Document:

Exhibit 10.1

 

EXECUTION COPY

 

SERIES A PREFERRED STOCK PURCHASE AGREEMENT

 

Dated as of October 29, 2003

 

by and between

 

GENAISSANCE PHARMACEUTICALS, INC.

 

and

 

RAM TRADING, LTD.

 

 

TABLE OF CONTENTS

 

	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE I  DEFINITIONS AND INTERPRETATION

  	
  1

  
	
   

  	
   

  
	
  1.1. 
  Definitions

  	
  1

  
	
  1.2. 
  Interpretation

  	
  6

  
	
  1.3. 
  Accounting Principles

  	
  7

  
	
   

  	
   

  
	
  ARTICLE II  PURCHASE AND SALE OF SERIES A PREFERRED
  SHARES; WARRANT

  	
  7

  
	
   

  	
   

  
	
  2.1. 
  Authorization of the Series A Preferred Shares; Filing of Certificate
  of Designation

  	
  7

  
	
  2.2. 
  Purchase and Sale of the Initial Series A Preferred Shares; Delivery
  of Initial Series A Preferred Shares

  	
  7

  
	
  2.3.  Warrant

  	
  8

  
	
  2.4.  Closing

  	
  8

  
	
   

  	
   

  
	
  ARTICLE III  CONDITIONS OF THE INVESTOR’S OBLIGATIONS
  AT THE CLOSING

  	
  8

  
	
   

  	
   

  
	
  3.1. 
  Representations and Warranties

  	
  8

  
	
  3.2. 
  Performance

  	
  8

  
	
  3.3. 
  Governmental Authority

  	
  8

  
	
  3.4. 
  Consents

  	
  8

  
	
  3.5. 
  Issuance Permitted by Requirements of Law

  	
  9

  
	
  3.6. 
  Closing Deliveries

  	
  9

  
	
  3.7.  Waiver

  	
  10

  
	
   

  	
   

  
	
  ARTICLE IV  CONDITIONS OF THE COMPANY’S OBLIGATIONS AT
  THE CLOSING

  	
  10

  
	
   

  	
   

  
	
  4.1. 
  Representations and Warranties

  	
  10

  
	
  4.2. 
  Performance

  	
  10

  
	
  4.3. 
  Registration Rights Agreement

  	
  10

  
	
  4.4.  Payment
  of Purchase Price

  	
  10

  
	
  4.5. 
  Governmental Authority

  	
  10

  
	
  4.6. 
  Consents

  	
  10

  
	
  4.7. 
  Issuance Permitted by Requirements of Law

  	
  10

  
	
  4.8.  Waiver

  	
  11

  
	
   

  	
   

  
	
  ARTICLE V  ADDITIONAL AGREEMENTS

  	
  11

  
	
   

  	
   

  
	
  5.1. 
  Compliance with Agreements

  	
  11

  
	
  5.2. 
  Reporting Status; Current Public Information

  	
  11

  
	
  5.3. 
  Reservation of Common Stock

  	
  11

  
	
  5.4.  Listing

  	
  11

  
	
  5.5. 
  Pre-emptive Rights

  	
  12

  
	
  5.6. 
  Filing of Form 8-K

  	
  13

  
	
  5.7.  Press
  Release; Use of Party’s Name

  	
  13

  

 

i

 

	
  5.8. 
  Expenses

  	
  13

  
	
  5.9. 
  Use of Proceeds

  	
  13

  
	
  5.10.  Short
  Sales

  	
  13

  
	
  5.11.  Standstill

  	
  13

  
	
  5.12.  Non-Public Information.

  	
  14

  
	
  5.13.  Transfer Restrictions.

  	
  14

  
	
   

  	
   

  
	
  ARTICLE VI  TRANSFER OF RESTRICTED SECURITIES

  	
  15

  
	
   

  	
   

  
	
  6.1.  Legend

  	
  15

  
	
  6.2. 
  Legend Removal

  	
  15

  
	
   

  	
   

  
	
  ARTICLE VII  REPRESENTATIONS AND WARRANTIES OF THE
  COMPANY

  	
  15

  
	
   

  	
   

  
	
  7.1. 
  Organization, Qualifications and Corporate Power

  	
  16

  
	
  7.2. 
  Authorization; No Conflicts

  	
  16

  
	
  7.3. 
  Subsidiaries and Investments

  	
  17

  
	
  7.4. 
  Authorized Capital Stock

  	
  17

  
	
  7.5. 
  SEC Documents

  	
  18

  
	
  7.6.  NASDAQ

  	
  19

  
	
  7.7. 
  Financial Statements

  	
  19

  
	
  7.8.  No
  Material Adverse Change

  	
  19

  
	
  7.9.  Contracts

  	
  19

  
	
  7.10. 
  Tax Matters

  	
  19

  
	
  7.11. 
  Intellectual Property Rights

  	
  19

  
	
  7.12. 
  Possession of Licenses and Permits

  	
  20

  
	
  7.13. 
  Compliance with Laws; Litigation.

  	
  20

  
	
  7.14. 
  Governmental Approvals; No Registration

  	
  20

  
	
  7.15. 
  Investment Company

  	
  21

  
	
  7.16.  Employees

  	
  21

  
	
  7.17. 
  Regulatory Matters

  	
  21

  
	
  7.18.  No
  Manipulation of Stock

  	
  21

  
	
  7.19. 
  Brokers

  	
  21

  
	
  7.20.  No
  General Solicitation

  	
  21

  
	
   

  	
   

  
	
  ARTICLE VIII  REPRESENTATIONS AND WARRANTIES OF THE
  INVESTOR

  	
  21

  
	
   

  	
   

  
	
  8.1. 
  Authorization

  	
  22

  
	
  8.2.  Brokers

  	
  22

  
	
  8.3. 
  Investment Representations.

  	
  22

  
	
  8.4.  Company
  Stock Ownership

  	
  23

  
	
   

  	
   

  
	
  ARTICLE IX  MISCELLANEOUS

  	
  23

  
	
   

  	
   

  
	
  9.1. 
  Survival of Representations and Warranties

  	
  23

  
	
  9.2. 
  Amendments and Waivers

  	
  23

  
	
  9.3. 
  Successors and Assigns

  	
  23

  
	
  9.4. 
  Remedies

  	
  23

  

 

ii

 

	
  9.5. 
  Indemnification

  	
  23

  
	
  9.6.  Severability

  	
  24

  
	
  9.7.  Notices

  	
  24

  
	
  9.8. 
  Governing Law

  	
  25

  
	
  9.9.  Submission to Jurisdiction; Waiver of Jury Trial

  	
  25

  
	
  9.10. 
  Attorneys’ Fees

  	
  25

  
	
  9.11. 
  Execution in Counterparts

  	
  26

  
	
  9.12. 
  Entire Agreement

  	
  26

  

 

iii

 

	
  EXHIBITS

  
	
   

  
	
  Exhibit A

  	
  Certificate of Designation

  
	
  Exhibit B

  	
  Form of Warrant

  
	
  Exhibit C

  	
  Form of Registration Rights Agreement

  
	
  Exhibit D

  	
  Form of Legal Opinion of Counsel to the Company

  
	
   

  
	
  DISCLOSURE SCHEDULE

  

 

iv

 

SERIES
A PREFERRED STOCK PURCHASE AGREEMENT

 

This SERIES A
PREFERRED STOCK PURCHASE AGREEMENT is made as of October 29,
2003 (this “Agreement”), by and between Genaissance Pharmaceuticals,
Inc., a Delaware corporation (the “Company”), and RAM Trading, Ltd., a
Cayman Islands exempted company (the “Investor”).

 

RECITALS

 

WHEREAS, the Company desires to issue and
sell to the Investor, and the Investor desires to purchase from the Company,
270,000 shares of the authorized and unissued shares of Series A Preferred
Stock, $0.001 par value of the Company (the “Series A Preferred Stock”),
which shares of Series A Preferred Stock are convertible into shares of Common
Stock, $0.001 par value of the Company (the “Common Stock”), with the
shares of Series A Preferred Stock and the shares of Common Stock into which
they are convertible to have the respective rights, preferences and privileges
specified in the Series A Preferred Stock Certificate of Designation (the “Certificate
of Designation”), a copy of which is attached as Exhibit A hereto,
and the Certificate of Incorporation of the Company, all on the terms and
subject to the conditions set forth herein;

 

WHEREAS, the Company desires to issue to
the Investor, and the Investor desires to receive from the Company, a Warrant,
in the form attached as Exhibit B hereto,
to purchase an additional 190,000 shares of Series A Preferred Stock on the
terms and subject to the conditions set forth therein; and

 

WHEREAS, the Investor has required, as a
condition to its willingness to enter into this Agreement, that the Company
enter into a Registration Rights Agreement in the form attached as Exhibit C
hereto.

 

NOW, THEREFORE, in consideration of the
foregoing and the mutual representations, warranties, covenants and agreements
contained herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Parties hereby agree as
follows:

 

ARTICLE I

 

DEFINITIONS AND
INTERPRETATION

 

1.1.                            Definitions. 
For the purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1.1:

 

“Affiliate” means,
with respect to any particular Person, any other Person that directly or
indirectly controls, is controlled by or is under common control with such
particular Person.  For the purpose of
this definition, “control” means the possession, directly or indirectly,
of the power to direct the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.

 

 

“Agreement” has
the meaning set forth in the first paragraph of this Agreement.

 

“Board of Directors”
means the Board of Directors of the Company.

 

“Business Day”
means any day except a Saturday, Sunday or other day on which banks in Chicago,
Illinois are authorized or obligated  by
law or executive order to close.

 

“By-laws” means
the By-laws of the Company, as they may be amended from time to time.

 

“Certificate of
Designation” has the meaning set forth in the first Recital above.

 

“Certificate of
Incorporation” means the Certificate of Incorporation of the Company, as it
may be amended from time to time.

 

“Closing” has the
meaning set forth in Section 2.4.

 

“Closing Date” has
the meaning set forth in Section 2.4.

 

“Common Stock” has
the meaning set forth in the first Recital above.

 

“Company” has the
meaning set forth in the first paragraph of this Agreement.

 

“Company Intellectual
Property” has the meaning set forth in Section 7.11.

 

“Contract” means
all contracts, agreements, commitments, understandings and arrangements,
whether written or oral.

 

“Conversion Common
Shares” means the shares of Common Stock issued or issuable upon conversion
of the Series A Preferred Shares.  For
purposes of this Agreement, any Person who holds Series A Preferred Shares (or
who has the right to acquire Series A Preferred Shares) shall be deemed to be
the holder of the Conversion Common Shares obtainable upon conversion of such
Series A Preferred Shares, regardless of any restriction or limitation on the
conversion of such Series A Preferred Shares, such Conversion Common Shares
shall be deemed to be in existence, and such Person shall be entitled to
exercise the rights of a holder of Conversion Common Shares hereunder.  As to any particular Conversion Common
Shares, such shares shall cease to be Conversion Common Shares when they have
been (a) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (b) distributed to the
public through a broker, dealer or market maker pursuant to Rule 144 under the
Securities Act (or any similar provision then in force), (c) otherwise disposed
of by the Investor, except to an Affiliate thereof, or (d) repurchased by the
Company.

 

“Court Order”
means any judgment, order, award or decree of any foreign, Federal, state,
local or other court or tribunal and any award in any arbitration proceeding.

 

“Disclosure Schedule”
means the Disclosure Schedule attached hereto, dated as of the date hereof,
delivered by the Company to the Investor in connection with this Agreement.

 

2

 

“Exchange Act”
means the Securities Exchange Act of 1934, as amended, or any similar Federal
law then in force, and the rules and regulations promulgated thereunder.

 

“Excluded Issuances”
has the meaning set forth in Section 5.5(d).

 

“GAAP” means
United States generally accepted accounting principles, consistently applied.

 

“Governmental
Authority” means any foreign, Federal, state, local or other government,
governmental, statutory or administrative authority or regulatory body
(including, without limitation, NASDAQ) or any court, tribunal or judicial or
arbitral body.

 

“Governmental Licenses”
has the meaning set forth in Section 7.12.

 

“Indemnified
Liabilities” has the meaning set forth in Section 9.5.

 

“Indemnitees” has
the meaning set forth in Section 9.5.

 

“Initial Series A
Preferred Shares” has the meaning set forth in Section 2.2.

