Document:

Exhibit
10.3

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR EXEMPTION FROM REGISTRATION
UNDER THE FOREGOING LAWS.

 

WARRANT
NO.     

 

to
Purchase Common Stock of

 

GENAISSANCE
PHARMACEUTICALS, INC.

 

THIS WARRANT IS TO CERTIFY THAT [XMARK OPPORTUNITY FUND, L.P.], a
[Delaware limited partnership] (the “Holder”), is entitled to purchase
from Genaissance Pharmaceuticals, Inc., a Delaware corporation (the “Company”),
[                        ]
shares of Common Stock of the Company (the “Common Stock”) for the
Exercise Price described herein upon the terms and conditions set forth
herein.  This Warrant is being issued by
the Company in connection with the issuance by the Company and Lark
Technologies, Inc. (“Lark”) of senior secured notes, in the aggregate
principal amount of Four Million Five Hundred Thousand Dollars ($4,500,000)
(collectively, the “Notes”), and is one of one or more common stock
purchase warrants (collectively, the “April 2005 Warrants”) issued
in connection therewith.

 

Section 1. 
Certain Definitions.

 

(a) Unless otherwise stated in this Warrant,
capitalized terms used but not defined herein shall have the meanings set forth
in that certain Note and Warrant Purchase Agreement, dated as of the date
hereof, between the Company and the Holder.

 

(b) As used in this Warrant, capitalized terms used
herein shall have the following meanings:

 

“Affiliate” shall mean, with respect to any
Person, any other Person which directly or indirectly Controls, is Controlled
by, or is under common Control with, such Person.

 

“Control” shall mean the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise. “Exchange Act” means the Securities Exchange Act of 1934, as
amended.

 

“Expiration Date” shall mean April 21, 2010.

 

“Securities Act”
shall mean the Securities Act of 1933, as amended.

 

“Warrant” shall mean this Warrant and any warrant(s) issued in
substitution for

 

 

this Warrant.

 

“Warrantholder” shall mean the Holder, as the initial holder of
this Warrant, and any transferee of the Holder to whom this Warrant has been
transferred in accordance with Section 12 hereof.

 

Section 2. 
Warrant Shares; Exercise Price.

 

(a) This Warrant may be exercised in accordance with Section 3
for up to [                        ]
shares of Common Stock (such shares, as they may be adjusted from time to time
pursuant to the terms hereof, are referred to herein as the “Warrant Shares”).

 

(b) The exercise price for each Warrant Share is $2.25
(such price, as it may be adjusted from time to time pursuant to the terms
hereof, is referred to herein as the “Exercise Price”).

 

Section 3. 
Exercise of Warrant.

 

(a)(i) Subject to Sections 3(b) and clause 3(a)(ii)
below, the Warrantholder may exercise this Warrant, in whole or in part, at any
time beginning on the date hereof until and including the Expiration Date; provided, however, that the minimum number
of Warrants Shares subject to any exercise notice shall be 25,000.  In the event this Warrant is exercised in
part, the Company, at its expense, will cause to be issued in the name of, and
delivered to, the Warrantholder a new warrant or warrants (dated the date
hereof) of like tenor, calling in the aggregate on the face or faces thereof
for the number of Warrant Shares equal (without giving effect to any adjustment
therein) to the number of such shares called for on the face of this Warrant
minus the number of Warrant Shares for which this Warrant was so exercised.

 

(ii)                                  Notwithstanding the foregoing, at any time beginning on the date hereof until
and including the Expiration Date, the Warrantholder may, at its option, elect
to exchange this Warrant, in whole or in part (a “Warrant Exchange”),
into the number of Warrant Shares determined in accordance with this Section 3(a)(ii)
by presentation and surrender of this Warrant to the Company at its principal
office, accompanied by a notice (a “Notice of Exchange”) stating that
this Warrant is being exchanged and the number of Warrant Shares to be
exchanged.  In connection with any
Warrant Exchange, this Warrant shall represent the right to acquire the number
of shares of Common Stock (rounded to the nearest whole number) equal to (i)
the total number of Warrant Shares to be exchanged (the “Total Number”),
less (ii) the number of shares equal to the quotient obtained by dividing (A)
the product of the Total Number and the then applicable Exercise Price by (B)
the then fair market value (determined as set forth below) per share of Common
Stock.  For purposes of this Section 3(a)(ii),
the “fair market value” per share of Common Stock as of any date shall be the
closing sale prices of the Common Stock, as reported on the securities exchange
that is the principal market for the Common Stock on the trading day immediately
preceding the date the Notice of Exchange is received by the Company.  If the Common Stock is not publicly traded,
the “fair market value” per share of Common Stock shall be an amount determined
by the Company’s Board of Directors upon request of the Warrantholder.

 

(b) Notwithstanding anything herein to the contrary,
in no event shall the

 

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Warrantholder be entitled to exercise any portion of this Warrant
in excess of that portion of this Warrant upon exercise of which the sum of (1)
the number of shares of Common Stock beneficially owned by the Warrantholder and its Affiliates (other
than shares of Common Stock which may be deemed beneficially owned through the
ownership of the unexercised portion of this Warrant or the unexercised or
unconverted portion of any other security of the Warrantholder subject to any existing limitation on conversion
analogous to the limitations contained herein) and (2) the number of shares of
Common Stock issuable upon the exercise of the portion of this Warrant with
respect to which the determination is being made, would result in beneficial
ownership by the Warrantholder and
its Affiliates of more than 9.9% of the then outstanding shares of Common
Stock.  For purposes of the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Exchange Act and Regulations 13D-G thereunder, except
as otherwise provided in clause (1) of such sentence.  The Warrantholder
may waive the limitations set forth herein by sixty-one (61) days written
notice to the Company.

 

(c) Except as provided in Section 3(a)(ii) above,
the Warrantholder shall exercise this Warrant by delivering to the Company at
the address set forth on the signature page hereto (i) the Exercise Notice set
out at the end of this Warrant as Exhibit A, (ii) this Warrant and (iii)
a cash payment equal to the aggregate Exercise Price payable in respect of the
number of Warrant Shares purchased upon such exercise, by wire transfer to an
account of the Company designated in writing by the Company to the
Warrantholder.

 

(d) Upon exercise of this Warrant and delivery of the
Exercise Notice with proper payment (or upon a valid Warrant Exchange pursuant
to Section 3(a)(ii) above) relating thereto, the Company shall issue and
deliver as soon as practicable (and in any case within three (3) Business Days
thereafter) to the Warrantholder a stock certificate or certificates, duly
executed by the Company, representing the Warrant Shares.

 

(e) The stock certificate or certificates for the
Warrant Shares to be delivered in accordance with this Section 3 shall be
registered in the name of the Warrantholder or such other Person as shall be
designated in the Exercise Notice.  Such
certificate or certificates shall be issued and the Warrantholder or any other
Person so designated to be named therein shall become the holder of record of
such shares, including to the extent permitted by law the right to vote such
shares or to consent or to receive notice as stockholders, as of the time said
notice is delivered to the Company as aforesaid.

 

(f) The Company shall pay all expenses payable in
connection with the preparation, issue and delivery of stock certificates under
this Section 3, including any transfer taxes resulting from the exercise
of this Warrant by the Warrantholder
and the issuance of the Warrant Shares to the Warrantholder hereunder.

 

(g) Upon the exercise of this Warrant in accordance
with the terms hereof, the Warrant Shares shall be validly issued, fully paid
and non-assessable, and free from all liens, other than liens created by the
Warrantholder.

 

Section 4. 
Adjustment for Stock Splits, Combinations, Merger, etc.

 

3

 

(a) Upon each adjustment of the Exercise Price as
provided in Section 4(b), the Warrantholder shall thereafter be entitled
to purchase, at the Exercise Price resulting from such adjustment, the number
of shares of Common Stock equal to the product of (i) the number of shares of
Common Stock that the Warrantholder was entitled to purchase prior to such
adjustment and (ii) the quotient obtained by dividing (x) the Exercise Price
existing prior to such adjustment by (y) the new Exercise Price resulting from
such adjustment.

 

(b) If, at any time prior to the Expiration Date, the
number of outstanding shares of Common Stock is (i) increased by a stock
dividend payable in shares of Common Stock or by a subdivision or split-up of
shares of Common Stock or (ii) decreased by a combination of shares of Common
Stock, then, following the record date fixed for the determination of holders
of Common Stock entitled to receive the benefits of such stock dividend,
subdivision, split-up, or combination, the Exercise Price shall be adjusted to
a new amount equal to the product of (I) the Exercise Price in effect on such
record date and (II) the quotient obtained by dividing (x) the number of shares
of Common Stock outstanding on such record date (without giving effect to the
event referred to in the foregoing clause (i) or (ii)), by (y) the number of
shares of Common Stock which would be outstanding immediately after the event
referred to in the foregoing clause (i) or (ii), if such event had occurred
immediately following such record date.

