Exhibit 10.1

EXECUTION COPY

CONTINGENT VALUE RIGHTS AGREEMENT

THIS CONTINGENT VALUE RIGHTS AGREEMENT , dated as of December 23, 2008 (this “ Agreement ”), is entered into by and among LIGAND PHARMACEUTICALS INCORPORATED , a Delaware corporation (“ Buyer ”), PHARMACOPEIA, INC. , a Delaware corporation (“ Target ”), and MELLON INVESTOR SERVICES LLC , a New Jersey limited liability company, as Rights Agent (the “ Rights Agent ”).

Preamble

Buyer, Margaux Acquisition Corp., a Delaware corporation (“ Sub ”), Latour Acquisition, LLC, a Delaware limited liability company, and Target have entered into an Agreement and Plan of Merger dated as of September 24, 2008 (the “ Merger Agreement ”), pursuant to which Sub will merge with and into Target (the “ Merger ”), with Target (or a successor entity) surviving the Merger as a subsidiary of Buyer.

Pursuant to the Merger Agreement, Buyer agreed to create and issue to Target’s stockholders of record immediately prior to the effective time of the Merger and other securityholders of Target, contingent value rights as hereinafter described.

The parties have done all things necessary to make the contingent value rights, when issued pursuant to the Merger Agreement and hereunder, the valid obligations of Buyer and to make this Agreement a valid and binding agreement of Buyer, in accordance with its terms.

NOW, THEREFORE, for and in consideration of the premises and the consummation of the transactions referred to above, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders (as hereinafter defined), as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Definitions.

(a) For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:

(i) the terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular;

(ii) all accounting terms used herein and not expressly defined herein shall have the meanings assigned to such terms in accordance with U.S. generally accepted accounting principles, as in effect on the date hereof;

(iii) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision;

(iv) unless the context otherwise requires, words describing the singular number shall include the plural and vice versa, words denoting any gender shall include all genders and words denoting natural Persons shall include corporations, partnerships and other Persons and vice versa; and

(v) all references to “including” shall be deemed to mean including without limitation.

(b) Capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Merger Agreement. The following terms shall have the meanings ascribed to them as follows:

“ Achievement Certificate ” has the meaning set forth in Section 2.4(a).

“ Board of Directors ” means the board of directors of Buyer.

“ Board Resolution ” means a copy of a resolution certified by the secretary or an assistant secretary of Buyer to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Rights Agent.

“ Business Day ” means any day other than a Saturday, Sunday or a day on which banking institutions in California, New York or New Jersey are authorized or obligated by law or executive order to remain closed.

“ CVR Payment Amount ” means an amount equal to $15 million, payable in cash.

“ CVR Payment Date ” means the date that the CVR Payment Amount is payable by Buyer to the Holders, which date shall be established pursuant to Section 2.4.

“ CVR Payment Event ” means the entry by Buyer or any of its subsidiaries into a license or sale agreement related to DARA, or any other agreement for the development, marketing or sale of DARA, or any option to enter into any such agreements, with any third party, other than Bristol-Myers Squibb Company or any of its Affiliates, on or prior to December 31, 2011.

“ CVR Register ” has the meaning set forth in Section 2.3(b).

“ CVR Registrar ” has the meaning set forth in Section 2.3(b).

“ CVRs ” means the contingent value rights issued by Buyer pursuant to the Merger Agreement and this Agreement.

“ DARA ” means any product candidate from Target’s dual-acting angiotensin and endothelin receptor antagonist program (including Target’s Phase 2 product candidate identified by code PS433540), including related back-up compounds, research data, Intellectual Property and any other related rights or assets.

“ Holder ” means a Person in whose name a CVR is registered in the CVR Register.

“ Non-Achievement Certificate ” has the meaning set forth in Section 2.4(d).

“ Notice of Objection ” has the meaning set forth in Section 2.4(d).

“ Objection Period ” has the meaning set forth in Section 2.4(d).

“ Officer’s Certificate ” means a certificate signed by the chief executive officer, president, chief financial officer, any vice president, the controller, the treasurer or the secretary, in each case of Buyer, in his or her capacity as such an officer, and delivered to the Rights Agent.

“ Permitted Transfer ” means: (i) the transfer of any or all of the CVRs (upon the death of the Holder) by will or intestacy; (ii) transfer by instrument to an inter vivos or testamentary trust in which the CVRs are to be passed to beneficiaries upon the death of the trustee; (iii) transfers made pursuant to a court order of a court of competent jurisdiction (such as in connection with divorce, bankruptcy or liquidation); (iv) if the Holder is a partnership or limited liability company, a distribution by the transferring partnership or limited liability company to its partners or members, as applicable; or (v) a transfer made by operation of law (including a consolidation or merger) or in connection with the dissolution, liquidation or termination of any corporation, limited liability company, partnership or other entity.

“ Person ” means any individual, corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization, entity or governmental entity.

“ Rights Agent ” means the Rights Agent named in the first paragraph of this Agreement, until a successor Rights Agent shall have become such pursuant to the applicable provisions of this Agreement, and thereafter “Rights Agent” shall mean such successor Rights Agent.

“ Rights Agent Fee ” means the fee of the Rights Agent to act in such capacity pursuant to the terms of this Agreement.

“ Surviving Person ” has the meaning set forth in Section 6.1(a)(i).

ARTICLE II

CONTINGENT VALUE RIGHTS

Section 2.1 Issuance of CVRs; Appointment of Rights Agent.

(a) The CVRs shall be issued pursuant to the Merger Agreement at the time and in the manner set forth in the Merger Agreement.

(b) Buyer hereby appoints Mellon Investor Services LLC as the Rights Agent to act as rights agent for Buyer in accordance with the terms and conditions set forth in this Agreement, and the Rights Agent hereby accepts such appointment.

Section 2.2 Nontransferable.

The CVRs shall not be sold, assigned, transferred, pledged, encumbered or in any other manner transferred or disposed of, in whole or in part, other than through a Permitted Transfer.

Section 2.3 No Certificate; Registration; Registration of Transfer; Change of Address.

(a) The CVRs shall not be evidenced by a certificate or other instrument.

(b) The Rights Agent shall keep a register (the “ CVR Register ”) for the registration of CVRs. The Rights Agent is hereby initially appointed “ CVR Registrar ” for the purpose of registering CVRs and transfers of CVRs as herein provided.

