Document:

Exhibit 10.1

 

NOTE AND WARRANT PURCHASE
AGREEMENT

 

among

 

GENAISSANCE PHARMACEUTICALS,
INC.,

 

LARK TECHNOLOGIES, INC.,

 

the Co-Borrowers,

 

and

 

XMARK OPPORTUNITY FUND, L.P.,

 

XMARK OPPORTUNITY FUND, LTD.,

 

and

 

XMARK JV INVESTMENT PARTNERS,
LLC,

 

the Purchasers

 

Dated:  April 21,
2005

 

 

NOTE AND WARRANT PURCHASE AGREEMENT

 

THIS
NOTE AND WARRANT PURCHASE AGREEMENT (this “Agreement”) is made and
entered into as of April 21, 2005, by and among Genaissance
Pharmaceuticals, Inc., a Delaware corporation (“Genaissance”) and Lark Technologies, Inc., a
Delaware corporation (“Lark”,
and together with Genaissance, the “Co-Borrowers”),
and Xmark Opportunity Fund, Ltd., a Cayman Islands exempted company, Xmark
Opportunity Fund, L.P., a Delaware limited partnership, and Xmark JV Investment
Partners, LLC, a Delaware limited liability company (together, the “Purchasers” and
each, a “Purchaser”).

 

RECITALS

 

A.                                   In
reliance upon and subject to the representations, warranties, covenants, terms
and conditions hereinafter set forth, the Purchasers desire to purchase from
the Co-Borrowers, and the Co-Borrowers desire to sell to the Purchasers, Senior
Secured Notes due 2007, in the form attached hereto as Exhibit A (the “Notes”), in the
aggregate principal amount of $4,500,000 for the aggregate purchase price of
$4,500,000;

 

B.                                     The
Co-Borrowers have agreed to secure their respective obligations under the Notes
by granting to the Purchasers a first priority security interest in certain of
their respective assets, including, among other assets, in the case of
Genaissance, a pledge of the capital stock of Lark;

 

C.                                     In
order to evidence the grants of the security interests described above, the
Co-Borrowers have agreed to execute and deliver to the Purchasers one or more
security agreements, pledge agreements and other related documents as described
herein; and

 

D.                                    In
consideration of providing the aforesaid financing, the Co-Borrowers are
issuing to the Purchasers warrants to acquire 2,000,000 shares of Genaissance’s
Common Stock, and granting to the Purchasers certain registration rights in
respect thereof, all as more particularly set forth herein.

 

NOW THEREFORE, in
consideration of the foregoing recitals and the mutual promises hereinafter set
forth, the parties hereto agree as follows:

 

1.                                      DEFINITIONS.

 

When used in this Agreement, the following terms have
the meaning set forth the below (such meanings being equally applicable to both
the singular and plural forms of the terms defined):

 

“Affiliate”,
as applied to any Person, means any other Person directly or indirectly
controlling, controlled by, or under common control with, that Person.  For the purposes of this definition, “control”
(including, with correlative meanings, the terms “controlling”, “controlled by”
and “under common control with”), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities or by contract or otherwise.  For

 

 

purposes of this definition, (a) a Person shall be deemed to be “controlled
by” a Person if such Person possesses, directly or indirectly, power to vote
25% or more of the securities having ordinary voting power for the election of
directors of such Person, provided
that in no event shall either Co-Borrower or any of its Subsidiaries be deemed
to be controlled by Purchaser, (b) members of the immediate family of a Person
shall be deemed to be Affiliates of such Person and (c) members of the board of
directors or board of managers or similar body of a Co-Borrower or any
Subsidiary of a Co-Borrower shall be deemed to be Affiliates of such
Co-Borrower.

 

“Benefit Arrangement”
has the meaning assigned thereto in Section 3.19.

 

“Business Day”
means any day other than a Saturday, Sunday or any other day on which
commercial banks in New York, New York are authorized or required to close.

 

“Capital Lease”
means any lease (or other agreement conveying the right to use property), the
obligations of which are required to be capitalized on the balance sheet of a
Person in accordance with GAAP.

 

“Capital Stock”
means (i) with respect to any Person that is a corporation, any and all shares,
interests, participations or other equivalents (however designated and whether
voting or nonvoting) of corporate stock, including each class of common stock
and preferred stock of such Person and (ii) with respect to any Person that is
not a corporation, any and all general partnership, limited partnership,
membership or other equity interests of such Person.

 

“CERCLA”
shall mean the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. 9601 et seq.), as amended from
time to time, and any successor statute thereto.

 

“Change
of Control” means, with respect to a Person, at any time: (i)
any other Person or any other Persons acting together that would constitute a “group”
for purposes of Section 13(d) under the Exchange Act, or any successor
provision thereto, acquires beneficial ownership (within the meaning of
Rule 13d-3 under the Exchange Act, or any successor provision thereto) in
a single transaction or a series of related transactions, of more than 50% of
the aggregate voting power of such Person; or (ii) such Person merges into
or consolidates with any other Person, or any other Person merges into or
consolidates with such Person and, after giving effect thereto, the
stockholders of such Person immediately prior to such transaction own less than
50% of the ordinary voting power of such Person or any successor entity; or
(iii) such Person sells, transfers, assigns, leases, conveys or otherwise
disposes of all or substantially all of its assets, to another Person; or (iv)
any “change of control” or similar event under any loan agreement, mortgage,
indenture or other agreement relating to any Indebtedness of such Person shall
occur and such change of control results in (x) the acceleration of
Indebtedness under such agreement, or (y) a Material Adverse Effect; or (v)
such Person adopts a plan of liquidation, dissolution or otherwise winds-up its
affairs or business.

 

“CII”
means Connecticut Innovations, Inc.

 

2

 

“CII
Financing” means the existing financing arrangements between
Genaissance and CII.

 

“Closing”
has the meaning assigned thereto in Section 2.4.

 

“Closing Date”
has the meaning assigned thereto in Section 2.4.

 

“Co-Borrower” has the meaning
assigned thereto in the preamble.

 

“Collateral
Agent” means that certain collateral agent specified in any of
the Security Documents.

 

“Common Stock”
has the meaning assigned thereto in Section 3.2.

 

“Company Intellectual
Property” has the meaning assigned thereto in Section 3.20(a).

 

“Comerica”
means Comerica Bank.

 

“Comerica
Facility” means Genaissance’s existing credit facility with
Comerica, evidenced by that certain Loan and Security Agreement, dated as of September 30,
2003, by and between Genaissance and Comerica.

 

“Control
Agreements” means agreements, in form and substance reasonably
satisfactory to the Purchasers, granting the Purchasers certain control rights
over deposit accounts maintained by a Co-Borrower or any of its Subsidiaries.

 

“Default”
means an Event of Default or an event that with notice or lapse of time or both
would, unless cured or waived, become an Event of Default.

 

“Disclosure Schedule”
has the meaning assigned thereto in the second sentence of Section 3.

 

“Environmental Law”
shall mean the Resource Conservation and Recovery Act (“RCRA”),
CERCLA, the Superfund Amendments and Reauthorization Act of 1986, the Federal
Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control Act,
or any state or local statute, regulation, ordinance, order or decree relating
to health, safety or the environment.

 

“Equity Documents” means the Warrants and the Registration Rights Agreement.

 

“Event of Default”
has the meaning assigned thereto in Section 8.1.

 

“Exchange Act”
means the Securities Exchange Act of 1934, as amended.

 

“Financial Statements”
has the meaning assigned thereto in Section 3.11(b)(i).

 

“GAAP” means
those generally accepted accounting principles in the United States of America,
as in effect from time to time.

 

3

 

“Governmental Authority”
means any federal, state, municipal, foreign or other government, governmental
department, commission, board, bureau, agency or instrumentality, or any
private or public court or tribunal.

 

“Guarantee”
as applied to any Person, shall mean any direct or indirect liability,
contingent or otherwise, of that Person: 
(i) with respect to any underlying Indebtedness, lease, dividend or
other obligation of another Person if the primary purpose or intent of the
Person incurring such liability, or the primary effect thereof, is to provide
assurance to the obligee of such liability that the underlying Indebtedness,
lease, dividend or other obligation will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
liability will be protected (in whole or in part) against loss with respect
thereto; (ii) with respect to any letter of credit issued for the account
of that Person or as to which that Person is otherwise liable for reimbursement
of drawings; or (iii) under any foreign exchange contract, currency swap
agreement, interest rate swap agreement or other similar agreement or
arrangement designed to alter the risks of that Person arising from
fluctuations in currency values or interest rates.  Guarantees shall include (a) the direct
or indirect guaranty, endorsement (other than for collection or deposit in the
ordinary course of business), co-making, discounting with recourse or sale with
recourse by such Person of the obligation of another, (b) the obligation
to make take-or-pay or similar payments if required regardless of
nonperformance by any other party or parties to an agreement, or to maintain
working capital or equity capital of such other Person or otherwise to maintain
the net worth or solvency of such other Person, (c) any liability of such
Person for the obligations of another through any agreement to purchase,
repurchase or otherwise acquire such obligation or any property constituting
security therefor, to provide funds for the payment or discharge of such
obligation or to maintain the solvency, financial condition or any balance
sheet item or level of income of another, and (d) otherwise to assure or
hold harmless the owner of such obligation against loss in respect
thereof.  The amount of any Guarantee
shall be equal to the amount of the obligation so guaranteed or otherwise
supported or, if not a fixed and determined amount, the maximum amount so
guaranteed.

 

“Hazardous Materials”
means (i) any “hazardous substance”, as defined by CERCLA, (ii) any “hazardous
waste”, as defined by RCRA, (iii) any petroleum product, or (iv) any
pollutant or contaminant or hazardous, dangerous or toxic chemical, material or
substance regulated by any Environmental Law.

 

“Hedging Agreement”
means any interest rate swap, collar, cap, floor or forward rate agreement or
other agreement regarding the hedging of interest rate risk exposure executed
in connection with hedging the interest rate exposure of any Person and any
confirming letter executed pursuant to such agreement, all as amended,
supplemented, restated or otherwise modified from time to time.

 

“Indebtedness”
means, without duplication, as to any Person or Persons (a) indebtedness for
borrowed money; (b) indebtedness for the deferred purchase price of property or
services; (c) indebtedness evidenced by bonds, debentures, notes or other
similar instruments; (d) obligations and liabilities secured by a Lien,
other than a Permitted Lien specified in clauses (a) through (h) and (k)
through (n) of the definition of “Permitted Lien”, upon property owned by such
Person, whether or not owing by such Person and even though such Person has not

 

4

 

assumed or become liable for the payment thereof; (e) obligations and
liabilities directly or indirectly Guaranteed by such Person; (f) obligations
or liabilities created or arising under any conditional sales contract or other
title retention agreement with respect to property used and/or acquired by such
Person; (g) net liabilities of such Person under Hedging Agreements and
foreign currency exchange agreements, as calculated on a basis satisfactory to
the Purchasers and in accordance with accepted practice; (h) all obligations of
such Person in respect of bankers’ acceptances and (i) all obligations,
contingent or otherwise of such Person as an account party or applicant in
respect of letters of credit.

 

“Intellectual Property”
means all (i) trademarks and service marks, logos, trade dress, product
configurations, trade names and other indications of origin, applications or
registrations in any jurisdiction pertaining to the foregoing and all goodwill
associated therewith; (ii) inventions (whether or not patentable),
discoveries, improvements, ideas, know-how, formula methodology, research and
development, business methods, processes, technology, software (including
password unprotected interpretive code or source code, object code, development
documentation, programming tools, drawings, specifications and data) and
applications or patents in any jurisdiction pertaining to the foregoing,
including re-issues, continuations, divisions, continuations-in-part, renewals
or extensions; (iii) trade secrets, including confidential information and the
right in any jurisdiction to limit the use or disclosure thereof; (iv)
copyrights in writings, designs, software, mask works or other works, applications
or registrations in any jurisdiction for the foregoing and all moral rights
related thereto; (v) database rights; (vi) Internet Web sites, Web pages,
domain names and applications and registrations pertaining thereto; and (vii)
all rights under agreements relating to the foregoing.

 

“Investment”
means, for any Person:  (a) the
acquisition (whether for cash, property, services or securities or otherwise)
of capital stock, bonds, notes, debentures, partnership or other ownership
interests or other securities of any other Person or any agreement to make any
such acquisition (including, without limitation, any “short sale” or any sale
of any securities at a time when such securities are not owned by the Person
entering into such sale); or (b) the making of any deposit with, or
advance, loan or other extension of credit to, any other Person (including the
purchase of property from another Person subject to an understanding or
agreement, contingent or otherwise, to resell such property to such Person),
but excluding any such advance, loan or extension of credit having a term not
exceeding 90 days arising in connection with the sale of inventory or supplies
by such Person in the ordinary course of business.

 

“Key Employee” means each of Kevin L. Rakin, Gerald F.
Vovis, Richard S. Judson, Ben D. Kaplan, Carl W. Balezentis, Krishnan
Nandabalan, and Carol R. Reed.

 

“Lark”
has the meaning assigned thereto in the Recitals.

 

“Lien” means
any lien, mortgage, deed of trust, pledge, security interest, charge or
encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any of the foregoing).

 

“Listed Intellectual
Property” has the meaning assigned thereto in Section 3.19(b).

 

5

 

“Majority Purchasers” means the
holders of at least 51% of the outstanding principal amount of the Notes.

 

“Material Adverse Effect”
means a material adverse effect on (i) the business, properties, assets,
liabilities, profits, results of operations or condition (financial or
otherwise) of the Co-Borrowers and their Subsidiaries, taken as a whole or (ii)
the ability of either Co-Borrower or any Subsidiary of a Co-Borrower to perform
its obligations under any of the Transaction Documents; provided, however,
that none of the following (individually or in combination) shall be deemed to
constitute, or shall be taken into account in determining whether there has been
or would be a Material Adverse Effect: 
(A) any adverse change or effect resulting from or relating to general
business, economic or financial market conditions; (B) any adverse change or
effect resulting from or relating to conditions generally affecting the
industry or sector in which a Co-Borrower or any of its Subsidiaries operates
or competes; (C) any adverse change or effect resulting from or relating to
changes in laws or interpretations thereof by courts or other Governmental
Authorities; or (D) any adverse change or effect resulting from or relating to
changes in GAAP.

 

“Material Agreement”
has the meaning assigned thereto in Section 3.14(a).

 

“Maturity
Date” has the meaning assigned thereto in Section 2.3(b).

 

“Moody’s”
means Moody’s Investors Services, Inc. and any successor entity.

 

“New
Haven Business” means the operating division of Genaissance that
operates as a services business (consisting primarily of a genotyping facility)
in New Haven, Connecticut.

 

“North
Carolina Business” means the operating division of Genaissance
that operates as a services business (consisting primarily of a DNA banking and
genotyping facility) in North Carolina.

 

“Notes”
has the meaning assigned thereto in the Recitals.

 

“Obligations”
means all principal, interest (including interest accrued after the filing of a
bankruptcy or similar petition whether or not a claim therefor is enforceable),
fees, expenses and indemnities payable from time to time by a Co-Borrower or
any Subsidiary under the Notes, the Security Documents or this Agreement,
including indemnity payments and reimbursements under Section 9.

 

“Offered
Securities” has the meaning assigned thereto in Section 5.17(a).

 

“Officer”
means, with respect to any Person, the Chairman of the Board of Directors, the
Chief Executive Officer, the President, any Vice President, the Chief Financial
Officer, the Treasurer, the Controller, or the Secretary of such Person, or any
other officer designated by the Board of Directors of such Person serving in a
similar capacity.