 

Section 5. 
Reclassification, Etc.  In
case of any reclassification or change of the outstanding shares of Common
Stock (other than as a result of a subdivision, combination or stock dividend),
or in case of any consolidation of the Company with, or merger of the Company
into, another corporation or other business organization (other than a
consolidation or merger in which the Company is the continuing corporation and
which does not result in any reclassification or material change of the
outstanding shares of Common Stock) at any time prior to the Expiration Date,
then, as a condition of such reclassification, reorganization, change,
consolidation or merger, lawful provision shall be made, and duly executed
documents evidencing the same from the Company or its successor shall be
delivered to the Warrantholder, so that the Warrantholder shall have the right
prior to the Expiration Date to purchase, at a price not to exceed the
aggregate Exercise Price, the kind and amount of shares of stock and other
securities and property receivable upon such reclassification, reorganization,
change, consolidation or merger by a holder of the number of shares of Common
Stock purchasable by the Warrantholder immediately prior to such
reclassification, reorganization, change, consolidation or merger, and in any
such case appropriate provisions shall be made with respect to the rights and
interests of the Warrantholder to the end that the provisions hereof shall
thereafter be applicable in relation to any shares of stock and other
securities and property thereafter deliverable upon exercise hereof.

 

Section 6. 
Adjustments for Additional Stock Issuances.  For the term of this Warrant, in addition to
the provisions contained above, the Exercise Price shall be subject to
adjustment as provided below.  An
adjustment to the Exercise Price shall become effective immediately after the
payment date in the case of each dividend or distribution and immediately after
the effective date of each other event which requires an adjustment.  No adjustment to the Exercise Price shall be
made in an amount less than $0.01, but any such lesser amount shall be carried
forward and shall be given effect in the next Exercise Price adjustment, if
any.

 

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(a)                                  Except as provided in Section 6(b)
hereof, if and whenever the Company shall issue or sell, or is, in accordance
with the provisions hereof, deemed to have issued or sold, any Additional
Shares of Common Stock for a consideration per share less than the Exercise
Price in effect immediately prior to the time of such issue or sale, then and
in each such case (a “Trigger Issuance”) the then-existing Exercise
Price shall be reduced, as of the close of business on the effective date of
the Trigger Issuance, to an Exercise Price determined as follows:

 

(A)                              If the Trigger Issuance occurs during the
period beginning 150 days after the date hereof until but not including the 270th
day after the date hereof, and all or any portion of the Notes is outstanding
on the 150th day after the date hereof, then, the Exercise Price
shall be equal to the lesser of (x) $2.25 and (y) an amount equal to 140% of
the lowest price per share at which any Additional Shares of Common Stock were
issued or sold or deemed to be issued or sold in such Trigger Issuance;

 

(B)                                If the Trigger Issuance occurs during the
period beginning on or after the 270th day after the date hereof
until but not including the 18 month anniversary of the date hereof, and all or
any portion of the Notes is outstanding on the 270th day after the
date hereof, then, the Exercise Price shall be equal to the lesser of (x) $2.25
and (y) an amount equal to 120% of the lowest price per share at which any
Additional Shares of Common Stock were issued or sold or deemed to be issued or
sold in such Trigger Issuance; and

 

(C)                                If the Trigger Issuance occurs during the
period beginning on or after the 18 month anniversary of the date hereof until
and including the Expiration Date, and all or any portion of the Notes is
outstanding on the 18 month anniversary of the date hereof, then, the Exercise
Price shall be reduced to the lowest price per share at which any Additional
Shares of Common Stock were issued or sold or deemed to be issued or sold in
such Trigger Issuance.

 

No adjustment in the
Exercise Price shall be made under this Section 6(a) if a Trigger Issuance
occurs at any time beginning after the date hereof and prior to the 150th
day after the date hereof.  In connection
with any adjustment in the Exercise Price made pursuant to this Section 6(a),
no adjustment shall be made in the number of Warrant Shares which may be
purchased hereunder.

 

For purposes of this subsection (a),
“Additional Shares of Common Stock” shall mean all shares of Common
Stock issued by the Company or deemed to be issued pursuant to this Section 6(a),
other than Excluded Issuances (as defined in Section 6(b) hereof).

 

For purposes of this Section 6(a),
the following Sections 6(a)(i) to 6(a)(v) shall also be applicable (subject, in
each such case, to the provisions of Section 6(b) hereof) and to each
other subsection contained in this Section 6(a):

 

(i)                                     Issuance
of Rights or Options; Issuance of Convertible Securities.  If at any time the Company shall in any
manner grant or issue or sell (directly and not by assumption in a merger or
otherwise) any warrants or other rights to subscribe for or to purchase, or any
options for the purchase of, Common Stock or any stock or security convertible
into or exchangeable for Common Stock (such warrants, rights or options being
called “Options” and such convertible or exchangeable stock or
securities being called “Convertible Securities”),

 

5

 

whether or not such
Options or the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such Options or upon the conversion or exchange
of such Convertible Securities (determined by dividing (A) the sum (which sum
shall constitute the applicable consideration) of (x) the total amount, if any,
received or receivable by the Company as consideration for the granting of such
Options or for the issue and sale of such Convertible Securities, plus (y) the
aggregate amount of additional consideration, if any, payable to the Company
upon the exercise of all such Options, or the conversion or exchange of all
such Convertible Securities, plus (z) in the case of such Options which
relate to Convertible Securities, the aggregate amount of additional
consideration, if any, payable upon the conversion or exchange of such
Convertible Securities, by (B) the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon the conversion or
exchange of all such Convertible Securities issuable upon the exercise of such
Options or upon the conversion or exchange of all such Convertible Securities)
shall be less than the Exercise Price in effect immediately prior to the time
of the granting of such Options or the issue or sale of such Convertible
Securities, then the total number of shares of Common Stock issuable upon the
exercise of such Options or upon conversion or exchange of the total amount of
such Convertible Securities issuable upon the exercise of such Options or the
total number of shares of Common Stock issuable upon the conversion or exchange
of such Convertible Securities, shall be deemed to have been issued for such
price per share as of the date of granting of such Options (including Options
to purchase Convertible Securities) or the issuance of such Convertible
Securities and thereafter shall be deemed to be outstanding for purposes of
adjusting the Exercise Price.  Except as
otherwise provided in Section 6(a)(ii), no adjustment of the Exercise Price
shall be made upon the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such Options or upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible Securities.

 

(ii)                                  Change
in Option Price or Conversion Rate. 
If (A) the purchase price provided for in any Option referred to in Section 6(a)(i)
hereof, (B) the additional consideration, if any, payable upon the conversion
or exchange of any Convertible Securities referred to in Section 6(a)(i),
or (C) the rate at which Convertible Securities referred to in Section 6(a)(i)
are convertible into or exchangeable for Common Stock shall increase or
decrease at any time (including, but not limited to, changes under or by reason
of provisions designed to protect against dilution), the Exercise Price in
effect at the time of such event shall forthwith be readjusted to the Exercise
Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold, but only if as a result of such
re-adjustment of the Exercise Price then in effect hereunder is thereby
reduced.

 

(iii)                               Consideration
for Stock.  In case any shares of
Common Stock, Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to be the amount
received by the Company therefor, without deduction therefrom of any expenses
incurred or any underwriting commissions or concessions paid or allowed by the
Company in connection therewith.  In case
any shares of Common Stock, Options or Convertible Securities shall be issued
or sold for a consideration other than cash or for a

 

6

 

consideration including
cash and such other consideration, the amount of the consideration other than
cash received by the Company shall be deemed to be the fair value of such consideration
as determined in good faith by the Board, before deduction of any expenses
incurred or any underwriting commissions or concessions paid or allowed by the
Company in connection therewith.  In case
any Options shall be issued in connection with the issue and sale of other
securities of the Company, together comprising one integral transaction in
which no specific consideration is allocated to such Options by the parties
thereto, such Options shall be deemed to have been issued for such consideration
as determined in good faith by the Board.  The determination of the fair value of
consideration (or the allocation thereof) for purposes of this Section 6(a)
need not be the amount recorded in the books and records of the Company if the
Board determines that the determination of different amounts for different
contexts is in the best interest of the Company and its stockholders and
creditors as a whole.

