, on the
        other,
        that is required by the Act to be described in the Registration Statement,
        the
        General Disclosure Package
        and the
        Prospectus and that is not so described therein.

       

      (xxviii)  Foreign
        Corrupt Practices Act.
        Neither
        the Company nor any of its subsidiaries nor, to the knowledge of the Company,
        any director, officer, agent, employee acting on behalf of the Company or
        any of
        its subsidiaries has (i) used any corporate funds for any unlawful contribution,
        gift, entertainment or other unlawful expense relating to political activity;
        (ii) made any direct or indirect unlawful payment to any foreign or domestic
        government official or employee from corporate funds; (iii) violated or is
        in
        violation of any provision of the Foreign Corrupt Practices Act of 1977;
        or (iv)
        made any bribe, rebate, payoff, influence payment, kickback or other unlawful
        payment.

       

      (xxix)  Money
        Laundering Laws.
        The
        operations of the Company and its subsidiaries are and have been conducted
        at
        all times in compliance with applicable financial recordkeeping and reporting
        requirements of the Currency and Foreign Transactions Reporting Act of 1970,
        as
        amended, the money laundering statutes of all jurisdictions, the rules and
        regulations thereunder and any related or similar rules, regulations or
        guidelines, issued, administered or enforced by any governmental agency
        (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by
        or before any court or governmental agency, authority or body or any arbitrator
        involving the Company or any of its subsidiaries with respect to the Money
        Laundering Laws is pending or, to the best knowledge of the Company,
        threatened.

       

      (xxx)  Statistical
        and Market Data.
        Nothing
        has come to the attention of the Company that has caused the Company to believe
        that the statistical and market-related data included in the Registration
        Statement, the
        General Disclosure Package
        and the
        Prospectus is not based on or derived from sources that are reliable and
        accurate in all material respects.

       

      (xxxi)  Sarbanes-Oxley
        Act.
        There
        has been no failure on the part of the Company or to the knowledge of the
        Company, on the part of any of the Company’s directors or officers, in their
        capacities as such, to comply in all material respects with any applicable
        provision of the Sarbanes-Oxley Act, including without limitation Section
        402
        related to loans.

       

      (xxxii)  Reports;
        Aggregate Market Value.
        The
        Company (a) was subject to the requirements of Section 12 or 15(d) of the
        Exchange Act and has filed all the material required to be filed pursuant
        to
        Section 13, 14 or 15(d) for a period of at least 36 calendar months immediately
        preceding each of (1) the filing of the Registration Statement and (2) the
        date
        hereof and (b) filed in a timely manner all reports required to be filed
        during
        the twelve calendar months and any portion of a month immediately preceding
        each
        of (1) the filing of the Registration Statement and (2) the date hereof,
        and if
        the Company has used (during the twelve calendar months and any portion of
        a
        month immediately preceding each of (1) the filing of the Registration Statement
        and (2) the date hereof) Rule 12b-25(b) under the Exchange Act with respect
        to a
        report or a portion of a report, that report or portion thereof has actually
        been filed within the time period prescribed by that rule. The aggregate
        market
        value of the Company’s outstanding voting stock held be non-affiliates (using
        the definition of “affiliate” provided in Securities Act Rule 405, as such rule
        was in effect prior to October 21, 1992) of the Company, measured as of a
        date
        within 60 days prior to the date of filing of the Registration Statement,
        was
        $150 million or more. The
        aggregate market value of the Company’s outstanding voting stock held by
        non-affiliates (using the definition of “affiliate” provided in Securities Act
        Rule 405, as such rule was in effect prior to October 21, 1992) of the Company,
        measured as of a date within 60 days prior to the date hereof , was $100
        million
        or more and, as of the date hereof, the Company had an “annual trading volume”
of such stock of three million shares or more (“annual trading volume” shall be
        the volume of shares traded in any continuous 12 month period ended within
        60
        days prior to the date hereof).

       

      (xxxiii)  Insider
        Trading.
        The
        Company has a written insider trading policy applicable to all officers and
        directors of the Company. Unless the Placement Agents otherwise agree, in
        their
        sole discretion and in writing, prior to the 30th day following the Closing
        Date, the Company will not fail to enforce the terms of its insider trading
        policy. 

       

      (xxxiv)  Certifications.
        The
        Chief Executive Officer and the Chief Operating Officer of the Company have
        signed, and the Company has furnished to the Commission, all certifications
        required by Sections 302 and 906 of the Sarbanes-Oxley Act. Such certifications
        contain no qualifications or exceptions to the matters certified therein
        other
        than such qualifications or exceptions as are part of the standard form of
        certification promulgated by the Commission, and have not been modified or
        withdrawn; and neither the Company nor any of its officers has received notice
        from any governmental entity questioning or challenging the accuracy,
        completeness, form or manner of filing or submission of such certifications.
        The
        Company is otherwise in compliance in all material respects with all applicable
        provisions currently in effect of the Sarbanes-Oxley Act and the rules and
        regulations issued thereunder by the Commission.

       

      (xxxv)  Taxes.
        The
        Company and each of its subsidiaries have timely filed all federal, state,
        local
        and foreign income and franchise tax returns required to be filed and is
        not in
        default in the payment of any taxes which were payable pursuant to said returns
        or any assessments withrespect
        thereto, other than any which the Company or any of its subsidiaries is
        contesting in good faith or which are not material. There is no pending dispute
        with any taxing authority relating to any of such returns and the Company
        has no
        knowledge of any proposed liability for any tax to be imposed upon the
        properties or assets of the Company or any of its subsidiaries for which
        there
        is not an adequate reserve reflected in the Company’s financial statements
        included in the Registration Statement.

       

      (xxxvi)  Stock
        Options.
        All
        Company options have been appropriately authorized by the board of directors
        of
        the Company or an appropriate committee thereof, including approval of the
        option exercise price or the methodology for determining the option exercise
        price and the substantive option terms. All Company options reflect the fair
        market value of the Company’s Common Stock as determined under Section 409A of
        the Code on the date the option was granted (within the meaning of Treasury
        Regulation §1.421-1(c)). No Company options have been retroactively granted, or
        the exercise price of any Company option determined retroactively. All Company
        options have been properly accounted for by the Company in accordance with
        GAAP,
        and no change is expected in respect of any prior Company Financial Statement
        relating to expenses for stock compensation. There is no pending audit,
        investigation or inquiry by any governmental agency or by the Company with
        respect to the Company’s stock option granting practices or other equity
        compensation practices. 

       

      (xxxvii)  Listing
        on Nasdaq Global Market. The
        Common Stock of the Company is listed on the Nasdaq Global Market under the
        ticker symbol “NRGN.” The Company has not received any notice that it is not in
        compliance with the listing requirements of the Nasdaq Global Market. The
        Company is, and has no reason to believe that it will not in the foreseeable
        future continue to be (except as a result of minimum trading price
        requirements), in compliance with all such listing requirements. There are
        no
        affiliations with the NASD among the Company’s officers or directors. A
        registration statement relating to the Common Stock on Form 8-A or other
        applicable form under the Exchange Act has become effective.

       

      (b)  Officer’s
        Certificates.
        Any
        certificate signed by any officer of the Company or any of its subsidiaries
        delivered to the Representative or to counsel for the Placement Agents shall
        be
        deemed a representation and warranty by the Company to each Placement Agent
        as
        to the matters covered thereby.

       

      

      SECTION
        3.  Covenants
        of the Company.

       

      The
        Company covenants with each Placement Agent as follows:

       

      (a)  Compliance
        with Securities Regulations and Commission Requests.
        The
        Company, subject to Section 3(b), will comply with the requirements of Rule
        430A
        or Rule 424, as applicable, and will notify the Representative promptly,
        and
        confirm the notice in writing, (i) when any post-effective amendment to the
        Registration Statement shall become effective, or any supplement to the
        Prospectus or any amended Prospectus shall have been filed, (ii) of the
        receipt of any comments from the Commission, (iii) of any request by the
        Commission for any amendment to the Registration Statement or any amendment
        or
        supplement to the Prospectus or for additional information, and (iv) of the
        issuance by the Commission of any stop order suspending the effectiveness
        of the
        Registration Statement or of any order preventing or suspending the use of
        the
        Prospectus, or of the suspension of the qualification of the Securities for
        offering or sale in any jurisdiction, or of the initiation or threatening
        of any
        proceedings for any of such purposes. The Company will promptly effect the
        filings necessary pursuant to Rule 424(b) and will take such steps as it
        deems
        necessary to ascertain promptly whether the form ofprospectus
        transmitted for filing under Rule 424(b) was received for filing by the
        Commission and, in the event that it was not, it will promptly file such
        prospectus. The Company will make every reasonable effort to prevent the
        issuance of any stop order and, if any stop order is issued, to obtain the
        lifting thereof at the earliest possible moment.