 

“Intellectual Property
Rights” means all (i) patents, patent applications, patent disclosures and
inventions, (ii) trademarks, service marks, trade dress, trade names, URL’s,
logos and corporate names and registrations and applications for registration
thereof, together with all of the goodwill associated therewith, (iii)
copyrights (registered or unregistered) and copyrightable works and
registrations and applications for registration thereof, (iv) mask works and
registrations and applications for registration thereof, (v) computer software,
data, data bases and documentation thereof, (vi) trade secrets and other
confidential information (including ideas, formulas, compositions, inventions
(whether patentable or unpatentable and whether or not reduced to practice),
know-how, manufacturing and production processes and techniques, research and
development information, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works, financial and marketing plans and customer
and supplier lists and information), (vii) other intellectual property rights
and (viii) copies and tangible embodiments thereof (in whatever form or
medium).

 

“Investor” has the
meaning set forth in the first paragraph of this Agreement.

 

“Knowledge” means
the actual knowledge of Kevin Rakin, Gerald F. Vovis, Richard S. Judson or Ben
D. Kaplan.

 

“Lien” means any
mortgage, pledge, security interest, encumbrance, lien, claim or charge of any
kind.

 

“Market Price”
shall mean, with respect to one share of Common Stock and for any Business
Day:  (i) if the Common Stock is then
listed on a national securities exchange or is authorized for quotation on
NASDAQ and is designated as a National Market System security, the last sale
price of one share of Common Stock, regular way, on such day on the principal
stock exchange or market system on which such Common Stock is then listed or
authorized for quotation as set forth in the “Close” column of the “Historical
Quotations” table on Yahoo!

 

3

 

Finance for the Company’s
stock price (or, if Yahoo! Finance is no longer available, as set forth in the
Wall Street Journal), or, if no such sale takes place on such Business Day, the
last sale price for one share of Common Stock on the prior Business Day as
reported in such column or (ii) if the Common Stock is not then listed or
authorized for quotation on any national securities exchange or designated as a
National Market System security on NASDAQ but is traded over-the-counter, the
closing price for one share of Common Stock as reported on NASDAQ or the
Electronic Bulletin Board or in the National Daily Quotation Sheets, as
applicable.

 

“Material Adverse
Effect” means any one or more events, changes or effects that, individually
or in the aggregate, have, or are reasonably likely to have, a material adverse
effect on (i) the business, properties, assets, liabilities, financial
condition or results of operations of the Company or (ii) the Investor’s rights
under this Agreement, the Registration Rights Agreement, the Warrant or the
Certificate of Designation.

 

“NASDAQ” means The
Nasdaq Stock Market, Inc.

 

“Nasdaq National
Market” means the Nasdaq National Market of NASDAQ.

 

“Offer Period” has
the meaning set forth in Section 5.5(a).

 

“Offered Securities”
has the meaning set forth in Section 5.5(a).

 

“Party” means each
of the Company and the Investor.

 

“Permitted Liens”
means (i) liens with respect to Taxes not yet due and payable or which are
being contested in good faith by appropriate proceedings and for which
appropriate reserves have been established in accordance with GAAP, (ii)
mechanics’, materialmen’s or contractors’ liens or encumbrances or any similar
lien or restriction, (iii) security interests held by Comerica Incorporated
pursuant to a Loan and Security Agreement dated as of September 30, 2003
and Connecticut Innovations, Inc. pursuant to a Second Amended and Restated
Open-End Leasehold Mortgage, Security Agreement and Financing Statement
(Construction Mortgage) dated as of July 26, 2000 and (iv) easements, rights-of-way,
restrictions and other similar charges and encumbrances not interfering with
the ordinary conduct of the business of the Company.

 

“Person” means an
individual, a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or any other entity.

 

“Proposal Notice”
has the meaning set forth in Section 5.5(a).

 

“Purchase Price”
has the meaning set forth in Section 2.2.

 

“Registration Rights
Agreement” means the Registration Rights Agreement, dated as of the date
hereof, between the Company and the Investor, the form of which is attached
hereto as Exhibit C.

 

“Representatives”
has the meaning set forth in Section 5.12(a).

 

4

 

“Requirements of Law”
means any foreign, Federal, state and local laws, statutes, regulations, rules,
codes, ordinances, orders or requirements enacted, adopted, issued or
promulgated by any Governmental Authority (including those pertaining to electrical,
building, zoning, subdivision, land use, environmental and occupational safety
and health requirements) or common law.

 

“Restricted Securities”
means (i) the Series A Preferred Shares issued hereunder and (ii) the
Conversion Common Shares.  As to any
particular Restricted Securities, such securities shall cease to be Restricted
Securities when they have (a) been effectively registered under the Securities
Act, (b) been distributed to the public through a broker, dealer or market
maker pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act or become eligible for sale pursuant to Rule 144(k) (or any
similar provision then in force) under the Securities Act, or (c) been
otherwise transferred and new certificates for them not bearing the Securities
Act legend set forth in Section 6.1 have been delivered by the
Company in accordance with Section 6.2.  Whenever any particular securities cease to be Restricted
Securities, the holder thereof shall be entitled to receive from the Company,
without expense, new securities of like tenor not bearing a Securities Act
legend of the character set forth in Section 6.1.

 

“Securities Act”
means the Securities Act of 1933, as amended, or any similar Federal law then
in force, and the rules and regulations promulgated thereunder.

 

“SEC” means the
United States Securities and Exchange Commission, including any Governmental
Authority or agency succeeding to the functions thereof.

 

“SEC Documents”
has the meaning set forth in Section 7.5.

 

“Series A Preferred
Shares” has the meaning set forth in Section 2.3.

 

“Series A Preferred
Stock” has the meaning set forth in the first Recital above.

 

“Tax” (and, with
correlative meaning, “Taxes” and “Taxable”) means:

 

(i)  any Federal, state, local or foreign net
income, gross income, gross receipts, windfall profit, severance, property,
production, sales, use, license, excise, franchise, employment, payroll,
withholding, alternative or add-on minimum, ad valorem, value-added, transfer,
stamp, or environmental tax, or any other tax, custom, duty, governmental fee
or other assessment or charge in the nature of taxes of any kind whatsoever,
together with any interest or penalty, addition to tax or additional amount
imposed by any Governmental Authority; and

 

(ii)  any liability of the Company for the payment
of amounts with respect to payments of a type described in clause (i) as a
result of any obligation of the Company under any Tax sharing or indemnity
arrangement.

 

“Warrant”
means the Warrant, dated as of the date hereof, issued by the Company to the
Investor, the form of which is attached hereto as Exhibit
B.

 

“Warrant
Shares” has the meaning set forth in Section 2.3.

 

5

 

1.2.                            Interpretation.  (a) As used in
this Agreement, the Registration Rights Agreement and the Warrant, unless the
context clearly indicates otherwise:

 

(i)                                     words
used in the singular include the plural and words in the plural include the
singular;

 

(ii)                                  reference
to any Person includes such Person’s successors and assigns, but only if such
successors and assigns are permitted by this Agreement, the Registration Rights
Agreement or the Warrant, and reference to a Person in a particular capacity
excludes such Person in any other capacity;

 

(iii)                               reference to any gender
includes the other gender;

 

(iv)                              whenever
the words “include,” “includes” or “including” are used in this Agreement or
the Registration Rights Agreement, they shall be deemed to be followed by the
words “without limitation” or “but not limited to” or words of similar import;

 

(v)                                 reference
to any Article, Section, Exhibit or Schedule means such Article or
Section of, or such Exhibit or Schedule to, this Agreement, and
references in any Section or definition to any clause means such clause of
such Section or definition;

 

(vi)                              the
words “herein,” “hereunder,” “hereof,” “hereto” and words of similar import
shall be deemed references to this Agreement as a whole and not to any
particular Section or other provision hereof;

 

(vii)                           reference to any agreement,
instrument or other document means such agreement, instrument or other document
as amended, supplemented and modified from time to time to the extent permitted
by the provisions thereof and by this Agreement;

 

(viii)                        reference to any law (including
statutes and ordinances) means such law (including all rules and regulations
promulgated thereunder) as amended, modified, codified or reenacted, in whole
or in part, and in effect at the time of determining compliance or
applicability, and reference to any particular provision of any law shall be
interpreted to include any revision of or successor to that provision
regardless of how numbered or classified;

 

(ix)                                relative
to the determination of any period of time, “from” means “from and including,”
“to” means “to but excluding” and “through” means “through and including”;

 

(x)                                   in
the event of any conflict between the provisions of the body of this Agreement
and the Disclosure Schedule, the provisions of the body of this Agreement shall
control; and

 

(xi)                                the
titles to Articles and headings of Sections contained in this Agreement have
been inserted for convenience of reference only and shall not be deemed to be a
part of or to affect the meaning or interpretation of this Agreement.

 

6

 

(b)                                 This
Agreement, the Registration Rights Agreement and the Warrant were negotiated by
the Parties with the benefit of legal representation, and no rule of
construction or interpretation otherwise requiring this Agreement, the
Registration Rights Agreement or the Warrant to be construed or interpreted
against any Party shall apply to any construction or interpretation
hereof.  Subject to Section 9.6,
this Agreement shall be interpreted and construed to the maximum extent
possible so as to uphold the enforceability of each of the terms and provisions
hereof, it being understood and acknowledged that this Agreement was entered
into by the Parties after substantial negotiations and with full awareness by
the Parties of the terms and provisions hereof and the consequences thereof.

 

1.3.                            Accounting Principles.  The classification, character and amount of
all assets, liabilities, capital accounts and reserves and of all items of
income and expense to be determined, and any consolidation or other accounting
computation to be made, and the interpretation of any definition containing any
financial term, pursuant to this Agreement shall be determined and made in
accordance with GAAP, unless such principles are inconsistent with the express
requirements of this Agreement; provided, that, if because of a change
of GAAP after the date of this Agreement the Company would be required to alter
a previously utilized accounting principle, method or policy in order to remain
in compliance with GAAP, such determination shall continue to be made in
accordance with the Company’s previous accounting principles, methods and
policies.

 

ARTICLE II

 

PURCHASE AND SALE
OF SERIES A PREFERRED SHARES; WARRANT

 

2.1.                            Authorization of the Series A
Preferred Shares; Filing of Certificate of Designation.  Prior to or contemporaneously with the
Closing (as defined below), the Company shall (a) authorize the issuance and
sale to the Investor of up to 460,000 shares of Series A Preferred Stock, (b)
reserve for issuance a sufficient number of shares of Series A Preferred Stock
to permit the exercise in full of the Warrant, (c) reserve for issuance a
sufficient number of shares of Common Stock to permit conversion of all such
shares of Series A Preferred Stock and (d) file the Certificate of Designation
attached as Exhibit A hereto.

 

2.2.                            Purchase and Sale of the Initial
Series A Preferred Shares; Delivery of Initial Series A Preferred Shares.  At the Closing, subject to the terms and the
conditions set forth herein, including the representations and warranties set
forth herein and the closing documents delivered pursuant hereto, (a) the
Company shall issue, sell and deliver to the Investor, free and clear of all
Liens, and the Investor shall purchase from the Company at a purchase price of
$22.50 per share, 270,000 shares of Series A Preferred Stock (the “Initial Series A Preferred Shares”) against
delivery to the Company by the Investor of Six Million Seventy Five Thousand
Dollars ($6,075,000) (the “Purchase Price”) by wire transfer of
immediately available funds to an account specified by the Company and (b) the
Company shall issue and deliver to the Investor, free and clear of all Liens,
one or more stock certificates, duly executed by the Company and registered in
the Company’s stock ledger in the Investor’s or its nominee’s name, evidencing
the Initial Series A Preferred Shares

 

7

 

2.3.                            Warrant.  At the Closing, subject to the terms and the
conditions set forth herein, including the representations and warranties set
forth herein and the closing documents delivered pursuant hereto, the Company
shall issue to the Investor the Warrant to purchase, on the terms and
conditions set forth therein, an additional 190,000 shares of Series A
Preferred Stock (the “Warrant Shares” and, together with the Initial
Series A Preferred Shares, the “Series A Preferred Shares”).

 

2.4.                            Closing.  The closing of the purchase and sale of the
Initial Series A Preferred Shares and the issuance of the Warrant (the “Closing”)
shall take place at the offices of Sidley Austin Brown & Wood LLP, Bank One
Plaza, 10 South Dearborn Street, Chicago, Illinois 60603 at 10:00 a.m., local
time, on the date of this Agreement, or at such other place or time or on such
other date as shall be agreed to by the Company and the Investor.  The time and date on which the Initial
Closing is actually held are sometimes referred to herein as the “Closing
Date.”

