10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2000

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number 0-23223

CURAGEN CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE	06–1331400
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)
555 Long Wharf Drive, 11th Floor, New Haven, Connecticut	06511
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (203) 401-3330

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.01 par value

(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

The aggregate market value of voting common stock and nonvoting common stock held by non-affiliates of the registrant (without admitting that any person whose shares are not included in determining such value is an affiliate) on February 28, 2001, was approximately $565,218,300.

The number of shares outstanding of the Registrant's voting common stock and nonvoting common stock as of February 28, 2001 was 47,224,104 and 1,270,272, respectively.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant intends to file a definitive proxy statement pursuant to Regulation 14A within 120 days of the end of the fiscal year ended December 31, 2000. Portions of such proxy statement are incorporated by reference into Part III of this report.

CURAGEN CORPORATION
FORM 10-K
INDEX

PART I	Page #
ITEM 1. BUSINESS	1
ITEM 2. PROPERTIES	14
ITEM 3. LEGAL PROCEEDINGS	14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS	16
ITEM 6. SELECTED FINANCIAL DATA	17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS	18
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	23
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURES	43
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT	43
ITEM 11. EXECUTIVE COMPENSATION	43
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	43
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	43
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8–K	43

PART I

ITEM 1. BUSINESS

The following Business Section contains forward-looking statements, which involve risks and uncertainties. The Registrant's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Certain Factors That May Affect Results of Operations."

BUSINESS

General

We are a genomics based biopharmaceutical company. We research, develop and use technologies based on the discovery of genes and our understanding of their functions and relationships to accelerate the discovery and development of products to improve human and animal health and the vitality of agriculture, in collaboration with other companies and through our proprietary internal programs.

Our Internet-enabled genomics technologies, processes and information systems are fully integrated with one another and rapidly generate comprehensive information about the following:

• gene sequence--the order in which nucleotides (the building blocks of DNA) appear in a gene and control its function;
• variations in gene sequences;
• gene expression--the degree of gene activity;
• biological pathways and protein interactions--the pathways that proteins follow in carrying out the biological functions of cells and the interactions between them; and,
• the way potential drugs affect each of these respective areas.

Our genomics technologies and information systems are comprised of four primary components, each of which is fully operational and has been commercialized. A brief description is listed below:

• SeqCalling--a technology for gene sequencing and discovery of variations in gene sequences;
• GeneCalling--a patented technology for gene discovery and comprehensive gene expression analysis;
• PathCalling--a patented technology for analyzing the function and relationships between genes (and the proteins these genes encode) in biological pathways; and,
• SNPCalling--a technology for correlating genetic variations with specific diseases across distinct patient populations (commonly referred to as genotyping).

Each of these components is comprised of one or more proprietary technologies, automated processes, related databases and bioinformatics analysis tools. In addition to accelerating the discovery of new drug candidates, we are also using our GeneCalling technology, to predict the efficacy and safety of drug candidates currently in pharmaceutical development pipelines, and to review the performance and side effects of drugs already being marketed. This approach, referred to as pharmacogenomics, is aiding in the development of more effective and safer drugs. Pharmacogenomics can also potentially be utilized to identify more appropriate patient populations for use in clinical drug studies.

We have unified our SeqCalling, GeneCalling, PathCalling and SNPCalling technologies, processes and databases under a computer operating system that we refer to as GeneScape, which tracks and analyzes data and integrates all aspects of process management, data analysis and visualization. GeneScape is also a web-based portal that provides simultaneous, real-time access to our technologies, systems, databases and bioinformatics to researchers at multiple sites, allowing them to work together on discovery and development projects. We plan to continue enhancing and building additional technologies on our GeneScape operating platform.

We market our genomics technologies and information to pharmaceutical, biotechnology, agricultural, animal health and other life science companies through research collaborations. These research collaborations involve the application of our SeqCalling, GeneCalling, PathCalling, and SNPCalling technologies, systems and databases to collaborative research projects, and include support services required to characterize gene and target discoveries. These collaborations typically provide current revenues, but also include milestone payments for successful projects, and royalty-based revenues from products emerging from the drug development programs of our partners. We have conducted research with, and have the potential to receive future milestones and royalties from companies including Abgenix, Inc. ("Abgenix"), Bayer AG ("Bayer"), Biogen, Inc. ("Biogen"), COR Therapeutics, Inc. ("COR"), DuPont/Pioneer Hi-Bred International, Inc. ("DuPont/Pioneer Hi-Bred"), Gemini Genomics plc ("Gemini"), Genentech, Inc. ("Genentech"), GlaxoSmithKline, Inc. ("Glaxo"), Hoffmann-La Roche Inc. ("Roche Pharma") and its affiliate, Roche Vitamins, Inc. ("Roche Vitamins"), Monsanto Company ("Monsanto"), and Ono Pharmaceuticals Co., Ltd. ("Ono").

We are also applying our suite of genomics technologies to conduct research on our own behalf that encompasses drug discovery, drug development and pharmacogenomics. We have established internal programs to develop products to treat metabolic diseases, cancer, autoimmune and inflammatory diseases, and disorders of the central nervous system. During the next five years, our objective is to analyze systematically the genetic basis of many common diseases as well as the mechanisms of action and the adverse side effects of many commonly prescribed drugs. We are focusing our efforts on programs that address unmet medical needs and that we believe have the potential to yield products that can be commercialized in a relatively short time. In particular, we select human diseases and animal models of human diseases based on their potential to yield protein drugs, antibody drugs or novel small molecule drug targets for common diseases that lack effective treatments or to aid in the rational development or marketing of existing drugs. At each stage, we plan to reevaluate the relative merits of continuing such programs solely through internal efforts or through research collaborations.

The goal of our drug development programs is to advance promising therapeutic candidates into the clinic. We believe that we are leveraging the entire human genome to do this more systematically than ever before possible. We are focusing on two broad classes of therapeutics:

• secreted proteins, and,
• fully human monoclonal antibodies raised against membrane-bound or secreted proteins.

In order to determine the therapeutic potential of genes encoding secreted proteins, we have implemented high-throughput protocols for the production, purification and testing of these proteins. We have established high-throughput cell-based assays for characterizing the therapeutic potential of secreted proteins. We are currently evaluating the efficacy of a number of secreted proteins as potential human therapeutics using animal models. We are also employing a genomics-based approach for the development of monoclonal antibody therapeutics. These proteins will be used to make fully human monoclonal antibodies. Antibodies are naturally occurring proteins used by the body's immune system to combat many diseases. As therapeutic products, antibodies have several potential advantages over other therapies. The highly specific interaction between an antibody and its target may, for example, reduce unwanted side effects that may occur with other therapies. Fully human antibodies are desirable because they avoid the risk of rejection present with mouse or partial mouse antibodies.

Our business and competitive position depend in part on our ability to protect our genomics technologies, gene sequences, products, information systems and proprietary databases, software and other methods and technology. We have filed patent applications for our proprietary methods and devices for sequencing, gene expression analysis, for discovery of biological pathways and for drug screening and development. As of the date of this report, we have approximately 450 patent applications pending covering our technology, discoveries and products with the United States Patent and Trademark Office ("USPTO"), and have filed numerous corresponding international and foreign patent applications. As of the date of this report, we have been issued 15 patents with respect to aspects of our technologies, discoveries and products.

On January 5, 2001, the USPTO issued new guidelines for patent applications reflecting the USPTO's current policy regarding statutory written description and utility requirements for patentability. The implementation of these new guidelines may cause the USPTO to reject some of our pending new gene/protein patent applications. Although we believe that we will overcome such rejections to any of our commercially important new gene/protein cases, there is no guarantee that the USPTO will approve them. The new guidelines are not expected to impact pending cases directed to technology platforms.

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Overview

Complex diseases often arise through a combination of genetic and environmental factors. The successful treatment of such diseases often depends upon an understanding of how the body uses its genetic information, how disruptions in this information can lead to disease and, in turn, how drugs can arrest or reverse disease progression. Metabolic diseases, cancer, autoimmune diseases and disorders of the central nervous system are examples of such complex diseases. As scientific advances improve our understanding of the genetic basis of many diseases, we believe that the methods the pharmaceutical industry uses to develop new drugs will undergo a fundamental transformation. We believe that if we can develop and apply new genomics technologies to address this transformation, we will have a unique opportunity to develop the next generation of therapeutic products to treat important complex diseases.

In recent years, scientists have analyzed large portions of the genetic information contained within the human genome, which is a complete set of human genetic information. The most prominent of these projects was the publicly funded Human Genome Project. This discipline is termed genomics. Through genomics, scientists seek to understand the genetic basis of disease and to develop more effective treatments. However, to date, the pharmaceutical, animal health and agricultural industries have not used genomics extensively to develop new product opportunities primarily because:

• genomics technologies have been inadequate;
• discovery processes used by these industries have caused them to underestimate the influence of genetic and environmental factors upon disease;
• uniform information systems necessary to drive genomics technologies have been unavailable; and,
• information systems designed to manage, analyze, and ultimately understand genomic information were unavailable.

The treatment of complex diseases remains a major technological challenge and will require an integrated set of genomics technologies, processes and information systems. We believe that increased information about gene sequences, variations in gene sequences, gene expression, biological pathways and the proteins affecting these pathways, and about their interplay with drugs and the environment, coupled with information systems that enable the comprehensive understanding of this information, will accelerate drug discovery and development. We have developed our technologies, processes and information systems to generate this information and enable this understanding.

Our Approach to Genomics Based Drug Discovery

Our integrated genomic technologies, processes and information systems are designed to overcome significant technological limitations present in existing gene-based drug discovery and development methods. Our technology platform rapidly generates comprehensive information about gene sequences, variations in gene sequences, gene expression, biological pathways and the proteins affecting these pathways, and about their interplay with drugs, the environment and diverse patient populations. Our technology platform has been used by our collaborators and ourselves to analyze many diseases and has led to the discovery of a number of disease-related genes, drug targets and potential drugs.

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Gene Discovery (Our SeqCalling and GeneCalling Technologies)

Our SeqCalling technology generates comprehensive sequence databases of expressed genes from any species and is used to identify genetic variations (cSNPs). Our GeneCalling technology measures substantially all of the differences in gene expression levels between biological samples in order to discover disease-related genes and to measure their activity. Specifically, we designed our GeneCalling technologies to:

• comprehensively measure the expression levels of 95% of the genes expressed in any species; and,
• be integrated into an efficient, automated, high-throughput process.

The combination of these traits enables us to rapidly generate large databases of gene expression profiles. These technologies also permit us to pursue research programs for many disease systems and systematically process many samples in parallel. As a result, we are able to discover and seek patent protection for many commercially valuable disease-related genes and gene products.

Target Identification (Our GeneCalling and PathCalling Technologies)

We have developed our proprietary GeneCalling and PathCalling technologies to reduce the time and cost associated with the identification and functional understanding of targets for therapeutic intervention. Our GeneCalling technology measures substantially all of the differences in gene expression levels between biological samples in order to discover disease-related genes and to measure their activity. These genes can potentially be novel drug targets. Our PathCalling system is an automated, high-throughput process that identifies interactions between combinations of proteins and assembles these protein-protein interactions into our PathCalling database. By identifying such protein-protein interactions and comparing them with known pathways within the PathCalling database, we can determine the role of these proteins within a given biological pathway. We have designed our PathCalling technologies to permit disease-related genes to be linked rapidly to specific biological pathways, providing valuable information, that can lead to the discovery of new genes and additional targets for therapeutic intervention.

Pharmacogenomics and Pharmacogenetics (Our SeqCalling, GeneCalling, PathCalling, and SNPCalling Technologies)

Our SeqCalling, GeneCalling, PathCalling, and SNPCalling technologies can also be used in preclinical and clinical trials to predict which drugs are more likely to be effective by analyzing gene expression changes induced by drug treatment in humans and animal models. We have generated our GeneCalling databases for numerous drugs already on the market to accelerate the development of an improved generation of drugs with fewer side effects and to assist in the selection of appropriate patient populations. By correlating gene expression levels and the activities of biological pathways following treatment with specific drugs, we may be able to minimize the side effects of drugs, to identify appropriate patient populations for existing drugs and to aid in the development of safer and more effective drugs. In addition we use our SeqCalling database to identify genetic variations (cSNPs) in genes that respond to drugs, and can use these variations for identifying the most appropriate patients for a specific drug treatment.

Technology Integration and Information Systems (Our GeneScape Platform)

We have integrated our SeqCalling, GeneCalling, PathCalling and SNPCalling technologies under a single bioinformatics operating system we refer to as our GeneScape platform. This system unifies all aspects of process management, data storage and analysis, and visualization programs used in our technologies. Our goal is to establish our fully integrated technologies and GeneScape operating system as the preferred platform for genomics, as well as drug discovery, drug development and pharmacogenomics.

We designed GeneScape to meet the needs of researchers for a single operating system, which integrates research requests, project management, database access and data analysis and visualization. GeneScape provides the user with a web-based standardized interface to our processes and databases, operating over the Internet on any computer platform that supports a standard web browser. By providing simultaneous, real-time access to our technologies, systems and databases to researchers at multiple sites, GeneScape is a powerful tool that permits researchers to work together on discovery and development projects. As GeneScape is modular and may be

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expanded to incorporate other technologies, systems and databases, we intend to continually enhance this technology platform by adding additional technologies as they become applicable.

Products and Services

We are marketing our genomics technologies and genetic information derived from our technologies by establishing research collaborations with pharmaceutical, biotechnology, agricultural, animal health and other life science companies. Our research collaborations involve the application of our SeqCalling, GeneCalling, PathCalling, and SNPCalling technologies to a collaborator's projects. These technologies can be used alone or in concert in discovery efforts as well as preclinical and clinical trials to predict which drugs are more likely to succeed by analyzing gene expression changes induced by drug treatment in humans and animal models. We may also provide certain support services necessary to characterize gene and target discoveries, subscriptions to our databases and integration with a collaborator's existing development pipeline of products. We use our GeneScape software platform in such collaborations to manage our processes and provide access to our databases.

SeqCalling and GeneCalling Systems: Gene Sequencing and Gene Expression Services and Databases

We developed our proprietary SeqCalling and GeneCalling technologies to overcome significant limitations of competing gene and gene sequence discovery methods currently in use. Our GeneCalling system generates and analyzes gene expression profiles and stores differences in gene expression profiles to identify disease-related genes. The system permits sensitive detection of genes when expressed at very low levels and stores this information in a database. The patented GeneCalling technologies enable researchers to identify potentially novel genes and then compare them to existing genes through a database look-up approach. Unlike methods that use expressed-sequence tags, known as ESTs, our GeneCalling system does not require repetitive sequencing to measure gene expression. Our GeneCalling system measures expression levels and determines gene expression differences between biological samples (such as diseased and normal human tissues) and enhances the ability to discover disease-related genes.

Our SeqCalling system generates comprehensive sequence databases of expressed genes from any species and is used to identify new genes and human genetic variations known as single nucleotide polymorphisms (cSNPs). This system is biased towards identifying cSNPs, which are located within the coding regions of genes. cSNPs are of increasing value in research because they are believed to be useful markers in the identification of disease related genes and genetic differences, which may determine the response of a patient to disease and to drug treatment. Our technology is comprehensive in detecting genes with novel sequences and is therefore applicable universally to humans, animals, plants, and pathogens. In comparison, hybridization-based methods are primarily limited to known genes and do not readily discriminate between the many genes that share closely related DNA sequences.

PathCalling Systems: Protein and Pathway Analysis Services and Database

Once genes involved in a disease have been identified using our SeqCalling and GeneCalling technologies, it is important to be able to determine how the proteins that these genes encode interact in the complex biological pathways involved in the disease. A particular disease-related protein might not always be the best candidate for treatment or as a target for drug development. However, increased knowledge of the other proteins in the same pathway may lead to promising protein drugs or target candidates. Our PathCalling technologies were developed to provide a link between disease-related proteins and their biological pathways to aid in the identification and validation of appropriate targets following the discovery of a disease-related gene.

Our PathCalling system consists of patented, automated, high-throughput biological operations that simultaneously test for interactions between pairs of proteins. Our PathCalling system then assembles discovered protein-protein interactions into connected biological pathways, including pathways discovered previously by us or previously described in the scientific literature. Our objective is to continue to build our PathCalling database to contain protein-protein interactions that constitute the pathways that are relevant to disease. Our PathCalling bioinformatics tools permit a three-dimensional graphical display of all pathways contained in the database involving any particular protein and allow these pathways to be queried for information in much the same way gene sequence databases are queried today. We believe that this will allow disease-related genes to be linked to specific biological pathways. We believe the linkage will provide crucial biological context for gene discoveries, which may lead to the identification of potential targets for therapeutic intervention.

We seek patent protection on the use of specific proteins or protein- protein interactions as drug targets based on information provided by PathCalling, as well as our other high-throughput assays and animal model

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systems, in addition to composition of matter claims based on the sequences of novel and non-obvious proteins and the genes encoding them.

SNPCalling

Our SNPCalling technology identifies and characterizes human genetic variations for use in developing safer and more effective therapeutics. Our SNPCalling technology identifies and characterizes human genetic variations, known as single nucleotide polymorphisms, which are derived from the coding and regulatory regions of expressed genes (cSNPs). Through our genotyping process, these cSNPs are associated with disease genes and validated with a human clinical population. The SNPCalling technology is based upon our GeneCalling and SeqCalling technologies, and is integrated into the GeneScape Internet-based operating portal. SNPCalling enables scientists to:

• rapidly identify novel human genetic variations in genes and provide a catalog of information useful for the development of pharmaceutical and diagnostic products;
• correlate human cSNPs with specific diseases, enabling the discovery and rational selection of novel drug targets and predictive markers;
• identify genetic variations associated with individual drug response phenotypes and produce data that is useful for optimizing clinical trial design;
• characterize haplotypes and cSNP distributions in diverse populations; and,
• generate pharmacogenetic data for the stratification of patient populations and enable the selection and triage of therapeutics and appropriate diagnostics.

Our GeneScape Bioinformatics Platform

We designed GeneScape to meet the needs of researchers for a single operating system, which integrates research requests, project management, database access and data analysis and visualization. GeneScape provides the user with a web-based standardized interface to our processes and databases, operating over the Internet on any computer platform that supports a standard web browser. GeneScape is modular and may be expanded to incorporate other processes. GeneScape currently consists of three components:

• discovery;
• study management; and,
• CuraTools.

Discovery. The Discovery component of our GeneScape system manages queries to our SeqCalling, GeneCalling, and PathCalling databases. GeneScape provides data analysis and visualization through a flexible, easy-to-use point-and-click interface organized in three sections corresponding to the SeqCalling, GeneCalling, and PathCalling databases. The GeneScape system provides the answers to queries in visual format, organized according to the following preferences set by the end user:

• differential gene expression;
• expression in particular samples, tissues, or disease stages;
• participation in metabolic or signal transduction pathways;
• map position;
• functional role;
• interactions with proteins or small molecules; or,
• other custom criteria.

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Study Management. Our collaborators can manage processes and resources over the Internet to meet their individual research needs. Separate links on the Study Management page of our GeneScape software platform provide direct, up-to-the-minute status reports for projects, individual processes within projects, and resource allocation among projects and processes. The Study Management component of the GeneScape software platform automates the operation of every station in the SeqCalling, GeneCalling, and PathCalling systems and monitors quality control at each processing step.

CuraTools. GeneScape also includes CuraTools, an easy-to-use, unified bioinformatics software package which provides the following information:

• DNA and protein sequence analysis;
• sequence similarity to known genes, protein drugs and protein targets;
• identification of proteins participating in biological pathways; and,
• custom literature searches.

CuraTools also provides users with access to publicly available sequence, mapping and expression databases that we have imported, assembled, and annotated for enhanced value. In addition, we have assembled proprietary sequence and mapping databases for portions of the corn, mouse, rat and human genomes. Collaborators can elect to have us link their own proprietary or third party sequence databases into GeneScape and CuraTools for their own exclusive use.

GeneScape Portal

The GeneScape Portal is our Internet portal that makes available a subset of our bioinformatics analysis tools (known as CuraTools) and non-proprietary gene sequence and expression data to non-collaborators, primarily the academic research community. We believe the GeneScape Portal enhances our standing among this influential group, aiding our employee recruitment effort and generating referrals for future collaborations. The GeneScape Portal also serves as a vehicle to aggregate all the public information on the Human Genome Project with our internal efforts. In addition, we will use the GeneScape Portal to release selected additional information on genes, sequence variations, and biological pathways to current and future users.

Technology Subsidiary

In June 2000, we announced the formation of 454 Corporation ("454"), a majority-owned subsidiary established to develop novel technologies for rapidly and comprehensively analyzing entire genomes. The technologies being developed at 454 are expected to have broad applications in drug discovery, preclinical drug development, and the field of pharmacogenetics. This subsidiary was funded primarily through a private placement totaling $32,500,000 from investors including Soros Fund Management, L.L.C., Cooper Hill Partners, L.L.C, and members of our senior management team.

Research Collaborations

As part of our business strategy, we establish research collaborations with pharmaceutical, biotechnology, agricultural, animal health and other life science companies. Our collaborations generally provide revenues in the form of fees for work performed by our employees in the generation of gene sequences, gene expression, biological pathway, and/or genotyping data from samples provided by a collaborator. The collaborator has the ability to control how resources are allocated to generate SeqCalling, GeneCalling, PathCalling, and SNPCalling databases. Collaborators typically have the right to license, for an up-front fee, discoveries arising from a collaboration, including rights to novel genes, novel uses of previously identified genes, protein drugs, antibody targets, small molecule drug targets, as well as markers for prioritizing drugs and markers for selecting patient populations. Collaborations typically include possible milestone payments to us based on objectives achieved and potential royalty payments to us on sales of products developed using discoveries made through the use of our technology. Either party can terminate the agreement at any time the collaboration permits them to or if either party materially breaches the contract. We may not be able to maintain or expand existing collaborations or establish any additional research collaborations, licensing or subscription agreements. For instance, Biogen and DuPont/Pioneer Hi-Bred, which together accounted for approximately 26% of our revenue in 2000, have opted not to renew the research portions of their collaborations with us, although DuPont/Pioneer has opted to remain a client of ours by taking a license to our GeneScape bioinformatics system. If any of our remaining collaborators were to breach,

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terminate or not renew their agreements with us or otherwise fail to conduct collaborative activities successfully and in a timely manner, the preclinical or clinical development or commercialization of product candidates or research programs would be delayed or terminated.

We also seek to enter into strategic alliances that provide us access to complementary technologies to accelerate our own internal discovery and development projects, and to co-develop and co-commercialize certain products. To date, we have entered into significant strategic alliances with Abgenix, Bayer, and Gemini, in addition to numerous smaller agreements to facilitate these efforts.

Abgenix

In December 1999, we entered into a strategic alliance with Abgenix to develop and commercialize genomics-based antibody drugs using Abgenix' XenoMouseTM technology. This five-year alliance was established initially to identify up to 120 fully human antibody drug candidates intended for treating a broad range of complex diseases including cancer and autoimmune disorders. Antibodies determined to have commercial product potential will be allocated between the parties for further development. We will reciprocate milestone and royalty payments with Abgenix for products resulting from this drug development alliance. In addition, under the agreement, Abgenix purchased 837,990 shares of our common stock at a price of $17.90 per share for $15,000,021 through a private placement.