       

      (b)  Filing
        of Amendments.
        The
        Company will give the Representative notice of its intention to file or prepare
        any amendment to the Registration Statement (including any filing under Rule
        462(b)) or any amendment, supplement or revision to the Prospectus, will
        furnish
        the Representative with copies of any such documents a reasonable amount
        of time
        prior to such proposed filing or use, as the case may be, and will not file
        or
        use any such document to which the Placement Agents or counsel for the Placement
        Agents shall reasonably object in writing, except as required pursuant to
        legal
        or administrative order or process.

       

      (c)  Delivery
        of Registration Statements.
        The
        Company has furnished or will deliver to the Representative and counsel for
        the
        Placement Agents, without charge, signed copies of the Registration Statement
        as
        originally filed and of each amendment thereto (including exhibits filed
        therewith or incorporated by reference therein) and signed copies of all
        consents and certificates of experts, and will also deliver to the
        Representative, without charge, a conformed copy of the Registration Statement
        as originally filed and of each amendment thereto (without exhibits) for
        each of
        the Placement Agents. The copies of the Registration Statement and each
        amendment thereto furnished to the Placement Agents will be identical to
        the
        electronically transmitted copies thereof filed with the Commission pursuant
        to
        EDGAR, except to the extent permitted by Regulation S-T.

       

      (d)  Delivery
        of Prospectuses.
        The
        Company will furnish to each Placement Agent, without charge, during the
        period
        when the Prospectus is required to be delivered under the Act (including
        in
        circumstances where such requirement may be satisfied pursuant to Rule 172),
        such number of copies of the Prospectus (as amended or supplemented) as such
        Placement Agent may reasonably request. The Prospectus and any amendments
        or
        supplements thereto furnished to the Placement Agents will be identical to
        the
        electronically transmitted copies thereof filed with the Commission pursuant
        to
        EDGAR, except to the extent permitted by Regulation S-T.

       

      (e)  Continued
        Compliance with Securities Laws.
        The
        Company will comply with the Act and the Rules and Regulations so as to permit
        the completion of its sale of the Securities as contemplated in this Agreement
        and in the Prospectus. If at any time when a prospectus is required by the
        Act
        to be delivered in connection with sales of the Securities (including in
        circumstances where such requirement may be satisfied pursuant to Rule 172),
        any
        event shall occur or condition shall exist as a result of which it is necessary
        to amend the Registration Statement or amend or supplement the Prospectus
        in
        order that the Prospectus will not include any untrue statements of a material
        fact or omit to state a material fact necessary in order to make the statements
        therein not misleading in the light of the circumstances existing at the
        time it
        is delivered to an Investor, or if it shall be necessary at any such time
        to
        amend the Registration Statement or amend or supplement the Prospectus in
        order
        to comply with the requirements of the Act or the Rules and Regulations,
        the
        Company will promptly prepare and file with the Commission, subject to Section
        3(b), such amendment or supplement as may be necessary to correct such statement
        or omission or to make the Registration Statement or the Prospectus comply
        with
        such requirements, and the Company will furnish to the Placement Agents such
        number of copies of such amendment or supplement as the Placement Agents
        may
        reasonably request.
        If at
        any time following the issuance of an Issuer-Represented Free Writing Prospectus
        there occurred or occurs an event or development as a result of which such
        Issuer-Represented Free Writing Prospectus conflicted or would conflict with
        the
        information contained in theRegistration
        Statement or included or would include an untrue statement of a material
        fact or
        omitted or would omit to state a material fact necessary in order to make
        the
        statements therein, in the light of the circumstances prevailing at that
        subsequent time, not misleading, the Company will promptly notify the
        Representative and will promptly amend or supplement, at its own expense,
        such
        Issuer-Represented Free Writing Prospectus to eliminate or correct such
        conflict, untrue statement or omission.

       

      (f)  Blue
        Sky Qualifications.
        The
        Company shall cooperate with the Placement Agents to qualify the Securities
        for
        offering and sale under the applicable securities laws of such states and
        other
        domestic jurisdictions as the Placement Agents may designate and to maintain
        such qualifications in effect for a period of not less than one year from
        the
        later of the effective date of the Registration Statement and any Rule 462(b)
        Registration Statement; provided,
        however,
        that
        the Company shall not be obligated to file any general consent to service
        of
        process or to qualify as a foreign corporation or as a dealer in securities
        in
        any jurisdiction in which it is not so qualified or to subject itself to
        taxation in respect of doing business in any jurisdiction in which it is
        not
        otherwise so subject.

       

      (g)  Rule
        158.
        The
        Company will timely file such reports pursuant to the Exchange Act as are
        necessary in order to make generally available to its securityholders as
        soon as
        practicable an earnings statement for the purposes of, and to provide the
        benefits contemplated by, the last paragraph of Section 11(a) of the
        Act.

       

      (h)  Compliance
        with Registration Statement. The
        Company will comply with all the undertakings contained in the Registration
        Statement. 

       

      (i)  Press
        Releases.
        Prior to
        the Closing Date, the Company will issue no press release or other
        communications directly or indirectly and hold no press conference with respect
        to the Company or any of its subsidiaries, the condition, financial or
        otherwise, or the earnings or business affairs of any of them, or the offering
        of the Securities without the prior consent of the Representative unless
        in the
        judgment of the Company and its counsel, and after reasonable notification
        to
        the Placement Agents (giving effect to the basis of such required disclosure),
        such press release or communication is required by law. 

       

      (j)  Use
        of Proceeds.
        The
        Company will use the net proceeds received by it from the sale of the Securities
        in the manner specified in the Prospectus under “Use of Proceeds”.

       

      (k)  Restriction
        on Sale of Securities.
        During
        a period of thirty (30) days from the date of the Final Prospectus Supplement,
        the Company will not, without the prior written consent of the Representative,
        (i) directly or indirectly, offer, pledge, sell, contract to sell, sell any
        option or contract to purchase, purchase any option or contract to sell,
        grant
        any option, right or warrant to purchase or otherwise transfer or dispose
        of any
        share of Common Stock or any securities convertible into or exercisable or
        exchangeable for Common Stock or file any registration statement under the
        Act
        (other than on Form S-8 or any successor form) with respect to any of the
        foregoing or (ii) enter into any swap or any other agreement or any transaction
        that transfers, in whole or in part, directly or indirectly, the economic
        consequence of ownership of the Common Stock, whether any such swap or
        transaction described in clause (i) or (ii) above is to be settled by delivery
        of Common Stock or such other securities, in cash or otherwise. The foregoing
        sentence shall not apply to (A) the Securities to be sold hereunder, (B)
        any
        shares of Common Stock issued by the Company upon the exercise of an option
        or
        warrant or the conversion of a security outstanding on the date hereof and
        referred to in the Prospectus, (C) any shares of Common Stock issued or options
        to purchase Common Stock granted pursuant to existingemployee
        benefit plans of the Company or (D) any shares of Common Stock issued or
        options
        to purchase Common Stock granted pursuant to any non-employee director stock
        plan or dividend reinvestment plan.

       

      (l)  Reporting
        Requirements.
        The
        Company, during the period when the Prospectus is required to be delivered
        under
        the Act, will file all documents required to be filed with the Commission
        pursuant to the Exchange
        Act
        within the time periods required by the Exchange Act and the rules and
        regulations of the Commission thereunder.

       

      (m)  Listing.
        The
        Company will use its commercially reasonable efforts to effect and maintain
        the
        quotation of the Securities on the Nasdaq Global Market.

       

      (n)  Issuer
        Free Writing Prospectuses.
        The
        Company represents and agrees that, unless it obtains the prior consent of
        the
        Placement Agents, it has not made and will not make any offer relating to
        the
        Securities that would constitute an “issuer free writing prospectus,” as defined
        in Rule 433, or that would otherwise constitute a “free writing prospectus,” as
        defined in Rule 405, required to be filed with the Commission. Any such free
        writing prospectus consented to by the Company and the Placement Agents is
        hereinafter referred to as a “Permitted Free Writing Prospectus.” The Company
        represents that it has treated or agrees that it will treat each Permitted
        Free
        Writing Prospectus as an “issuer free writing prospectus,” as defined in Rule
        433, and has complied and will comply with the requirements of Rule 433
        applicable to any Permitted Free Writing Prospectus, including timely filing
        with the Commission where required, legending and record keeping.