 

ARTICLE III

 

CONDITIONS OF THE
INVESTOR’S OBLIGATIONS AT THE CLOSING

 

The obligation of the Investor to purchase the Initial
Series A Preferred Shares at the Closing is subject to the fulfillment to the
reasonable satisfaction of the Investor at or prior to the Closing of each of
the following conditions:

 

3.1.                            Representations and Warranties.  Each of the representations and warranties
of the Company contained in Article VII shall be true, correct and
complete on and as of the Closing Date as though then made (except for
representations and warranties that speak as of a specific date in which case
such representations or warranties only need be true and correct as of the
specified date).

 

3.2.                            Performance.  All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Company on
or prior to the Closing Date shall have been performed or complied with.

 

3.3.                            Governmental Authority.  On or prior to the Closing Date, any authorizations, consents,
approvals or permits of any Governmental Authority that are required by law in
connection with the lawful sale and issuance of the Series A Preferred Shares
or the consummation of the transactions contemplated by this Agreement, the
Registration Rights Agreement and the Warrant, shall have been duly obtained by
the Company, and shall be effective on and as of the Closing Date.

 

3.4.                            Consents.  On or prior to the Closing Date, the Company
shall have received and delivered to special counsel to the Investor, copies of
all consents and approvals of third parties required under all Contracts to
which the Company is a party in connection with the execution, delivery or
performance by the Company of this Agreement or any of the other agreements or
documents contemplated hereby (including any necessary waivers of any
preemptive rights, any rights of first refusal and any registration rights),
other than those set forth on Schedule 3.4
of the Disclosure Schedule and those which would not, individually or in
the aggregate, have a Material Adverse Effect.

 

8

 

3.5.                            Issuance Permitted by Requirements
of Law.  The issuance of the Series A Preferred
Shares to be issued by the Company hereunder at the Closing and the
consummation of the transactions contemplated hereby at the Closing (a) shall
not be prohibited by any Requirements of Law and (b) shall not subject the
Investor to any penalty under or pursuant to any Requirements of Law.

 

3.6.                            Closing Deliveries.  At the Closing, the Company shall have delivered to the Investor
all of the following:

 

(a)                                  Copy
of the Certificate of Incorporation, as amended by the Certificate of
Designation, certified as of a recent date by the Secretary of State of the
State of Delaware;

 

(b)                                 Certificate
of good standing of the Company issued as of a recent date by the Secretary of
State of the State of Delaware;

 

(c)                                  Certificate
of the Chief Executive Officer of the Company, dated the Closing Date, to the
effect that, to his knowledge after due inquiry, the conditions specified in Sections
3.1 through 3.5 have been satisfied fully;

 

(d)                                 One
or more stock certificates, duly executed by the Company and registered in the
Company’s stock ledger in the Investor’s or its nominee’s name, evidencing the
Initial Series A Preferred Shares;

 

(e)                                  Certificate
of the Secretary or an Assistant Secretary of the Company, dated the Closing
Date, in form and substance reasonably satisfactory to the Investor, as to (i)
no amendments to the Certificate of Incorporation since a specified date; (ii)
the By-laws; (iii) the resolutions duly adopted by the Board of Directors
authorizing and approving (including for purposes of §203 of the Delaware
General Corporation Law), as appropriate, the execution, delivery and
performance of this Agreement, the Registration Rights Agreement and the
Warrant by the Company and the transactions contemplated hereby and thereby,
including the issuance, sale and delivery of the Series A Preferred Shares and
the reservation for issuance of the Conversion Common Shares, and the filing of
the Certificate of Designation with the Secretary of State of the State of
Delaware; and (iv) the incumbency and signatures of the officers of the Company
authorized to execute and deliver this Agreement, the Registration Rights
Agreement, the Warrant and the Certificate of Designation;

 

(f)                                    Legal
opinion of Hale and Dorr LLP, special counsel for the Company, dated the
Closing Date, addressed to the Investor and in substantially the form attached
hereto as Exhibit D;

 

(g)                                 Registration
Rights Agreement, duly executed by the Company;

 

(h)                                 Warrant,
duly executed by the Company; and

 

(i)                                     Such
other documents, instruments, approvals or opinions relating to the
transactions contemplated by this Agreement as the Investor or its special
counsel may reasonably request.

 

9

 

3.7.                            Waiver.  Any condition specified in this Article III
may be waived if consented to by the Investor; provided, that no such
waiver shall be effective against the Investor unless it is set forth in a
writing duly executed by the Investor.

 

ARTICLE IV

 

CONDITIONS OF THE
COMPANY’S OBLIGATIONS AT THE CLOSING

 

The obligation of the Company to issue, sell and
deliver the Initial Series A Preferred Shares at the Closing is subject to the
fulfillment to the reasonable satisfaction of the Company at or prior to the
Closing of each of the following conditions:

 

4.1.                            Representations and Warranties.  Each of the representations and warranties
of the Investor contained in Article VIII shall be true, correct
and complete on and as of the Closing Date as though then made (except for
representations and warranties that speak as of a specific date in which case
such representations or warranties only need be true and correct as of the
specified date).

 

4.2.                            Performance.  All covenants, agreements and conditions contained in this
Agreement to be performed or complied with by the Investor on or prior to the
Closing Date shall have been performed or complied with.

 

4.3.                            Registration Rights Agreement.  At the Closing, the Investor shall have
executed and delivered the Registration Rights Agreement to the Company.

 

4.4.                            Payment of Purchase Price.  The Investor shall have delivered to the Company the Purchase
Price in accordance with Section 2.2.

 

4.5.                            Governmental Authority.  On or prior to the Closing Date, the
Company shall have received any authorizations, consents, approvals or permits
of any Governmental Authority that are required by law in connection with the
lawful sale and issuance of the Series A Preferred Shares or the consummation
of the transactions contemplated by this Agreement, the Registration Rights
Agreement and the Warrant.

 

4.6.                            Consents. 
Other than as set forth on Schedule 3.4 of the Disclosure
Schedule, on or prior to the Closing Date, the Company shall have received any
consents required under material Contracts to which the Company is a party in
connection with the execution, delivery or performance by the Company of this
Agreement or any of the other agreements or documents contemplated hereby
(including any necessary waivers of any preemptive rights, any rights of first
refusal and any registration rights), other than those that would not,
individually or in the aggregate, have a Material Adverse Effect.

 

4.7.                            Issuance Permitted by Requirements of Law.  The issuance of the Series A Preferred
Shares to be issued by the Company hereunder at the Closing and the
consummation of the transactions contemplated hereby at the Closing (a) shall
not be prohibited by any Requirements of Law and (b) shall not subject the
Company to any penalty under or pursuant to any Requirements of Law.

 

10

 

4.8.                            Waiver. 
Any condition specified in this Article IV may be waived if
consented to by the Company; provided, that, no such waiver shall be
effective against the Company unless it is set forth in a writing duly executed
by the Company.

 

ARTICLE V

 

ADDITIONAL
AGREEMENTS

 

5.1.                            Compliance with Agreements.  The Company shall perform and observe (a)
all of its obligations to each holder of the Series A Preferred Shares and all
of its obligations to each holder of the Conversion Common Shares set forth in
the Certificate of Incorporation (including the Certificate of Designation) and
the By-laws and (b) all of its obligations to each holder of Registrable
Securities (as defined in the Registration Rights Agreement) set forth in the
Registration Rights Agreement.  The
Company shall not hereafter enter into any agreement that violates, or prevents
the Company from performing its obligations under, this Agreement, the Certificate
of Designation or the Registration Rights Agreement.

 

5.2.                            Reporting Status; Current Public
Information.  The Company shall comply with all applicable
laws, rules and regulations of all Governmental Authorities, including the
rules and regulations under the Securities Act and the Exchange Act, and the
rules of any securities exchange upon which any shares of its capital stock are
listed and/or NASDAQ, except where the failure to do so would not have a
Material Adverse Effect.  The Company
shall use commercially reasonable efforts to maintain (a) its status as a
company with securities registered under Section 12 of the Exchange Act
and (b) the quotation of the Common Stock on the Nasdaq National Market.  The Company shall take such action and
provide such information regarding the Company as the Investor may reasonably
request to enable the Investor to sell Restricted Securities pursuant to
Rule 144 adopted by the SEC under the Securities Act (as such rule may be
amended from time to time) or any similar rule or regulation hereafter adopted
by the SEC.  Upon request, the Company
shall deliver to any holder of Restricted Securities a written statement as to
whether it has complied with such requirements.

 

5.3.                            Reservation of Common Stock.  The Company shall at all times reserve
and keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of issuance upon the conversion of the Series A
Preferred Shares, such number of shares of Common Stock as shall from time to time
be sufficient to effect the full conversion of all outstanding Series A
Preferred Shares, and if at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the full conversion of
all of the Series A Preferred Shares, the Company shall use its best efforts to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes.

 

5.4.                            Listing.  The Company shall promptly secure the
listing (or quotation) of all the Conversion Common Shares upon each national
securities exchange and automated quotation system upon which shares of Common
Stock are then listed (or quoted) and shall maintain, so long as any other
shares of Common Stock shall be so listed (or quoted), such listing (or
quotation) of all Conversion Common Shares.

 

11

 

5.5.                            Pre-emptive Rights.  (a) Except
for Excluded Issuances (as defined below in Section 5.5(d)), if the
Company issues any of its Common Stock, Series A Preferred or other equity
securities, debt securities containing equity features or other securities or
other rights convertible into or containing options or rights to acquire any
such debt or equity securities (“Offered Securities”), the Company shall
first offer, by written notice (a “Proposal Notice”), to sell to each
holder of Series A Preferred Shares and the holder of the Warrant, a portion of
such Offered Securities equal to the product of (i) the number of such Offered
Securities and (ii) the quotient determined by dividing (A) the number of
Conversion Common Shares held by such holder by (B) the number of shares
of Common Stock then outstanding (calculated assuming the conversion into
Common Stock of all Series A Preferred Shares outstanding immediately prior to
such proposed issuance and assuming the exercise of all securities then
exercisable into Common Stock and the conversion of all securities then
convertible into Common Stock).  The
Proposal Notice shall be delivered to each holder of Series A Preferred Shares
at least  twenty (20) days prior to the
proposed issuance and shall set forth in reasonable detail the Offered
Securities, the purchase price thereof, the payment terms and such holder’s
percentage allotment.  During such
10-day period following delivery of the Proposal Notice (the “Offer Period”),
each holder of Series A Preferred Shares shall be entitled to purchase its
portion of such Offered Securities at the most favorable price and on the most
favorable terms as such Offered Securities are to be offered to any other
Person.

 

(b)                                 In
order to exercise its purchase rights hereunder, each holder of Series A
Preferred Shares must deliver a written notice to the Company describing its
election hereunder within ten (10) days after receipt of the Proposal Notice
from the Company; provided, that any such
election may be subject to the consummation of the sale of the Offered
Securities and other rights described in the Proposal Notice on the terms set
forth therein.

 

(c)                                  To
the extent any of the Offered Securities are not acquired by any holder of
Series A Preferred Shares pursuant to Section 3.5(a), the Company
shall be entitled to sell such Offered Securities on terms and conditions no
more favorable to the purchasers thereof than those offered to the holders of
Series A Preferred Shares during the ninety (90) days following the expiration
of the Offer Period.  Any Offered
Securities so offered or sold by the Company to any Person after such 90-day
period must be reoffered to each holder of Series A Preferred Shares pursuant
to the terms of Section 3.5(a).

 

(d)                                 For
purposes of the foregoing, “Excluded Issuances” means (A) issuances to
employees, officers, directors and consultants of the Company of stock options,
restricted stock or other stock awards under any equity incentive or restricted
stock plan or plans currently existing or as amended or approved hereafter by
the Board of Directors, (B) the issuance of shares of Common Stock upon
exercise of the options referred to in clause (A) of this subsection in
accordance with their terms, (C) issuances of Common Stock or other equity
securities of the Company upon conversion or exchange of any Series A Preferred
Shares or of any securities issued directly or indirectly upon conversion or
exchange thereof, in each case in accordance with the Certificate of
Incorporation, (D) the issuance of shares of Common Stock pursuant to the
respective terms of warrants outstanding on the date hereof, (E) the issuance
of shares of Common Stock of the Company or any of its successors issued as
dividends or as a result of stock splits and similar reclassifications, (F) the
issuance of shares of Common Stock in connection with acquisitions or equipment
lease financings, (G) the issuance of shares of

 

12

 

Common Stock in a public
offering pursuant to an effective registration statement and (H) any other
issuance of Common Stock or other Company securities if and to the extent that
the holders of a majority of the outstanding Series A Preferred Shares have
waived in writing the provisions of this Section 5.5 in respect
thereof.

