Document:

Exhibit
10.5

 

SECURITY
AGREEMENT

 

THIS SECURITY
AGREEMENT (this “Agreement”) is made as of April 21, 2005, by and
among GENAISSANCE PHARMACEUTICALS, INC., a Delaware corporation (the “Company”), and the Investors set forth
on the signatures page affixed hereto (each an “Investor” and collectively, the “Investors”).

 

RECITALS:

 

Pursuant to
the terms of a certain Note and Warrant Purchase Agreement, of even date
herewith (the “Purchase Agreement”), by and among the Company, Lark
Technologies, Inc. (“Lark”) and the Investors, the Investors have agreed
to purchase (a) from the Company and Lark an aggregate of $4,500,000 in
principal amount of the 5.0% Senior Secured Notes of the Company and Lark due April 2007
(the “Notes”); and (b) from the Company a warrant to acquire up to
2,000,000 shares of the Company’s common stock. 
The Investors are willing to enter into the Purchase Agreement only upon
the condition, among others, that the Company secure its obligations under the
Purchase Agreement and certain of the other Transaction Documents by executing
and delivering this Agreement to the Investors.

 

NOW,
THEREFORE, in consideration of the foregoing and the respective covenants
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Investors hereby agree as follows:

 

SECTION 1. 
DEFINITIONS.

 

1.1.                              General
Definitions.  As used in this
Agreement, except as otherwise expressly provided or unless the context
otherwise requires, the following terms shall have the meanings set forth
below:

 

“Chattel Paper” means all chattel paper as such term is defined
in the UCC, now owned or hereafter acquired, including, without limitation,
electronic chattel paper, as such term is defined in the UCC.

 

“CII Assets” means (A) all of the Company’s right, title, and
interest in, to and under the Lease dated as of September 15, 1998, as
amended by and between the Company and Science Park Development Corporation
(the “Lease”), and the leasehold estate created thereby, together with the
appurtenances and all the estate and rights of the Company of, in and to the
Demised Premises (as defined in the Lease); (B) all right, title and interest
of the Company, if any, in and to (a) all modifications, extensions and
renewals of the Lease and in and to all rights to renew or extend the
respective terms of the Lease; (b) all credits, deposits, options, privileges
and rights of the Company under the Lease; and (c) all awards heretofore made
or hereafter to be made for the taking by eminent domain of the whole or any
part of the Demised Premises, or any estate of easement therein; (C) all
leasehold improvements and fixtures or every nature whatsoever now or hereafter
owned by the Company and attached to and used or intended to be used in
connection with the operation of the Demised Premises (excluding, however, any
kitchen appliances, laboratory equipment, laboratory fume hoods, laboratory
casework, and the controlled environment room subject to leasehold financing
and any replacements thereof, and all extensions, additions, improvements,
betterments, renewals, substitutions and replacements to any of the foregoing),
and all of the right, title and interest of the Company in and to such

 

 

personal
property; and (D) all right, title and interest of the Company in and to any
and all subleases and occupancy or similar agreements, now or hereafter on or
affecting the Demised Premises, together with all security therefor and all
moneys payable thereunder.

 

“Collateral” means and includes all now and hereafter acquired
assets of the Company including, without limitation:

 

(A)                              all
Inventory;

 

(B)                                all
Equipment;

 

(C)                                all
General Intangibles;

 

(D)                               all
Receivables;

 

(E)                                 all
Chattel Paper;

 

(F)                                 all
Deposit Accounts and all Letter-of-Credit Rights;

 

(G)                                all
Instruments;

 

(H)                               the
commercial tort claims set forth on Schedule II;

 

(I)                                    all
books, records, ledgercards, files, correspondence, computer programs, tapes,
disks and related data processing software (owned by the Company or in which it
has an interest) which at any time evidence or contain information relating to
any or all of (A), (B), (C), (D), (E), (F), (G) and (H) above or are otherwise
necessary or helpful in the collection thereof or realization thereupon;

 

(J)                                   documents
of title, policies and certificates of insurance, securities, Chattel Paper,
other documents or instruments evidencing or pertaining to any or all of (A),
(B), (C), (D) (E), (F), (G), (H) and (I) above;

 

(K)                               all
Supporting Obligations and guaranties, including letters of credit and
guarantees issued in support of Receivables, Chattel Paper, General Intangibles
and Investment Property, Liens on real or personal property, leases, and other
agreements and property which in any way secure or relate to any or all of (A),
(B), (C), (D), (E), (F), (G), (H), (I) and (J) above, or are acquired for the
purpose of securing and enforcing any item thereof;

 

(L)                                 (i)  all
cash held as cash collateral to the extent not otherwise constituting
Collateral, (ii) all Payment Intangibles, (iii) all letter of credit
obligations, and (iv) all Investment Property; and

 

(M)                            all
products and proceeds of (A), (B), (C), (D), (E), (F), (G), (H), (I), (J), (K)
and (L) above (including, but not limited to, all claims to items referred to
in (A), (B), (C), (D), (E), (F), (G), (H), (I), (J), (K) and (L) above) and all
claims of the Company against third parties for (x)(i) loss of, damage to, or
destruction of, and (ii) payments due or to become due under leases, rentals
and hires of any or all of, (A), (B), (C), (D), (E), (F), (G), (H), (I), (J),
(K) and (L) above and (y) proceeds payable under, or unearned premiums with
respect to policies of insurance in whatever form;

 

provided,
however, notwithstanding the foregoing or anything contained in this Agreement
to the contrary, Collateral shall not include the Excluded Assets and the
Company is not granting the Investors a Security Interest in the Excluded
Assets.

 

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“Customer” means and includes the account debtor with respect to
any Receivable and/or the prospective purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with the Company,
pursuant to which the Company is to deliver any personal property or perform
any services.

 

“Default” means any act or event which, with the giving of
notice or passage of time or both, would constitute an Event of Default.

 

“Deposit Accounts” means all deposit accounts as such term is defined in the
UCC.

 

“Equipment” means all equipment as such term is defined in the UCC, now
owned or hereafter acquired, including, without limitation, equipment,
machinery and goods (excluding Inventory), whether or not constituting
fixtures, including, without limitation: 
plant and office equipment, tools, dies, parts, data processing
equipment, computer equipment with embedded software and peripheral equipment,
furniture and trade fixtures, trucks, trailers, loaders and other vehicles and
all replacements and substitutions therefore and all accessions thereto.

 

“Event of Default” means the occurrence of any of the events set
forth in Section 6.1.

 

“Excluded Assets” means (i) the Intellectual Property of the
Company, (ii) the CII Assets, (iii) assets constituting purchase money security
interests and Capital Lease obligations in an amount not to exceed the
principal amount of $380,000 in the aggregate at any time outstanding for all
such purchase money security interests and Capital Lease Obligations, and (iv)
cash collateral held by Comerica Bank to secure the Company’s letter of credit
reimbursement obligations in principal amount of $224,211.46.

 

“General Intangibles” means all general intangibles as such term is defined in
the UCC, now owned or hereafter acquired, except for any Excluded Assets.

 

“Instruments” means all
instruments as such term is defined in the UCC, now owned or hereafter
acquired, including, without limitation, a negotiable instrument or a
certificated security or any other writing which evidences a right to the
payment of money.

 

“Intellectual Property” means all Intellectual Property (as
defined in the Purchase Agreement) of the Company but shall not include any
Intellectual Property of its Subsidiaries.

 

“Inventory” means all inventory as such term is defined in the UCC, now
owned or hereafter acquired, including, without limitation, goods, merchandise
and other personal property, wherever located, to be furnished under any
contract of service or held for sale or lease, all raw materials, work in
process, finished goods and materials and supplies of any kind, nature or
description which are or might be used or consumed in business or used in
selling or furnishing such goods, merchandise and other personal property, and
all documents of title or other documents representing them.

 

“Investment Property” means all
investment property as such term is defined in the UCC.

 

“Investors” shall have the meaning set forth in the introductory
paragraph hereof.

 

3

 

“Letter-of-Credit Rights” means all letter-of-credit rights as
such term is defined in the UCC, now owned or hereafter acquired, including,
without limitation, rights to payment or performance under a letter of credit,
whether or not the beneficiary has demanded or is entitled to demand payment or
performance.

 

“Liens” means any pledge, hypothecation, assignment, deposit
arrangement, lien, charge, claim, security interest, security title, mortgage,
security deed or deed of trust, easement or encumbrance, or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including any lease or title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
perfecting a security interest under the UCC or comparable law of any
jurisdiction).

 

“Notes” shall have the meaning set forth in the Recitals
paragraph hereof.

 

“Obligations” means all obligations now existing and hereafter
arising of the Company to the Investors under this Agreement, the Notes, the
Purchase Agreement and the other Transaction Documents, and specifically
excluding any and all obligations arising under or in connection with the
Warrant (or any shares of Common Stock issuable thereunder) and the
Registration Rights Agreement, including, without limitation, all expenses
(including reasonable attorneys’ fees and expenses incurred by one (1) counsel
to the Investors) chargeable from time to time to the Company’s account or
incurred from time to time by any of the Investors in connection with the
Company’s account whether provided for herein or in any other agreement, instrument
or document executed by or on behalf of the Company in connection with this
Agreement or the Collateral.

 

“Payment Intangibles” means all payment intangibles means all
accounts as such term is defined in the UCC, now owned or hereafter acquired,
including, without limitation a General Intangible under which the account
debtor’s principle obligation is a monetary obligation.