 

“Officers’ Certificate”
means a certificate signed by any Officer of a Co-Borrower.

 

6

 

“Organizational Documents”
has the meaning assigned thereto in Section 3.1(a).

 

“Permitted Indebtedness”
means:

 

(a)                                  Indebtedness
to the Purchasers hereunder;

 

(b)                                 accounts
payable or trade credit incurred in the ordinary course of business;

 

(c)                                  Indebtedness
that is unsecured, fully subordinated (in payment and priority) to any and all
of the Obligations, and does not exceed the principal amount of $500,000 in the
aggregate outstanding at any one time;

 

(d)                                 Indebtedness
of the type set forth in clauses (b) and (f) of the definition of “Indebtedness”
and Capital Lease obligations not to exceed the principal amount of $380,000 in
the aggregate outstanding at any one time;

 

(e)                                  Indebtedness
currently owing to CII;

 

(f)                                    extensions,
renewals, refundings, refinancings, modifications, amendments and restatements
of any of (b), (c), (d), and (e) above, provided that the principal amount
thereof is not increased or the terms thereof are not modified to impose
materially more burdensome terms upon a Co-Borrower or the Subsidiary incurring
such Indebtedness;

 

(g)                                 any debts, loans or advances between the
Co-Borrowers;

 

(h)                                 reimbursement obligations pursuant to Letter
of Credit issued by Genaissance to Comerica Bank in the aggregate amount of
$224,211.46;

 

(i)                                     any Indebtedness underlying Permitted Liens;
provided, that, such Indebtedness (other than Indebtedness underlying Permitted
Liens set forth in clauses (h) and (j) of the definition of Permitted Liens) is
fully subordinated (in payment and priority) to any and all of the Obligations; and

 

(j)                                     all other unsecured Indebtedness not to
exceed $150,000 in the aggregate.

 

“Permitted Investments”
means:  (a) direct obligations of
the United States of America, or of any agency thereof or any state, or
obligations guaranteed as to principal and interest by the United States of
America, or of any agency thereof, or any state, (b) certificates of
deposit issued by any bank or trust company organized under the laws of the
United States of America or any State thereof and having capital, surplus and
undivided profits of at least $500,000,000, maturing not more than one (1) year
from the date of acquisition thereof; (c) commercial paper rated A-1 or
better or P-1 by S&P or Moody’s, respectively, maturing not more than one
(1) year from the date of acquisition thereof; (d) investments consisting of the endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of
business consistent with past practice; (e) investments consisting of travel
advances, relocation expenses and similar loans and advances in the ordinary
course of business consistent with past practices;

 

7

 

(f) investments consisting of notes
receivable or prepaid royalties and other credit extensions, to customers and
suppliers who are not Affiliates of a Co-Borrower or any of its Subsidiaries,
in the ordinary course of business consistent with past practice; (g)
any investments set forth on the Disclosure Schedule; (h) investments in
Sciona, Ltd.; and (i) investments consisting of money market accounts and cash
accounts.

 

“Permitted Liens”
means:

 

(a)                                  Liens
imposed by law for taxes, fees, assessments or other government charges or
levies that are not yet due or are being contested in compliance with Section 5.5(b);

 

(b)                                 carriers’,
warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens
imposed by law, arising in the ordinary course of business and securing
obligations that are not overdue by more than 90 days or that are being
contested in good faith;

 

(c)                                  pledges
and deposits made in the ordinary course of business in compliance with workers’
compensation, unemployment insurance and other social security laws or
regulations;

 

(d)                                 deposits
to secure the performance of bids, trade contracts, leases (real property or
otherwise), statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature, in each case in the ordinary course of
business;

 

(e)                                  easements,
zoning restrictions, rights-of-way and similar encumbrances on real property
imposed by law or arising in the ordinary course of business that do not secure
any monetary obligations and do not materially detract from the value of the
affected property or interfere with the ordinary conduct of business of a
Co-Borrower or any of its Subsidiaries;

 

(f)                                    Liens
to secure payment of worker’s
compensation, employment insurance, old age pensions or other social security
obligations of a Co-Borrower or any of its Subsidiaries in the ordinary course
of business consistent with past practice;

 

(g)                                 Liens representing the owner’s retained
interest in any property leased by a Co-Borrower or any of its Subsidiaries;

 

(h)                                 Liens securing Permitted Indebtedness of
the type set forth in clause (d) of the definition of “Permitted Indebtedness” so long as such Lien is limited to the
property acquired with the proceeds of such Permitted Indebtedness;

 

(i)                                     Liens in favor of the Purchasers as
are contemplated hereunder and/or under any of the Transaction Documents;

 

(j)                                     Liens on CII Assets (as defined in the
Security Agreement executed by Genaissance in favor of the Investors) in favor
of CII in connection with the CII Financing;

 

(k)                                  Liens incurred in the extension, renewal or
refinancing of the Indebtedness secured by Liens described in (h), provided that any extension, renewal or

 

8

 

replacement Lien must be limited to the
property encumbered by the existing Lien and provided that the principal amount
thereof is not increased or the terms thereof are not modified to impose
materially more burdensome terms upon a Co-Borrower or any of its Subsidiaries
incurring such Indebtedness;

 

(l)                                     any
Liens set forth on the Disclosure Schedule;

 

(m)                               Liens
in favor of banks where a Co-Borrower or any of its Subsidiaries has accounts
for customary fees or charges; and

 

(n)                                 any
judgment Liens stayed or bonded in the face amount thereof.

 

“Person”
shall be construed in the broadest sense and means and includes any natural
person, a partnership, a corporation, an association, a joint stock company, a
limited liability company, a trust, a joint venture, an unincorporated
organization and other entity or Governmental Authority.

 

“Preferred Stock”
has the meaning assigned thereto in Section 3.2.

 

“Proportionate
Share” means, with respect to a Purchaser (or any assignee of
the Warrants), a fraction, the numerator of which is the total number of shares
of Common Stock owned by such Purchaser (assuming the exercise of all Warrants
then held by such Purchaser and taking into account all shares of Common Stock
issuable upon conversion of Preferred Stock then held by such Purchaser and
exercise of all other in-the-money securities exercisable or convertible into
shares of Common Stock held by such Purchaser) and the denominator of which is
the total number of shares of Common Stock outstanding (taking into account all
shares of Common Stock issuable upon conversion of any outstanding shares of
Preferred Stock and exercise of all in-the-money securities exercisable or
convertible into shares of Common Stock). 
For purposes hereof, a Purchaser’s Proportionate Share shall exclude any
shares of Capital Stock purchased or otherwise acquired by such Purchaser in
the open market.

 

“Proprietary Software”
has the meaning assigned thereto in Section 3.21.

 

“Purchasers”
has the meaning assigned thereto in the preamble.

 

“Quarterly Interest Payment Date”
shall mean the first Business Day of each fiscal quarter commencing July 1,
2005 and continuing thereafter.

 

“Registration Rights
Agreement” means the Registration Rights Agreement between
Genaissance and the Purchasers in the form of Exhibit B annexed hereto.

 

“Securities”
means, collectively, the Notes, the Warrants and the Warrant Shares.

 

“Securities Act”
means the Securities Act of 1933, as amended.

 

“Security Agreements”
means (i) the Pledge and Security Agreement executed by Genaissance in favor of
the Purchasers and the collateral agent named therein and (ii) the Security
Agreements executed by each Co-Borrower in favor of the Purchasers in
substantially

 

9

 

the form of Exhibits
C, D and E hereto, as amended, supplemented, restated or
otherwise modified from time to time.

 

“Security
Documents” means the Security Agreements, the Control Agreements
and any other document, agreement or instrument delivered to the Purchasers in
connection with this Agreement creating a Lien on any assets of a Co-Borrower
or its Subsidiaries.

 

“Software”
has the meaning assigned thereto in Section 3.21.

 

“S&P”
means Standard & Poor’s Ratings Services and any successor entity.

 

“Subsidiary”
means, with respect to any Person, (i) any corporation of which the
outstanding Capital Stock having at least a majority of the votes entitled to
be cast in the election of directors under ordinary circumstances shall at the
time be owned, directly or indirectly, by such Person, (ii) any other
Person (other than a partnership) of which at least a majority of the voting
interest under ordinary circumstances is at the time, directly or indirectly,
owned by such Person or (iii) any partnership (a) the sole general
partner or the managing general partner of which is such Person or a Subsidiary
of such Person or (b) the only general partners of which are such Person
or one or more Subsidiaries of such Person (or any combination thereof).  For purposes of clarification, Lark is a
Subsidiary of Genaissance.

 

“Transaction Documents”
means this Agreement, the Security Documents, the Note, the Warrants, the
Registration Rights Agreement and all other documents executed or delivered to
the Purchasers by a Co-Borrower or any Subsidiary of a Co-Borrower in
connection with the transactions contemplated herein.

 

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

 

“U.S.”
means the United States of America.

 

“Warrants”
has the meaning assigned thereto in Section 2.2.

 

“Warrant Shares”
means the Common Stock for which the Warrants are exercisable.

 

“Works” has
the meaning assigned thereto in Section 3.21.

 

For purposes hereof, references to a Co-Borrower’s “knowledge”
or any phrase of similar import shall be deemed to refer to the actual
knowledge of such Co-Borrower’s officers or members of its Board of Directors,
or the knowledge which any such person would reasonably be expected to have
assuming reasonable inquiry.

 

10

 

2.                                      PURCHASE AND SALE OF THE SECURITIES.

 

2.1                               Sale
and Issuance of the Notes.  Subject
to the terms and conditions hereof, the Co-Borrowers shall jointly and
severally issue and sell to each of the Purchasers on the Closing Date, and
each Purchaser shall purchase for face value on the Closing Date, the Notes in
the principal amount set forth opposite such Purchaser’s name on Schedule I
annexed hereto and made a part hereof. 
For the avoidance of doubt, the aggregate principal amount of all the
Notes to be issued under this Agreement is $4,500,000.

 

2.2                               Issuance
of Warrants.  Subject to the terms
and conditions hereof, Genaissance shall issue and deliver to each of the
Purchasers on the Closing Date, as part of its inducement to the Purchasers to
purchase the Notes, warrants, initially having an exercise price of $2.25 per
share, entitling each of the Purchasers to purchase the number of shares of
Common Stock set forth opposite such Purchaser’s name on Schedule I
annexed hereto and made a part hereof (the “Warrants”).  The Warrants shall be in the form of the
warrant attached hereto as Exhibit
F.

 

2.3                               Notes.

 

(a)                                  Security.  Each Note and the obligations of each
Co-Borrower and its Subsidiaries under the Transaction Documents shall be
secured in accordance with the terms of the Security Documents.

 

(b)                                 Maturity
Date.  The entire unpaid principal
amount of the Notes and any accrued and unpaid interest thereon shall be due
and payable on April 21, 2007 (the “Maturity Date”),
unless such amounts become due and payable earlier upon acceleration as
provided herein or in the Notes or as otherwise provided pursuant to the terms
of the Notes.

 

(c)                                  Interest.

 

(i)                                     Interest.  The outstanding principal amount of each Note
shall bear interest at the rate of five percent (5%) per annum, which interest
shall be payable in arrears in cash on each Quarterly Interest Payment Date.

 

(ii)                                  Post-Default
Interest.  Notwithstanding clause (i)
above, upon the occurrence and during the continuance of any Default or Event
of Default, the outstanding principal amount on each Note shall bear interest
at a maximum rate of ten percent (10%) per annum over the interest rate
otherwise provided for herein.

 

(iii)                               Computation.  All computations of interest payable hereunder
shall be on the basis of a 365-day year and actual number of days elapsed in
the period of which such interest is payable.

 

2.4                               Closing.  The closing of the purchase and sale of
the Notes and Warrants hereunder (the “Closing”)
shall take place at the offices of Lowenstein Sandler PC, 1251 Avenue of the
Americas, New York, NY, at 10:00 A.M. on the second (2nd) Business
Day following the satisfaction (or waiver, as the case may be) of the
conditions to each party’s obligations set forth

 

11

 

herein (the “Closing Date”), or at such other
time and place as the Genaissance and the Purchasers mutually agree upon in
writing.  At the Closing: (a) the
Co-Borrowers shall deliver to the Purchasers the Notes pursuant to Section 2.1;
(b) Genaissance shall deliver to the Purchasers the Warrants pursuant to Section 2.2;
and (c) the Purchasers shall cause to be delivered to the Co-Borrowers by wire
transfer of immediately available funds the aggregate amount of Four Million Five
Hundred Thousand Dollars ($4,500,000) to the account specified by Genaissance,
representing the purchase price for the Notes and the Warrants.

 

2.5                               Prepayment.

 

(a)                                  Optional
Prepayment.  The Co-Borrowers may, at
their joint written election, prepay the Notes in whole (or in part to the
extent permitted under Section 2.5(b)) and in cash only upon 30 days prior
written notice.

 

(b)                                 Mandatory
Prepayment.  Subject to Section 5.6
(h), the Co-Borrowers shall jointly and severally prepay the Notes as follows:

 

(i)                                     Upon
the occurrence of any of the following events, the Co-Borrowers shall jointly
and severally make a prepayment on the Notes in an amount equal to the lesser
of (x) the then outstanding principal amount of the Notes, together with all
accrued and unpaid interest thereon, and (y) the net proceeds received by any
Co-Borrower, any Subsidiary or any stockholder thereof in connection with such event;

 

(A)  in one or a series of transactions, the sale,
transfer, assignment, lease, conveyance, license, liquidation, wind-up,
dissolution or other disposition by Genaissance of substantially all of the
assets constituting the North Carolina Business, or

 

(B)  in one or a series of transactions, the sale,
transfer, assignment, lease, conveyance, license, liquidation, wind-up,
dissolution or other disposition by Genaissance of substantially all of the
assets constituting its New Haven Business. 
Genaissance shall use commercially reasonable efforts to liquidate any
non-cash proceeds received in any sale, transfer or other disposition referred
to in this Section 2.5(b)(i) (but in no event longer than (x) in the case
of Capital Stock that is then registered for resale under the Exchange Act, 90
days after such sale, transfer or other disposition referred to in this Section 2.5(b)(i),
(y) in the case of Capital Stock that is issued to Genaissance in a
non-registered securities offering, 90 days after the effective date of a
resale registration statement covering the resale of such Capital Stock or (z)
in the case of non-cash proceeds (other than Capital Stock), 90 days after such
sale, transfer or other disposition referred to in this Section 2.5(b)(i));

 

(ii)                                  Upon
Genaissance or any Subsidiary entering into one or more exclusive license
arrangements (other than field-limited exclusive license arrangements) with
respect to Intellectual Property of Genaissance or the Subsidiary, as the case
may be, which provides for aggregate royalties or other payments of $8,000,000
or more, the Co-Borrowers shall immediately jointly and severally prepay the
then outstanding principal balance of the Notes, together with all accrued and
unpaid interest thereon;

 

(iii)                               In
the event the Co-Borrowers’ aggregate cash balances (including without
limitation any depositary or other accounts that are not subject to Control

 

12

 

Agreements) exceed
$10,000,000 at the end of any calendar month, the Co-Borrowers will jointly and
severally repay, within five (5) business days of such event, to the Purchasers
a sum equal to the lesser of (x) $2,250,000 and (y) the aggregate amount of
principal and interest then due and owing under the Notes; or

 

(iv)                              Upon
the sale, transfer, assignment, dissolution or other disposition of
substantially all of the assets of Lark or the sale, transfer, or assignment by
Genaissance of the shares of Capital Stock of Lark held by it, the Co-Borrowers
shall immediately jointly and severally prepay the then outstanding principal
balance of the Notes, together with all accrued and unpaid interest thereon.