 

5.6.                            Filing of Form 8-K.  Following the Closing Date, the Company shall file a current
report on Form 8-K with the SEC concerning the transactions contemplated hereby
in accordance with the rules and regulations of the SEC.

 

5.7.                            Press Release; Use of Party’s Name.  Any press release issued by either party
hereto in connection with the transactions contemplated hereby or by the
Registration Rights Agreement shall be approved by the other party hereto prior
to its issuance.  In addition, neither
party hereto shall use the name of the other party hereto in any manner,
context or format (including any reference on or links to websites or any press
release) without the prior written approval of the other party hereto, which
approval shall not be unreasonably withheld, other than in connection with any
required filing with the SEC or in connection with any claim, suit, subpoena or
other legal proceeding.

 

5.8.                            Expenses.  Each of the Company and the Investor shall
bear its own expenses in connection with the negotiation, execution, delivery
and performance of this Agreement, the Registration Rights Agreement and the
transactions contemplated hereby and thereby and the filing of the Certificate
of Designation with the Secretary of State of the State of Delaware, except
that the Company shall reimburse the Investor for its reasonable out-of-pocket
due diligence expenses and for the reasonable legal fees and expenses, not to
exceed $100,000, of Sidley Austin Brown & Wood LLP, special legal counsel
to the Investor.  The Company
acknowledges that its obligation to reimburse the Investor for the fees and
expenses of Sidley Austin Brown & Wood LLP shall be fulfilled at the
Closing.  In addition, the Company shall
also reimburse the Investor for its reasonable legal expenses incurred in
connection with any amendment of, or waiver or consent requested by or for the
benefit of the Company under, this Agreement or the Registration Rights
Agreement.

 

5.9.                            Use of Proceeds.  The Company
shall use the proceeds of the sale of the Series A Preferred Shares for working
capital and other general corporate purposes.

 

5.10.                     Short Sales. 
The Investor hereby agrees that it will not, and shall cause its
Affiliates not to, sell shares of Common Stock on a “short” basis from the date
hereof until the earlier of (a) January 30, 2004 or (b) the date on which
the Market Price of the Common Stock exceeds $4.00 (as adjusted for any stock
split, stock dividend, recapitalization or otherwise).

 

5.11.                     Standstill. 
Except as may be specifically approved in writing by the Board of
Directors, the Investor shall not, and shall cause any Affiliates to not, in
any manner, directly or indirectly, either individually or together with any
Person or Persons acting in concert of beneficial ownership (within the meaning
of Rule 13d-3 of the Exchange Act), acquire, or offer or agree to acquire, or
become the beneficial owner of or obtain any rights in respect of any capital
stock of the Company, except (a) shares of Common Stock that may be issuable
upon the conversion of the Series A Preferred Shares, (b) shares of Series A
Preferred Stock that may be

 

13

 

issued upon exercise of the Warrant, (c) securities of
the Company or any of its successors issued as dividends or as a result of
stock splits and similar reclassifications or received in a consolidation,
merger or other business combination in respect of, in exchange for or upon
conversion of the Series A Preferred Shares or securities held by the Investor
or any of its Affiliates at the time of such dividend, split, reclassification,
consolidation or merger or business combination or (d) shares of Common Stock
of the Company acquired in the market or privately negotiated transactions,
provided that, in the case of this clause (d), the aggregate number of such
shares of Common Stock so acquired plus all shares of underlying Common Stock held
by the Investor or its Affiliates do not exceed after such acquisition thirty
percent (30%) of all the issued and outstanding shares of Common Stock of the
Company on a fully-diluted basis, assuming the exercise of all securities then
exercisable into Common Stock and the conversion of all securities then
convertible into Common Stock; provided, that, in no event shall the
aggregate number of shares of Common Stock so acquired plus all shares of
underlying Common Stock held by the Investor and its Affiliates exceed thirty
five percent (35%) of all of the issued and outstanding shares of Common Stock
(including any Common Stock that is issuable upon the exercise of issued and
outstanding Series A Preferred Shares) of the Company.

 

5.12.                     Non-Public Information.

 

(a)                                  The
Investor will hold, and will use its reasonable best efforts to cause each of
its officers, partners, directors, employees, accountants, counsel,
consultants, advisors and agents (the “Representatives”) to hold, in
confidence, at all times unless compelled to disclose by judicial or
administrative process or by other Requirements of Law, all confidential
documents and information concerning the Company and its Affiliates that have
been furnished to the Investor or its Representatives as of the date
hereof.  The Investor agrees that it
will not, and will use its reasonable best efforts to cause the Representatives
not to, use any confidential documents or information concerning the Company
for any purpose other than in connection with the transactions contemplated by
this Agreement.  If this Agreement is
terminated, the Investor will, and will use its reasonable best efforts to
cause the Representatives to, destroy or deliver to the Company all
confidential documents and other materials concerning the Company, and all
copies thereof, obtained by the Investor, or on its behalf, from the Company or
its advisors in connection with this Agreement.

 

(b)                                 The
Company covenants and agrees that neither it nor any other Person acting on its
behalf after the execution hereof will provide the Investor or its agents or
counsel with any information that the Company believes constitutes material
non-public information.

 

(c)                                  The
Company understands and confirms that the Investor shall be relying on the
foregoing covenant in effecting transactions in securities of the Company.

 

5.13.                     Transfer Restrictions.

 

(a)                                  The
Investor shall not sell or otherwise transfer any Series A Preferred Shares,
except (i) to an Affiliate of the Investor (provided such sale or other transfer
is of at least 10,000 Series A Preferred Shares at any given time), (ii) to any
other Person with the prior written consent of the Company’s Board of
Directors, which consent shall not be unreasonably withheld, (iii) to the
Company in connection with its redemption or conversion to Common

 

14

 

Stock pursuant to the Certificate of Designation, or
(iv) in connection with a tender offer approved by the Company’s Board of
Directors.  No transfer otherwise permissible
shall be effective unless a permitted transferee agrees in writing expressly
for the Company’s benefit to be bound by the provisions of this Agreement.

 

(b)                                 The
Company acknowledges and agrees that the Investor may from time to time make a
bona fide pledge, and/or grant a security interest in some or all, of the
Series A Preferred Shares pursuant to a bona fide margin agreement in
connection with a bona fide margin account and, if required under the terms of
such agreement or account, the Investor may deliver pledged or secured Series A
Preferred Shares to the pledgees or secured parties.  Such a pledge or transfer would not be subject to approval or
consent of the Company.  No notice shall
be required of such pledge.

 

ARTICLE VI

 

TRANSFER OF RESTRICTED
SECURITIES

 

6.1.                            Legend.  Each certificate or instrument representing
Restricted Securities shall be imprinted with a legend in substantially the
following form:

 

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

 

6.2.                            Legend Removal.  If any
Restricted Securities become eligible for sale pursuant to Rule 144(k),
the Company shall, upon the request of the holder of such Restricted
Securities, remove the legend set forth in Section 6.1 from the
certificates for such Restricted Securities.

 

ARTICLE VII

 

REPRESENTATIONS
AND WARRANTIES OF THE COMPANY

 

As an inducement to the Investor to enter into this
Agreement and to the purchase of the Series A Preferred Shares, and except as
set forth on the Disclosure Schedule attached hereto (the disclosures in
any Schedule of the Disclosure Schedule shall qualify other Schedules
only to the extent it its reasonably clear from a reading of the disclosure
that such disclosure is applicable to such other Schedules), the Company hereby
represents and warrants to the Investor and agrees as follows:

 

15

 

7.1.                            Organization, Qualifications and Corporate
Power.  (a)  The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware.  The Company has full legal
and corporate power and authority to own or lease and to operate and use its
properties and assets and to carry on its business as now conducted.  The Company is duly qualified or licensed to
transact business as a foreign corporation and is in good standing in each of
the jurisdictions in which the ownership or leasing of its assets or the
conduct of its business requires such qualification or licensing, except where
the failure to be so qualified or licensed or in good standing, would not,
individually or in the aggregate, have a Material Adverse Effect.

 

(b)                                 The
Company has full legal and corporate power and authority (i) to execute,
deliver and perform each of this Agreement, the Registration Rights Agreement
and the Warrant, (ii) to issue, sell and deliver the Series A Preferred Shares
and the Conversion Common Shares, (iii) to carry out fully and perform its
obligations under the terms hereof and thereof, and (iv) to file the
Certificate of Designation with the Secretary of State of the State of
Delaware.

 

(c)                                  The
Company is in compliance in all material respects with all of the terms and
provisions of its Certificate of Incorporation and By-laws.

 

7.2.                            Authorization; No Conflicts.  (a) 
The execution, delivery and performance by the Company of each of this
Agreement, the Registration Rights Agreement and the Warrant, the filing of the
Certificate of Designation with the Secretary of State of the State of
Delaware, and the issuance, sale and delivery of the Series A Preferred Shares
and the Conversion Common Shares (i) have been duly authorized and approved by
all requisite action on the part of the Company and the Board of Directors
(including for purposes of Section 203 of the Delaware General Corporation
Law) and (ii) do not require any approval or authorization from the Company’s
stockholders (whether pursuant to the Certificate of Incorporation, By-laws,
any Requirements of Law or otherwise). 
This Agreement has been duly authorized, executed and delivered by the
Company and is the legal, valid and binding obligation of the Company
enforceable in accordance with its terms, and each of the Registration Rights
Agreement and the Warrant has been duly authorized by the Company and, upon
execution and delivery by the Company, will be a legal, valid and binding
obligation of the Company enforceable in accordance with its respective terms,
in each case subject to bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or other similar laws of general applicability relating to
or affecting the enforcement of creditors’ rights and by the effect of general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).

 

(b)                                 Neither
the execution and delivery of this Agreement, the Registration Rights Agreement
or the Warrant or the consummation of any of the transactions contemplated
hereby or thereby by the Company nor compliance with or fulfillment of the
terms, conditions and provisions hereof or thereof by the Company will:

 

(i)                                     conflict
with, result in a breach or violation of the terms, conditions or provisions
of, or constitute a default, an event of default or an event creating rights of
acceleration, termination or cancellation or a loss of rights under, or result
in the creation or imposition of any Lien upon any of the assets or properties
of the Company, under (A) the Certificate of Incorporation or the By-laws, (B)
any note, instrument, contract,

 

16

 

agreement,
mortgage, lease, license, franchise, permit or other authorization, right,
restriction or obligation to which the Company is a party or any of its assets
or properties is subject or by which the Company is bound, (C) any Court Order
to which the Company is a party or any of its assets or properties is subject
or by which the Company is bound, or (D) any Requirements of Law affecting the
Company or its assets or properties, other than, with respect to clauses (B),
(C) and (D), any such conflicts, breaches, defaults, rights or Liens that would
not, individually or in the aggregate, have a Material Adverse Effect; or

 

(ii)                                  require
the approval, consent, authorization or act of, or the making by the Company of
any material declaration, filing or registration with, any Person (except for
(A) with respect to the Registration Rights Agreement, the registration of the
shares covered thereby with the SEC and filings pursuant to state securities
laws, (B) routine post-closing notice filings with the SEC and under state
corporation and securities laws, each of which will be filed timely within the
applicable period therefor), (C) the filing of a listing of additional shares
notification form with NASDAQ listing the Conversion Common Shares on the
Nasdaq National Market (provided, that this clause (C) shall not be
construed to limit or in any way affect the representation of the Company
contained in Section 7.2(a)(ii)) and (D) as disclosed on Schedule 3.4 of the Disclosure Schedule).

 

7.3.                            Subsidiaries and Investments.  Except as set forth on Schedule 7.3
of the Disclosure Schedule, the Company does not, directly or indirectly, (a)
own of record or beneficially or hold the right to acquire any outstanding
voting securities or other equity interests, in each case in any other Person
or (b) control or direct the operations of any other Person.

