RESEARCH COLLABORATION AND LICENSE AGREEMENT

EXHIBIT 10.43

RESEARCH COLLABORATION AND LICENSE AGREEMENT

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

Background:

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

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

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

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

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

Article I DEFINITIONS

The following terms shall have the respective meanings set forth below:

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

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

1.3 "Adverse Event" means any adverse event or experience as defined in the then current edition of ICH Guidelines, 21 C.F.R. §301.305, 21 C.F.R. §314.80 and any other applicable regulations or regulatory guidelines.

1.4 "Affiliate" means (a) any corporation or business entity of which more than fifty percent (50%) or more of the securities or other ownership interests representing the equity or voting interest are owned, controlled or held, directly or indirectly, by MSD or NEUROGEN; or (b) any corporation or business entity which, directly or indirectly, owns, controls or holds more than fifty percent (50%) (or the maximum ownership interest permitted by law) or more of the securities or other ownership interests representing the equity or voting interest of MSD or NEUROGEN; or (c) any corporation or business entity of which more than fifty percent (50%) or more of the securities or other ownership interests representing the equity or voting interest are owned, controlled or held, directly or indirectly, by a corporation or business entity described in (a) or (b).

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

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

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

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

1.9 "Commercially Reasonable Efforts" means, [          ]*

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

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

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

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

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

1.15 "FDC Act" means the United States Food, Drug and Cosmetic Act, as amended from time to time.

1.16 "Field" means [          ]* relating to VR1 Modulators.

1.17 "Filing" of an NDA shall mean the acceptance by a Regulatory Authority of an NDA for filing.

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

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

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

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

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

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

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

1.25 "HSR Filing" means filings by MSD or its Affiliates and NEUROGEN with the United States Federal Trade Commission and the Antitrust Division of the United States Department of Justice of a Notification and Report Form for Certain Mergers and Acquisitions (as that term is defined in the HSR Act) with respect to the matters set forth in this Agreement, together with all required documentary attachments thereto.

1.26 "IND" means an Investigational New Drug application (together with all subsequent submissions, supplements and amendments thereto) filed with the FDA in conformance with applicable laws and regulations, for approval to conduct human clinical investigations, and the equivalent thereof, as applicable, in jurisdictions outside the United States.

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

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

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

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

1.31 "Joint Patents" means all Patents that claim Inventions made in the course of performing the Program that have inventors from both NEUROGEN and MSD (including their respective employees, agents or consultants).

1.32 "JRC" means the Joint Research Committee described in Section 2.5 of this Agreement.

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

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

1.35 "[           ]*" means MSD’s proprietary VR1 Modulator designated as [          ]*.

1.36 "MSD Know-How" means all Know-How (including MSD’s Inventions, its Information and its interest in Joint Inventions) that was conceived, generated or reduced to practice before or during the Program Term or within the twelve (12) month period following the Program Term and which is in MSD’s or its Affiliates’ Control during the Program Term or within the twelve (12) month period following the Program Term, and is either (a) related to VR1 and its modulation or the identification and discovery of VR1 Modulators, or (b) necessary to NEUROGEN to conduct its activities under the Program. Notwithstanding any other provision of this Agreement, it is understood and agreed to by the Parties that the MSD Know-How does not include any of MSD’s proprietary screening, combinatorial chemistry or computational chemistry technologies that are not specific to VR1, including MSD’s and MERCK’s chemical libraries.

1.37 "MSD Patents" means any and all Patents in the Field Controlled by MSD or its Affiliates that claim a priority date prior to the expiration of the twelve (12) month period following the expiration of the Program Term, including MSD’s interests in (a) Joint Patents, (b) VR1 Compound Patent Rights and (c) VR1 Related Patent Rights. For clarity, MSD Patents include those listed on Attachment 1.37.

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

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

1.40 "NDA Approval" means approval of an NDA by the FDA, EMEA or other applicable Regulatory Authority.