 

(iv)                              Record
Date.  In case the Company shall take
a record of the holders of its Common Stock for the purpose of entitling them
(A) to receive a dividend or other distribution payable in Common Stock,
Options or Convertible Securities or (B) to subscribe for or purchase Common
Stock, Options or Convertible Securities, then such record date shall be deemed
to be the date of the issue or sale of the shares of Common Stock deemed to
have been issued or sold upon the declaration of such dividend or the making of
such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be. 
If the Company shall have taken a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or distribution
or subscription or purchase rights and shall, thereafter and before the
distribution to stockholders thereof, legally abandon its plan to pay or
deliver such dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of such
record and any such adjustment previously made in respect thereof shall be
automatically rescinded and annulled.

 

(v)                                 Treasury
Shares.  The number of shares of
Common Stock outstanding at any given time shall not include shares owned or
held by or for the account of the Company or any of its wholly-owned subsidiaries,
and the disposition of any such shares (other than the cancellation or
retirement thereof) shall be considered an issue or sale of Common Stock for
the purpose of this Section 6(a).

 

(b)                                 Excluded Issuances.  Anything herein to the contrary notwithstanding,
the Company shall not be required to make any adjustment of the Exercise Price:
(x) where such an adjustment would be duplicative of another adjustment of
the Exercise Price resulting from the same event that is made pursuant to other
provisions of this Warrant; or (y) in the case of (i) issuances upon
the exercise of any Options or Convertible Securities granted, issued and
outstanding on the date hereof, (ii) shares of Common Stock (or Options with
respect thereto) issued or issuable to employees, officers or directors of, or
consultants or advisors to, the Company or any of its subsidiaries, pursuant to
a plan, agreement or arrangement approved by the Board, (iii) issuances of
securities as consideration for a merger or consolidation with, or purchase of
assets from, a non-Affiliated third party, and (iv) issuances of Common Stock
upon conversion of the Company’s Series A Preferred Stock (collectively, “Excluded
Issuances”).

 

Section 7. 
Adjustment of Number of Shares; Notice of Adjustments.  Except as

 

7

 

otherwise provided hereunder and solely with respect to adjustments
made pursuant to Sections 4 and 5 hereof, upon each adjustment in the Exercise
Price hereunder, the number of Warrant Shares purchasable hereunder shall be
adjusted, to the nearest whole share, to the product obtained by multiplying
the number of Warrant Shares purchasable immediately prior to such adjustment
by a fraction, (i) the numerator of which shall be the Exercise Price immediately
prior to such adjustment, and (ii) the denominator of which shall be the
Exercise Price immediately thereafter. 
With each adjustment, the Company shall deliver a certificate signed by
its chief financial or executive officer setting forth, in reasonable detail,
the event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated, and the Exercise Price and the number of
Warrant Shares purchasable hereunder after giving effect to such adjustment,
which shall be mailed by first class mail, postage prepaid to the Warrantholder.

 

Section 8. 
Reservation and Authorization of Common Stock; Stock Fully Paid;
Listing.  The Company shall at all
times reserve and keep available for issuance such number of its authorized but
unissued shares of Common Stock as will be sufficient to permit the exercise of
this Warrant.  All Warrant Shares issued
upon exercise of this Warrant shall be, at the time of delivery of the
certificates for such Warrant Shares upon payment in full of the Exercise Price
therefor in accordance with the terms of this Warrant (or proper exercise of
the cashless exercise rights contained in Section 3(a)(ii) hereof), duly
authorized, validly issued, fully paid and non-assessable shares of Common Stock
of the Company.  The Company shall during
all times prior to the Expiration Date when the shares of Common Stock issuable
upon the exercise of this Warrant are authorized for listing or quotation on
any national securities exchange, (or the over-the-counter bulletin board or
the “pink sheets”, as the case may be), use its reasonable best efforts to
maintain the listing or quotation of the Common Stock on such national
securities exchange, Nasdaq (or the over-the-counter bulletin board or the “pink
sheets”, as the case may be).

 

Section 9. 
Stock Books.  The Company
will not at any time, except upon dissolution, liquidation or winding up or in
accordance with Section 5, close its stock books so as to result in
preventing or delaying the exercise of this Warrant during normal business
hours.

 

Section 10. 
Limitation of Liability. 
No provisions hereof, in the absence of affirmative action by the
Warrantholder to purchase the Warrant Shares hereunder, shall give rise to any
liability of the Warrantholder to pay the Exercise Price or as a stockholder of
the Company (whether such liability is asserted by the Company or creditors of
the Company).

 

Section 11. 
Legend.  Each stock
certificate representing Warrant Shares shall bear a legend substantially in
the following form:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
UNDER APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, ASSIGNED, PLEDGED
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE
ACT OR IN A TRANSACTION WHICH QUALIFIES AS AN EXEMPT TRANSACTION UNDER THE ACT,
THE RULES AND REGULATIONS PROMULGATED THEREUNDER AND THE SECURITIES LAW OF

 

8

 

ANY APPLICABLE STATE.”

 

Section 12. 
Transfer.  Subject to
compliance with the Securities Act and the applicable rules and regulations
promulgated thereunder and applicable state securities laws, the Warrantholder
may transfer this Warrant, in whole or in part, to any Person without the
consent of the Company; provided, that, in the case of a transfer to a Person
that is not an Affiliate of the Warrantholder, (i) the transfer is in
denominations of no less than the right to acquire 50,000 Warrant Shares (as
adjusted for any stock split, stock dividend, recapitalization or otherwise),
and (ii) if no Default or Event of Default has occurred, such Person is not 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.  Any such transfer shall be made by surrender
of this Warrant to the office or agency of the Company at which this Warrant is
exercisable, by the registered holder hereof by its duly authorized attorney,
and upon surrender of this Warrant together with the assignment hereof properly
endorsed, a new warrant shall be issued and delivered by the Company,
registered in the name of the transferee. 
Upon such surrender, the Company shall treat the assignee as the owner
hereof (to the extent of such transfer) for all purposes.

 

Section 13. 
Additional Protection.  If, at any time,
the Company shall issue any warrants or other rights to acquire securities of
the Company, or adjust the rights of any now or hereafter existing warrants, so
that the terms and conditions thereof are in any way superior to the terms and
conditions of this Warrant, then, and in each such instance, this Warrant
shall, automatically and without further action or deed by the Company or any
holder of this Warrant, be adjusted to have such superior terms and conditions,
which adjustment shall be immediately effective.  The Company shall cause this Warrant to be
amended as appropriate, but such amendment shall not be a pre-requisite to the
effectiveness of any adjustment required by this Section 13.  At least fifteen (15) days in advance
thereof, the Company shall provide written notice to the holders of the April 2005
Warrants of any issuance or adjustment giving rise to an adjustment to this
Warrant hereunder.  The Company shall not
take any action that impairs, restricts or otherwise compromises the rights of,
or the Company’s ability to perform its obligations with respect to, the April 2005
Warrants and the Warrantholders.

 

Section 14. 
Loss, Destruction, Etc. of Warrant.  Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company will make and deliver, in lieu of
such lost, stolen, destroyed or mutilated Warrant, a new warrant of like tenor
and representing the right to purchase the Warrant Shares.

 

Section 15. 
Amendments.  The terms of
this Warrant may be amended, and the observance of any term herein may be
waived (either generally or in a particular instance and either retroactively
or prospectively), upon written consent of the Company and the holders of at
least 50% of the shares of Common Stock issued or issuable upon exercise of the
April 2005 Warrants then outstanding; provided,
however, that any such amendment or waiver will apply to all April 2005
Warrants then outstanding; and provided
further that the number of Warrant Shares subject to this Warrant
and the Exercise Price of this Warrant may not be amended, and the right to
exercise this Warrant may not be waived, without the written consent of the
holder of

 

9

 

this Warrant (it being agreed that an event occurring under any of the
provisions of Sections 4, 5 and 6 of this Warrant shall not be considered an
amendment of the number of Warrant Shares or the Exercise Price).

 

Section 16. 
Notices.  All notices or
other communications required or permitted hereunder shall be in writing and
shall be deemed given or delivered (a) when delivered personally, (b) if
transmitted by facsimile when confirmation of transmission is received, (c) if
sent by registered or certified mail, postage prepaid, return receipt
requested, three Business Days after mailing or (d) if sent by reputable
overnight courier service, one Business Day after delivery to such service; and
shall be addressed as follows:

 

	
  If to the Company, to:

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
  Genaissance
  Pharmaceuticals, Inc.

  Five Science Park

  New Haven, Connecticut 06511

  Attention: Chief Financial Officer

  Facsimile: (203) 786-3567

  	
   

  	
  Wilmer Cutler Pickering
  Hale and Dorr LLP

  60 State Street

  Boston, Massachusetts 02109

  Attention: Steven D. Singer, Esq.