(c) Subject to the restriction on transferability set forth in Section 2.2, every request made to transfer a CVR must be in writing and accompanied by a written instrument or instruments of transfer and any other requested documentation in form reasonably satisfactory to Buyer and the CVR Registrar, properly completed and duly executed by the registered Holder or Holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney, such signature to be guaranteed by a participant in a recognized Signature Guarantee Medallion Program. A request for a transfer of a CVR shall be accompanied by such documentation establishing satisfaction that the transfer is a Permitted Transfer as may be reasonably requested by Buyer and the CVR Registrar (including opinions of counsel), if appropriate. Upon receipt of such written notice by Buyer and the CVR Registrar, the CVR Registrar shall, subject to the Buyer’s confirmation in writing to the CVR Registrar that the transfer instrument is in proper form and the transfer otherwise complies with the other terms and conditions herein, register the transfer of the CVRs in the CVR Register. All duly transferred CVRs registered in the CVR Register shall be the valid obligations of Buyer, evidencing the same right and shall entitle the transferee to the same benefits and rights under this Agreement, as those held by the transferor. No transfer of a CVR shall be valid until registered in the CVR Register, and any transfer not duly registered in the CVR Register will be void ab initio. Any transfer or assignment of the CVRs shall be without charge (other than the cost of any transfer tax or governmental charge which shall be the responsibility of the transferor) to the Holder.

(d) A Holder may make a written request to the CVR Registrar to change such Holder’s address of record in the CVR Register. The written request must be duly executed by the Holder. Upon receipt of such written notice, the CVR Registrar shall promptly record the change of address in the CVR Register.

(e) Any Holder may make a written request (which must be duly executed by such Holder) to Buyer for a list containing the names, addresses and number of CVRs of the Holders that are registered in the CVR Register. Within three Business Days following the date of receipt by Buyer of such request, Buyer shall make a written request to the CVR Registrar for such list, which request shall specify the name of the requesting Holder. Upon receipt of such written request from Buyer, the CVR Registrar shall promptly (and in any event within three Business Days) deliver a copy of such list to the requesting Holder at the address for such Holder in the CVR Register.

Section 2.4 Payment Procedures.

(a) Promptly following the occurrence of the CVR Payment Event, of which date Buyer shall notify the Rights Agent in writing, but in no event later than ten Business Days after such event, Buyer shall deliver to the Rights Agent a certificate (the “ Achievement Certificate ”), certifying that the Holders are entitled to receive the CVR Payment Amount. The Rights Agent shall have no duty or obligation to verify or confirm the accuracy, validity or sufficiency of the CVR Payment Amount and shall have no duty or obligation to verify or confirm whether a CVR Payment Event has occurred. No transaction in compliance with Section 6.1 hereof shall give the Holders the right to receive the CVR Payment Amount.

(b) If a CVR Payment Event has not occurred on or prior to December 31, 2011, then, within five Business Days after such date, Buyer shall deliver to the Rights Agent a certificate (the “ Non-Achievement Certificate ”), stating that a CVR Payment Event did not occur.

(c) Except as otherwise requested by any Holder, the Rights Agent shall promptly (and in no event later than five Business Days after receipt thereof) send each Holder a copy of any Achievement Certificate or Non-Achievement Certificate at its address as reflected in the CVR Register as of the date the Rights Agent received such Achievement Certificate or Non-Achievement Certificate.

(d) Upon demand by any Holder or Holders of at least 20% in the aggregate of the outstanding CVRs received within 45 calendar days after distribution by the Rights Agent of a Non-Achievement Certificate (the “ Objection Period ”), the Rights Agent shall deliver a written notice to Buyer, which shall be prepared by such Holder or Holders, (i) specifying that such Holder or Holders object to the determination of Buyer that a CVR Payment Event did not occur and (ii) stating the reason upon which such Holder or Holders have determined that a CVR Payment Event has occurred on or prior to December 31, 2011 (a “ Notice of Objection ”). Any dispute arising from a Notice of Objection shall be resolved in accordance with the procedure set forth in Section 7.12, which decision shall be binding on the parties hereto and the Holders.

(e) If a Notice of Objection has not been delivered to Buyer within the Objection Period, then the Holders shall have no right to receive the CVR Payment Amount, and Buyer and the Rights Agent shall have no further obligations with respect to the CVR Payment Amount.

(f) If Buyer delivers an Achievement Certificate to the Rights Agent or if the CVR Payment Amount is determined to be payable pursuant to Section 2.4(d) above, Buyer shall establish a CVR Payment Date that is within 15 calendar days of the date of the Achievement Certificate or the date of final determination pursuant to Section 2.4(d) above, as applicable, and shall notify the Rights Agent of such date in writing. At least five Business Days prior to such CVR Payment Date, Buyer shall cause the CVR Payment Amount to be delivered to the Rights Agent, who will in turn, on the CVR Payment Date, distribute the CVR Payment Amount to the Holders (each Holder being entitled to receive its pro rata share of the CVR Payment Amount based on the number of CVRs held by such Holder as reflected on the CVR Register, which pro rata amount shall be provided by Buyer in writing to the Rights Agent) by check mailed to the address of each Holder as reflected in the CVR Register as of the close of business on the last Business Day prior to such CVR Payment Date. The determination by Buyer of any CVR Payment Amount shall be final and binding on Buyer, the Rights Agent and each Holder.

(g) Buyer shall be entitled to deduct and withhold, or cause to be deducted or withheld, from each CVR Payment Amount otherwise payable pursuant to this Agreement, such amounts as Buyer or the applicable subsidiary of Buyer is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld or paid over to or deposited with the relevant governmental entity, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Holder in respect of which such deduction and withholding was made.

(h) Buyer shall promptly furnish to the Rights Agent all information and documentation in connection with this Agreement and the CVRs that the Rights Agent or any Holder or Holders of at least 5% in the aggregate of the outstanding CVRs may reasonably request in connection with the determination of whether the CVR Payment Event has occurred. The Rights Agent shall forward any information and documentation it receives to the Holders who request such information.

Section 2.5 No Voting, Dividends or Interest; No Equity or Ownership Interest in Buyer.

(a) The CVRs shall not have any voting or dividend rights, and interest shall not accrue on any amounts payable on the CVRs to any Holder.

(b) The CVRs shall not represent any equity or ownership interest in Buyer or in any constituent company to the Merger.

Section 2.6 Sole Discretion and Decision Making Authority.

Notwithstanding anything contained herein to the contrary, the development of pharmaceutical products, such as DARA, is uncertain and expensive and as a result, Buyer shall have sole discretion and decision making authority over whether to continue to invest, how much to invest in DARA and whether and on what terms, if any, to enter into (i) a license or sale agreement related to DARA, (ii) any other agreement for the development, marketing or sale of DARA, or (iii) any option to enter into any such agreements.

ARTICLE III

THE RIGHTS AGENT

Section 3.1 Certain Duties and Responsibilities.

The Rights Agent shall not have any liability for any actions taken, suffered or omitted to be taken in connection with this Agreement, except to the extent of its willful misconduct, bad faith or gross negligence (which willful misconduct, bad faith or gross negligence must be determined by a final, non-appealable judgment of a court of competent jurisdiction). Anything to the contrary notwithstanding, in no event shall the Rights Agent be liable for any special, punitive, indirect, consequential or incidental loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Rights Agent has been advised of the likelihood of such loss or damage. Any liability of the Rights Agent will be limited to the amount of annual fees paid by Buyer to the Rights Agent. No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers.

Section 3.2 Certain Rights of Rights Agent.