 

2.6                               Application
of Payments.  All payments hereunder
shall first be applied to any accrued and unpaid costs and expenses of the
Purchasers, then to accrued and unpaid interest on the Notes and then to
outstanding principal on the Notes.

 

2.7                               Payments
Generally.

 

(a)                                  All
payments hereunder and under each other Transaction Document to the Purchasers
shall be made in the lawful money of the United States of America, in
immediately available funds and without set-off, defense, deduction or
counterclaim.

 

(b)                                 If
the due date of any payment under this Agreement would otherwise fall on a day
that is not a Business Day, such date shall be extended to the next succeeding
Business Day, and interest shall be payable for any principal so extended for
the period of such extension.

 

3.                                      REPRESENTATIONS AND WARRANTIES OF THE BORROWER

 

Except as disclosed by
Genaissance in a written Disclosure Schedule provided by Genaissance to
the Purchasers dated the date hereof (the “Disclosure Schedule”), the Co-Borrowers hereby represent and warrant to each Purchaser that
the statements contained in this Section 3 are complete and accurate as of
the date of this Agreement.  The
Disclosure Schedule shall be arranged in sections corresponding to the
numbered and lettered sections and subsections contained in Section 3.

 

3.1                               Organization.

 

(a)                                  Each
of Genaissance and its Subsidiaries is a corporation, limited liability or
other entity, duly organized, validly existing and in good standing under the
laws of its State of organization. 
Attached hereto as Exhibit
G are true and
complete copies of the certificates of incorporation, by-laws, certificates of
formation, operating agreements and other organizational documents of
Genaissance and each of its Subsidiaries, each as amended through the date
hereof (collectively, the “Organizational Documents”).  Neither Genaissance nor any Subsidiary of
Genaissance is in breach of the terms of its Organizational Documents.

 

(b)                                 Each
of Genaissance and its Subsidiaries has all requisite power and authority and
has all necessary approvals, licenses, permits and authorization to own its

 

13

 

properties and to
carry on its business as now conducted and as presently contemplated to be
conducted.  Each of Genaissance and its
Subsidiaries has all requisite power and authority to execute and deliver the
Transaction Documents to which is it a party and to perform its obligations
thereunder.  This Agreement and the other
Transaction Documents constitute the legal, valid and binding obligations of
Genaissance and each of its Subsidiaries, as the case may be, enforceable
against Genaissance and/or each of its Subsidiaries, as the case may be, in
accordance with their respective terms.

 

(c)                                  Each
of Genaissance and its Subsidiaries is qualified to do business as a foreign
entity in, and each of Genaissance and its Subsidiaries is in good standing
under, the laws of each jurisdiction in which the conduct of its business as
now conducted or the nature of the property owned requires such qualification,
except where the failure to so qualify would not have a Material Adverse
Effect.

 

3.2                               Capitalization.  All of the issued and outstanding shares of
Capital Stock of Genaissance have been duly authorized and validly issued and
are fully paid and nonassessable.  All
the issued and outstanding shares of Capital Stock of each Subsidiary of
Genaissance have been duly authorized and validly issued and are owned by
Genaissance or a Subsidiary free and clear of all Liens other than Liens
created pursuant to the Transaction Documents and Permitted Liens.  All of the outstanding shares of Capital
Stock, options and warrants of Genaissance have been validly issued in
compliance with applicable state and federal securities laws.  As of April 21, 2005, the authorized
capital of Genaissance consisted of (a) 58,000,000 shares of common stock, par
value $0.001 per share (“Common Stock”),
(b) 2,000,000 shares of non-voting common stock, par value $0.001 per share (“Non-Voting Common Stock”),
and (c) 1,000,000 shares of preferred stock (“Preferred
Stock”), of which 35,343,097 shares of Common Stock are issued
and outstanding as of March 31, 2005, no shares of Non-Voting Common Stock
are issued or outstanding, 460,000 shares of Series A Preferred Stock are
issued and outstanding, and, as of March 31, 2005, 11,189,594 shares of
Common Stock are reserved for issuance upon the exercise of outstanding
options, warrants and other rights to acquire or subscribe for shares of Common
Stock, including the Warrant Shares.  Schedule 3.2 hereto contains a true, complete, and accurate list
of each other right, warrant, option or agreement (including any convertible
security) to acquire any Common Stock from Genaissance
outstanding as of April 21, 2005.  Except as described on Schedule 3.2,
no Person is entitled to pre-emptive or similar statutory or contractual rights
with respect to any securities of Genaissance. 
Except as described in this Section 3.2 or on Schedule 3.2,
there are no outstanding warrants, options, convertible securities or other
rights, agreements or arrangements of any character under which Genaissance or
any Subsidiary is obligated to issue any equity securities of any kind and
except as contemplated by this Agreement. 
Except for the Registration Rights Agreement, there are no voting
agreements, buy-sell agreements, option or right of first purchase agreements
or other agreements of any kind among Genaissance and any of the
securityholders of Genaissance relating to the securities of Genaissance held
by them.  Except as provided in the
Registration Rights Agreement, no Person has the right to require Genaissance
to register any securities of Genaissance under the Securities Act, whether on
a demand basis or in connection with the registration of securities of
Genaissance for its own account or for the account of any other Person.  The issuance and sale of the Securities
hereunder will not obligate Genaissance to issue shares of Capital Stock or
other securities to any other

 

14

 

Person (other than
the Purchasers) and will not result in the adjustment of the exercise,
conversion, exchange or reset price of any outstanding security.  Genaissance does not have outstanding
stockholder purchase rights or “poison pill” or any similar arrangement.

 

3.3                               Proceedings,
etc.  All corporate, limited
liability company or other actions of Genaissance and its Subsidiaries
necessary for the authorization, execution, and delivery of this Agreement and
the other Transaction Documents to which each of them is a party, the
performance of all obligations of Genaissance and each Subsidiary hereunder and
thereunder, and the authorization, issuance (or reservation for issuance), and
delivery of the Securities have been taken or will be taken prior to the
Closing.  This Agreement and the other
the Transaction Documents constitute the valid and legally binding obligations
of Genaissance and its Subsidiaries party thereto, enforceable in accordance
with their respective terms, except as limited by (a) applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditors’ rights generally, (b) laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies and (c) state and federal securities laws with respect to rights to
indemnification or contribution. 
Genaissance has taken all action necessary to exempt (i) the issuance
and sale of the Securities and (ii) the other transactions contemplated by
the Transaction Documents from the provisions of any anti-takeover, business
combination or control share law or statute binding on Genaissance or to which
Genaissance or any of its assets and properties may be subject and any
provision of the Organizational Documents that is or would reasonably be
expected to become applicable to the Purchasers as a result of the transactions
contemplated hereby, including without limitation, the issuance of the
Securities and the ownership, disposition or voting of the Securities by the
Purchasers or the exercise of any right granted to the Purchasers pursuant to
this Agreement or the other Transaction Documents.

 

3.4                               Consents
and Approvals.  The execution and delivery by
Genaissance and each Subsidiary of the Transaction Documents to which it is a
party, the performance by each of them of its obligations thereunder and the
consummation by each of them of the transactions contemplated thereby do not
require Genaissance or any Subsidiary to obtain any consent, approval or action
of, or make any filing with or give any notice to, any corporation, person or
firm or any public, governmental or judicial authority, except those which will
be obtained or made prior to Closing.

 

3.5                               Valid Issuance of Securities.  The Warrant Shares have been duly authorized
and reserved for issuance, and, when issued, sold and delivered in accordance
with the terms of the Warrants for the consideration expressed therein, will be
duly and validly issued, fully paid and nonassessable and will be free and
clear of all encumbrances and restrictions, except for restrictions on transfer
set forth in the Transaction Documents or imposed by applicable securities laws
and except for those in favor of the Purchasers.  Genaissance has reserved a sufficient number
of shares of Common Stock for issuance upon the exercise of the Warrants, free
and clear of all encumbrances and restrictions, except for restrictions on
transfer set forth in the Transaction Documents or imposed by applicable
securities laws and except for those created in favor of the Purchasers.

 

15

 

3.6                               Absence
of Defaults.  The execution and
delivery of this Agreement and the other Transaction Documents and the performance
of its obligations hereunder and thereunder (including the issuance and sale of
the Securities) will not result in a breach of any of the terms, conditions or
provisions of, or constitute a default under, or permit the acceleration of
rights under or termination of, any Material Agreement (as defined in Section 3.14(a))
or the Organizational Documents.  No
event has occurred and no condition exists which, upon notice or the passage of
time (or both), would constitute a default under any of the foregoing or a
violation of any material license, permit or authorization to which Genaissance
or any Subsidiary is a party and which, individually or in the aggregate, would
be reasonably likely to have a Material Adverse Effect.

 

3.7                               Litigation.  There is no action, suit, proceeding or
investigation pending or, to Genaissance’s knowledge, currently threatened
against Genaissance or any Subsidiary that questions the validity of this
Agreement, the Securities or any other Transaction Document or the right of Genaissance
or any Subsidiary to enter into them, or to consummate the transactions
contemplated hereby or thereby, or that would reasonably be expected to result,
either individually or in the aggregate, in a Material Adverse Effect.  Neither Genaissance nor any Subsidiary is a
party to nor are any of their respective assets subject to the provisions of
any order, writ, injunction, judgment or decree of any court or government
agency or instrumentality that would be reasonably likely to result,
individually or in the aggregate, in a Material Adverse Effect.  There is no action, suit or proceeding or, to
Genaissance’s or its Subsidiaries’ knowledge, investigation of or against
Genaissance or any Subsidiary currently pending except for matters which are
not likely to result, individually or in the aggregate, in a Material Adverse
Effect.

 

3.8                               Solvency.  Immediately after the Closing and after
giving effect to the purchase and sale of the Notes and Warrants and the
contemplated use of proceeds thereof, (a) the fair value of the assets of
Genaissance and each Subsidiary, on a consolidated basis, at a fair valuation,
will exceed its debts and liabilities, subordinated, contingent or otherwise;
(b) the present fair saleable value of the property of Genaissance and each
Subsidiary, on a consolidated basis, will be greater than the amount that will
be required to pay the probable liability of its debts and other liabilities,
subordinated, contingent or otherwise, as such debts and other liabilities
become absolute and matured; (c) Genaissance and each Subsidiary, on a
consolidated basis, will be able to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured; and (d) neither Genaissance nor any Subsidiary will have
unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be conducted
following the Closing.

 

3.9                               Subsidiaries.  Schedule 3.9
is a correct and complete list of the name and relationship to Genaissance of
all Genaissance’s Subsidiaries.

 

3.10                        Status
of Security Interests.  The security
interest purported to be created by the Security Documents constitutes a first
priority security interest in the collateral specified therein, subject to no
other Liens except Permitted Liens.

 

16

 

3.11                        SEC Filings; Financial Statements.

 

(a)                                  Genaissance
has made available to the Purchasers through the EDGAR system, true and
complete copies of Genaissance’s most recent Annual Report on Form 10-K for the
fiscal year ended December 31, 2004 (the “10-K”), and all other reports filed by
Genaissance pursuant to the Exchange Act since the filing of the 10-K and prior
to the date hereof (collectively, the “SEC Filings”).  The SEC Filings are the only filings required
of Genaissance pursuant to the Exchange Act for such period.  Genaissance and its Subsidiaries are engaged
in all material respects only in the business described in the SEC Filings and
the SEC Filings contain a complete and accurate description in all material
respects of the business of Genaissance and its Subsidiaries, taken as a whole.

 

(b)

 

(i)                                     The
audited consolidated balance sheet of Genaissance as at December 31, 2004
and the related audited consolidated statements of income, stockholders equity
and cash flow for the fiscal year ended December 31, 2004 together with
the notes thereto included in the 10-K are referred to herein as the “Financial Statements”;

 

(ii)                                  The
Financial Statements (x) were prepared in accordance with GAAP, (y) present
fairly in all material respects the consolidated financial position, results of
operations and statements of cash flow of Genaissance and its Subsidiaries as
at such date and for the period then ended, (z) are complete and correct in all
material respects in accordance with the books of account and records of
Genaissance and its Subsidiaries.  The
statements of income included in the Financial Statements do not contain any
material items of special or nonrecurring income except as expressly specified
therein, and the balance sheets included in the Financial Statements do not
reflect any write-up or revaluation increasing the book value of any
assets.  The books and accounts of
Genaissance and its Subsidiaries are complete and correct in all material
respects and fairly reflect all of the material transactions, items of income
and expense and all assets and liabilities of Genaissance and its Subsidiaries
consistent with prior practices of Genaissance and its Subsidiaries.

 

3.12                        Absence
of Certain Developments.  Since the
filing of the 10-K, there has been not been:

 

(a)                                  any
Material Adverse Effect;

 

(b)                                 any
resignation or termination of any officers or Key Employees of Genaissance or
any Subsidiary, and Genaissance has no knowledge of any impending resignation
or termination of employment of any such officer of Key Employee;

 

(c)                                  any
material change, except in the ordinary course of business, in the contingent
obligations of Genaissance or any Subsidiary by way of guaranty, endorsement,
indemnity, warranty or otherwise;

 

(d)                                 any
damage, destruction or loss, whether or not covered by insurance, which has had
a Material Adverse Effect;

 

17

 

(e)                                  any
waiver by Genaissance or any Subsidiary of a valuable right or of a material
debt owed to it;

 

(f)                                    any
direct or indirect loans made by Genaissance or any Subsidiary to any of its
employees, officers or directors, other than advances made in the ordinary course
of business;

 

(g)                                 any
material change in any compensation arrangement or agreement with any employee,
officer or director;

 

(h)                                 any
declaration or payment of any dividend or other distribution of the assets of
Genaissance or any Subsidiary;

 

(i)                                     to
Genaissance’s knowledge, any labor organization activity with respect to any
employees of Genaissance or any Subsidiary;

 

(j)                                     any
debt, obligation or liability incurred, assumed or guaranteed by Genaissance or
any Subsidiary, except (i) those amounts which, in the aggregate, do not exceed
$100,000, (ii) current liabilities incurred in the ordinary course of business,
or (iii) Permitted Indebtedness;

 

(k)                                  any
sale, assignment or transfer or any patents, trademarks, copyrights, trade
secrets or other intangible assets other than in the ordinary course of
business;

 

(l)                                     any
change in any Material Agreement that would be reasonably likely to have a
Material Adverse Effect;

 

(m)                               any
satisfaction or discharge of any Lien or payment of any obligation by
Genaissance or any Subsidiary, except in the ordinary course of business;

 

(n)                                 any
Lien on any Asset of Genaissance or any Subsidiary except Permitted Liens;

 

(o)                                 any
action, suit, proceeding or investigation against Genaissance or any Subsidiary
known to it or them, except any such action, suit, proceeding or investigation
that if determined adversely, would not reasonably be likely to have a Material
Adverse Effect;

 

(p)                                 any
written communication received by Genaissance or any Subsidiary alleging that
Genaissance or any Subsidiary or any of their respective products has violated
any of the patents or patent related licenses and other proprietary rights and
processes of any other Person; or

 

(q)                                 any
other events or conditions of any character that, either individually or
cumulatively, have resulted in a Material Adverse Effect.

 

18

 

3.13                        Compliance
with Law.

 

(a)                                  To
Genaissance’s Knowledge, neither Genaissance nor any Subsidiary is in material
violation of any laws, ordinances, governmental rules or regulations to which
it is subject, including, without limitation, laws or regulations relating to
the environment or to occupational health and safety, and, except with respect
to ongoing compliance with the Sarbanes-Oxley Act of 2002, no material
expenditures are expected to be required in order to cause its current
operations or properties to comply with any such laws, ordinances, governmental
rules or regulations.