 

“Permitted Liens” means: (a) Liens of carriers, warehousemen,
artisans, bailees, mechanics and materialmen and other like Liens incurred in
the ordinary course of business securing sums not more than ninety (90) days
overdue or being contested in good faith; (b) Liens incurred in the ordinary
course of business in connection with worker’s compensation, unemployment
insurance or other forms of governmental insurance or benefits, relating to
employees, securing sums (i) not overdue or (ii) being diligently contested in
good faith, provided, that, adequate reserves with respect thereto are
maintained on the books of the Company in conformity with GAAP; (c) Liens in
favor of any of the Investors; (d) Liens imposed by law for taxes, fees,
assessments, or other government charges or levies (i) not yet due or (ii)
being diligently contested in good faith by appropriate proceedings, provided,
that, adequate reserves with respect thereto are maintained on the
books of the Company in conformity with GAAP provided, further,
that, all Liens under this clause (d) in the aggregate outstanding
at any time do not exceed $20,000, (e) zoning restrictions, easements,
licenses, or other restrictions on the use of real property or other minor
irregularities in title thereto, so long as the same does not materially impair
the use, value or marketability of such real estate, (f) Liens to secure the
performance of bids, trade contracts, leases (real property or otherwise),
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature of the Company, in each case incurred in the
ordinary course of the Company’s business,

 

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(g) Liens
representing the owner’s retained interest in any property leased by the
Company, (h) Liens on the Company’s assets set forth on the Disclosure
Schedule, (i) Liens in favor of banks where the Company or any of its
Subsidiaries has accounts for customary fees or charges, (j) Liens securing
Permitted Indebtedness of the type set forth in clause (d) of the definition of
“Permitted Indebtedness” in the Purchase Agreement so long as such Lien is limited
to the property acquired with the proceeds of such Permitted Indebtedness, (k)
Liens on the CII Assets in favor of CII in connection with the CII Financing
and (l) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (j) above, provided that any extension, renewal or
replacement Lien must be limited to the property encumbered by the existing
Lien and provided that the principal amount thereof is not increased or the
terms thereof are not modified to impose more burdensome terms upon the Company
or any Subsidiary incurring such Indebtedness.

 

“Premises” means all premises where the Company conducts its
business and has any rights of possession, including, without limitation, the
premises described in Schedule I attached hereto.

 

“Purchase Agreement” shall have the meaning set forth in the
Recitals paragraph hereof.

 

“Receivables” means all accounts as such term is defined in the UCC,
including, without limitation each and every right to the payment of money,
whether such right to payment now exists or hereafter arises, whether such
right to payment arises out of a sale, lease or other disposition of goods or
other property, out of a rendering of services, out of a loan, out of the
overpayment of taxes or other liabilities, or otherwise arises under any
contract or agreement, whether such right to payment is created, generated or
earned by the Company or by some other Person who subsequently transfers such
Person’s interest to the Company, whether such right to payment is or is not
already earned by performance, and howsoever such right to payment may be
evidenced, together with all other rights and interests (including all Liens)
which the Company may at any time have by law or agreement against any account
debtor or other obligor obligated to make any such payment or against any
property of such account debtor or other obligor; all including but not limited
to all present and future accounts, contract rights, loans and obligations
receivable, Chattel Paper, bonds, notes and other debt instruments, tax refunds
and rights to payment in the nature of General Intangibles.

 

“Security Interest” shall have the meaning assigned to such term
in Section 2.1 hereof.

 

“Subsidiary” of any entity means, at any date, any Person (a)
the accounts of which would be consolidated with those of the applicable entity
in such entity’s consolidated financial statements if such financial statements
were prepared in accordance with GAAP as of such date; or (b) the securities or
other ownership interests representing more than 50% of the equity or more than
50% of the ordinary voting power or, in the case of a partnership, more than
50% of the general partnership interests or more than 50% of the profits or
losses of which are, as of such date, owned, controlled or held by the
applicable entity or one or more Subsidiaries of such entity.

 

“Supporting Obligations” means all supporting obligations as
such term is defined in the UCC.

 

5

 

“UCC” means the Uniform Commercial Code as in effect from time
to time in the state designated in Section 7.12 as the state whose
laws govern this Agreement or in any other state whose laws are held to govern
this Agreement or any portion hereof.

 

1.2.                              Other
Terms.

 

(a)                                  All
capitalized terms not otherwise defined herein shall have the meanings assigned
to them in the Purchase Agreement.

 

(b)                                 All
terms defined in the UCC and not defined in this Agreement or the Purchase
Agreement shall have the meanings specified in the UCC.

 

(c)                                  All
accounting terms not otherwise defined in this Agreement or the Purchase
Agreement shall have the meanings assigned to them in accordance with GAAP.

 

1.3.                              Cross
References.

 

(a)                                  All
references in this Agreement to Articles, Sections, subsections, Exhibits and
Schedules, shall be to Articles, Sections, subsections, Exhibits and Schedules
of this Agreement unless otherwise explicitly specified.

 

(b)                                 All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations.

 

SECTION 2. 
SECURITY INTEREST.

 

2.1.                              Security
Interest.

 

(a)                                  To
secure the prompt and complete payment and performance to the Investors of the
Obligations, the Company hereby pledges and grants to the Investors a
continuing first priority security interest in and to the Collateral, whether
now owned or existing or hereafter acquired or arising and wheresoever located,
whether or not the same is subject to Article 9 of the UCC (the “Security
Interest”).  All of the Company’s
ledger sheets, files, records, books of account, business papers and documents
relating to the Collateral shall, until delivered to or removed by the
Investors, be kept by the Company in trust for the Investors until all
Obligations have been paid in full in cash. 
For the avoidance of doubt, the Collateral does not include the Excluded
Assets and no Security Interest is being granted to the Investors in the
Excluded Assets.

 

(b)                                 The
Company hereby authorizes each of the Investors to file one or more financing
statements (including fixture filings), amendments, or other documents for the
purpose of perfecting, confirming, continuing, enforcing or protecting the
Security Interest granted by the Company, without the Company’s signature
appearing thereon.  The Company agrees to
furnish to each of the Investors promptly upon request any information
necessary for the purpose of perfecting, confirming, continuing, enforcing or
protecting the Security Interest granted by the Company.  The Company also ratifies its authorization
for each of the Investors to file any initial financing statements or
amendments thereto filed prior to the date hereof.  If any Receivable becomes evidenced by a
promissory note or any other instrument for the payment of

 

6

 

money, the Company will immediately deliver such instrument to the
Investors appropriately endorsed.

 

(c)                                  The
Company agrees that promptly after execution of this Agreement, it shall take
at its sole cost and expense all steps necessary to perfect each of the
Investor’s security interest (subject only to Permitted Liens) in Collateral
held for sale or transshipment in any jurisdiction outside of the United
States.

 

SECTION 3. 
REPRESENTATIONS AND WARRANTIES.

 

The Company
represents and warrants to the Investors as follows:

 

3.1.                              Title
and Liens.  Except as set forth on Schedule 3.1
hereto, the Collateral: (a) is owned solely by the Company free and clear of
all Liens except (i) those in the Investors’ favor, and (ii) Permitted Liens;
and (b) as of the date hereof, is not subject to any Material Agreement
prohibiting the granting of a Lien or requiring notice of or consent to the
granting of a Lien.

 

3.2.                              Validity
of Security Interest.  The Security
Interest constitutes: (a) a legal and valid Lien in all the Collateral; and (b)
subject to the filing of the financing statements described in Section 2.1(b),
a perfected first priority Lien in all Collateral in which a Lien may be
perfected by the filing of a financing statement under United States law,
subject to Permitted Liens.

 

SECTION 4. 
COVENANTS.

 

4.1.                              Change
of Name; Location of Collateral; Records; Place of Business.  The Company shall not make any change: (a) in
its name; (b) in the location of its chief executive office, its principal
place of business, any office in which it maintains books or records relating
to Collateral owned by it or any office facility at which Collateral owned by
it is located (including the establishment of any such new office or facility)
from the locations set forth on Schedule I attached hereto; (c) in
its identity or type of organization or corporate structure; (d) in its Federal
Taxpayer Identification Number or state-issued organizational identification
number; or (e) in its jurisdiction of organization; unless in each such case,
(i) the Company provides the Investors at least thirty (30) days prior written
notice of such change, (ii) all filings have been made under the UCC or
otherwise that are required in order for the Investors to continue at all times
following such change to have a valid, legal and perfected first priority Lien
in all the Collateral which may be perfected under United States law by filing
of a financing statement, subject to Permitted Liens, and (iii) such change is
not otherwise prohibited under the Purchase Agreement.

 

4.2.                              Records.  The Company shall keep and maintain at its
own cost and expense, satisfactory and complete records of the Collateral
including, without limitation, a record of any and all payments received and
any and all credits granted with respect to the Collateral and all other
dealings with the Collateral.  Following
the occurrence of an Event of Default, the Majority Purchasers may at any time
verify the Company’s Receivables utilizing an audit control company or any
other agent designated by the Majority Purchasers.  The Majority Purchasers or their designee
may, following the occurrence of an Event of Default, notify

 

7

 

Customers at any time, at the Majority Purchasers’ reasonable
discretion, of the Investors’ Lien in Receivables (contracts, instruments, or
chattel paper, as the case may be), collect them directly from the Customers or
parties to contracts, instruments and chattel paper and charge the collection
costs and expenses to the Company’s account; provided,
however, unless and until the
Majority Purchasers do so or give the Company other instructions, the Company
shall collect all Receivables for the Investors, receive all payments thereon
for Investors’ benefit in trust as Investors’ trustee and immediately deliver
them to Investors in their original form with all necessary endorsements or, as
directed by the Majority Purchasers, deposit such payments as reasonably
directed by the Majority Purchasers.  The
Company shall place notations upon the Company’s books of account and any
financial statement prepared by the Company to disclose the Investors’ Lien in
the Collateral and shall provide the Investors, as requested by any of them, such
schedules, documents and/or information regarding the Collateral as an Investor
may require.

 

4.3.                              Protection
of Collateral and Security Interest. 
The Company shall, at its own cost and expense, take any and all actions
necessary to defend the Collateral against the claims and demands of all
parties and to defend the Lien of the Investors in the Collateral and the
priority thereof against any Lien, except Permitted Liens.

 

4.4.                              Further
Assurances.  Any time and from time
to time, upon the written request of an Investor and at the sole expense of the
Company, the Company shall promptly and duly execute and deliver any and all
such further instruments and documents and take such further actions as such
Investor may reasonably request to preserve, protect and perfect the Security
Interest and the rights and remedies created hereby.