The Rights Agent undertakes to perform only such express duties and obligations as are specifically set forth in this Agreement, and no implied duties or obligations shall be read into this Agreement against the Rights Agent. In addition:

(a) the Rights Agent may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;

(b) whenever the Rights Agent shall deem it necessary or desirable that a fact or matter be proved or established prior to taking, suffering or omitting any action hereunder (including, without limitation, the identity of a Holder), the Rights Agent may rely upon an Officer’s Certificate, and such Officer’s Certificate shall be full and complete authorization and protection to the Rights Agent. The Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted by it absent bad faith under the provisions of this Agreement in reliance on such Officer’s Certificate;

(c) the Rights Agent shall not be subject to, nor be required to comply with, or determine if any person or entity has complied with, the Merger Agreement or any other agreement between or among the parties hereto, even though reference thereto may be made in this Agreement , or to comply with any notice, instruction, direction, request or other communication, paper or document other than as expressly set forth in this Agreement;

(d) the Rights Agent may engage and consult with counsel of its selection (who may be legal counsel for Buyer) and the advice or opinion of such counsel shall be full and complete authorization and protection for the Rights Agent, and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted by it absent bad faith in accordance with such advice or opinion;

(e) the Rights Agent may engage and consult with tax experts, valuation firms and other experts and third parties that it, in its sole and absolute discretion, deems appropriate or necessary to enable it to discharge its duties hereunder;

(f) the permissive rights of the Rights Agent to do things enumerated in this Agreement shall not be construed as a duty;

(g) the Rights Agent shall not be required to give any note or surety in respect of the execution of such powers or otherwise in respect of the premises;

(h) Buyer agrees that it shall perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged or delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement;

(i) the Rights Agent shall not be deemed to have any knowledge of any event which it was supposed to have received notice thereof hereunder, and the Rights Agent shall be fully protected and shall incur no liability for failing to take any action in connection therewith unless and until it has received such notice;

(j) the Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from an officer of Buyer, and to apply to such officer for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in accordance with instructions from such officer;

(k) the Rights Agent shall not incur any liability for not performing any act, duty, obligation or responsibility by reason of any occurrence beyond the control of the Rights Agent (including, without limitation, any act or provision of any present or future law or regulation or governmental authority, any act of God, war, civil disorder or failure of any means of communication);

(l) the Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the CVRs or other securities of Buyer or become pecuniarily interested in any transaction in which Buyer may be interested, or contract with or lend money to Buyer or otherwise act as fully and freely as though the Rights Agent were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for Buyer or for any other Person;

(m) the Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself (through its directors, officers or employees) or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, omission, default, neglect or misconduct of any such attorneys or agents or for any loss to Buyer or any other Person resulting from any such act, default, neglect or misconduct, absent willful misconduct, bad faith or gross negligence (which willful misconduct, bad faith or gross negligence must be determined by a final, non-appealable judgment of a court of competent jurisdiction);

(n) in the event the Rights Agent reasonably believes any ambiguity or uncertainty exists hereunder or in any notice, instruction, direction, request or other communication, paper or document received by the Rights Agent hereunder, the Rights Agent may, in its sole discretion, refrain from taking any action, and shall be fully protected and shall not be liable in any way to Buyer or other person or entity for refraining from taking such action, unless the Rights Agent receives written instructions signed by Buyer which eliminates such ambiguity or uncertainty to the reasonable satisfaction of the Rights Agent.

(o) the recitals or statements of fact contained herein shall be taken as statements of Buyer, and the Rights Agent assumes no responsibility for their correctness nor shall it be required to verify the same. The Rights Agent shall be under no responsibility for the validity or sufficiency of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of the CVRs, nor shall it be responsible for any breach by Buyer of any covenant or condition contained in this Agreement or any CVR.

(p) Buyer agrees to indemnify, defend, protect, save and keep harmless the Rights Agent and its affiliates and their respective successors, assigns, directors, officers, managers, employees, agents, attorneys, accountants and experts (collectively, the “ Indemnitees ”), against any and all loss, liability, obligation, damage, fine, settlement, penalty, action, judgment, suit, cost, disbursement, proceeding, investigation, claim, demand or expense of any kind or nature whatsoever (including, without limitation, the reasonable fees and expenses of legal counsel and the costs and expenses of defending the Indemnitee against any claim of liability arising therefrom) (collectively, “ Losses ”) that may be imposed on, incurred by, or asserted against any Indemnitee, at any time, and in any way relating to, arising out of or in connection with the execution, delivery or performance of this Agreement, the enforcement of any rights or remedies in connection with this Agreement, and the payment, transfer or other application of funds pursuant to this Agreement, or as may arise by reason of any act, omission or error of the Indemnitee; provided, however, that no Indemnitee shall be entitled to be so indemnified, defended, protected, saved or kept harmless to the extent such Loss was caused by its own willful misconduct, bad faith or gross negligence (each as determined by a final, non-appealable judgment of a court of competent jurisdiction).

(q) Buyer agrees (i) to pay the fees and expenses of the Rights Agent in connection with this Agreement, as set forth on Schedule 1 hereto, and (ii) to reimburse the Rights Agent for all taxes and governmental charges, reasonable expenses and other charges of any kind and nature (including, without limitation, reasonable fees and disbursements of counsel) incurred in connection with the preparation, negotiation, amendment, modification, waiver, execution, delivery, performance or enforcement of this Agreement (other than taxes measured by the Rights Agent’s net income). An invoice for the Rights Agent Fee will be rendered a reasonable time prior to, and paid on, the effective date of the transaction. An invoice for any out-of-pocket expenses and per item fees realized will be rendered and payable within thirty (30) days after receipt by Buyer, except for postage and mailing expenses, which funds must be received by the Rights Agent one (1) Business Day prior to the scheduled mailing date.

Section 3.3 Resignation and Removal; Appointment of Successor.

(a) The Rights Agent may resign at any time by giving written notice thereof to Buyer specifying a date when such resignation shall take effect, which notice shall be sent at least 30 days prior to the date so specified.

(b) If the Rights Agent shall resign, be removed or become incapable of acting, Buyer, by way of a Board Resolution, shall promptly appoint a qualified successor Rights Agent who may be a Holder but shall not be an officer of Buyer. The successor Rights Agent so appointed shall, forthwith upon its acceptance of such appointment in accordance with this Section 3.3(b), become the successor Rights Agent.

(c) Buyer shall give notice of each resignation and each removal of a Rights Agent and each appointment of a successor Rights Agent by mailing written notice of such event by first-class mail, postage prepaid, to the Holders as their names and addresses appear in the CVR Register. Each notice shall include the name and address of the successor Rights Agent. If Buyer fails to send such notice within ten days after acceptance of appointment by a successor Rights Agent, the successor Rights Agent shall cause such notice to be mailed at the expense of Buyer. Failure to give any notice provided for in this Section 3.3, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of a successor Rights Agent, as the case may be.

Section 3.4 Acceptance of Appointment by Successor.