1.41 "Net Sales" means the gross invoiced amount on sales of the Product(s) by MSD, its Affiliates or Sublicensees to unrelated Third Parties less, to the extent included in the gross invoice amount [          ]*, deductions for the following:

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

2. returns, rebates and allowances actually allowed;

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

4. retroactive price reductions that are actually allowed or granted;

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

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

Any and all such discounts, allowances, credits, rebates and other deductions shall be fairly and equitably allocated to the Product and other products of MSD, its Affiliates or Sublicensees, such that the Product does not bear a disproportionate portion of such deductions. The sale or other transfer of a Product among MSD or its Affiliate or Sublicensee shall not be considered a sale, but in such cases the royalty shall be due and calculated upon MSD’s or its Affiliate’s or its Sublicensee’s Net Sales to the first independent Third Party. In addition, royalties shall not accrue on the disposition of Product in reasonable quantities by MSD, its Affiliates or Sublicensees as samples (promotion or otherwise) or as donations (for example, to non-profit institutions or government agencies for a non-commercial purpose). Every other commercial use or disposition of the Product by MSD, its Affiliates and Sublicensees in barter or other transactions (other than dispensing of reasonable and customary quantities of promotional samples) shall be considered a sale of such Product at the weighted average Net Sales price for such Product during the preceding quarter.

With respect to sales of a Combination Product for the purpose of determining royalty and milestone payments, Net Sales shall be calculated by multiplying the total Net Sales of such Combination Product by the fraction A/A+B where A is the actual invoice price of the Product in the same dosage amount in the applicable country if sold separately and B is the sum of the actual invoice prices of all other active ingredients or products in the same dosage amount in the Combination Product in the applicable country if sold separately during the applicable quarter. If A or B cannot be determined because values for the Product or the other active ingredients sold alone are not available in a particular country then MSD and NEUROGEN will discuss an appropriate allocation for the fair market value of the Product and other active ingredients in the Combination Product to determine Net Sales for such Combination Product. The deductions set out in subparagraphs (a) through (f) will be applied in calculating Net Sales for a Combination Product.

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

1.43 "NEUROGEN Patents" means any and all Patents in the Field Controlled by NEUROGEN or its Affiliates that claim a priority date prior to the expiration of the twelve (12) month period following the expiration of the Program Term including NEUROGEN’s interests in (a) Joint Patents, (b) VR1 Compound Patent Rights and (c) VR1 Related Patent Rights. For clarity, NEUROGEN Patents include those listed on Attachment 1.43.

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

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

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

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

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

1.49 "PDRC" means MERCK’s Preclinical Development Review Committee or any successor committee that performs the same functions.

1.50 "Phase I Clinical Trial" means a human clinical trial that is intended to initially evaluate the safety and/or pharmacological or antigenic effect of a Product in human subjects including a trial that would satisfy the requirements of 21 C.F.R. 312.21(a), as may be amended or the foreign equivalent thereof.

1.51 "Phase II Clinical Trial" means a human clinical trial that is intended to gain evidence of the efficacy of a Product for a particular Indication or Indications in human subjects with the disease or Indication under study including a trial that would satisfy the requirements of 21 C.F.R. 312.21(b), as may be amended or the foreign equivalent thereof.

1.52 "Phase III Clinical Trial" means a pivotal human clinical trial that is intended to gain evidence to establish the efficacy and safety of a Product as a basis for an NDA including a trial that would satisfy the requirements of 21 C.F.R. 312.21(c), as may be amended or the foreign equivalent thereof.

1.53 "Phase IV Clinical Trials" means post-registrational studies or other clinical studies required as a condition to, or for the maintenance of, Regulatory Approval of a Product in the Territory, including a trial that would satisfy the requirements of 21 C.F.R. 312.85, as may be amended or the foreign equivalent thereof.

1.54 "Product" means a product or preparation in final form for sale by prescription, over-the-counter or any other method, for any and all uses and by any route of administration, containing one or more Collaboration Compounds as a pharmaceutically active ingredient(s), including any Combination Product.