 

4.5.                              Inspection
and Examination.  At such reasonable
times and intervals on reasonable advance notice to the Company, the Majority
Purchasers shall have the right to: (a) visit and inspect the Company’s
properties and the Collateral; and (b) inspect, audit and make extracts from
the Company’s relevant books and records relating to the Collateral; provided
that such inspections shall not occur more than once per calendar year unless
an Event of Default shall have occurred and be continuing.  The Company will execute and deliver to the
Investors any instrument necessary for the Investors to obtain records from any
service bureau maintaining records for the Company.  Notwithstanding the foregoing, the Company
shall not disclose material nonpublic information or provide access to material
nonpublic information to any of the Investors, unless prior to disclosing or
providing access to such information the Company identifies such information as
being material nonpublic information and provides the Investor with the
opportunity to accept or refuse to accept such material nonpublic information
and the Investor electing to receive such material nonpublic information shall
enter into an appropriate confidentiality agreement with the Company with
respect thereto.

 

4.6.                              Liens.  The Company shall not encumber, mortgage,
pledge, assign or grant any Lien in any Collateral to any Person other than the
Investors, except for Permitted Liens.

 

4.7.                              Use
and Disposition of Collateral.  The
Company shall: (a) not dispose of any of the Collateral whether by sale, lease
or otherwise except for (i) the sale of Inventory in the ordinary course of
business, (ii) the disposition or transfer of obsolete, excess or worn-out

 

8

 

Equipment in the ordinary course of business, (iii) the sale of assets
constituting the New Haven Business, the North Carolina Business or Lark to a
non-affiliated third party in strict accordance with, and only to the extent
permitted by, the Purchase Agreement, including without limitation the
mandatory prepayment provisions contained therein, and in all events, the
proceeds from any such disposition shall remain subject to the Liens created hereby,
and (iv) any cash advance or capital contribution to Lark; provided, that, the
Investors have a first priority, security interest in (x) any note, instrument
or security evidencing the advance or capital contribution to Lark and (y)
except as otherwise permitted under Section 5.6(p) of the Purchase
Agreement, any cash advance or capital contribution made to Lark; and (b) keep
and maintain the Equipment in good operating condition, except for ordinary
wear and tear, and shall make all necessary repairs and replacements thereof so
that the value and operating efficiency shall at all times be maintained and
preserved.  For the avoidance of doubt,
the Company may freely transfer or dispose of its rights under its Intellectual
Property, including, without limitation, any licenses and other arrangements
with respect thereto.

 

4.8.                              Risk
of Loss; Insurance.  The Company
shall bear the full risk of loss from any loss of any nature whatsoever with
respect to the Collateral.  The Company
shall keep the Collateral insured as follows:

 

(a)                                  Casualty Insurance.  Maintain extended coverage casualty insurance
written in the name of the Company in the broadest “all risks” form available
on a full replacement cost basis covering all Collateral.  Such insurance shall be in amounts and with
deductible amounts that are customary for companies in the same industry as the
Company in the same geographic market as the Company, but in no event shall the
coverage be less than the full insurable value of the covered Collateral.

 

(b)                                 Liability Insurance.  Maintain commercial general liability
insurance in the name of each of the Investors, including a contractual
liability endorsement and a completed operations and personal injury coverage,
with a combined single limit for any one occurrence of at least $3,000,000.

 

(c)                                  Policy Terms.  All policies shall meet the following
requirements:

 

(i)                                     overall
blanket or excess coverage policies may be supplied provided, however,
that all insurance shall be in amounts sufficient to prevent any insured from
being a co-insurer and that the amount of the casualty insurance coverage
attributable to the Collateral is clearly set forth; and

 

(ii)                                  all
policies shall (A) name each of the Investors “and its successors and assigns
as their interests may appear” as “additional insured” and “loss payee” on all
casualty insurance and as “additional insured” as to all other insurance, and
(B) contain a provision stating that such policy “shall not be canceled or
modified except after ten (10) days prior written notice delivered to the
Investors at its address for notices herein or as subsequently directed in
writing by the Investors”; and

 

(iii)                               all policies shall be in
a form reasonably acceptable to the Investors and shall be issued by
financially sound insurers duly licensed and authorized to

 

9

 

conduct that type of insurance
business in each state where the Collateral is located; and

 

(iv)                              all
policies of insurance and endorsements thereof, together with a paid receipt,
shall be deposited with the Investors prior to the date hereof.  Upon request, prior to the expiration of any
such policies, the Company shall furnish paid receipts and other evidence
satisfactory to the Investors that all such policies have been renewed or
replaced.

 

(d)                                 Insurance
Proceeds.  Unless an Event of Default
shall have occurred and be continuing, the Company shall receive directly all
awards and proceeds with respect to any loss. 
After the occurrence and during the continuance of an Event of Default,
the Investors shall have the exclusive authority to do each of the following in
its reasonable discretion:

 

(i)                                     Receive
directly all awards and proceeds;

 

(ii)                                  Settle
or compromise all claims relating to all awards and proceeds; and

 

(iii)                               Determine whether to
apply any awards and proceeds to reduce the Notes or any other Obligations.

 

(e)                                  Further
Actions.  Upon the occurrence of an
Event of Default, each of the Investors shall have the authority on behalf of
the Company to execute and deliver any such instruments, agreements and
documents as may be necessary to effect the provisions of this Section 4.8.  Any deficiency remaining in the amounts owing
by the Company to the Investors after application of any awards and proceeds
shall be paid by the Company to the Investors, on demand, and shall be deemed
Obligations and additional principal under the Note bearing interest at the
rate specified therein until paid in full in cash.

 

4.9.                              [intentionally omitted]

 

4.10.                        Other Actions.  In order to further insure the attachment,
perfection and priority of, and the ability of the Investors to enforce, the
Security Interest, the Company agrees, in each case at the Company’s expense,
to take the following actions with respect to the following Collateral:

 

(a)                                  Deposit
Accounts.  For each deposit account
that the Company at any time opens or maintains and that is included in the
Collateral, the Company shall, at an Investor’s request and option, pursuant to
an agreement in form and substance reasonably satisfactory to the Investors,
either: (i) cause the depositary bank to agree to comply at any time with
instructions from the Investors to such depositary bank directing the
disposition of funds from time to time credited to such deposit account,
without further consent of the Company; or (ii) arrange for the Investors to
become the customer of the depositary bank with respect to the deposit account,
with the Company being permitted, only with the consent of the Investors, to
exercise rights to withdraw funds from such deposit account.  Each of the Investors agrees with the Company
that it shall not give any such instructions or withhold any withdrawal rights
from the Company, unless an Event of Default has occurred and is continuing,
or, after giving effect to

 

10

 

any withdrawal would occur.  The
provisions of this Section 4.10(a) shall not apply to any deposit
account: (i) for which the Company, the depositary bank and an Investor have
entered into a cash collateral agreement specifically negotiated among the
Company, the depositary bank and an Investor for the specific purpose set forth
therein; or (ii) as provided in Section 5.6(p) of the Purchase Agreement

 

(b)                                 Investment
Property.  If the Company shall at
any time hold or acquire any certificated securities (including without
limitation any securities received as consideration for sales of assets
permitted by Section 5.6(h) of the Purchase Agreement), the Company shall
forthwith endorse, assign and deliver the same to the Lenders, accompanied by
such instruments of transfer or assignment duly executed in blank as the
Investors may from time to time specify. 
If any securities now or hereafter acquired by the Company are uncertificated
and are issued to the Company or its nominee directly by the issuer thereof,
the Company shall immediately notify the Investors thereof and, at the
Investors’ request and option, pursuant to an agreement in form and substance
satisfactory to the Investors, either: (i) cause the issuer to agree to comply
with instructions from the Investors as to such securities, without further
consent of the Company or such nominee; or (ii) arrange for the Investors to
become the registered owner of the securities. 
If any securities, whether certificated or uncertificated, or other
Investment Property now or hereafter acquired by the Company are held by the
Company or its nominees through a securities intermediary or commodity
intermediary, the Company shall immediately notify the Investors thereof and,
at the Investors’ request and option, pursuant to an agreement in form and
substance reasonably satisfactory to the Investors, either: (i) cause such
securities intermediary or (as the case may be) commodity intermediary to agree
to comply with entitlement orders or other instructions from the Investors to
such securities intermediary as to such securities or other Investment
Property, or (as the case may be) to apply any value distributed on account of
any commodity contract as directed by the Investors to such commodity
intermediary, in each case without further consent of the Company or such
nominee; or (ii) in the case of financial assets or other Investment Property
held through a securities intermediary, arrange for the Investors to become the
entitlement holder with respect to such Investment Property, with the Company
being permitted, only with the consent of the Investors, to exercise rights to
withdraw or otherwise deal with such Investment Property.  Each of the Investors agrees with the Company
that it shall not give any such entitlement orders, instructions or directions
to any such issuer, securities intermediary or commodity intermediary, and
shall not withhold its consent to the exercise of any withdrawal or dealing
rights by the Company, unless an Event of Default has occurred, or, after
giving effect to any such investment and withdrawal rights would occur.  The provisions of this Section 4.10(b)
shall not apply to any financial assets credited to a securities account for
which an Investor is the securities intermediary.

 

(c)                                  Letter
of Credit Rights.  If the Company is
at any time a beneficiary under a letter of credit (other than any letter
credit constituting a Supporting Obligation) now or hereafter issued in favor
of the Company, the Company shall promptly notify the Investors thereof and, at
the request and option of the Investors, the Company shall, pursuant to an
agreement in form and substance reasonably satisfactory to the Investors,
either (i) arrange for the issuer and any confirmer to such letter of credit to
consent to an assignment to the Investors of the proceeds of any drawing under
the letter of credit or (ii) arrange for the Investors to become the transferee
beneficiary of the letter of credit, with the Investors agreeing, in each

 

11

 

case, that the proceeds of any drawing under the letter of credit are
to be applied to satisfy the Obligations.