In November 2000, we expanded our alliance with Abgenix to develop and commercialize up to 250 fully human antibody drug candidates across all disease areas. As part of this expanded alliance, Abgenix purchased an additional 1,441,442 shares of our common stock at a price of approximately $34.69 per share for $50,000,000 in a private placement. The shares issued to Abgenix are restricted securities under the Securities Act. In addition, all the shares issued to Abgenix, including shares previously purchased by Abgenix, are subject to a one-year lock-up restriction ending on November 27, 2001. After November 27, 2001, Abgenix has demand and piggyback registration rights on the shares.

Bayer

In January 2001, we signed two comprehensive drug discovery, evaluation, development, and co-commercialization agreements with Bayer. As part of these agreements, Bayer purchased 3,112,482 shares of our common stock at a price of approximately $27.31 per share (which purchase price reflected the average closing price during the 20-day trading period preceding the date of the stock purchase agreement) in a private placement totaling $85,000,000.

The first agreement is a comprehensive collaboration to discover, develop, and jointly commercialize small molecule drugs to treat obesity and adult onset diabetes. We are to provide 80 drug targets over the first five years of the collaboration, as well as grant access to our comprehensive suite of functional genomic technologies, bioinformatics and pharmacogenomic expertise to select, prioritize and ensure that the resulting drugs are administered to the appropriate patients. Bayer will utilize its high-throughput screening, combinatorial chemistry, medicinal chemistry, pharmacology, and development expertise to develop small molecule compounds against the targets supplied by us. We will share expenses with Bayer related to later stage preclinical and clinical compound development, and both companies have committed to bringing twelve candidates in obesity and diabetes to clinical development. Both parties will jointly fund the relevant research, development and commercialization activities up to $1,340,000,000 over a 15-year period. The research and development costs will be split 56% to 44% between both Bayer and us, respectively. Ultimately, we will jointly commercialize drugs resulting from this alliance with Bayer, and then share profits according to our respective contributions. Under the termination provisions outlined in the agreement, either party can terminate upon breach of contract or if there is a change in corporate control, upon providing 30 days written notice to the other party.

The second agreement is a broad, five-year pharmacogenomic and toxicogenomic collaboration that is expected to provide us with $39,000,000 in revenues over the term of the agreement. We will apply our functional genomic technologies and pharmacogenomics expertise to evaluate Bayer's developmental and preclinical pipeline of pharmaceutical compounds across all disease areas. Through the efforts of this collaboration, we and Bayer expect to reduce drug development costs, reduce the time to market, and create safer and more efficacious drugs. In addition, we and Bayer intend to compile a database of gene-based markers and information that will enable scientists to predict potential drug toxicities, understand how particular drugs work, and identify new disease indications. Both parties have exclusive rights to use the established database, however we have the right to market this database and pay Bayer royalties on the resulting revenues. During the later stages of this collaboration, Bayer

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has an option to negotiate a technology transfer agreement. Under the termination provisions outlined in the agreement, either party can terminate at any time upon mutually agreeing to do so, or after 30 days written notice of breach of contract.

Biogen

In October 1997, we entered into a research collaboration with Biogen to discover novel genes and therapeutics across a range of Biogen-specified disease programs. This early collaboration provided Biogen with access to our proprietary genomics technologies, including the GeneScape bioinformatics software platform in order to generate GeneCalling and PathCalling databases from Biogen-specified disease systems. Biogen had an option to acquire exclusive licenses to certain discoveries arising from the collaboration. In October 2000, we concluded the research portion of our agreement with Biogen and licensed to them five novel drug targets. All rights to the information generated throughout this collaboration reverted back to us upon concluding this collaboration, and we are eligible to receive royalty payments if any products emerge from work conducted during this collaboration.

COR

In May 1999, we signed a product discovery and pharmacogenomics agreement with COR. Under the terms of this agreement, we apply our functional genomics technologies, related services, and pharmacogenomics expertise to identify new drug targets and develop novel cardiovascular drugs. This collaboration was for an initial term of 18 months, ending in November 2000, with an option to extend the collaboration for three additional twelve month terms. In December 2000, both parties extended their agreement until negotiations for continuation or conclusion are completed. In March 2000, we expanded our collaboration with COR to apply our PathCalling proteomics technology and bioinformatics systems to create an annotated database of protein-protein interactions derived from cardiovascular endothelial cells, in order to discover additional novel drug targets, as well as to offer functional information and validation of previously discovered targets. We receive research funding, and may receive milestone and royalty payments for products developed by COR as a result of this collaboration. COR intends to utilize this database to advance the discovery and development of novel pharmaceutical products designed for the treatment and prevention of severe cardiovascular diseases.

Dupont/Pioneer Hi-Bred

In June 1997, we entered into a collaborative research and license agreement with DuPont/Pioneer Hi-Bred whereby we agreed to perform research funded by DuPont/Pioneer Hi-Bred for the selection, identification and development of improved crops. In November 2000, we concluded the research portion of our agreement with DuPont/Pioneer Hi-Bred, with all work in progress to be completed by May 2001. Upon conclusion, DuPont/Pioneer Hi-Bred signed a three year agreement with us to gain access to our GeneScape bioinformatics system. After one year, DuPont/Pioneer Hi-Bred can terminate this agreement upon 30 days written notice. We will now receive access subscription payments, and can potentially receive royalty payments based upon products emerging from collaborative research conducted during this collaboration.

Gemini

In April 2000, we entered into a comprehensive, renewable two-year collaboration with Gemini to link human genetic variations (cSNPs) and clinical information to identify and validate novel drug targets for use in the discovery and development of pharmaceutical and diagnostic products. The parties intend to associate thousands of our human genetic variants with disease traits derived from Gemini's database of clinical populations, in order to validate genes and genetic variants that contribute to the onset of complex diseases such as obesity and diabetes, cancer, autoimmune diseases, and psychiatric disorders. We intend to apply this information to advance the development of drugs and to discover diagnostics for use in selecting and prescribing the most appropriate drugs to treat human diseases.

In October 2000, we entered into a new drug target discovery collaboration with Gemini, which includes the application of our PathCalling proteomic technology to identify potential therapeutic intervention points by identifying important disease-related pathways and examining interactions between proteins within those biochemical pathways. The parties will jointly own intellectual property arising from this collaboration and it is anticipated that this collaborative research will enable Gemini and us to identify key targets for drug discovery and understand the biological context of disease-associated genes. This collaboration builds upon the prior collaborative research agreement established in April 2000. Under the termination provisions outlined in the agreement, either party can terminate the collaboration upon 60 days written notice of breach of contract.

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Genentech

In June 1996, we entered into a pilot research services and evaluation agreement with Genentech. The pilot collaboration was superseded by the evaluation agreement, signed and effective December 1996, pursuant to which we performed additional research services during 1997. We completed the research within four months of the receipt of tissue samples from Genentech as required by the evaluation agreement.

In November 1997, we entered into a research collaboration with Genentech to discover novel genes and therapeutics across a range of Genentech-specified disease programs. Genentech has an option to acquire licenses to certain discoveries arising from the collaboration. In March 2000, Genentech extended their agreement for an additional two and one half years and paid us an undisclosed amount for discoveries through this date stemming from our collaboration. Under the termination provisions outlined in the agreement, either party can terminate after March 31, 2003 upon providing 60 days written notice.

Glaxo

In November 1998, we entered into a drug discovery collaboration with Glaxo to apply our integrated genomics technologies to the study and selection of Glaxo compounds for clinical development. This discovery and pharmacogenomics collaboration, up to five years in duration, is intended to enable Glaxo to select drug candidates with the highest likelihood of success in clinical trials. Specifically, we evaluate numerous compounds across Glaxo therapeutic programs, identifying gene responses associated with compound efficacy and toxicity. Under the terms of the agreement, we receive research funding and may receive additional milestone and royalty payments if any drugs emerge from this collaboration. Under the termination provisions outlined in the agreement, either party can terminate after completing the initial 18 months of the collaboration by providing 90 days written notice.

Monsanto

In December 2000, we entered into an early stage collaboration with Monsanto to apply our functional genomic technologies to discover key genes involved in the growth of crops with improved quality traits. Specifically, scientists will apply our integrated functional genomic technologies to measure gene expression in various strains of corn in order to identify select genes that naturally improve output traits and enhance the development of corn crops with higher nutritional value. Under the termination provisions outlined in the agreement, this collaboration can be either expanded or terminated upon completion of the initial projects.

Ono

In June 2000, we entered into an expandable, two-year pharmacogenomic collaboration with Ono to apply our platform of functional genomic technologies to gain a greater understanding of how drugs work, their potential side effects, and to determine how genetic variations influence an individual's specific response to a particular drug. Understanding how genes influence and affect drug efficacy and toxicity will potentially enhance Ono's ongoing effort to evaluate and select the safest and most efficacious drug candidates for further advancement into clinical trials. Under the termination provisions outlined in the agreement, either party can terminate the collaboration at any time by providing 60 days written notice.

Roche Pharma and Roche Vitamins

In March 1999, we signed a life sciences target discovery and pharmacogenomics collaboration retroactively effective as of January 1, 1999 with F. Hoffmann-La Roche Ltd., Roche Pharma and Roche Vitamins. This agreement outlines strategic partnerships with F. Hoffmann-La Roche Ltd. and its affiliates and is designed to discover new drug targets, evaluate existing product candidates and facilitate the development of drugs and diagnostic tests for the purposes of improving human and animal health. Under the terms of this agreement, we receive research funding and may receive additional milestone and royalty payments if any products emerge from this collaboration. The original agreement was for an initial term of two years and includes an option to extend for three additional one-year terms. Effective January 2001, Roche Pharma and Roche Vitamins extended their agreements with us for a period of one year and are currently negotiating with us for access to other services provided by us.

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Curagen's Internal Programs

We also use our integrated genomics technologies on our own behalf to pursue a broad portfolio of research programs that encompass drug discovery, pharmacogenomics and drug development. Our objective is to systematically analyze the genetic basis of many common diseases as well as the mechanisms of action and adverse side effects of many commonly prescribed drugs. We are focusing our efforts on programs that address unmet medical needs and programs that we believe have the potential to yield products that can be commercialized in a relatively short time. In particular, we select human diseases and animal models of human diseases based on their potential to yield novel protein, antibody, and small molecule drugs for treating common diseases that lack effective treatments. These programs have also been established to aid in the rational development of new drugs and in the marketing of existing drugs.

We have also developed an innovative approach to discover genes associated with inherited diseases that we call positional expression cloning. We combine our proprietary analyses concerning gene expression with existing gene mapping techniques to identify candidate genes that both show altered expression and can be "mapped" to the chromosomal locations known to contain underlying disease genes. Our positional expression cloning approach is particularly effective in identifying and characterizing genes indicating susceptibility to and genes providing protection against many common complex diseases. In addition, we use systematic studies of existing drugs and our large-scale databases of sequences, sequence variation, gene expression profiles, and pathways to identify disease-related targets.

We use our technologies to pursue research programs for many disease systems in parallel. Each of these programs has the potential to rapidly identify a large number of commercially valuable disease-related genes and potential drug targets. As part of our internal programs, we also seek patent protection for newly discovered disease-related genes and proteins, as well as for novel uses of known genes and the proteins they encode.

Drug Discovery Programs

Our internal programs apply our integrated functional genomic technologies to drug discovery and drug development. The discovery programs focus on human diseases that have the potential to yield protein therapeutics, monoclonal antibodies and small molecule targets and seek to uncover variations of genes that may predispose or protect individuals from susceptibility, onset or progression of disease. Pharmacogenomic studies are also used to find additional drug targets, to understand how current drugs work, and to prioritize the development of our own drugs. It is our intention to partner in the development and commercialization of small molecule therapeutics to treat these diseases.

Metabolic Diseases. Within the field of metabolic diseases, we are analyzing a variety of primary human disease tissues and genetic and cell-based models relating to specific metabolic diseases, including obesity, adult onset diabetes, and hypertension. We believe that our technologies are well suited to identifying the genes and pathways involved in these diseases, which are known to involve errors in signal transduction and the regulation of metabolic pathways. To date, we have used SeqCalling and GeneCalling to discover genes associated with these diseases and have used PathCalling to identify disease-related pathways and additional targets for drug discovery.

Cancer. Cancer encompasses disease processes of almost every organ system and involves the loss of control of multiple, diverse mechanisms of signal transduction and pathway regulation. We are applying SeqCalling, GeneCalling and PathCalling to identify the genes and pathways involved in the early development of cancer and its step-wise progression to metastatic disease. We have analyzed a number of models of cancer and have identified pathways incorporating proteins common to many of the models. Genes specifically upregulated in cancerous tissue may be excellent targets for the development of monoclonal antibody drugs.

Autoimmune and Inflammatory Diseases. Although diseases of the immune system, such as systemic lupus erythematosus and rheumatoid arthritis, are among the most common and chronic, existing drugs for autoimmune diseases have exhibited limited efficacy and debilitating side effects. We are actively identifying and validating potential drug targets associated with these diseases and have filed for patent protection related to discoveries made thus far.

Disorders of the Central Nervous System. We are currently examining both psychiatric and neurological disorders in order to identify potential targets in these areas. Our efforts combine the understanding of currently marketed drugs with the best human and animal models of the disease. To date we have studied over 40 drugs with specific action in the central nervous system and uncovered a number of novel genes, pathways and potential targets.

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Pharmacogenomics

Using our GeneCalling technologies, the tissues targeted by a drug, as well as the organs that might exhibit side effects, including heart, liver and kidney, can be studied in animal models thought to be indicative of human response. We believe that this information may help pharmaceutical companies select and optimize drug candidates based on improved efficacy and reduced side effects. We further believe that this information will help the pharmaceutical industry to significantly reduce the time and cost of drug development.

In addition to reducing the time and cost of developing drugs, we believe that the understanding generated by our technologies may strengthen Food and Drug Administration ("FDA") applications. For drugs already on the market, an understanding of the mechanism of action through pharmacogenomics can help identify appropriate patient populations and lead to an improved second generation of drugs.

We have analyzed drugs whose commercial viability or clinical indications are threatened either by a lack of understanding of mechanism of action or by severe side effects. Our goal is to continue to generate databases (CuraTox and CuraMode) to provide pharmacology and toxicology information, to understand the mechanism of drug action, to identify patient populations that are likely to respond favorably to a particular medication and, potentially, to identify new indications or more optimal targets.

Using this approach, we have identified candidate genes predictive of drug efficacy and toxicity in model systems. Currently, we are studying over 140 marketed drugs, preclinical candidates and non-pharmaceutical toxins to identify putative predictive markers of drug efficacy and toxicity that can be prospectively used by us and our pharmaceutical collaborators to effectively and efficiently triage novel drugs.

In addition to understanding the genes that respond to drug treatment we are linking these genes to our database containing hundreds of thousands of cSNPs. The discovery of cSNPs predicting efficacy or toxicity may be of tremendous value in personalizing medicine at the genetic level by:

• expediting compounds through clinical trials;
• reducing toxicity by segmenting patient populations; and,
• giving the right drug to the right patient.

To date, we have identified thousands of cSNPs in potential drug targets and drug response genes.

Drug Development Programs

The goal of our drug development programs is to advance promising therapeutic candidates into the clinic. We are focusing on two broad classes of therapeutics:

• secreted proteins; and,
• fully human monoclonal antibodies raised against membrane-bound or secreted proteins.

The therapeutic candidates that show superior efficacy will be further evaluated with our pharmacogenomics technology.

Therapeutic Proteins. In order to determine the therapeutic potential of genes encoding secreted proteins, we have implemented high-throughput protocols for the production, purification and testing of these proteins. We have established high-throughput cell-based assays for characterizing the therapeutic potential of secreted proteins. We are currently evaluating the efficacy of a number of secreted proteins as potential human therapeutics using animal models. Protein candidates that have excellent efficacy and favorable toxicity profiles will be selected as clinical candidates.

Therapeutic Antibodies. We are also employing a genomics based approach for the development of monoclonal antibody therapeutics. We have identified genes that make suitable targets for monoclonal antibody therapy, may be associated with disease, and on which we potentially have a good intellectual property position. These proteins will be used to make fully human monoclonal antibodies. Antibodies are naturally occurring proteins used by the body's immune system to combat many diseases. As therapeutic products, antibodies have several potential advantages over other therapies. The highly specific interaction between an antibody and its target may, for example, reduce

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unwanted side effects that may occur with other therapies. Fully human antibodies are desirable because they avoid the risk of rejection present with mouse or partial mouse antibodies. We will be systematically testing human monoclonal antibodies for efficacy in human cell and animal models of disease. Monoclonal antibodies that demonstrate excellent efficacy combined with a favorable toxicity profile will be selected as clinical candidates for the treatment of disorders.

Competition

We face, and will continue to face, intense competition from one or more of the following entities:

• pharmaceutical companies;
• biotechnology companies;
• diagnostic companies;
• academic and research institutions; and,
• government agencies.

We are also subject to significant competition from organizations that are pursuing technologies and products that are the same as or similar to our technology and products. Many of the organizations competing with us have greater capital resources, research and development staffs and facilities and marketing capabilities. In addition, research in the field of genomics generally is highly competitive. Our competitors in the genomics area include:

• Human Genome Sciences, Inc.;
• Millennium Pharmaceuticals, Inc.;
• major pharmaceutical companies; and,
• universities and other research institutions (including those receiving funding from the federally funded Human Genome Project).

A number of our competitors are attempting to rapidly identify and patent genes and gene fragments sequenced at random, typically without specific knowledge of the function of such genes or gene fragments. If our competitors discover or characterize important genes or gene fragments before we do, it could adversely affect any of our related disease research programs. We expect that competition in genomics research will intensify as technical advances are made and become more widely known. The competition listed above was selected based upon identifying those companies that we feel have business models that are similar to ours.

Intellectual Property

Our business and competitive position depend on our ability to protect our genomics technologies, gene sequences, products, information systems and proprietary databases, software and other methods and technology. We have filed patent applications for our proprietary methods and devices for sequencing, gene expression analysis, for discovery of biological pathways and for drug screening and development. As of the date of this report, we have approximately 450 patent applications pending covering our technology, discoveries and products with the USPTO, and have filed numerous corresponding international and foreign patent applications. As of the date of this report, we have been issued 15 patents with respect to aspects of our technologies, discoveries and products.

On January 5, 2001, the USPTO issued new guidelines for patent applications reflecting the USPTO's current policy regarding statutory written description and utility requirements for patentability. The implementation of these new guidelines may cause the USPTO to reject some of our pending new gene/protein patent applications. Although we believe that we will overcome such rejections to any of our commercially important new gene/protein cases, there is no guarantee that the USPTO will approve them. The new guidelines are not expected to impact pending cases directed to technology platforms.

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Government Regulation

Prior to the marketing of any new drug developed by us, or by our collaborators, that new drug must undergo an extensive regulatory approval process in the United States and other countries. This regulatory process, which includes preclinical and clinical studies, as well as post-marketing surveillance to establish a compound's safety and efficacy, can take many years and require the expenditure of substantial resources. Data obtained from such studies are susceptible to varying interpretations that could delay, limit or prevent regulatory approval. The rate of completion of clinical trials is dependent upon, among other factors, the enrollment of patients. Patient accrual is a function of many factors, including:

• the size of the patient population;
• the proximity of patients to clinical sites;
• the eligibility criteria for the study; and
• the existence of competitive clinical trials.

We have not submitted an investigational new drug application for any product candidate, and no product candidate has been approved for commercialization in the United States or elsewhere. We, or any of our collaborators, may not be able to conduct clinical testing or obtain the necessary approvals from the FDA or other regulatory authorities for any products. Failure by us, or our collaborators, to obtain required governmental approvals will delay or preclude our collaborators from marketing drugs or diagnostic products developed with us or limit the commercial use of such products and could have a material adverse effect on our business, financial condition and results of operations.

Our research and development activities involve the controlled use of hazardous materials and chemicals. We are subject to federal, state and local laws and regulations governing the use, storage, handling and disposal of such materials and certain waste products.

We were incorporated in Delaware in November 1991. Our principal executive offices are located at 555 Long Wharf Drive, 11th Floor, New Haven, Connecticut 06511. Our telephone number is (203) 401-3330. We maintain a web site on the Internet at http://www.curagen.com.

GeneScape(R), GeneCalling(R), Niagara(R), QEA(R), OGI(R), SeqCalling(TM), PathCalling(R), HitCalling(TM), SNPCalling(TM), GeneTools(TM), Niagara(TM), MicroNiagara(TM), NanoNiagara(TM), CuraGen(TM), CuraMode(R), CuraTools(R), CuraMap(TM), CuraSelect(TM), CuraTox(R) and GeneScape Portal(R) and other trademarks of CuraGen Corporation mentioned in this report are the property of CuraGen Corporation. All other trademarks or trade names referred to herein are the property of their respective owners.

Employees

As of December 31, 2000, we had 358 full and part-time employees, 117 of whom hold Ph.D., M.D. or J.D. degrees. The employee group includes engineers, physicians, molecular biologists, chemists, lawyers and computer scientists. We believe that we maintain good relationships with our employees. We believe that our future success will depend in large part on our ability to attract and retain experienced and skilled employees.

Seasonality

Our business is not subject to any material fluctuations based on the season of the year.

ITEM 2. PROPERTIES

We maintain our principal administrative offices along with research facilities in both Branford and New Haven, Connecticut. We lease a total of approximately 86,000 square feet at both locations. The leases are generally for terms of two to five years, and provide renewal options for terms of up to one year. We believe that our facilities are adequate for our current operations or that suitable additional space will be available as needed.

ITEM 3. LEGAL PROCEEDINGS

We are not a party to any material legal proceedings.

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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our security holders during the quarter ended December 31, 2000.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

Our voting common stock is traded on the Nasdaq National Market under the symbol ""CRGN"". There is no established public trading market for our nonvoting common stock. We effected a two-for-one stock split in March 2000, and accordingly, the prices below are shown on a post-split basis. The following table sets forth, for the periods indicated, the low and high closing prices per share for our voting common stock, as reported by the Nasdaq National Market:

	1999
	Low	High
Quarter Ended March 31, 1999	$3.0000	$3.6250
Quarter Ended June 30, 1999	2.5315	4.0000
Quarter Ended September 30, 1999	3.3750	9.2500
Quarter Ended December 31, 1999	6.9375	34.8750
	2000
	Low	High
Quarter Ended March 31, 2000	$31.3125	$118.2500
Quarter Ended June 30, 2000	23.3750	46.3125
Quarter Ended September 30, 2000	32.3906	53.2812
Quarter Ended December 31, 2000	26.8125	64.8750

Stockholders

As of February 28, 2001, there were approximately 172 shareholders of record of our voting common stock and, according to our estimates, 13,657 beneficial owners of our voting common stock. All of our nonvoting common stock is held by Genentech.

Dividends

We have never paid cash dividends on our common stock and do not anticipate declaring any cash dividends in the foreseeable future. We currently intend to retain earnings, if any, to finance the development of our business.

Stock Split

On March 2, 2000, we announced a two-for-one split on both our voting common stock and our nonvoting common stock, each payable to our stockholders in the form of a stock dividend. On March 30, 2000, our stockholders of record received one additional share of our voting common stock for every share of voting common stock and one additional share of nonvoting common stock for every share of nonvoting common stock each stockholder owned at the close of business on March 15, 2000. All share and per share data have been adjusted retroactively to reflect the split.