1.55 "Program" means the collaborative research program conducted by the Parties under the Research Plan as set forth in Attachment 2.1 and during the Program Term to discover, identify and develop Active Compounds, PCCs and Collaboration Compounds and to better understand the physiology, pharmacology, chemistry, potential clinical utility and potential therapeutic applications of VR1 Modulators, all as further described in Article II.

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

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

1.58 "Sublicensee" means a Third Party to whom MSD grants a license or sublicense to develop, make, use, or sell the Products, or otherwise grants rights to promote or sell the Collaboration Compounds or Products.

1.59 "Territory" means all of the countries in the world, and their territories and possessions.

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

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

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

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

1.64 [            ]*.

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

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

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

1.68 Interpretation.

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

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

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

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

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

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

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

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

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

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

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

Article II RESEARCH PROGRAM

2.1 General.

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

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

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

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

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

2.2 FTE Commitments and Funding.

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

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

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

2.5 Joint Research Committee.

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

(vii) evaluate whether VR1 Modulators meet the Active Compound Criteria;

(viii) establish criteria for Active Compounds to advance into the primary in vivo assays;

(ix) as appropriate, nominate Active Compounds for consideration by the PDRC as a PCC; and

(x) record the achievement of the Research Milestone set forth in Section 6.4(a).

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

2.6 Meetings, Expenses, Minutes and JRC Term.

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

2.7 Research Reports and Records.

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

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

1. In the event that one Party [          ]* discloses Information [          ]*, the other Party [          ]* will use such Information [          ]* required by the Research Plan and within the scope of a [           ]*. All compounds synthesized by the [          ]* shall be referred to herein as a [          ]* or a [          ]*.
2. Should the [          ]* that proposed or ongoing synthesis by the Receiving Party is likely to result in the [          ]* may so inform the JRC and such [          ]* shall then be transferred to the [          ]* If the Parties do not agree on the issue of whether the [          ]*, then the issue shall be submitted promptly to a [          ]*.
3. [          ]*, then:

(i) With regard to the [          ]*, during the Program Term and for [          ]*, without regard to any early termination of the Program [          ]* may not use any compound within the [          ]* in either case for any purpose whatsoever other than:

(A) for [          ]*, or

(B) for [          ]*, or

(C) for other [          ]*, but then only if the [          ]*, other than as a result of a breach of confidentiality by the [          ]*. In particular, except to the extent agreed to in writing by the [          ]*.

(ii) With regard to the [          ]*, during a period that is the [          ]*, in either case for any purpose whatsoever other than:

(A) for [          ]*, or

(B) for [          ]*, or

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

To the extent that a Party designates compounds as [          ]*.

2.9 Use of Compounds Outside the Program and Development Plan.

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

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

Article III LICENSES, EXCLUSIVITY AND DILIGENCE

3.1 Reciprocal Research License.

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

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

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

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

3.5 Exclusivity.

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

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

Article IV DEVELOPMENT, MANUFACTURING AND COMMERCIALIZATION

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

4.2 Development and Regulatory Matters.

1. Responsibility for Development. MSD shall have responsibility for the development of Collaboration Compounds and Products within the scope of the rights granted to it hereunder. MSD shall use Commercially Reasonable Efforts to develop and commercialize Collaboration Compounds for each therapeutic Indication which is scientifically and commercially reasonable, which shall include Pain and urinary incontinence if such Indications are scientifically and commercially reasonable.
2. NEUROGEN FTEs. Upon the mutual written agreement of both Parties, NEUROGEN may make available FTEs to assist MSD in any development activities conducted pursuant to this Agreement. If MSD elects to utilize NEUROGEN FTEs in development activities, then MSD agrees to fund such FTE participation, quarterly in advance, at the Annual FTE Rate, and shall reimburse NEUROGEN for any external costs incurred by NEUROGEN in the performance of activities conducted pursuant to the Development Plan and upon receipt of an invoice from NEUROGEN; provided , that MSD has approved such costs in writing in advance of NEUROGEN incurring such external costs.
3. Development Plan. As soon as practicable following selection of a Collaboration Compound for preclinical development by MSD, MS