 

(d)                                 Commercial
Tort Claims.  If the Company shall at
any time hold or acquire a material commercial tort claim, the Company shall
immediately notify the Investors in a writing signed by the Company of the
brief details thereof and upon request of the Investors grant to the Investors
in writing a security interest therein and in the proceeds thereof, all upon
the terms of this Agreement, with such writing to be in form and substance
reasonably satisfactory to the Investors.

 

4.11.                        Information.  The Company shall inform the Investors in
writing within fifteen (15) days, in the case of clauses (a) and (b) of this Section 4.11,
or within thirty (30) days, in the case of clauses (c) through (e) of this Section 4.11,
of becoming aware of: (a) the commencement of all material proceedings and, to
the Company’s knowledge, investigations by or before and/or the receipt of any
notices from, any Governmental Authority or nongovernmental body and all
actions and proceedings in any court or before any arbitrator against or in any
way concerning any of the Collateral, in any case that would reasonably be likely
to have a Material Adverse Effect; (b) any Event of Default or Default; (c) any
change in the location of the Company’s executive offices; (d) any change in
the location of a material portion of the Company’s Inventory or Equipment from
the locations listed on Schedule I attached hereto, and (e) any
additional tradenames, corporate names or company names not provided to the
Investors.

 

SECTION 5. 
POWER OF ATTORNEY.

 

The Company hereby irrevocably appoints one
representative designated by the Majority Purchasers (which such designated
Person the Majority Purchasers may change upon written notice to the Company)
as the Company’s attorney-in-fact, with full power and authority in place and
stead of the Company and in the name of the Company or in the name of any
Investor to, after the occurrence of an Event of Default:  (a) endorse the Company’s name on any checks,
notes, acceptances, money orders, drafts or other forms of payment or security
that may come into an Investor’s possession; (b) sign the Company’s name on any
invoice or bill of lading relating to any Receivables, drafts against
customers, schedules and assignments of Receivables, notices of assignment,
financing statements and other public records, verifications of account and
notices to or from Customers; (c) verify the validity, amount or any other
matter relating to any Receivable by mail, telephone, telegraph or otherwise
with Customers; (d) execute customs declarations and such other documents as
may be required to clear Inventory through United States Customs; (e) do all
things necessary to carry out this Agreement; (f) continue any insurance
existing pursuant to the terms of this Agreement and pay all or any part of the
premium therefor and the cost thereof, and any such payment shall be added to
the Obligations and bear interest at the rate then in effect under the Notes;
and (g) notify the post office authorities to change the address for delivery
of the Company’s mail to an address designated by the Majority Purchasers, and
to receive, open and dispose of all mail addressed to the Company.  The Company hereby ratifies and approves all
acts of the said attorney.  The powers
conferred on the Investors hereunder are solely to protect its interests in the
Collateral and shall not impose any duty upon it to exercise any such
powers.  Neither the Investors nor the
said attorney will be liable for any acts or omissions or for any error of
judgment or mistake of fact or law absent

 

12

 

gross negligence or intentional misconduct.  This power, being coupled with an interest,
is irrevocable so long as any Receivable which is assigned to an Investor or in
which an Investor has a Security Interest remains unpaid and until the
Obligations have been fully satisfied.

 

SECTION 6. 
EVENTS OF DEFAULT; RIGHTS AND REMEDIES.

 

6.1.                              Events
of Default.  The occurrence of any
one or more of the following events shall constitute an “Event of Default”:

 

(a)                                  the
occurrence of a Default (which continues for a period of ten (10) days) or an
Event of Default under this Agreement, the Purchase Agreement, the Notes or any
other Transaction Document; or

 

(b)                                 the
Security Interest for any reason ceases to be or is not a valid and perfected
Lien having a first priority security interest, subject to Permitted Liens.

 

6.2.                              Rights
and Remedies.  Upon the occurrence of
any Event of Default, the Majority Purchasers shall have the right to demand
repayment in full of all Obligations, whether or not otherwise due (in such
case the Investors may deposit any and all such amounts realized in a cash
collateral deposit account to be maintained as security for the
Obligations).  The Investors agree that
no notice of exclusive control, order or similar notice of control will be
given under any Control Agreement unless the Majority Purchasers so instruct
any Investor entitled to act under any such Control Agreement.  Until all Obligations have been fully
satisfied, the Investors shall retain the Security Interest.  The Investors shall have, in addition to all
other rights provided herein, the rights and remedies of a secured party under
the UCC, and under other applicable law, all other legal and equitable rights
to which the Investors may be entitled, including without limitation, the right
to take immediate possession of the Collateral, to require the Company to
assemble the Collateral, at the Company’s expense, and to make it available to
the Investors at a place designated by the Investors which is reasonably
convenient to both parties and, subject to the rights of third parties, to
enter any of the Premises of the Company or wherever the Collateral shall be
located, with or without force or process of law, and to keep and store the
same at any such premises until sold (and in the case of any of the Premises or
any other property of the Company, the Company agrees not to charge the
Investors for storage thereof).  Further,
the Investors may, at any time or times after the occurrence of an Event of
Default, sell and deliver all Collateral held by or for the Investors in one or
more parcels at public or private sale for cash, upon credit or otherwise, at
such prices and upon such terms as the Investors, in the their reasonable
discretion, deem advisable or the Investors may otherwise recover upon the Collateral
in any commercially reasonable manner as the Investors, in their reasonable
discretion, deems advisable.  Except as
to that part of the Collateral which is perishable or threatens to decline
speedily in nature or is of a type customarily sold on a recognized market, the
requirement of reasonable notice shall be met if such notice is mailed postage
prepaid to the Company at the Company’s address as shown in the Investors’
records, at least ten (10) days before the time of the event of which notice is
being given.  The Investors may be the
purchaser at any sale, if it is public. 
Until the Investors are able to effect a sale, lease, or other
disposition of Collateral, the Investors shall have the right to use or operate
Collateral, or any part thereof, to the extent reasonably appropriate for the
purpose of preserving Collateral or its value or for any other purpose deemed
appropriate by the Investors.  The
Investors shall have no obligation to the

 

13

 

Company to maintain or preserve the rights of the Company as against
third parties with respect to Collateral while Collateral is in the possession
of the Investors.  Each of the Investors
may, if it so elects, seek the appointment of a receiver or keeper to take
possession of Collateral and to enforce any of the Investors’ remedies with
respect to such appointment without prior notice or hearing.  The proceeds of sale shall be applied first
to all costs and expenses of sale, including reasonable attorneys’ fees and
expenses incurred by one (1) counsel to the Investors, and second to the
payment (in whatever order the Investors elect) of all Obligations.  The Investors will return any excess to the
Company and the Company shall remain liable to the Investors for any
deficiency.

 

SECTION 7. 
MISCELLANEOUS.

 

7.1.                              No
Waiver; Cumulative Remedies.  No
failure or delay by the Investors in exercising any right, power or remedy
under this Agreement shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
under this Agreement.  The remedies
provided in this Agreement are cumulative and not exclusive of any remedies provided
by law.

 

7.2.                              Waivers.  The Company waives presentment and protest of
any instrument and notice thereof, notice of default and all other notices to
which the Company might otherwise be entitled (other than such notices required
by the Purchase Agreement).

 

7.3.                              Security
Interest Absolute.  All rights of the
Investors hereunder, the Security Interest and all the Obligations shall be
absolute and unconditional irrespective of: (a) any lack of validity or
enforceability of the Purchase Agreement, any other Transaction Document, any
agreement with respect to any of the Obligations or any other agreement or
instrument relating to any of the foregoing; (b) any change in the time, manner
or place of payment of, or in any other term of, all or any of the Obligations,
or any other amendment or waiver of or any consent to any departure from the
Purchase Agreement, the Notes, any other Transaction Document or any other
agreement or instrument; (c) any exchange, release or non-perfection of any
Lien on other collateral, or any release or amendment or waiver of or consent
under or departure from any guarantee securing or guaranteeing all or any of
the Obligations; or (d) any other circumstance that might otherwise constitute
a defense available to, or a discharge of, the Company in respect of the
Obligations.

 

7.4.                              Amendments,
Etc.  No amendment, modification,
termination or waiver of any provision of this Agreement or consent to any
departure by the Company therefrom or any release of a Lien shall be effective
unless the same shall be in writing and signed by the Company and the Majority
Purchasers, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.  No notice to or demand on the Company in any
case shall entitle the Company to any other or further notice or demand in
similar or other circumstances.

 

7.5.                              Notices.  Except as otherwise expressly provided
herein, any notice or request hereunder shall be given in accordance with the
terms of the Purchase Agreement.

 

14

 

7.6.                              Collateral.  This Agreement does not contemplate a sale of
accounts, contract rights or chattel paper, and, as provided by law, the
Company is entitled to any surplus and shall remain liable for any
deficiency.  The Investors’ duty of care
with respect to Collateral in their possession (as imposed by law) shall be
deemed fulfilled if it exercises reasonable care in physically keeping such
Collateral, or in the case of Collateral in the custody or possession of a
bailee or other third Person, exercises reasonable care in the selection of the
bailee or other third Person, and the Investors need not otherwise preserve,
protect, insure or care for any Collateral. 
The Investors shall not be obligated to preserve any rights the Company
may have against prior parties, to realize on the Collateral at all or in any
particular manner or order or to apply any cash proceeds of the Collateral in
any particular order of application.

 

7.7.                              Costs
and Expenses; Indemnification.

 

(a)                                  The
Company shall pay all of the Investors’ reasonable and documented out-of-pocket
costs and expenses including, without limitation, reasonable and documented
fees and disbursements of one (1) counsel to the Investors and appraisers, in
connection with the prosecution or defense of any action, contest, dispute,
suit or proceeding concerning any matter in any way arising out of, related to
or connected with this Agreement.  The
Company shall also pay all of the Investors’ reasonable and documented
out-of-pocket costs and expenses, including, without limitation, reasonable and
documented fees and disbursements of one (1) counsel to the Investors, in
connection with: (i) the preparation, execution and/or delivery of any waiver,
amendment or consent proposed by, or at the request of, the Company or Lark or
executed in connection with the transactions contemplated by this Agreement,
whether or not it becomes effective; (ii) the Investors’ obtaining performance
of the Company’s obligations under this Agreement, including, but not limited
to, the enforcement or defense of the Security Interest, assignments of rights
and Liens hereunder as valid perfected security interests; and (iii) subject to
the terms hereof, any attempt to inspect, verify, protect, collect, sell,
liquidate or otherwise dispose of any Collateral.