 

7.4.                            Authorized Capital Stock.  (a)  The authorized capital stock of the Company
consists of (i) 58,000,000 shares of Common Stock, of which 23,212,807 shares
are issued and outstanding as of the date hereof, (ii) 2,000,000 shares of
non-voting common stock, par value $0.001 per share, of which no shares are
issued and outstanding as of the date hereof, and (iii) 1,000,000 shares of
preferred stock, $0.001 par value per share, of which 460,000 shares have been
designated as Series A Preferred Stock, no shares of which are issued and
outstanding.  The Company has reserved
for issuance sufficient shares of Common Stock for issuance upon
conversion of all outstanding Series A Preferred Shares.

 

(b)                                 There
are outstanding as of October 27, 2003, (i) options to purchase an aggregate
of 3,673,350 shares of Common Stock, of
which 923,775 have an exercise price of less than $2.25 per share, and (ii)
warrants to purchase an aggregate of 733,836 shares of Common Stock, subject,
in each case, to the terms thereof.

 

(c)                                  No
Person is entitled to any pre-emptive right or right of first refusal with
respect to the issuance of any capital stock of the Company, including the
Series A Preferred Shares.  Except as
set forth on Schedule 7.4 of the Disclosure Schedule and those
described in paragraph (b) above, (i) there are no outstanding pre-emptive
rights, options, warrants, conversion rights, agreements or other rights to
purchase any of the authorized but unissued capital stock of the Company or any securities convertible
or exchangeable into any capital stock of the
Company, other than those issued, reserved or committed to be issued
pursuant to this

 

17

 

Agreement and (ii) none of such rights, options,
warrants or agreements provide for a purchase price of Common Stock of less
than $2.25 per share.

 

(d)                                 The
Company is not a party to any existing written agreement with the holder of any
of its securities that requires the Company
to purchase or otherwise acquire any of such securities from their holder under
any circumstances (other than (i) option agreements or restricted stock
purchase agreements or other comparable agreements approved by the Board of
Directors that require the Company to repurchase or otherwise acquire from an
officer, employee, director or consultant of the Company shares of the
Company’s capital stock or other equity securities (A) upon the termination of
employment of such officer, employee, director or consultant of the Company or
(B) in connection with the surrender of shares or other equity securities to
the Company or (ii) any agreements pursuant to which the Company is required to
purchase or otherwise acquire its securities for an amount, individually or in
the aggregate, less than $50,000).

 

(e)                                  The
Series A Preferred Shares, when issued, sold and delivered in accordance with
the terms of this Agreement, will be (i) duly and validly issued, fully paid,
non-assessable and free and clear of all Liens, except any Liens created by or
through the Investor, and will be free of restrictions on transfer other than
restrictions on transfer under applicable state and Federal securities laws and
(ii) issued in compliance with all state and Federal securities laws and in
compliance with the rules and regulations of NASDAQ.

 

(f)                                    The
Conversion Common Shares issuable upon conversion of the Series A Preferred
Shares have been duly and validly reserved for issuance and, upon issuance in
accordance with the provisions of the Series A Preferred Shares, will be (i)
duly and validly issued, fully paid, non-assessable and free and clear of all
Liens, except any Liens created by or through the Investor, and will be free of
restrictions on transfer other than restrictions under applicable state and
Federal securities laws, (ii) issued in compliance with all state and Federal
securities laws and in compliance with the rules and regulations of NASDAQ and
(iii) entitled to be quoted and/or listed on the Nasdaq National Market.

 

7.5.                            SEC Documents.  The Common Stock
is registered pursuant to Section 12 of the Exchange Act, the Company has
taken no action designed to, or likely to have the effect of, terminating such
registration and the Company has not received any notification that the SEC is
contemplating terminating such registration. Since October 15, 2000, the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Exchange Act (all of the foregoing and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein being referred to herein as the “SEC
Documents”).  As of the respective
date of filing of each such SEC Document, each such SEC Document complied in
all material respects with the applicable requirements of the Exchange Act and
the rules and regulations of the SEC promulgated thereunder.  None of the SEC Documents, at the time they
were filed with the SEC, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading.  As of the
date hereof, to the Knowledge of the Company, there are no unresolved comments
issued by the

 

18

 

SEC with respect to the SEC Documents.  The Company is currently eligible to use
Form S-3 to register the Conversion Common Shares to be offered for the account
of the Investor.

 

7.6.                            NASDAQ.  The Common Stock is quoted on the Nasdaq
National Market and the Company has taken no action designed to, or likely to
have the effect of, terminating such quotation.  The Company is not in violation of the listing or quotation
requirements of NASDAQ and has no Knowledge of any facts that would reasonably
lead to delisting or suspension of the Common Stock by NASDAQ in the
foreseeable future.

 

7.7.                            Financial Statements.  The financial statements (including, in each case, any related
notes and schedules thereto) of the Company included in the SEC Documents have
been prepared in accordance with GAAP during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim statements, to the extent that they
may exclude footnotes or may be condensed or summary statements) and fairly
present in all material respects the financial position of the Company as of
the respective dates thereof and the results of its operations and cash flows
for the periods indicated (subject, in the case of unaudited statements, to
normal year-end audit adjustments).

 

7.8.                            No Material Adverse Change.  Since June 30, 2003, (a) there has been no Material Adverse
Effect and (b) the Company has operated its business in the ordinary course in
all material respects.

 

7.9.                            Contracts.  The Contracts described in the SEC Documents as being in effect
on the date hereof that are material to the Company are in full force and
effect on the date hereof, and the Company is not, nor, to the Knowledge of the
Company, is any other party thereto, in breach of or default under any of such
Contracts, except where such breach or default would not, individually or in
the aggregate, have a Material Adverse Effect.

 

7.10.                     Tax Matters.  All material Tax returns of the Company
required by law to be filed have been duly filed and all Taxes which are due
and payable, have been paid, except any such Taxes (a) (i) the payment of
which the Company is contesting in good faith, (ii) for which adequate
reserves (as determined in accordance with GAAP) have been provided on the
books of the Company, and (iii) as to which no Lien other than a Permitted
Lien has attached and no foreclosure, sale or similar proceedings have been
commenced, (b) which may result from audits not yet conducted or (c) the
failure of which to pay would not have a Material Adverse Effect.  The charges, accruals and reserves on the
financial statements of the Company included in the SEC Documents in respect of
Taxes have been determined in accordance with GAAP.

 

7.11.                     Intellectual Property Rights.  The Company owns or has the right to use
pursuant to a valid license, sublicense, agreement or other permission all
Intellectual Property Rights that are material to the operation of the
Company’s business as currently conducted (collectively, the “Company Intellectual Property”).  To the Knowledge of the Company, no third
Person has asserted any challenge to the validity of the rights of the Company
in or to any Company Intellectual Property and to the Knowledge of the Company,
there is currently no infringement by any third Person of any Company
Intellectual Property.  Except as set
forth on Schedule 7.11 of the Disclosure Schedule, there is no pending
or, to the Knowledge of the

 

19

 

Company, threatened action, suit, proceeding or claim
by any third Person that the operation of the business by the Company infringes
or otherwise violates any intellectual property of any third Person nor, to the
Knowledge of the Company, does any reasonable basis exists for such an action,
suit, proceeding or claim.

 

7.12.                     Possession of Licenses and Permits.  The Company possesses such permits,
licenses, approvals, consents, franchises, grants, easements, variances,
exceptions, certificates and other authorizations issued by Governmental
Authorities that are necessary to own, lease and operate its properties and to
conduct its business as currently conducted (collectively, “Governmental
Licenses”), except such permits, licenses, approvals, consents, franchises,
grants, easements, variances, exceptions, certificates and other authorizations
the failure of which to possess would not, individually or in the aggregate,
have a Material Adverse Effect.  The
Company is in compliance with the terms and conditions of all such Governmental
Licenses, except where the failure so to comply would not, individually or in
the aggregate, have a Material Adverse Effect. 
All of the Governmental Licenses are valid and in full force and effect,
except when the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not, individually or
in the aggregate, have a Material Adverse Effect.  To the Knowledge of the Company, the Company has not received any
notice of proceedings relating to the revocation, suspension, cancellation or
modification of any such Governmental Licenses which, individually or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
have a Material Adverse Effect.

 

7.13.                     Compliance with Laws; Litigation.

 

(a)                                  The
Company is in compliance with all applicable Requirements of Law and Court
Orders, except where the failure to be in such compliance would not,
individually or in the aggregate, have a Material Adverse Effect.  To the Knowledge of the Company, neither the
Company nor any officer, director, representative, agent or Affiliate of the Company
has at any time made any unlawful payments on behalf of the Company for
political contributions or made any bribes, kickback payments or other illegal
payments.

 

(b)                                 Except
as set forth in the SEC Documents, (i) there is no material action, suit,
proceeding, inquiry, arbitration or any investigation before any court, public
board, government agency or self-regulatory organization or body pending or, to
the Knowledge of the Company, threatened against the Company and (ii) to the
Knowledge of the Company, there is no material action, suit or proceeding
pending or threatened in which the Company is the plaintiff or claimant.

 

7.14.                     Governmental Approvals; No
Registration.  Subject to the accuracy of the
representations and warranties of the Investor set forth in Article VIII,
no material permit, consent, approval or authorization of, or registration to
or filing with, any Governmental Authority is or will be required in connection
with the execution, delivery and performance by the Company of this Agreement or the Registration Rights
Agreement, or the issuance, sale and delivery of the Series A Preferred Shares
or the reservation for issuance of the Conversion Common Shares, or the
consummation by the Company of any
other transactions contemplated hereby or thereby, except for (a) with respect
to the Registration Rights Agreement, the registration of the shares covered
thereby with the SEC and filings pursuant to state securities

 

20

 

laws, (b) routine post-closing notice filings with the
SEC and under state corporation and securities laws, each of which will be
filed timely within the applicable period therefor, and (c) the filing of
a listing of additional shares notification form with NASDAQ listing the
Conversion Common Shares on the Nasdaq National Market.

 

7.15.                     Investment Company.  The Company is not, and immediately after receipt of the Purchase
Price will not be, an “investment company” or an “affiliated person” of, or
“promoter” or “principal underwriter” for an investment company, within the
meaning of the Investment Company Act of 1940, as amended, and conducts its
business in a manner so that it will not become subject to such Act.

 

7.16.                     Employees.  The Company does not have Knowledge that any
executive officer of the Company or
any group of employees of the Company has
any plans to terminate employment with the
Company.  The Company has
complied in all material respects with all laws relating to the employment of
labor (including provisions relating to wages, hours, equal opportunity, collective
bargaining and the payment of social security and other employment taxes, and
the Employee Retirement Income Security Act of 1974, as amended.  No labor dispute with the employees of the
Company exists nor, to the Knowledge of the Company, is threatened.

 

7.17.                     Regulatory Matters.  To the Knowledge of the Company, there are no rulemaking or
similar proceedings before The United States Food and Drug Administration which
involve or affect the Company, which, if the subject of an action unfavorable
to the Company, would have a Material Adverse Effect, other than as disclosed
in the SEC Documents; provided, that, it is agreed and acknowledged that
the Company has not made any investigation whatsoever with respect to this
representation.

 

7.18.                     No Manipulation of Stock.  The Company has not taken and will not, in violation of
applicable law, take any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of
the Common Stock.

 

7.19.                     Brokers.  The
Company has no Contract with any broker, finder or similar agent with
respect to the transactions contemplated by this Agreement for which the Company shall have any liability or
responsibility.

 

7.20.                     No General Solicitation.  None of the Company, any of its Affiliates or any Person acting
on its or their behalf has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D under the Securities
Act) in connection with the offer or sale of the Series A Preferred Shares.

 

ARTICLE VIII

 

REPRESENTATIONS
AND WARRANTIES OF THE INVESTOR

 

As an inducement to the Company to enter into this
Agreement and to issue and sell the Series A Preferred Shares, the Investor
hereby represents and warrants to the Company and agrees as follows:

 

21

 

8.1.                            Authorization.  The execution,
delivery and performance of this Agreement and the Registration Rights
Agreement have been duly authorized and approved by the Investor.  This Agreement has been duly executed and
delivered by the Investor and is the legal, valid and binding obligation of the
Investor enforceable in accordance with its terms, and the Registration Rights
Agreement has been duly authorized by the Investor and, upon execution and
delivery by the other parties thereto, will be a legal, valid and binding
obligation of the Investor enforceable in accordance with its terms, in each
case subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other similar laws of general applicability relating to or
affecting the enforcement of creditors’ rights and by the effect of general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).

 

8.2.                            Brokers. 
The Investor has no Contract with any broker, finder or similar agent
with respect to the transactions contemplated by this Agreement for which the
Investor shall have any liability or responsibility.