Every successor Rights Agent appointed hereunder shall execute, acknowledge and deliver to Buyer and to the retiring Rights Agent an instrument accepting such appointment and a counterpart of this Agreement, and thereupon such successor Rights Agent, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Rights Agent; provided , that upon the request of Buyer or the successor Rights Agent, such retiring Rights Agent shall execute and deliver an instrument transferring to such successor Rights Agent all the rights, powers and trusts of the retiring Rights Agent.

ARTICLE IV

COVENANTS

Section 4.1 List of Holders.

Buyer shall furnish or cause to be furnished to the Rights Agent (a) in such form as Buyer receives from its transfer agent (or other agent performing similar services for Buyer), the names, addresses and shareholdings of the Holders within five Business Days of the effective time of the Merger, (b) at such other times as the Rights Agent may request in writing, within five days after receipt by Buyer of any such request, a list, in such form as Buyer receives from its transfer agent (or other agent performing similar services for Buyer), of the names and the addresses of the Holders as of a date not more than 15 days prior to the time such list is furnished, and (c) any other information reasonably requested by the Rights Agent. Buyer shall also furnish or cause to be furnished to the Rights Agent with respect to each holder of any Assumed Company Option and New Warrant, such holder’s name, address and the number of shares of Buyer’s common stock issuable upon exercise of such Assumed Company Option or New Warrant. Upon such exercise, such holder shall be a “Holder” for all purposes of this Agreement. The Rights Agent shall not be deemed to have knowledge of, and shall not have any duty or liability with respect to, any holder of any Assumed Company Option or New Warrant unless and until it shall have received written notice from Buyer regarding such Holder’s name, address and shareholding.

Following the distribution by the Rights Agent of the CVR Payment Amount, if any, to the Holders in accordance with Section 2.4 hereof, any remaining undistributed amount will be promptly returned to Buyer to be held by Buyer for distribution to the appropriate Holders.

Section 4.2 Payment of CVR Payment Amount.

Buyer shall duly and promptly pay the CVR Payment Amount, if any, in immediately available funds, to the Rights Agent to be distributed to the Holders in the manner provided for in Section 2.4 and in accordance with the terms of this Agreement.

Section 4.3 Ability to Make Prompt Payment.

Neither Buyer nor any of its Subsidiaries shall enter into any agreement that would restrict Buyer’s right to be able to promptly make payments to the Holders under this Agreement or otherwise restrict Buyer’s ability to fund such payments.

Section 4.4 Assignment.

Buyer shall not, in whole or in part, assign any of its rights or obligations under this Agreement other than in accordance with the terms of Section 6.1 hereof.

Section 4.5 Registration

If required pursuant to applicable U.S. securities laws, the CVRs will be registered pursuant to the Registration Statement under the Securities Act and Buyer covenants and agrees:

(a) to prepare and file with the SEC such amendments and supplements to the Registration Statement and the prospectus used in connection therewith as may be necessary to keep the Registration Statement effective through the CVR Payment Date or until such time as the CVRs terminate in accordance with the terms hereof and to use its reasonable efforts to keep the Registration Statement effective during such period; and

(b) to use its reasonable efforts to register or qualify the CVRs under the securities or blue sky laws of each jurisdiction in which such registration or qualification is necessary.

Buyer shall be solely responsible for monitoring compliance with this Section 4.5. In addition, the Rights Agent will not be under any duty or responsibility to insure compliance with any applicable federal or state securities laws, including but not limited to the Securities Act, in connection with the issuance, transfer, exchange, registration or qualification of the CVRs.

ARTICLE V

AMENDMENTS

Section 5.1 Amendments Without Consent of Holders.

(a) Without the consent of any Holders or the Rights Agent, Buyer, when authorized by a Board Resolution, at any time and from time to time, may enter into one or more amendments hereto, for any of the following purposes:

(i) to evidence the succession of another Person to Buyer and the assumption by any such successor of the covenants of Buyer herein in a transaction contemplated by Section 6.1 hereof; or

(ii) to evidence the termination of the CVR Registrar and the succession of another Person as a successor CVR Registrar and the assumption by any successor of the obligations of the CVR Registrar herein.

(b) Without the consent of any Holders, Buyer, when authorized by a Board Resolution, and the Rights Agent, in the Rights Agent’s sole and absolute discretion, at any time and from time to time, may enter into one or more amendments hereto, for any of the following purposes:

(i) to evidence the succession of another Person as a successor Rights Agent and the assumption by any successor of the covenants and obligations of the Rights Agent herein;

(ii) to add to the covenants of Buyer such further covenants, restrictions, conditions or provisions as the Board of Directors and the Rights Agent shall consider to be for the protection of the Holders; provided, that in each case, such provisions shall not adversely affect the interests of the Holders;

(iii) to cure any ambiguity, to correct or supplement any provision herein that may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Agreement; provided, that in each case, such provisions shall not adversely affect the interests of the Holders; or

(iv) to add, eliminate or change any provision of this Agreement unless such addition, elimination or change is adverse to the interests of the Holders.

(c) Promptly after the execution by Buyer and the Rights Agent of any amendment pursuant to the provisions of this Section 5.1, Buyer shall mail a notice thereof by first-class mail to each of the Holders at their addresses as they shall appear on the CVR Register, setting forth in general terms the substance of such amendment.

Section 5.2 Amendments With Consent of Holders.

(a) Subject to Section 5.1 (which amendments pursuant to Section 5.1 may be made without the consent of the Holders), with the consent of the Holders of not less than a majority of the outstanding CVRs, whether evidenced in writing or taken at a meeting of the Holders, Buyer, when authorized by a Board Resolution, and the Rights Agent may enter into one or more amendments hereto for the purpose of adding, eliminating or changing any provisions of this Agreement, even if such addition, elimination or change is in any way adverse to the interests of the Holders.

(b) Promptly after the execution by Buyer and the Rights Agent of any amendment pursuant to the provisions of this Section 5.2, Buyer shall mail a notice thereof by first-class mail to the Holders at their addresses as they shall appear on the CVR Register, setting forth in general terms the substance of such amendment.

Section 5.3 Execution of Amendments.

Prior to executing any amendment permitted by this Article V, the Rights Agent shall be entitled to receive, and shall be fully protected in relying upon, an Officer’s Certificate and an opinion of counsel stating that the execution of such amendment is authorized or permitted by this Agreement. Notwithstanding anything herein to the contrary, the Rights Agent may, but is not obligated to, enter into any such amendment that affects the Rights Agent’s own rights, privileges, covenants, duties, obligations or immunities under this Agreement or otherwise, and the Rights Agent shall not be bound by amendments not executed by it.

Section 5.4 Effect of Amendments.

Upon the execution of any amendment under this Article V, this Agreement shall be modified in accordance therewith, such amendment shall form a part of this Agreement for all purposes and every Holder shall be bound thereby.

ARTICLE VI

CONSOLIDATION, MERGER, SALE OR CONVEYANCE

Section 6.1 Buyer May Consolidate, Etc.