 

(b)                                 Any
such amounts payable as provided hereunder shall be additional Obligations
secured hereby.  The provisions of this Section 7.7
shall remain operative and in full force and effect regardless of the
termination of this Agreement or any other Transaction Document, the
consummation of the transactions contemplated hereby, the repayment of any of
the Obligations, the invalidity or unenforceability of any term or provision of
this Agreement or any other Transaction Document, or any investigation made by
or on behalf of the Investors.  All
amounts due under this Section 7.7 shall be payable on written
demand therefor.

 

7.8.                              Counterparts;
Faxes.  This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.  This Agreement may also be executed via
facsimile, which shall be deemed an original.

 

7.9.                              Binding
Effect; Assignment; Complete Agreement. 
This Agreement shall be binding upon and inure to the benefit of the
Company and the Investors and their respective successors and assigns, except
that the Company shall not have the right to assign this Agreement or any of
their rights, interests, or obligations hereunder; unless simultaneously

 

15

 

therewith, the Notes, together with all accrued and unpaid interest
thereon and all other Obligations then due and owing hereunder, are repaid in
cash in full.  Each of the Investors may
assign its rights under this Agreement, except that an Investor shall not
assign any of their rights under this Agreement to a for-profit company engaged
in the business of researching (including, without limitation, contract
research organizations), developing and/or commercializing pharmaceutical or
biotechnology products or services that are then competitive with products or
services of the Company or Lark; provided, however, that such transfer complies
with the requirements of applicable securities laws and the transferee agrees
to be bound by, and entitled to the benefits of, this Agreement as an original
party thereto.

 

7.10.                        Severability of Provisions.  Any provision of this Agreement which is
prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof.

 

7.11.                        Titles and Subtitles;
Cross-References.  The titles and
subtitles used in this Agreement are used for convenience only and are not to
be considered in construing or interpreting this Agreement.  All references in this Agreement to Articles,
Sections, subsections, Exhibits and Schedules, shall be to Articles, Sections,
subsections, Exhibits and Schedules of this Agreement unless otherwise
explicitly specified.  All references to
statutes and related regulations shall include any amendments of same and any
successor statutes and regulations.

 

7.12.                        Governing Law; Consent to Jurisdiction.  This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York,
without reference to the choice of law principles thereof.  The Company and the Investors hereby (a)
irrevocably consent and submit to the non-exclusive jurisdiction of the state
and federal courts located in New York in connection with any suit, action or
other proceeding directly or indirectly arising out of or relating to this
Agreement, and (b) irrevocably waive, to the fullest extent permitted by law,
any objection that any of them may now or hereafter have to the laying of the
venue of any such suit, action or proceeding in any such court or that any such
suit, action or proceeding which is brought in any such court has been brought
in an inconvenient forum.  Nothing in
this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.

 

7.13.                        No Jury Trial.  Each party acknowledges and agrees that any
controversy that may arise under this Agreement is likely to involve
complicated and difficult issues.  ACCORDINGLY, EACH SUCH PARTY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY
HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT.  Each party
certifies and acknowledges that (i) no other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek
to enforce the foregoing waiver, (ii) each such party understands and has
considered the implications of this waiver, and (iii) each such party has been
induced to enter into this Agreement by, among other things, the waivers and
certifications in this Section 7.13.

 

16

 

7.14.                        Recapture.  Anything in this Agreement to the contrary
notwithstanding, if an Investor receives any payment or payments on account of
the Obligations, which payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver, or any other party under the
United States Bankruptcy Code, as amended, or any other federal or state
bankruptcy, reorganization, moratorium or insolvency law relating to or
affecting the enforcement of creditors’ rights generally, common law or
equitable doctrine, then to the extent of any sum not finally retained by any
such Investor, the Company’s obligations to such Investor shall be reinstated
and this Agreement shall remain in full force and effect (or be reinstated)
until payment shall have been indefeasibly made to such Investor, which payment
shall be due on demand.

 

7.15.                        Construction.  The parties acknowledge that each party and
its counsel have reviewed this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any amendments, schedules or exhibits hereto. 
For the avoidance of doubt, any rights, benefits or obligations
specified in this Agreement shall be in addition to and not lieu or limitation
of any rights, benefits or obligations specified in the Purchase Agreement.

 

[Signatures
on Next Page]

 

17

 

IN WITNESS WHEREOF, this Agreement has been
duly executed as of the day and year first above written.

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  GENAISSANCE
  PHARMACEUTICALS,

  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ben D.
  Kaplan

  	
   

  
	
   

  	
  Name:

  	
  Ben D.
  Kaplan

  
	
   

  	
  Title:

  	
  Senior VP
  & CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  INVESTORS:

  
	
   

  	
   

  
	
   

  	
  XMARK
  OPPORTUNITY FUND, LTD.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mitchell
  D. Kaye

  	
   

  
	
   

  	
  Name:

  	
  Mitchell D.
  Kaye

  
	
   

  	
  Title:

  	
  C.I.O.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  XMARK
  OPPORTUNITY FUND, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mitchell
  D. Kaye

  	
   

  
	
   

  	
  Name:

  	
  Mitchell D.
  Kaye

  
	
   

  	
  Title:

  	
  C.I.O.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  XMARK JV
  INVESTMENT PARTNERS,

  LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mitchell
  D. Kaye

  	
   

  
	
   

  	
  Name:

  	
  Mitchell D.
  Kaye

  
	
   

  	
  Title:

  	
  C.I.O.

  
								

 

18

 

	
  STATE OF CONNECTICUT)

  
	
   

  	
  : ss.: New Haven

  
	
  COUNTY OF NEW HAVEN)

  

 

On the 21st day of April, 2005, before me
personally came Ben D. Kaplan to me known, who, being by me duly sworn did
depose and say that s/he is the Sr. VP & CFO of GENAISSANCE
PHARMACEUTICALS, INC., a Delaware corporation, the corporation described in and
which executed the above instrument; and that s/he signed her/his name thereto
by order of the board of directors of said corporation.

 

	
   

  	
  /s/ Marcia I. Passavant

  	
   

  
	
   

  	
  Notary Public

  
	
   

  	
  My comm. Expires 12/31/06

  

 

	
  STATE OF CONNECTICUT)

  
	
   

  	
  : ss.:

  
	
  COUNTY OF FAIRFIELD)

  

 

On the 20th day of April, 2005, before me
personally came Mitchell D. Kaye to me known, who, being by me duly sworn did
depose and say that s/he is the C.I.O. of XMARK OPPORTUNITY FUND, LTD., a Cayman
Islands company, which executed the above instrument; and that s/he signed
her/his name thereto by order of said company.

 

	
   

  	
  /s/ Patti L. Vaughn

  	
   

  
	
   

  	
  Notary Public

  
	
   

  	
  My commission expires Mar 31, 2010

  

 

	
  STATE OF CONNECTICUT)

  
	
   

  	
  : ss.:

  
	
  COUNTY OF FAIRFIELD)

  

 

On the 20th day of April, 2005, before me
personally came Mitchell D. Kaye to me known, who, being by me duly sworn did
depose and say that s/he is the C.I.O. of XMARK OPPORTUNITY FUND, L.P., a
Delaware limited partnership, which executed the above instrument; and that
s/he signed her/his name thereto by order of said limited partnership.

 

	
   

  	
  /s/ Patti L. Vaughn

  	
   

  
	
   

  	
  Notary Public

  
	
   

  	
  My commission expires Mar 31, 2010

  

 

	
  STATE OF CONNECTICUT)

  
	
   

  	
  : ss.:

  
	
  COUNTY OF FAIRFIELD)

  

 

On the 20th day of April, 2005, before me
personally came Mitchell D. Kaye to me known, who, being by me duly sworn did
depose and say that s/he is the C.I.O. of XMARK JV INVESTMENT PARTNERS, LLC, a
Delaware limited liability company, which executed the

 

19

 

above instrument; and that s/he signed her/his name thereto by order of
said limited liability company.

 

	
   

  	
  /s/ Patti L. Vaughn

  	
   

  
	
   

  	
  Notary Public

  
	
   

  	
  My commission expires Mar 31, 2010

  

 

20

 

SCHEDULE I

 

Collateral
Locations

 

A.  Chief Executive
Office/Principal Place of Business

 

B.  Other Collateral Locations

 

21

 

SCHEDULE II

 

Commercial
Tort Claims

 

None.

 

22Exhibit
10.6

 

PLEDGE
AND SECURITY AGREEMENT

 

PLEDGE AND SECURITY AGREEMENT (the “Agreement”),
dated April 21, 2005, by and among Genaissance Pharmaceuticals, Inc., a
Delaware corporation (the “Pledgor”), Xmark Opportunity Fund, Ltd., a
Cayman Islands company (“Xmark, Ltd.”), Xmark Opportunity Fund, L.P., a
Delaware limited partnership in its capacity as a Lender (as defined below) and
as Collateral Agent for the Lenders (“Xmark, L.P.”), and Xmark JV
Investment Partners, LLC, a Delaware limited liability company (“Xmark JV”
and together with Xmark, L.P. and Xmark, Ltd., the “Lenders”).