       

      SECTION
        4.  Payment
        of Expenses; Termination

       

      (a)  Expenses.
        The
        Company will pay or cause to be paid all expenses incident to the performance
        of
        its obligations under this Agreement, including (i) the preparation, printing
        and filing of the Registration Statement (including financial statements
        and
        exhibits) as originally filed and of each amendment thereto, (ii) the
        preparation, issuance and delivery of the certificates for the Securities
        to the
        Investors, including any stock or other transfer taxes and any stamp or other
        duties payable upon the sale, issuance or delivery of the Securities to the
        Investors, (iv) the fees and disbursements of the Company’s counsel,
        accountants and other advisors, (v) the qualification of the Securities
        under securities laws in accordance with the provisions of Section 3(f)
        hereof, including filing fees and the reasonable fees and disbursements of
        counsel for the Placement Agents in connection therewith and in connection
        with
        the preparation of the Blue Sky Survey and any supplement thereto (not to
        exceed
        $10,000), (vi) the printing and delivery to the Placement Agents of copies
        of the Prospectus and any amendments or supplements thereto and any Permitted
        Free Writing Prospectus (including without limitation any costs associated
        with
        electronic delivery of these materials), (vii) the preparation, printing
        and delivery to the Placement Agents of copies of the Blue Sky Survey and
        any
        supplement thereto, (viii) the fees and expenses of any transfer agent or
        registrar for the Securities, (ix) the costs and expenses of the Company
        relating to investor presentations and (x) the fees and expenses incurred
        in
        connection with the inclusion of the Securities in the Nasdaq Global Market.
        

       

      (b)  Termination
        of Agreement.
        If this
        Agreement is terminated by the Placement Agents in accordance with the
        provisions of Section 5(l), Section 9(a)(i) or Section 10 hereof, the Company
        shall reimburse the Placement Agents for all of their reasonable out-of-pocket
        expenses, including the reasonable fees and disbursements of counsel for
        the
        Placement Agents, in each case as actually incurred by them in connection
        with
        this Agreement and the proposed sale of the Securities or in contemplation
        of
        their performance of their obligations hereunder. 

       

      (c)  Conditions
        of Placement Agents’ Obligations.

       

      The
        obligations of the several Placement Agents hereunder are subject to the
        accuracy of the representations and warranties of the Company contained in
        Section 2 hereof or in certificates of any officer of the Company or any
        subsidiary of the Company pursuant to the provisions hereof, to the performance
        by the Company in all material respects of its covenants and other obligations
        hereunder required to be performed or satisfied prior to the Closing Date,
        and
        to the following further conditions:

       

      (d)  Effectiveness
        of Registration Statement.
        The
        Registration Statement continues to be effective and at the Closing Date
        no stop
        order suspending the effectiveness of the Registration Statement shall have
        been
        issued under the Act or proceedings therefor initiated or threatened by the
        Commission, and any request on the part of the Commission for additional
        information shall have been complied with to the reasonable satisfaction
        of
        counsel to the Placement Agents. A prospectus shall have been filed with
        the
        Commission in accordance with Rule 424(b).

       

      (e)  Opinion
        of Counsel for Company.
        On the
        Closing Date, the Representative shall have received the favorable opinion,
        dated as of the Closing Date, of Milbank,
        Tweed, Hadley & McCloy LLP,
        counsel
        for the Company, in form and substance satisfactory to counsel for the Placement
        Agents, to the effect set forth in Exhibit C-1 hereto. On the Closing Date,
        the
        Representative shall have received the favorable opinion, dated as of the
        Closing Date, of Jeffrey
        Dill, Esq.,
        chief
        corporate counsel for the Company, in form and substance satisfactory to
        counsel
        for the Placement Agents, to the effect set forth in Exhibit C-2
        hereto.

       

      (f)  Opinion
        of Counsel for Placement Agents.
        On the
        Closing Date, the Representative shall have received the favorable opinion,
        dated as of the Closing Date, of Latham & Watkins LLP, counsel for the
        Placement Agents, in form and substance satisfactory to the Placement
        Agents.

       

      (g)  Accountant’s
        Comfort Letter.
        The
        Representative shall have received from PricewaterhouseCoopers LLP a letter
        dated the date of the execution of this Agreement, in form and substance
        satisfactory to the Placement Agents, containing statements and information
        of
        the type ordinarily included in accountants’ “comfort letters” with respect to
        the financial statements and certain financial information contained in or
        incorporated by reference into the Registration Statement and the
        Prospectus.

       

      (h)  Bring-down
        Comfort Letter.
        On the
        Closing Date, the Representative shall have received from PricewaterhouseCoopers
        LLP a letter, dated as of the Closing Date, to the effect that they reaffirm
        the
        statements made in the letter furnished pursuant to subsection (d) of this
        Section, except that the specified date referred to shall be a date not more
        than three business days prior to the Closing Date.

       

      (i)  Lock-up
        Agreements.
        At the
        date of this Agreement, the Representative shall have received an agreement
        substantially in the form of Exhibit D hereto signed by the persons listed
        on
Schedule
        B
        hereto.

       

      (j)  Officers’
        Certificate.
        On the
        Closing Date, there shall not have been, since the date hereof or since the
        respective dates as of which information is given in the Prospectus or the
        General Disclosure Package, any material adverse change in the condition,
        financial or otherwise, or in the earnings or business affairs of the Company
        and its subsidiaries taken as a whole, whether or not arising in the ordinary
        course of business, and the Representative shall have received a certificate
        of
        the President or a Vice President of the Company and of the chief financial
        or
        chief accounting officer of the Company, dated as of the Closing Date, to
        the
        effect that (i) there has been no such material adverse change,
        (ii) therepresentations
        and warranties in Section 2(a) hereof are true and correct with the same
        force and effect as though expressly made at and as of the Closing Date,
        (iii) the Company has complied in all material respects with all agreements
        and satisfied all conditions on its part to be performed or satisfied at
        or
        prior to the Closing Date, and (iv) no stop order suspending the
        effectiveness of the Registration Statement has been issued and, to their
        knowledge, no proceedings for that purpose have been instituted or are
        pending.

       

      (k)  Escrow
        Agreement/Purchase Agreements.
        The
        Company shall have entered into the Escrow Agreement and one or more Investors
        shall have entered into the Purchase Agreements and deposited funds into
        the
        Escrow Agreement in accordance with Section 1 above and the Escrow Agreement.
        The Escrow Agent shall be prepared to release the fees due to the Placement
        Agents from the Escrow Account. 

       

      (l)  NASD
        Matters.
        The
        NASD shall, if applicable, have confirmed that it has not raised any objection
        with respect to the fairness and reasonableness of the placement agency terms
        and arrangements.

       

      (m)  Nasdaq
        Global Market Listing.
        The
        Securities shall have been approved for trading on Nasdaq Global Market,
        and any
        necessary filings with Nasdaq Global Market in connection therewith, including
        any required notification form relating to the listing of additional shares,
        shall have been made in compliance with time periods required by Nasdaq Global
        Market. 

       

      (n)  Additional
        Information.
        On or
        prior to the Closing Date, the Representative and counsel to the Placement
        Agents shall have been furnished with such information, certificates and
        documents as they may reasonably require for the purpose of enabling them
        to
        pass upon the issuance and sale of the Securities as contemplated herein
        and
        related proceedings, or to evidence the accuracy of any of the representations
        or warranties, or the fulfillment of any of the conditions, herein contained,
        or
        otherwise in connection with the Offering contemplated hereby; and all opinions
        and certificates mentioned above or elsewhere in this Agreement shall be
        reasonably satisfactory in form and substance to the Placement Agents and
        counsel for the Placement Agents.

       

      The
        Company will furnish the Placement Agents with such conformed copies of such
        opinions, certificates, letters and other documents as they shall reasonably
        request.

       

      (o)  Termination
        of Agreement.
        

       

      (i) If
        any
        condition specified in this Section shall not have been fulfilled when and
        as
        required to be fulfilled, this Agreement may be terminated by the Placement
        Agents by written notice to the Company at any time at or prior to the Closing
        Date, and such termination shall be without liability of any party to any
        other
        party except as provided in Section 4 and except that Sections 2, 6, 7 and
        8
        shall survive any such termination and remain in full force and effect.

       

      (ii) If
        none
        of the Securities have been sold pursuant to the Purchase Agreements by the
        date
        which is thirty (30) days after the date of this Agreement solely due to
        the
        failure of the condition set forth in Section 5(g) or 5(h) above, this Agreement
        may be terminated by the Company by written notice to the Representative,
        and
        such termination shall be without liability of any party to any other party
        except as provided in Section 4 and except that Sections 6 and 7 shall survive
        any such termination and remain in full force and effect. 

       

      SECTION
        5.  Indemnification.