(a) Buyer shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, unless:

(i) the Person formed by such consolidation or into which Buyer is merged or the Person that acquires by conveyance or transfer, or that leases, the properties and assets of Buyer substantially as an entirety (the “ Surviving Person ”) shall expressly assume payment of amounts on all the CVRs and the performance of every duty and covenant of this Agreement on the part of Buyer to be performed or observed; and

(ii) Buyer has delivered to the Rights Agent an Officer’s Certificate and an opinion of counsel, stating that such consolidation, merger, conveyance, transfer or lease complies with this Article VI and that all conditions precedent herein provided for relating to such transaction have been complied with.

(b) For purposes of this Section 6.1 only, “convey, transfer or lease its properties and assets substantially as an entirety” shall mean (i) properties and assets contributing in the aggregate at least 80% of Buyer’s total consolidated revenues for the current period as reported in Buyer’s last available periodic financial report (quarterly or annual, as the case may be) or (ii) properties and assets constituting in the aggregate at least 80% of Buyer’s total assets for the current period as reported in Buyer’s last available periodic financial report (quarterly or annual, as the case may be).

(c) In the event Buyer conveys, transfers or leases its properties and assets substantially as an entirety in accordance with the terms and conditions of this Section 6.1, Buyer and the Surviving Person shall be jointly and severally liable for the payment of the CVR Payment Amount and the performance of every duty and covenant of this Agreement on the part of Buyer to be performed or observed.

Section 6.2 Successor Substituted.

Upon any consolidation of or merger by Buyer with or into any other Person, or any conveyance, transfer or lease of the properties and assets substantially as an entirety to any Person in accordance with Section 6.1, the Surviving Person shall succeed to, and be substituted for, and may exercise every right and power of, Buyer under this Agreement with the same effect as if the Surviving Person had been named as Buyer herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Agreement and the CVRs.

ARTICLE VII

OTHER PROVISIONS OF GENERAL APPLICATION

Section 7.1 Notices to Rights Agent and Buyer.

Any request, demand, authorization, direction, notice, consent, waiver or other document provided or permitted by this Agreement shall be sufficient for every purpose hereunder if in writing and sent by facsimile transmission, delivered personally, or by certified or registered mail (return receipt requested and first-class postage prepaid) or sent by a nationally recognized overnight courier (with proof of service), addressed as follows, and shall be deemed to have been given upon receipt:

(a) if to the Rights Agent, addressed to it at Newport Office Center VII, 480 Washington Blvd., Jersey City, NJ 07310, Attention: Relationship Manager, facsimile at (501) 760-1538, with a copy to Newport Office Center VII, 480 Washington Blvd., Jersey City, NJ 07310, Attention: General Counsel, or at any other address previously furnished in writing to the Holders and Buyer by the Rights Agent in accordance with this Section 7.1; or

(b) if to Buyer, addressed to it at 10275 Science Center Drive, San Diego, California 92121, facsimile at (858) 550-7272, or at any other address previously furnished in writing to the Rights Agent and the Holders by Buyer in accordance with this Section 7.1.

Section 7.2 Notice to Holders.

Where this Agreement provides for notice to Holders, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his, her or its address as it appears in the CVR Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders.

Section 7.3 Effect of Headings.

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

Section 7.4 Successors and Assigns.

All covenants and agreements in this Agreement by Buyer shall bind its successors and assigns, whether so expressed or not.

Section 7.5 Benefits of Agreement.

Nothing in this Agreement, express or implied, shall give to any Person (other than the parties hereto, the Holders and their permitted successors and assigns hereunder) any benefit or any legal or equitable right, remedy or claim under this Agreement or under any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the parties hereto, the Holders and their permitted successors and assigns.

Section 7.6 Governing Law.

This Agreement and the CVRs shall be governed by and construed in accordance with the laws of the State of Delaware without regards to its rules of conflicts of laws; provided, however, that all provisions regarding the rights, duties, responsibilities and obligations of the Rights Agent will be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such state.

Section 7.7 Legal Holidays.

In the event that a CVR Payment Date shall not be a Business Day, then, notwithstanding any provision of this Agreement to the contrary, any payment required to be made in respect of the CVRs on such date need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the CVR Payment Date.

Section 7.8 Severability Clause.

In case any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, but this Agreement shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the court or other tribunal making such determination is authorized and instructed to modify this Agreement so as to effect the original intent of the parties as closely as possible so that the transactions and agreements contemplated herein are consummated as originally contemplated to the fullest extent possible; provided, however, that if such modified provision shall affect the rights, immunities, duties or obligations of the Rights Agent, the Rights Agent shall be entitled to resign immediately.

Section 7.9 Counterparts.

This Agreement may be signed in any number of counterparts (which may be effectively delivered by facsimile or other electronic means), each of which shall be deemed to constitute but one and the same instrument.

Section 7.10 Termination.

This Agreement shall terminate and be of no further force or effect, and the parties hereto shall have no liability hereunder, upon the earlier to occur of (a) the payment of the CVR Payment Amount, (b) in the event that a Notice of Objection is not delivered within the Objection Period, the expiration of the Objection Period or (c) in the event of the delivery of a Notice of Objection, either (i) the final determination in accordance with this Agreement that a CVR Payment Event has not been achieved or (ii) the fulfillment of any payment or other obligation required pursuant to a final determination made in accordance with this Agreement.

Section 7.11 Entire Agreement.

As between Buyer and Target only, this Agreement and the Merger Agreement represent their entire understanding with reference to the CVRs, and this Agreement supersedes any and all other oral or written agreements between Buyer and Target made with respect to the CVRs, except for the Merger Agreement. If and to the extent that any provision of this Agreement is inconsistent or conflicts with the Merger Agreement, this Agreement shall govern and be controlling.

Section 7.12 Negotiation; Arbitration.

(a) Prior to any arbitration pursuant to Section 7.12(b), Buyer and any Holder or Holders of at least 5% in the aggregate of the outstanding CVRs shall negotiate in good faith for a period of 30 days to resolve any controversy or claim arising out of or relating to this Agreement or the breach thereof.

(b) After expiration of the 30-day period contemplated by Section 7.12(a), such controversy or claim, including any claims for breach of this Agreement, shall be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrators may be entered in any court having jurisdiction thereof . Buyer and any Holder or Holders of at least 20% in the aggregate of the outstanding CVRs may initiate an arbitration for any matter relating to this Agreement. However, in the event of a dispute arising from the delivery of a Notice of Objection, the sole matter to be settled by arbitration shall be whether a CVR Payment Event has occurred on or prior to December 31, 2011. The number of arbitrators shall be three. Within 15 days after the commencement of arbitration, each party shall select one person to act as arbitrator, and the two selected shall select a third arbitrator within 15 days of their appointment. If the arbitrators selected by the parties are unable or fail to agree upon the third arbitrator, the third arbitrator shall be selected by the American Arbitration Association. The place of the arbitration shall be New York, New York. The arbitrators shall be lawyers or retired judges with experience in the life sciences industry and with mergers and acquisitions. Except as may be required by law, neither a party nor an arbitrator may disclose the existence, content or results of any arbitration hereunder without the prior written consent of both parties (provided that the Rights Agent may disclose to the Holders any such information without the consent of Buyer). Any award payable in favor of the Holders as a result of arbitration shall be distributed to the Holders on a pro rata basis, based on the number of CVRs held by each Holder. Buyer shall pay all fees and expenses incurred in connection with any arbitration, including the costs and expenses billed by the arbitrators in connection with the performance of their duties described herein; provided , however , that if the arbitrator rules in favor of Buyer, the Arbitrator’s fees and expenses shall be offset against the CVR Payment Amount, if any.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF , each of the parties has caused this Agreement to be executed on its behalf by its duly authorized officers as of the day and year first above written.