 

8.3.                            Investment Representations.

 

(a)                                  The
Investor is acquiring the Series A Preferred Shares, and the shares of Common
Stock into which the Series A Preferred Shares may be converted, for its own
account for investment and not with a view to, or for sale in connection with,
any distribution thereof, without prejudice, however, to the Investor’s right
at all times to sell or otherwise dispose of all or any part of such securities
in compliance with this Agreement and all applicable federal and state
securities laws.  Subject to the
immediately preceding sentence and Section 5.10, nothing contained
herein shall be deemed a representation or warranty by the Investor to hold the
Series A Preferred Shares or the shares of Common Stock into which the Series A
Preferred Shares may be converted for any period of time.  The Investor is acquiring the Series A
Preferred Shares and the shares of Common Stock into which the Series A
Preferred Shares may be converted in the ordinary course of its business and
the Investor does not have any agreement or understanding, directly or
indirectly, with any Person to distribute any of such securities.  The Investor agrees to the imprinting, so
long as required by law, of a legend on certificates representing the shares of
Series A Preferred Shares or any shares of Common Stock issued upon conversion
of the Series A Preferred Shares as set forth in Section 6.

 

(b)                                 The
Investor is an “accredited investor” as such term is defined in
Rule 501(a) of Regulation D under the Securities Act.

 

(c)                                  The
Investor understands that the Restricted Securities being sold hereby have not
been registered under the Securities Act, or applicable state securities laws,
and are being issued in reliance on exemptions for private offerings contained
in Section 4(2) of the Securities Act and in reliance on exemptions from
the registration requirements of certain state securities laws.  Because the Restricted Securities have not
been registered under the Securities Act or applicable state securities laws,
the Restricted Securities may not be re-offered or resold except through a
valid and effective registration statement or pursuant to a valid exemption
from the registration requirements under the Securities Act and applicable
state securities laws.

 

(d)                                 The
Investor has sufficient knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of its
investment in the

 

22

 

Series A Preferred Shares and is capable of bearing
the economic risks of such investment, including a complete loss of its
investment in the Series A Preferred. 
The Investor understands that its investment in the Series A Preferred
Shares involves a high degree of risk.

 

8.4.                            Company Stock Ownership.  The Investor, together with its Affiliates, own, in the
aggregate, including any rights to acquire any capital stock of the Company
(other than pursuant to this Agreement), not more than 900,000 shares of Common
Stock as of the date hereof.

 

ARTICLE IX

 

MISCELLANEOUS

 

9.1.                            Survival of Representations and
Warranties.  All representations and warranties contained
herein will survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by or on behalf of the Investor, until the date that is one
year after the Closing Date.

 

9.2.                            Amendments and Waivers.  Except as otherwise expressly provided herein, the provisions of
this Agreement may be amended, modified or waived only with the written consent
of the Company and the holders of a majority of the outstanding Conversion
Common Shares.  No course of dealing
between the Company and the holder of any Conversion Common Shares or any delay
in exercising any rights hereunder or under the Registration Rights Agreement
or the Certificate of Designation will operate as a waiver of any rights of any
such holders.

 

9.3.                            Successors and Assigns.  Except as otherwise expressly provided herein, all covenants and
agreements contained in this Agreement by or on behalf of any of the Parties
will bind and inure to the benefit of the respective successors and permitted
assigns of the Parties, whether so expressed or not.  Neither party may assign this Agreement or its respective rights
hereunder; provided, that the Investor may assign its rights hereunder,
without the consent of the Company, to any of its Affiliates.

 

9.4.                            Remedies.  Each holder of any Series A Preferred Shares
or Conversion Common Shares shall have all rights and remedies set forth in
this Agreement, the Certificate of Incorporation and all rights that such
holders have under any law.

 

9.5.                            Indemnification.  In
consideration of the Investor’s execution and delivery of this Agreement and
acquisition of the Series A Preferred Shares and in addition to all of the
Company’s other obligations under this Agreement, the Company shall defend,
protect, indemnify and hold harmless the Investor and each other holder of
Series A Preferred Shares and Conversion Common Shares and all of their
partners, officers, directors, employees and agents (including those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the “Indemnitees”) from and against any and all losses,
costs, penalties, fees, liabilities and damages and expenses  (irrespective
of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), including reasonable attorneys’ fees and
disbursements (the “Indemnified Liabilities”), incurred by the
Indemnitees as a result of, or

 

23

 

arising out of, or relating to any action, cause of
action, suit or claim brought by a third party as a result of or in connection
with the transactions contemplated hereby (it being agreed and understood that
the indemnification provisions set forth in the Registration Rights Agreement
shall govern any matters contemplated thereby); provided, however,
that the Company shall not defend, protect, indemnify, hold harmless or
otherwise be obligated with respect to any Indemnitee for Indemnified
Liabilities that are the result of or arise out of such Indemnitee’s
recklessness, willful misconduct or bad faith; and provided, further,
that the Company shall not be required to defend, protect, indemnify and hold
harmless under this Section 9.5 with respect to any Indemnified
Liabilities incurred by the Indemnitees unless the aggregate amount of such
Indemnified Liabilities subject to indemnification exceeds $100,000, and once
such amount is exceeded, the Company shall defend, protect, indemnify and hold
harmless the Indemnitees for all Indemnified Liabilities starting from dollar
one.

 

9.6.                            Severability.  Wherever
possible, each provision of this Agreement will be interpreted in such manner
as to be effective and valid under applicable law and in such a way as to, as
closely as possible, achieve the intended economic effect of such provision and
this Agreement as a whole, but if any provision contained herein is, for any
reason, held to be invalid, illegal or unenforceable in any respect, such provision
shall be ineffective to the extent, but only to the extent, of such invalidity,
illegality or unenforceability without invalidating the remainder of such
provision or any other provisions hereof, unless such a construction would be
unreasonable.

 

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

 

	
  If to the Company, to:

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
  Genaissance Pharmaceuticals, Inc.

  	
   

  	
  Hale and Dorr LLP

  
	
  Five Science Park

  	
   

  	
  60 State Street

  
	
  New Haven, Connecticut 06511

  	
   

  	
  Boston, Massachusetts 02109

  
	
  Attention:    Chief Financial
  Officer

  	
   

  	
  Attention:  Steven D. Singer, Esq.

  
	
  Facsimile:    (203) 786-3567

  	
   

  	
  Facsimile:  (617) 526-5000

  

 

24

 

	
  If to the Investor, to:

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
  RAM Trading, Ltd.

  	
   

  	
  Sidley Austin Brown & Wood LLP

  
	
  c/o Ritchie Capital Management, LLC

  	
   

  	
  Bank One Plaza

  
	
  2100 Enterprise Avenue

  	
   

  	
  10 South Dearborn Street

  
	
  Geneva, Illinois 60134

  	
   

  	
  Chicago, Illinois 
  60603

  
	
  Attention: 
  Jon Lewis, General Counsel

  	
   

  	
  Attention: 
  Jon A. Ballis, Esq.

  
	
  Facsimile: 
  (630) 232-4407

  	
   

  	
  Facsimile: 
  (312) 853-7036

  

 

9.8.                            Governing Law.  This Agreement
and the Exhibits and Disclosure Schedule hereto shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without giving
effect to any choice of law or conflict of law rules or provisions (whether of
the State of Delaware or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of
Delaware.  In furtherance of the
foregoing, the internal law of the State of Delaware shall control the interpretation
and construction of this Agreement (and the Disclosure Schedule and
Exhibits hereto), even though under that jurisdiction’s choice of law or
conflict of law analysis, the substantive law of some other jurisdiction would
ordinarily apply.

 

9.9.                            Submission to Jurisdiction; Waiver
of Jury Trial.  (a) 
Each of the Parties hereby irrevocably submits in any suit, action or
proceeding arising out of or related to this Agreement, the Registration Rights
Agreement or the Warrant, or any of the transactions contemplated hereby or
thereby, to the jurisdiction of the United States District Court for the
Northern District of Illinois and/or the Circuit Court of Cook County, Illinois
and, to the extent permissible by law, waives any and all claims and objections
that any such court is an inconvenient forum or improper venue.

 

(b)                                 EACH
OF THE PARTIES HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN OR AMONG ANY
OF THE PARTIES ARISING OUT OF OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT OR THE WARRANT, OR ANY OTHER
INSTRUMENT OR DOCUMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR
THEREWITH.  ANY PARTY MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES TO THE WAIVER OF THEIR RIGHT TO TRIAL BY
JURY.

 

9.10.                     Attorneys’ Fees.  In the event of
any action or suit based upon or arising out of any actual or alleged breach by
any Party of any representation, warranty or agreement in this Agreement, the
prevailing party shall be entitled to recover its reasonable attorneys’ fees
and expenses of such action or suit from the losing party, in addition to any
other relief ordered by the court.

 

25

 

9.11.                     Execution in Counterparts.  This Agreement may be executed in any number
of counterparts (including via facsimile), each of which will be considered an
original instrument, but all of which together will be considered one and the
same agreement, and will become binding when one or more counterparts have been
signed by and delivered to each of the Parties.

 

9.12.                     Entire Agreement.  This
Agreement and the Exhibits and Disclosure Schedule referred to herein, the
Registration Rights Agreement, the Warrant and the other documents delivered
pursuant hereto contain the entire understanding of the Parties with regard to
the subject matter contained herein or therein, and supersede all prior agreements,
understandings or letters of intent between or among any of the Parties,
including the Term Sheet dated as of October 7, 2003 entered into between
the Company and Ritchie Capital Management, LLC.

 

[SIGNATURE PAGE FOLLOWS]

 

26

 

IN WITNESS WHEREOF, the Parties have caused
this Series A Preferred Stock Purchase Agreement to be executed the day and
year first above written.

 

	
   

  	
  GENAISSANCE

  
	
   

  	
  PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kevin Rakin

  
	
   

  	
   

  	
  Name:  Kevin Rakin

  
	
   

  	
   

  	
  Title: 
  President & CEO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  RAM TRADING, LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James R. Park

  
	
   

  	
   

  	
  Name:  James
  R. Park

  
	
   

  	
   

  	
  Title:  VP
  Ritchie Capital Management, LLC

            
  Investment Advisor to RAM Trading, Ltd.

  
				

 

Signature
Page

to
the

Series
A Preferred Stock Purchase AgreementExhibit
10.2

 

EXECUTION
COPY

 

REGISTRATION RIGHTS AGREEMENT

 

This REGISTRATION
RIGHTS AGREEMENT (this “Agreement”) is made as of October 29,
2003, by and between Genaissance Pharmaceuticals, Inc., a Delaware corporation
(the “Company”), and RAM Trading, Ltd., a Cayman Islands exempted
company (the “Investor”).

 

WHEREAS, on the
date hereof, the Investor will be purchasing 270,000 shares of Series A
Preferred Stock, $0.001 par value per share (the “Series A Preferred Stock”),
of the Company  (the “Initial Series
A Preferred Shares”) pursuant to the terms of the Series A Preferred Stock
Purchase Agreement dated as of October 29, 2003, by and between the Company
and  the Investor (the “Series A
Purchase Agreement”);

 

WHEREAS, on the
date hereof, the Company is also issuing to the Investor the Warrant, pursuant
to which the Investor may purchase, and under certain circumstances specified
therein shall be required to purchase, an additional 190,000 shares of Series A
Preferred Stock (the “Warrant Shares” and, together with the Initial
Series A Preferred Shares, the “Series A Preferred Shares”);

 

WHEREAS, pursuant
to the terms of, and in partial consideration for the Investor’s agreement to
enter into, the Series A Purchase Agreement, the Company has agreed to enter into
this Agreement to provide the Investor with certain registration rights, as
well as certain other rights and remedies set forth in this Agreement with
respect to the Series A Preferred Shares; and

 

WHEREAS, the Series
A Purchase Agreement is conditioned upon this Agreement being executed by the
parties hereto.

 

NOW, THEREFORE, in
consideration of the foregoing and the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:

 

1.                                      Definitions.

 

1.1                                 Unless
otherwise stated herein, capitalized terms used but not defined herein shall
have the meanings set forth in the Series A Purchase Agreement.

 

1.2                                 Unless
otherwise provided in this Agreement, capitalized terms used herein shall have
the following meanings:

 

“Advice”
has the meaning specified in Section 3.

 

“Agreement”
has the meaning set forth in the first paragraph hereof.

 

“Common Stock”
means the Common Stock, par value $0.001 per share, of the Company.