       

      SECTION
        6.  Indemnification
        of Placement Agents.
        The
        Company agrees to indemnify
        and hold harmless the each Placement Agent, its affiliates, as such term
        is
        defined in Rule 501(b) under the Act (each, an “Affiliate”), its employees and
        agents and each person, if any, who controls any Placement Agent within the
        meaning of Section 15 of the Act or Section 20 of the Exchange Act as
        follows:

       

      (i)  against
        any and all loss, liability, claim, damage and expense whatsoever arising
        out of
        any untrue statement or alleged untrue statement of a material fact contained
        in
        the Registration Statement (or any amendment thereto), or the omission or
        alleged omission therefrom of a material fact required to be stated therein
        or
        necessary to make the statements therein not misleading or arising out of
        any
        untrue statement or alleged untrue statement of a material fact included
        in the
        General Disclosure Package, any Issuer-Represented Free Writing Prospectus
        or
        the Prospectus (or any amendment or supplement thereto), or the omission
        or
        alleged omission therefrom of a material fact necessary in order to make
        the
        statements therein, in the light of the circumstances under which they were
        made, not misleading;

       

      (ii)  against
        any and all loss, liability, claim, damage and expense whatsoever to the
        extent
        of the aggregate amount paid in settlement of any litigation, or any
        investigation or proceeding by any governmental agency or body, commenced
        or
        threatened, or of any claim whatsoever based upon any such untrue statement
        or
        omission, or any such alleged untrue statement or omission; provided that
        (subject to Section 6(d) below) any such settlement is effected with the
        written
        consent of the Company; and

       

      (iii)  against
        any and all expense whatsoever (including the fees and disbursements of counsel
        chosen by the Placement Agents), reasonably incurred in investigating, preparing
        or defending against any litigation, or any investigation or proceeding by
        any
        governmental agency or body, commenced or threatened, or any claim whatsoever
        based upon any such untrue statement or omission, or any such alleged untrue
        statement or omission, to the extent that any such expense is not paid under
        (i)
        or (ii) above;

       

      provided,
        however,
        that
        this indemnity agreement shall not apply to any loss, liability, claim, damage
        or expense to the extent arising out of any untrue statement or omission
        or
        alleged untrue statement or omission made in reliance upon and in conformity
        with written information furnished to the Company by any Placement Agent
        through
        the Representative expressly for use in the Registration Statement (or any
        amendment thereto), any Issuer-Represented Free Writing Prospectus or the
        Prospectus.

       

      (b)
         Indemnification
        of Company, Director, Officers, Agents and Employees.
        Each
        Placement Agent severally agrees to indemnify and hold harmless the Company,
        its
        directors, each of its officers, agents and employees, and each person, if
        any,
        who controls the Company within the meaning of Section 15 of the Act or Section
        20 of the Exchange Act, against any and all loss, liability, claim, damage
        and
        expense described in the indemnity contained in subsection (a) of this Section,
        but only with respect to untrue statements or omissions, or alleged untrue
        statements or omissions, made in the Registration Statement (or any amendment
        thereto), or any Issuer-Represented Free Writing Prospectus or the Prospectus
        (or any amendment or supplement thereto) in reliance upon and in conformity
        with
        written information furnished to the Company by such Placement Agent through the
        Representative expressly for use in the Registration
        Statement (or any amendment thereto) or the Prospectus (or any amendment
        or
        supplement thereto). 

       

      (c) Actions
        against Parties; Notification.
        Each
        indemnified party shall give notice as promptly as reasonably practicable
        to
        each indemnifying party of any action commenced against it in respect of
        which
        indemnity may be sought hereunder, but failure to so notify an indemnifying
        party shall not
        relieve such indemnifying party from any liability hereunder to the extent
        it is
        not materially prejudiced as a result thereof and in any event shall not
        relieve
        it from any liability which it may have otherwise than on account of this
        indemnity agreement. In the case of parties indemnified pursuant to Section
        6(a)
        above, the Company shall be entitled to assume the defense of any action
        or
        proceeding with counsel reasonably satisfactory to the indemnified party.
        Upon
        assumption by the Company of the defense of any such action or proceeding,
        the
        indemnified party shall have the right to participate in such action or
        proceeding and to retain its own counsel but the Company shall not be liable
        for
        any legal expenses of such counsel retained by such indemnified party in
        connection with the defense thereof unless (i) the Company has agreed to
        pay
        such fees and expenses, (ii) the Company shall have failed to employ counsel
        reasonably satisfactory to the indemnified party in a timely manner, or (iii)
        the indemnified party shall have been advised by counsel that there are actual
        or potential conflicting interests between the Company and the indemnified
        party, including situations in which there are one or more legal defenses
        available to the indemnified party that are different from or additional
        to
        those available to the Company; provided,
        however,
        that
        the Company shall not, in connection with any one such action or proceeding
        or
        separate but substantially similar actions or proceedings in the same
        jurisdiction arising out of the same general allegations, be liable for the
        fees
        and expenses of more than one separate firm of attorneys at any time for
        all
        indemnified parties. The Company will not settle, compromise or consent to
        the
        entry of any judgment in any pending or threatened claim, action or proceeding
        in respect of which indemnification could be sought under this Section 6
        or 7
        (whether or not any indemnified party is an actual or potential party to
        such
        claim, action or proceeding), unless such settlement, compromise or consent
        includes an unconditional release of each indemnified party from all liability
        arising out of such claim, action or proceeding. The Company shall not have
        any
        liability with respect to any settlement, compromise or consent to the entry
        of
        any judgment in any pending or threatened claim, action or proceeding entered
        into or made by any indemnified party in respect of which indemnification
        or
        contribution could be sought under this Section 6 or 7 (whether or not the
        any
        indemnified party is an actual or potential party to such claim, action or
        proceeding), without the prior written consent of the Company.

       

      (d) Settlement
        without Consent if Failure to Reimburse.
        If at
        any time an indemnified party shall have requested an indemnifying party
        to
        reimburse the indemnified party for fees and expenses of counsel, such
        indemnifying party agrees that it shall be liable for any settlement of the
        nature contemplated by Section 6(a)(ii) effected without its written consent
        if
        (i) such settlement is entered into more than 90 days after receipt by such
        indemnifying party of the aforesaid request, (ii) such indemnifying party
        shall
        have received notice of the terms of such settlement at least 45 days prior
        to
        such settlement being entered into and (iii) such indemnifying party shall
        not
        have reimbursed such indemnified party in accordance with such request prior
        to
        the date of such settlement, unless there is a bona
        fide
        dispute
        between such indemnifying party and indemnified party regarding such
        reimbursement of such fees and expenses and the indemnifying party shall
        have
        fully reimbursed the indemnified party for all undisputed fees and
        expenses.

       

      (e) Placement
        Agents’ Information.
        The
        parties hereto acknowledge and agree that the statements set forth in the
        second
        sentence of the third paragraph and the seventh and eighth paragraphs under
        the
        heading “Plan of Distribution” in the Prospectus Supplement constitute the only
        written information relating to any Placement Agent furnished to the Company
        by
        any Placement Agent through the Representative expressly for use in the
        Registration Statement (or any amendment thereto), Prospectus (or any amendment
        or supplement thereto) and the General Disclosure Package, including for
        purposes of Sections 2(a)(i), 6(a) and 6(b) hereof.

       

      SECTION
        7.  Contribution.

       

      SECTION
        8.  If
        the
        indemnification provided for in Section 6 hereof is for any reason
        unavailable to or insufficient to hold harmless an indemnified party in respect
        of any losses, liabilities, claims, damages or expenses referred to therein,
        then each indemnifying party shall contribute to the aggregate amount of
        such
        losses, liabilities, claims, damages and expenses incurred by such indemnified
        party, as incurred, (i) in such proportion as is appropriate to reflect the
        relative benefits received by the Company, on the one hand, and the Placement
        Agents, on the other hand, from the offering of the Securities pursuant to
        this
        Agreement or (ii) if the allocation provided by clause (i) is not permitted
        by
        applicable law, in such proportion as is appropriate to reflect not only
        the
        relative benefits referred to in clause (i) above but also the relative fault
        of
        the Company on the one hand and of the Placement Agents on the other hand
        in
        connection with the statements or omissions which resulted in such losses,
        liabilities, claims, damages or expenses, as well as any other relevant
        equitable considerations.

       

      The
        relative benefits received by the Company on the one hand and the Placement
        Agents on the other hand in connection with the offering of the Securities
        pursuant to this Agreement shall be deemed to be in the same respective
        proportions as (x) the net proceeds from the offering of the Securities pursuant
        to this Agreement received by the Company and (y) the
        total
        fees received by the Placement Agents pursuant to Section 1(b) hereof
bear
        to
        the sum of (x) and (y).