Exhibit 10.2

L IGAND P HARMACEUTICALS I NCORPORATED

A MENDED AND R ESTATED S EVERANCE P LAN

( AND S UMMARY P LAN D ESCRIPTION )

This Amended and Restated Severance Plan (the “ Plan ”) sets forth the terms of severance benefits for certain employees of Ligand Pharmaceuticals Incorporated (the “ Company ”) in the event of a termination of employment with the Company under the circumstances described below. For purposes of this Plan, “ Company ” will include any subsidiary of the Company and any successor to substantially all of the business, shares or assets of the Company.

The Plan is an employee welfare benefit plan subject to the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”). This Plan document is also the summary plan description of the Plan. References in the Plan to “You” or “Your” are references to an employee of the Company.

1. Eligibility and Participation. You will be eligible for benefits under this Plan only if, immediately prior to your date of termination, you are an employee of the Company who is not subject to disciplinary action or on a formal performance improvement plan. You will be considered an employee of the Company if you are on a Company-approved leave of absence immediately prior to your date of termination and you were employed full-time immediately prior to the commencement of such leave. You will not be eligible for benefits under this Plan if (a) you are a party to any individual change in control severance agreement, employment agreement or other arrangement providing severance benefits, in each case, as approved by the Board or a committee thereof in effect as of the date of your termination, (b) you voluntarily terminate your employment with the Company, (c) you are discharged by the Company for Cause (as defined below), or (d) you decline an offer by the Company or any successor to the Company (or any acquirer of any of the Company’s assets or product lines) made to you at the time of your termination of employment of a similar or better position in job content and base compensation, provided that the location of the offered position is not more than 75 miles from your principal work location at the time of your termination of employment.

2. Severance Benefit. If you are a participant in the Plan, and you are discharged from employment by the Company without Cause (“ Involuntary Termination ”), subject to your compliance with Sections 3 and 4, you will receive the benefits set forth below:

(a) Accrued Obligations . On the date of your Involuntary Termination, you will receive a lump sum payment in cash for (a) your fully earned but unpaid base salary, through the date of such termination, at the rate then in effect, and (b) your accrued but unused vacation through the date of such termination.

(b) Base Salary Severance Benefit . You will receive a severance benefit (your “ Base Salary Severance Benefit ”) in one lump sum payment in cash equal to your Base Salary for the Severance Period (as defined below). This payment will be paid to you within 10 days following your Release Effective Date (as defined below in Section 3).

Your “ Severance Period ” will be equal to (a) two months plus (b) one week for each of your Years of Service as of the date of your Involuntary Termination.

Your “ Base Salary ” will be the rate of your base salary from the Company as in effect on the date of your Involuntary Termination. If you are an hourly employee, your “ Base Salary ” will be your hourly wage rate (determined without regard to overtime) on the date of your Involuntary Termination multiplied times your annual scheduled hours determined on the date of such termination. For this purpose, your Base Salary will not include any bonus, incentive compensation, benefits or expense reimbursements or equity awards.

A “ Year of Service ” will mean each 12-month period of your continuous and uninterrupted service with the Company (or, in the event of a partial year of service, to the extent you provided continuous and uninterrupted service to the Company for at least six months and one day during such year, such year shall count as a full “ Year of Service ” for purposes of this Plan).

If you are entitled to receive any payments or benefits from the Company pursuant to the requirements of the Worker Adjustment and Retraining Notification Act and/or any similar federal, state or local law, then the amount of severance payable under this Plan shall be reduced by any and all such payments made by the Company.

(c) Continued Health Benefits. If you elect continued coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”), the Company will pay the portion of the premiums of your group health insurance coverage, including coverage for your eligible dependents, that exceeds the contributions required by you immediately prior to your date of Involuntary Termination for your Severance Period; provided, however, that the Company will pay premiums for your eligible dependents only for coverage for which those eligible dependents were enrolled immediately prior to the date of your Involuntary Termination. No premium payments will be made following the effective date of your eligibility for coverage by a health insurance plan of a subsequent employer. For the balance of the period that you are entitled to coverage under federal COBRA law, if any, you will be entitled to maintain such coverage at your own expense.

In no event will you receive benefits under this Plan in the event of a termination of your employment as a result of your death or disability.

3. Release Prior to Payment of Benefits. Prior to the payment of any benefits under this Plan, you will be required to execute a release (the “ Release ”) acceptable to the Company.

As specified in the applicable Release, you will have a certain number of calendar days to consider whether to execute such Release, and you may revoke such Release within 7 calendar days after execution. You must execute the Release and not revoke the Release in order to be entitled to benefits under this Plan. With respect to each participant in the Plan, his or her “ Release Effective Date ” will be the day upon which the 7 day revocation period applicable to such Release expires without a revocation of such Release by the participant.

Your Release Effective Date must be within 60 days following the date of your Involuntary Termination. If your Release Effective Date does not occur within 60 days of your Involuntary Termination, you will not be entitled to benefits under this Plan.

4. Confidentiality Obligations . You acknowledge that you have executed and are subject to the provisions of the Company’s standard employee confidentiality and inventions agreement (the “ Confidential Information Agreement ”), which agreement is incorporated herein by reference. If you breach or threaten to commit a breach of the Confidential Information Agreement, the Company shall have the right to cease all payments to you under Section 2, in addition to any other rights and remedies available to the Company under law or in equity.

5. Effective Date of Plan; Amendment. This Plan will be effective as of December 20, 2008 (the “ Effective Date ”). The Compensation Committee of the Board will have the power to amend or terminate this Plan from time to time in its sole and absolute discretion.

6. Claims Procedures.

(a) Normally, you do not need to present a formal claim to receive benefits payable under this Plan.

(b) If any person (the “ Claimant ”) believes that benefits are being denied improperly, that the Plan is not being operated properly, that fiduciaries of the Plan have breached their duties, or that the Claimant’s legal rights are being violated with respect to the Plan, the Claimant must file a formal claim, in writing, with the Plan Administrator (as defined in Section 7(a) below). This requirement applies to all claims that any Claimant has with respect to the Plan, including claims against fiduciaries and former fiduciaries, except to the extent the Plan Administrator determines, in its sole discretion, that it does not have the power to grant all relief reasonably being sought by the Claimant.