 

W I T N E S S E T H:

 

WHEREAS, pursuant to that certain Note and
Warrant Purchase Agreement, dated as of even date hereof (the “Purchase
Agreement”), by and among the Pledgor, Lark Technologies, Inc. (“Lark”)
and the Lenders, the Lenders have agreed to lend the Pledgor and Lark the sum
of $4,500,000 (the “Loan”), which Loan is to be evidenced by senior
secured promissory notes due 2007 (the “Notes”) issued by the Pledgor
and Lark to the Lenders in the aggregate principal amount of the Loan; and

 

WHEREAS, in order to induce the Lenders to
enter into the Purchase Agreement and to make the Loan, the Pledgor has agreed
to pledge the Collateral (as defined in Section 2 below) to Collateral
Agent for the benefit of the Lenders.

 

NOW, THEREFORE, in consideration of the
mutual covenants set forth herein, to induce the Lenders to enter into the
Purchase Agreement and to make the Loan, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:

 

1.                                       Definitions.

 

1.1  Defined
Terms.  Capitalized terms in this
Agreement shall be defined as follows (and as defined elsewhere in this
Agreement):

 

“Business Day” means any day that is
not a Saturday, a Sunday or a day on which banks are required or permitted to
be closed in the State of New York.

 

“Collateral Agent” shall mean Xmark,
L.P. or any replacement collateral agent appointed by the Lenders.

 

“Distributions” means all stock
dividends, liquidating dividends, shares of stock resulting from stock splits,
reclassifications, warrants, options, non-cash dividends and other
distributions on or with respect to the Shares, whether similar or dissimilar
to the foregoing, but shall not include Dividends.

 

“Dividends” means all regular cash
dividends declared with respect to the Shares.

 

 

“Obligations” means any and all
obligations, liabilities and indebtedness of every kind, nature and description
owing by the Pledgor and/or Lark to the Collateral Agent and the Lenders
arising under the Purchase Agreement, the Notes, or the other Transaction
Documents (as defined in the Purchase Agreement), including, without
limitation, principal, interest, charges, fees, costs and expenses, however
evidenced, whether as principal, surety, endorser or otherwise, whether now
existing or hereafter arising, and whether direct or indirect, absolute or
contingent, joint or several, secured or unsecured, due or not due, contractual
or tortious, and liquidated or unliquidated, but specifically excluding any and
all obligations arising under or in connection with the Warrant and the
Registration Rights Agreement (each as defined in the Purchase Agreement) or
any shares of Pledgor’s common stock issued thereunder.

 

“Shares” means the one thousand
(1,000) shares of common stock of Lark owned by the Pledgor as of the date of
this Agreement and any additional shares of capital stock of Lark acquired by
the Pledgor at any time from and after the date hereof.

 

“UCC” means the Uniform Commercial
Code as in effect in the State of New York from time to time.

 

1.2                                 Rules of
Construction.  In this Agreement,
unless specified otherwise:

 

a.                                       “Any” means “any
one or more”; “including” means “including without limitation”; “or” means “and/or”.

 

b.                                      Singular words
include plural, and vice versa.

 

c.                                       Headings are for
convenience only, and do not affect the meaning of any provision.

 

d.                                      Reference to an
agreement includes reference to its permitted supplements, restatements,
amendments and other modifications.

 

e.                                       Reference to a
law includes reference to any amendment or modification of the law and to any
rules or regulations issued thereunder.

 

f.                                         Reference to a
person includes reference to its permitted successors and assigns in the
applicable capacity.

 

g.                                      Reference to a Section signifies
reference to a Section of this Agreement, unless the context clearly
indicates otherwise.

 

h.                                      “Hereunder,” “hereto,”
“hereof,” “herein,” and like words, refer to the whole of this Agreement rather
than to a particular part hereof, unless the context clearly indicates
otherwise.

 

2

 

1.3                                 No Strict
Construction.  The parties
acknowledge that this Agreement has been prepared jointly by the Pledgor and
the Lenders, and this Agreement shall not be strictly construed against any
party.

 

2.                                       Grant of
Security Interest.  As security for
the payment in full in cash of all of the Obligations, the Pledgor hereby
pledges to the Collateral Agent for the benefit of the Lenders and the
Collateral Agent, and grants to the Collateral Agent for the benefit of the
Lenders and the Collateral Agent a continuing first priority security interest
in and to, the Shares (including the certificates representing the Shares),
together with all Dividends and Distributions, interest and other payments and
rights with respect thereto, together with all proceeds thereof (collectively,
the “Collateral”).  The Pledgor
further pledges to the Collateral Agent for the benefit of the Lenders and the
Collateral Agent, and grants to the Collateral Agent for the benefit of the
Lenders and the Collateral Agent a continuing first priority security interest
in and to, and agrees to duly endorse to the order of the Collateral Agent for
the benefit of the Lenders and the Collateral Agent, any additional Collateral,
together with all proceeds thereof, from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the
Shares.  Any Collateral delivered by the
Pledgor to the Collateral Agent may be endorsed by the Collateral Agent or the
Lenders, in their own name or in the name of the Pledgor, on behalf of the
Pledgor to the order of the Lenders, provided, however, that the Collateral Agent and the Lenders shall not
be entitled to effect or demand a transfer of title to the Collateral into the
name of the Collateral Agent, the Lenders or the Lenders’ nominee without the
consent of the Pledgor except after the occurrence and during the continuance
of an Event of Default (as defined in Section 8).  Lenders hereby appoint Collateral Agent as
their agent and bailee for the purpose of holding, and maintaining control
over, any Collateral that, pursuant to this Agreement, is to be in the
possession or control of Lenders (or their nominee) or the Collateral
Agent.  The Collateral Agent hereby
agrees to serve as Collateral Agent under this Agreement and, in that capacity,
agrees to follow the directions of the Majority Purchasers (as defined in the
Purchase Agreement) with respect to maintaining possession and control of
Collateral that is in Collateral Agent’s possession or control.

 

3.                                       Stock Powers,
Endorsements, Etc.  The Pledgor
shall, from time to time, upon request of the Collateral Agent or the Lenders,
promptly execute such endorsements and deliver to the Collateral Agent such
stock powers and similar documents, reasonably satisfactory in form and
substance to the Collateral Agent or the Lenders, with respect to the
Collateral as the Collateral Agent or the Lenders may reasonably request and
shall, from time to time, upon request of the Collateral Agent or the Lenders,
promptly transfer any securities which are part of the Collateral into the name
of any nominee designated by the Collateral Agent or the Lenders on the books
of the entity issuing such securities; provided, however, that the Collateral Agent and the Lenders shall not
be entitled to effect or demand a transfer of the Collateral into the name of
the Collateral Agent, the Lenders or the Lenders’ nominee without the consent
of the Pledgor except after the occurrence and during the continuance of an
Event of Default (as defined in Section 8).  The Pledgor shall cause Lark to record on its
books and records the pledge created by this Agreement and to execute and
deliver the Acknowledgment and Agreement in the form of Schedule A
attached hereto.  The Pledgor hereby
authorizes and instructs Lark to comply with any instruction received by it
from the Collateral Agent or the Lenders without any further order or further
consent from instructions from the Pledgor, and the Pledgor agrees that Lark
shall be

 

3

 

fully protected in so complying with any such instructions from the
Collateral Agent or the Lenders.

 

4.                                       Rights of the
Pledgor.  Unless and until an Event
of Default shall have occurred and is continuing, the Pledgor shall have the
following rights with regard to the Shares:

 

a.                                       To vote the
Shares or to give consents, waivers, and ratifications with respect to the
Shares; provided, however, that no vote shall be cast, and no
consent, waiver or ratification shall be given or action taken, which would
have the effect of materially impairing the position or interest of the Lenders
in respect of the Collateral or which would authorize or effect the dissolution
or liquidation of Lark, in whole or in part, or any other Change of Control (as
defined in the Purchase Agreement) with respect to Lark, unless the Pledgor
repays the Notes in full in connection therewith; and

 

b.                                      To receive any
Dividends declared on the Shares to the extent not in violation of the Notes; provided,
however, that the following Dividends shall remain subject to the liens
created by this Agreement and shall be delivered to the Lenders within five (5)
Business Days following receipt thereof: (i) all Dividends paid or payable in
connection with a partial or total liquidation or dissolution of Lark and (ii)
cash paid, payable or otherwise distributed in redemption of, or in exchange
for, any Collateral.

 

5.                                       Affirmative
Covenants.  Unless otherwise
consented to in writing by the Lenders holding a majority of the outstanding
amount of Notes, until the Obligations have been paid in full in cash, the
Pledgor hereby covenants as follows:

 

a.                                       The Pledgor will
not sell, assign, or transfer any of its rights in or to the Collateral or
permit Lark to issue any additional shares, or rights to purchase shares, of
any class or series of capital stock of Lark;

 

b.                                      The Pledgor will
make due and timely payment or deposit of all taxes, assessments, or
contributions required by law, except those taxes, assessments or contributions
contested by the Pledgor in good faith and with respect to which adequate
reserves have been set aside, which may be lawfully levied or assessed with
respect to the Collateral for all periods up and until the date when such
Collateral is transferred in accordance with this Agreement and will execute
and deliver to the Lenders upon reasonable demand, appropriate certificates
attesting to the timely payment or deposit of all such taxes, assessments or
contributions;

 

c.                                       The Pledgor
shall comply, and shall cause Lark to comply, with the requirements of all
applicable laws, rules, regulations and ordinances and orders of any
governmental authority, the noncompliance with which would materially and
adversely effect the Pledgor’s or Lark’s ability to perform its Obligations;

 

d.                                      The Pledgor shall
notify the Collateral Agent in writing within ten (10) Business Days of receipt
of any Distributions, and the Pledgor shall deliver such Distributions to the
Collateral Agent for the benefit of the Lenders;

 

4

 

e.                                       The Pledgor
shall observe, conform and comply with the covenants, terms and conditions of this
Agreement and each other Transaction Document to which it is a party.  The Pledgor shall promptly notify the
Collateral Agent in writing upon the occurrence of any event of default (or any
event which, with the giving of notice and/or the passage of time, would become
an event of default) under this Agreement or any of the other Transaction
Documents;

 

f.                                         At any time,
or from time to time, upon request of the Collateral Agent or the Lenders, the
Pledgor shall execute and deliver such further documents and do such other acts
and things as the Collateral Agent or the Lenders may reasonably request in
order to effectuate more fully the purposes of this Agreement.  The Pledgor hereby authorizes the Collateral
Agent and Lenders to file and record in such public records offices as the
Collateral Agent or the Lenders may determine such financing statements as the
Collateral Agent or the Lenders may determine relative to the transactions
contemplated by this Agreement; and

 

g.                                      The Pledgor has
and will defend the title to the Collateral pledged by it and the security
interest granted in such Collateral to the Collateral Agent for the benefit of
the Lenders against the claim of any Person, except with respect to Permitted
Liens, (each as defined in the Purchase Agreement) and will maintain and
preserve such security interest.