 

“Company”
has the meaning set forth in the first paragraph hereof.

 

 

“Existing
Registration Rights Agreement” means the agreements set forth on Schedule
A hereto.

 

“Holder”
means the Investor and any transferee of the Investor’s Registrable Securities
with respect to the rights that such transferee shall have acquired in
accordance with Section 8, at such times as such Persons shall own
Registrable Securities.

 

“Initial Series
A Preferred Shares”  has the meaning
set forth in the first recital above.

 

“Investor”
has the meaning set forth in the first paragraph hereof.

 

“Losses”
has the meaning specified in Section 7.1.

 

“Participating
Holders” means the Holders participating in a registration hereunder.

 

“Put Event”
has the meaning specified in Section 2.3.

 

“Put Notice”
has the meaning specified in Section 2.3.

 

“Put Price”
has the meaning specified in Section 2.3.

 

“Put Right”
has the meaning specified in Section 2.3.

 

“Put Shares”
has the meaning specified in Section 2.3.

 

“Registrable
Securities” means (a) any Common Stock issued upon the conversion of any
Series A Preferred Shares and (b) any Common Stock issued or issuable with
respect to the securities referred to in clause (a) by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.  As to any particular Registrable Securities,
such securities shall cease to be Registrable Securities when they have been
(i) distributed to the public pursuant to an offering registered under the
Securities Act, (ii) distributed to the public through a broker, dealer or
market maker pursuant to Rule 144 (or any similar provision then in force)
under the Securities Act or (iii) otherwise transferred and new certificates
for them not bearing the Securities Act legend set forth in Section 6.1 of the
Series A Purchase Agreement have been delivered by the Company in accordance
with Section 6.2 of the Series A Purchase Agreement.  For purposes of this Agreement, a Person shall be deemed to be
the holder of Registrable Securities, and the Registrable Securities shall be
deemed to be outstanding and in existence, whenever such Person has the right
to acquire Registrable Securities, and such Person shall be entitled to
exercise the rights of a holder of such Registrable Securities hereunder.

 

“Required
Holders” has the meaning specified in Section 2.3.

 

“SEC” means
the Securities and Exchange Commission, including any governmental authority or
agency succeeding to the functions thereof.

 

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

 

2

 

“Series A
Preferred Shares” has the meaning set forth in the second recital above.

 

“Series A
Preferred Stock” has the meaning set forth in the first recital above.

 

“Series A
Purchase Agreement” has the meaning set forth in the first recital above.

 

“Shelf
Registration Statement” means a registration statement on Form S-3 (except
if the Company is not then eligible to register the Registrable Securities on
Form S-3, any other appropriate form) filed under the Securities Act providing
for the registration of, and the sale on a continuous or delayed basis by the
Holders of, all Registrable Securities, among other capital stock issued or
issuable by the Company, pursuant to Rule 415 under the Securities Act and/or
any similar rule that may be adopted by the SEC, filed by the Company pursuant
to the provisions of Section 2, including any amendments (including
post-effective amendments) and supplements to such registration statement.

 

“Suspension
Period has the meaning specified in Section 3.

 

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

 

“Violation”
has the meaning specified in Section 7.1.

 

“Warrant Shares”
has the meaning set forth in the second recital above.

 

2.                            Shelf
Registration.

 

2.1                                 The
Company shall use its best efforts to prepare and file with the SEC, no later
than 45 days following the Closing Date, a Shelf Registration Statement
relating to the offer and sale on a continuous basis of the Registrable
Securities, among other capital stock issued by the Company, and, thereafter,
shall use its best efforts to cause such Shelf Registration Statement to be
declared effective under the Securities Act no later than 120 days following
the Closing Date.  The Shelf
Registration Statement shall contain a “Plan of Distribution” section as is
reasonably requested by the Required Holders (as defined below).  If the Company fails to meet the filing
and/or effectiveness deadlines set forth in this Section 2.1, the
Company shall nonetheless be obligated to file the Shelf Registration Statement
with the SEC and to use its best efforts to cause such Shelf Registration
Statement to be declared effective by the SEC as soon as practicable following
the applicable deadline provided in this Section 2.1 for so long as the
Investor holds any Series A Preferred Shares or is entitled to acquire any such
shares pursuant to the Warrant.

 

2.2                                 The
Company shall use its best efforts to keep the Shelf Registration Statement
continuously effective under the Securities Act (subject to Section 3)
until the earlier of (i) the date that all Registrable Securities covered by
the Shelf Registration Statement have been publicly sold, or (ii) the date on
which all Registrable Securities not otherwise sold pursuant 

 

3

 

to clause (i) and
covered by the Shelf Registration Statement may be sold pursuant to Rule
144(k).

 

2.3                                 The
holders of 66-2/3% of the Series A Preferred Shares (the “Required Holders”)
shall have the right (the “Put Right”) to require the Company to
repurchase all, but not less than all, of the outstanding Series A Preferred
Shares (the “Put Shares”) if:

 

(a)                                  after
the 45th day following the Closing Date, the Shelf Registration Statement has
not been filed with the SEC; or

 

(b)                                 after
the 120th day following the Closing Date, the Shelf Registration Statement has
not been declared effective by the SEC.

 

The occurrence of any event described in clauses (a) or (b) above shall
hereinafter be referred to as a “Put Event”.

 

Within 15 days of
the occurrence of any Put Event, the Required Holders shall be entitled to
exercise the Put Right by delivery of a written notice of exercise (the “Put
Notice”) to the Company.  Within 10
days of the Company’s receipt of the Put Notice, the Company shall repurchase
the Put Shares for an aggregate cash purchase price equal to (a) $22.50 multiplied
by the number of outstanding Put Shares plus (b) all accrued but unpaid
dividends on the Put Shares (the “Put Price”).  The Put Price shall be paid to the holders of the Put Shares as
specified in the Put Notice.

 

3.                            Temporary
Suspensions of Shelf Registration Statement.  Notwithstanding anything to the contrary contained in this
Agreement, the Company shall be entitled, from time to time by providing
written notice to the Holders, to require the Holders to suspend the use of the
prospectus forming a part of the Shelf Registration Statement for sales of
Registrable Securities for a reasonable period of time, not to exceed 60 days
in succession or 90 days in the aggregate in any 12-month period (a “Suspension
Period”), if the Company shall determine that it is required to disclose in
the Shelf Registration Statement a financing, acquisition, corporate
reorganization or other similar corporate transaction or other material event
or circumstance affecting the Company or its securities, and that such
disclosure of such information at such time would be seriously detrimental to the
Company and its stockholders. 
Immediately upon receipt of such notice, the Holders of Registrable
Securities covered by the Shelf Registration Statement shall suspend the use of
the prospectus forming a part of the Shelf Registration Statement until requisite
changes to such prospectus have been made as required herein or until the
Holders are advised in writing (the “Advice”) by the Company that the
use of the prospectus may be resumed. 
After the expiration of any Suspension Period and without any further
request from a Holder, the Company shall as promptly as reasonably practicable
prepare a post-effective amendment or supplement to the Shelf Registration
Statement or the prospectus forming a part thereof, or any document
incorporated therein by reference, or file any other required document so that,
as thereafter delivered to purchasers of Registrable Securities included
therein, such prospectus will not include an untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.

 

4.                            Registration
Procedures; Additional Agreements. 
With respect to the

 

4

 

Company’s
obligations under Section 2, the Company shall:

 

4.1                                 Prepare
and file with the SEC a registration statement with respect to such Registrable
Securities and use its best efforts to cause such registration statement to
become effective; provided, however, that before filing a registration
statement or prospectus or any amendments or supplements thereto, the Company
shall furnish to one firm of counsel selected by the Participating Holders
holding a majority of the Registrable Securities covered by such registration
statement copies of all such documents in the form substantially as proposed to
be filed with the SEC at least three (3) Business Days (or with respect to any
prospectus or any amendment or supplement, at least two (2) Business Days)
prior to filing for review and comment by such counsel, which opportunity
to comment shall include an absolute right to control or contest disclosure if
any Participating Holder reasonably believes that it may be subject to
controlling person liability under applicable securities laws with respect
thereto, and if such review lasts longer than 48 hours, the filing and
effectiveness requirements set forth in Section 2 shall be suspended
during the pendency of such review.

 

4.2                                 Notify
each Participating Holder of the effectiveness of any registration statement
with respect to the Registrable Securities and prepare and file with the SEC
such amendments and supplements to such registration statement and the
prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act and rules
thereunder with respect to the disposition of all securities covered by such
registration statement.  The Company
shall amend the registration statement or supplement the prospectus included
therein so that it will remain current and in compliance with the requirements
of the Securities Act for the period specified in Section 2.2, and if
during such period any event or development occurs as a result of which the
registration statement or prospectus contains a misstatement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, the Company shall promptly notify
each Participating Holder, amend the registration statement or supplement the
prospectus so that each will thereafter comply with the Securities Act and
furnish to each Participating Holder such amended or supplemented prospectus,
which each such Holder shall thereafter use in the Transfer of Registrable
Securities covered by such registration statement.

 

4.3                                 
Furnish to each of the Participating Holders, without charge, such numbers of
copies of such registration statement, any pre-effective or post-effective
amendment thereto, the prospectus included therein, including each preliminary
prospectus, and any amendments or supplements thereto, in each case in
conformity with the requirements of the Securities Act, and such other related
documents as any such Participating Holders may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such
Participating Holders.

 

4.4                                 Use
its best efforts to register and qualify the securities covered by such
registration statement under such other securities or blue sky laws of such
states or jurisdictions as shall be reasonably requested by the Participating
Holders owning a majority of the Registrable Securities to be included in such
registration statement; provided, however, that the Company shall
not be required in connection therewith or as a condition thereto to qualify to
do business as a foreign corporation, to consent to general service of process
or to subject itself to taxation in any state or jurisdiction.

 

5

 

4.5                                 Promptly
notify each Participating Holder of any stop order issued by the SEC in
connection therewith and take all reasonable actions required to prevent the
entry of such stop order or to remove it if entered.

 

4.6                                 Make
available for inspection by any Participating Holder and the representatives of
such Holders all financial and other information as shall be reasonably
requested by them, and provide such Holders the reasonable opportunity to
discuss the business affairs of the Company with its principal executives and
with the independent public accountants who have certified the audited
financial statements included in such registration statement, in each case all
as necessary to enable them to exercise their due diligence responsibility
under the Securities Act, and in each case subject to the execution of a
confidentiality agreement in a form acceptable to the Company.

 

4.7                                 Use
all reasonable efforts to cause all Registrable Securities to be listed on the
NASDAQ National Market.

 

4.8                                 Take
such other actions as are reasonably required in order to expedite or
facilitate the disposition of Registrable Securities included in each such
registration.

 

5.                            Holders’
Obligations.  It shall be a
condition precedent to the obligations of the Company to take any action
pursuant to this Agreement with respect to the Registrable Securities of any
Participating Holder of Registrable Securities that such Participating Holder
shall furnish to the Company such information regarding such Participating
Holder, the number of the Registrable Securities owned by it, the number of
Registrable Securities being registered and the intended method of disposition
of such securities as shall be required to effect the registration of such
Holder’s Registrable Securities, and to cooperate with the Company in preparing
such registration.

 

6.                            Registration
Expenses.

 

6.1                                 Company
Expenses.  All expenses incident to
the Company’s performance of or compliance with this Agreement, including,
without limitation, all registration and filing fees, fees of any transfer agent
and registrar, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, fees and
disbursements of custodians, fees and disbursements of counsel for the Company
and its independent certified public accountants, the Company’s internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any liability insurance and the expenses and fees for listing the securities to
be registered on each securities exchange or quotation system on which similar
securities issued by the Company are then listed or quoted shall be borne by
the Company.

 

6.2                                 Holder
Expenses.  In connection with a
registration hereunder, the Company shall reimburse the Holders with
Registrable Securities included in such registration for the reasonable fees
and disbursements of one counsel chosen by the holders of a majority of the
Registrable Securities included in such registration, provided that any such
expenses shall be included in and subject to the overall expense cap set forth
in Section 5.8 of the Series A Purchase Agreement.