(c) A formal claim must be filed within 90 days after the date the Claimant first knew or should have known of the facts on which the claim is based, unless the Plan Administrator in writing consents otherwise. The Plan Administrator will provide a Claimant, on request, with a copy of the claims procedures established under subsection (d).

(d) The Plan Administrator has adopted procedures for considering claims (which are set forth in Appendix A ), which it may amend from time to time, as it sees fit. These procedures will comply with all applicable legal requirements. These procedures may provide that final and binding arbitration will be the ultimate means of contesting a denied claim (even if the Plan Administrator or its delegates have failed to follow the prescribed procedures with respect to the claim). The right to receive benefits under this Plan is contingent on a Claimant using the prescribed claims procedures to resolve any claim.

7. Plan Administration.

(a) The Plan will be administered by the Compensation Committee of the Board and/or its delegate which will be one or more senior officers of the Company (the “ Plan Administrator ”). The Plan Administrator is responsible for the general administration and management of the Plan and will have all powers and duties necessary to fulfill its responsibilities,

including, but not limited to, the discretion to interpret and apply the Plan and to determine all questions relating to eligibility for benefits. The Plan will be interpreted in accordance with its terms and their intended meanings. All actions taken and all determinations made in good faith by the Plan Administrator or by Plan fiduciaries will be final and binding on all persons claiming any interest in or under the Plan.

(b) If, due to errors in drafting, any Plan provision does not accurately reflect its intended meaning, as demonstrated by consistent interpretations or other evidence of intent, or as determined by the Plan Administrator in its sole discretion, the provision will be considered ambiguous and will be interpreted by the Plan Administrator and all Plan fiduciaries in a fashion consistent with its intent, as determined in the sole discretion of the Plan Administrator. The Plan Administrator will amend the Plan retroactively to cure any such ambiguity.

(c) No Plan fiduciary will have the authority to answer questions about any pending or final business decision of the Company or any affiliate that has not been officially announced, to make disclosures about such matters, or even to discuss them, and no person will rely on any unauthorized, unofficial disclosure. Thus, before a decision is officially announced, no fiduciary is authorized to tell any person, for example, that he or she will or will not be laid off or that the Company will or will not offer exit incentives in the future. Nothing in this subsection will preclude any fiduciary from fully participating in the consideration, making, or official announcement of any business decision.

(d) This Section may not be invoked by any person to require the Plan to be interpreted in a manner inconsistent with its interpretation by the Plan Administrator or other Plan fiduciaries.

8. Superseding Plan. This Plan (a) will be the only plan with respect to which benefits may be provided to you as a result of your discharge by the Company without Cause and (b) will supersede any other plan previously adopted by the Company with respect to severance benefits payable to you. Any of your rights hereunder will be in addition to any rights you may otherwise have under benefit plans or agreements of the Company (other than severance plans or agreements) to which you are a party or in which you are a participant, including, but not limited to, any Company-sponsored employee benefit plans and equity incentive award plans and any awards made thereunder.

9. Limitation on Employee Rights. This Plan will not give any employee the right to be retained in the service of the Company, nor will it interfere with or restrict the right of the Company to discharge or otherwise terminate the employee.

10. No Third-Party Beneficiaries. This Plan will not give any rights or remedies to any person other than eligible employees and the Company.

11. Successors. This Plan shall be binding upon and inure to the benefit of the successors of the Company.

12. Governing Law and Venue. This Plan is a welfare plan subject to ERISA and it will be interpreted, administered, and enforced in accordance with that law. To the extent that state law is applicable, the statutes and common law of the State of California, excluding any that mandate the use of another jurisdiction’s laws, will apply. Any suit brought hereon shall be brought in the federal courts sitting in the Southern District of California, and you hereby waive any claim or defense that such forum is not convenient or proper.

13. Miscellaneous. Where the context so indicates, the singular will include the plural and vice versa. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of the Plan. Unless the context clearly indicates to the contrary, a reference to a statute or document will be construed as referring to any subsequently enacted, adopted, or executed counterpart.

14. Notice. For purposes of this Plan, notices and all other communications provided for in this Plan will be in writing and will be deemed to have been duly given when delivered or mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed to the Company at its primary office location and to an employee at such employee’s last known address as listed on the Company’s records, provided that all notices to the Company will be directed to the attention of its Secretary, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address will be effective only upon receipt.

15. Withholding. The Company will be entitled to withhold from any payments or deemed payments to you hereunder any amount of withholding required by law.

16. Additional Information. As a participant in the Plan, you are entitled to certain rights and protections under ERISA, as described in Appendix B .

17. Section 409A of the Code .

(a) Notwithstanding anything herein to the contrary, to the extent any payments to you pursuant to Section 2 are treated as non-qualified deferred compensation subject to Section 409A of the Code, then (i) no amount shall be payable pursuant to such section unless your termination of employment constitutes a “separation from service” with the Company (as such term is defined in Treasury Regulation Section 1.409A-1(h) and any successor provision thereto) (a “ Separation from Service ”), and (ii) if you, at the time of your Separation from Service, are determined by the Company to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code and the Company determines that delayed commencement of any portion of the termination benefits payable to you pursuant to this Plan is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code (any such delayed commencement, a “ Payment Delay ”), then such portion of your termination benefits described in Section 2 shall not be provided to you prior to the earlier of (x) the expiration of the six-month period measured from the date of employee’s Separation from Service, (y) the date of employee’s death or (z) such earlier date as is permitted under Section 409A. Upon the expiration of the applicable Code Section 409A(a)(2)(B)(i) deferral period, all payments deferred pursuant to a Payment Delay shall be paid in a lump sum to you within 30 days following such expiration, and any remaining payments due under this Plan shall be paid as otherwise provided herein. The determination of whether you are a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code as of the time of your Separation from Service shall made by the Company in accordance with the terms of Section 409A of the Code and applicable guidance thereunder (including without limitation Treasury Regulation Section 1.409A-1(i) and any successor provision thereto).

(b) Notwithstanding Section 17(a), to the maximum extent permitted by applicable law, amounts payable to you pursuant to Section 2 shall be made in reliance upon Treasury Regulation Section 1.409A-1(b)(9) (with respect to separation pay plans) or Treasury Regulation Section 1.409A-1(b)(4) (with respect to short-term deferrals).

(c) To the extent the payments and benefits under this Plan are subject to Section 409A of the Code, this Plan shall be interpreted, construed and administered in a manner that satisfies the requirements of Sections 409A(a)(2), (3) and (4) of the Code and the Treasury Regulations thereunder (and any applicable transition relief under Section 409A of the Code).

18. Funding . No provision of the Plan shall require the Company, for purposes of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor shall the Company maintain separate bank accounts, books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes. Eligible Employees shall have no rights under the Plan other than as unsecured general creditors of the Company or its successor.

19. Transferability . No employee’s rights hereunder shall be anticipated, assigned, attached, garnished, optioned, transferred or made subject to any creditor’s process, whether voluntarily, involuntarily or by operation of law, except as approved by the Plan Administrator.