Private Placement

On November 27, 2000, we sold an aggregate of 1,441,442 shares of our common stock, in a private placement, to Abgenix for an aggregate purchase price of $50,000,000. We sold these shares at the same time we expanded our collaboration agreement with Abgenix. No underwriters were involved in this offering and sale of these shares. We offered and sold these shares in reliance on the exemption from the registration provisions of the Securities Act of 1933, as amended, set forth in Section 4(2) of the Securities Act. The offer and sale was made only to ""accredited investors"" as that term is defined in Regulation D under the Securities Act and we did not engage in a general solicitation or advertisement of the offer and sale of the shares. The shares issued to Abgenix are restricted securities under the Securities Act. In addition, all the shares issued to Abgenix, including shares previously purchased by Abgenix, are subject to a one-year lock-up restriction ending on November 27, 2001. After November 27, 2001, Abgenix has demand and piggyback registration rights on the shares.

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ITEM 6. SELECTED FINANCIAL DATA

The selected financial data set forth below for each of the three years in the period ended December 31, 2000 are derived from our consolidated balance sheets as of December 31, 1999 and 2000 and the related consolidated statements of operations, of stockholders' equity and of cash flows for the three years ended December 31, 1998, 1999 and 2000 and notes thereto as audited by Deloitte & Touche LLP, independent auditors, which are included elsewhere in this report. The selected financial data as of December 31, 1996, 1997 and 1998 and for the two years in the period ended December 31, 1997 have been derived from our related financial statements, and are not included in this report. The selected financial data set forth below should be read in conjunction with, and are qualified by reference to, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our audited financial statements.

	Year Ended December 31,
	2000	1999	1998	1997	1996(1)
Consolidated Statement of Operations Data:
Total revenue	$20,838,213	$15,103,517	$9,257,025	$5,896,543	$4,422,947
Net loss attributable to common stockholders	(26,978,387)	(25,762,760)	(18,936,920)	(7,290,434)	(606,241)
Net loss per share attributable to common
stockholders	(0.70)	(0.89)	(0.78)	(0.46)	(0.06)
Weighted average number of common shares
outstanding attributable to common
stockholders	38,747,819	28,801,984	24,402,012	15,776,766	10,194,146
	December 31,
	2000	1999	1998	1997	1996
Consolidated Balance Sheet Data:
Cash and cash equivalents	$476,298,314	$76,374,571	$43,293,995	$17,417,161	$3,298,642
Working capital	462,542,783	67,890,543	33,065,608	14,738,672	2,474,038
Total assets	499,162,833	93,894,276	60,804,501	26,519,029	5,653,391
Total long–term liabilities	154,907,154	8,409,994	6,983,927	4,375,125	1,908,915
Accumulated deficit	(81,680,655)	(54,702,268)	(28,939,508)	(10,511,023)	(3,289,013)
Stockholders' equity	311,608,855	74,998,629	42,475,193	13,682,175	2,117,801
Cash dividends declared
per common share	None	None	None	None	None

(1) During the year ended December 31, 1996, we completed our development stage activities with the signing of our first collaborative research agreement and commenced our planned principal operations.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We are a genomics based biopharmaceutical company. We apply proprietary technologies to discover genes and proteins, and to determine how these genes and proteins function in healthy and diseased states. We use this information to develop products on our own behalf, and in collaboration with other companies, in order to improve human health, animal health, and the vitality of agriculture. We have established internal drug discovery and development programs that are focused upon developing products to treat humans afflicted by diseases such as obesity and diabetes, cancer, autoimmunity and inflammation, and central nervous system disorders. We are developing protein drugs on our own behalf; have established a collaboration with Abgenix, Inc. ("Abgenix") to develop antibody drugs across all diseases areas; and have established a collaboration with Bayer AG ("Bayer") to develop small molecule drugs to treat obesity and diabetes. We are currently investigating additional collaborations to develop small molecule drugs across other disease areas.

We were incorporated in November 1991 and, until March 1993, were engaged primarily in organizational activities, research and development of our technology, grant preparation and obtaining financing. We have incurred losses since inception, principally as a result of research and development and general and administrative expenses in support of our operations. We anticipate incurring additional losses over the next several years as we expand our drug discovery and development operations. We expect that losses will fluctuate from quarter to quarter and that such fluctuations may be substantial.

We anticipate that collaborations will continue to be an important element of our future revenues. We do not expect that government grant revenues, which were a significant source of our revenues through 1998, to be significant in the coming years. Therefore, the loss of revenues from existing collaborations would materially adversely affect our business, financial condition and results of operations. Our ability to grow revenues and become profitable is dependent, in part, on our ability to enter into additional collaborative arrangements, and on our ability and the ability of our collaborative partners to successfully commercialize products incorporating, or based upon, our technologies and drug discovery and development programs. We cannot guarantee that we will be able to maintain or expand existing collaborations, or enter into future collaborations to apply our integrated genomic technologies on terms satisfactory to us, if at all, and, if entered into, we cannot guarantee that any such collaborative arrangements will be successful. We have also established a majority owned subsidiary, 454 Corporation ("454"), to develop novel technologies for use in drug discovery and development. We expect that 454 will commercialize these products upon their development, which may be a future source of revenues for us.

Our failure to successfully develop and market additional products over the next several years, or to realize existing product revenues, would materially adversely affect our business, financial condition and results of operations. Royalties or other revenue generated for us from commercial sales of products developed through the application of our technologies are not expected for several years, if at all.

The 1998 and 1999 consolidated financial statements have been reclassified to conform to the classification used in 2000.

Results of Operations

Years Ended December 31, 2000 and 1999

Revenue. Collaboration revenue for the year ended December 31, 2000 was $20,838,213, an increase of $6,371,676, or 44%, as compared to $14,466,537 for the corresponding period in 1999. The increase for the twelve months ended December 31, 2000 was largely due to revenue recorded under our collaborative arrangements with Abgenix, COR Therapeutics, Inc. ("COR"), Genentech, Inc. ("Genentech") and GlaxoSmithKline, Inc. ("Glaxo"). The revenue we recognize under our collaborative arrangements is generally based upon work performed on behalf of collaborators by our employees, or based upon our attainment of certain benchmarks specified in the related agreements. Further revenue growth will be dependent upon our ability to add additional collaborations, expand current collaborations and garner revenues from products currently under development by our collaborators.

Grant revenue for the twelve months ended December 31, 2000 decreased 100% compared to the same period in 1999, due to the completion of our last two federal grants during the first and second quarters of 1999. As

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a result of the completion of such federal grants, we foresee no additional grant revenue in future periods, unless additional grant awards are received.

Operating Expenses. Collaborative research and development expenses for the year ended December 31, 2000 were $40,950,894 compared to $29,517,900 for the same period in 1999. The increase of $11,432,994, or 39%, was primarily attributable to internal research efforts and our obligations to fulfill research requirements under new and existing collaborations, which resulted in increased purchases of laboratory supplies, increased equipment depreciation and facilities expenses and additional personnel costs. Future collaborative research and development expenses are expected to increase as additional personnel are hired, research and development facilities are expanded to accommodate our internal research and collaborations and as the operations of 454 are expanded, offset by a decrease in research and development expenses due to the completion of the research portion of various collaborative agreements.

Grant research expenses for the twelve months ended December 31, 2000 were $0 and represented a 100% decrease compared to $417,386 for the twelve months ended December 31, 1999. The decrease in grant research expenses was attributable to the completion of our federal grants during the first and second quarters of 1999. As a result of the completion of such federal grants, we foresee no additional grant research expenses in future periods, unless additional grant awards are received.

During the fourth quarter of 1999, we undertook an upgrade of scientific technologies and related lab equipment and signed an agreement with Comdisco, Inc. ("Comdisco") for the acquisition of certain lab equipment with a fair market value of approximately $2,400,000. As a part of this transaction, we also purchased other lab equipment recorded as a capital lease for approximately $3,600,000 from Transamerica Business Credit Corporation ("TBCC"). The Comdisco agreement calls for the exchange of the TBCC equipment for the Comdisco equipment. As a result of the exchange of the TBCC equipment for the Comdisco equipment, we recognized an asset impairment expense of approximately $2,700,000 in the fourth quarter of 1999.

General and administrative expenses for the year ended December 31, 2000 increased $4,882,613, or 52%, to $14,243,986 as compared to $9,361,373 for the same period in 1999. The increases were primarily attributable to higher recruiting, personnel, payroll and marketing costs, upgrades to our administration facilities and related increased rent expense, as well as legal expenses in support of the development of our intellectual property portfolios. Over the next several years, we anticipate that the percentage increases in general and administrative expenses will be similar to percentage increases in collaborative research and development expenses.

Interest Income, Net. Net interest income for the year ended December 31, 2000 of $5,650,290 increased $4,562,890, or 420%, compared to $1,087,400 for 1999. The increases were primarily due to higher cash and cash equivalent balances as a result of funds we received from the completion of our convertible subordinated debt offering in February 2000, the inclusion of cash raised in conjunction with the formation of our newly formed subsidiary 454 in June 2000 and from the proceeds of our public offering in November 2000, offset by the accrued interest expense associated with the completion of our convertible subordinated debt offering. Aside from the additional gross interest income which we expect to receive on the combined net proceeds from our private placements with Abgenix in late 2000 and with Bayer during the first quarter of 2001, we anticipate that net interest income will begin to decrease as cash and cash equivalent balances are utilized in the normal course of operations. Gross interest expense for the year ended December 31, 2000 of $10,066,308 increased $8,874,417, or 745%, compared to $1,191,891 for 1999. This increase in gross interest expense was primarily attributable to accrued interest and interest paid to the holders of our convertible subordinated debt which we issued on February 2, 2000. We would expect gross interest expense to remain relatively constant for 2001.

Income Taxes. For the year ended December 31, 2000, we have recorded a Connecticut research and development income tax benefit of $1,400,000. We recorded this income tax benefit as a result of recent Connecticut legislation which allows companies to obtain cash refunds from the State of Connecticut at a rate of 65% of their annual incremental research and development expense credit, in exchange for foregoing carryforward of their research and development credit. During the year 2001, we anticipate that the income tax benefit will continue to increase, as we incur additional qualifying collaborative research and development costs.

Net Loss Attributable to Common Stockholders. For the year ended December 31, 2000, we reported a net loss attributable to common stockholders of $26,978,387, or ($0.70) per share, as compared to a net loss attributable to common stockholders of $25,762,760, or ($0.89) per share in 1999. Since inception, we have incurred operating losses, and as of December 31, 2000 had an accumulated deficit of $81,680,655. We have not paid any federal income taxes. Realization of deferred tax assets is dependent on future earnings, if any, the timing and amount of which are uncertain.

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Accordingly, valuation allowances in amounts equal to the deferred income tax assets have been established to reflect these uncertainties in all periods presented.

Minority Interest. Minority interest of $327,990 is recorded for the portion of 454's losses attributable to stockholders of 454 other than us. As the expected future level of 454's losses increases, we anticipate recording additional minority interest based upon our ownership percentage.

Years Ended December 31, 1999 and 1998

Revenue. Our revenue for the year ended December 31, 1999 was $15,103,517, representing an increase of $5,846,492, or 63%, compared to our revenue of $9,257,025 in 1998. This increase was largely due to an increase in collaboration revenue recorded under our arrangements with Glaxo, Hoffmann-La Roche Inc., Roche Vitamins, Inc., and COR. The increase was offset by a decrease in grant revenue due to the completion of all of our federal grants during the 1999 calendar year.

Operating Expenses. Grant research expenses for the year ended December 31, 1999 were $417,386, representing a decrease of $1,667,815, or 80%, compared to $2,085,201 in 1998. The decrease in grant research expenses was attributable to the completion of our federal grants during the first and second quarters of 1999.

Collaborative research and development expenses for the year ended December 31, 1999 were $29,517,900, representing an increase of $8,506,061, or 40%, compared to $21,011,839 for the year ended December 31, 1998. The increase in such expenses was primarily attributable to our obligations to fulfill research requirements under new and existing collaborations, in addition to internal research efforts, which resulted in increased purchases of laboratory supplies, increased equipment depreciation and facilities expenses, and additional personnel costs.

General and administrative expenses for the year ended December 31, 1999 increased $3,340,313, or 55%, to $9,361,373 as compared to $6,021,060 for the year ended December 31, 1998. The net increase was primarily attributable to the reclassification of overhead expenses.

Interest Income, Net. Net interest income for the year ended December 31, 1999 of $1,087,400 decreased $345,190, or 24%, compared to $1,432,590 for 1998. The decrease was primarily due to the lower balances held in our cash and cash equivalent accounts, and the additional interest expense we paid on capital lease obligations. Gross interest expense for the year ended December 31, 1999 of $1,191,891 represented an increase of $197,087, or 20%, compared to $994,804 for 1998. This increase in gross interest expense was primarily attributable to additional capital lease obligations for equipment entered into during the twelve months ended December 31, 1999, which enabled us to support our research and development activities.

Net Loss Attributable to Common Stockholders. For the year ended December 31, 1999, we reported a net loss attributable to common stockholders of $25,762,760, or ($0.89) per share, as compared to, a net loss attributable to common stockholders of $18,936,920, or ($0.78) per share, in 1998.

Liquidity and Capital Resources

As of December 31, 2000, we had $476,298,314 in cash and cash equivalents, compared to $76,374,571 as of December 31, 1999. This increase was primarily a result of our receipt of the following net proceeds: $145,558,000 from our issuance of convertible subordinated debt in February 2000, $186,960,000 from our public offering of common stock in November 2000 and $50,000,000 from our private placement with Abgenix in November 2000. Also contributing to this increase were proceeds from stock option and warrant exercises, interest income and the inclusion of cash raised in conjunction with the formation of 454 in June 2000. Our increase in cash and cash equivalents was partially offset by operating losses in support of our research and development activities and interest paid to the holders of our convertible subordinated debt. We have financed our operations since inception primarily through public offerings, our convertible subordinated debt offering, revenues received under our collaborative research and development arrangements, private placements of equity securities, government grants, and capital leases. As of December 31, 2000, we had recognized $57,378,859 of cumulative sponsored research revenues from collaborative research agreements and government grants. To date, inflation has not had a material effect on our business.

Our investing activities have consisted primarily of acquisitions of equipment and expenditures for leasehold improvements. At December 31, 2000, our gross investment in equipment, computers and leasehold improvements since inception was $25,661,662. At December 31, 2000, equipment with a gross book value of

20

$11,371,106 secures our equipment financing facility. We anticipate that we will use net proceeds of up to $6,000,000 from our available lease line for capital expenditures over the next several years, primarily for the purchase of additional equipment and improvements at our laboratories. We had approximately $350,000 in material commitments for capital expenditures at December 31, 2000.

In accordance with our investment policy, we are utilizing the following investment objectives for cash and cash equivalents: (1) investment decisions are made with the expectation of minimum risk of principal loss, even with a modest penalty in yield; (2) appropriate cash balances and related short-term funds are maintained for immediate liquidity needs, and appropriate liquidity is available for medium-term cash needs; and (3) maximum after-tax yield is achieved.

Net cash used in operating activities was $15,398,347 for the year ended December 31, 2000, compared to $19,470,656 for the year ended December 31, 1999. Net cash outflows for operating activities for the year ended December 31, 2000 included payments of licensing fees, decreases in accounts receivable and deferred revenue, and increases in income taxes receivable, accounts payable, accrued expenses and interest payable. Cash used in investing activities during the year ended December 31, 2000 primarily included acquisitions of property and equipment. Cash outflows for financing activities during the year ended December 31, 2000 primarily included payments of financing and stock issuance costs and payments on capital lease obligations, while cash inflows consisted of proceeds from our convertible subordinated debt offering, the issuance of common stock, preferred stock and warrants, and exercises of stock options and warrants.

In June 2000, we launched 454, a 60% owned subsidiary established to develop novel technologies for use in drug discovery, preclinical development, and pharmacogenetics. We sold to Soros Fund Management, L.L.C. and Cooper Hill Partners, L.L.C. five year warrants to purchase 937,500 shares of our common stock at $32.375 per share for an aggregate purchase price of $12,500,000. Simultaneously, 454 sold 4,000,000 shares of Series B Preferred Stock to Soros Fund Management and Cooper Hill Partners and members of our senior management team and related parties for an aggregate purchase price of $20,000,000.

In order to complete the funding of 454 and in exchange for 6,000,000 shares of Series A Preferred Stock, we contributed $20,000,000 in cash and certain technologies to 454 for conducting genomic analyses. As a result of our contribution of technology to 454, we recognized a gain of $3,928,869 recorded in additional paid-in capital.

As of December 31, 2000, we and 454 had federal and Connecticut net operating loss carryforwards for income tax purposes of approximately $139,000,000 and $131,000,000, and $840,000 and $840,000, respectively. Federal net operating loss carryforwards expire beginning in 2008, and Connecticut net operating loss carryforwards began expiring in 1998. We and 454 also had federal and Connecticut research and development tax credit carryforwards for income tax purposes of approximately $4,600,000 and $3,400,000, and $35,000, and $0, respectively at December 31, 2000. For income tax purposes, we will not file consolidated income tax returns with our subsidiary.

As of December 31, 2000, minority interest was $15,405,327. Minority interest is related to the recent establishment of 454, a majority-owned subsidiary, and reflects the initial minority shareholders' capitalization and above mentioned gain recognition, less the minority shareholders' portion of various expenses incurred to date.

Recently Enacted Pronouncements

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). The new standard establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value. Accounting for changes in the values of those derivatives depends on the intended use of the derivatives and whether they qualify for hedge accounting. SFAS 133, as amended by Statement of Financial Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of Effective Date of SFAS 133", and Statement of Financial Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activitites", is effective for fiscal years beginning after June 15, 2000. Historically we have not entered into derivatives contracts either to hedge existing risks or for speculative purposes. Accordingly, we do not expect adoption of the new standard to affect our consolidated financial statements.

In December 1999, the Securities and Exchange Commission published Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements". SAB 101 summarizes certain of the staff's views in

21

applying generally accepted accounting principles to revenue recognition in financial statements and provides interpretations regarding the application of generally accepted accounting principles to revenue recognition where there is an absence of authoritative literature addressing a specific arrangement or a specific industry. SAB 101 became effective for us in 2000. The adoption of SAB 101 did not have any effect on our consolidated financial statements

Certain Factors That May Affect Results of Operations

This report may contain forward-looking statements that are subject to certain risks and uncertainties. These statements include statements regarding (i) our plans to build additional technologies, to enhance our GeneScape platform, and to systematically analyze the genetic basis of many common diseases and the actions and side effects of many commonly prescribed drugs, (ii) the expected transformation of the pharmaceutical industry and our opportunities with respect thereto, (iii) the likely success of our technologies, (iv) the expected benefits of the linkage to be provided by our PathCalling systems, (v) the expected benefits, effects, efficiency and performance of our services and products, (vi) our ability (a) to overcome the limitations of competing technologies, processes and databases by condensing key steps in gene-based discovery and development, (b) to develop, through our products and services, the next generation of therapeutic products for important complex diseases, (c) to advance promising therapeutics into the clinic and to leverage the entire human genome in order to accomplish that goal, and (d) to develop, in a timely fashion, a broad portfolio of research programs that encompass drug discovery, drug development and pharmacogenomics, (e) our ability to identify inappropriate candidates earlier, reduce research costs, and advance only the most promising compounds into clinical trials, (f) our ability to diagnose patients, identify patients as non-responders to certain drugs and reducing the side effects or limiting adverse reactions patients may have to certain drugs, prior to their enrollment into clinical trials, (vii) the capacity of our products to predict the efficacy and safety of drugs already on the market and in development pipelines, (viii) the suitability of Company-discovered genes and proteins involved in diabetes, hypertension and obesity as targets for small molecule drug development, (ix) our potential to receive future milestone and royalty payments from our partners, (x) our ability to enter into additional strategic alliances and collaborations, including with COR and Roche Pharma, and (xi) the expected future levels of losses, operating expenses and material commitments, (xii) our ability, through our collaboration with Abgenix, to create and evaluate 250 antibodies as potential therapeutics, (xiii) the capacity of our technologies and services to provide a global understanding of genes and proteins, and their role in disease as potential drug targets, (xiv) our ability to identify small molecule targets that are ideal for the development of novel pharmaceuticals and hundreds of proteins that appear to have potential as therapeutics, (xv) our ability to develop promising research programs, novel proprietary therapeutics and novel drug candidates that will have a significant impact upon the practice of medicine and ensure our future success, (xvi) the likely success of overcoming USPTO rejections to our pending patent applications, including our commercially important new gene/protein patent applications, (xvii) the ability of our subsidiary, 454, to create novel technologies in a timely fashion. Such statements are based on our management's current expectations and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. We caution investors that there can be no assurance that actual results or business conditions will not differ materially from those projected or suggested in such forward-looking statements as a result of various factors, including, but not limited to, the following: our early stage of development, technological uncertainty and product development risks, uncertainty of additional funding, reliance on research collaborations, competition, our ability to protect our patents and proprietary rights and uncertainties relating to commercialization rights, our ability to develop a drug pipeline, reliance upon patient enrollment, our ability to obtain regulatory approval for our products, reliance upon technological advantages, incurring significant product liability expenses, available resources to bring pharmaceutical products to market, ability to retain our current licensed technologies and acquire new ones. For further information, refer to the more specific risk and uncertainties discussed throughout this discussion and analysis.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have reviewed the provisions of Regulation S-K Item 305. At December 31, 2000, we did not hold any derivative financial instruments, commodity-based instruments or other long-term debt obligations that would require disclosure of the kind required by that item.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

23

CURAGEN CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS

	DECEMBER 31,
	1999	2000
ASSETS
Current assets:
Cash and cash equivalents	$76,374,571	$476,298,314
Grants receivable	25,019	––
Accounts receivable	767,606	––
Income taxes receivable	––	1,400,000
Other current assets	73,752	670,938
Prepaid expenses	1,135,248	1,415,028
Total current assets	78,376,196	479,784,280
Property and equipment, net	15,077,370	14,187,873
Notes receivable – related parties	96,500	328,356
Other assets	246,049	315,621
Intangible assets, net	98,161	4,546,703
Total assets	$93,894,276	$499,162,833
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$1,843,675	$3,586,930
Accrued expenses	1,849,227	3,132,176
Interest payable, short–term	––	3,750,000
Deferred revenue	3,982,632	3,851,742
Deferred rent	77,726	59,384
Current portion of obligations under capital leases	2,732,393	2,861,265
Total current liabilities	10,485,653	17,241,497
Long–term liabilities:
Deferred rent, net of current portion	110,152	59,384
Interest payable	21,000	––
Convertible subordinated debt	––	150,000,000
Obligations under capital leases, net of current portion	8,278,842	4,847,770
Total long–term liabilities	8,409,994	154,907,154
Commitments and contingencies
Minority interest in subsidiary	––	15,405,327
Stockholders' equity:
Common Stock – Voting; $.01 par value, issued and outstanding 32,843,076 shares at
December 31, 1999, and 44,050,017 shares at December 31, 2000	328,430	440,500
Common Stock – Non–Voting; $.01 par value, issued and outstanding 1,955,272 shares at
December 31, 1999, and 1,270,272 shares at December 31, 2000	19,552	12,702
Additional paid–in capital	129,667,959	392,866,689
Accumulated deficit	(54,702,268)	(81,680,655)
Unamortized stock–based compensation	(315,044)	(30,381)
Total stockholders' equity	74,998,629	311,608,855
Total liabilities and stockholders' equity	$93,894,276	$499,162,833