       

      The
        relative fault of the Company on the one hand and the Placement Agents on
        the
        other hand shall be determined by reference to, among other things, whether
        any
        such untrue or alleged untrue statement of a material fact or omission or
        alleged omission to state a material fact relates to information supplied
        by the
        Company or by the Placement Agents and the parties’ relative intent, knowledge,
        access to information and opportunity to correct or prevent such statement
        or
        omission.

       

      The
        Company and the Placement Agents agree that it would not be just and equitable
        if contribution pursuant to this Section 7 were determined by pro rata
        allocation (even if the Placement Agents were treated as one entity for such
        purpose) or by any other method of allocation which does not take account
        of the
        equitable considerations referred to above in this Section 7. The aggregate
        amount of losses, liabilities, claims, damages and expenses incurred by an
        indemnified party and referred to above in this Section 7 shall be deemed
        to
        include any legal or other expenses reasonably incurred by such indemnified
        party in investigating, preparing or defending against any litigation, or
        any
        investigation or proceeding by any governmental agency or body, commenced
        or
        threatened, or any claim whatsoever based upon any such untrue or alleged
        untrue
        statement or omission or alleged omission.

       

      Notwithstanding
        the provisions of this Section 7, no Placement Agent shall be required to
        contribute any amount in excess of the total fee received by such Placement
        Agent pursuant to Section 1(b) hereof.

       

      No
        person
        guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
        of
        the Act) shall be entitled to contribution from any person who was not guilty
        of
        such fraudulent misrepresentation.

       

      For
        purposes of this Section 7, each person, if any, who controls a Placement
        Agent
        within the meaning of Section 15 of the Act or Section 20 of the Exchange
        Act
        and each Placement Agent’s Affiliates, employees and agents shall have the same
        rights to contribution as such Placement Agent, and each director, officer,
        agent and employee of the Company, and each person, if any, who controls
        the
        Company within the meaning of Section 15 of the Act or Section 20 of the
        Exchange Act shall have the same rights to contribution as the Company.

       

      Any
        party
        entitled to contribution will, promptly after receipt of notice of commencement
        of any action, suit or proceeding against such party in respect of which
        a claim
        for contribution may be made against another party or parties under this
        Section 7, notify such party or parties from whom contribution may
        be
        sought, but the omission so to notify such party or parties from whom
        contribution may be sought shall not relieve the party or parties from whom
        contribution may be sought from any other obligation it or they may have
        hereunder or otherwise than under this Section 7. No party shall be liable
        for contribution with respect to any action, suit, proceeding or claim settled
        without its written consent. The Placement Agents’ obligations to contribute
        pursuant to this Section 7 are several in proportion to their respective
        amounts of placement agent fees each has actually received pursuant to this
        Agreement and not joint.

      

       

      SECTION
        9.  Representations and
        Agreements to Survive Delivery.

       

      All
        representations, warranties, and agreements contained in this Agreement or
        in
        certificates of officers of the Company or any of its subsidiaries submitted
        pursuant hereto shall remain operative and in full force and effect regardless
        of (i) any investigation made by or on behalf of any Placement Agent or its
        Affiliates or selling agents, any person controlling any Placement Agent,
        its
        officers or directors or any person controlling the Company, and (ii) delivery
        of and payment for the Securities.

       

      SECTION
        10.  Termination
        of Agreement.

       

      (a)  Termination;
        General.
        The
        Placement Agents may terminate this Agreement, by notice to the Company,
        at any
        time at or prior to the Closing Date (i) if there has been, since the time
        of
        execution of this Agreement or since the respective dates as of which
        information is given in the Prospectus or the General Disclosure Package,
        any
        material adverse change in the condition, financial or otherwise, or in the
        earnings or business affairs of the Company and its subsidiaries taken as
        a
        whole, whether or not arising in the ordinary course of business, so material
        and adverse as to make it impractical or inadvisable to proceed with the
        placement or (ii) if there has occurred any material adverse change in the
        financial markets in the United States or the international financial markets,
        any outbreak of hostilities or escalation thereof or other calamity or crisis
        or
        any change or development involving a prospective change in national or
        international political, financial or economic conditions, in each case the
        effect of which is such as to make it, in the judgment of the Placement Agents,
        impracticable or inadvisable to market the Securities or to enforce contracts
        for the sale of the Securities, or (iii) if trading in any securities of
        the Company has been suspended or materially limited by the Commission or
        the
        Nasdaq Global Market, or if trading generally on the New York Stock Exchange
        or
        in the Nasdaq Global Market has been suspended or materially limited, or
        minimum
        or maximum prices for trading have been fixed, or maximum ranges for prices
        have
        been required, by any of said exchanges or by such system or by order of
        the
        Commission, the National Association of Securities Dealers, Inc. or any other
        governmental authority, or (iv) a material disruption has occurred in
        commercial banking or securities settlement or clearance services in the
        United
        States or (v) if a banking moratorium has been declared by either Federal
        or New
        York authorities. Notice of any termination of this Agreement shall be promptly
        given to the Company by telecopy or telephone and shall be subsequently
        confirmed by letter.

       

      (b)  Liabilities.
        If this
        Agreement is terminated pursuant to this Section, such termination shall
        be
        without liability of any party to any other party except as provided in Section
        4 hereof, and provided further that Sections 2, 6, 7 and 8 shall survive
        such
        termination and remain in full force and effect.

       

      SECTION
        11.  Default
        by the Company.

       

      If
        the
        Company shall fail at the Closing Date to sell the number of Securities that
        it
        is obligated to sell hereunder due exclusively to its failure to perform
        its
        obligations to deliver the Securities as contemplated hereunder against payment
        therefore and no alternate delivery arrangements are arranged  and
        agreed between the Company and the Placement Agent, then this Agreement shall
        terminate without any liability on the part of any nondefaulting party;
provided,
        however,
        that
        the provisions of Sections 2, 4, 6, 7 and 8 shall remain in full force and
        effect. No action taken pursuant to this Section shall relieve the Company
        from
        liability, if any, in respect of such default.

       

      SECTION
        12.  Notices.

       

      All
        notices and other communications hereunder shall be in writing and shall
        be
        deemed to have been duly given if mailed or transmitted by any standard form
        of
        telecommunication. Notices to the Placement Agents shall be directed to
the
        Representative at One
        Bush
        Street, Suite 1700, San Francisco, CA 94104,
        attention of Richard
        Osgood;
        notices
        to the Company shall be directed to it at 35
        NE
        Industrial Road,
        Branford,
        CT 06405, attention
        of Stephen
        R. Davis, Chief Operating Officer, with a copy to Milbank, Tweed, Hadley
&
McCloy LLP, 1 Chase Manhattan Plaza, New York, NY 10005, attention of Robert
        B.
        Williams, Esq.

      

      

      SECTION
        13.  Parties.

       

      This
        Agreement shall inure to the benefit of and be binding upon the Placement
        Agents
        and the Company and their respective successors. Nothing expressed or mentioned
        in this Agreement is intended or shall be construed to give any person, firm
        or
        corporation, other than the Placement Agents, the Company and their respective
        successors and the controlling persons and officers and directors referred
        to in
        Sections 6 and 7 and their heirs and legal representatives, any legal or
        equitable right, remedy or claim under or in respect of this Agreement or
        any
        provision herein contained. This Agreement and all conditions and provisions
        hereof are intended to be for the sole and exclusive benefit of the Placement
        Agents, the Company and their respective successors, and said controlling
        persons and officers and directors and their heirs and legal representatives,
        and for the benefit of no other person, firm or corporation. 

       

      SECTION
        14.  GOVERNING
        LAW.

       

      THIS
        AGREEMENT (INCLUDING ANY CLAIM OR CONTROVERSY ARISING OUT OF OR RELATING
        TO THIS
        AGREEMENT) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
        OF THE
        STATE OF NEW YORK, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THAT
        WOULD RESULT IN THE APPLICATION OF ANY LAW OTHER THAN THE LAW OF THE STATE
        OF
        NEW YORK.

       

      SECTION
        15.  TIME.

       

      TIME
        SHALL BE OF THE ESSENCE OF THIS AGREEMENT. EXCEPT AS OTHERWISE SET FORTH
        HEREIN,
        SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.

       

      SECTION
        16.  Counterparts.

       

      This
        Agreement may be executed (including by facsimile) in any number of
        counterparts, each of which shall be deemed to be an original, but all such
        counterparts shall together constitute one and the same Agreement.

       

      SECTION
        17.  Effect
        of Headings.

       

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

      [Signature
        Page Follows]

       

      

      If
        the
        foregoing is in accordance with your understanding of our agreement, please
        sign
        and return to the Company a counterpart hereof, whereupon this instrument,
        along
        with all counterparts, will become a binding agreement among the Placement
        Agent
        and the Company in accordance with its terms.