20. Definitions. For purposes of this Plan, the following terms will have the following meanings:

(a) “ Board ” means the board of directors of the Company.

(b) “ Cause ” means that, in the reasonable determination of the Company, you:

(i) have been convicted of (or entered a plea of no contest to) any felony or any other criminal act;

(ii) commit any act of fraud or embezzlement;

(iii) permit or allow any unauthorized use or disclosure of confidential or proprietary information or trade secrets of the Company or its subsidiaries;

(iv) commit any material violation of the Company’s policies; or

(v) commit any other intentional misconduct which adversely affects the business or affairs of the Company in a material manner.

* * * * *

Executed at San Diego, California, effective as of December 20, 2008.

A PPENDIX A

D ETAILED C LAIMS P ROCEDURES

1. Claims Procedure.

(a) Initial Claims. All claims will be presented to the Plan Administrator in writing. Within 90 days after receiving a claim, a claims official appointed by the Plan Administrator will consider the claim and issue his or her determination thereon in writing. The claims official may extend the determination period for up to an additional 90 days by giving the Claimant written notice. The initial claim determination period can be extended further with the consent of the Claimant. Any claims that the Claimant does not pursue in good faith through the initial claims stage will be treated as having been irrevocably waived.

(b) Claims Decisions. If the claim is granted, the benefits or relief the Claimant seeks will be provided. If the claim is wholly or partially denied, the claims official will, within 90 days (or a longer period, as described above), provide the Claimant with written notice of the denial, setting forth, in a manner calculated to be understood by the Claimant: (i) the specific reason or reasons for the denial; (ii) specific references to the provisions on which the denial is based; (iii) a description of any additional material or information necessary for the Claimant to perfect the claim, together with an explanation of why the material or information is necessary; and (iv) appropriate information as to the steps to be taken if the Claimant wishes to submit his or her claim for review, including the time limits applicable to such procedures, and a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse decision upon review. If the Claimant can establish that the claims official has failed to respond to the claim in a timely manner, the Claimant may treat the claim as having been denied by the claims official.

(c) Appeals of Denied Claims. Each Claimant will have the opportunity to appeal the claims official’s denial of a claim in writing to an appeals official appointed by the Plan Administrator (which may be a person, committee, or other entity). A Claimant must appeal a denied claim within 60 days after receipt of written notice of denial of the claim, or within 60 days after it was due if the Claimant did not receive it by its due date. The Claimant (or his or her duly authorized representative) may review pertinent documents in connection with the appeals proceeding and may present issues, comments and documents in writing relating to the claim. The review will take into account all comments, documents, records and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit claim determination. Any claims that the Claimant does not pursue in good faith through the appeals stage, such as by failing to file a timely appeal request, will be treated as having been irrevocably waived.

(d) Appeals Decisions. The decision by the appeals official will be made not later than 60 days after the written appeal is received by the Plan Administrator, unless special circumstances require an extension of time, in which case a decision will be rendered as soon as possible, but not later than 120 days after the appeal was filed, unless the Claimant agrees to a further extension of time. The appeal decision will be in writing, will be set forth in a manner calculated to be understood by the Claimant, and will include specific reasons for the decision, specific references to the provisions on which the decision is

based, if applicable, a statement that the Claimant is entitled to receive upon request and free of charge reasonable access to and copies of all documents, records and other information relevant to the Claimant’s claim for benefits, as well as a statement of the Claimant’s right to bring an action under Section 502(a) of ERISA. If a Claimant does not receive the appeal decision by the date it is due, the Claimant may deem his or her appeal to have been denied.

(e) Procedures. The Plan Administrator will adopt procedures by which initial claims will be considered and appeals will be resolved; different procedures may be established for different claims. All procedures will be designed to afford a Claimant full and fair consideration of his or her claim.

A PPENDIX B

A DDITIONAL I NFORMATION

R IGHTS UNDER ERISA

As a participant in the Plan, you are entitled to certain rights and protections under ERISA. ERISA provides that all Plan participants will be entitled to:

Receive Information About Your Plan and Benefits

1. Examine, without charge, at the Plan Administrator’s office and at certain Company offices, all Plan documents including collective bargaining agreements, if any, and copies of all documents filed by the Plan with the U.S. Department of Labor, and available at the Public Disclosure Room of the Employee Benefits Security Administration, such as annual reports and Plan descriptions.

2. Obtain, upon written request to the Plan Administrator, copies of documents governing the operation of the Plan, including collective bargaining agreements and copies of the latest annual report (Form 5500 Series) and updated summary plan description. The Plan Administrator may make a reasonable charge for the copies.

3. Obtain upon written request to the Plan Administrator information as to whether a particular employer or employer organization is a sponsor of the Plan and the address of any employer or employer organization that is a plan sponsor. Your beneficiaries also have a right to obtain this information upon written request to the Plan Administrator.

4. Receive a summary of the Plan’s annual financial report. The Plan Administrator is required by law to furnish each participant with a copy of this summary annual report.

5. Receive a written explanation of why a claim for benefits has been denied, in whole or in part, and a review and reconsideration of the claim.

6. Continue health care coverage for yourself, spouse or dependent if there is a loss of coverage as a result of a qualifying event. You or your dependents may have to pay for such coverage. Review this Plan and summary plan description on the rules governing your COBRA continuation coverage rights.

Prudent Actions by Plan Fiduciaries

In addition to creating rights for Plan participants, ERISA imposes duties upon the people who are responsible for the operation of the employee benefit plan. The people who operate your Plan, called “fiduciaries” of the Plan, have a duty to do so prudently and in the interest of you and other Plan participants and beneficiaries. No one, including the Company, your union, or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a welfare benefit or exercising your right under ERISA. However, this rule neither guarantees continued employment, nor affects the Company’s right to terminate your employment for other reasons.

Enforce Your Rights

If your claim for a welfare benefit is denied or ignored, in whole or in part, you have a right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain time schedules.

Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request a copy of plan documents or the latest annual report from the Plan and do not receive them within 30 days, you may file suit in a Federal court. In such a case, the court may require the Plan Administrator to provide the materials and pay you up to $110 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the Plan Administrator. If you have a claim for benefits which is denied or ignored, in whole or in part, you may file suit in a state or Federal court. In addition, if you disagree with the Plan’s decision or lack thereof concerning the qualified status of a domestic relations order or a medical child support order, you may file suit in Federal court. If it should happen that Plan fiduciaries misuse the Plan’s money, or if you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor, or you may file suit in a federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees, for example, if it finds your claim is frivolous.

Assistance with Your Questions

If you have any questions about your Plan, you should contact the Plan Administrator. If you should have any questions about this statement or about your rights under ERISA, or if you need assistance in obtaining documents from the Plan Administrator, you should contact the nearest office of the Employee Benefits Security Administration, U. S. Department of Labor, listed in your telephone directory or the Division of Technical Assistance and Inquires, Employee Benefits Security Administration, U. S. Department of Labor, 200 Constitution Avenue N. W., Washington, D. C. 20210. You may also obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Employee Benefits Security Administration.