 

(b)                                 Each
of Genaissance and its Subsidiaries has all licenses, permits, franchises or
other governmental authorizations necessary for the ownership of its property
or to the conduct of its business as now conducted, that if violated or not
obtained would be reasonably likely to have a Material Adverse Effect, individually
or in the aggregate.  Neither Genaissance
nor any Subsidiary has finally been denied any application for any such
licenses, permits, franchises or other governmental authorizations necessary to
its business, which denial would be reasonably likely to result, individually
or in the aggregate, in a Material Adverse Effect.  There has not been, and, to Genaissance’s
Knowledge, there is no proceeding pending, served or threatened to suspend,
revoke or limit such license, and, to Genaissance’s knowledge, there is no
circumstance that exists which with notice or passage of time or both, will
result in such revocation, suspension or limitation except for matters which
are not reasonably likely to result, individually or in the aggregate, in a
Material Adverse Effect.

 

3.14                        Material
Agreements; Customers and Suppliers.

 

(a)                                  Schedule 3.14(a) sets forth a true and complete list of
each material contract, agreement, instrument, commitment and other arrangement
to which Genaissance or any Subsidiary is a party or is otherwise bound and
which is listed as an exhibit to an SEC Filing (each, a “Material
Agreement”).  Each
Material Agreement is valid, binding and enforceable against Genaissance or the
Subsidiary party thereto, in full force and effect and, to Genaissance’s
knowledge, the other parties thereto, in accordance with its terms, except as
limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium,
and other laws of general application affecting enforcement of creditors’
rights generally, (b) laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (c) state and
federal securities laws with respect to rights to indemnification or
contribution.  Neither Genaissance nor
any Subsidiary is in default or breach under any of the Material Agreements,
nor, to the knowledge of Genaissance, is any other party thereto in default or
breach thereunder, nor, to the knowledge of Genaissance, are there facts or
circumstances which have occurred which, with or without the giving of notice
or the passage of time or both, would constitute a material default or breach
under any of the Material Agreements.

 

(b)                                 Since
December 31, 2004, no customer whose accounts represent more than 5% of
Genaissance’s consolidated revenues, the loss of which would be reasonably
likely to have a Material Adverse Effect, has canceled or otherwise terminated
its relationship with Genaissance or any Subsidiary.  To Genaissance’s knowledge, no such customer
intends to cancel or materially curtail its relationship with Genaissance or
any Subsidiary.

 

19

 

3.15                        Environmental
Matters.  Neither Genaissance nor any
Subsidiary has, nor, to Genaissance’s knowledge, has any other Person has ever
caused or permitted any Hazardous Material to be disposed of in violation of
any applicable Environment Laws on or under any real property now or previously
owned, leased or operated by Genaissance or any Subsidiary except for matters
which are not reasonably likely to result, individually or in the aggregate, in
a Material Adverse Effect.  Neither
Genaissance nor any Subsidiary has any material liability with respect to
Hazardous Materials, and, to Genaissance’s knowledge, no facts or circumstances
exist which would reasonably be expected to give rise to liabilities with
respect to Hazardous Materials except for matters which are not reasonably
likely to result, individually or in the aggregate, in a Material Adverse
Effect.

 

3.16                        Employees.

 

(a)                                  Each
of Genaissance and its Subsidiaries is in compliance in all material respects
with all laws regarding employment, wages, hours, equal opportunity, collective
bargaining and payment of social security and other taxes, except to the extent
that noncompliance would not reasonably be expected to have a Material Adverse
Effect, individually or in the aggregate. 
Neither Genaissance nor any Subsidiary is engaged in any unfair labor
practice or discriminatory employment practice, and no complaint of any such
practice against Genaissance or any Subsidiary is filed or, to Genaissance’s
knowledge, threatened to be filed with or by the National Labor Relations
Board, the Equal Employment Opportunity Commission or any other administrative
agency, federal or state, that regulates labor or employment practices, nor is
any grievance filed or, to Genaissance’s knowledge, threatened to be filed,
against Genaissance or any Subsidiary by any employee pursuant to any
collective bargaining or other employment agreement to which Genaissance or any
Subsidiary is a party or is bound except for matters which are not reasonably
likely to result, individually or in the aggregate, in a Material Adverse
Effect.  Each of Genaissance and its
Subsidiaries is in compliance with all applicable foreign, federal, state and
local laws and regulations regarding occupational safety and health standards,
except to the extent that noncompliance would not reasonably be expected to
have a Material Adverse Effect, individually or in the aggregate, and has
received no complaints from any foreign, federal, state or local agency or
regulatory body alleging violations of any such laws and regulations except
where such violations would not have, individually or in the aggregate, a
Material Adverse Effect.

 

(b)                                 Schedule 3.16(b) sets forth a true and complete list of
all Key Employees of Genaissance or any Subsidiary and all independent
contractors or consultants hired or engaged by Genaissance or any Subsidiary
during calendar year 2004.  Except as set
forth on Schedule 3.16(b), the employment
of all Persons and officers is terminable at will without any penalty or
severance obligation of any kind on the part of the employer.  Except as set forth on Schedule 3.16(b), all sums due for
employee compensation and benefits and all vacation time owing to any of such
employees have been duly and adequately accrued on the accounting records of
Genaissance.

 

(c)                                  To
Genaissance’s knowledge, none of the employees of Genaissance or any Subsidiary
is obligated under any contract (including licenses, covenants or commitments
of any nature) or other agreement, or subject to any judgment, decree or order
of

 

20

 

any court or
administrative agency, that would reasonably be likely to interfere with the
use of such employee’s reasonable efforts to promote the interests of
Genaissance and its Subsidiaries or that would conflict with Genaissance’s and
its Subsidiaries’ business as currently conducted.

 

(d)                                 There
are no strikes, stoppages, slowdowns or other labor disputes against
Genaissance or any Subsidiary pending or, to Genaissance’s knowledge,
threatened.

 

3.17                        Tax
Matters.  There are no material,
federal, state, county or local taxes due and payable by Genaissance or any
Subsidiary which have not been paid.  The
provisions for taxes on the balance sheet filed with the 10-K are sufficient
for the payment of all accrued and unpaid federal, state, county and local
taxes of Genaissance and its Subsidiaries whether or not assessed or disputed
as of the respective dates of such balance sheet.  Genaissance and its Subsidiaries have made
provision for the payment of all taxes which, to Genaissance’s knowledge, are
reasonably expected to become due with respect to their respective business,
properties and operations.  Each of
Genaissance and its Subsidiaries has duly filed all federal, state, county and
material local tax returns required to have been filed by it and there are in
effect no waivers of applicable statutes of limitations with respect to taxes for
any year.  Since January 1, 2000,
neither Genaissance nor any Subsidiary has been subject to a federal or state
tax audit of any kind.

 

3.18                        Employee
Benefit Plans.  Neither Genaissance
nor any Subsidiary has any employee benefit plans (as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974) covering its former and
current employees, or under which Genaissance or any Subsidiary has any
obligation or liability.  Schedule 3.18 lists all material bonus, commission,
profit-sharing, saving, stock option, insurance, deferred compensation, or
fringe or employee benefit plans or arrangements maintained or provided by
Genaissance or any Subsidiary to its employees or under which Genaissance or
any Subsidiary has any obligation or liability (each, a “Benefit
Arrangement”).  The
Benefit Arrangements are and have been administered in substantial compliance
with their terms and with the requirements of applicable law.

 

3.19                        Intellectual
Property.

 

(a)                                  Genaissance
and its Subsidiaries own, have a valid and enforceable license to use, or
otherwise have an enforceable right to use all the Intellectual Property that
is used by them to conduct their respective businesses as currently conducted,
except for any instances which would not reasonably be likely to have a
Material Adverse Effect, individually or in the aggregate (the “Company Intellectual Property”).  Genaissance and its Subsidiaries are in
compliance in all material respects with the contractual obligations regarding
the use of such of the Company Intellectual Property that they use pursuant to
license agreements.  To Genaissance’s
knowledge, there are no infringements by any third party of any Company
Intellectual Property which are owned by Genaissance.  To Genaissance’s knowledge, the conduct of
Genaissance’s and its Subsidiaries’ respective businesses as currently
conducted does not infringe any Intellectual Property right of any third
party.  There is no claim, suit, action
or proceeding pending or, to Genaissance’s knowledge, threatened against
Genaissance or any Subsidiary: 
(i) alleging any such infringement of any third party’s
Intellectual Property rights; or

 

21

 

(ii) challenging
Genaissance’s or any Subsidiary’s ownership or use of, or the validity or
enforceability of, any Company Intellectual Property.

 

(b)                                 Schedule 3.19(b) sets forth a complete and current list
of all known patents, patent applications, registered trademarks (and
applications therefor) and registered copyrights (and applications therefor)
that are owned by Genaissance or any Subsidiary (“Listed
Intellectual Property”) and the owner of record, date of application
or issuance and relevant jurisdiction (if applicable) as to each.  All Listed Intellectual Property is owned by
Genaissance or a Subsidiary.  There are
no inventorship challenges or interferences declared with respect to any
patents or patents applications included in the Listed Intellectual Property
which are owned by Genaissance or any Subsidiary.

 

(c)                                  Schedule 3.19(c) sets forth a complete list of
all:  (i) Material Agreements in which
Genaissance or any Subsidiary has granted to any Person the right to use the
Company Intellectual Property which are owned by Genaissance or any Subsidiary;
and (ii) all other Material Agreements which contain consents,
indemnifications, forbearances to sue, settlement agreements and licensing or
cross-licensing arrangements to which Genaissance or any Subsidiary is a party
relating to the Intellectual Property of any third party, the use of which by
Genaissance or such Subsidiary is material to conducting their respective
businesses as currently conducted. 
Neither Genaissance nor any Subsidiary is under any obligation to pay
royalties or other payments in connection with the use of Intellectual Property
of any third party pursuant to any existing Material Agreement.

 

(d)                                 To
Genaissance’s knowledge: (i) Genaissance and its Subsidiaries have taken
reasonable measures to protect that Company Intellectual Property which
Genaissance or any Subsidiary owns and considers to be its trade secret or
confidential information from use, disclosure or appropriation to the detriment
of Genaissance or its Subsidiaries for the benefit of any Person other than
Genaissance or its Subsidiaries; and (ii) no employee, independent contractor
or agent of Genaissance or any Subsidiary has misappropriated any trade secrets
or other confidential information of any other Person in the course of the
performance of his or her duties as an employee, independent contractor or
agent of Genaissance or a Subsidiary.

 

3.20                        Software.

 

(a)                                  The
applications computer software programs and databases used by Genaissance or
any Subsidiary that are material to the conduct of their respective businesses
as now conducted (collectively, the “Software”)
are listed on Schedule 3.20 hereto.  Genaissance and its Subsidiaries: (i) hold
valid licenses to use, reproduce, modify, distribute and/or sublicense, to the
extent currently done in the conduct of their respective businesses as now
conducted, the Software, other than any portion thereof (collectively, the “Proprietary Software”) that was
developed by or assigned to Genaissance or a Subsidiary and which Genaissance
or such Subsidiary currently owns, and (ii) either own, or have a perpetual,
royalty-free license to use, reproduce, modify, distribute and/or sublicense,
to the extent currently done in the conduct of their respective businesses as
now conducted, the Proprietary Software and Schedule 3.20 lists each Material Agreement pursuant to
which Genaissance or any Subsidiary

 

22

 

has sold,
licensed, leased or otherwise transferred or granted any interest or rights in
or to any portion of the Proprietary Software.

 

(b)                                 Each
employee who has created inventions or works of authorship (“Works”) in the
regular course of such employee’s employment using Genaissance’s or any
Subsidiary’s facilities and resources or any employee who in the regular course
of his employment may create Works and all consultants have signed an
assignment or similar agreement with Genaissance or its Subsidiary confirming
its ownership of or, in the alternate, transferring and assigning to it, all
right, title and interest in and to Works created in the regular course of such
employee’s employment using Genaissance’s or such Subsidiary’s facilities and
resources, including copyright and other intellectual property rights
therein.  Each individual consultant to
Genaissance or any Subsidiary has signed an assignment or similar agreement
with Genaissance or the Subsidiary confirming its ownership of or, in the
alternate, transferring and assigning to it, all right, title and interest in
and to Works which are material to the business of Genaissance or such Subsidiary
as currently conducted and which Works such consultant created in the course of
such consultant’s work for Genaissance or the relevant Subsidiary.

 

3.21                        Title
to Tangible Assets.  Each of
Genaissance and its Subsidiaries has good and marketable title to its tangible
properties and assets and good and marketable title to all its leasehold
estates, in each case subject to no Liens other than Permitted Liens.

 

3.22                        Condition
of Properties.  All facilities,
machinery, equipment, fixtures, vehicles and other properties owned or leased
by Genaissance or any Subsidiary (a) are in good operating condition and
repair, reasonably fit and usable for the purposes for which they are being
used and adequate and sufficient for its business as now conducted and (b)
conform in all material respects with all applicable ordinances, regulations
and laws.

 

3.23                        Insurance.  Genaissance’s and its Subsidiaries’
properties are insured, in the reasonable judgment of Genaissance, against such
losses and with such insurers as are prudent when considered in light of the
nature of the properties and the business of Genaissance and its Subsidiaries
as now conducted.  Schedule 3.23 sets forth a true and
complete listing of all such commercial insurance policies as in effect on the
date hereof, including in each case the applicable coverage limits, deductibles
and the policy expiration dates.  No
notice of any termination or threatened termination of any of such policies has
been received and such policies are in full force and effect.  Except as set forth in Schedule 3.23,
there is no material claim by Genaissance or any Subsidiary pending under such
policies.

 

3.24                        Transactions
with Related Parties.  Neither
Genaissance nor any Subsidiary is a party to any agreement with any of the
officers, directors, or greater than 5% shareholders of Genaissance or any
Subsidiary or any Affiliate or family member of any officer, director or, to
Genaissance’s knowledge, 5% shareholder of Genaissance or any Subsidiary under
which it: (i) leases any real or personal property (either to or from such
Person), (ii) licenses technology (either to or from such Person),
(iii) is obligated to purchase any tangible or intangible asset from or
sell such asset to such Person, (iv) purchases products or services from such
Person or (v) has borrowed money from or lent money to such Person.  Neither Genaissance nor any Subsidiary
employs as an employee or engages as a consultant any immediate family member
of any of the directors, officers, or, to Genaissance’s knowledge,

 

23

 

greater than 5%
shareholders of Genaissance or any Subsidiary. 
To Genaissance’s knowledge, there exist no agreements among shareholders
of Genaissance or any Subsidiary to act in concert with respect to their voting
or holding of Genaissance’s or any Subsidiary’s securities.

 

3.25                        Interest
in Competitors.  Neither Genaissance
nor any Subsidiary has any interest, either by way of contract or by way of
investment (other than as holder of not more than 2% of the outstanding capital
stock of a publicly traded Person) or otherwise, directly or indirectly, in any
Person that (i) provides any services or designs, produces or sells any product
or product lines or engages in any activity that competes with any activity
currently conducted by Genaissance or any of its Subsidiaries or (ii) has any
direct or indirect interest in any asset or property, real or personal,
tangible or intangible, of Genaissance or any Subsidiary.