       

      Very
        truly,

      

      Neurogen
        Corporation

      

      By: 

      Name: Stephen
        R. Davis

      Title: Chief
        Operating Officer

      

      

      Confirmed
        as of the date first 

      above
        mentioned.

      

      Pacific
        Growth Equities, LLC

      

      

      By:   

      Name: Rick
        Osgood

      Title: Chairman

      

      

      CIBC
        World Markets Corp.

      

      

      By:   

      Name: 

      Title: 

      

      

      Leerink
        Swann & Company

      

      

      By:   

      Name: 

      Title: 

      

      

      Merriman
        Curhan Ford & Co.

      

      

      By:   

      Name: 

      Title: 

      

      

      

      

      SCHEDULE
        A

      

      Warburg
        Pincus

      Baker
        Brothers Investments

      Andrew
        H.
        Tisch

      Daniel
        R.
        Tisch

      James
        S.
        Tisch

      Thomas
        J.
        Tisch

      Joan
        H.
        Tisch

      

      

      

      

      

      SCHEDULE
        B

      

      

      Felix
        J.
        Baker 

      Julian
        C.
        Baker 

      Eran
        Broshy

      Stephen
        R. Davis

      William
        H. Koster

      Craig
        Saxton

      John
        Simon

      

      Bertrand
        L. Chenard

      Alan
        J.
        Hutchison

      James
        E.
        Krause

      Stephen
        Uden

      

      Warburg
        Pincus

      

      

      

      SCHEDULE
        C

      

      	·  	
              Issuer
                Free Writing Prospectus filed by the Company with the SEC pursuant
                to Rule
                433 on December 19, 2006.

            

      

      

      

      

      

      EXHIBIT
        A

      

      FORM
        OF ESCROW AGREEMENT

      

        EXHIBIT
          B

         

        PURCHASE
          AGREEMENT

         

        Neurogen
          Corporation

        35
          NE
          Industrial Road

        Branford,
          CT 06405

         

        Ladies
          and Gentlemen:

         

        The
          undersigned, __________________________________
          (the
“Investor”),
          hereby confirms its agreement with you as follows:

         

        This
          Purchase Agreement (the “Agreement”)
          is
          made as of December 18,
          2006
          between Neurogen Corporation, a Delaware corporation (the “Company”),
          and
          the Investor. 

        

        The
          Company has authorized the sale and issuance of up to 6,993,000 shares
          (the
“Securities”)
          of
          common stock, par value $0.025 per share (the “Common
          Stock”),
          of
          the Company to certain investors (the “Offering”).
          The
          Offering and issuance of the Securities have been registered under the
          Securities Act of 1933, as amended (the “Act”),
          pursuant to the Company’s Registration Statement on Form S-3, initially
          filed on August 16, 2002 (No. 333-98237), as amended (the “Registration
          Statement”).

         

        The
          Company and the Investor agree that the Investor will purchase from the
          Company
          and the Company will issue and sell to the Investor ___________________
          Securities, for a purchase price of $5.72 per share or an aggregate purchase
          price of $ ________________,
          pursuant to the Terms and Conditions for Purchase of Securities attached
          hereto
          as Annex
          I
          and
          incorporated herein by reference as if fully set forth herein. The Investor
          acknowledges that the offering is not being underwritten by the Placement
          Agents
          (as defined in the Placement Agency Agreement dated December 18, 2006,
          between
          the Company and the Placement Agents (the “Placement
          Agency Agreement”))
          and
          that there is no minimum offering amount. Certificates representing the
          shares
          of Common Stock purchased by the Investor will not be issued to the Investor;
          instead, such shares of Common Stock will be credited to the Investor using
          customary procedures for book-entry transfer through the facilities of
          The
          Depository Trust Company (“DTC”).
          This
          offering will not clear directly through the Placement Agents acting in
          such
          capacity. Consequently, the Investor must instruct their individual broker
          how
          to settle the transaction. 

         

        The
          Investor represents that, except as fully described on Annex
          II
          attached
          hereto, (a) it has had no position, office or other material relationship
          within the past three years with the Company or persons known to it to
          be
          affiliates of the Company, (b) neither it, nor any group of which it is a
          member or to which it is related, beneficially owns (including the right
          to
          acquire or vote) any securities of the Company, (c) it has no direct or
          indirect affiliation or association with any NASD member as of the date
          hereof
          and (d) after giving effect to the Offering, neither the undersigned Investor
          nor any group of Investors (as identified in a public filing
          made with the Commission) of which the undersigned Investor is a part,
          in
          connection with the offering of the Shares will acquire, or obtain the
          right to
          acquire, 20% or more of the Common Stock (or securities convertible or
          exercisable for Common Stock) or the voting power of the Company.

         

        The
          Investor hereby consents to the receipt of the Company’s prospectus supplement,
          dated December 18, 2006 (the “Prospectus
          Supplement”)
          and
          the accompanying base prospectus, dated February 13, 2003 (the “Base
          Prospectus”
and
          together with the Prospectus Supplement, the “Prospectus”),
          in
          portable document format, or PDF, via electronic mail. 

         

        Your
          attention is directed to the “Instruction Sheet for Investors” attached hereto
          for directions regarding this Purchase Agreement.

         

        [signatures
          follow]

         

        ************

        Please
          confirm that the foregoing correctly sets forth the agreement between us
          by
          signing in the space provided below for that purpose.

         

        

        Name
          of
          Investor:     

        

        

        By:
                

        

        Title:
                

        

        Address:
                

        

         

        

        Tax
          ID
          No:      

        

        Contact
          Name:      

        

        Telephone:      

         

        Name
          in
          which

        book-entry

        should
          be
          made

        (if
          different):      

        

        Name
          of
          Broker:      

        

        Broker’s
          DTC No.:     

        

        Broker’s
          ID No.: _________________________

        

        Broker
          Contact Name: ____________________

        

        Broker
          Telephone: _______________________   

        

        

        Number
          of
          Securities Purchased:   

        AGREED
          AND ACCEPTED:

        

        NEUROGEN
          CORPORATION,

        a
          Delaware corporation

        

        

        By:
            

        

        Name:
           

        

        Title:
             

        

        ANNEX
          I

         

        TERMS
          AND CONDITIONS FOR PURCHASE OF SECURITIES

         

        1.  Authorization
          and Sale of Securities.
          The
          Company has authorized the sale of up to 6,993,000 Securities. The Company
          reserves the right to increase or decrease this number in its sole discretion.
          

         

        2.  Agreement
          to Sell and Purchase the Securities; Subscription Date.

         

        2.1  Upon
          the
          terms and subject to the conditions hereinafter set forth, at the Closing
          (as
          defined in Section 3), the Company will sell to the Investor, and the
          Investor will purchase from the Company, the number of Securities
          set forth on the signature page hereto, at the purchase price set forth
          in the
          fourth paragraph of the Purchase Agreement to which this Annex
          I
          is
          attached. 

         

        2.2  The
          Company may enter into agreements similar to this Agreement with certain
          other
          investors (the “Other
          Investors”)
          and
          expects to complete sales of Securities to them. (The Investor and the
          Other
          Investors are hereinafter sometimes collectively referred to as the
“Investors”,
          and
          this Agreement and the purchase agreements executed by the Other Investors
          are
          hereinafter sometimes collectively referred to as the “Agreements.”)

         

        3.  Delivery
          of the Securities at Closing.
          Concurrently with the execution and delivery of this Agreement, the Investor
          shall deliver to American Stock Transfer & Trust Company (the “Escrow
          Agent”),
          pursuant to the wire instructions set forth on Annex
          III
          or as
          otherwise directed by the Placement Agents, a wire transfer of immediately
          available funds in the full amount of the purchase price for the Securities
          being purchased hereunder as set forth in the fourth paragraph of the Purchase
          Agreement to which this Annex
          I
          is
          attached. The Escrow Agent will invest such funds in a non-interest bearing
          account (the “Escrow
          Account”)
          in
          accordance with Rule 15c2-4 under the Securities Exchange Act of 1934,
          as
          amended (the “Exchange
          Act”).
          The
          Escrow Agent will not accept any Investor funds until the date of the Prospectus
          Supplement. The Company will deposit the Securities with DTC upon receiving
          notice from the Placement Agents. The Company or the Placement Agents may
          accept
          or reject any proposed purchase of Securities, in whole or in part, or
          Agreements in their sole discretion. The completion of the purchase and
          sale of
          the Securities (the “Closing”)
          shall
          occur on December 21,
          2006
          (the “Closing
          Date”)
          or
          such other time as shall be agreed upon by the Company and the Placement
          Agents,
          at the offices of Latham & Watkins LLP, 885 Third Avenue, Suite 1000, New
          York, New York 10022. At the Closing, and upon satisfaction of the conditions
          set forth in this Agreement and the Placement Agency Agreement, the Company
          shall deliver to the Investor, using customary book-entry procedures, the
          number
          of Securities set forth on the signature page hereto, and the Escrow Agent
          will
          disburse the funds from the Escrow Account to the Company and the Placement
          Agents, by wire in federal (same day) funds,

         

        4.  as
          provided in the escrow agreement between the Company and the Escrow Agent.
          In
          the event that (a) the Closing does not occur on or prior to December 21,
          2006,
          (b) the Company informs the Escrow Agent in writing that it has determined
          that
          the Closing is not likely to occur on or prior to December 21, 2006, (c)
          the
          Placement Agents have terminated the Placement Agency Agreement pursuant
          to the
          terms thereof or (d) the Placement Agents have determined that the
          conditions to closing in the Placement Agency Agreement have not been satisfied,
          such funds will be returned to the Investor. 