 

6.                                       No Other
Security Interest.  Unless the
Majority Purchasers shall otherwise consent in writing, until the Obligations
have been paid in full in cash, the Pledgor hereby covenants that it shall not
incur, create or permit to exist any mortgage, assignment, pledge,
hypothecation, security interest, lien, or other encumbrance (collectively, “Liens”)
on any of the Collateral now owned and pledged in accordance with this
Agreement or hereafter acquired, except for those Liens in favor of the Lenders
created by this Agreement and Permitted Liens.

 

7.                                       Representations
and Warranties.  The Pledgor
represents and warrants to the Lenders that:

 

a.                                       The Pledgor has
the capacity to execute and deliver this Agreement and to perform its
obligations hereunder;

 

b.                                      This Agreement
has been duly executed and delivered by the Pledgor and constitutes a valid and
binding obligation of the Pledgor, enforceable against the Pledgor in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
fraudulent conveyance, securities or banking laws, reorganization or similar
laws affecting creditors’ rights generally or by general equitable principles
and except insofar as the enforceability of any provision of such agreement
would be restricted or void by reason of public policy;

 

c.                                       The Pledgor has
obtained all requisite governmental and other material third party consents or
approvals necessary for the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby;

 

d.                                      The Pledgor is
the legal and beneficial owner of the Shares and no other Person has any right,
title or interest in or to the Shares, and there are no existing options,
warrants, calls, purchase rights or similar commitments relating to the Shares;

 

5

 

e.                                       The Shares have
been duly authorized, validly issued and are fully paid and non-assessable;

 

f.                                         The Shares
constitute, as of the date hereof, 100% of the issued and outstanding shares of
the capital stock of Lark, and no Person has, as of the date hereof, any
option, warrant, subscription right, or other right to purchase any shares of
capital stock of Lark;

 

g.                                      The Collateral is
owned by the Pledgor free and clear of any Liens, except for the Liens granted
herein in favor of the Lenders and the Collateral Agent and Permitted Liens;
and

 

h.                                      Upon delivery of
the Shares to the Collateral Agent, this Agreement shall create a first
priority security interest in the Collateral and the proceeds thereof, subject
to no prior or secondary security interest or other Liens, except for Permitted
Liens.

 

8.                                       Events of
Default.

 

8.1                                 The occurrence of any
one or more of the following events shall constitute an event of default (each,
an “Event of Default”) by the Pledgor under this Agreement:

 

a.                                       any event of
default (after giving effect to any applicable grace periods) shall occur and
be continuing under the Notes or any other Transaction Document; and

 

b.                                      any representation
or warranty made by the Pledgor in this Agreement, the Purchase Agreement or
any other Transaction Document to which it is a party shall have been untrue or
misleading in any material respect as of the date hereof.

 

9.                                       Remedies Upon
an Event of Default.

 

9.1                                 Upon an Event of
Default, the Collateral Agent for the benefit of the Lenders shall have the
following remedies available, at its election:

 

a.                                       To vote the
Shares;

 

b.                                      To give consents,
waivers and ratifications with respect to the Shares;

 

c.                                       To receive all
dividends, cash, securities and all other distributions of any kind given with
respect to the Shares;

 

d.                                      (i)                                     To sell, assign or
transfer the Shares and any other Collateral pledged under this Agreement, or
any part thereof, in one or more sales, at a public or private sale, conducted
by any officer or agent of, or auctioneer or attorney for, the Lenders, at a
place designated by the Collateral Agent for the benefit of the Lenders, for
cash, upon credit or for future delivery, and at such price or prices as the
Collateral Agent for the benefit of the Lenders shall, in its sole and absolute
discretion, determine, and the Collateral Agent, any of the Lenders

 

6

 

and/or the Pledgor or any or all of them may be the purchaser of any or
all of the Collateral so sold;

 

(ii)                                  Upon any such sale,
the Collateral Agent for the benefit of the Lenders shall have the right to
deliver, assign and transfer to the purchaser(s) thereof the Collateral so
sold.  Each purchaser (including the
Lenders) at any such sale shall hold the Collateral so sold absolutely free
from any claim or right of any kind whatsoever, including, without limitation,
any equity or right of redemption of the Pledgor, which the Pledgor hereby
specifically waives;

 

(iii)                               At any such public or
private sale, the Collateral may be sold in one lot as an entirety or in
separate installments;

 

(iv)                              In case of any sale of
all or any part of the Collateral on credit or for future delivery, the Collateral
so sold may be retained by the Collateral Agent for the benefit of the Lenders
until the purchase price is paid by the purchaser(s) thereof, but the
Collateral Agent and the Lenders shall not incur any liability in case of the
failure of such purchaser to take up and pay for the Collateral so sold.  In case of any such failure, such Collateral
may again be sold under and pursuant to the provisions of this Agreement; and

 

(v)                                 The receipt from the
Collateral Agent or the Lenders for the purchase price paid at any such sale of
the Shares shall be a sufficient discharge therefor to any purchaser(s) of the
Collateral, or any portion thereof, sold as described in this Section 9.1(d).  No such purchaser (or such purchaser’s
representatives or assigns), after paying such purchase price and receiving
such receipt, shall be bound to see to the application of such purchase price
or any part thereof or in any manner whatsoever be answerable for any loss,
misapplication or non-application of any such purchase price, or be bound to
inquire as to the authorization, necessity, expediency or regularity of any
such sale;

 

e.                                       To institute
proceedings to collect all Obligations from any Person who may be responsible
for the payment of any such Obligations; and

 

f.                                         To exercise
any remedy provided for under the UCC, any other applicable law or the other
Transaction Documents.

 

9.2                                 Upon the occurrence
and during the continuance of an Event of Default, the proceeds of any sale of,
or other realization upon, all or any part of the Collateral shall be applied
by the Collateral Agent and the Lenders in the following order of priorities:

 

a.                                       first, to
payment of the reasonable out-of-pocket expenses of such sale or other
realization, including reasonable compensation to agents and one counsel for
the Collateral Agent and the Lenders, and all reasonable out-of-pocket
expenses, liabilities and advances incurred or made by the Collateral Agent or
the Lenders in connection therewith, and any other unreimbursed expenses for
which the Collateral Agent or the Lenders are to be reimbursed pursuant to the
Transaction Documents;

 

7

 

b.                                      second, to the
payment of accrued but unpaid interest (including post-petition interest) on
the Notes;

 

c.                                       third, to the
payment of unpaid principal on the Notes;

 

d.                                      fourth, to the
payment of all other Obligations, until all such Obligations shall have been
paid in full; and

 

e.                                       finally, to
payment to the Pledgor of any surplus then remaining from such proceeds.

 

The Collateral Agent and the Lenders may make distributions hereunder
in cash or in kind or in any combination thereof.

 

To the extent that fewer than all shares are sold in full satisfaction
of the Obligations, the remaining shares shall be returned to Pledgor.

 

9.3                                 Effective upon the
occurrence of an Event of Default, the Pledgor hereby designates, constitutes
and appoints the Collateral Agent for the benefit of the Lenders as its
attorney-in-fact, irrevocably and with power of substitution, to make and execute
all conveyances, assignments and instruments of transfer regarding the
Collateral sold pursuant to this Section 9 and to do all other acts and
things necessary and advisable in the reasonable discretion of the Collateral
Agent and/or the Lenders to carry out and enforce this Agreement.  The Collateral Agent, in its capacity as
attorney-in-fact for the Pledgor, shall not be liable for any acts of
commission or omission nor for any error of judgment or mistake of fact or law,
except for gross negligence or intentional misconduct.  This power of attorney being coupled with an
interest is irrevocable while any of the Obligations shall remain unpaid.

 

9.4                                 The Collateral Agent
and the Lenders may, in any order and at any time, simultaneously or not
simultaneously, exercise any of the remedies set forth in this Section 9,
in addition to, and not in lieu of, any remedies that may otherwise be
available at law or in equity.

 

9.5                                 The Pledgor, the
Collateral Agent and the Lenders acknowledge that the Shares have not been
registered under the Securities Act of 1933, as amended, or any similar state
or federal law and that, therefore, the Collateral Agent for the benefit of the
Lenders may be unable to effect a public sale of all or any part of the Shares,
and may be compelled to resort to one or more private sales to a restricted
group of purchasers who will be obligated to agree, among other things, to
acquire the Shares for their own account, for investment, and not with a view
to the distribution or resale thereof.  The Pledgor acknowledges that any such private
sales may be at prices and terms less favorable to the Pledgor than those of
public sales, and agrees that such private sales shall be deemed to have been
made in a commercially reasonable manner and that the Collateral Agent for the
benefit of the Lenders has no obligation to delay any sale to permit the issuer
thereof to register them under the Securities Act of 1933, as amended.

 

10.                                 Lien Absolute.  All rights of the Collateral Agent and the
Lenders hereunder, and all obligations of the Pledgor hereunder, shall be
absolute and unconditional irrespective of:

 

8

 

10.1.                        any lack of validity or
enforceability of the Notes or any other agreement or instrument governing or
evidencing any of the Obligations;

 

10.2.                        any change in the time, manner
or place of payment of, or in any other term of, all or any part of the
Obligations, or any other amendment or waiver of, or any consent to any
departure, from the Notes or any other agreement or instrument governing or
evidencing any of the Obligations;

 

10.3.                        any exchange, release or non-perfection
of any collateral (including the Collateral), or any release or amendment or
waiver of or consent to departure from any guaranty, for all or any of the
Obligations;

 

10.4.                        the insolvency of Lark; or

 

10.5.                        any other circumstance which
might otherwise constitute a defense available to, or a discharge of, the
Pledgor.