See accompanying notes to consolidated financial statements

24

CURAGEN CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS

	YEAR ENDED DECEMBER 31,
	1998	1999	2000
Revenue:
Grant revenue	$3,182,025	$636,980	$––
Collaboration revenue	6,075,000	14,466,537	20,838,213
Total revenue	9,257,025	15,103,517	20,838,213
Operating expenses:
Grant research	2,085,201	417,386	––
Collaborative research and development	21,011,839	29,517,900	40,950,894
Asset impairment expense	––	2,657,018	––
General and administrative	6,021,060	9,361,373	14,243,986
Total operating expenses	29,118,100	41,953,677	55,194,880
Loss from operations	(19,861,075)	(26,850,160)	(34,356,667)
Interest income, net	1,432,590	1,087,400	5,650,290
Net loss before income tax benefit and minority interest	(18,428,485)	(25,762,760)	(28,706,377)
Income tax benefit	––	––	1,400,000
Minority interest	––	––	327,990
Net loss before preferred dividends	(18,428,485)	(25,762,760)	(26,978,387)
Preferred dividends	(508,435)	––	––
Net loss attributable to common stockholders	$(18,936,920)	$(25,762,760)	$(26,978,387)
Basic and diluted net loss per share attributable to common stockholders	$(0.78)	$(0.89)	$(0.70)
Weighted average number of shares used in computing basic and diluted
net loss per share attributable to common stockholders	24,402,012	28,801,984	38,747,819

See accompanying notes to consolidated financial statements

25

CURAGEN CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Year Ended December 31, 1998, 1999 and 2000

		Voting Common		Non–Voting Common
	Number of	Stock ($.01 par	Number of	Stock ($.01	Number of
	Shares	value)	Shares	par value)	Shares
January 1, 1998	17,160,224	$171,602	––	––	175,000
Issuance of Common Stock	8,463,040	84,630	––	––	––
Conversion of Redeemable Common Stock	583,750	5,838	––	––	––
Redemption of Preferred Stock – Series B	––	––	––	––	(175,000)
Stock issuance costs	––	––	––	––	––
Amortization of stock–based compensation	––	––	––	––	––
Amortization of warrants – capital lease obligations	––	––	––	––	––
Preferred dividends	––	––	––	––	––
Exercise of employee stock options	426,500	4,265	––	––	––
Issuance of options to non–employees	––	––	––	––	––
Net loss	––	––	––	––	––
December 31, 1998	26,633,514	266,335	––	––	––
Issuance of Common Stock	5,060,034	50,600	1,955,272	$19,552	––
Stock issuance costs	––	––	––	––	––
Amortization and write–off of stock–based compensation	––	––	––	––	––
Amortization of warrants – capital lease obligations	––	––	––	––	––
Exercise of employee stock options	184,838	1,848	––	––	––
Exercise of non–employee stock options	912,000	9,120	––	––	––
Issuance of options to non–employees	––	––	––	––	––
Stock–based 401(k) employer plan match	52,690	527	––	––	––
Other	––	––	––	––	––
Net loss	––	––	––	––	––
December 31, 1999	32,843,076	328,430	1,955,272	19,552	––
Issuance of Common Stock	6,241,442	62,414	––	––	––
Issuance of warrants		––	––	––	––
Stock issuance costs	––	––	––	––	––
Amortization and write–off of stock–based compensation	––	––	––	––	––
Amortization of warrants – capital lease obligations	––	––	––	––	––
Exercise of employee stock options	775,782	7,758	––	––	––
Exercise of non–employee stock options	356,224	3,562	––	––	––
Exercise of non–employee warrants	3,137,732	31,377	––	––	––
Issuance of options to non–employees	––	––	––	––	590,769
Stock–based 401(k) employer plan match	10,761	109	––	––	––
Conversion of non–voting common stock	685,000	6,850	(685,000)	(6,850)	––
Gain on sale of technology to subsidiary	––	––	––	––	––
Net loss	––	––	––	––	––
December 31, 2000	44,050,017	$440,500	1,270,272	$12,702	––

		Additional		Unamortized
		Paid–in	Accumulated	Stock–Based
	Preferred Stock	Capital	Deficit	Compensation	Total
January 1, 1998	$1,459,196	$23,775,864	$(10,511,023)	$(1,213,464)	$13,682,175
Issuance of Common Stock	––	48,577,850	––	––	48,662,480
Conversion of Redeemable Common Stock	––	3,934,474	––	––	3,940,312
Redemption of Preferred Stock – Series B	(1,750,000)	––	––	––	(1,750,000)
Stock issuance costs	––	(4,509,612)	––	––	(4,509,612)
Amortization of stock–based compensation	––	––	––	444,532	444,532
Amortization of warrants – capital lease obligations	––	(16,232)	––	––	(16,232)
Preferred dividends	290,804	(508,435)	––	––	(217,631)
Exercise of employee stock options	––	373,635	––	––	377,900
Issuance of options to non–employees	––	289,754	––	––	289,754
Net loss	––	––	(18,428,485)	––	(18,428,485)
December 31, 1998	––	71,917,298	(28,939,508)	(768,932)	42,475,193
Issuance of Common Stock	––	55,929,844	––	––	55,999,996
Stock issuance costs	––	(118,264)	––	––	(118,264)
Amortization and write–off of stock–based compensation	––	(192,729)	––	453,888	261,159
Amortization of warrants – capital lease obligations	––	(16,233)	––	––	(16,233)
Exercise of employee stock options	––	661,301	––	––	663,149
Exercise of non–employee stock options	––	992,190	––	––	1,001,310
Issuance of options to non–employees	––	103,655	––	––	103,655
Stock–based 401(k) employer plan match	––	306,458	––	––	306,985
Other	––	84,439	––	––	84,439
Net loss	––	––	(25,762,760)	––	(25,762,760)
December 31, 1999	––	129,667,959	(54,702,268)	(315,044)	74,998,629
Issuance of Common Stock	––	246,737,586	––	––	246,800,000
Issuance of warrants	––	12,500,000	––	––	12,500,000
Stock issuance costs	––	(10,949,749)	––	––	(10,949,749)
Amortization and write–off of stock–based compensation	––	(131,250)	––	284,663	153,413
Amortization of warrants – capital lease obligations	––	(16,232)	––	––	(16,232)
Exercise of employee stock options	––	2,672,201	––	––	2,679,959
Exercise of non–employee stock options	––	899,965	––	––	903,527
Exercise of non–employee warrants	––	6,432,965	––	––	6,464,342
Issuance of options to non–employees	––	590,769	––		590,769
Stock–based 401(k) employer plan match	––	533,606	––	––	533,715
Conversion of non–voting common stock	––	––	––	––	––
Gain on sale of technology to subsidiary	––	3,928,869	––	––	3,928,869
Net loss	––	––	(26,978,387)	––	(26,978,387)
December 31, 2000	––	$392,866,689	$(81,680,655)	$(30,381)	$311,608,855

See accompanying notes to consolidated financial statements

26

CURAGEN CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS

 

	YEAR ENDED DECEMBER 31,
	1998	1999	2000
Cash flows from operating activities:
Net loss	$(18,428,485)	$(25,762,760)	$(26,978,387)
Adjustments to reconcile net loss to net cash
used in operating activities:
Asset impairment expense	––	2,657,018	––
Depreciation and amortization	2,668,142	5,552,612	6,090,715
Non-monetary compensation	894,286	364,814	744,182
Stock-based 401(k) employer plan match	––	306,985	533,715
Minority interest	––	––	(327,990)
Changes in assets and liabilities:
Grants receivable	(178,677)	575,225	25,019
Accounts receivable	156,350	(756,409)	767,606
Income tax receivable	––	––	(1,400,000)
Other current assets	12,733	(60,836)	(597,186)
Prepaid expenses	(347,723)	(641,812)	(279,780)
Other assets	(109,809)	126,990	(69,572)
Payment of intangible assets	(88,450)	(96,232)	(461,873)
Accounts payable	1,671,866	(934,324)	1,743,255
Accrued payroll-related party	(308,125)	––	––
Accrued expenses	301,498	202,464	1,282,949
Deferred revenue	4,500,000	(892,370)	(130,890)
Deferred rent	71,928	(112,021)	(69,110)
Interest payable	––	––	3,729,000
Net cash used in operating activities	(9,184,466)	(19,470,656)	(15,398,347)
Cash flows from investing activities:
Acquisitions of property and equipment	(11,560,246)	(8,625,520)	(4,273,413)
Loans to related parties	(153,500)	(3,798)	(231,856)
Proceeds from sale of fixed assets	814	1,001	165,274
Net cash used in investing activities	(11,712,932)	(8,628,317)	(4,339,995)
Cash flows from financing activities:
Payments on capital lease obligations	(1,872,001)	(3,020,177)	(3,318,430)
Proceeds from issuance of Common Stock	48,662,480	55,999,996	246,800,000
Proceeds from issuance of 454 Corporation Preferred Stock	––	––	20,000,000
Proceeds from issuance of warrants	––	––	12,500,000
Proceeds from sale-leaseback of equipment	4,999,845	6,653,535	––
Proceeds from issuance of convertible subordinated debt	––	––	150,000,000
Payments of stock issuance costs	(3,426,361)	(118,264)	(11,287,562)
Payments of financing costs	––	––	(5,079,641)
Proceeds from exercise of stock options	377,900	1,664,459	3,583,486
Proceeds from exercise of warrants	––	––	6,464,342
Redemption of Series B Preferred Stock	(1,967,631)	––	––
Net cash provided by financing activities	46,774,232	61,179,549	419,662,195
Net increase in cash and cash equivalents	25,876,834	33,080,576	399,923,853
Cash and cash equivalents, beginning of year	17,417,161	43,293,995	76,374,571
Cash and cash equivalents, end of year	$43,293,995	$76,374,571	$476,298,424
Supplemental cash flow information:
Interest paid	$988,533	$1,040,560	$5,652,179
Noncash financing transactions:
Obligations under capital leases	$5,051,378	$8,381,778	$––

See accompanying notes to consolidated financial statements

27

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Summary of Significant Accounting Policies

Organization--CuraGen Corporation (the "Company" or "CuraGen") is a genomics based biopharmaceutical company that researches, develops and uses technologies based on the discovery of genes and its understanding of their functions and relationships to accelerate the discovery and development of products to improve human and animal health and the vitality of agriculture, in collaboration with other companies and through its proprietary internal programs. The Company was incorporated in November 1991 and, until March 1993, was engaged primarily in organizational activities, research and development of the Company's technology, grant preparation and obtaining financing. In June 2000, the Company formed 454 Corporation ("454"), a majority owned subsidiary.

The 1998 and 1999 consolidated financial statements have been reclassified to conform to the classification used in 2000.

Effective March 2, 2000, the Company declared a two-for-one split on its Voting Common Stock and Non-Voting Common Stock, each payable to stockholders in the form of a stock dividend. The stock dividend was distributed on March 30, 2000 to stockholders of record on March 15, 2000. All share and per share data have been adjusted retroactively to reflect the split.

Principles of Consolidation--The consolidated financial statements include CuraGen and 454, its majority owned subsidiary. All material intercompany accounts, transactions, and profits have been eliminated in consolidation.

Revenue Recognition--The Company has entered into certain collaborative research agreements which provide for the partial or complete funding of specified projects in exchange for access to and certain rights in the resultant data discovered under the related project. Revenue is recognized based upon work performed or upon the attainment of certain benchmarks specified in the related agreements (see Note 4). Grant revenue is recognized as related costs qualifying under the terms of the grants are incurred. Grant revenue is derived solely from federal and Connecticut agencies (see Note 7). Deferred revenue arising from payments received from collaborative agreements is recognized as income when earned.

Cash and Cash Equivalents--The Company considers investments readily convertible into cash with a maturity of three months or less at the date of purchase to be cash equivalents.

Property and Equipment--Property and equipment are recorded at cost. Equipment under capital leases is recorded at the lower of the net present value of the minimum lease payments required over the term of the lease or the fair value of the assets at the inception of the lease. Additions, renewals and betterments that significantly extend the life of an asset are capitalized. Minor replacements, maintenance and repairs are charged to operations as incurred. Equipment is depreciated over the estimated useful lives of the related assets, ranging from three to seven years, using the straight-line method. Equipment under capital leases is amortized over the shorter of the estimated useful life or the terms of the lease, using the straight-line method. Leasehold improvements are amortized over the shorter of the estimated life or the term of the lease, using the straight-line method. When assets are retired or otherwise disposed of, the assets and related accumulated depreciation or amortization are eliminated from the accounts and any resulting gain or loss is reflected in income.

Impairment of Long-Lived Assets--The Company regularly evaluates the recoverability of the net carrying value of its property, and intangible assets, when an indicator of impairment is present by comparing the carrying values to the estimated future undiscounted cash flows. A deficiency in these cash flows relative to the carrying amounts is an indication of the need for a write-down due to impairment. The impairment write-down would be the difference between the carrying amounts and the fair value of these assets as determined by using estimated future undiscounted cash flows. A loss on impairment would be recognized by a charge to earnings.

Deferred Real Estate Costs--Deferred real estate costs were paid in 1997 in connection with the signing of the operating lease in New Haven, Connecticut (see Note 3). These costs, which are included in Intangible assets, net, are amortized over the remaining life of the lease as of the date of occupancy, 69 months, using the straight-line method. Accumulated amortization aggregated $20,984, $32,975 and $44,966, respectively, as of December 31, 1998, 1999 and 2000. Related amortization expense was $11,991, $11,989 and $11,991, respectively, for the years ended December 31, 1998, 1999 and 2000.

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Licensing Fees--Licensing fees for various research and development purposes were paid during 1998, 1999 and 2000. These costs, which are included in Intangible assets, net, are amortized over the various lives of the licenses. Certain fully-amortized licensing fees were written-off during 2000. Accumulated amortization aggregated $30,288, $127,503 and $101,465, respectively, as of December 31, 1998, 1999 and 2000. Related amortization expense was $30,288, $97,215 and $429,061, respectively, for the years ended December 31, 1998, 1999 and 2000.

Financing Costs--Financing costs related to the convertible subordinated debt offering (see Note 8) were paid during 2000. Accumulated amortization aggregated $655,332 as of December 31, 2000. Related amortization expense was $655,332 for the year ended December 31, 2000.

Patent Application Costs--Costs incurred in filing for patents are charged to operations, until such time as it is determined that the filing will be successful. When it becomes evident with reasonable certainty that an application will be successful, the costs incurred in filing for patents will begin to be capitalized. Capitalized costs related to successful patent applications will be amortized over a period not to exceed twenty years or the remaining life of the patent, whichever is shorter, using the straight-line method. During 1998, 1999 and 2000, all patent application costs have been charged to operations.

Research and Development Costs--Research and development costs are charged to operations as incurred. Grant research expenses include all direct research and development costs incurred related to specific grant awards and programs. All remaining research and development costs are incurred for the development and maintenance of current and future research collaboration agreements and accordingly, have been classified as collaborative research and development expenses.

Stock-Based Compensation--In October 1995, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), which was effective for the Company beginning January 1, 1996. SFAS 123 requires expanded disclosures of stock-based compensation arrangements with employees and non-employees and encourages (but does not require) compensation cost to be measured based on the fair value of the equity instruments awarded to employees. Companies are permitted to continue to apply Accounting Principles Board ("APB") No. 25, which recognizes compensation cost based on the intrinsic value of the equity instruments awarded. The Company will continue to apply APB No. 25 to its stock-based compensation awards to employees. For equity instruments awarded to non-employees, the Company records the transactions based upon the consideration received for such awards or the fair value of the equity instruments issued, whichever is more reliably measurable. The Company recorded stock-based compensation expense attributable to non-employees totaling $289,754, $103,655 and $590,769 for the years ended December 31, 1998, 1999 and 2000, respectively. For options issued to employees, the Company records the transactions based upon the difference between the option strike price and the estimated fair market value as of the date of issuance. Stock-based compensation associated with options granted to employees during 1997 amounted to $1,672,998 and is being expensed by the Company over the vesting period of the underlying options. During 1998, 1999 and 2000, no stock-based compensation in connection with options granted to employees was recorded as all options granted were issued at the estimated fair market value as of the date of issuance. The Company recorded amortization, net of write-offs, of stock-based compensation expense for options issued to employees of $444,532, $261,159 and $153,413 for the years ended December 31, 1998, 1999 and 2000, respectively.

Income Taxes--Income taxes are provided for as required under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". This Statement requires the use of the asset and liability method in determining the tax effect on future years of the "temporary differences" between the tax basis of assets and liabilities and their financial reporting amounts.

Loss Per Share--Basic earnings per share ("EPS") is computed by dividing net loss by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue Common Stock were exercised or converted into Common Stock. Due to the loss from operations, warrants granted but not yet exercised, convertible subordinated debt, and stock options granted under the Company's stock option plans but not yet exercised are antidilutive and therefore not considered for the diluted EPS calculations. Under the assumption that warrants, convertible subordinated debt and options were not antidilutive, the denominator for diluted loss per share would be 26,049,946, 30,789,412 and 42,638,848 at December 31, 1998, 1999 and 2000, respectively.

Fair Value of Financial Instruments--Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments" ("SFAS 107"), requires the disclosure of fair value information for certain assets and liabilities, whether or not recorded in the balance sheets, for which it is practical to estimate that value. The Company has the following financial instruments: cash, receivables, accounts payable and accrued

29

expenses and certain other liabilities. The Company considers the carrying amount of these items to approximate fair value due to their short term nature. In addition, the Company also has convertible subordinated debt (see Note 8).

Use of Estimates--The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Segments--The FASB issued Statement of Financial Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and Related Information" effective for fiscal years beginning after December 15, 1997. The Company had one reportable segment as of December 31, 2000.

Recently Enacted Pronouncements--In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). The new standard establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value. Accounting for changes in the values of those derivatives depends on the intended use of the derivatives and whether they qualify for hedge accounting. SFAS 133, as amended by Statement of Financial Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of Effective Date of SFAS 133", and Statement of Financial Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activitites", is effective for fiscal years beginning after June 15, 2000. Historically, the Company has not entered into derivatives contracts either to hedge existing risks or for speculative purposes. Accordingly, the Company does not expect adoption of the new standard to affect its consolidated financial statements.

In December 1999, the Securities and Exchange Commission published Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements". SAB 101 summarizes certain of the staff's views in applying generally accepted accounting principles to revenue recognition in financial statements and provides interpretations regarding the application of generally accepted accounting principles to revenue recognition where there is an absence of authoritative literature addressing a specific arrangement or a specific industry. SAB 101 became effective for the Company in 2000. The Company's adoption of SAB 101 did not have any effect on its consolidated financial statements.

2. Property and Equipment

Property and equipment consisted of the following:

	December 31,
	1999	2000
Laboratory equipment	$  5,966,192	$  8,193,119
Leased equipment	12,609,660	11,371,106
Leasehold improvements	1,165,598	1,582,028
Office equipment	2,674,522	4,515,409
Total property and equipment	22,415,972	25,661,662
Less accumulated depreciation and amortization	7,338,602	11,473,789
Total property and equipment, net	$15,077,370	$14,187,873

Depreciation and amortization expense was $2,580,400, $5,441,172, and $4,877,986 for the years ended December 31, 1998, 1999 and 2000, respectively.

30

3. Leases

Capital Leases

In April 1997, the Company signed a lease-financing commitment to receive $4,000,000 to purchase equipment and expand its facilities. The lease commitment provides for a payment term of 48 months per individual lease schedule. In addition, the commitment provides for the issuance to the lessor of two warrants (the "First Warrant" and the "Second Warrant") to purchase shares of the Common Stock. The First Warrant was issued in April 1997 and entitles the lessor to purchase 22,222 shares of Common Stock at an exercise price of $4.50 per share. The Second Warrant was issued in September 1997 when the Company's aggregate equipment cost under the agreement exceeded $2,000,000. The Second Warrant entitles the lessor to purchase 20,000 shares of Common Stock at an exercise price of $5.00 per share. The value ascribed to the warrants was $59,520. In June 1998, the Company signed a lease-financing commitment to receive $10,000,000 to purchase various laboratory, office and computer equipment. The lease commitment provides for payment terms of 60 months per individual lease schedule. In November 1999, the Company signed an agreement with Comdisco, Inc. for the acquisition of certain lab equipment of $2,400,000. The agreement provides for payment terms of twelve quarterly installments.

The Company has also entered into other capital lease agreements to finance the purchase of equipment. Leased equipment under all such agreements consisted of the following:

	December 31,
	1999	2000
Leased equipment	$12,609,660	$11,371,106
Less accumulated amortization	3,787,225	5,473,542
Total Leased equipment, net	$  8,822,435	$  5,897,564

The Company financed leased assets with costs of $5,051,378, $8,381,778 and $0 for the years ended December 31, 1998, 1999 and 2000, respectively. These arrangements have terms of three to five years with interest rates ranging from approximately 9% to 20%. However, of the remaining outstanding leases, the majority of those arrangements have interest rates ranging from approximately 9% to 15%. At the end of the respective lease terms, the Company has the right to either return the equipment to the lessor or purchase the equipment at between $1 and 15% of the then fair market value of the equipment.

The future minimum lease payments under capital lease obligations at December 31, 2000 were as follows:

 

2001	$3,535,153
2002	3,759,524
2003	1,427,511
2004	97,308
Total minimum lease payments	8,819,496
Less amounts representing interest	1,110,461
Present value of future minimum lease payments	7,709,035
Less current portion of obligations	2,861,265
Obligations under capital leases, net of current portion	$4,847,770

Operating Leases

In December 1996, the Company entered into a six-year lease agreement for 26,000 square feet to house its principal research and administrative facilities at 555 Long Wharf Drive, New Haven, Connecticut. In October 1997, August 1998 and December 2000, the Company amended that lease to increase its leased space to a total of 32,000, 36,000 and 40,000 square feet, respectively. The Company may renew the lease for two additional terms of five years each.

In May 1998, the Company entered into a two-year lease agreement for its 32,000 square foot research facility in Branford, Connecticut. In October 1999, the Company exercised its first option to renew for an additional two-year term. In addition to exercising its option, the Company amended that lease to increase its total leased space to a total of 46,000 square feet. The term of the lease as it pertains to the original space and new space commenced on June 2000 and shall continue until May 2002. The Company has the option to renew this lease for two additional terms of two years each.

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Total rent expense under all operating leases for 1998, 1999 and 2000 was approximately $1,016,050, $1,335,350 and $1,476,200, respectively.

The future minimum rental payments for all operating leases are as follows as of December 31, 2000:

Year
2001	$1,554,313
2002	1,168,282
Total	$2,722,595

4. Collaborations

Genentech, Inc.

In June 1996, the Company entered into a pilot research services and evaluation agreement with Genentech, Inc. ("Genentech") pursuant to which the Company performed certain research services for a $200,000 fee. The pilot collaboration was superseded by the Evaluation Agreement, signed and effective December 27, 1996. In connection with the execution of the Evaluation Agreement, Genentech made an equity investment of $1,800,000 in the form of 614,334 shares of Series A Convertible Preferred Stock. In March 1998, upon the closing of the initial public offering of its Common Stock, the Company automatically converted the Series A Preferred Stock into shares of Common Stock on a 1 for 1 basis.