  Facsimile: (617) 526-5000

  
	
   

  	
   

  	
   

  
	
  If to the Holder, to:

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
  [Xmark Opportunity
  Fund, Ltd.]

  301 Tresser Blvd.

  Suite 1230

  Attention: Mitchell Kaye

  Facsimile: (203) 653-2525

  	
   

  	
  Lowenstein Sandler PC

  65 Livingston Avenue

  Roseland, NJ 07068

  Attention: Steven Siesser, Esq.

  Facsimile: (973) 597-2400

  

 

Section 17. 
Successors and Assigns. 
This Warrant shall bind and inure to the benefit of and be enforceable
by the parties hereto and their respective permitted successors and assigns.

 

Section 18. 
Governing Law.  This
Warrant and the obligations arising hereunder shall be governed by, and
construed and enforced in accordance with, the laws of the State of New York
(other than its conflicts of law provisions).

 

Section 19. 
No Stockholder Rights With Respect to Warrant Shares.  Until the Warrant Shares subject to this
Warrant are issued to the Warrantholder upon exercise of this Warrant, the
Warrantholder shall have no right to vote the Warrant Shares in connection with
any matters to which holders of Common Stock are entitled to vote and shall
have no rights as a stockholder of the Company with respect to the Warrant
Shares.

 

[Signature page follows]

 

10

 

IN WITNESS WHEREOF, the
Company has caused this Warrant to be executed by a duly authorized officer as
of April 21, 2005.

 

 

	
   

  	
  GENAISSANCE PHARMACEUTICALS,

  INC., a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  Five Science Park

  
	
   

  	
  New Haven, Connecticut
  06511

  
	
   

  	
  Attention: Chief
  Financial Officer

  
	
   

  	
  Fax: (203) 786-3567

  

 

[Holder’s agreement and acknowledgement follows]

 

 

Signature
Page to Warrant

 

 

	
  AGREED AND ACKNOWLEDGED

  AS OF APRIL 21, 2005:

  
	
   

  
	
  [XMARK OPPORTUNITY FUND, L.P.,

  a Delaware limited partnership]

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

 

Holder's
Agreement and Acknowledgement

 

 

Exhibit A

 

EXERCISE
NOTICE

 

(to be executed
only upon exercise of Warrant)

 

To:                              Genaissance
Pharmaceuticals, Inc.

Five Science Park

New Haven, Connecticut
06511

Attention:  Chief Financial Officer

 

The undersigned, pursuant to the provisions set forth in the attached
Warrant, hereby irrevocably elects to purchase                              of
the Warrant Shares covered by such Warrant and herewith makes payment of the
aggregate Exercise Price payable in respect of the number of Warrant Shares
purchased upon such exercise, as provided for in such Warrant.

 

The Warrant Shares shall be registered in the name of the following
Person:

 

                                                                                    .

 

 

	
  Dated:

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
							

 

 

Exhibit B

 

NOTICE OF
TRANSFER

 

(to be executed
only upon transfer of Registrable Securities)

 

To:                              Genaissance
Pharmaceuticals, Inc.

Five Science Park

New Haven, Connecticut
06511

Attention:  Chief Financial Officer

 

Notice is hereby given that the undersigned (the “Transferor”),
pursuant to the provisions set forth in the attached Warrant and pursuant to Section 8(c)
of the Registration Rights Agreement (the “Agreement”) made and entered into as
of the           day of
April, 2005, by and among Genaissance Pharmaceuticals, Inc., a Delaware
corporation (the “Company”), the Transferor and certain other parties thereto,
has transferred [                       ]
Registrable Securities (as defined in the Agreement) to [                                ]
(the “Transferee”).  As a condition to
such transfer:

 

(i)                                     Transferee represents and warrants to the
Company that Transferee is not 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, as of the date set forth below, competitive with the products or
services of the Company or Lark Technologies, Inc.

 

(ii)                                  Transferee represents and warrants to the
Company that it has provided a correct and complete copy of the Agreement to
the Transferee.

 

(iii)                               Transferee and Transferee represent and
warrant to the Company that the transfer described herein complies with the
requirements of applicable securities laws.

 

Subject to the foregoing representations, warranties and agreements, upon
delivery of this Notice to the Company, the Transferee shall, without further
action or deed, automatically and immediately have all rights in and to the
Agreement, and the Transferee hereby agrees to be bound by and subject to the
terms and conditions of the Agreement to the extent of the transferred
Registrable Securities.

 

 

	
  Dated:

  	
   

  	
   

  	
  TRANSFEREE

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
								

 

 

	
   

  	
  TRANSFEROR

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:Exhibit
10.4

 

REGISTRATION
RIGHTS AGREEMENT

 

This Registration Rights Agreement (the “Agreement”) is made and entered into as
of this 21st day of April, 2005, by and among Genaissance Pharmaceuticals,
Inc., a Delaware corporation (the “Company”),
and the “Investors” named in that certain Note and Warrant Purchase Agreement,
dated April 21, 2005, by and among the Company and the Investors (the “Purchase Agreement”).  Capitalized terms not otherwise defined
herein shall have the meanings ascribed thereto in the Purchase Agreement.

 

The parties hereby agree as follows:

 

1.  Certain Definitions.

 

As used in this Agreement, the following
terms shall have the following meanings:

 

“Affiliate”
shall mean, with respect to any person, any other person which directly or
indirectly Controls, is Controlled by, or is under common Control with, such
person.

 

“Business
Day” shall mean a day, other than a Saturday or Sunday, on which
banks in New York City are open for the general transaction of business.

 

“Common
Stock” shall mean the Company’s common stock, par value $0.001
per share, and any securities into which such shares may hereinafter be
reclassified.

 

“Company
Sale” means: (a) a merger or consolidation in which (i) the
Company is a constituent party, or (ii) any subsidiary of the Company is a
constituent party and the Company issues shares of its capital stock pursuant
to such merger or consolidation, except in the case of either clause (i) or
(ii) any such merger or consolidation involving the Company or any subsidiary
of the Company in which the shares of capital stock of the Company outstanding
immediately prior to such merger or consolidation continue to represent, or are
converted into or exchanged for shares of capital stock which represent,
immediately following such merger or consolidation, more than 50% by voting
power of the capital stock of (A) the surviving or resulting corporation or (B)
if the surviving or resulting corporation is a wholly owned subsidiary of
another corporation immediately following such merger or consolidation, the
parent corporation of such surviving or resulting corporation; (b) the sale,
lease, transfer, exclusive license or other disposition, in a single
transaction or series of related transactions, by the Company or any subsidiary
of the Company of all or substantially all the assets of the Company and the
subsidiaries of the Company taken as a whole (except where such sale, lease,
transfer, exclusive license or other disposition is to a wholly owned
subsidiary of the Company); or (c) the sale or transfer, in a single
transaction or series of related transactions, by the stockholders of the
Company of more than 50% by voting power of the then-outstanding capital stock
of the Company to any person or entity or group of affiliated persons or
entities.

 

“Control”
means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a person, whether through the
ownership of voting securities, by contract or otherwise.

 

“Effectiveness
Deadline” has the meaning set forth in Section 2(c)(i).

 

 

“Holders”
shall mean the Investors and any transferee of the Investors’ Registrable
Securities with respect to the rights that such transferee shall have acquired
in accordance with Section 8(c) hereof, at such times as such transferee
shall own such Registrable Securities.

 

“Investors”
shall mean the Investors identified in the Purchase Agreement.

 

“NASD”
shall mean the National Association of Securities Dealers, Inc.

 

“Prospectus”
shall mean the prospectus included in any Registration Statement, as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by such
Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated
by reference in such prospectus.

 

“Register,”
“registered” and “registration” refer to a registration
made by preparing and filing a Registration Statement or similar document in
compliance with the 1933 Act (as defined below), and the declaration or
ordering of effectiveness of such Registration Statement or document.

 

“Registrable
Securities” shall mean the shares of Common Stock issuable (i)
upon the exercise of the Warrants and (ii) with respect to or in exchange for
Registrable Securities; provided, that, a security shall cease to
be a Registrable Security (x) upon any sale or exchange pursuant to a
Registration Statement or Rule 144 under the 1933 Act or in a tender offer or
exchange offer under the 1934 Act, (y) upon any sale in any manner to a person
or entity which is not entitled, pursuant to Section 8(c) hereof, to the
rights under this Agreement or (z) at such time as they become eligible for sale
pursuant to Rule 144(k) under the 1933 Act.