 

3.26                        Internal Controls.  Genaissance and its Subsidiaries are in material compliance with the provisions of the Sarbanes-Oxley Act
of 2002 currently applicable to Genaissance and its
Subsidiaries. 
Genaissance and its Subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences. Genaissance and its Subsidiaries have
established disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) for Genaissance and its Subsidiaries and
designed such disclosure controls and procedures to ensure that material
information relating to Genaissance and its Subsidiaries, are made known to the
certifying officers by others within those entities, particularly during the
period in which Genaissance and its Subsidiaries most recently filed period
report under the Exchange Act, as the case may be, is being prepared.  Genaissance and its Subsidiaries’ certifying
officers have evaluated the effectiveness of Genaissance and its Subsidiaries’
controls and procedures as of the end of the period covered by the most
recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”).  Genaissance and its Subsidiaries presented in
its most recently filed periodic report under the Exchange Act the conclusions
of the certifying officers about the effectiveness of the disclosure controls
and procedures based on their evaluations as of the Evaluation Date.  Since the Evaluation Date, there have been no
significant changes in Genaissance and its Subsidiaries’ internal controls or,
to Genaissance and its Subsidiaries’ knowledge, in other factors that would be
reasonably likely to significantly affect Genaissance and its Subsidiaries’
internal controls.

 

3.27                        No Directed Selling Efforts or General
Solicitation.  Neither
Genaissance nor any Person acting on its behalf has conducted any general
solicitation or general advertising (as those terms are used in Regulation D)
in connection with the offer or sale of any of the Securities.

 

3.28                        Private Placement.  The offer and sale of the Securities to the
Purchasers as contemplated hereby is exempt from the registration requirements
of the Securities Act and the Securities have been registered or qualified (or
are exempt from registration and

 

24

 

qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws.

 

3.29                        Questionable Payments.  Neither
Genaissance, any Subsidiary, nor, to Borrower’s knowledge, any of their
respective current or former officers, directors, or, to Genaissance’s
knowledge, greater than 5% shareholders, nor, to Genaissance’s knowledge, any
of their respective current or former employees or agents or other Persons acting
on their behalf, has on behalf of Genaissance or any Subsidiary or in
connection with their respective businesses: (a) used any corporate funds for
unlawful contributions, gifts, entertainment or other unlawful expenses
relating to political activity; (b) made any direct or indirect unlawful
payments to any governmental officials or employees from corporate funds; (c)
established or maintained any unlawful or unrecorded fund of corporate monies
or other assets; (d) made any false or fictitious entries on the books and
records of Genaissance or any Subsidiary; or (e) made any unlawful bribe,
rebate, payoff, influence payment, kickback or other unlawful payment of any
nature.

 

3.30                        Brokerage.  There are no claims for brokerage
commissions or finder’s fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement made by or
on behalf of Genaissance or any Subsidiary, and Genaissance shall indemnify and
hold the Purchasers harmless against any costs or damages incurred as a result
of any such claim.

 

3.31                        Material
Facts. This Agreement, the Disclosure Schedules furnished contemporaneously
herewith, and the certificates or written statements required hereunder to be
furnished to the Purchasers at the Closing by or on behalf of Genaissance or
any Subsidiary, taken as a whole, do not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
contained therein or herein, in light of the circumstances in which they were
made, not misleading.

 

3.32                        Foreign
Assets Control Regulations, etc. 
Neither the payment by the Purchasers to the Co-Borrowers contemplated
hereunder nor the use of the proceeds of the Securities will violate the
Trading with the Enemy Act, as amended, or any of the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) or any enabling legislation or executive order relating
thereto.  Without limiting the foregoing,
neither Genaissance nor any Subsidiary of Genaissance (i) is or will become a
blocked person described in Section 1 of Executive Order 13224 of September 23,
2001 Blocking Property and Prohibiting Transactions With Persons Who Commit,
Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) or (ii)
knowingly engages or will engage in any dealings or transactions with any such
blocked person.

 

4.                                      REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.

 

Each of the Purchasers
hereby, severally and not jointly, represents and warrants to the Co-Borrowers
as follows:

 

4.1                               Organization.  Such Purchaser is a company or partnership,
as the case may be, duly organized, validly existing and in good standing under
the laws of its jurisdiction of formation.

 

25

 

4.2                               Authorization.  Such Purchaser has the company or
partnership, as the case may be, power and authority to execute and deliver
this Agreement and the other Transaction Documents to which it is a signatory,
and to perform its obligations hereunder and thereunder, all of which have been
duly authorized by all requisite company or partnership, as the case may be,
action.  This Agreement and the other
Transaction Documents to which it is a signatory have been duly authorized,
executed and delivered by such Purchaser and each of them constitutes a valid
and binding agreement of such Purchaser, enforceable against it in accordance
with their respective terms.

 

4.3                               Access to Information.  Such Purchaser and its representatives, if
any, have had an opportunity to ask questions of and receive answers from
representatives of Genaissance concerning its businesses and conditions
(financial and other) and the terms and conditions of the transactions
contemplated by this Agreement.  Notwithstanding
anything in this Agreement to the contrary, such Purchaser shall be entitled to
rely on the representations and warranties made by the Co-Borrowers in, and in
connection with, this Agreement and the other Transaction Documents, regardless
of any investigation of the Co-Borrowers or any of their respective Affiliates
by such Purchaser, and no such investigation shall limit any rights to
indemnification hereunder.

 

4.4                               Accredited Investor.  Such Purchaser is an “Accredited Investor” as
such term is defined in Rule 501 under the Securities Act.

 

4.5                               Investment Intent.

 

(a)                                  Such
Purchaser is acquiring the Securities for its own account for investment only
and not for or with a view to the resale or distribution thereof in violation
of the Securities Act.  The Purchaser has
not entered into any contract, undertaking, agreement or arrangement with any
Person to sell, transfer or pledge to such Person or anyone else any of the
Securities and such Purchaser has no present plans or intentions to enter into
any such contract, undertaking, agreement or arrangement.  Notwithstanding anything in this Section 4.5(a)
to the contrary, nothing in this Section 4.5(a) shall require such
Purchaser to hold any of the Securities for any period of time.

 

(b)                                 Such
Purchaser has the present financial ability to bear the economic risk of its
investment in the Securities, and such Purchaser has no present need for
immediate liquidity in such investment, and the amount so invested does not
constitute a substantial portion of its committed and available capital.

 

(c)                                  Such
Purchaser, through its agents and employees, has substantial experience in
making investment decisions of this type and/or is relying on its own advisors
in making this investment decision and, therefore, either alone or together
with its advisors, has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of an investment
in the Securities.  Such Purchaser was
not formed solely for the purpose of acquiring the Securities in the
transactions contemplated by this Agreement.

 

4.6                               Short Sales. 
Such Purchaser has not, and has caused its Affiliates not to,
during the 15 days prior to the date of this Agreement, directly or indirectly,
traded in the

 

26

 

Common Stock or
established any hedge or other position in the Common Stock that is outstanding
on the Closing Date and that is designed to or would reasonably be expected to
lead to or result in a disposition of Common Stock of Genaissance by such Purchaser
or any other Person on or before the Closing Date, nor will such Purchaser
engage in any hedging or other transaction on or before the Closing Date which
is designed to or would reasonably be expected to lead to or result in a
disposition of Common Stock of Genaissance by the Purchaser or any other Person
in violation of the Securities Act.  Such
prohibited hedging or other transactions would include without limitation
effecting any short sale or having in effect any short position (whether or not
such sale or position is against the box and regardless of when such position
was entered into) or any purchase, sale or grant of any right (including
without limitation any put or call option) with respect to the Common Stock of
Genaissance or with respect to any security (other than a broad-based market
basket or index) that includes, relates to or derives any significant part of
its value from the Common Stock of Genaissance.

 

5.                                      COVENANTS AND AGREEMENTS OF THE BORROWER.

 

5.1                               Reservation
of Stock.  Genaissance shall at all times,
while the Warrants are exercisable, reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
providing for the exercise of the Warrants, such number of shares of Common
Stock as shall from time to time equal the number of shares sufficient to
permit the full exercise of the Warrants in accordance with their terms without
regard to any exercise or conversion limitations therein.

 

5.2                               Inspection.  For as long as the Notes are outstanding,
each of the Co-Borrowers shall, and shall cause each of its Subsidiaries to,
permit the Majority Purchasers, through their representatives and agents, to
inspect any of such Co-Borrower’s or such Subsidiary’s properties, licenses,
corporate books and financial records, to examine and make copies of the books
of accounts and other financial records of such Co-Borrower and each such
Subsidiary and to discuss the affairs, finances and accounts of the Co-Borrower
and each of its Subsidiaries with, and to be advised as to the same by, their
respective officers and accountants at such reasonable times and intervals on
reasonable advance written notice to such Co-Borrower; provided that such
inspections shall not occur more than once per calendar year unless an Event of
Default shall have occurred and be continuing; provided, however, that such
Co-Borrower shall not disclose material nonpublic information to the Majority
Purchasers, through their representatives and agents, unless prior to
disclosure of such information such Co-Borrower identifies such information as
being material nonpublic information and provides the applicable
representatives and agents of the Majority Purchasers with the opportunity to
accept or refuse to accept such material nonpublic information and the Majority
Purchasers and their applicable representatives shall enter into an appropriate
confidentiality agreement with such Co-Borrower with respect thereto.

 

5.3                               Reports.  For as long as the Notes are outstanding,
each of the Co-Borrowers will furnish to the Purchasers such information
relating to such Co-Borrower and its Subsidiaries as from time to time may
reasonably be requested by the Majority Purchasers; provided, however, that
such Co-Borrower shall not disclose material nonpublic information to the
Majority Purchasers, or to advisors to or representatives of the Majority
Purchasers, unless

 

27

 

prior to
disclosure of such information such Co-Borrower identifies such information as
being material nonpublic information and provides the Majority Purchasers, such
advisors and representatives with the opportunity to accept or refuse to accept
such material nonpublic information for review and any Majority Purchaser
wishing to obtain such information shall enter into an appropriate
confidentiality agreement with such Co-Borrower with respect thereto.

 

5.4                               Board Observer Rights.  For so long as the Notes are outstanding,
Genaissance shall (i) give the Majority Purchasers written notice of each
meeting of Genaissance’s Board of Directors and each committee thereof at least
at the same time and in the same manner as notice is given to the directors,
and Genaissance shall permit one representative of the Majority Purchasers to
attend as an observer all meetings of Genaissance’s Board of Directors and all
committees thereof; provided that in the case of telephonic meetings conducted
in accordance with Genaissance’s bylaws and applicable law, the Majority
Purchasers’ representative shall be given the opportunity to listen to such
telephonic meetings and (ii) cause its Board of Directors to hold meetings at
least quarterly.  The Majority Purchasers’
representative shall be entitled to receive all written materials and other
information (including without limitation copies of meeting minutes) given to
directors in connection with such meetings at the same time such materials and
information are given to the directors. 
If Genaissance proposes to take any action by written action in lieu of
a meeting of its Board of Directors or of any committee thereof, Genaissance
shall give written notice thereof to the Majority Purchasers’ representative
and each of Genaissance’s directors prior to the effective date of such written
action describing in reasonable detail the nature and substance of such
action.  The Co-Borrowers shall jointly
and severally pay the reasonable and documented out-of-pocket expenses of the
Majority Purchasers’ representative incurred in connection with attending such
board and committee meetings up to an aggregate of $5,000 per calendar
year.  Genaissance shall cause each of
its Subsidiaries to provide to the Majority Purchasers the same rights with
respect to such Subsidiary (including without limitation relating to notice of
and attendance at meeting of the board of directors of such Subsidiary) as
provided by Genaissance to the Majority Purchasers hereunder.  Notwithstanding the foregoing or anything
contained herein to the contrary, the Majority Purchasers’ representative may
be excluded from access to any material or meeting or portion thereof if
Genaissance’s Board of Directors or the board of directors of any subsidiary of
Genaissance (or, in each case, any committee thereof) determines in good faith
that such exclusion is reasonably necessary to preserve Genaissance’s
attorney-client privilege or is required in order to comply with applicable
securities laws, including Regulation FD. 
Notwithstanding anything herein
or in the other Transaction Documents to the contrary, Genaissance shall not
provide any materials (except for the notices required under this Section 5.4,
which notices to the Majority
Purchasers shall have any material non-public information contained therein
redacted by Genaissance prior to delivery to the Majority Purchasers) under this Section 5.4 to
the Majority Purchasers unless
the Majority Purchasers shall
have either (x) notified Genaissance in writing of its desire to exercise its
observer rights hereunder until further notice by the Majority Purchasers, or (y) specifically requested
such materials from Genaissance.

 

5.5                               Affirmative Covenants.  For so long as any amount due under the Notes
is outstanding, each of the Co-Borrowers hereby covenants and agrees as
follows:

 

28

 

(a)                                  Genaissance shall, and shall cause each
Subsidiary to, (i) conduct its operations in the ordinary course of
business, (ii) keep in full force and effect its corporate existence and all
material rights, franchises, intellectual property rights and goodwill
necessary to operate its businesses, and (iii) maintain all requisite authority
to conduct its business in those jurisdictions in which the failure to do so
would reasonably be expected to have a Material Adverse Effect.  Notwithstanding the foregoing, Genaissance
may engage in dispositions of the New Haven Business, the North Carolina
Business or Lark as and to the extent contemplated by Section 5.6(h);

 

(b)                                 Genaissance
shall and shall cause each Subsidiary to pay when due all taxes, assessments
and governmental charges and levies upon it or its income, profits or property,
except those that are being contested in good faith and with respect to which
adequate reserves have been set aside;

 

(c)                                  Genaissance
shall give notice to the Purchasers in writing within fifteen (15) days of
becoming actually aware of any litigation or proceedings threatened in writing
or any pending litigation and proceedings naming it or any of its Subsidiaries
or to which it or any of its Subsidiaries is or becomes a party involving a
claim against any of them that would reasonably be expected to result in a
Material Adverse Effect, stating the nature and status of such litigation or
proceedings, provided, however, except as provided under Section 5.4
above, that the Purchasers shall not be provided with material non-public
information, unless prior to disclosure of such material non-public information
Genaissance identifies such information as being material nonpublic information
and provides the Purchasers with the opportunity to accept or refuse to accept
such material nonpublic information and any Purchaser wishing to obtain such
information enters into an appropriate confidentiality agreement with
Genaissance with respect thereto;

 

(d)                                 Genaissance
shall and shall cause each Subsidiary to promptly notify the Purchasers in
writing of the occurrence of any Default or Event of Default under the Notes,
this Agreement or any other Transaction Document;

 

(e)                                  Genaissance
shall and shall cause each Subsidiary to comply with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
it may be subject except where the failure to so comply would not reasonably be
expected to have a Material Adverse Effect;

 

(f)                                    Genaissance
shall and shall cause each Subsidiary to use commercially reasonable efforts to
do all things necessary to maintain, preserve, protect and keep its properties
in good repair, working order and condition and use commercially reasonable
efforts to make all necessary and proper repairs, renewals and replacements so
that its business carried on in connection therewith may be conducted in the
manner as currently conducted;

 

(g)                                 Genaissance
shall promptly notify the Purchasers in writing of any change in the business
or the operations of Genaissance or any of its Subsidiaries which would
reasonably be expected to have a Material Adverse Effect; and

 

29

 

(h)                                 To
the extent Genaissance is not subject to the reporting requirements of the
Exchange Act, Genaissance shall inform the Purchasers in writing within three
Business Days of the following material developments: (i) entry by Genaissance
or any Subsidiary into material agreements or into any material amendment,
modification or supplement to any material agreement; (ii) any termination of
any material agreement of Genaissance or any Subsidiary; (iii) any termination
or material adverse change in Genaissance’s relationships with its key
customers and suppliers; (iv) any material change in the compensation payable
to Genaissance’s Key Employees; and (v) a sale, lease or transfer of any
material portion of the assets of Genaissance or any Subsidiary.