In November 1997, CuraGen and Genentech entered into a research collaboration and database subscription arrangement to discover novel genes and therapeutics. Pursuant to the agreement, Genentech purchased $5,000,000 of Common Stock in a private placement concurrent with the Company's initial public offering at the initial public offering price of $5.75 per share. Genentech also agreed to provide CuraGen with an interest-bearing loan facility which based on the March 2000 amended agreement could reach $21,000,000. The loan facility contains annual borrowing limits and the outstanding principal and interest under the loan facility are payable five years from the date of the agreement. Subject to certain limitations, during the term of the agreement, and after the end of the first year, the drawn-down portion of the loan is convertible at CuraGen's option into CuraGen Non-Voting Common Stock, par value $.01 per share (the "Non-Voting Common Stock") based upon a formula that approximates the prevailing market price of the Company's Common Stock. On October 15, 1999, the Company made a drawdown of $16,000,000 under this facility and simultaneously converted the loan into 1,955,272 shares of its Non-Voting Common Stock, par value $.01 per share. The Non-Voting Common Stock is convertible into Common Stock (a) at any time, at Genentech's option or (b) automatically upon the sale or transfer of the Non-Voting Common Stock to a non-affiliated party. Genentech currently holds 2,410,272 shares of the Company's Common Stock, including 1,270,272 shares of Non-Voting Common Stock. The current ownership information for Genentech is based solely on a Schedule 13G filed with the Securities and Exchange Commission on February 14, 2001.

In March 2000, Genentech extended its collaboration with the Company for a minimum of an additional two and one-half years. Under the terms of this extension, Genentech will pay research funding payments for collaborative discovery of genes and for access to CuraGen's functional genomic technologies and databases. In return, Genentech will retain the rights to license, develop, and market therapeutics derived from these research efforts. The Company will also receive milestone and royalty payments based upon the development and sales of products that result from this collaboration. Genentech has the right to terminate the research collaboration, upon a breach by the Company of any material obligation under the agreement on or after April 2000, on 60 days prior notice.

For the year ended December 31, 2000, the Company recorded revenue of $2,731,794 related to this agreement, which represented 13% of total revenue. In addition, $768,206 has been received from Genentech for which the related services have not been performed and, therefore, such amount is recorded as deferred revenue at December 31, 2000.

DuPont/Pioneer Hi-Bred International, Inc.

Effective June 1, 1997, the Company entered into a collaborative research and license agreement with DuPont/Pioneer Hi-Bred International, Inc. ("DuPont/Pioneer Hi-Bred") whereby the Company was to perform research that would be funded by DuPont/Pioneer Hi-Bred. In conjunction with the execution of this agreement, DuPont/Pioneer Hi-Bred made an equity investment of $7,500,000 in the form of 2,000,000 shares of Series D Convertible Preferred Stock. In March 1998, upon the closing of the initial public offering of its Common Stock, the Company automatically converted the Series D Preferred Stock into shares of Common Stock on a 1 for 1 basis. As of September 30, 2000, DuPont/Pioneer Hi-Bred no longer held this equity position in the Company. In addition, DuPont/Pioneer Hi-Bred paid the Company $2,500,000 per year, for the first ten months, in quarterly installments with the first payment prorated. In March of 1998, DuPont/Pioneer Hi-Bred increased the minimum annual research funding to $5,000,000 per year. The $5,000,000 per year fee was based upon an established number of CuraGen employees who were to be devoted to the DuPont/Pioneer Hi-Bred research. DuPont/Pioneer Hi-Bred had the right to terminate the research program at any time upon a breach by the Company and on three months' written notice at any time after May 2000.

The Company received notification from DuPont/Pioneer Hi-Bred dated July 31, 2000, informing it of the termination of research under the collaborative research and license agreement effective November 2000, with all work in progress to be completed by May 2001. At the end of November 2000, DuPont/Pioneer Hi-Bred entered into a one year extension to their license agreement for access to CuraGen's databases for the 2001 calendar year.

For the years ended December 31, 1999 and 2000, the Company recorded revenue of $5,000,000 and $4,705,506 related to this agreement, which represented 33% and 23% of total revenue, respectively. In addition, $42,989 has been received from DuPont/Pioneer Hi-Bred for which the related services have not been performed and $260,000 has been received from DuPont/Pioneer Hi-Bred for 2001 license fees, and, therefore, such amounts are recorded as deferred revenue at December 31, 2000.

Biogen, Inc.

In June 1997, the Company entered into a stock purchase agreement with Biogen, Inc. ("Biogen"), pursuant to which Biogen made a $1,000,000 equity investment in the form of 200,000 shares of Series E Convertible Preferred Stock. In March 1998, upon the closing of the initial public offering of its Common Stock, the Company automatically converted the Series E Preferred Stock into shares of Common Stock on a 1 for 1 basis.

In October 1997, the Company entered into a research collaboration and database subscription arrangement with Biogen to discover novel genes and therapeutics across a range of Biogen-specified disease programs. The parties also expect to conduct pharmacogenomic analysis of selected products and product candidates in Biogen's portfolio. The collaboration, which called for payments by Biogen for up to five years, provided Biogen with access to the Company's proprietary genomics technologies, including the GeneScape bioinformatics software platform in order to generate GeneCalling and PathCalling databases from Biogen-specified disease systems. Biogen had an option to acquire exclusive licenses to certain discoveries arising from the collaboration. Biogen had the right to terminate the research collaboration upon any breach by the Company of any material obligation under the Biogen agreement or at any time after October 1999, on 30 days' written notice. In addition, pursuant to the agreement, Biogen purchased $5,000,000 of the Company's Common Stock in a private placement concurrent with the Company's initial public offering at the initial public offering price of $5.75 per share, and agreed to provide a $10,000,000 interest-bearing loan facility. On October 15, 1999, the Company made a drawdown of $10,000,000 under this facility and simultaneously converted the loan into 1,222,044 shares of its Common Stock.

The Company received termination notification from Biogen for research under the collaborative research and license agreement effective October 2000, and licensed back to Biogen five novel drug targets. All rights to the information generated throughout this collaboration reverted back to the Company upon concluding this collaboration, and it is eligible to receive royalty payments if any products emerge from work conducted during this collaboration.

For the years ended December 31, 1999 and 2000, the Company recorded revenue of $2,100,000 and $848,125 related to this agreement which represented 14% and 4% of total revenue, respectively.

GlaxoSmithKline, Inc. (formerly Glaxo-Wellcome, Inc.)

In November 1998, CuraGen and GlaxoSmithKline, Inc. ("Glaxo") announced a drug discovery collaboration to utilize CuraGen's integrated genomics processes for the study and selection of Glaxo compounds for clinical development. This discovery and pharmacogenomics collaboration, up to five years in duration, is intended to enable Glaxo to select drug candidates with the highest likelihood of success in clinical trials. Specifically, CuraGen will evaluate numerous compounds across Glaxo therapeutic programs, identifying gene responses associated with compound efficacy and toxicity.

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For the years ended December 31, 1999 and 2000, the Company recorded revenue of $2,407,918 and $4,102,082 related to this agreement, which represented 16% and 20% of total revenue, respectively. However, $1,375,000 has been received from Glaxo for 2001 for which the related services have not been performed and, therefore, such amount is recorded as deferred revenue at December 31, 2000.

Hoffmann-La Roche Inc. and Roche Vitamins, Inc.

In March 1999, the Company signed a life sciences target discovery and pharmacogenomics collaboration retroactively effective as of January 1, 1999 with Hoffmann-La Roche Inc. ("Roche Pharma") and its affiliate, Roche Vitamins, Inc. ("Roche Vitamins"). This agreement outlines strategic partnerships with F. Hoffmann-La Roche Ltd. and its affiliates and is designed to discover new drug targets, evaluate existing product candidates and facilitate the development of drugs and diagnostic tests for the purposes of improving human and animal health. Under the terms of this agreement, the Company will receive research funding and may receive additional milestone and royalty payments if any products emerge from this collaboration. The original agreement was for an initial term of two years and includes an option to extend for three additional one-year terms. In October 2000, the first one-year extension to the agreement was entered into with a commencement date of January 1, 2001, under which Roche Pharma and Roche Vitamins, respectively, will pay fees for access to CuraGen's databases, and are currently negotiating in good faith for access to other services provided by the Company.

For the year ended December 31, 1999 and 2000, the Company recorded revenue of $3,736,396 and $3,510,604 related to this agreement which represented 25% and 17% of total revenue, respectively. However, $288,000 has been received from Roche Vitamins and such amount is recorded as deferred revenue at December 31, 2000.

COR Therapeutics, Inc.

In May 1999, the Company signed a product discovery and pharmacogenomics agreement with COR Therapeutics, Inc. ("COR"). Under the terms of this agreement, CuraGen will apply its SeqCalling, GeneCalling, and PathCalling technologies, related services, and pharmacogenomics expertise to identify new drug targets and develop novel cardiovascular drugs. This collaboration was for an initial term of 18 months with an option to extend the collaboration for three additional twelve-month terms. The Company may receive research funding, milestone payments and royalty payments for products developed by COR as a result of this collaboration. In March 2000, the Company expanded the collaboration with COR to apply its PathCalling proteomics technology and bioinformatics systems to create an annotated database of protein-protein interactions derived from cardiovascular endothelial cells, in order to discover additional novel drug targets, as well as to offer functional information and validation of previously discovered targets. COR intends to utilize this database to advance the discovery and development of novel pharmaceutical products designed for the treatment and prevention of severe cardiovascular diseases. In December 2000, COR and CuraGen extended their agreement and are currently negotiating in good faith for other services provided by CuraGen.

For the year ended December 31, 2000, the Company recorded revenue of $2,362,567 related to this agreement which represented 11% of total revenue. In addition, $140,208 has been received from COR for which the related services have not been performed and, therefore, such amount is recorded as deferred revenue at December 31, 2000.

Abgenix, Inc.

In December 1999, CuraGen entered into a collaboration agreement with Abgenix, Inc. ("Abgenix") to develop and commercialize genomics-based antibody drugs using Abgenix' XenoMouse technology. This five-year alliance has been established to identify up to 120 fully human antibody drug candidates intended for treating a broad range of complex diseases including cancer and autoimmune disorders. Antibodies determined to have commercial product potential will be allocated between the parties for further development. Abgenix and the Company will receive reciprocating milestone payments and royalty payments for products resulting from this drug development alliance. In addition, under the agreement Abgenix purchased 837,990 shares of the Company's Common Stock for approximately $15,000,000.

In November 2000, Abgenix and the Company expanded their collaboration agreement to develop up to 250 fully human antibody drug candidates over a five-year period. CuraGen and Abgenix have selected 24 fully human antibody drug candidates for further evaluation and possible development as cancer therapeutics. As part of this expanded alliance, Abgenix purchased an additional 1,441,442 shares of the Company's Common Stock at a price of approximately $34.69 per share for $50,000,000 in a private placement. The shares issued to Abgenix are restricted securities under the Securities Act. In addition, all the shares issued to Abgenix, including shares previously

34

purchased by Abgenix, are subject to a one-year lock-up restriction ending on November 27, 2001. After November 27, 2001, Abgenix has demand and piggyback registration rights on the shares.

For the year ended December 31, 2000, the Company recorded revenue of $2,371,329 related to this agreement, which represented 11% of total revenue.

Ono Pharmaceutical Co., Ltd.

During June 2000, the Company entered into a pharmacogenomics collaboration with Ono Pharmaceutical Co., Ltd. ("Ono"), to apply its platform of functional genomic technologies to gain a greater understanding of how genes influence, and ultimately affect, drug efficacy and toxicity. During this expandable two-year collaboration, CuraGen will collaborate with Ono in the application of molecular toxicology, an emerging science designed to help drug companies evaluate and select the safest and most efficacious drug candidates for further advancement into clinical trials. By applying functional genomic technologies to measure the activity of specific genes, scientists can gain greater insight into how drugs work, and their potential side effects, as well as determine how genetic variations influence an individual's specific response to a particular drug. The information generated from this collaboration will ultimately enhance Ono's ongoing effort to develop safer and more efficacious drugs.

Monsanto Company

In December 2000, CuraGen entered into a project based agricultural products discovery collaboration with Monsanto Company. CuraGen will apply gene expression technology to evaluate various strains of corn in order to identify select genes that naturally improve output traits and enhance the development of corn crops with higher nutritional value.

5. Stockholders' Equity

Authorized Capital Stock

The Company's authorized capital stock consists of 250,000,000 shares of Common Stock, par value of $.01 per share ("Common Stock"), 5,000,000 shares of Preferred Stock, par value of $.01 per share ("Preferred Stock") and 3,000,000 shares of Non-Voting Common Stock. In March 2000, the Board of Directors of the Company unanimously approved an amendment to the Articles of Incorporation to increase the number of authorized shares of Common Stock from 50,000,000 to 250,000,000 and received shareholder approval in May 2000.

At December 31, 2000, the Company had reserved 967,500 shares of Common Stock for issuance pursuant to outstanding warrants, 625,786 shares of Common Stock for issuance pursuant to the 1993 Stock Plan and 7,000,000 shares of Common Stock for issuance pursuant to the 1997 Stock Plan.

Common Stock

In March 2000, the Company announced a two-for-one split on both its Voting Common Stock and Non-Voting Common Stock, each payable to stockholders in the form of a stock dividend. All share and per share data have been adjusted retroactively to reflect the split.

In order to complete the funding of 454 and in exchange for 6,000,000 shares of Series A Preferred Stock, the Company contributed $20,000,000 in cash and certain technologies for conducting genomic analyses. As a result of this contribution of technology to 454, CuraGen recognized a gain of $3,928,869 recorded in additional paid-in capital.

In November 2000, the Company completed a public offering of 4,800,000 shares of its Common Stock and received net proceeds of $186,960,000.

In November 2000, the Company completed a private placement of 1,441,442 shares of unregistered Common Stock for an aggregate purchase price of $50,000,000 to Abgenix (see Note 4).

Stock Options

The Company's 1993 Stock Plan was adopted by the Company's Board of Directors and stockholders in December 1993 and subsequently amended by the Board of Directors in May 1997. The 1993 Stock Plan provides for the issuance of stock options and stock awards to officers, directors, advisors, employees, and affiliates of the

35

Company. Of the 3,000,000 shares of Common Stock which were originally reserved for issuance under the 1993 Stock Plan, options to purchase 1,308,366 and 625,786 shares were granted and outstanding as of December 31, 1999 and 2000, respectively. The Company does not intend to grant any additional options or awards under the 1993 Stock Plan.

A summary of all stock option activity under the 1993 Stock Plan during the years ended December 31, 1998, 1999 and 2000 is as follows:

		Weighted
	Number	Average
	of Shares	Exercise Price
Outstanding January 1, 1998	2,057,768	$2.37
Granted	–	–
Exercised	(194,002)	1.25
Canceled or lapsed	(120,000)	2.18
Outstanding December 31, 1998	1,743,766	2.51
Granted	–	–
Exercised	(219,800)	2.17
Canceled or lapsed	(215,600)	3.53
Outstanding December 31, 1999	1,308,366	2.40
Granted	–
Exercised	(630,980)	2.26
Canceled or lapsed	(51,600)	3.75
Outstanding December 31, 2000	625,786	2.43
Exercisable December 31, 2000	471,599	2.13

The following table summarizes information about stock options under the 1993 Stock Plan at December 31, 2000:

 

		Weighted
	Number of	Average	Weighted
Range of	Options	Contractual	Average
Exercise Prices	Outstanding	Life	Exercise Price
$0.50 – $1.25	165,900	4.4	$1.05
1.26 – 2.05	228,020	5.8	1.81
2.06 – 3.75	170,666	6.7	3.67
3.76 – 5.00	61,200	6.7	5.00
	625,786

		Weighted
		Average
	Number of	Exercise Price
Range of	Options	of Options
Exercise Prices	Exercisable	Exercisable
$0.50 – $1.25	165,900	$1.05
1.26 – 2.05	178,900	1.85
2.06 – 3.75	105,599	3.71
3.76 – 5.00	21,200	5.00
	471,599

In addition to the options granted under the 1993 Stock Plan, the Company has granted non-plan options to purchase shares of Common Stock pursuant to individual agreements with Company employees and consultants. As of December 31, 1999 and 2000, there were 16,500 and 0 options, respectively, outstanding which are not part of a specific plan. These options incorporate the provisions of the 1993 Stock Plan to the extent such provisions are not inconsistent with the terms of those options.

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A summary of all non-plan stock option activity during the years ended December 31, 1998, 1999 and 2000 is as follows:

		Weighted
	Number	Average
	of Shares	Exercise Price
Outstanding January 1, 1998	1,140,000	$ .97
Granted	–	–
Exercised	(232,500)	.58
Canceled or lapsed	–	–
Outstanding December 31, 1998	907,500	1.07
Granted	–	–
Exercised	(777,000)	.94
Canceled or lapsed	(114,000)	2.05
Outstanding December 31, 1999	16,500	.50
Granted	–	–
Exercised	(16,500)	.50
Canceled or lapsed	–	–
Outstanding December 31, 2000	–	–
Exercisable December 31, 2000	–	–

The Company's 1997 Stock Plan was approved by the Company's Board of Directors and stockholders in October 1997. The 1997 Stock Plan provides for the issuance of stock options and stock grants ("Stock Rights") to employees, directors and consultants of the Company. A total of 7,000,000 shares of Common Stock are reserved for issuance under the 1997 Stock Plan. The 1997 Stock Plan is administered by the Compensation Committee of the Board of Directors. The Compensation Committee has the authority to administer the provisions of the 1997 Stock Plan and to determine the persons to whom Stock Rights will be granted, the number of shares to be covered by each Stock Right and the terms and conditions upon which a Stock Right may be granted. As of December 31, 2000, the Company had 3,486,095 options outstanding under the 1997 Stock Plan and an additional 3,513,905 available for grant. In addition, 534,164 stock options have been exercised under the 1997 Stock Plan as of December 31, 2000.

A summary of all stock option activity under the 1997 Stock Plan during the years ended December 31, 1998, 1999 and 2000 is as follows:

		Weighted
	Number	Average
	of Shares	Exercise Price
Outstanding January 1, 1998	130,000	$ 5.75
Granted	2,612,200	4.37
Exercised	–	–
Canceled or lapsed	(190,000)	5.56
Outstanding December 31, 1998	2,552,200	4.34
Granted	1,199,000	4.83
Exercised	(100,038)	4.57
Canceled or lapsed	(673,496)	4.54
Outstanding December 31, 1999	2,977,666	4.49
Granted	1,182,520	49.31
Exercised	(434,126)	4.44
Canceled or lapsed	(239,965)	20.03
Outstanding December 31, 2000	3,486,095	18.67
Exercisable December 31, 2000	794,172	6.15

37

The following table summarizes information about stock options under the 1997 Stock Plan at December 31, 2000:

		Weighted
	Number of	Average	Weighted
Range of	Options	Contractual	Average
Exercise Prices	Outstanding	Life	Exercise Price
$2.05 – $3.75	908,471	7.2	$3.30
3.76 – 5.00	604,224	8.5	3.88
5.01 – 5.97	577,830	7.2	5.69
5.98 – 8.405	200,000	8.7	7.38
8.406– 58.334	1,195,570	9.1	45.99
	3,486,095

		Weighted
		Average
	Number of	Exercise Price
Range of	Options	of Options
Exercise Prices	Exercisable	Exercisable
$2.05 – $3.75	379,094	$3.27
3.76 – 5.00	95,040	3.88
5.01 – 5.97	223,630	5.75
5.98 – 8.405	40,000	7.38
8.406– 58.334	56,408	30.00
	794,172

454's 2000 Employee, Director and Consultant Stock Plan ("2000 Stock Plan") was approved by its Board of Directors and stockholders in September 2000. The 2000 Stock Plan provides for the issuance of stock options and stock grants ("Stock Rights") to employees, directors and consultants of the Company. A total of 2,500,000 shares of Common Stock are reserved for issuance under the 2000 Stock Plan. The 2000 Stock Plan is administered by the Compensation Committee of the Board of Directors. The Compensation Committee has the authority to administer the provisions of the 2000 Stock Plan and to determine the persons to whom Stock Rights will be granted, the number of shares to be covered by each Stock Right and the terms and conditions upon which a Stock Right may be granted. As of December 31, 2000, the Company had 780,000 options outstanding under the 2000 Stock Plan and an additional 1,720,000 available for grant.

A summary of all stock option activity under the 2000 Stock Plan during the year ended December 31, 2000 is as follows:

		Weighted
	Number	Average
	of Shares	Exercise Price
Outstanding December 31, 1999	–	–
Granted	780,000	$5.00
Exercised	–	–
Canceled or lapsed	–	–
Outstanding December 31, 2000	780,000	5.00
Exercisable December 31, 2000	–	–

The following table summarizes information about stock options under the 2000 Stock Plan at December 31, 2000:

		Weighted
	Number of	Average	Weighted
Range of	Options	Contractual	Average
Exercise Prices	Outstanding	Life	Exercise Price
$5.00	780,000	9.7	$5.00
	780,000

 38

Had compensation cost for the Company's stock option plans been determined in accordance with SFAS 123, the Company's net loss attributable to common stockholders and net loss per share attributable to common stockholders would have approximated the pro forma amounts shown below for each of the years ended December 31, 1998, 1999 and 2000.

 

	December 31,
	1998		1999		2000
	As Reported	Pro Forma	As Reported	Pro Forma	As Reported	Pro Forma
Net loss attributable to common
stockholders	$(18,936,920)	$(20,095,345)	$(25,762,760)	$(28,452,852)	$(26,978,387)	$(47,975,000)
Net loss per share attributable to
common stockholders.	$(0.78)	$(0.83)	$(0.89)	$(0.99)	$(0.70)	$(1.24)

The assumptions utilized by the Company in deriving the pro forma amounts for the year ended December 31, 1998 are as follows: 1) 0% dividend yield, 2) 50% expected volatility, 3) risk-free interest rate of approximately 5.25%, and 4) expected life of the options of 10 years. The assumptions utilized by the Company in deriving the pro forma amounts for the year ended December 31, 1999 are as follows: 1) 0% dividend yield, 2) 102% expected volatility, 3) risk-free interest rate of approximately 5.25%, and 4) expected lives of the options between 5.2 and 8.7 years. The assumptions utilized by the Company in deriving the pro forma amounts for the year ended December 31, 2000 are as follows: 1) 0% dividend yield, 2) 60% expected volatility, 3) risk-free interest rate of approximately 6.00%, and 4) expected lives of the options between 4.1 and 8.7 years. The weighted average grant date fair value of options granted during the years ended December 31, 1998, 1999, and 2000 was approximately $2.95 per share, $3.23 per share and $35.17 per share, respectively.