 

“Registration
Statement” shall mean any registration statement of the Company
filed under the 1933 Act that covers the resale of any of the Registrable
Securities pursuant to the provisions of this Agreement, amendments and
supplements to such Registration Statement, including post-effective
amendments, and all exhibits and all material incorporated by reference in such
Registration Statement.

 

“SEC”
shall mean the U.S. Securities and Exchange Commission.

 

“Transfer”
shall mean and include the act of selling, giving, transferring, creating a
trust (voting or otherwise), assigning or otherwise disposing of (other than
pledging, hypothecating or otherwise transferring as security) (and correlative
words shall have correlative meanings); provided, however, that
any transfer or other disposition upon foreclosure or other exercise of
remedies of a secured creditor after an event of default under or with respect
to a pledge, hypothecation or other transfer as security shall constitute a “Transfer”.

 

“1933
Act” shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

 

“1934
Act” shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.

 

2

 

2.                                       Registration.

 

(a)                                  Registration
Statements.

 

(i)                                     Promptly
after the Closing (the “Closing Date”),
but in no event later than thirty-five (35) days after the Closing Date (the “Filing Deadline”), the Company shall,
subject to receipt of necessary information from the Holders, prepare and file
with the SEC one Registration Statement on Form S-3 (or, if Form S-3 is not
then available to the Company, on such form of Registration Statement as is
then available to effect a registration for resale of the Registrable
Securities), covering the resale of all of the Registrable Securities.  Such Registration Statement shall include the
plan of distribution attached hereto as Exhibit A.  Such Registration Statement also shall cover,
to the extent allowable under the 1933 Act, such indeterminate number of
additional shares of Common Stock resulting from stock splits, stock dividends
or similar transactions with respect to the Registrable Securities.  The Registration Statement may include shares
of Common Stock other than those held by the Holders, provided that the
inclusion of those shares would not affect the plan of distribution included in
the Registration Statement.  The
Registration Statement (and each amendment or supplement thereto, and each
request for acceleration of effectiveness thereof) shall be provided in
accordance with Section 3(c) to the Holders and their counsel prior
to its filing or other submission.  If a
Registration Statement covering the Registrable Securities is not filed with
the SEC on or prior to the Filing Deadline (a “Registration Default”), the Company will make pro rata
payments to each Holder, as liquidated damages (and not as a penalty, as
damages are impossible to forecast or predict and these amounts are deemed
reasonable in all respects), in an amount equal to 1.0% of the aggregate amount
invested by such Holder (the amount invested by a Holder shall include the
aggregate principal amount of the Notes acquired by such Holder and shall
exclude any amount attributable to the Warrants acquired by such Holder
pursuant to the Purchase Agreement) for each 30-day period or pro rata for any
portion thereof following the date by which such Registration Statement should have
been filed for which no Registration Statement is filed with respect to the
Registrable Securities.  Notwithstanding
anything to the contrary in Section 6 hereof or any other provision of
this Agreement, the issuance of cash as provided in this Section 2(a)(i)
shall constitute the Holders’ sole and exclusive
remedy in the event of any Registration Default; provided, however,
that if the foregoing remedy is deemed unenforceable by a court of competent
jurisdiction then the Holder shall have all other remedies available at law or
in equity.  Such payments shall be made
to each Holder in cash.  The amounts
payable as liquidated damages pursuant to this paragraph shall be payable in
lawful money of the United States, and amounts payable as liquidated damages shall
be paid within five (5) Business Days of the last day of each such 30-day
period during which the Registration Statement should have been filed for which
no Registration Statement was filed with respect to the Registrable Securities.

 

(ii)                                  Additional
Registrable Securities.  Upon the
written demand of the Investors and only upon any increase pursuant to Sections
4 and 5 of the Warrants in the number of “Warrant Shares” (as that term is
defined in the Warrants) purchasable under the Warrants such that additional
shares of Common Stock become issuable upon exercise of such Warrants, the
Company shall prepare and file with the SEC one or more Registration Statements
on Form S-3 (or, if Form S-3 is not then available to the Company, on such form
of Registration Statement as is then available to effect a registration for
resale of such additional shares of

 

3

 

Common Stock (the “Additional Shares”)) covering the
resale of the Additional Shares, but only to the extent the Additional Shares
are not at the time covered by an effective Registration Statement.  Such Registration Statement shall include the
plan of distribution attached hereto as Exhibit A.  Such Registration Statement also shall cover,
to the extent allowable under the 1933 Act, such indeterminate number of
additional shares of Common Stock resulting from stock splits, stock dividends
or similar transactions with respect to the Additional Shares.  The Registration Statement may include shares
of Common Stock other than those held by the Holders, provided that the
inclusion of those shares would not affect the plan of distribution included in
the Registration Statement.  The
Registration Statement (and each amendment or supplement thereto, and each request
for acceleration of effectiveness thereof) shall be provided in accordance with
Section 3(c) to the Holders and their counsel prior to its filing
or other submission.  If a Registration
Statement covering the Additional Shares is required to be filed under this Section 2(a)(ii)
and is not filed with the SEC within thirty (30) days of the request of the
Investors (an “Additional Shares Default”),
the Company will make pro rata payments to each Holder, as liquidated damages
(and not as a penalty, as damages are impossible to forecast or predict and
these amounts are deemed reasonable in all respects), in an amount equal to
1.0% of the aggregate amount invested by such Holder (the amount invested by a
Holder shall include the aggregate principal amount of the Notes acquired by
such Holder and shall exclude any amount attributable to the Warrants acquired
by such Holder pursuant to the Purchase Agreement) for each 30-day period or
pro rata for any portion thereof following the date by which such Registration Statement
should have been filed for which no Registration Statement is filed with
respect to the Additional Shares. 
Notwithstanding anything to the contrary in Section 6 hereof or any
other provision of this Agreement, the issuance of cash as provided in this Section 2(a)(ii)
shall constitute the Holders’ sole and exclusive remedy in the event of any
Additional Shares Default; provided, further, however,
that if the foregoing remedy is deemed unenforceable by a court of competent
jurisdiction then the Holder shall have all other remedies available at law or
in equity.  Such payments shall be made
to each Holder in cash.  The amounts
payable as liquidated damages pursuant to this paragraph shall be payable in
lawful money of the United States, and amounts payable as liquidated damages
shall be paid within five (5) Business Days of the last day of each such
30-day period during which the Registration Statement should have been filed
for which no Registration Statement was filed with respect to the Additional Shares.

 

(b)                                 Expenses.  The Company will pay all expenses associated
with each registration, including filing and printing fees, counsel and
accounting fees and expenses, costs associated with clearing the Registrable
Securities for sale under applicable state securities laws and listing fees,
but excluding the fees and disbursements of more than one law firm serving as
counsel to the Holders, and discounts, commissions, fees of underwriters,
selling brokers, dealer managers or similar securities industry professionals,
or taxes of any kind (including, without limitation, transfer taxes), with
respect to the Registrable Securities being sold.

 

4

 

(c)                                  Effectiveness.

 

(i)                                     The
Company shall, subject to receipt of necessary information from the Holders,
use commercially reasonable best efforts to have the Registration Statement
declared effective not later than the earlier to occur (the “Effectiveness Deadline”) of (y) the
120th day immediately following the Closing Date, or (z) five (5) Business Days
following the Company’s receipt of a no-review letter from the SEC relating to
the Registration Statement; provided, however, if the
Registration Statement is not declared effective before the Effectiveness
Deadline, the Company shall continue to use commercially reasonable best
efforts to have the Registration Statement declared effective as soon as
possible thereafter.  If (A) the
Registration Statement has not been declared effective by the Effectiveness
Deadline, or (B) after a Registration Statement has been declared effective by
the SEC, sales cannot be made pursuant to such Registration Statement for any
reason (including, without limitation, by reason of a stop order, or the
Company’s failure to update the Registration Statement), but except as excused
pursuant to subsection (ii) below (an “Effectiveness Default”), then the Company will make pro
rata payments to each Holder, as liquidated damages (and not as a penalty, as
damages are impossible to forecast or predict and these amounts are deemed
reasonable in all respects), in an amount equal to 1.0% of the aggregate amount
invested by such Holder (the amount invested by a Holder shall include the
aggregate principal amount of the Notes acquired by such Holder and shall
exclude any amount attributable to the Warrants acquired by such Holder
pursuant to the Purchase Agreement) for each 30-day period or pro rata for any
portion thereof following the date (1) by which such Registration Statement
should have been effective as described in (A) above had the Company used
commercially reasonable best efforts to have the Registration Statement
declared effective or (2) sales cannot be made pursuant to such Registration
Statement after it has been declared effective as described in (B) above (the “Blackout Period”).  Notwithstanding anything to the contrary in Section 6
hereof or any other provision of this Agreement, the issuance of cash as
provided in this Section 2(c)(i) shall constitute the Holders’ sole and
exclusive remedy for in the event of an Effectiveness Default; provided,
however, that if the foregoing remedy is deemed unenforceable by a court
of competent jurisdiction then the Holder shall have all other remedies
available at law or in equity.  The
Blackout Period shall terminate upon (x) the effectiveness of the Registration
Statement in the case of (A) above; and (y) the Registration Statement again
being available for sales by the Holders in the case of (B) above.  Such payments shall be made to each Holder in
cash.  The amounts payable as liquidated
damages pursuant to this paragraph shall be payable in lawful money of the
United States, and amounts payable as liquidated damages shall be paid within
five (5) Business Days of the last day of each 30-day period following the
commencement of the Blackout Period until the termination of the Blackout
Period.