         

        The
          Company’s obligation to issue and sell the Securities to the Investor shall be
          subject to the following conditions, any one or more of which may be waived
          by
          the Company: (a) completion of the purchases and sales of Securities under
          the Agreements that may be executed with the Other Investors; and (b) the
          accuracy of the representations and warranties made by the Investors and
          the
          fulfillment of those undertakings of the Investors to be fulfilled prior
          to the
          Closing. If this Agreement is not executed and delivered by the Company
          or the
          Offering is terminated, this Agreement shall be of no further force and
          effect.

         

        The
          Investor’s obligation to purchase the Securities shall be subject to the
          condition that the Placement Agents shall not have (a) terminated the
          Placement Agency Agreement pursuant to the terms thereof or (b) determined
          that the conditions to closing in the Placement Agency Agreement have not
          been
          satisfied. 

         

        5.  Representations,
          Warranties and Covenants of the Company.
          The
          Company hereby represents and warrants to, and covenants with, the Investor,
          as
          follows:

         

        5.1  The
          Company has full corporate power and authority to (a) enter into the Placement
          Agency Agreement and the Agreement and to consummate the transactions
          contemplated hereby and thereby, including the sale of the Securities,
          and (b)
          authorize, execute, issue, and deliver the Securities as contemplated by
          the
          Placement Agency Agreement and the Agreement. 

         

        5.2  The
          Placement Agency Agreement and the Agreement have been duly authorized,
          executed
          and delivered by the Company, and, assuming due authorization, execution
          and
          delivery by the Investor of the Agreement, constitute legal and binding
          obligations of the Company, enforceable in accordance with their terms,
          except
          to the extent that rights to indemnity hereunder or under the Placement
          Agency
          Agreement may be limited by federal or state securities laws and except
          as such
          enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency,
          reorganization or similar laws affecting the rights of creditors generally
          and
          subject to general principles of equity. 

         

        6.  Representations,
          Warranties and Covenants of the Investor.
          The
          Investor hereby represents and warrants to, and covenants with, the Company,
          as
          follows:

         

        7.  The
          Investor, if outside the United States, will comply with all applicable
          laws and
          regulations in each foreign jurisdiction in which it purchases, offers,
          sells or
          delivers Securities or has in its possession or distributes any offering
          material, in all cases at its own expense. 

         

        7.1  The
          Investor has full power and authority to enter into this Agreement and
          to
          consummate the transactions contemplated hereby, including the purchase
          of the
          Securities as contemplated by this Agreement.

         

        7.2  This
          Agreement has been duly authorized, executed and delivered by the Investor,
          and
          constitutes a valid, legal and binding obligation of the Investor, enforceable
          in accordance with its terms, except as such enforceability may be limited
          by
          bankruptcy, insolvency, fraudulent conveyance, reorganization or similar
          laws
          affecting the rights of creditors generally and subject to general principles
          of
          equity.

         

        7.3  The
          Investor understands that nothing in the Prospectus, this Agreement or
          any other
          materials presented to the Investor in connection with the purchase and
          sale of
          the Securities constitutes legal, tax or investment advice. The Investor
          has
          consulted such legal, tax and investment advisors as it, in its sole discretion,
          has deemed necessary or appropriate in connection with its purchase of
          Securities. 

         

        7.4  The
          making, execution and performance of this Agreement by the Investor and
          the
          consummation of the transactions contemplated herein will not conflict
          with or
          result in a breach or violation of any of the terms and provisions of,
          or
          constitute a default under, (i) the charter, bylaws or other organizational
          documents of such Investor, as applicable, or (ii) any law, order, rule,
          regulation, writ, injunction, judgment or decree of any court, administrative
          agency, regulatory body, government or governmental agency or body, domestic
          or
          foreign, having jurisdiction over such Investor or its properties, except
          for
          any conflict, breach, violation or default which is not reasonably likely
          to
          have a material adverse effect on such Investor’s performance of its obligations
          hereunder or the consummation of the transactions contemplated hereby.
          

         

        7.5  The
          Investor will maintain the confidentiality of all information acquired
          as a
          result of the transactions contemplated herein prior to the public disclosure
          of
          that information by the Company.

         

        7.6  The
          Investor will not, at any time, use any of the Securities acquired pursuant
          to
          this Agreement to cover any short position in the Common Stock if doing
          so would
          be in violation of applicable securities laws.
          The
          Investor (i) represents that on and from the date the Investor first became
          aware of the offering of the Securities until the date hereof neither it
          nor
          anyone acting on its behalf has engaged in any hedging or other transaction
          which was designed to or could reasonably be expected to lead to or result
          in,
          or be characterized as, a sale, an offer to sell, a solicitation of offers
          to
          buy, disposition of, loan, pledge or grant of any right with respect to
          the
          Common Stock of the Company by the Investor or any person or entity, in
          each
          case, in violation of applicable securities laws and (ii) covenants that
          for
          the
          period
          commencing on the date hereof
          and ending on the earlier to occur of (A) the Company’s issuance of a press
          release disclosing the transactions contemplated hereby and (B) the Company’s
          filing of a Current Report on Form 8-K disclosing the transactions contemplated
          hereby, neither it nor anyone acting on its behalf will, engage in any
          hedging
          or other transaction which is designed to or could reasonably be expected
          to
          lead to or result in, or be characterized as, a sale, an offer to sell,
          a
          solicitation of offers to buy, disposition of, loan, pledge or grant of
          any
          right with respect to the Common Stock of the Company by the Investor or
          any
          person or entity, in each case, in violation of applicable securities laws.
          Such
          prohibited hedging or other transaction would include without limitation
          effecting any short sale or having in effect any short position (whether
          or not
          such sale or position is “against the box” and regardless of when such position
          was entered into) or any purchase, sale or grant of any right (including
          without
          limitation any put or call option) with respect to the Common Stock of
          the
          Company or with respect to any security (other than a broad-based market
          basket
          or index) that includes, relates to or derives any significant part of
          its value
          from the Common Stock of the Company

         

        8.  Survival
          of Representations, Warranties and Agreements.
          Notwithstanding any investigation made by any party to this Agreement,
          all
          covenants, agreements, representations and warranties made by the Company
          and
          the Investor herein shall survive the execution of this Agreement, the
          delivery
          to the Investor of the Securities being purchased and the payment therefor.
          

         

        9.  Notices.
          All
          notices, requests, consents and other communications hereunder shall be
          in
          writing, shall be mailed (A) if within domestic United States by
          first-class registered or certified airmail, or nationally recognized overnight
          express courier, postage prepaid, or by facsimile, or (B) if delivered from
          outside the United States, by International Federal Express or facsimile,
          and
          shall be deemed given (i) if delivered by first-class registered or
          certified mail domestic, three business days after so mailed, (ii) if
          delivered by a nationally recognized overnight carrier, one business day
          after
          so mailed, (iii) if delivered by International Federal

         

        10.  Express,
          two business days after so mailed, (iv) if delivered by facsimile, upon
          electronic confirmation of receipt and shall be delivered as addressed
          as
          follows: 

         

        
          	 	
                  (a)

                	
                  if
                    to the Company, to: 

                

        

         

        Neurogen
          Corporation

        35
          NE
          Industrial Road

        Branford,
          CT 06405

        Attention:
          Jeffrey Dill, Esq.

         

        Telecopy
          No.: (203) 488 - 4710

         

        With
          a
          copy to: 

         

        
          	 	 	
                  Milbank,
                    Tweed, Hadley & McCloy LLP

                

        

         

        1
          Chase
          Manhattan Plaza

         

        New
          York,
          NY 10005

         

        Attention:
          Robert B. Williams, Esq.