 

5.6                               Negative
Covenants.  For so long as any amount
due under the Notes is outstanding and until payment in full in cash of all
amounts payable by the Co-Borrowers thereunder, each of the Co-Borrowers shall
not:

 

(a)                                  take
or omit to be taken any action, or permit any of its Subsidiaries to take or to
omit to take any action, which would reasonably be expected to result in a
Material Adverse Effect;

 

(b)                                 and
shall cause its Subsidiaries not to (i) incur or permit to exist any
Indebtedness other than Permitted Indebtedness and (ii) pay any interest on any
Indebtedness (other than with respect to Permitted Indebtedness);

 

(c)                                  and
shall cause its Subsidiaries not to create, incur, assume or suffer to exist
any Lien upon any of their respective properties, whether now owned or
hereafter acquired other than Permitted Liens;

 

(d)                                 and
shall cause its Subsidiaries not to, directly or indirectly, enter into or
permit to exist any transaction or series of related transactions (including,
without limitation, the purchase, sale, lease or exchange of any property or
the rendering of any service) with, or for the benefit of, any of their
respective Affiliates, except for any such transactions with any of their
respective Affiliates which are entered into in the ordinary course of business
consistent with past practice and are on arm’s length terms, in each case,
other than, if no Event of Default shall then exist, the declaration or payment
of dividends on Genaissance’s Series A Preferred Stock in accordance with the
terms of Genaissance’s Series A Preferred Stock;

 

(e)                                  and
except with respect to equitable adjustments with respect to Genaissance’s
Capital Stock provided for in their governing instruments, as in effect on the
date hereof, shall cause its Subsidiaries not to, directly or indirectly,
declare or pay any dividends or make any other distributions on account of any
shares of any class of its Capital Stock now or hereafter outstanding (other
than, if no Event of Default shall then exist, the declaration or payment of
dividends on Genaissance’s Series A Preferred Stock in accordance with the
terms of Genaissance’s Series A Preferred Stock), or set aside or otherwise
deposit or invest any sums for such purpose;

 

(f)                                    and
shall cause its Subsidiaries not to, directly or indirectly, redeem, retire,
defease, purchase or otherwise acquire any shares of any class of its Capital
Stock (or set aside or otherwise deposit or invest any sums for such purpose)
for any consideration or apply or

 

30

 

set apart any sum, or make any other distribution (by reduction of
capital or otherwise) in respect of any such shares; provided, that Genaissance
may repurchase Capital Stock from a former employee in connection with the
termination or other departure of such employee provided that (A) such repurchase is at cost and is made
pursuant to a plan approved or adopted by a majority of the Board of Directors
of Genaissance, and (B) no such payment may be made if a Default or Event of
Default has occurred and is continuing;

 

(g)                                 authorize,
create, designate, issue or sell any (A) class or series of Capital Stock
(including shares of treasury stock), or (B) rights, options, warrants or other
securities convertible into or exercisable or exchangeable for Capital Stock,
which, in the case of each of clauses (A) and (B), such Capital Stock matures
or is redeemable prior to the maturity date of the Notes (and no such payment
upon maturity or redemption of such Capital Stock shall be paid until the Notes
have been paid in full in cash);

 

(h)                                 effect
any Change of Control of Genaissance or any Subsidiary; provided, however,
Genaissance may sell or otherwise dispose of its North Carolina Business, New
Haven Business or Lark if all of the following conditions are met to the extent
applicable: (i) in all cases, written notice specifying the material terms and conditions
of the subject transaction shall be provided to the Purchasers at least five
(5) Business Days before the execution of a definitive agreement therefore;
(ii) in all cases, (x) the consideration from such sale or disposition consists
only of cash and/or shares of Capital Stock, or (y) the Majority Purchasers
shall have consented thereto in writing; and (iii) in the case of a sale in
which some or all of the consideration consists of non-cash proceeds
(including, without limitation, Capital Stock) (assuming, in the case of
non-cash proceeds other than Capital Stock, the Majority Purchasers have
consented thereto), (x) Genaissance uses its commercially reasonable efforts to
liquidate any such non-cash proceeds to the extent necessary to fund repayment of
the Notes under Section 2.5(b), and (y) the Purchasers shall have a duly
perfected, valid, binding and enforceable Lien in all such non-cash proceeds
pursuant to the Security Documents (including without limitation Section 4.10(b)
of the Security Agreements described in clause (ii) of the definition thereof);
and (iv) in the case of any Capital Stock consideration (in addition to clause
(iii) immediately preceding), (x) such Capital Stock is then registered for
resale under the Exchange Act or is subject to registration rights
substantially as favorable to Genaissance as the registration rights provided
to the Purchasers in the Registration Rights Agreement, and (y) the average
daily trading volume of the issuer of such Capital Stock exceeds $1,000,000 based
upon the volume weighted average price measured over the 60 consecutive
calendar days immediately preceding execution of a definitive agreement
governing such sale or disposition.  For
purposes of clarification, any sale or other disposition of the North Carolina
Business, the New Haven Business or Lark not permitted by the immediately
preceding sentence shall require the Majority Purchasers’ prior written
consent, which may be withheld in their reasonable discretion;

 

(i)                                     and
shall cause its Subsidiaries not, to make or own any Investment in any Person,
including without limitation any joint venture, other than:

 

(A)                              Permitted
Investments;

 

(B)                                except
as otherwise prohibited in Section 5.6(p), operating deposit accounts with
banks;

 

31

 

(C)                                Hedging
Agreements entered into in the ordinary course of Genaissance’s financial
planning and not for speculative purposes; and

 

(D)                               any
cash advance or capital contribution between Genaissance and Lark; provided,
that, the Purchasers have a first priority, security interest in (x) any note,
instrument or security evidencing such advance or capital contribution and (y)
except as otherwise permitted under Section 5.6(p), any such cash advance
or capital contribution;

 

(j)                                     and
shall cause its Subsidiaries not to cancel any liability or debt owed to it,
except for consideration equal to or exceeding the outstanding balance of such
liability or debt, and in any event, in the ordinary course of business;

 

(k)                                  and
shall cause its Subsidiaries not to liquidate or dissolve, except in connection
with a transaction in which all of such Subsidiary’s assets are transferred to
Genaissance;

 

(l)                                     alter
or amend the terms of Genaissance’s Series A Preferred Stock in a manner
adverse to the Purchasers;

 

(m)                               amend
its or any Subsidiary’s certificate of incorporation or by-laws in a manner
adverse to the Purchasers;

 

(n)                                 and
shall cause its Subsidiaries not to amend any agreement if the amendment is
reasonably likely to have a Material Adverse Effect;

 

(o)                                 permit
any Subsidiary to issue, sell or otherwise dispose of any shares of its Capital
Stock, or any warrants, options, conversion rights or other rights to subscribe
for, purchase or acquire such Capital Stock; or

 

(p)                                 open,
maintain, make deposits into or withdraw funds from for its own use, or
otherwise utilize, any depository accounts unless (x) such account is subject
to a Control Agreement, or (y) the balance of such account, together with all
other accounts maintained by the Co-Borrowers not subject to a Control
Agreement, at no time exceeds, from the Closing Date through July 15,
2005, $525,000, and after July 15, 2005, $500,000, and neither Co-Borrower
shall make any deposits to, or otherwise, cause the balance thereof to exceed,
from the Closing Date through July 15, 2005, $525,000, and after July 15,
2005, $500,000.

 

5.7                               Use
of Proceeds.  The proceeds from the
sale of the Notes shall be used to repay in full all indebtedness owed to
Comerica under the Comerica Facility and for general corporate purposes.

 

5.8                               SEC Filings.  Genaissance shall (i) maintain its status as
a reporting company under the Exchange Act, (ii) file with the Securities and
Exchange Commission in a timely manner all reports and other documents required
of Genaissance under the Exchange Act, and (iii) furnish to each Purchaser upon
request (A) a written statement by Genaissance that it has complied with the
reporting requirements of the Exchange Act, (B) a copy of Genaissance’s most
recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q, and (C)
such other

 

32

 

information as may
be reasonably requested in order to avail the Purchaser of any rule or
regulation of the Securities and Exchange Commission that permits the sale of
restricted securities without registration.

 

5.9                               Press Releases.  Any press release or other publicity
concerning the Transaction Documents or the transactions contemplated by the
Transaction Documents shall be submitted to the non-releasing party for comment
at least two (2) Business Days prior to issuance, unless the release is
required to be issued within a shorter period of time by law or pursuant to the
rules of a national securities exchange, in which case, as soon as practicable
prior to issuance.

 

5.10                        Consents.  Genaissance shall, and shall cause its
Subsidiaries to, use commercially reasonable efforts to obtain all
authorizations, consents, waivers, approvals or other actions necessary or
desirable to consummate the transactions contemplated hereby and to cause the
conditions to Genaissance’s obligation to close to be satisfied.

 

5.11                        No Conflicting Agreements.  Genaissance will not, and will cause its
Subsidiaries not to, take any action, enter into any agreement or make any
commitment that would be reasonably likely to conflict or interfere in any
material respect with the obligations to the Purchasers under the Transaction
Documents.

 

5.12                        Listing of Underlying Shares.  Genaissance hereby agrees, promptly following
the Closing of the transactions contemplated by the Transaction Documents, to
take such action to cause the Warrant Shares to be listed on the Nasdaq
National Market as promptly as possible but no later than the effective date of
the registration contemplated by the Registration Rights Agreement.  Genaissance further agrees that if
Genaissance applies to have its Common Stock or other securities traded on any
other principal stock exchange or market, it will include in such application
the Warrant Shares and will take such other action as is necessary to cause
such Common Stock to be so listed.

 

5.13                        Further
Assurances.  At the Purchasers’
reasonable request, Genaissance shall and shall cause each Subsidiary to, at
its own expense, make, execute, endorse, acknowledge, file and/or deliver to
the Purchasers from time to time such other documentation, consents,
authorizations and approvals in form and substance reasonably satisfactory to
the Purchasers as the Purchasers shall reasonably deem necessary or appropriate
to consummate the transactions contemplated in any of the Transaction Documents
and/or obtain the benefits of the Security Documents, subject to the terms and
conditions stated therein.

 

5.14                        Financial Statements, Etc.  To
the extent Genaissance is not subject to the reporting requirements of the
Exchange Act, Genaissance shall deliver to Purchasers the following financial
statements as and when indicated below:

 

(a)                                  Monthly
Financials.  As soon as available and
in any event within 30 days after the end of each of month, a consolidated (and
if Genaissance prepares or is required to do so, a consolidating statement of
income) statement of income of Genaissance and its Subsidiaries for such
monthly period and for the period from the beginning of the respective fiscal year
to the end of such period and the related consolidated balance sheet (or
consolidating balance sheet, as

 

33

 

the case may be)
of Genaissance and its Subsidiaries as at the end of such period, setting forth
in each case in comparative form the corresponding consolidated statements
of income and cash flows (or consolidating statements of income and cash flows,
as the case may be) for the corresponding period in the preceding fiscal year
to the extent such financial statements are available.

 

(b)                                 Quarterly
Financials.  As soon as available and
in any event within 45 days after the end of each of the first three (3)
quarterly fiscal periods of each fiscal year, a consolidated statement of
income and cash flows (and, if so prepared or required to be prepared, a
consolidating statement of income and cash flows) of Genaissance and its
Subsidiaries for such period and for the period from the beginning of the
respective fiscal year to the end of such period, and the related consolidated
balance sheet (and, if so prepared or required to be prepared, consolidating
balance sheet) of Genaissance and its Subsidiaries as at the end of such
period, setting forth in each case in comparative form the corresponding
consolidated statements of income and cash flows (or consolidating statements
of income and cash flows, as the case may be) for the corresponding period in
the preceding fiscal year to the extent such financial statements are
available.

 

(c)                                  Annual
Financials.  As soon as available and
in any event within 90 days after the end of each fiscal year, an audited
consolidated statement of income and cash flows (and if Genaissance so prepares
or is required to do so, audited consolidating statement of income and cash
flows) of Genaissance and its Subsidiaries for such year and the related
audited consolidated balance sheet (and, if prepared or required to be
prepared, the audited consolidating balance sheet) of Genaissance and its
Subsidiaries at the end of such year, setting forth in each case in comparative
form the corresponding information as of the end of and for the preceding
fiscal year to the extent such financial statements are available, accompanied
by an opinion, without a going concern or similar qualification or exception as
to scope or other material qualification or exception, thereon of Genaissance’s
auditors (which auditors shall be reasonably acceptable to the Purchasers),
which opinion shall state, in substance, that said audited financial statements
fairly present in all material respects the consolidated and consolidating
financial condition, as the case may be, results of operations and cash flows
of Genaissance and its Subsidiaries as at the end of, and for, such fiscal year
in conformity with GAAP.

 

5.15.                     Removal of
Legends.  Upon the earlier of (i)
registration for resale pursuant to the Registration Rights Agreement and
receipt by Genaissance of a Purchaser’s written confirmation that such Warrant
Shares will not be disposed of except in compliance with the prospectus
delivery requirements of the Securities Act or (ii) Rule 144(k) becoming
available, Genaissance shall, upon a Purchaser’s written request and its
delivery of a customary representation letter regarding non-affiliate status,
promptly cause certificates evidencing the Purchaser’s Warrant Shares, in the
case of clause (i) or (ii), or Warrants, in the case of clause (ii), to be
replaced with certificates which do not bear such restrictive legends.  When Genaissance is required to cause unlegended
certificates to replace previously issued legended certificates, if unlegended
certificates are not delivered to a Purchaser within three (3) Business Days of
submission by that Purchaser of legended certificate(s) to Genaissance’s
transfer agent together with a representation letter in customary form,
Genaissance shall be liable to the Purchaser for liquidated damages in an
amount equal to 1.0% of the principal amount of the Note purchased by

 

34

 

such Purchaser for
each thirty (30) day period (or portion thereof) beyond such three (3) Business
Days that the unlegended certificates have not been so delivered.

 

5.16.                     Senior
Note Status.  The Indebtedness
represented by the Notes shall be senior to any and all Indebtedness of
Genaissance or any Subsidiary, whether now existing or hereafter arising,
except for (i) the existing obligations to CII pursuant to the CII Financing
and (ii) any purchase money obligations and Capital Lease obligations not to
exceed the principal amount of $400,000 in the aggregate at any one time
outstanding.

 

5.17.                     Pre-emptive
Rights.

 

(a)                                  Except
as set forth in Section 5.17(c) hereof, if Genaissance proposes to issue
or sell any shares of its Capital Stock or rights, options or warrants to
purchase shares of its Capital Stock (collectively, the “Offered Securities”),
Genaissance shall first give to the Purchasers a notice setting forth in reasonable detail the price and other
terms on which such Offered Securities are proposed to be issued or sold, the
terms of such Offered Securities and the amount thereof proposed to be issued
or sold.  The Purchasers shall thereafter
have the pre-emptive right, upon written notice given to Genaissance no later than
twenty (20) days after receipt of Genaissance’s notice, to purchase the number
of such Offered Securities set forth in such Purchaser’s notice to Genaissance
(but in no event more than such Purchaser’s Proportionate Share thereof, as of
the date of Genaissance’s notice), for the price and other terms set forth in
Genaissance’s notice.  In the event any
of the Purchasers exercise their pre-emptive rights pursuant to this Section 5.17,
the closing of the purchase and sale of the Offered Securities to any such
Purchasers shall take place on such date, no less than ten (10) and no more
than thirty (30) days after the expiration of the 20-day period referred to
above, as Genaissance may determine; provided, that Genaissance shall give the
purchasing Purchasers prompt prior notice of such date.