 

(ii)                                  For
not more than twenty (20) consecutive days or for a total of not more than
forty (40) days in any eighteen (18) month period, the Company may delay the disclosure
of material non-public information concerning the Company, by terminating or
suspending effectiveness of any registration contemplated by this Section 2,
if the disclosure of such material non-public information at the time is not,
in the good faith opinion of the Board of Directors of Company, in the best
interests of the Company (an “Allowed
Delay”); provided, that the Company shall promptly (a)
notify the Holders in writing of the existence of material non-public
information giving rise to an Allowed Delay, and (b) advise the Holders in
writing to cease all sales under the Registration Statement until the end of
the Allowed Delay.

 

5

 

(d)                                 Underwritten
Offering.  If any offering pursuant
to a Registration Statement filed pursuant to Section 2(a) hereof
involves an underwritten offering, the Company shall have the right to select
an investment banker and manager to administer the offering, which investment
banker or manager shall be reasonably satisfactory to the Investors.

 

3.                                       Company
Obligations.  The Company will use
commercially reasonable best efforts to effect the registration of the
Registrable Securities in accordance with the terms hereof, and pursuant
thereto the Company will, as expeditiously as possible:

 

(a)                                  use
commercially reasonable best efforts to cause such Registration Statement to
become effective and to remain continuously effective for a period not
exceeding, with respect to each Holder’s Registrable Securities, the earlier of
(i) the second anniversary of the Closing Date, (ii) the date on which such
Holder may sell all Registrable Securities then held by the Holder without
restriction by the volume limitations of Rule 144(e) of the 1933 Act, and (iii)
such time as all Registrable Securities held by such Holder have been sold (A)
pursuant to a Registration Statement, (B) to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction, and/or
(C) in a transaction exempt from the registration and prospectus delivery
requirement of the 1933 Act under Section 4(l) thereof so that all
transfer restrictions and restrictive legends with respect thereto, if any, are
removed upon the consummation of such sale;

 

(b)                                 prepare
and file with the SEC such amendments and post-effective amendments to the
Registration Statement and the Prospectus as may be necessary to keep the
Registration Statement effective for the period specified in Section 3(a)
and to comply with the provisions of the 1933 Act and the 1934 Act with respect
to the distribution of all Registrable Securities;

 

(c)                                  provide
copies to and permit counsel to the Investors to review each Registration
Statement and all amendments and supplements thereto no fewer than
three (3) Business Days prior to their filing with the SEC and not
file such Registration Statement or any amendment or supplement thereto to
which such counsel reasonably objects within two (2) Business Days
following receipt by such counsel of such Registration Statement and/or amendments
and supplements thereto;

 

(d)                                 furnish
to all of the Holders: (i) with a copy to their legal counsel, promptly after
the same is prepared and publicly distributed, filed with the SEC, or received
by the Company (but not later than two (2) Business Days after the filing date,
receipt date or sending date, as the case may be), at least five (5) copies of
any Registration Statement and any amendment thereto, each preliminary
prospectus and Prospectus and each amendment or supplement thereto, and that
portion of each letter written by or on behalf of the Company to the SEC or the
staff of the SEC, and that portion of correspondence from the SEC or the staff
of the SEC, in each case relating to information contained in the Registration
Statement pertaining to the Holders or the plan of distribution; (ii) with a
copy to their legal counsel, such number of copies of a Prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents as each Holder may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Holder; and (iii)
upon receipt of

 

6

 

notice or an order from the SEC
of, but in any event before, the effectiveness of any Registration Statement,
notice of the date and time such Registration Statement will become effective;

 

(e)                                  in
the event the Company selects an underwriter for the offering, the Company
shall enter into and perform its reasonable obligations under an underwriting
agreement, in usual and customary form, including, without limitation,
customary indemnification and contribution obligations, with the underwriter of
such offering;

 

(f)                                    if
required by the underwriter, the Company shall furnish, on the effective date
of the Registration Statement (i) an opinion, dated as of such date, from
independent legal counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is customarily given in
an underwritten public offering, addressed to the underwriter and (ii) a
letter, dated such date, from the Company’s independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public
offering, addressed to the underwriter and the Holders;

 

(g)                                 use
commercially reasonable best efforts to prevent the issuance of any stop order
or other suspension of effectiveness and, if such order is issued, obtain the
withdrawal of any such order at the earliest possible moment;

 

(h)                                 prior
to any public offering of Registrable Securities, use commercially reasonable
best efforts to register or qualify or cooperate with the Holders and their
counsel in connection with the registration or qualification of such
Registrable Securities for offer and sale under the securities or blue sky laws
of such jurisdictions reasonably requested by the Holders and do any and all
other reasonable acts or things necessary or advisable to enable the distribution
in such jurisdictions of the Registrable Securities covered by the Registration
Statement; provided, however, that the Company shall not be
required in connection with this paragraph (h) to qualify as a foreign
corporation or to execute a general consent to service of process in any
jurisdiction or amend its Certificate of Incorporation or By-Laws in a manner
that the Board of Directors of the Company deems inadvisable;

 

(i)                                     use
its best efforts to cause all Registrable Securities covered by a Registration
Statement to be listed on each securities exchange, interdealer quotation
system or other market, if any, on which similar securities issued by the
Company are then listed;

 

(j)                                     within
one (1) Business Day of receipt, notify the Holders, at any time when a
Prospectus relating to the Registrable Securities is required to be delivered
under the 1933 Act, after the Company shall receive notice or obtain knowledge
of the existence of any fact, or the happening of any event, as a result of
which the Prospectus included in such Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and at the
request of any such Holder, promptly prepare and furnish to such Holder a
reasonable number of copies of a supplement to or an amendment of such
Prospectus as may be necessary so that, as thereafter delivered to the purchasers
of such Registrable Securities, such Prospectus shall not include an untrue
statement

 

7

 

of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing;
and

 

(k)                                  otherwise
use its best efforts to comply with all applicable rules and regulations of the
SEC under the 1933 Act and the 1934 Act and take such other actions as may be
reasonably necessary to facilitate the registration of the Registrable
Securities hereunder.

 

4.                                       Due
Diligence Review; Information.  The
Company shall make available, during normal business hours and upon reasonable
notice by the Holders, for inspection and review by the Holders, advisors to
and representatives of the Holders (who may or may not be affiliated with the
Holders), and any underwriter participating in any disposition of Common Stock
on behalf of the Holders pursuant to a Registration Statement or amendments or
supplements thereto or any blue sky, NASD or other filing, all financial and
other records, all filings with the SEC, and all other corporate documents and
properties of the Company as may be reasonably necessary for the purpose of
such review, and cause the Company’s officers, directors and employees, within
a reasonable time period, to supply all such information reasonably requested
by the Holders or any such representative, advisor or underwriter in connection
with such Registration Statement (including, without limitation, in response to
all questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Holders and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of such Registration Statement.

 

Notwithstanding the foregoing, except as set forth in Section 5.4
of the Purchase Agreement, the Company shall not disclose material nonpublic
information to the Holders, or to advisors to or representatives of the
Holders, unless prior to disclosure of such information the Company identifies
such information as being material nonpublic information and provides the
Holders, such advisors and representatives with the opportunity to accept or
refuse to accept such material nonpublic information for review.

 

5.                                       Obligations
of the Holders.

 

(a)                                  Each
Holder shall furnish in writing to the Company such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it, as shall be required to
effect the registration of such Registrable Securities and shall execute such
documents in connection with such registration as the Company may reasonably
request.  At least ten (10) Business Days
prior to the first anticipated filing date of any Registration Statement, the
Company shall notify each Holder of the information the Company requires from
such Holder if such Holder elects to have any of the Registrable Securities
included in the Registration Statement. 
A Holder shall provide such information to the Company at least five (5)
Business Days prior to the first anticipated filing date of such Registration
Statement if such Holder elects to have any of the Registrable Securities
included in the Registration Statement.