 

6

 

7.                            Indemnification;
Contribution.

 

7.1                                 With
respect to a Shelf Registration Statement, to the extent permitted by
applicable law, the Company shall indemnify and hold harmless each
Participating Holder, each Person, if any, who controls such Participating
Holder within the meaning of the Securities Act, and each officer, director,
partner, and employee of such Participating Holder and such controlling Person,
against any and all losses, claims, damages, liabilities and expenses (joint or
several), including reasonable attorneys’ fees and disbursements and expenses
of investigation (collectively, “Losses”), incurred by such party
pursuant to any actual or threatened action, suit, proceeding or
investigation,  or to which any of the
foregoing Persons may become subject under the Securities Act, the Exchange Act
or other federal or state laws, insofar as such Losses arise out of or are
based upon any of the following statements, omissions or violations
(collectively a “Violation”):

 

(a)                                  any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein, or any amendments or supplements thereto;

 

(b)                                 the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading; or

 

(c)                                  any
violation or alleged violation by the Company of any federal or state
securities law applicable to the Company relating to any action or inaction by
the Company in connection with the registration effected by the registration
statement;

 

provided, however, that the
indemnification required by this Section 7.1 shall not apply to amounts
paid in settlement of any such Loss if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such Loss to the extent
that it arises out of or is based upon a Violation which occurs in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of the indemnified party expressly for use in connection with such
registration; provided, further, that any indemnification
required by this Section 7.1 shall not apply to any Participating Holder
to the extent that any such Loss is based on or arises out of (i) sales of
Registrable Securities during any Suspension Period or (ii) an untrue statement
or alleged untrue statement of a material fact, or an omission or alleged
omission to state a material fact, contained in or omitted from any preliminary
prospectus if the final prospectus shall correct such untrue statement or
alleged untrue statement, or such omission or alleged omission, and a copy of
the final prospectus has been delivered to any such Participating Holder but
has not been sent or given by any such Participating Holder to such Person
alleging damage.

 

7.2                                 To
the extent permitted by applicable law, each Participating Holder shall,
severally and not jointly, indemnify and hold harmless the Company, each of its
directors, each of its officers who shall have signed the registration
statement, each Person, if any, who controls the Company within the meaning of
the Securities Act against any and all Losses incurred by the Company or such
Person pursuant to any actual or threatened action, suit, proceeding or

 

7

 

investigation, or
to which the Company or any of the foregoing Persons may otherwise become
subject under the Securities Act, the Exchange Act or other federal or state
laws, insofar as such Losses arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation arises out
of or is based upon and in conformity with written information furnished by or
on behalf of a Participating Holder expressly for use in connection with such
registration; provided, however, that (x) the indemnification
required by this Section 7.2 shall not apply to amounts paid in settlement
of any such Loss if such settlement is effected without the consent of the
relevant Participating Holder, which consent shall not be unreasonably
withheld, and (y) in no event shall the amount of any indemnity obligation
under this Section 7.2 exceed the net proceeds from the applicable
offering received by such Participating Holder.

 

7.3                                 (a)  Promptly after receipt by an indemnified
party under this Section 7 of notice of the commencement of any action,
suit, proceeding, investigation or threat thereof for which such indemnified
party may make a claim under this Section 7, such indemnified party
shall deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to assume the defense
thereof.  The failure to deliver written
notice to the indemnifying party as soon as practicable following the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 7 to the extent of such prejudice
but shall not relieve the indemnifying party of any liability that it may have
to any indemnified party otherwise than pursuant to this Section 7.  Any fees and expenses incurred by the
indemnified party (including any fees and expenses incurred in connection with
investigating or preparing to defend such action or proceeding) shall be paid
to the indemnified party, as incurred, within forty five (45) days of written
notice thereof to the indemnifying party (regardless of whether it is
ultimately determined that an indemnified party is not entitled to
indemnification hereunder).

 

(b)                                 Any
such indemnified party shall have the right to employ separate counsel in any
such action, claim or proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be the expenses of such indemnified
party unless (i) the indemnifying party shall have failed to promptly assume
the defense of such action, claim or proceeding or (ii) the named parties to
any such action, claim or proceeding (including any impleaded parties) include
both such indemnified party and the indemnifying party, and such indemnified
party shall have been advised by counsel that there may be one or more legal
defenses available to it which are different from or in addition to those
available to the indemnifying party and that the assertion of such defenses
would create a conflict of interest such that counsel employed by the
indemnifying party could not faithfully represent the indemnified party (in
which case, if such indemnified party notifies the indemnifying party in
writing that it elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to assume
the defense of such action, claim or proceeding on behalf of such indemnified
party, it being understood, however, that the indemnifying party shall not, in
connection with any one such action, claim or proceeding or separate but substantially
similar or related actions, claims or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for all such indemnified
parties.

 

8

 

7.4                                 If
the indemnification required by this Section 7 from the indemnifying
party is unavailable to an indemnified party hereunder in respect of any Losses
referred to in this Section 7:

 

(a)                                  The
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such Losses in such proportion as is appropriate to reflect the relative
fault of the indemnifying party and indemnified parties in connection with the
actions which resulted in such Losses, as well as any other relevant equitable
considerations.  The relative fault of
such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any Violation has been committed by,
or relates to information supplied by, such indemnifying party or indemnified
parties, and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such Violation.  The amount paid or payable by a party as a result of the Losses
referred to above shall be deemed to include, subject to the limitations set
forth in Section 7.1 and Section 7.2, any legal or other fees or
expenses reasonably incurred by such party in connection with any investigation
or proceeding.

 

(b)                                 The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 7.4 were determined by pro rata allocation
or by any other method of allocation which does not take into account the
equitable considerations referred to in Section 7.4(a).  No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.

 

7.5                                 If
indemnification is available under this Section 7, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
this Section 7 without regard to the relative fault of such indemnifying
party or indemnified party or any other equitable consideration referred to in Section
7.4.

 

7.6                                 The
obligations of the Company and the Participating Holders under this Section
7 shall survive the completion of any offering of Registrable Securities
pursuant to a registration statement under this Agreement, and otherwise.

 

8.                            Transfer
of Registration Rights.  The
rights of a Holder with respect to Registrable Securities pursuant to this
Agreement may be Transferred by such Holder to any Affiliate of such Holder in
connection with the Transfer of Registrable Securities to such Affiliate, in
all cases, if (a) the transferor shall have delivered to the Company written
notification of such proposed Transfer, setting forth the name of the
transferor, name and address of the transferee, and the number of Registrable
Securities which shall be so Transferred, (b) such transferee agrees in writing
to be bound by and subject to the terms and conditions of this Agreement and
the Company is provided a copy of such agreement and (c) the transferor is
Transferring at least 10,000 shares of Series A Preferred Stock (as adjusted
for any stock split, stock dividend, recapitalization or otherwise) at any
given time.

 

9

 

9.                                      Miscellaneous.

 

9.1                                 No
Other Agreements.  The Company shall
not hereafter enter into any agreement with respect to its securities that
violates the rights granted to the Holders in this Agreement.  The Investor hereby acknowledges that the
Company has made available for its review the Existing Registration Rights
Agreements.

 

9.2                                 Remedies.  Any Person having rights under any provision
of this Agreement shall be entitled to enforce such rights specifically to
recover damages caused by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law.  The parties hereto agree and acknowledge
that money damages are not an adequate remedy for any breach of the provisions
of this Agreement and that any party may apply for specific performance and for
other injunctive relief in order to enforce or prevent violation of the
provisions of this Agreement.

 

9.3                                 Amendments
and Waivers.

 

(a)                                  This
Agreement may not be amended, modified or supplement except by a written
instrument signed by each of the Company and the Holders of a majority of the
then Registrable Securities.

 

(b)                                 Any
term or provision of this Agreement may be waived, or the time for performance
extended, as authorized in writing by the party or parties entitled to the
benefit thereof.  No waiver of any term
or condition of this Agreement shall operate as a waiver of any other breach of
such term and condition or any other term or condition, nor shall any failure
to enforce any provision hereof operate as a waiver of such provision or of any
other provision hereof.  No written
waiver hereunder, unless it by its own terms explicitly provides to the contrary,
shall be construed to effect a continuing waiver of the provisions being waived
and no such waiver in any instance shall constitute a waiver in any other
instance or for any other purpose or impair the right of the party against whom
such waiver is claimed in all other instances or for all other purposes to
require full compliance with such provision.

 

9.4                                 Successors
and Assigns.  All covenants and
agreements in this Agreement by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto.

 

9.5                                 Entire
Agreement.  This Agreement, together
with the Series A Purchase Agreement, constitutes the entire agreement of the
parties hereto with respect to the subject matter contained herein, and
supersedes all prior agreements, negotiations, discussions and understandings
between the parties hereto with respect to such subject matter (including,
without limitation, the Term Sheet dated as of October 7, 2003 between the
Company and the Investor).

 

9.6                                 Severability.  Wherever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law and in such a way as to, as closely as possible, achieve the
intended economic effect of such provision and this Agreement as a whole, but
if any provision contained herein is, for any reason, held to be invalid,
illegal or unenforceable in any respect, such provision shall be ineffective to
the extent, but only to the extent, of such invalidity, illegality or
unenforceability without invalidating the

 

10

 

remainder of such
provision or any other provisions hereof, unless such a construction would be
unreasonable.

 

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

 

	
  If to the Company, to:

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
  Genaissance
  Pharmaceuticals, Inc.

  Five Science Park

  New Haven, Connecticut 06511

  Attention:  Chief Financial Officer

  Facsimile:  (203) 786-3567

  	
   

  	
  Hale and Dorr LLP

  60 State Street

  Boston, Massachusetts 02109

  Attention:  Steven D. Singer, Esq.

  Facsimile:  (617) 526-5000

  
	
   

  	
   

  	
   

  
	
  If to the Investor, to:

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
  RAM Trading, Ltd.

  c/o Ritchie Capital Management, LLC

  2100 Enterprise Avenue

  Geneva, Illinois 60134

  Attention:  Jon Lewis, General Counsel

  Facsimile:  (630) 232-4407

  	
   

  	
  Sidley Austin Brown
  & Wood LLP

  Bank One Plaza

  10 South Dearborn Street

  Chicago, Illinois  60603

  Attention:  Jon A. Ballis, Esq.

  Facsimile:  (312) 853-7036

  

 

9.8                                 Governing
Law.  This Agreement shall be
governed by, and construed in accordance with, the laws of the State of
Delaware, without giving effect to any choice of law or conflict of law rules
or provisions (whether of the State of Delaware or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the
State of Delaware.  In furtherance of
the foregoing, the internal law of the State of Delaware shall control the
interpretation and construction of this Agreement, even though under that
jurisdiction’s choice of law or conflict of law analysis, the substantive law
of some other jurisdiction would ordinarily apply.

 

9.9                                 Execution
in Counterparts.  This Agreement may
be executed in any number of counterparts (including via facsimile), each of
which will be considered an original instrument, but all of which together will
be considered one and the same agreement, and will become binding when one or
more counterparts have been signed by and delivered to each of the parties.

 

9.10                           Termination.  This Agreement may be terminated at any time
by a written instrument signed by all parties hereto.

 

9.11                           Attorneys’
Fees.  In any action or proceeding
brought to enforce any provision of this Agreement, or where any provision
hereof is validly asserted as a defense, the

 

11

 

successful party
shall be entitled to recover reasonable attorneys’ fees (including any fees
incurred in any appeal) in addition to its costs and expenses and any other
available remedy.

 

9.12                           No
Third Party Beneficiaries.  Nothing
herein expressed or implied is intended to confer upon any person, other than
the parties hereto or their respective permitted assigns, successors, heirs and
legal representatives, any rights, remedies, obligations or liabilities under
or by reason of this Agreement.

 

9.13                           Further
Assurances.  Each of the parties
hereto shall execute all such further instruments and documents and take all
such further action as any other party hereto may reasonably require in order
to effectuate the terms and purposes of this Agreement.

 

[SIGNATURE PAGE FOLLOWS]

 

12

 

IN WITNESS WHEREOF,
the parties hereto have caused this Registration Rights Agreement to be
executed the day and year first above written.

 

 

	
   

  	
  GENAISSANCE

  PHARMACEUTICALS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kevin Rakin

  	
   

  
	
   

  	
   

  	
  Name:  Kevin Rakin

  
	
   

  	
   

  	
  Title:  President & CEO

  
	
   

  	
   

  	
   

  
	
   

  	
  RAM
  TRADING, LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James R. Park

  	
   

  
	
   

  	
   

  	
  Name:  James R. Park

  
	
   

  	
   

  	
  Title:  VP
  Ritchie Capital Management, LLC

             Investment Advisor to RAM
  Trading, Ltd.

  

 

 

Signature Page

to the

Registration Rights Agreement

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