 

(b)                                 From
the expiration of the 20-day period first referred to in Section 5.17(a)
and for a period of ninety (90) days thereafter, Genaissance may offer, issue
and sell to any Person, Offered Securities having the terms set forth in
Genaissance’s notice relating to such Offered Securities for a price and on
other terms no less favorable to Genaissance, and including no less cash, than
those set forth in such notice (without deduction for reasonable underwriting,
sales agency and similar fees payable in connection therewith); provided,
further, that Genaissance may not issue, grant or sell Offered Securities in an
amount greater than the amount set forth in such notice minus the amount
purchased or committed to be purchased by the Purchasers upon exercise of their
pre-emptive rights.

 

(c)                                  The
provisions of Section 5.17(a) shall not apply to (i) issuances to
employees, officers, directors and consultants of Genaissance of options to
acquire Common Stock, restricted stock or other stock awards pursuant to any
stock option or restricted stock plan currently existing or as amended or
approved hereafter by the Board of Directors of Genaissance; (ii) the issuance
of Common Stock upon exercise of any of the stock options specified in clause
(i) above; (iii) the issuance of any shares of Common Stock upon exercise of
the Warrants; (iv) the issuance of any shares of Common Stock or other
securities of Genaissance upon conversion or exchange of any of the outstanding
shares of Genaissance’s Series A Preferred Stock or of any securities issued
directly or indirectly upon conversion or

 

35

 

exchange thereof, in each case in accordance with Genaissance’s
certificate of incorporation; (v) the issuance of any shares of Common Stock upon
exercise of any warrants or options outstanding on the date hereof in
accordance with their respective terms; (vi) the issuance of any securities of
Genaissance in connection with (A) dividends or as a result of stock splits and
similar reclassifications, (B) acquisitions of any business, patents, patent
rights, intellectual property rights, products, product candidates or
technology (including by way of license), or (C) equipment lease financings;
(vii) the issuance of any securities of Genaissance in a public offering
pursuant to an effective registration statement; and (viii) any other issuance
of securities of Genaissance if and to the extent that the Majority Purchasers
have waived in writing the provisions of this Section 5.17 in respect
thereof.

 

6.                                      PURCHASER’S CLOSING CONDITIONS.

 

The obligation of the Purchasers to purchase and pay for the Notes and
the Warrants on the Closing Date, as provided in Section 2 hereof, shall
be subject to the performance by each of the Co-Borrowers of its agreements theretofore
to be performed hereunder and to the satisfaction, prior thereto or
concurrently therewith, of the following further conditions (which may be
waived in the sole discretion of the Purchasers):

 

6.1                               Representations
and Warranties.  The representations
and warranties of each Co-Borrower contained in this Agreement shall be true
and correct in all respects on the date hereof and on and as of the Closing
Date as though such warranties and representations were made at and as of such
date, except as otherwise affected by the transactions contemplated hereby.

 

6.2                               Compliance
with Agreement, No Default or Event of Default.  Each of the Co-Borrowers
shall have performed and complied with all agreements, covenants and conditions
contained in this Agreement required to be performed or complied with by it
prior to or on the Closing Date.  No
Default or Event of Default shall exist prior to or after giving effect to the
transactions contemplated on the Closing Date.

 

6.3                               Officers’
Certificate.  The Purchasers shall have received a certificate, dated the
Closing Date, signed by each of the President and the Chief Financial Officer
or Treasurer of each Co-Borrower, certifying that the conditions specified in
Sections 6.1, 6.2 and 6.4 hereof have been fulfilled.

 

6.4                               Injunction.  No judgment, writ, order, injunction,
award or decree of or by any court, or judge, justice or magistrate, including
any bankruptcy court or judge, or any order of or by any governmental
authority, shall have been issued, and no action or proceeding shall have been
instituted by any governmental authority, enjoining or preventing the
consummation of the transactions contemplated hereby or in the other
Transaction Documents.

 

6.5                               Counsel’s
Opinion.  The Purchasers shall have
received from Genaissance’s counsel, Wilmer Cutler Pickering Hale and Dorr LLP,
an opinion, dated the Closing Date, substantially in the form of Exhibit H hereto.

 

36

 

6.6                               Adverse
Development.  Since December 31,
2004, there shall have been no Material Adverse Effect.

 

6.7                               Litigation.  No
pending litigation shall exist against Genaissance or its Subsidiaries which,
if successful, would be reasonably likely to result in a Material Adverse
Effect or impair the ability of the Co-Borrowers to repay the Notes.

 

6.8                               Consents.  Each
of the Co-Borrowers shall have obtained any and all requisite consents and/or
waivers necessary to consummate the transactions contemplated hereunder and
under the other Transaction Documents.

 

6.9                               Other
Fees and Expenses.  Each of the Co-Borrowers shall have
paid to the Purchasers all other amounts payable hereunder, including the
payment to Lowenstein Sandler PC, counsel to Purchasers, of $20,000 as an
advance on the reasonable fees and expenses thereof.

 

6.10                        Insurance.  The Purchasers shall have received evidence
reasonably satisfactory to them that each of the Co-Borrowers has in effect
commercially reasonable insurance for a company of its size and in its
industry, and any non-renewal, cancellation or amendment riders to such
policies shall provide for ten (10) days advance written notice to the
Purchasers.

 

6.11                        Repayment of Comerica Facility and other
Borrowed Money Indebtedness. 
Genaissance shall have provided evidence reasonably satisfactory to the
Purchasers that (i) the Comerica Facility shall be repaid in full at Closing
with the proceeds of the Notes and (ii) all of Genaissance’s other Indebtedness
(other than Permitted Indebtedness, including, without limitation, the CII
Financing and obligations relating to up to the principal amount of $400,000 in
purchase money security interests and Capital Lease obligations) shall have
been repaid in full and all Liens securing such Indebtedness shall have been
terminated.

 

6.12                        Payoff Letter.  Genaissance shall have complied with the
terms of a payoff letter executed by Genaissance and Comerica Bank, such terms
to be reasonably satisfactory to the Purchasers.

 

6.13                        Security
Interests.  All action necessary or
determined by the Purchasers to be necessary to create and perfect the security
interests purported to be created by the Security Documents shall have been
taken or completed, including the filing of UCC financing statements, delivery
of instruments or securities and delivery of “control” agreements necessary to
establish control of deposit accounts and securities accounts as contemplated
by Articles 8 and 9 of the UCC.

 

6.14                        Secretary’s
Certificate.  The Purchasers shall have received a certificate, dated the
Closing Date, signed by the Secretary or Assistant Secretary, as the case may
be, of Genaissance and each Subsidiary certifying that (i) its certificate of
incorporation annexed thereto is in full force and effect without any
amendment, (ii) the by-laws annexed thereto are correct and complete as in
effect on the date thereof; and (iii) the resolutions annexed thereto

 

37

 

approving the
transactions contemplated herein have been duly approved by the Board of
Directors of such Persons and remain in full force and effect.

 

6.15                        Other Transaction Documents.  In addition to the delivery of the Notes and
the Warrants as contemplated by Section 2.4, Genaissance shall have
executed and delivered, or caused its Subsidiaries to have executed and
delivered, to the Purchasers the other Transaction Documents.

 

7.                                      BORROWER’S CLOSING CONDITIONS.  The obligation of the
Co-Borrowers to issue the Notes and the Warrants on the Closing Date, as
provided in Section 2 hereof, shall be subject to the satisfaction, prior
thereto or concurrently therewith, of the following further conditions (which
may be waived in the sole discretion of the Co-Borrowers):

 

7.1.                            Representations and Warranties.  The
representations and warranties of the Purchasers contained in this Agreement
shall be true and correct in all respects on the date hereof and on and as of
the Closing Date as though such warranties and representations were made at and
as of such date.

 

7.2.                            Compliance with Obligations.  The Purchasers shall have performed
and complied with all agreements, covenants and conditions contained in this
Agreement required to be performed or complied with by them prior to or on the
Closing Date.

 

7.3.                            Transaction Documents.  The Purchasers shall have executed
and delivered to Genaissance the other Transaction Documents to which they are
a party.

 

8.                                      DEFAULT AND REMEDIES.

 

8.1                               Events
of Defaults.  An “Event of Default” shall exist if one
or more of the following conditions or events shall occur and be continuing
(whether or not any of the following are within the control of either
Co-Borrower):

 

(i)                                     Genaissance
or any Subsidiary shall fail to pay when due (whether at stated maturity or at
a date fixed for optional or mandatory prepayment or otherwise) any payment of
principal, interest, any fee or any other amount on or under any of the Notes
or any other Transaction Document;

 

(ii)                                  Any
representation or warranty made by Genaissance or any Subsidiary in or in
connection with this Agreement or any other Transaction Document, or in any
certificate, financing statement or other document delivered in connection with
this Agreement or any other Transaction Document, shall prove to have been
false or misleading in any material respect when made or deemed made;

 

(iii)                               Genaissance
or any Subsidiary shall fail to observe or perform any covenant, condition or
agreement contained herein (other than any payment default which is governed by
clause (i) above) or in any of the other Transaction Documents and such failure
shall continue unremedied for a period of ten (10) days after Genaissance
received notice of such failure;

 

38

 

(iv)                              Genaissance
or any Subsidiary shall become unable, fail generally or admit in writing its
inability to pay its debts as they become due;

 

(v)                                 Genaissance
or any Subsidiary shall (a) voluntarily commence any proceeding or file
any petition seeking liquidation, reorganization or other relief under any
Federal, state or foreign bankruptcy, insolvency, receivership or similar law
now or hereafter in effect, (b) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition
described in clause (vi) of this Section, (c) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for Genaissance or any Subsidiary or for all or a substantial
part of their respective assets, (d) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (e) make
a general assignment for the benefit of creditors or (f) take any action
for the purpose of effecting any of the foregoing;

 

(vi)                              An
involuntary proceeding shall be commenced or an involuntary petition shall be
filed seeking (a) liquidation, reorganization or other relief in respect
of Genaissance or any Subsidiary or their respective debts, or of all or a
substantial part of their respective assets, under any Federal, state or
foreign bankruptcy, insolvency, receivership or similar law now or hereafter in
effect or (b) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for Genaissance or any Subsidiary
or for all or a substantial part of their respective assets, and, in any such
case, such proceeding or petition shall continue undismissed for 60 days
or an order or decree approving or ordering any of the foregoing shall be
entered;

 

(vii)                           Genaissance
or any Subsidiary shall fail to observe or perform any material covenant,
condition or agreement contained in any Material Agreement, which failure shall
continue unremedied for a period equal to the lesser of (a) 30 days and (b) any
applicable cure period set forth in such Material Agreement, if in any event
such unremedied failure would reasonably be expected to have a Material Adverse
Effect (provided, however, the foregoing shall not be deemed to limit in any
respect clause (x) below);

 

(viii)                        Any
Material Agreement shall be canceled or terminated, other than by Genaissance
or a Subsidiary acting with the consent of Genaissance in the ordinary course
of business, if such cancellation or termination would reasonably be expected
to have a Material Adverse Effect;

 

(ix)                                There
shall have occurred an acceleration of the stated maturity of any Indebtedness
of Genaissance and/or any Subsidiary of $300,000 or more in aggregate principal
amount (which acceleration is not rescinded, annulled or otherwise cured within
ten (10) days of receipt by Genaissance or any Subsidiary of notice of such
acceleration);

 

(x)                                   Any
Liens created by the Security Documents shall at any time not constitute a
valid and perfected first priority Lien (subject only to Liens described in
clause (h) of the definition of “Permitted Liens”) on the collateral intended
to be covered thereby (to the extent perfection by filing, registration,
recordation or possession is required herein or therein) in favor of the
Purchasers, free and clear of all other Liens (other than the Permitted Liens),
or the Security Documents shall for whatever reason be terminated or cease to
be in full

 

39

 

force and effect
(except in accordance with their terms), or the enforceability thereof or any
other Transaction Document shall be contested by or on behalf of Genaissance or
any Subsidiary;

 

(xi)                                One
or more judgments for the payment of money in an aggregate amount in excess of
$300,000 (net of any available insurance proceeds) shall be rendered against
Genaissance or any one of its Subsidiaries and the same shall remain
undischarged for a period of 30 consecutive days during which execution
shall not be effectively stayed, or any effective action shall be legally taken
by a judgment creditor to attach or levy upon any assets of Genaissance or any
Subsidiary to enforce any such judgment;

 

(xii)                             A
Change of Control shall have occurred (other than the sale of the North
Carolina Business, the New Haven Business or Lark as permitted by Section 5.6(h)
and in compliance with the mandatory prepayment provisions of this Agreement);
or

 

(xiii)                          Any
Material Adverse Effect shall have occurred.

 

8.2                               Remedies.

 

(a)                                  If
any Event of Default described in Section 8.1 shall have occurred, the
principal on and under the Notes then outstanding, together with accrued
interest thereon and all fees and other obligations of Genaissance accrued
hereunder and under the other Transaction Documents, shall automatically become
due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by Genaissance on its own behalf and on
behalf of its Subsidiaries.

 

(b)                                 No
course of dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder’s rights, powers or remedies.  No right, power or remedy conferred by this
Agreement or by any other Transaction Document upon the Purchasers shall be
exclusive of any other right, power or remedy referred to herein or therein or
now or hereafter available at law, in equity, by statute or otherwise.

 

9.                                      INDEMNIFICATION.

 

9.1                               Indemnification
of the Purchasers.  Each of the
Co-Borrowers shall jointly and severally indemnify and hold harmless the
Purchasers, the Collateral Agent and their respective officers, directors,
stockholders, partners, employees, agents, representatives and affiliates
(collectively, the “Indemnitees”) against any and all out-of-pocket losses,
damages, liabilities and expenses incurred in connection with any and all
breaches (except for gross negligence or willful of the Purchaser or the
Collateral Agent; for the avoidance of doubt, the indemnification obligations
of the Co-Borrowers contained in this Section 9.1 shall not limit the
Co-Borrowers right to pursue a cause of action against the Purchasers for any
breaches of the Purchasers’ representations, warranties or covenants contained
in the Transaction Documents), actions, suits, proceedings including
investigations and claims of any kind arising out of or in connection with the
execution or delivery of, any advance made under, the indebtedness evidenced
by, or any amendment, waiver or consent (whether or not such amendment, waiver
or consent becomes effective) relating to all or any of the Transaction
Documents, including

 

40

 

(without
limitation) all out-of-pocket costs and expenses (including, without
limitation, reasonable attorneys’ fees) (the “Indemnified Liabilities”) in
connection with:  (i) any breach or
Event of Default under or with respect to any Transaction Document,
(ii) enforcing, defending or declaring any rights or remedies under the
Transaction Documents; and (iii) responding to any subpoena or other legal
process or participating (whether voluntarily or involuntarily) in any legal or
other proceeding or investigation of any nature relating to the Transaction
Documents; and any insolvency or bankruptcy of Genaissance or any
Subsidiary.  Without limiting the
generality of the foregoing, Genaissance shall, upon demand, pay or reimburse
each indemnitee for all indemnified costs and expenses (including reasonable
attorneys’ fees and expenses) incurred thereby. 
Genaissance’s obligations under this Section 9.1 shall survive the
payment, transfer, conversion, cancellation, enforcement, amendment, waiver or
release of the Transaction Documents.