 

(b)                                 Each
Holder, by its acceptance of the Registrable Securities, agrees to cooperate
with the Company as reasonably requested by the Company in connection with the

 

8

 

preparation and filing of a
Registration Statement hereunder, unless such Holder has notified the Company
in writing of its election to exclude all of its Registrable Securities from
such Registration Statement.

 

(c)                                  In
the event the Company, at the request of the Holders, determines to engage the
services of an underwriter, each such Holder agrees to enter into and perform
its obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
dispositions of the Registrable Securities.

 

(d)                                 Each
Holder agrees that, upon receipt of any notice from the Company of the
happening of any event rendering a Registration Statement no longer effective,
such Holder will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities,
until the Holder’s receipt of copies of the supplemented or amended Prospectus
filed with the SEC and declared effective and, if so directed by the Company,
the Holder shall deliver to the Company (at the expense of the Company) or
destroy (and deliver to the Company a certificate of destruction) all copies in
the Holder’s possession of the Prospectus covering the Registrable Securities
current at the time of receipt of such notice.

 

(e)                                  No
Holder may participate in any third party underwritten registration hereunder
unless it (i) agrees to sell the Registrable Securities on the basis provided
in any underwriting arrangements in usual and customary form entered into by
the Company, (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements, and (iii) agrees to pay its
pro rata share of all underwriting discounts and commissions.  Notwithstanding the foregoing, no Holder
shall be required to make any representations to such underwriter, other than
those with respect to itself and the Registrable Securities owned by it,
including its right to sell the Registrable Securities, and any indemnification
in favor of the underwriter by the Holders shall be several and not joint and
limited in the case of any Holder, to the net proceeds received by such Holder
from the sale of its Registrable Securities. 
The scope of any such indemnification in favor of an underwriter shall
be limited to the same extent as the indemnity provided in Section 6(b)
hereof.

 

6.                                       Indemnification.

 

(a)                                  Indemnification
by the Company.  The Company will
indemnify and hold harmless each Holder and each other person, if any, who
controls such Holder within the meaning of the 1933 Act or 1934 Act against any
losses, claims, damages or liabilities, joint or several, to which such Holder
or controlling person may become subject under the 1933 Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof; (ii) any blue sky application or other
document executed by the Company specifically for blue sky compliance or based
upon written information furnished by the Company filed in any state or other
jurisdiction

 

9

 

in order to qualify any or all
of the Registrable Securities under the securities laws thereof (any such
application, document or information herein called a “Blue Sky Application”); (iii)
the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading;
(iv) any violation by the Company of any rule or regulation promulgated under
the 1933 Act applicable to the Company and relating to action or inaction
required of the Company in connection with such registration; or (v) any
failure to register or qualify the Registrable Securities included in any such
Registration Statement in any state where the Company has affirmatively
undertaken or agreed in writing that the Company will undertake such registration
or qualification on a Holder’s behalf (the undertaking of any underwriter
chosen by the Company being attributed to the Company) and will reimburse such
Holder and each such controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case if and to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in conformity with information furnished in writing by or on behalf of
such Holder or any such controlling person specifically for use in such
Registration Statement or Prospectus.

 

(b)                                 Indemnification
by the Holders.  In connection with
any Registration Statement pursuant to the terms of this Agreement, each Holder
will furnish to the Company in writing such information as the Company
reasonably requests concerning such Holder or the proposed manner of such
Holder’s distribution for use in connection with any Registration Statement or
Prospectus and agrees, severally but not jointly, to indemnify and hold
harmless, to the fullest extent permitted by law, the Company, its Subsidiaries
and its and their respective directors, officers, employees, shareholders and
each person who controls the Company (within the meaning of the 1933 Act)
against any losses, claims, damages, liabilities and expenses (including
reasonable attorney fees) resulting from any untrue statement of a material
fact or any omission of a material fact required to be stated in the
Registration Statement or Prospectus or preliminary prospectus or amendment or
supplement thereto or necessary to make the statements therein not misleading,
to the extent, but only to the extent that such untrue statement or omission is
contained in any information furnished in writing by such Holder to the Company
specifically for inclusion in such Registration Statement or Prospectus or
amendment or supplement thereto.  In no
event shall the liability of a Holder be greater in amount than the aggregate
dollar amount of the net proceeds received by such Holder upon the sale of the
Registrable Securities included in the Registration Statement giving rise to
such indemnification obligation.

 

(c)                                  Conduct
of Indemnification Proceedings.  Any
person entitled to indemnification hereunder shall (i) give prompt notice to
the indemnifying party of any claim with respect to which it seeks
indemnification and (ii) permit such indemnifying party to assume the defense
of such claim with counsel reasonably satisfactory to the indemnified party; provided
that any person entitled to indemnification hereunder shall have the right to
employ separate counsel and to participate in the defense of such claim, but
the fees and expenses of such counsel shall be at the expense of such person
unless (a) the indemnifying party has agreed to pay such fees or expenses, or
(b) the indemnifying party shall have failed to assume the defense of such
claim and employ counsel reasonably satisfactory to such person or (c) in the
reasonable judgment of any such person, based upon advice of its counsel, a
conflict of interest

 

10

 

exists between such person and
the indemnifying party with respect to such claims (in which case, if the
person notifies the indemnifying party in writing that such person elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such claim
on behalf of such person); and provided, further, that the
failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations hereunder, except to the
extent that such failure to give notice shall materially adversely affect the
indemnifying party in the defense of any such claim or litigation.  It is understood that the indemnifying party
shall not, in connection with any proceeding in the same jurisdiction, be
liable for fees or expenses of more than one separate firm of attorneys at any
time for all such indemnified parties. 
No indemnifying party will, except with the consent of the indemnified
party, consent to entry of any judgment or enter into any settlement that does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
of such claim or litigation.

 

(d)                                 Contribution.  If for any reason the indemnification
provided for in the preceding paragraphs (a) and (b) is unavailable to an
indemnified party or insufficient to hold it completely harmless, other than as
expressly specified therein, then the indemnifying party shall contribute to
the amount paid or payable by the indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnified party and the indemnifying party, as well as
any other relevant equitable considerations. 
No person guilty of fraudulent misrepresentation within the meaning of Section 11(f)
of the 1933 Act shall be entitled to contribution from any person not guilty of
such fraudulent misrepresentation.  In no
event shall the contribution obligation of a Holder be greater in amount than
the aggregate dollar amount of the net proceeds received by it upon the sale of
the Registrable Securities giving rise to such contribution obligation.  No party shall be liable for contribution
with respect to any action, suit, proceeding or claim settled without its prior
written consent, which consent will not be unreasonably withheld, conditioned
or delayed.

 

(e)                                  The
rights and obligations of the Company and the Holders under this Section 6
shall survive the termination of this Agreement.

 

7.                                       Termination.  All of the Company’s obligations to register
Registrable Securities under Section 2 shall terminate upon the earliest
of (a) five (5) years after the Closing Date or (b) the date on which no Holder
holds any Registrable Securities.

 

8.                                       Miscellaneous.

 

(a)                                  Amendments
and Waivers.  This Agreement may be
amended only by a writing signed by the Company and Holders holding a majority
of the Registrable Securities.  The
Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company shall have obtained
the written consent to such amendment, action or omission to act of Holders
holding a majority of the Registrable Securities.

 

(b)                                 Notices.  All notices and other communications provided
for or permitted hereunder shall be made as set forth in Section 10.4 of
the Purchase Agreement.

 

11

 

(c)                                  Assignments
and Transfers by Holders.  The rights
of a Holder with respect to Registrable Securities pursuant to this Agreement
may be Transferred by such Holder to any Affiliate of such Holder in connection
with the Transfer of Registrable Securities to such Affiliate, in all cases,
if: (i) the transferor provides written notice of such Transfer to the Company
promptly after such Transfer is effected; and (ii) such transferee agrees in
writing to be bound by and subject to the terms and conditions of this
Agreement, and the Company is provided a copy of such agreement.  The rights of a Holder with respect to
Registrable Securities pursuant to this Agreement may be Transferred by such
Holder to any non-Affiliate of such Holder in connection with the Transfer of
Registrable Securities to such non-Affiliate, in all cases, if: (i) the
transferor is Transferring at least 50,000 Registrable Securities (as adjusted
for any stock split, stock dividend, recapitalization or otherwise) at any
given time; (ii) if no Default or Event of Default has occurred, the transferee
is not a for-profit company engaged in the business of researching (including
without limitation, contract research organizations), developing and/or
commercializing pharmaceutical or biotechnology products that are then competitive
with products of the Company; (iii) the transferor provides written notice of
such Transfer to the Company promptly after such Transfer is effected; and (iv)
such transferee agrees in writing to be bound by and subject to the terms and
conditions of this Agreement, and the Company is provided a copy of such
agreement.  Immediately upon compliance
with the provisions of this Section 8(c), the transferee shall have all of
the rights of the transferor under this Agreement, without further action or
deed by the Company, the Holder or any other party.