Preferred Stock

The Company received aggregate consideration of $1,750,000 from five investors as subscriptions for the purchase of 350,000 shares of Series B Preferred Stock. In September 1996, October 1996 and January 1997, the Company received proceeds of $1,600,000, $50,000 and $100,000, respectively. The Series B Preferred Stock was non-convertible and accrued dividends at the prime rate. Dividends were payable when declared by the Board of Directors. Dividends in arrears at December 31, 1997 were $181,563. Upon completing a qualified equity financing, as defined in the Series B Preferred Stock Agreement, the Company was entitled to redeem all of the shares of the Series B Preferred Stock. The completion of the Company's initial public offering satisfied such requirement, and accordingly, in March 1998, the Company redeemed all of such Series B Preferred Stock for an aggregate redemption price of $1,750,000, plus accrued dividends and dividends in arrears.

In addition, holders of the Series B Preferred Stock received five-year warrants to purchase an aggregate of 716,722 shares of Common Stock at $2.93 per share, which warrants expire on March 27, 2002. Such warrants were valued at $376,334. All of these warrants were exercised in 2000. The value of such warrants was accreted over the warrant period and such accretion was classified as preferred dividends. For the years ended December 31, 1997 and 1998, such accretion amounted to $68,424 and $17,106, respectively.

6. Income Taxes

The net deferred income tax assets consisted of the following:

 

	December 31,
	1999	2000
Total deferred income tax assets	$30,200,000	$66,150,000
Valuation allowance	(30,200,000	(66,150,000)
Total	$0	$0

The deferred income tax assets are primarily a result of the federal and Connecticut net operating loss carryforwards, research and development credit carryforwards, expenses related to option exercises and timing differences relating to depreciation and amortization. As the Company has no prior earnings history, a valuation allowance has been established due to the Company's uncertainty in its ability to benefit from the federal and Connecticut net operating loss carryforwards. The change in the valuation allowance was $9,470,000, $14,800,000 and $35,950,000 for the years ended December 31, 1998, 1999 and 2000, respectively.

39

At December 31, 2000, CuraGen and 454 had federal and Connecticut net operating loss carryforwards for income tax purposes of approximately $139,000,000 and $131,000,000, and $840,000 and $840,000, respectively. Federal net operating loss carryforwards expire beginning in 2008, and Connecticut net operating loss carryforwards began expiring in 1998. The Company and 454 also had federal and Connecticut research and development tax credit carryforwards for income tax purposes of approximately $4,600,000 and $3,400,000, and $35,000 and $0, respectively at December 31, 2000. For income tax purposes, the Company and 454 will not file consolidated income tax returns.

At December 31, 2000, an income tax benefit of $1,400,000 has been recorded as a result of recent Connecticut legislation, which allows companies to obtain cash refunds from the State of Connecticut at a rate of 65% of their annual incremental research and development expense credit, in exchange for foregoing carryforward of the research and development credit.

7. Grants

The Company received federal grants during 1999 and earlier years, for specific purposes that are subject to review and audit by the grantor agencies. Such audits could lead to requests for reimbursement by the grantor agency for any expenditures disallowed under the terms of the grant. Additionally, any noncompliance with the terms of the grant could lead to loss of current or future awards.

During 1995, the Company received two grants from Connecticut Innovations, Inc. ("CII") in the amounts of $450,000 and $237,500. The term of the $450,000 grant is January 4, 1995 to December 31, 2004, and the term of the $237,500 grant is February 1, 1995 to January 31, 2005. The Company could be required to repay 100% of these amounts if during the terms of the respective grants (i) the Company breaches and fails to cure a material covenant, (ii) a material representation or warranty of the Company becomes untrue and is not cured, (iii) the Company becomes bankrupt or insolvent or liquidates its assets, or (iv) the Company is required to repay the federal grants to which the CII grants relate. In addition, the Company could be required to repay up to 200% of the amounts of the CII grants if the Company ceases to have a "Connecticut presence," during the terms of the respective grants.

8. Convertible Subordinated Debt

During February 2000, the Company completed an offering for $125,000,000 of 6% convertible subordinated debentures due 2007 and received net proceeds of approximately $121,250,000. In addition, also in February 2000, the initial purchasers exercised their option to purchase an additional $25,000,000 of 6% convertible subordinated debentures due 2007, providing the Company with additional net proceeds of approximately $24,308,000. Related interest expense for the year ended December 31, 2000 was $8,191,667.

The debentures may be resold by the initial purchasers to qualified institutional buyers under Rule 144A of the Securities Act and to non-U.S. persons outside the United States under Regulation S under the Securities Act. The debentures are convertible into CuraGen Common Stock at any time prior to their maturity at a conversion price of $63.8275 per share. In addition, prior to February 2, 2003, if the Company's Common Stock price reaches specified levels, it has the right to redeem the debentures at a premium by converting the debentures into Common Stock. The market value of the debentures based on quoted market prices, is estimated to be $97,500,000 at December 31, 2000.

9. Minority Interest in Subsidiary

In June 2000, the Company launched 454, a 60% owned subsidiary established to develop novel technologies for use in drug discovery, preclinical development, and pharmacogenetics. The Company agreed to sell to Soros Fund Management, L.L.C., and Cooper Hill Partners, L.L.C. five year warrants to purchase 937,500 shares of its Common Stock at $32.375 per share for an aggregate purchase price of $12,500,000. Simultaneously, 454 sold 4,000,000 shares of Series B Preferred Stock to Soros Fund Management and Cooper Hill Partners and members of the Company's senior management team and related parties for an aggregate purchase price of $20,000,000.

In order to complete the funding of 454 and in exchange for 6,000,000 shares of Series A Preferred Stock, the Company contributed $20,000,000 in cash and certain technologies for conducting genomic analyses. As a result of this contribution of technology to 454, the Company recognized a gain of $3,928,869 recorded in additional paid-in capital.

40

10. Subsequent Event

In January 2001, the Company entered into collaboration agreements with Bayer Corporation and Bayer AG ("Bayer") involving the metabolic disorders field and the pharmacogenomics and toxicogenomics fields, respectively.

Under the metabolic disorder agreement, the Company and Bayer have agreed to collaborate on the discovery and development of small molecule drugs to treat metabolic diseases based on certain qualified drug targets identified by the Company. The Company will bear the costs of the collaboration related to its identification of potential targets and Bayer will bear the costs of the collaboration related to the screening of such targets. All costs of the collaboration related to the development of any compound identified in the collaboration will be borne equally by Bayer and the Company. Operating income derived from any compound developed under the collaboration will be divided 56% to Bayer and 44% to the Company. Ultimately, the Company will jointly commercialize drugs resulting from this alliance with Bayer, and then share profits according to respective contributions.

Under the pharmacogenomics agreement, Bayer and the Company have agreed to collaborate to develop toxicogenomics and pharmacogenomic services for use in the identification of gene-based markers, assays and databases useful in predicting the toxicity of drug candidates and the gene expression profiling of animal and human cells to predict the pharmacological effectiveness of drug candidates. This collaboration agreement is for a term of five years, consisting of a set-up phase and a production phase. In the set-up phase, the Company has agreed to create a database of genes associates with toxicity and develop certain technologies to be used for high throughput toxicogenomic testing. In the production phase, the Company will conduct certain pharmacogenomic testing and analyses of Bayer targets. Bayer has agreed to provide funding to the Company over the five year term of the agreement. Bayer has the right to terminate the agreement if the Company fails to achieve certain performance criteria.

As part of these collaborations, Bayer purchased 3,112,482 shares of the Company's Common Stock in a private placement, at a price of approximately $27.31 per share or $85,000,000 in the aggregate.

11. Summary Selected Quarterly Financial Data (unaudited)

	Quarter Ended
	March 31	June 30	Sept. 30	Dec. 31
2000:
Total revenues	$5,640,340	$4,939,214	$5,040,215	$5,218,444
Total operating expenses	11,150,373	12,410,632	13,715,915	17,917,960
Net loss attributable to common stockholders	(5,039,496)	(6,281,087)	(7,051,042)	(8,606,762)
Net loss per common share	(0.14)	(0.16)	(0.18)	(0.22)
1999:
Total revenues	$2,671,943	$3,332,687	$4,311,737	$4,787,150
Total operating expenses	10,181,137	9,366,833	9,557,768	12,847,939
Net loss attributable to common stockholders	(7,206,927)	(5,925,143)	(5,147,393)	(7,483,297)
Net loss per common share	(0.27)	(0.22)	(0.18)	(0.22)

41

INDEPENDENT AUDITORS' REPORT

To the Board of Directors
of CuraGen Corporation
New Haven, Connecticut

We have audited the accompanying consolidated balance sheets of CuraGen Corporation and its subsidiary (the "Company") as of December 31, 1999 and 2000, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CuraGen Corporation and its subsidiary at December 31, 1999 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP
Hartford, Connecticut
January 23, 2001

42

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The response to this item is incorporated by reference from the discussion under the captions "Management" and "Section 16(a) Beneficial Ownership Reporting Compliance" in our Proxy Statement for the 2001 Annual Meeting of Stockholders.

ITEM 11. EXECUTIVE COMPENSATION

The response to this item is incorporated by reference from the discussion under the caption "Executive Compensation" in our Proxy Statement for the 2001 Annual Meeting of Stockholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The response to this item is incorporated by reference from the discussion under the caption "Security Ownership of Certain Beneficial Owners and Management" in our Proxy Statement for the 2001 Annual Meeting of Stockholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The response to this item is incorporated by reference from the discussion under the captions "Executive Compensation-Employment Agreements and Other Termination of Employment Agreements" and "Related Transactions" in our Proxy Statement for the 2001 Annual Meeting of Stockholders.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

ITEM 14 (a)(1) FINANCIAL STATEMENTS.

The following Financial Statements are included in Item 8:

Consolidated Balance Sheets as of December 31, 1999 and 2000

Consolidated Statements of Operations for the Years Ended December 31, 1998, 1999 and 2000

Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 1998, 1999 and 2000

Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1999 and 2000

Notes to Consolidated Financial Statements

Independent Auditors' Report

ITEM 14 (a)(2) FINANCIAL STATEMENT SCHEDULES.

All schedules are omitted because they are not applicable or the required information is shown in the financial statements or the notes thereto.

43

ITEM 14 (a)(3) EXHIBITS.

The following is a list of exhibits filed as part of this Annual Report on Form 10-K.

EXHIBIT NO.		DESCRIPTION
@	3.1	Amended and Restated Certificate of Incorporation of the
		Registrant (Filed as Exhibit 3.3)
@	3.2	Amended and Restated Bylaws of the Registrant (Filed as Exhibit 3.5)
@	4.1	Article Fourth of the Amended and Restated Certificate of
		Incorporation of the Registrant (Filed as Exhibit 4.1)
@	4.2	Form of Common Stock Certificate (Filed as Exhibit 4.2)
-	4.3	Indenture dated as of February 2, 2000 between the Registrant and
		The Chase Manhattan Bank, as trustee (filed as Exhibit 4.1)
%	10.1	Memorandum of Lease Agreements dated December 23, 1996, October
		27, 1997 and August 31, 1998 (New Haven) between the Registrant
		and Fusco Harbour Associates, LLC (Filed as Exhibit 10.1)
#	10.2	Lease, dated May 29, 1998, (Branford) by and between T.K.J.
		Associates, LLC and the Registrant (Filed as Exhibit 10.1)
=	10.3	1997 Employee, Director and Consultant Stock Plan, as amended and
		restated through May 12, 1999 (Filed as Exhibit 99)
@	10.4	1993 Stock Option and Incentive Award Plan (Filed as Exhibit 10.5)
@	10.5	Amendment to 1993 Stock Option and Incentive Plan, dated May 12,
		1997 (Filed as Exhibit 10.6)
$	10.6	Form of Non-Qualified Stock Option Agreement with respect to
		options to purchase an aggregate of 570,000 shares of Common
		Stock (Filed as Exhibit 99.3)
+!	10.7	Agreement, dated March 1999, by and among the Registrant, F.
		Hoffmann-LaRoche Ltd., Roche Vitamins, Inc. and Hoffmann-LaRoche,
		Inc. (Filed as Exhibit 10.1)
@	10.8	Employment Letter, dated July 18, 1997, between the Registrant
		and David M. Wurzer (Filed as Exhibit 10.8)
+@	10.9	Option and Exclusive License Agreement, dated October 4, 1996,
		between the Registrant and Wisconsin Alumni Research Foundation
		(Filed as Exhibit 10.11)
+@	10.10	Standard Non-Exclusive License Agreement--Brumley, dated July 1,
		1996, between the Registrant and Wisconsin Alumni Research
		Foundation (Filed as Exhibit 10.12)
+@	10.11	Collaborative Research and License Agreement, dated May 16, 1997,
		between the Registrant and Pioneer Hi-Bred International, Inc.
		(Filed as Exhibit 10.13)
+@	10.12	Research and Option Agreement, dated October 1, 1997, between the
		Registrant and Biogen, Inc. (Filed as Exhibit 10.14)
+@	10.13	Research and Option Agreement, dated November 20, 1997, between
		the Registrant and Genentech, Inc. (Filed as Exhibit 10.15)
+@	10.14	Notice of Grant Award and Grant Application to Department of
		Health and Human Services for Automated Sequencing System for
		Human Genome Project, dated March 25, 1995 (Filed as Exhibit 10.16)
@	10.15	ATP Agreement for Integrated Microfabricated DNA Analysis Device
		for Diagnosis of Complex Genetic Disorders, dated February 1995
		(Filed as Exhibit 10.17)
@	10.16	ATP Agreement for Molecular Recognition Technology for Precise
		Design of Protein-Specific Drugs, dated March 2, 1995 (Filed as
		Exhibit 10.18)
@	10.17	ATP Agreement for Programmable Nanoscale Engines for Molecular
		Separation, dated May 6, 1997 (Filed as Exhibit 10.19)
@	10.18	Material Transfer and Screening Agreement, dated January 15,
		1998, between the Registrant and ArQule, Inc. (Filed as Exhibit 10.20)
+%	10.19	Pharmacogenomics Research and License Agreement, dated November
		18, 1998, by and between Glaxo Wellcome, Inc. and the Registrant
		(Filed as Exhibit 10.21)
+&	10.20	Agreement between COR Therapeutics, Inc. and the Registrant
		dated May 1, 1999 (Filed as Exhibit 10.1)
/	10.21	Letter Agreement with Pequot Partners Fund, L.P. and Pequot
		International Fund, Inc. (Filed as Exhibit 10.1)
-	10.22	Registration Rights Agreement dated as of February 2, 2000 among
		the Registrant and Lehman Brothers Inc., Morgan Stanley & Co.
		Incorporated and Dain Rauscher Incorporated, as the initial
		purchasers (filed as Exhibit 4.2)
+-	10.23	Collaboration Agreement, dated as of December 8, 1999, between
		Abgenix, Inc. and the Registrant (filed as Exhibit 10.1)
		44

+*10.24	Metabolic Disorder Collaboration Agreement, dated January 12,
	2001, by and between Bayer Corporation and the Registrant
+*10.25	Pharmacogenomics Agreement, dated January 12, 2001, by and
	between the Registrant and Bayer AG
*10.26	Stock Purchase Agreement, dated January 12, 2001, by and between
	Bayer AG and the Registrant
+*10.27	Restated Collaboration Agreement, dated November 27, 2000,
	between Abgenix, Inc. and the Registrant
*11.1	Schedule of Computation of Net Loss Per Share
*21.1	Subsidiaries of the Registrant
*23.1	Consent of Deloitte & Touche LLP

*	Filed herewith
@	Previously filed with the Commission as Exhibits to, and incorporated
	herein by reference from, the Registrant's Registration Statement filed on
	Form S–1, File No. 333–38051.
#	Previously filed with the Commission and incorporated herein by reference
	from the Form 10–Q, File No. 000–23223, for the period ending June 30,
	1998.
%	Previously filed with the Commission and incorporated herein by reference
	from the Form 10–K, File No. 000–23223, for the year ended December 31,
	1998.
!	Previously filed with the Commission and incorporated herein by reference
	from the Form 10–K, File No. 000–23223, for the year ended March 31, 1999.
&	Previously filed with the Commission and incorporated herein by reference
	from the Form 10–Q, File No. 000–23223, for the period ending June 30,
	1999.
/	Previously filed with the Commission and incorporated herein by reference
	from the Form 10–Q, File No. 000–23223, for the period ending September 30,
	1999.
$	Previously filed as Exhibit 99.3 to the Company's Registration Statement on
	Form S–8, File No. 333–56829, and incorporated herein by reference.
=	Previously filed as Exhibit 99.1 to the Company's Registration Statement on
	Form S–8, File No. 333–89465, and incorporated herein by reference.
–	Previously filed with the Commission as Exhibits to, and incorporated
	herein by reference from the Registrant's Registration Statement on Form
	S–3, File No. 333–32756.
~	Previously filed with the Commission as Exhibits to, and incorporated
	herein by reference from the Form 10–Q/A, File No. 000–23223, for the
	period ending June 30, 2000.
+	Confidential Treatment has been granted by the Commission as to certain
	portions.

Where a document is incorporated by reference from a previous filing, the Exhibit number of the document in that previous filing is indicated in parentheses after the description of such document.

ITEM 14 (b) REPORTS ON FORM 8-K

The following Reports on Form 8-K were filed by the Company during the quarter ended December 31, 2000:

October 10, 2000 - Item 5, Other Events - Form S-3 shelf registration statement for the sale of up to $500,000,000 of various types of securities. In addition, on October 9, 2000, the Registrant publicly disseminated a press release announcing that it had licensed five drug targets to Biogen, marking the completion of the research portion of their discovery collaboration.

November 6, 2000 - Item 5, Other Events - public offering of 4,000,000 newly issued shares of its common stock, plus up to 600,000 additional shares to cover any over-allotments.

November 7, 2000 - Item 5, Other Events - recent developments portion of prospectus supplement related to the Company's public offering of 4,000,000 shares of its common stock.

November 16, 2000 - Item 5, Other Events - agreement to sell 4,800,000 shares of its common stock to the public (plus up to an additional 720,000 shares of its common stock to cover underwriters' over-allotments), if any.

45

November 28, 2000 - Item 5, Other Events - expansion of the strategic alliance with Abgenix to develop and commercialize genomics-based antibody drugs using Abgenix' XenoMouse technology. Under the terms of the agreement, the Company sold 1,441,442 shares of its common stock at a purchase price of approximately $34.69 to Abgenix.

December 21, 2000 - Item 9, Regulation FD Disclosure - collaboration with Monsanto to apply its functional genomic technologies to discover key genes involved in the growth of crops with improved quality traits.

46

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: March 28, 2001	CuraGen Corporation
	By: /s/ David M. Wurzer
	David M. Wurzer
	Executive Vice–President, Treasurer
	and Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on March 28, 2001.

Signature	Title
/s/ Jonathan M. Rothberg	Chief Executive Officer, Chairman
	of the Board of Directors and President
Jonathan M. Rothberg	(principal executive officer)
/s/ David M. Wurzer	Executive Vice–President, Treasurer
	and Chief Financial Officer (principal
David M. Wurzer	financial and accounting officer)
/s/ Richard H. Booth	Director
Richard H. Booth
/s/ Vincent T. DeVita, Jr.	Director
Vincent T. DeVita, Jr.
/s/ Robert E. Patricelli	Director
Robert E. Patricelli
/s/ Randy Thurman	Director
Randy Thurman

47

EXHIBIT INDEX

EXHIBIT NUMBER	DESCRIPTION
10.24	Metabolic Disorder Collaboration, dated January 12, 2001, by
	and between Bayer Corporation and the Registrant
10.25	Pharmacogenomics Agreement, dated January 12, 2001, by and
	between the Registrant and Bayer AG
10.26	Stock Purchase Agreement, dated January 12, 2001, by and
	between Bayer AG and the Registrant
10.27	Restated Collaboration Agreement, dated November 27, 2000,
	between Abgenix, Inc. and the Registrant
11.1	Schedule of Computation of Net Loss Per Share
21.1	Subsidiaries of the Registrant
23.1	Consent of Deloitte & Touche LLP

EX-10.24 2 dex1024.txt METABOLIC DISORDER COLLABORATION EXHIBIT 10.24 EXECUTION COPY METABOLIC DISORDER COLLABORATION AGREEMENT By and Between BAYER CORPORATION and CURAGEN CORPORATION. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. TABLE OF CONTENTS

Page ARTICLE I DEFINITIONS................................................................................ 1 - ----------------------- Section 1.1 Definitions................................................................. 1 ----------- ----------- Section 1.2 Additional Definitions...................................................... 13 ----------- ---------------------- ARTICLE II METABOLIC PROGRAM; RESEARCH PLAN.......................................................... 14 - ------------------------------------------- Section 2.1 Research Plan............................................................... 14 ----------- ------------- Section 2.2 Metabolic Program - General................................................. 14 ----------- --------------------------- Section 2.3 Technology Access........................................................... 16 ----------- ----------------- Section 2.4 Management of Metabolic Program............................................. 16 ----------- ------------------------------- Section 2.5 Qualified Target Production Phase........................................... 19 ----------- --------------------------------- Section 2.6 Target Screening Phase...................................................... 21 ----------- ---------------------- Section 2.7 Strategic Project Phase..................................................... 22 ----------- ----------------------- Section 2.8 Pre-Clinical Development Phase.............................................. 22 ----------- ------------------------------ Section 2.9 Clinical Development Phase.................................................. 23 ----------- -------------------------- Section 2.10 Commercialization Phase..................................................... 23 ------------ ----------------------- ARTICLE III BAYER AND CURAGEN RIGHTS AND OBLIGATIONS................................................. 23 - ----------------------------------------------------- Section 3.1 License Grant with Respect to CuraGen Know-How and CuraGen Patent Rights.... 23 ----------- ------------------------------------------------------------------------ Section 3.2 License Grant with Respect to Bayer Know-How and Bayer Patent Rights........ 24 ----------- -------------------------------------------------------------------- Section 3.3 Use of Configured Assays.................................................... 24 ----------- ------------------------ Section 3.4 Retained Rights; Ownership.................................................. 24 ----------- -------------------------- Section 3.5 CuraGen Co-Promotion Rights................................................. 24 ----------- --------------------------- Section 3.6 Ownership Rights............................................................ 25 ----------- ---------------- Section 3.7 CuraGen Reversionary Rights................................................. 25 ----------- --------------------------- ARTICLE IV FINANCIAL PROVISIONS...................................................................... 26 - ------------------------------- Section 4.1 Costs of Metabolic Program.................................................. 26 ----------- -------------------------- Section 4.2 Royalty Payments; Operating Income.......................................... 28 ----------- ---------------------------------- Section 4.3 Income Statement Reports.................................................... 31 ----------- ------------------------ Section 4.4 Royalty Reports............................................................. 32 ----------- --------------- Section 4.5 Accounting.................................................................. 32 ----------- ---------- Section 4.6 Currency and Method of Payments............................................. 33 ----------- ------------------------------- Section 4.7 Tax Withholding............................................................. 33 ----------- --------------- Section 4.8 Blocked Payments............................................................ 33 ----------- ---------------- Section 4.9 Compassionate Use........................................................... 33 ----------- ----------------- Section 4.10 Accounting Terms............................................................ 33 ------------ ----------------