 

10.                               MISCELLANEOUS.

 

10.1                        Assignments;
Parties in Interest.  Each of the
Transaction Documents shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, administrators of the parties hereto and
shall inure to the benefit of and be enforceable by each person who shall be a
holder of the Notes from time to time. 
Neither Genaissance nor any Subsidiary may assign any of the Transaction
Documents or any of their rights, interests, or obligations thereunder; unless
simultaneously therewith, the Notes, together with all accrued and unpaid
interest thereon, are repaid in cash in full; provided, however: (i) no such
assignment shall relieve Genaissance or such Subsidiary of any matured or unmatured
obligations hereunder; and (ii) any such assignee assumes the obligations under
this Agreement in a writing reasonably satisfactory to the Purchasers.  The Purchasers may assign any of its rights
under any of the Transaction Documents or pledge or grant a security interest
in the Notes and its rights thereunder, except that the Purchasers shall not
assign any of their rights under any of the Transaction Documents to a
for-profit company engaged in the business of researching (including, without
limitation, contract research organizations), developing and/or commercializing
pharmaceutical or biotechnology products or services that are then competitive
with the products or services of either Co-Borrower; provided,
however, that such transfer complies with the requirements of
applicable securities laws and the transferee agrees to be bound by, and
entitled to the benefits of, such Transaction Document as an original party
thereto.

 

10.2                        Counterparts.  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.

 

10.3                        Titles
and Subtitles.  The titles and
subtitles used in the Transaction Documents are used for convenience only and
are not to be considered in construing or interpreting the Transaction
Documents.

 

10.4                        Notices.  Any notice, request, demand or other
communication required or permitted under the Transaction Documents shall be
given in writing and shall be deemed effectively given upon personal delivery
to the party to be notified, upon the date of transmittal of services via
telecopy to the party to whom notice is given, or on the third day after
deposit in the United States Post Office, by registered or certified mail, with
postage and fees prepaid.  All

 

41

 

communications to
either of the Co-Borrowers and to the Purchasers shall be sent at the
respective addresses set forth below or at such other addresses as such
Co-Borrower or the Purchasers may designate by ten days’ advance written notice
to the other parties hereto.

 

If to the Co-Borrowers:

 

Genaissance Pharmaceuticals, Inc.

Five Science Park

New
Haven, CT  06511

Attention:  Chief Financial Officer

Telephone:
(203) 773-1450

Telecopy:  (203) 786-3567

 

with a copy to:

 

Wilmer
Cutler Pickering Hale and Dorr LLP

60
State Street

Boston,
MA  02109

Attention:  Steven D. Singer, Esq.

Telephone:
(617) 526-6000

Telecopy:  (617) 526-5000

 

If to Purchasers:

 

Xmark Opportunity Fund, L.P.

Xmark Opportunity Fund, Ltd.

Xmark JV Investment Partners, LLC

301 Tresser Boulevard

Suite 1320

Stamford, CT 
06901

Attention: 
Mitchell D. Kaye

Telephone: 
(203) 653-2500

Telecopy:  (203)
653-2501

 

with a copy to:

 

Lowenstein Sandler PC

1251 Avenue of the Americas, 18th Floor

New York, NY 
10020

Attention: Steven E. Siesser, Esq.

Telephone: 
(973) 597-2500

Telecopy:  (973)
597-2400

 

10.5                        Expenses.  Each
of the Co-Borrowers agrees to pay or reimburse the Purchasers for:  (a) all reasonable and documented costs,
expenses and other charges in respect

 

42

 

of any UCC
searches performed by a service firm, to be chosen by Purchasers in its sole
discretion, in connection with the transactions contemplated by this Agreement
and other collateral searches and filings; (b) all reasonable and documented
costs and expenses of the Purchasers, including the reasonable fees and
disbursements of Lowenstein Sandler PC incurred in connection with the
negotiation, preparation, execution and delivery of this Agreement and the
other Transaction Documents (whether
or not consummated) and the other instruments and agreements entered into
pursuant hereto and thereto; (c) all reasonable and documented costs and
expenses of the Purchasers including the reasonable fees and disbursements of
one counsel for the Majority Purchasers, incurred in connection with the
negotiation, preparation, execution and delivery of any modification,
supplement or waiver of this Agreement and any other Transaction Documents
(whether or not consummated); provided,
however, that Genaissance shall not be required to pay or reimburse
the Purchasers for any expenses incurred by the Purchasers in connection with
an assignment by the Purchasers of its rights under any of the Transaction
Documents; (d) all reasonable and documented expenses of the Purchasers
including the fees and disbursements of one counsel for the Majority Purchasers
in connection with (i) any Default and any enforcement or collection
proceedings resulting therefrom, including, without limitation, all manner of
participation in or other involvement with (x) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, (y) judicial
or regulatory proceedings and (z) workout, restructuring or other negotiations
or proceedings (whether or not the workout, restructuring or transaction
contemplated thereby is consummated) and (ii) the enforcement of this Section 10.5;
and (e) all transfer, stamp, documentary or other similar taxes, assessments or
charges levied by any governmental or revenue authority in respect of this
Agreement or any of the other Transaction Documents or any other document
referred to herein or therein and all reasonable and documented costs,
expenses, taxes, assessments and other charges incurred in connection with any
filing, registration, recording or perfection of any security interest
contemplated by the Security Agreements or any other document referred to
therein.  Payments under this Section shall
be made promptly and in any case no later than thirty (30) days after written
demand therefor.

 

10.6                        Amendments
and Waivers.  The terms of this
Agreement may be amended, modified or waived only upon the written consent of
Genaissance and the Majority Purchasers.

 

10.7                        Entire
Agreement; Severability.  The
Transaction Documents contain the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all prior
agreements and understandings among the parties with respect to such subject
matter.  If any provision of any
Transaction Document is invalid, illegal or unenforceable, the balance of the
Transaction Document shall remain in effect, and if any provision is
inapplicable to any person or circumstance, it shall nevertheless remain applicable
to all other persons and circumstances.

 

10.8                        Survival.  Any term or condition set forth in this
Agreement which by its terms or context survives any Closing Date will survive
and be enforceable on and after the Closing Date.  In no way limiting the foregoing it is
expressly acknowledged that this Agreement is also intended as a loan agreement
governing certain aspects of the Notes and, therefore, all of the covenants,
representations, warranties, obligations and conditions undertaken hereunder shall

 

43

 

survive for as
long as any Note remains outstanding and, without limiting the survival of any
other Sections hereunder pursuant to its terms, in the case of Sections 10.1,
10.4, 10.5, 10.6, 10.7, 10.9, 10.10 as well as this Section 10.8, shall
survive indefinitely.

 

10.9                        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 laws of the State of New
York without regard to principles of conflicts of laws.  Each of the Co-Borrowers and the Purchasers
hereby (a) irrevocably consent and submit to the non-exclusive jurisdiction of
the state and federal courts located in New York in connection with any suit,
action or other proceeding directly or indirectly arising out of or relating to
this Agreement, and (b) irrevocably waive, to the fullest extent permitted by
law, any objection that any of them may now or hereafter have to the laying of
the venue of any such suit, action or proceeding in any such court or that any
such suit, action or proceeding which is brought in any such court has been
brought in an inconvenient forum. 
Nothing in this Agreement will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.

 

10.10                 WAIVER
OF JURY TRIAL.  EACH PARTY HERETO HEREBY
WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF
OR BASED UPON THIS AGREEMENT OR ANY CONTEMPLATED TRANSACTION, INCLUDING
CONTRACT, TORT, BREACH OF DUTY, AND ALL OTHER CLAIMS.  EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS
COUNSEL.

 

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK]

 

44

 

IN WITNESS WHEREOF, the undersigned
have hereunto set their hands to this Note and Warrant Purchase Agreement as of
the day and year first above written.

 

	
   

  	
  GENAISSANCE PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Ben D. Kaplan

  	
   

  
	
   

  	
  Name:

  	
  Ben
  D. Kaplan

  
	
   

  	
  Title:

  	
  Senior
  VP & CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LARK TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Ben D. Kaplan

  	
   

  
	
   

  	
  Name:

  	
  Ben
  D. Kaplan

  
	
   

  	
  Title:

  	
  Secretary

  
	
   

  	
   

  
	
   

  	
  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.

  
						

 

45

 

SCHEDULE I

 

	
  Name

  of Purchaser

  	
   

  	
  Principal Amount

  of Note

  	
   

  	
  Number of

  Warrants

  	
   

  	
  Aggregate

  Purchase Price

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Xmark Opportunity Fund, L.P.

  	
   

  	
  $

  	
  1,200,000

  	
   

  	
  533,333

  	
   

  	
  $

  	
  1,200,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Xmark Opportunity Fund, Ltd.

  	
   

  	
  $

  	
  1,800,000

  	
   

  	
  800,000

  	
   

  	
  $

  	
  1,800,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Xmark JV Investment Partners, LLC

  	
   

  	
  $

  	
  1,500,000

  	
   

  	
  666,667

  	
   

  	
  $

  	
  1,500,000

  	
   

  

 

46Exhibit
10.2

 

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.

 

SENIOR
SECURED NOTE

 

	
  [$4,500,000](1)

  	
  New
  York, New York

  
	
  Issue
  Date: April 21, 2005

  	
  Stated
  Maturity: April 21, 2007

  

 

FOR
VALUE RECEIVED, GENAISSANCE PHARMACEUTICALS, INC., a Delaware
corporation and LARK TECHNOLOGIES, INC., a Delaware corporation (each, a “Borrower”
and collectively, the “Co-Borrowers”), hereby jointly and severally
promise to pay to the order of [XMARK OPPORTUNITY FUND, L.P., a Delaware
limited partnership][XMARK OPPORTUNITY FUND, LTD., a Cayman Islands exempt
company][XMARK JV INVESTMENT PARTNERS, LLC, a Delaware limited liability
company] (together with its successors and assigns, the “Holder”), at
its office located at 301 Tresser Boulevard, Suite 1320, Stamford, Connecticut
06901, or at such other location as the Holder may otherwise direct in writing,
the principal amount of FOUR MILLION FIVE HUNDRED THOUSAND DOLLARS and 00/100
($4,500,000) in lawful money of the United States, together with interest
thereon calculated from the date hereof and payable in accordance with the
provisions of this promissory note (this “Note”).

 

Article 1.                                            Purchase
Agreement.  This Note is the Senior
Secured Note due 2007 of the Co-Borrowers referred to in that certain Note and
Warrant Purchase Agreement (the “Purchase Agreement”), of even date
herewith, by and between the Holder, [insert name of other Xmark purchasing
entities] and the Co-Borrowers.  This
Note is subject to the terms and conditions of the Purchase Agreement (which is
incorporated by reference herein), and capitalized terms not expressly defined
herein shall have the meaning ascribed to such terms in the Purchase Agreement.

 

Article 2.                                            Maturity.  The
entire unpaid principal amount of the Note and any accrued and unpaid interest
thereon shall be due and payable on the second anniversary of the Issue Date, i.e., April 21, 2007, unless such
amounts become due and payable earlier upon acceleration or otherwise in
accordance with the terms of the Purchase Agreement.

 

Article 3.                                            Secured Obligation. 
This Note is secured by the Collateral (as defined in the Security
Documents).  The Security Documents grant
the Holder certain rights with respect to the Collateral upon the occurrence of
an Event of Default.

 

Article 4.                                            Maximum Interest. 
Anything contained in this Note or the Purchase Agreement to the
contrary notwithstanding, the Holder does not intend to charge, and the
Co-Borrowers shall not be required to pay, interest or other charges in excess
of a maximum rate of

 

(1)  Aggregate principal amount to be allocated
between the three Xmark entities.

 

 

 

ten
percent (10%) per annum over the interest rate otherwise provided for in the
Purchase Agreement.  Any payments in
excess of such maximum rate shall be refunded to the Co-Borrowers or credited
against principal hereunder at the election of the Holder.

 

Article 5.                                            Waiver of Presentment, Demand and Dishonor.

 

5.1                                 Each
of the Co-Borrowers hereby waives presentment for payment, protest, demand,
notice of protest, notice of non-payment and diligence with respect to this
Note, and waives and renounces all rights to the benefit of any moratorium,
appraisement, exemption or homestead now provided or that hereafter may be
provided by any federal or applicable state statute, including but not limited
to exemptions provided by or allowed under the U.S. Bankruptcy Code (or similar
state laws affecting creditors’ rights and any successors thereto), both as to
itself and as to all of its property, whether real or personal, against the
enforcement and collection of the obligations evidenced by this Note and any
and all extensions, renewals and modifications hereof.

 

5.2                                 No
failure on the part of the Holder to exercise any right or remedy hereunder
with respect to one or more of the Co-Borrowers, whether before or after the
happening of a Default or an Event of Default, shall constitute a waiver of any
future Default or Event of Default or of any other Default or Event of
Default.  No failure to accelerate the
debt of the Co-Borrowers evidenced hereby by reason of a Default or an Event of
Default or indulgence granted from time to time shall be construed to be a
waiver of the right to insist upon prompt payment thereafter; or a waiver of
such right of acceleration or any other right, or be construed so as to
preclude the exercise of any right the Holder may have, whether by the laws of
the state governing this Note, by agreement or otherwise; and each of the
Co-Borrowers hereby expressly waives the benefit of any statute or rule of law
or equity that would produce a result contrary to or in conflict with the
foregoing.

 

Article 6.                                            Amendment; Waiver. 
Subject to the terms of the Purchase Agreement, no modification,
alteration, waiver or change of any of the provisions hereof shall be effective
unless in writing and signed by the Co-Borrowers and the Holder and, then, only
to the extent set forth in such writing.

 

Article 7.                                            Governing Law; Consent to Jurisdiction.  This Note shall be
governed by, and construed in accordance with, the internal laws of the State
of New York, without reference to the choice of law principles thereof.  Each of the Co-Borrowers and, by accepting
this Note, the Holder hereby (a) irrevocably consents and submits to the
non-exclusive jurisdiction of the state and federal courts located in the State
of New York in connection with any suit, action or other proceeding directly or
indirectly arising out of or relating to this Note, and (b) irrevocably waives,
to the fullest extent permitted by law, any objection that it may now or hereafter
have to the laying of the venue of any such suit, action or proceeding in any
such court or that any such suit, action or proceeding which is brought in any
such court has been brought in an inconvenient forum.

 

Article 8.                                            No Jury
Trial.  Each of the Co-Borrowers
acknowledges and agrees that any controversy which may arise under this Note is
likely to involve complicated and difficult issues.  ACCORDINGLY,
EACH OF THE CO-BORROWERS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
IRREVOCABLY AND

 

2

 

UNCONDITIONALLY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS NOTE.
 Each of the Co-Borrowers certifies and
acknowledges that (i) it has not represented, expressly or otherwise, that it
would not, in the event of litigation, seek to enforce the foregoing waiver,
(ii) it has considered the implications of this waiver, and (iii) the Holder
has been induced to accept this Note by, among other things, the waivers and
certifications in this Article 8.

 

Article 9.                                            Assignment. 
This Note shall be binding upon each of the Co-Borrowers, its successors
and its assigns, and shall inure to the benefit of Holder, its successors and
its assigns.

 

Article 10.                                     Joint and Several. 
Each of the Co-Borrowers hereby agrees that the obligations of the
Co-Borrowers hereunder are joint and several as between them and their
respective successors and assigns.

 

[Signature Page Follows.]

 

3

 

IN WITNESS WHEREOF, each of the Co-Borrowers
has executed and delivered this Senior Secured Note as of the date first set
forth above.

 

 

	
   

  	
  GENAISSANCE PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LARK TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

[Signature Page to Senior
Secured Note]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00083-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00083-of-00352.parquet"}]]