 

(d)                                 Assignment
of Agreement; Company Sale.  This
Agreement shall not be assigned by the Company without the prior written
consent of Holders holding a majority of the Registrable Securities.  For purposes of clarity, the Company shall
have the ability to transact and/or consummate a Company Sale without the prior
written consent of the Holders upon notice duly given to such Holders, provided
that any successor in interest assumes the Company’s duties hereunder by
operation of law or contractually.

 

(e)                                  Benefits
of the Agreement.  The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective permitted successors and assigns of the parties.  Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

 

(f)                                    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.

 

(g)                                 Titles
and Subtitles.  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.

 

(h)                                 Severability.  Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but

 

12

 

shall be interpreted as if it
were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.  To the extent
permitted by applicable law, the parties hereby waive any provision of law
which renders any provisions hereof prohibited or unenforceable in any respect.

 

(i)                                     Further
Assurances.  The parties shall
execute and deliver all such further instruments and documents and take all
such other actions as may reasonably be required to carry out the transactions
contemplated hereby and to evidence the fulfillment of the agreements herein
contained.

 

(j)                                     Entire
Agreement.  This Agreement is
intended by the parties as a final expression of their agreement and intended
to be a complete and exclusive statement of the agreement and understanding of
the parties hereto in respect of the subject matter contained herein.  This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.

 

(k)                                  Governing
Law; Consent to Jurisdiction.  This
Agreement, and all matters arising directly or indirectly hereunder, shall be
governed by, and construed in accordance with, the internal laws of the State
of New York without regard to the choice of law principles thereof.  Each of the parties hereto irrevocably
consents and submits 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 relating to or arising out of this
Agreement.  Each party hereto irrevocably
waives, to the fullest extent permitted by law, any objection that any of them
may now or hereafter have to the laying of venue of any such suit, action or
proceeding brought 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.  THE COMPANY
AND EACH OF THE HOLDERS HEREBY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING RELATING TO OR ARISING OUT OF THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY.

 

[Signature
Pages Follow]

 

13

 

IN WITNESS WHEREOF, the parties have executed
this Agreement or caused their duly authorized officers to execute this
Agreement as of the date first above written.

 

 

	
  The Company:

  	
  GENAISSANCE PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ben D.
  Kaplan

  	
   

  
	
   

  	
  Name:

  	
  Ben D.
  Kaplan

  
	
   

  	
  Title:

  	
  Senior VP
  & CFO

  
	
   

  	
   

  
	
  The 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.

  
					

 

[Signature Page to Registration
Rights Agreement]

 

14

 

Exhibit A

 

Plan
of Distribution

 

The selling stockholders, which as used
herein includes donees, pledgees, transferees or other successors-in-interest
selling shares of common stock or interests in shares of common stock received
after the date of this prospectus from a selling stockholder as a gift, pledge,
partnership distribution or other transfer, may, from time to time, sell,
transfer or otherwise dispose of any or all of their shares of common stock or
interests in shares of common stock on any stock exchange, market or trading
facility on which the shares are traded or in private transactions.  These dispositions may be at fixed prices, at
prevailing market prices at the time of sale, at prices related to the prevailing
market price, at varying prices determined at the time of sale, or at
negotiated prices.

 

The selling stockholders may use any one or
more of the following methods when disposing of shares or interests therein:

 

• ordinary
brokerage transactions and transactions in which the broker-dealer solicits
purchasers;

 

• block trades
in which the broker-dealer will attempt to sell the shares as agent, but may
position and resell a portion of the block as principal to facilitate the
transaction;

 

• purchases by
a broker-dealer as principal and resale by the broker-dealer for its account;

 

• an exchange
distribution in accordance with the rules of the applicable exchange;

 

• privately
negotiated transactions;

 

• short sales;

 

• through the
writing or settlement of options or other hedging transactions, whether through
an options exchange or otherwise;

 

•
broker-dealers may agree with the selling stockholders to sell a specified
number of such shares at a stipulated price per share;

 

• a combination
of any such methods of sale; and

 

• any other
method permitted pursuant to applicable law.

 

The selling stockholders may, from time to
time, pledge or grant a security interest in some or all of the shares of
common stock owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer and sell the
shares of common stock, from time to time, under this prospectus, or under an
amendment to this prospectus under Rule 424(b)(3) or other applicable provision
of the Securities Act amending the

 

15

 

list of selling stockholders to include the pledgee, transferee or
other successors in interest as selling stockholders under this
prospectus.  The selling stockholders
also may transfer the shares of common stock in other circumstances, in which
case the transferees, pledgees or other successors in interest will be the
selling beneficial owners for purposes of this prospectus.

 

In connection with the sale of our common
stock or interests therein, the selling stockholders may enter into hedging
transactions with broker-dealers or other financial institutions, which may in
turn engage in short sales of the common stock in the course of hedging the
positions they assume.  The selling
stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities.  The selling stockholders may also enter into
option or other transactions with broker-dealers or other financial
institutions or the creation of one or more derivative securities which require
the delivery to such broker-dealer or other financial institution of shares
offered by this prospectus, which shares such broker-dealer or other financial
institution may resell pursuant to this prospectus (as supplemented or amended
to reflect such transaction).

 

The aggregate proceeds to the selling stockholders
from the sale of the common stock offered by them will be the purchase price of
the common stock less discounts or commissions, if any.  Each of the selling stockholders reserves the
right to accept and, together with their agents from time to time, to reject,
in whole or in part, any proposed purchase of common stock to be made directly
or through agents.  We will not receive
any of the proceeds from this offering.  Upon any exercise of the warrants by payment
of cash, however, we will receive the exercise price of the warrants.

 

The selling stockholders also may resell all
or a portion of the shares in open market transactions in reliance upon Rule
144 under the Securities Act of 1933, provided that they meet the criteria and
conform to the requirements of that rule.

 

The selling stockholders and any
underwriters, broker-dealers or agents that participate in the sale of the
common stock or interests therein may be “underwriters” within the meaning of Section 2(11)
of the Securities Act.  Any discounts,
commissions, concessions or profit they earn on any resale of the shares may be
underwriting discounts and commissions under the Securities Act.  Selling stockholders who are “underwriters”
within the meaning of Section 2(11) of the Securities Act will be subject
to the prospectus delivery requirements of the Securities Act.

 

To the extent required, the shares of our
common stock to be sold, the names of the selling stockholders, the respective
purchase prices and public offering prices, the names of any agents, dealer or
underwriter, any applicable commissions or discounts with respect to a
particular offer will be set forth in an accompanying prospectus supplement or,
if appropriate, a post-effective amendment to the registration statement that
includes this prospectus.

 

In order to comply with the securities laws of some
states, if applicable, the common stock may be sold in these jurisdictions only
through registered or licensed brokers or dealers.  In addition, in some states the common stock
may not be sold unless it has been registered or

 

16

 

qualified
for sale or an exemption from registration or qualification requirements is
available and is complied with.

 

We have advised the selling stockholders that the
anti-manipulation rules of Regulation M under the Exchange Act may apply to sales
of shares in the market and to the activities of the selling stockholders and
their affiliates.  In addition, we will
make copies of this prospectus (as it may be supplemented or amended from time
to time) available to the selling stockholders for the purpose of satisfying
the prospectus delivery requirements of the Securities Act.  The selling stockholders may indemnify any
broker-dealer that participates in transactions involving the sale of the
shares against certain liabilities, including liabilities arising under the
Securities Act.

 

We have agreed to indemnify the selling stockholders
against liabilities, including liabilities under the Securities Act and state
securities laws, relating to the registration of the shares offered by this
prospectus.

 

We have agreed with the selling stockholders to keep
the registration statement of which this prospectus constitutes a part
effective until the earlier of (1) such time as all of the shares covered by
this prospectus have been disposed of pursuant to and in accordance with the
registration statement or (2) the date on which the shares may be sold pursuant
to Rule 144(k) of the Securities Act.

 

17

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