         

        Telecopy
          No.: (212) 822 - 5516

         

        (b) if
          to the
          Investor, at its address on the signature page hereto, or at such other
          address
          or addresses as may have been furnished to the Company in writing. 

         

        11.  Changes.
          This
          Agreement may not be modified or amended except pursuant to an instrument
          in
          writing signed by the Company and the Investor. 

         

        12.  Headings.
          The
          headings of the various sections of this Agreement have been inserted for
          convenience or reference only and shall not be deemed to be part of this
          Agreement. 

         

        13.  Severability.
          In case
          any provision contained in this Agreement should be invalid, illegal or
          unenforceable in any respect, the validity, legality and enforceability
          of the
          remaining provisions contained herein shall not in any way be affected
          or
          impaired thereby. 

         

        14.  GOVERNING
          LAW.
          THIS
          AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL
          LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE PRINCIPLES
          OF
          CONFLICTS OF LAW.
          

         

        15.  TIME.
          TIME
          SHALL BE OF THE ESSENCE OF THIS AGREEMENT. EXCEPT AS OTHERWISE SET FORTH
          HEREIN,
          SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.

         

        16.  Counterparts.
          This
          Agreement may be executed (including by facsimile) in two or more counterparts,
          each of which shall constitute an original, but all of which, when taken
          together, shall constitute but one instrument, and shall become effective
          when
          one or more counterparts have been signed by each party hereto and delivered
          to
          the other parties.

         

        17.  Confidentiality.
          Each
          Investor acknowledges and agrees that any information or data it has acquired
          from the Company, not otherwise properly in the public domain, was

         

        18.  received
          in confidence. Except to the extent authorized by the Company and required
          by
          any federal or state law, the Investor agrees that it will refrain from
          disclosing any such information to any person or entity other than to any
          agents, attorneys, accountants, employees, officers and directors of the
          Investor who need to know such information in connection with the Investor’s
          purchase of the Securities and who agree to be bound by the confidentiality
          provisions of this Agreement. In the event that the Investor or its agents,
          attorneys, accountants, employees officers or directors are required by
          law,
          rule or regulation or any decision or order of any court or regulatory
          authority
          to release such information, it shall give the Company sufficient prior
          notice
          so that the Company may seek a stay or other release or waiver from disclosing
          such information. Each Investor agrees not to use to the detriment of the
          Company or for the benefit of any other person or entity, or misuse in
          any way,
          any confidential information of the Company.

        ANNEX
          II

         

        EXCEPTIONS
          TO NASD REPRESENTATIONS IN THE PURCHASE AGREEMENT

         

        __________________________________________________________________________

        

        __________________________________________________________________________

        

        __________________________________________________________________________

        

        __________________________________________________________________________

        

        __________________________________________________________________________

        

        __________________________________________________________________________

        

        __________________________________________________________________________

        

        __________________________________________________________________________

        

        __________________________________________________________________________

        

        __________________________________________________________________________

        

        __________________________________________________________________________

        

        __________________________________________________________________________

        

        __________________________________________________________________________

        

        __________________________________________________________________________

        

        __________________________________________________________________________

        

        __________________________________________________________________________

        

        __________________________________________________________________________

        

        __________________________________________________________________________

        

        ANNEX
          III

         

        WIRE
          INSTRUCTIONS

         

        JP
          MORGAN
          CHASE BANK

         

        ABA#:
           021
          000
          021

         

        
          	 	
                  Account
                    Name: 

                	
                  AMERICAN
                    STOCK TRANSFER AND TRUST COMPANY AS ESCROW AGENT FOR NEUROGEN
                    CORPORATION

                

        

         

        Account
          #:  323-838685

         

        

         

        

         

        IMPORTANT: Please
          clearly indicate on the wire (1) the name of the originator (i.e., the
          Investor)
          and (2) the beneficiary, Neurogen Corporation.

         

        INSTRUCTION
          SHEET FOR INVESTOR

        (to
          be
          read in conjunction with the Purchase Agreement)

        

        In
          order
          to participate in the Offering:

        

        
          	
                  1.

                	
                  Complete
                    the Purchase Agreement, and have the Purchase Agreement executed
                    by an
                    individual authorized to bind the
                    Investor.

                

        

        

        
          	
                  2.

                	
                  Provide
                    the information regarding the investor requested on (i) the signature
                    page
                    to the Purchase Agreement and (ii) if applicable, Annex II
                    thereto.

                

        

        

        
          	
                  3.

                	
                  By
                    the CLOSE
                    OF BUSINESS
                    on
                    MONDAY, DECEMBER 18, 2006, return
                    VIA
                    FACSIMILE signed
                    copies of the completed Purchase Agreement
                    to:

                

        

        

        Pacific
          Growth Equities, LLC

        Attn:
          Vinnie Devone

        Fascimile:
          (415) 274-6887

        Phone:
          (415) 274-6819

        

        
          	
                  4.

                	
                  Please
                    also deliver the ORIGINALLY
                    SIGNED DOCUMENTS
                    to
                    Pacific Growth Equities, LLC at the address included BELOW
                    VIA OVERNIGHT DELIVERY:

                

        

         

        Pacific
          Growth Equities, LLC

        One
          Bush
          Street, Suite 1700

        San
          Francisco, CA 94104

        Attn:
          Vinnie Devone

        

         

        A
          copy of
          the Purchase Agreement signed by the Company will be delivered to the Investor
          at a later date.

         

         

        
          	
                  5.

                	
                  By
                    12
                    NOON NEW
                    YORK CITY TIME on
                    WEDNESDAY, DECEMBER 20, 2006, the
                    Investor shall wire the purchase price for the Shares it is purchasing
                    to
                    the trust account of American Stock Transfer & Trust Company, as
                    Escrow Agent, pursuant to the Wire Instructions included as Annex
                    III to
                    the Purchase Agreement.

                

        

         

        

        

          EXHIBIT
            C-1

          

          FORM
            OF OPINION OF MILBANK,
            TWEED, HADLEY & MCCLOY LLP

          COUNSEL
            TO THE COMPANY

          EXHIBIT
            C-2

          

          FORM
            OF OPINION OF JEFFREY
            DILL, ESQ.

          CHIEF
            CORPORATE COUNSEL TO THE COMPANY

          

          EXHIBIT
            D

          

          FORM
            OF LOCK-UP AGREEMENT

           

          EXHIBIT
            E

          

           

          PRICING
            INFORMATION ANNEX

          

          
            	
                    Terms
                      and Conditions of Common Stock Offering

                  
	
                    Number
                      of shares

                  	
                    6,993,000
                      shares

                  
	
                    Public
                      offering price per share:

                  	
                    $5.72

                  
	
                    Net
                      Proceeds to Neurogen Corporation (after fees paid to the Placement
                      Agents,
                      but before expenses):

                  	
                    $37,524,962.40

                  
	
                    Use
                      of proceeds:

                  	
                    Clinical
                      and preclinical development of existing product candidates,
                      discovery of
                      additional product candidates, capital expenditures and other
                      general
                      corporate purposes.

                  
	
                    Additional
                      risk factor included below:

                  	 

          

          

          Limitation
            on the Use of Net Operating Loss Carryforwards (“NOLs”) and Tax
            Credits

           

          As
            previously disclosed, the Company’s ability to utilize its NOLs and tax credits
            may be limited if it undergoes or has undergone an ownership change,
            as defined
            in section 382 of the Internal Revenue Code, as a result of changes in
            the
            ownership of outstanding stock. An ownership change generally occurs
            if the
            percentage of stock owned by one or more stockholders who own, directly
            or
            indirectly, 5% or more of the value of the Company’s outstanding stock (or are
            otherwise treated as 5% stockholders under section 382 and the regulations
            promulgated thereunder) has increased by more than 50 percentage points
            over the
            lowest percentage of the Company’s outstanding stock owned by these stockholders
            at any time during the testing period, which is generally the three-year
            period
            preceding the potential ownership change. In the event of an ownership
            change,
            section 382 imposes an annual limitation on the amount of post-ownership
            change
            taxable income a corporation may offset with pre-ownership change NOLs.
            

           

           

          In
            2006,
            the Company reviewed its changes in ownership through a testing date
            of December
            31, 2005, and determined that an ownership change occurred in 2005. The
            Company
            is currently reviewing the impact of the change of ownership on the utilization
            of its NOLs and tax credits but has not completed its analysis. However,
            the
            change of ownership could have the effect of reducing the amount of NOLs
            and tax
            credits existing at the date of the ownership change that the Company
            may
            utilize to offset taxable income in the taxable years following the ownership
            change.

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