 

11.                                 Release.  The Pledgor consents and agrees that the
Majority Purchasers may at any time, or from time to time, in its reasonable
discretion:

 

11.1.                        renew, extend or change the
time of payment, and/or the manner, place or terms of payment, of all or any
part of the Obligations in each case, to the extent permitted by the Notes; and

 

11.2.                        exchange, release and/or
surrender all or any of the collateral (including the Collateral), or any part
thereof, by whomsoever deposited, which is now or may hereafter be held by the
Collateral Agent or the Lenders in connection with all or any of the
Obligations; all in such manner and upon such terms as such Majority Purchasers
may deem proper, and without notice to or further assent from the Pledgor, it
being hereby agreed that the Pledgor shall be and remain bound upon this
Agreement, irrespective of the value or condition of any of the collateral
(including the Collateral), and notwithstanding any such change, exchange,
settlement, compromise, surrender, release, renewal or extension.

 

12.                                 Reinstatement.  This Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
the Pledgor or Lark for liquidation or reorganization, should the Pledgor or
Lark become insolvent or make an assignment for the benefit of creditors or
should a receiver or trustee be appointed for all or any significant part of
the Pledgor’s or Lark’s assets, and shall continue to be effective or be
reinstated, as the case may be, if at any time payment and performance of the
Obligations, or any part thereof, is, pursuant to applicable law, rescinded or
reduced in amount, or must otherwise be restored or returned by any obligee of
the Obligations, whether as a “voidable preference”, “fraudulent conveyance”,
or otherwise, all as though such payment or performance had not been made.  In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Obligations shall be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.

 

9

 

13.                                 Satisfaction;
Lender’s Duty Regarding Shares.

 

13.1                           Promptly after the
Obligations have been paid in full in cash and the Notes are no longer
outstanding, this Agreement shall be terminated and of no further force and
effect.  At such time, the Shares and all
stock powers or other documents shall be returned to Pledgor.

 

13.2                           Beyond the exercise of
reasonable care to assure the safe custody of the Shares while held hereunder,
the Collateral Agent and the Lenders shall have no liability or duty with
respect to the Shares.  Placing or
depositing the Shares in a bank safe deposit box of the Collateral Agent’s
selection shall fully and completely satisfy the Collateral Agent’s and the
Lenders’ duty to exercise reasonable care. 
The Collateral Agent and the Lenders shall not have any duty or
liability to take any action or to preserve rights pertaining to the Shares and
shall be relieved of all responsibility for the Shares upon surrendering them
or tendering surrender thereof to the Pledgor.

 

14.                                 Nonwaiver.  No failure or delay on the part of the
Collateral Agent or the Lenders in exercising any of its rights and remedies
hereunder or otherwise shall constitute a waiver thereof, and no single or
partial waiver by the Collateral Agent or the Lenders of any default or other
right or remedy which it may have shall operate as a waiver of any other
default, right or remedy or of the same default, right or remedy on a future
occasion.

 

15.                                 Waivers by the
Pledgor.  The Pledgor hereby waives
presentment, notice of dishonor and protest of all instruments included in or
evidencing any of the Obligations or the Collateral and any and all other
notices and demands whatsoever whether or not relating to such instruments
(other than such notices required by the Purchase Agreement).  In the event of any litigation at any time
arising with respect to any matter connected with this Agreement or the
Obligations, the Pledgor hereby waives any and all defenses, rights of setoff
and rights to interpose counterclaims of any nature, other than the defense
that the Obligations have been indefeasibly satisfied in full.

 

16.                                 Modification.  No provision hereof shall be modified,
altered or limited except by a written instrument expressly referring to this
Agreement and to the provision so modified, altered or limited, and executed by
the Pledgor and the Majority Purchasers.

 

17.                                 Binding Effect.  This Agreement and all Obligations of the
Pledgor hereunder shall be binding upon the successors and assigns of the
Pledgor, and shall, together with the rights and remedies of the Collateral
Agent and the Lenders hereunder, inure to the benefit of the Collateral Agent,
the Lenders and their successors and assigns. 
The Lenders may only assign this Agreement in connection with its
transfer of the Notes.  The Pledgor may
not effect a Change of Control (as defined in the Purchase Agreement) of the
Pledgor unless simultaneously therewith, the Notes, together with all accrued
and unpaid interest thereon, are repaid in cash in full; provided, however, to
the extent the Pledgor sells or otherwise disposes of solely its North Carolina
Business or New Haven Business (as defined in the Purchase Agreement) in strict
accordance with, and only to the extent permitted by, the Purchase Agreement,
then the Pledgor

 

10

 

shall only be obligated to prepay the amount of the Notes required by Section 2.5(b)(i)
of the Purchase Agreement.

 

18.                                 Governing Law;
Consent to Jurisdiction.  This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York, without reference to the choice of law
principles thereof.  The Pledgor, the
Collateral Agent and the Lenders hereby (a) irrevocably consent and submit to
the non-exclusive jurisdiction of the state and federal courts located in New
York in connection with any suit, action or other proceeding directly or
indirectly arising out of or relating to this Agreement, and (b) irrevocably
waive, to the fullest extent permitted by law, any objection that any of them
may now or hereafter have to the laying of the venue of any such suit, action
or proceeding in any such court or that any such suit, action or proceeding
which is brought in any such court has been brought in an inconvenient
forum.  Nothing in this Agreement will
affect the right of any party to this Agreement to serve process in any other
manner permitted by law.

 

19.                                 Notices.  Except as otherwise expressly provided
herein, any notice or request hereunder shall be given in accordance with the
terms of the Purchase Agreement.  Notice
to the Collateral Agent shall be given in the same manner as provided in the
Purchase Agreement at the following address (or to the following facsimile
number):

 

Xmark
Opportunity Fund, L.P.

301 Tresser Boulevard

Suite 1320

Stamford, CT 
06901

Attention: 
Mitchell D. Kaye

Telecopy: 
(203) 653-2501

 

20.                                 Severability.  If any term of this Agreement shall be held
to be invalid, illegal or unenforceable, the validity of all other terms hereof
shall in no way be affected thereby.

 

21.                                 No Jury Trial.                        EACH OF THE PLEDGOR, THE COLLATERAL AGENT AND EACH OF
THE LENDERS HEREBY WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO ANY ASPECT OF THIS AGREEMENT AND REPRESENTS THAT IT
HAS CONSULTED WITH COUNSEL SPECIFICALLY WITH RESPECT TO THIS WAIVER.

 

11

 

IN WITNESS WHEREOF, the parties have executed
or caused this Agreement to be executed as of the date first written above.

 

	
   

  	
  GENAISSANCE PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Ben D. Kaplan

  	
   

  
	
   

  	
   

  	
  Name: Ben D. Kaplan

  
	
   

  	
   

  	
  Title: Senior VP & CFO

  
	
   

  	
   

  
	
   

  	
  XMARK OPPORTUNITY FUND, L.P., in its

  capacity as Collateral Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Mitchell D. Kaye

  	
   

  
	
   

  	
   

  	
  Name: Mitchell D. Kaye

  
	
   

  	
   

  	
  Title:C.I.O.

  
	
   

  	
   

  
	
   

  	
  XMARK OPPORTUNITY FUND, LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Mitchell D. Kaye

  	
   

  
	
   

  	
   

  	
  Name: Mitchell D. Kaye

  
	
   

  	
   

  	
  Title: C.I.O.

  
	
   

  	
   

  
	
   

  	
  XMARK JV INVESTMENT PARTNERS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mitchell D. Kaye

  	
   

  
	
   

  	
   

  	
  Name: Mitchell D. Kaye

  
	
   

  	
   

  	
  Title: C.I.O.

  
						

 

[Signature Page to Pledge and
Security Agreement]

 

12

 

SCHEDULE A

 

ACKNOWLEDGMENT AND CONSENT

 

Xmark Opportunity Fund, L.P.

Xmark Opportunity Fund, Ltd.

Xmark JV
Investment Partners, LLC

301 Tresser
Boulevard, Suite 1320

Stamford,
CT  06901

Attention:  Mitchell D. Kaye

 

Lark Technologies, Inc., a Delaware
corporation (“Company”), hereby (i) acknowledges receipt of a fully
executed copy of the Pledge and Security Agreement, dated as of April 21,
2005 (the “Agreement”; capitalized terms used herein without definition
have the meanings provided therein), made by Genaissance Pharmaceuticals, Inc.
(“Pledgor”) in favor of Xmark
Opportunity Fund, L.P., in its capacity as a lender and as collateral agent for
the Lenders, Xmark Opportunity Fund, Ltd. and Xmark JV Investment Partners, LLC
(collectively, the “Lenders”); (ii) consents and agrees to the pledge by
Pledgor of the Collateral pursuant to the Agreement and to all of the other
terms and provisions of the Agreement; (iii) agrees to comply with all
instructions received by it from the Collateral Agent for the benefit of the
Lenders without further consent by Pledgor; (iv) advises Pledgor, Collateral
Agent and Lenders that a pledge of the Shares has been registered on the books
of Company and in the name of the Collateral Agent, on behalf of the Lenders,
and agrees to so register any additional shares of capital stock of the Company
acquired by the Pledgor; and (v) represents and warrants that, except for the
pledge in favor of the Collateral Agent for the benefit of the Lenders and the
Collateral Agent and Permitted Liens (as defined in the Purchase Agreement),
there are no Liens to which the Shares are or may be subject as of the date
hereof.

 

IN WITNESS WHEREOF, a duly authorized officer
of the undersigned has executed and delivered this Acknowledgment and Consent
as of this 21st day of April, 2005.

 

	
   

  	
  LARK TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ben D. Kaplan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Ben D. Kaplan

  
	
   

  	
   

  	
  Title:

  	
  Secretary

  
					

 

13

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