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. i ARTICLE V INTELLECTUAL PROPERTY OWNERSHIP, PROTECTION AND RELATED MATTERS............................ 34 - ------------------------------------------------------------------------- Section 5.1 Ownership................................................................... 34 ----------- --------- Section 5.2 Prosecution and Maintenance of Patent Rights................................ 34 ----------- -------------------------------------------- Section 5.3 Cooperation................................................................. 35 ----------- ----------- Section 5.4 Third Party Infringement.................................................... 35 ----------- ------------------------ Section 5.5 Third Party Intellectual Property........................................... 36 ----------- --------------------------------- ARTICLE VI CONFIDENTIALITY........................................................................... 37 - -------------------------- Section 6.1 Confidential Information.................................................... 37 ----------- ------------------------ Section 6.2 Employee and Advisor Obligations............................................ 37 ----------- -------------------------------- Section 6.3 Term........................................................................ 38 ----------- ---- Section 6.4 Publications................................................................ 38 ----------- ------------ ARTICLE VII REPRESENTATIONS AND WARRANTIES........................................................... 38 - ------------------------------------------ Section 7.1 Due Organization............................................................ 38 ----------- ---------------- Section 7.2 Consents.................................................................... 38 ----------- -------- Section 7.3 Execution, Delivery and Performance......................................... 38 ----------- ----------------------------------- Section 7.4 Legal, Valid and Binding Obligation......................................... 39 ----------- ----------------------------------- Section 7.5 No Conflict................................................................. 39 ----------- ----------- Section 7.6 Employee Obligations........................................................ 39 ----------- -------------------- Section 7.7 CuraGen Intellectual Property............................................... 39 ----------- ----------------------------- Section 7.8 Bayer Intellectual Property................................................. 41 ----------- --------------------------- Section 7.9 Contracts................................................................... 42 ----------- --------- Section 7.10 No Material Admissions...................................................... 42 ------------ ---------------------- Section 7.11 No Warranties............................................................... 42 ------------ ------------- Section 7.12 Survival.................................................................... 42 ------------ -------- ARTICLE VIII COVENANTS............................................................................... 43 - ----------------------- Section 8.1 No New Restrictions - CuraGen............................................... 43 ----------- ----------------------------- Section 8.2 Exclusivity - CuraGen....................................................... 43 ----------- --------------------- Section 8.3 No Restrictions on Screening - Bayer........................................ 43 ----------- ------------------------------------ Section 8.4 Partnership for Tax Purposes................................................ 43 ----------- ---------------------------- ARTICLE IX TERM AND TERMINATION...................................................................... 43 - ------------------------------- Section 9.1 Term of the Agreement....................................................... 43 ----------- --------------------- Section 9.2 Termination For Material Breach............................................. 44 ----------- ------------------------------- Section 9.3 Termination Upon Change of Control.......................................... 44 ----------- ---------------------------------- Section 9.4 No Effectiveness Upon HSR Denial or Termination of Stock Purchase Agreement. 44 ----------- --------------------------------------------------------------------------- Section 9.5 Effect of Termination....................................................... 44 ----------- --------------------- Section 9.6 Survival.................................................................... 46 ----------- -------- Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. ii ARTICLE X DISPUTE RESOLUTION......................................................................... 46 - ---------------------------- Section 10.1 General..................................................................... 46 ------------ ------- Section 10.2 Independent Experts......................................................... 46 ------------ ------------------- Section 10.3 SUBMISSION TO JURISDICTION; SELECTION OF A FORUM; WAIVER OF TRIAL BY JURY... 46 ------------ ------------------------------------------------------------------------- Section 10.4 Limitations of Remedies; Remedies Cumulative................................ 47 ------------ -------------------------------------------- Section 10.5 Specific Performance........................................................ 47 ------------ -------------------- ARTICLE XI MISCELLANEOUS PROVISIONS.................................................................. 48 - ----------------------------------- Section 11.1 Product Liability Indemnification........................................... 48 ------------ --------------------------------- Section 11.2 Section 365(n) of the Bankruptcy Code....................................... 48 ------------ ------------------------------------- Section 11.3 Governing Law............................................................... 49 ------------ ------------- Section 11.4 Assignment.................................................................. 49 ------------ ---------- Section 11.5 Amendments.................................................................. 49 ------------ ---------- Section 11.6 Notices..................................................................... 49 ------------ ------- Section 11.7 Exports..................................................................... 50 ------------ ------- Section 11.8 Force Majeure............................................................... 50 ------------ ------------- Section 11.9 Public Announcements........................................................ 51 ------------ -------------------- Section 11.10 Independent Contractors..................................................... 51 ------------- ----------------------- Section 11.11 No Strict Construction...................................................... 51 ------------- ---------------------- Section 11.12 Headings.................................................................... 51 ------------- -------- Section 11.13 No Implied Waivers; Rights Cumulative....................................... 52 ------------- ------------------------------------- Section 11.14 Severability................................................................ 52 ------------- ------------ Section 11.15 Execution in Counterparts................................................... 52 ------------- ------------------------- Section 11.16 HSR Filing.................................................................. 52 ------------- ---------- EXHIBITS - -------- Exhibit A Bayer's Development Manual Exhibit B Bayer's procedures for the Global Development Project Team Exhibit C Research Plan Exhibit D Bayer's Strategic Project Manual Exhibit E CuraGen's technology access licenses Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. iii METABOLIC DISORDER COLLABORATION AGREEMENT THIS METABOLIC DISORDER COLLABORATION AGREEMENT (the "Agreement"), dated this 12th day of January, 2001 (the "Execution Date"), is by and between Bayer Corporation, a corporation organized and existing under the laws of the State of Indiana and having an office at 400 Morgan Lane, West Haven, Connecticut 06516- 4175 ("Bayer"), which is a wholly-owned subsidiary of Bayer AG, a corporation organized and existing under the laws of Germany and having its principal office at D 51368 Leverkusen, Germany ("Bayer AG"), and CuraGen Corporation, a corporation organized and existing under the laws of the State of Delaware and having its principal office at 555 Long Wharf Drive, 11th floor, New Haven, Connecticut 06511 ("CuraGen"). INTRODUCTION ------------ 1. CuraGen is engaged in the business of target discovery. 2. Bayer is in the business of discovering, developing and marketing pharmaceuticals. 3. Bayer AG and CuraGen are parties to that certain Pharmacogenomics Agreement ("Pharmacogenomics Agreement") of even date herewith to collaborate on toxicogenomic and pharmacogenomic services for use in (a) the identification of gene-based toxicity markers, development and operation of the toxicity assays, the generation and maintenance of databases related to the impact of small molecules on toxicity markers and toxicity marker association with specific histopathologies, prediction of relative toxicity of Compounds; and (b) gene expression profiling of animal and human cells in the presence of Compounds to assess and predict their pharmacological effectiveness. 4. Bayer AG and CuraGen are parties to that certain Stock Purchase Agreement of even date herewith wherein Bayer AG has agreed to make an $85 million dollar equity investment in CuraGen. 5. Bayer and CuraGen are interested in collaborating in the discovery and development of targets and assays to identify, develop and commercialize small molecule drugs for the treatment of metabolic disorders. NOW, THEREFORE, CuraGen and Bayer agree as follows: Article I --------- Definitions ----------- Section 1.1 Definitions. ----------- When used in this Agreement, each of the following terms shall have the meanings set forth in this Section 1.1: Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. "Affiliate" means any corporation, company, partnership, joint venture and/or firm which controls, is controlled by, comes into control by during the Term, or is under common control with a Party. For purposes of this definition, "control" shall mean (a) in the case of corporate entities, direct or indirect ownership of at least fifty percent (50%) of the stock or shares having the right to vote for the election of directors, and (b) in the case of non- corporate entities, direct or indirect ownership of at least fifty percent (50%) of the equity interest with the power to direct the management and policies of such non-corporate entities. "Annual Sales Volume" means total worldwide Net Sales of a Metabolic Program Drug during a Contract Year. "Bayer Know-How" means Know-How owned or otherwise controlled by Bayer or its Affiliates, and in which Bayer or an Affiliate has a licensable or sublicensable interest and which Bayer or an Affiliate can license to CuraGen, relating to (a) Bayer's generic toxicogenomic database; (b) Bayer's drug discovery programs and (c) Bayer's drug development program. "Bayer Patent Rights" means a Patent Right owned or otherwise controlled by Bayer or an Affiliate (singly or jointly with CuraGen) in which Bayer or an Affiliate has a licensable or sublicensable interest and which Bayer or an Affiliate can license to CuraGen, covering an invention that is part of the Bayer Know-How. "CFA" or "Collaborative Focus Area" means metabolic disorders, primarily obesity and Type 2 diabetes. "Change of Control" means (a) a merger or consolidation of a Party which results in the voting securities of such Party outstanding immediately prior thereto ceasing to represent at least forty percent (40%) of the combined voting power of the surviving entity immediately after such merger or consolidation; (b) the sale of all or substantially all of the assets of a Party (including a sale by Bayer or Bayer AG of all or substantially all of the assets consisting of Bayer's metabolic business); or (c) any "person", as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), together with any of such persons "affiliates" or "associates", as such terms are used in the Exchange Act, becoming the beneficial owner of forty percent (40%) or more of the combined voting power of the outstanding securities of a Party (other than such Party, any trustee or other fiduciary holding securities under an employee benefit plan of such Party or any corporation owned directly or indirectly by the stockholders of such Party in substantially the same proportion as their ownership of stock of such Party). For purposes of this definition only, "Party" shall mean either CuraGen or Bayer AG. "Claim" means either: (a) a claim of an issued and unexpired patent which has not been held permanently revoked, unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction, unappealable or unappealed within the time allowed for appeal, and which has not been admitted to be invalid or unenforceable through reissue or disclaimer or otherwise; or (b) a claim of a pending patent application which claim was filed and is being prosecuted in good faith and has not been abandoned or finally disallowed without the Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 2 possibility of appeal or refiling of the application; provided, however, that such patent application shall not have been pending for more than five (5) years unless it is the subject of an interference or its prosecution has been stayed or suspended for reasons that are beyond the control of the owner of the patent application containing such claim. "Clinical Development Phase" means Phase I, Phase II, Phase III, NDA Phase and Registration Phase. "Combination Product" means any pharmaceutical product which comprises the Metabolic Program Drug and other compounds having independent therapeutic activity. "Commercialization Phase" means the phase subsequent to a Development Compound's initial NDA Approval. "Compound" means a compound which interacts with a Qualified Target. "Confidential Information" means all materials, Know-How or other information, including, without limitation, proprietary information and materials (whether or not patentable) regarding a Party's technology, products, business information or objectives, which is designated as confidential in writing by the disclosing Party, whether by letter or by the use of an appropriate stamp or legend, prior to or at the time any such material, trade secret or other information is disclosed by the disclosing Party to the other Party. Notwithstanding the foregoing to the contrary, materials, Know-How or other information which is orally, electronically or visually disclosed by a Party, or is disclosed in writing without an appropriate letter, stamp or legend, shall constitute Confidential Information of a Party (a) if the disclosing Party, within thirty (30) days after such disclosure, delivers to the other Party a written document or documents describing the materials, Know-How or other information and referencing the place and date of such oral, visual, electronic or written disclosure and the names of the persons to whom such disclosure was made, or (b) such information is of the type that is customarily considered to be confidential information by persons engaged in activities that are substantially similar to the activities being engaged in by the Parties pursuant to this Agreement. "Configured Assay" means an assay embodying or based upon a QT that [____________________________________________], as further defined in the Research Plan. "Contract Quarter" means the period beginning on the Effective Date and ending on March 31, 2001, and each succeeding calendar quarter thereafter during the Term. "Contract Year" means the period beginning on the Effective Date and ending on December 31, 2001 ("Contract Year 1"), and each succeeding twelve (12) month period thereafter during the Term (referred to as the "Contract Year 2", "Contract Year 3", etc.). "Cost of Goods Sold" means the costs which are incurred by a Party or its Affiliates attributable to the manufacture of a Metabolic Program Drug determined in a manner consistent with the Commercialization Annual Budget prepared by Bayer. Cost of Goods Sold shall exclude Development Costs, Marketing Costs and Selling Costs. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 3 "Cost of Net Capital Invested" means the Net Capital Invested calculated at the end of a Contract Quarter (i) divided by four (4) and (ii) multiplied by [_________________________________]. "CuraGen Know-How" means Know-How owned or otherwise controlled by CuraGen or an Affiliate, and in which CuraGen has a licensable or sublicensable interest and which CuraGen or an Affiliate can license to Bayer, relating to (a) a QT, (b) the use of a QT to discover and develop Metabolic Program Drugs, and (c) the treatment of diseases and/or conditions with Metabolic Program Drugs that interact with a QT. "CuraGen Patent Rights" means a Patent Right owned or otherwise controlled by CuraGen or an Affiliate (singly or jointly with Bayer), and in which CuraGen or an Affiliate has a licensable or sublicensable interest, covering an invention that is part of the CuraGen Know-How. "CuraTools" means the suite of bioinformatics algorithms available in GeneScape for genomic analysis. "Designated Scientific Issue" means the following issues: whether (a) a Target Candidate has met the criteria to qualify as a QT, including, but not limited to, [_________________________________]; and (b) a QT is [____________________]. Notwithstanding the foregoing, it is hereby agreed that Designated Scientific Issues shall not include any matters explicitly left to the discretion, consent or approval of Bayer under this Agreement. "Development Candidate" means a Compound designated by Bayer [_____________________]. "Development Compound" means a Compound which is in the Pre-Clinical Development Phase or Clinical Development Phase. "Development Costs" means the costs incurred by a Party (or for its account by an Affiliate or a Third Party) which are generally consistent with the Development Annual Budget prepared by Bayer and are specifically attributable to the development of a Development Compound. Development Costs shall include, without limitation, (a) the cost of pre-clinical and clinical studies, [_______________________________________________________________], (b) all direct labor, benefits and payroll taxes and direct operating costs and supplies (i.e. reagents) as well as appropriate allocations of supervisory, bioinformatics and engineering labor, benefits and payroll taxes; facility rental (or depreciation) and operating costs (i.e. electricity, heating, maintenance, property taxes and insurance); capital equipment rental or depreciation and maintenance costs; license fees, database subscription charges and royalties; external grants and internal costs for monitoring; and registration costs, all to the extent attributable to the development of a Development Compound and (c) all costs incurred for marketing purposes of a Development Compound prior to NDA Approval. "Development Manual" means Bayer's procedures for developing Development Compounds attached hereto as Exhibit A, as the same may be amended or supplemented by Bayer from time to time. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 4 "DOJ" means the United States Department of Justice. "DP" or "Decision Point" means as follows: . [______________________________________________________________________]. . [______________________________________________________________________]. . [______________________________________________________________________]. . [______________________________________________________________________]. . [______________________________________________________________________]. "Effective Date" means the later of the HSR Clearance Date and the Closing Date as defined in the Stock Purchase Agreement. "Executive Officers" means the Head of Worldwide Pharmaceutical Research of Bayer (or an executive of Bayer designated by Bayer) and the Chief Executive Officer of CuraGen (or an officer of CuraGen designated by CuraGen). "Exploratory Research Phase" means the phase consisting of the Qualified Target Production Phase, Target Screening Phase and Lead Compound Evaluation Phase. "First Commercial Sale" means, for each Metabolic Program Drug, the first commercial sale in a country as part of a nationwide introduction by a Party, its Affiliates or its Sublicensees to Third Parties. Sales for test marketing, clinical trial purposes or compassionate or similar use shall not be considered to constitute a First Commercial Sale. "FDA" means the United States Food and Drug Administration or an equivalent governmental agency in Europe or Japan. "FTC" means the United States Federal Trade Commission. "GeneCalling" means CuraGen's technology for analyzing differential gene expression. "GeneScape" means CuraGen's set of computer programs executable through a standard internet browser (i.e. Netscape Communicator or Microsoft Internet Explorer), including LIMS and CuraTools, and their user documentation, together with all modifications made to such computer programs during the term of this Agreement. "Global Development Project Team" means the global development project team created by Bayer for a Compound, the procedures for which are as set forth in Exhibit B, as the same may be amended or supplemented by Bayer from time to time. "GPCR" means a G protein coupled receptor. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 5 "Hit" means a Small Molecule which interacts in an assay employing a QT to give a designated effect. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (15 U.S.C. Sec. 18a), and the rules and regulations promulgated thereunder. "HSR Clearance Date" means the earlier of (a) the date on which the FTC shall notify Bayer and CuraGen of early termination of the applicable waiting period under the HSR Act or (b) the day after the date on which the applicable waiting period under the HSR Act expires. "HSR Filing" means filings by Bayer and CuraGen with the FTC and the Antitrust Division of the DOJ of a Notification and Report Form for Certain Mergers and Acquisitions (as that term is defined in the HSR Act) with respect to the matters set forth in this Agreement, the Pharmacogenomics Agreement and the Stock Purchase Agreement, together with all required documentary attachments thereto. "HTS" means high throughput screening. "Improvement Rights" means a Party's entire right, title and interest in and to (including without limitation any Claims claiming) such Party's Improvements. "Improvements" means all patented inventions, trade secrets and Know-How solely made, created, developed, conceived or reduced to practice by a Party and/or its Affiliates pursuant to activities relating to this Agreement during the Term that (i)(A) have application to the manufacture, use, development, import, export and/or sale of a Metabolic Program Drug, and (B) are dominated by such Party's Patent Rights or (ii) are actually used to manufacture, use or sell a Metabolic Program Drug. A Party's Improvements shall exclude its interest in any Joint Inventions. "IND" means an investigational new drug application filed with the FDA. "IRC" means [_________________________________________________________]. "IPDC" means [________________________________________________________]. "Joint Invention" means (A) all patentable inventions (i) jointly invented (as determined in accordance with United States patent law) by Bayer (or its Affiliates) and CuraGen (or its Affiliates) pursuant to their activities relating to this Agreement during the Term, and (ii) covered by any Claim; and (B) all Know-How that Bayer (or its Affiliates) and CuraGen (or its Affiliates) jointly make, create, develop, discover, conceive or reduce to practice pursuant to their activities relating to this Agreement during the Term other than those in inventions described in (A). "Knowledge" means the knowledge, after due and reasonable investigation, of any officer of the Party. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 6 "Know-How" means any information, data and materials, including, without limitation, biological materials, such as cell lines, RNA, DNA, DNA fragments, organisms, Proteins, polypeptides, plasmids and vectors not covered by a Claim, that are owned or otherwise controlled by a Party or an Affiliate of a Party or jointly by the Parties and/or their respective Affiliates. "Lead Compound Evaluation Phase" means the phase in which all work necessary to produce and evaluate a potential lead compound occurs. "Lead Structures" means Compounds identified in the Target Screening Phase of the Metabolic Program that meet pre-defined criteria set forth in the Research Plan, and the expansion series developed within a Strategic Project. "LIMS" means laboratory information management system. "Marketing Cost" means the costs incurred by a Party or its Affiliates which are attributable to the promotion, advertising and marketing of a Metabolic Program Drug determined in a manner consistent with such Party's standard practices. Marketing Costs shall include without limitation all costs related to Phase IV studies but shall exclude Cost of Goods Sold, Development Costs and Selling Costs. "Metabolic Program" means the collaboration by Bayer and CuraGen on the discovery and development of Metabolic Program Drugs in the CFA based on the Qualified Targets provided by CuraGen, carried out in accordance with the Research Plan. "Metabolic Program Drug" means any therapeutic agent, the active ingredient in which is a Small Molecule that (a) is identified on the basis of its interaction with a Qualified Target in a Small Molecule or other screening assay, or (b) is designed or developed using medicinal chemistry, combinatorial chemistry, rational design techniques or other techniques to interact with a Qualified Target. The term "Metabolic Program Drug" shall include Non-CFA Products and, except as expressly provided to the contrary in Section 2.2(f), shall not include any pharmaceutical product in which the active ingredient is (i) a natural Protein, (ii) a vaccine, (iii) any antibody (whether polyclonal or monoclonal, multiple or single chain, whole or fragment), any soluble receptor, or fusion protein and the nucleic acid encoding any of the foregoing or (iv) a nucleic acid sequence encoding an expressed gene. "Metabolic Program Project Team" means, as applicable, the Metabolic Program Target Prosecution Team, the Metabolic Program Target Selection Team, the Metabolic Program Strategic Project Team or the Global Development Project Team. "MSC" means [________________________________________________________]. "NDA" means a new drug application submitted for a Development Compound or Protein Product in the Metabolic Program to the FDA. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 7 "NDA Approval" means approval of a Development Compound or Protein Product in the Metabolic Program by the FDA, including, where appropriate, price approval necessary for commercialization in a country. "NDA Phase" means the phase in which a NDA is submitted for a Development Compound or Protein Product in the Metabolic Program to the FDA. "Net Capital Invested" means the total of (i) inventories and trade receivables minus trade payables plus (ii) fixed assets [____________________________________________________]. "Net Sales" means with respect to a Metabolic Program Drug, the gross amount invoiced by a Party, its Affiliates and/or its Sublicensees on sales of the Metabolic Program Drug to Third Parties, less the following items: Trade, cash and quantity discounts actually allowed and taken with respect to such sales; Tariffs, duties, excises, sales taxes or other taxes imposed upon and paid directly with respect to the import, export, production, sale, delivery or use of the Metabolic Program Drug (excluding national, state or local taxes based on income); Amounts repaid or credited by reason of rejections, defects, recalls, or returns or because of chargebacks, refunds, rebates or retroactive price reductions; and An allowance for distribution expenses (such as freight, transportation and insurance expenses) and any other customary deductions attributable to the sale of a Metabolic Program Drug and determined in a manner consistent with such Party's standard practices. Such amounts shall be determined from the books and records of the applicable Party, its Affiliates and/or its Sublicensees. Sales of Metabolic Program Drugs between a Party and its Affiliates or Sublicensees, or among such Affiliates and Sublicensees, shall not be considered Net Sales, but in such cases the Royalty Payments or Operating Income shall be calculated on the Net Sales by such Affiliates or Sublicensees to a Third Party who is not a Sublicensee. The obligation to pay Royalty Payments is imposed only once with respect to the same unit of a Metabolic Program Drug. In the event the Metabolic Program Drug is sold as part of a Combination Product, the Net Sales from the Combination Product, for the purposes of determining Royalty Payments or Operating Income, shall be determined by multiplying the Net Sales of the Combination Product (as defined in the standard Net Sales definition), during the applicable reporting period, by the fraction, A/A+B, where A is the average sale price of the Metabolic Program Drug when sold separately in similar quantities in finished form and B is the average sale price of the other compounds having independent therapeutic activity included in the Combination Product when sold separately in similar quantities in finished form, in each case in the same country as the Combination Product during the applicable reporting period or, if sales of both the Metabolic Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 8 Program Drug and the other compounds having independent therapeutic activity did not occur in such period, then in the most recent reporting period in which sales of both occurred in the same country as the Combination Product. In the event that such average sale price cannot be determined for both the Metabolic Program Drug and all other compounds having independent therapeutic activity included in the Combination Product, Net Sales for the purposes of determining Royalty Payments or Operating Income shall be calculated by multiplying the Net Sales of the Combination Product by the fraction of C/C+D where C is the fair market value of the Metabolic Program Drug and D is the fair market value of all other compounds having independent therapeutic activity included in the Combination Product. In such event, the selling Party shall in good faith make a determination of the respective fair market values of the Metabolic Program Drug and all other compounds having independent therapeutic activity included in the Combination Product, and shall notify the other Party of such determination and provide the other Party with data to support such determination. The other Party shall have the right to review such determination and supporting data, and to notify the selling Party if it disagrees with such determination. If the other Party does not agree with such determination and if the Parties are unable to agree in good faith as to such respective fair market values, then such matter shall be resolved in accordance with Article X. "Non-CFA" means any human disease or condition that is not included within the CFA. "Novel Protein" means a nucleic acid sequence of the full length coding sequence of the protein it encodes where such sequence is significantly different from nucleic acid sequences in the Public Domain. The full length coding sequence will only be considered "significantly different if: [_________________________________________________________________________]. "Operating Income" means Net Sales (but excluding Net Sales of Sublicensees) of a Party and its Affiliates plus any revenues from any single-country co- marketing and outlicensing or sublicensing revenue from Third Parties minus (i) Development Costs (A) for which a Party has opted out and (B) which are associated with a line extension, new indication, new dosage, new formulation or new delivery mechanism of a Metabolic Program Drug, (ii) Marketing Costs, (iii) Cost of Goods Sold, (iv) Selling Costs, (v) Overhead Costs, (vi) Cost of Net Capital Invested, and (vii) miscellaneous costs appearing in the Commercialization Annual Budget attributable to the Operating Income Product. "Operating Income Product" means a Metabolic Program Drug with respect to which the Parties are sharing Operating Income. "Overhead Costs" means all operating expenses incurred by a Party or its Affiliates in support of the activities which are part of Cost of Goods Sold, Marketing Costs and Selling Costs to the extent not already counted therein determined in a manner consistent with such Party's standard practices. Cost elements generally included are: . direct labor wages, related payroll taxes and employee benefits . indirect labor wages, related payroll taxes and employee benefits . depreciation Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 9 . taxes, other than income, franchise and sales related taxes . insurance . rent . repairs and maintenance . supplies, scrap and inventory expenses . utilities . factory administration expenses . other similar allocable cost elements of factory overhead . allocation of general and administrative expenses attributable to the Metabolic Program determined in a manner consistent with such Party's standard practices; provided, however that general and administrative expenses of other business units of such Party shall not be allocated. "Party" means Bayer or CuraGen. "Parties" means Bayer and CuraGen. "Patent Right" means a patent or patent application and all divisions, continuations, continuations-in-part, reissues, reexaminations, extensions, supplementary protection certificates and foreign counterparts thereof that are owned or otherwise controlled by a Party. "PathCalling" means CuraGen's yeast two-hybrid system for identifying protein interactions. "Pharmacogenomics Agreement" means the Pharmacogenomics Agreement dated on the date hereof by and between CuraGen and Bayer AG. "Pharmacogenomic Services" means (i) services relating to gene expression profiling of animal and human cells in the presence of compounds to assess and predict their pharmacological effectiveness and (ii) genotyping to identify the genetic variations (SNPs and haplotypes) that predict differential drug response and toxicity. "Phase I" means the development phase in which human clinical trials to determine the safety of a Development Compound are conducted. "Phase II" means the development phase in which human clinical trials to initially determine the efficacy of a Development Compound are conducted. "Phase III" means the development phase in which large-scale human clinical trials to obtain data necessary for submission to obtain regulatory approval of a Development Compound are conducted. "Phase IV" means any human trials of a Metabolic Program Drug which are not planned to be included in the NDA filing with the FDA but which are in support of marketing activities. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 10 "Pre-Clinical Development Phase" means the pre-clinical development phase commencing with the acceptance by Bayer of a pre-clinical Development Candidate and ending at the decision to advance a Development Compound to Phase I. "Predictive Toxicogenomic Screen" means processing a Compound through the predictive toxicity assay developed in the set-up phase of the Pharmacogenomics Agreement. "Program Director" means the research executive appointed by each Party to serve as such Party's principal coordinator and liaison for the Metabolic Program. "Protein" means a compound composed of a variety of amino acids joined by amide linkages, including allelic variants thereof and post-translationally modified variants thereof (e.g., glycosylated Proteins); provided, however that a Protein shall not include (a) any peptide that is comprised of [_______] or fewer amino acids and (b) any antibody (whether polyclonal or monoclonal, multiple or single chain, whole or fragment), any soluble receptor, or fusion protein and the nucleic acid encoding any of the foregoing. "Protein Product" means a product (i) that interacts with a QT (ii) that is derived from a Protein and (iii) that is in pre-clinical or clinical development or is being commercialized. "Public Domain" as used with reference to a nucleic acid sequence, means that such sequence has been made available to the general public in any manner, including without limitation (a) in a published scientific paper, (b) in an issued patent or a published patent application, or (c) in a public nucleic acid or protein database (e.g., GenBank, DBEST, etc.). "Qualified Target" or "QT" means [_______________________________________________]. "Qualified Target Class" means the following: [___________________________________________]. Bayer shall furnish to CuraGen all essential information available to Bayer with respect to such signature motifs. "Registration Phase" means the development phase subsequent to the first NDA filing for a Development Compound up to the Development Compound's initial NDA Approval. "Research Plan" means the research plan attached as Exhibit C to this Agreement, as such plan may be updated or amended pursuant to Section 2.1. "Research Phase" means the Exploratory Research Phase and the Strategic Project Phase. "Restricted Target" means a Target Candidate to which CuraGen is prevented from granting to Bayer the exclusive right under CuraGen Know-How or CuraGen Patent Rights to exploit Metabolic Program Drugs identified using such Target Candidate for the treatment of human diseases and conditions in the CFA. "Right of First Negotiation" means that if CuraGen or an Affiliate wishes to transfer rights to a Protein, Protein Product, Qualified Target, Development Candidate or Development Compound Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 11 to a Third Party, CuraGen shall notify Bayer (a "Proposed Transfer"). Within [_____________] of receipt of such notice, Bayer shall notify CuraGen whether it wishes to enter into negotiations with respect to such Proposed Transfer. If Bayer does not respond within such [_____________] period, or if Bayer notifies CuraGen that it will not exercise its Right of First Negotiation with respect to such Proposed Transfer, CuraGen or its Affiliates shall have no further obligation to Bayer with respect to such Proposed Transfer. If Bayer notifies CuraGen that it is exercising its Right of First Negotiation, Bayer and CuraGen or its Affiliate shall enter into good faith negotiations for a transfer of the Protein, Protein Product, Qualified Target, Development Candidate or Development Compound to Bayer, on terms and conditions mutually agreeable to the Parties. CuraGen or an Affiliate shall not discuss, negotiate with, transfer, or grant any license or other right to any Third Party until [_____________] have elapsed since Bayer gave notice of its decision to exercise its Right of First Negotiation with respect to such Proposed Transfer. "Royalty Product" means a Metabolic Program Drug for which a Party is receiving Royalty Payments. "Screenable Qualified Target" or "Screenable QT" means a Qualified Target which is amenable to a Configured Assay for HTS. "Screening Term" means the period commencing on the Effective Date and ending on the date Bayer has completed eighty (80) screens of Qualified Targets, unless terminated earlier (y) by Bayer pursuant to Section 2.5(c) or (z) by CuraGen pursuant to Section 2.5(d); provided, however that the Screening Term shall in any event end on the [__________] anniversary of the Effective Date. "Selling Cost" means the costs which are incurred by a Party or its Affiliates which are after the First Commercial Sale of a Metabolic Program Drug and which are attributable to the sale of such Metabolic Program Drug determined in a manner consistent with such Party's standard practices. Selling Costs shall exclude Cost of Goods Sold, Development Costs and Marketing Costs. "SeqCalling" means CuraGen's technology for identifying the mRNA transcripts in a specific tissue. "Small Molecule" means a compound that is non-peptidic or, if peptidic, is comprised of no more than ten (10) amino acids, including, without limitation, a compound that is a natural product or is developed using medicinal, combinatorial, computational or other chemistry technologies. "Stock Purchase Agreement" means the Stock Purchase Agreement between Bayer AG and CuraGen dated as of the Execution Date. "Strategic Project" means a project undertaken to work with the Lead Structures [________________________________________________________]. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 12 "Strategic Project Phase" means the phase during which Bayer works with a Lead Structure or Lead Structures [________________________________________________________]. "Strategic Project Manual" means Bayer's publication "[______________________]" attached hereto as Exhibit D, as the same may be amended or supplemented by Bayer from time to time. "Sublicensee" shall mean any Third Party to whom a sublicense has been validly granted pursuant to this Agreement. "Target Candidate" means any potential Qualified Target in CuraGen's database to be submitted by CuraGen pursuant to Section 2.5 of this Agreement. "Third Party" means any person who is not a Party or an Affiliate under this Agreement. "Toxicogenomic Reference Data" means the data generated by CuraGen in the set-up phase of the Pharmacogenomics Agreement consisting of [____________________________________]. "TRA" means Bayer's therapeutic research area. "Unrecognized Protein" means a nucleic acid sequence of the full length coding region where [__________] percent or more of the protein sequence is present in the Public Domain but nevertheless is unrecognized because (a) [____________________________________] is not already present in the Public Domain (either because the Public Domain contains no annotation or where the Program Directors agree that the Public Domain annotation is in error), and (b) there is no documented annotation in the Public Domain relating the gene to the CFA. Section 1.2 Additional Definitions. ---------------------- Each of the following definitions is set forth in the section of this Agreement indicated below: Definitions Section ----------- ------- Agreement Preamble Audited Party Section 4.5 Auditing Party Section 4.5 Bayer Preamble Bayer Indemnified Parties Section 11.1(b) Biological Materials Section 2.2(d) Breaching Party Section 9.2 Commercialization Annual Budget Section 4.1(a) Commercialization Reconciliation Section 4.1(a) Compound Credit Section 4.1(b) CuraGen Preamble CuraGen Indemnified Parties Section 11.1(a) Designated Inventions Section 5.3 Development Annual Budget Section 4.1(a)(iii) Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 13 Development Reconciliation Section 4.1(a)(iii) Execution Date Preamble Metabolic Program Strategic Project Team Section 2.4(d) Metabolic Program Target Prosecution Team Section 2.4(c) Metabolic Program Target Selection Team Section 2.4(b) Non-Breaching Party Section 9.2 Non-CFA Product Section 2.2(b) Overflow Date Section 4.1(b)(i) Pharmacogenomic Project Agreement Preamble Project Manager Section 2.4(e) Proposed Transfer Section 3.7 Qualified Target Production Phase Section 2.5 Recovered Bayer Net Sales Section 5.4(a) Recovered CuraGen Net Sales Section 5.4(a) Royalty-Paying Party Section 4.4 Royalty Payment Section 4.2(a) Royalty Recipient Section 4.4 Screened Qualified Target Section 2.5(a) Strategic Project Leader Section 2.4(d) Target Screening Phase Section 2.6(a) Term Section 9.1 Article II ---------- Metabolic Program; Research Plan -------------------------------- Section 2.1 Research Plan. ------------- The Parties shall use commercially reasonable efforts to conduct the Metabolic Program in accordance with the Research Plan. The Program Directors will review the Research Plan on at least an annual basis and submit any proposed modifications or updates to the Parties for their approval; provided, however that any such modifications or updates shall not become effective until approved by both Parties in writing. The Parties agree to review and consider any such proposed modifications or updates on an expedited basis. Each Party agrees to use commercially reasonable efforts to (i) undertake the responsibilities assigned to such Party in the Research Plan, including, but not limited to, the dedication of resources appropriate to such efforts and (ii) make available to the other Party those resources set forth in the Research Plan. Section 2.2 Metabolic Program - General. --------------------------- (a) General. Each Party agrees to use commercially reasonable efforts to carry out all work done in the course of the Metabolic Program in material compliance with all applicable federal, state or local laws, regulations and guidelines governing the conduct of such work, including, without limitation, all applicable export and import control laws. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 14 (b) Non-CFA QTs, Compounds and Products. If a QT is used in a Non-CFA indication and if a Compound identified in the Metabolic Program using such QT is developed for a Non-CFA indication only (a "Non-CFA Product"), Bayer may at its sole discretion perform research on or with such QT outside the CFA and continue to develop such Non-CFA Product as a Metabolic Program Drug. In such event, if Bayer offers CuraGen the opportunity to share Development Costs and share the Operating Income or if CuraGen has identified the Non-CFA indication by giving written notice to Bayer, CuraGen may, at its election exercised by giving written notice to Bayer either within [___________] of Bayer's offer or within [___________] of CuraGen's notice, as appropriate, share the Development Costs relating to the Non-CFA Product as provided in Section 4.1(a)(ii) and thereby receive a share of Operating Income as provided in Section 4.2(b) in lieu of receiving Royalty Payments pursuant to Section 4.2(a); provided, however that CuraGen's payment of the Development Costs associated with such Non-CFA Product shall [_____________________________________________________]. If Bayer does not offer CuraGen the opportunity to share Development Costs and share the Operating Income or if CuraGen did not identify the non-CFA indication, then CuraGen shall receive Royalty Payments pursuant to Section 4.2(a) with respect to such Metabolic Program Drug without regard to the opt-out criteria in Section 4.1(b). (c) CFA and Non-CFA Indication. If a Compound is developed for both a Non-CFA indication and a CFA indication, the Compound shall be developed in the Metabolic Program and deemed to be a Metabolic Program Drug. The Development Costs associated with a Compound developed both for a Non-CFA indication and a CFA indication shall count toward the calculation of CuraGen's [___________] opt-out right under Section 4.1(b)(ii). (d) Biological Materials. For the purposes of facilitating the conduct of the Metabolic Program, each Party shall provide to the other Party, at its sole expense, such animal or human tissues, cells, blood samples and other materials ("Biological Materials") specified from time to time in the Research Plan. The Parties agree that: (i) all Biological Materials provided by one Party to the other shall be used solely for research purposes in the Metabolic Program; (ii) the Party providing such Biological Materials shall obtain (or cause its Third Party collaborators to obtain or certify that they have obtained) all appropriate and required consents from the source of such Biological Materials; and (iii) Biological Materials provided by one Party to the other shall not be made available by the receiving Party to any Third Party except pursuant to the Metabolic Program or upon the prior written consent of the Party providing such Biological Materials. (e) Disclosure of CuraGen Know-How. During the Screening Term, CuraGen (consistent with its applicable confidential disclosure obligations, if any) shall promptly disclose to Bayer (i) all CuraGen know-how specified in the Research Plan, and (ii) all CuraGen know-how not specified in the Research Plan which CuraGen reasonably believes to be applicable to Target Candidates, QTs or otherwise pertinent to the Metabolic Program. Without limiting the generality of the foregoing, promptly following the Effective Date, the Program Directors shall review CuraGen know-how in existence as of the Effective Date relevant to the Metabolic Program to identify any potential Qualified Targets, with the intention of placing all such Qualified Targets in the Metabolic Program. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 15 (f) Restrictions on CuraGen's Right to Develop Proteins. CuraGen may develop and commercialize (either alone or with any Affiliate or Third Party) any Proteins outside the Metabolic Program subject to the following conditions: (i) During the Term, CuraGen shall have the obligation to promptly report to Bayer that it is developing a Protein Product which interacts with a QT which has been accepted into the Metabolic Program. (ii) During the Term, if (A) CuraGen discovers a Protein, (B) CuraGen does not have a Protein Product relating to such Protein in development and (C) Bayer has a Development Compound that has received DP-1 approval and interacts with the same QT as such Protein, then [__________________________________________________________]. CuraGen shall receive 56% and Bayer shall receive 44% of the Operating Income for such Protein Product. (iii) During the Term, if, prior to the time CuraGen has filed an NDA, it is determined that [_____________________________________________]. CuraGen shall receive 56% and Bayer shall receive 44% of the Operating Income for such Protein Product. [______________________________________________]. (iv) During the Term, if, prior to DP-1 approval for a Compound in the Metabolic Program, [_________________________________________]. (v) During the Term, [___________________________________________]. (vi) For purposes of clarity, it is hereby acknowledged and agreed that nothing in this Section 2.2(f) is intended to restrict or otherwise affect in any way CuraGen's right to develop and commercialize antibodies (whether polyclonal or monoclonal, multiple or single chain, whole or fragment), soluble receptors, and fusion proteins and the nucleic acid encoding any of the foregoing within or outside of the CFA. Section 2.3 Technology Access. ----------------- During the Term, CuraGen will provide Bayer and/or its Affiliates with GeneScape access, including CuraTools and LIMS technology, to enable Bayer to view data associated with the Metabolic Program. CuraGen will also provide Bayer with access to CuraGen's proprietary GeneCalling and PathCalling experiments that are part of the Metabolic Program and to the public genomic, EST and protein databases maintained within GeneScape. Such access shall be granted pursuant to the terms of the licenses set forth in Exhibit E attached hereto. Section 2.4 Management of Metabolic Program. ------------------------------- (a) Program Directors. Each of Bayer and CuraGen shall appoint at its sole discretion a research scientist to serve as a Program Director for the Metabolic Program who will be replaceable at the will of such Party. The Bayer Metabolic Program Director will commit substantially all of his/her time to the Program and will be in residence at CuraGen for the equivalent of at least six (6) months of each year in order to facilitate close and direct collaboration. The Bayer Metabolic Program Director will have access to the offices and Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 16 personnel of CuraGen to the extent necessary to facilitate close and direct collaboration. The CuraGen Metabolic Program Director will commit substantially all of his/her time to the Program. The CuraGen Metabolic Program Director will have access to the offices and personnel of Bayer to the extent necessary to facilitate close and direct collaboration. The Program Directors will jointly oversee the conduct of the Metabolic Program and will be responsible for recommending to the Parties any changes to the Metabolic Research Plan. Additional individuals from both Parties will be involved as each Party determines is appropriate. The Program Directors will work with the Metabolic Program Project Teams described below to recommend the operational decisions required to implement the Research Plan. The Program Directors shall oversee the process of acceptance of Qualified Targets from CuraGen's metabolic disease research program through analysis of data generated by such research, and of the disease/therapeutic hypotheses of Target Candidates, and shall designate the Qualified Targets based on recommendations of the Metabolic Program Target Selection Team. To ensure that the process of selection is orderly and efficient, the criteria for Qualified Target selection will be guided by the definitions set forth in the Research Plan, unless such a Qualified Target is otherwise approved by the Bayer Program Director. The Program Directors shall provide jointly-prepared monthly spreadsheets to the Parties within [_____________] days after the end of each calendar month and jointly-prepared semi-annual reports within [_____________] after the end of each April and October summarizing the information included in the monthly spreadsheets for such calendar year. The formats for such spreadsheets and reports shall be agreed upon by the Program Directors. (b) Metabolic Program Target Selection Team. The Metabolic Program Directors, in consultation with Bayer, will appoint a Metabolic Program Target Selection Team, consisting of an equal number of representatives from both Bayer and CuraGen. The Metabolic Program Target Selection Team will provide to the Metabolic Program [_______________________________]. In addition to the Metabolic Program Directors, Bayer and CuraGen will commit to the Metabolic Program Target Selection Team [_______________________], and Bayer will commit [_______________________________]. The composition and makeup of the team will be reviewed yearly and recommendations for change will be made jointly by the Program Directors as they deem necessary. CuraGen shall grant the Metabolic Program Target Selection Team the technology access set forth in Section 2.3 for the purposes of reviewing and selecting Qualified Targets and for any further purposes of the Metabolic Program, as well as access to CuraGen personnel to enable the Team to identify Target Candidates. The Metabolic Program Target Selection Team will make recommendations to the Metabolic Program Directors concerning Target Candidates and Qualified Targets that should move forward in the program. The Bayer Metabolic Program Director shall decide which Target Candidates and Qualified Targets shall move forward and shall so notify the Metabolic Program Target Selection Team. The Metabolic Program Target Selection Team will be responsible for the following: (i) Determining which of the tissue banks at CuraGen and Bayer will serve as resources for reagents [________________________________________]. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 17 (ii) Recommending potential Qualified Targets to be investigated further using CuraGen's technologies, information systems, model systems, databases, and disease expertise to generate Qualified Targets. The Metabolic Program Target Selection Team will review such data, and as the program evolves, determine whether to conduct extended studies. (iii) Ensuring that the QTs are delivered as sequenced full-length cDNA in vectors of Bayer's choice which shall be reasonably acceptable to CuraGen. (c) Metabolic Program Target Prosecution Teams. Bayer and CuraGen will appoint two Metabolic Program Target Prosecution Teams, one for obesity and one for diabetes, each of which shall consist of appropriate scientists from Bayer and CuraGen. Each Metabolic Program Target Prosecution Team will be headed by a Bayer representative, will include the Metabolic Program Directors from Bayer and CuraGen and will report directly to the respective directors of diabetes and obesity research at Bayer. Each Metabolic Program Target Prosecution Team will be responsible for the following: (i) after selection of each Qualified Target, preparing a detailed target project plan; (ii) managing the Exploratory Research Phase, [_______________________]; (iii) before initiation of assay development, requesting CuraGen to do SNP mining and allele frequency analysis of SNPs across relevant disease populations approved by the Metabolic Program Target Prosecution Team; and (iv) through the Bayer and CuraGen Metabolic Program Directors, directing CuraGen to conduct Predictive Toxicogenomics Screens of Compounds derived from HTS and lead optimization. Bayer in its sole discretion shall have the right to decide whether or not to continue to attempt to screen a QT. (d) Metabolic Program Strategic Project Team. Each Metabolic Program Strategic Project Team will be chaired by a Bayer-approved leader ("Strategic Project Leader"). The composition of each Metabolic Program Strategic Project Team will vary as the Strategic Project proceeds and will be decided by the Strategic Project Leader. Each Metabolic Program Strategic Project Team will be composed of representatives of Bayer, the number of which will be determined by Bayer in its discretion, and a minimum of two (2) representatives of CuraGen. The duties and responsibilities of each Metabolic Program Strategic Project Team shall be as set forth in the Strategic Project Manual. While CuraGen's representatives to each Metabolic Program Strategic Project Team will have the right to participate in all meetings of such Metabolic Program Strategic Project Team, Bayer in its sole discretion shall have the right to make all decisions relating to the Strategic Project Phase. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 18 (e) Global Development Project Team. Each Global Development Project Team will be chaired by a Bayer-approved leader ("Project Manager"). The composition of each Global Development Project Team will vary and will be decided by the Project Manager. Each Global Development Project Team will be composed of representatives of Bayer, the number of which will be determined by Bayer in its discretion. During the Pre-Clinical Development Phase, Clinical Development Phase and Commercialization Phase, CuraGen shall appoint two (2) representatives to each Global Development Project Team relating to (i) Development Compounds in connection with which CuraGen is participating in the Development Costs and (ii) Metabolic Program Drugs in connection with which CuraGen has not opted out of the Development Costs. CuraGen's representatives to such Global Development Project Teams shall have the right to participate in all meetings of such Global Development Project Teams and shall be provided with the opportunity to be informed of and comment on the development, clinical, regulatory and marketing activities related to the relevant Development Compounds or Metabolic Program Drugs; provided, however that Bayer shall have the right to make all decisions relating to such Global Development Project Teams and shall have the right to make all decisions relating to such Development Compounds and Metabolic Program Drugs. During the Clinical Development Phase and Commercialization Phase, CuraGen shall be permitted to appoint one (1) representative to reside at Bayer, at CuraGen's sole discretion, for at least six (6) months of each year. (f) Consensus Determinations; Dispute Resolution. The Metabolic Program Target Selection Team and Metabolic Program Target Prosecution Teams will decide matters appropriate to the scope of their responsibilities on a consensus basis. If a matter cannot be resolved on a consensus basis, and the matter is not left to Bayer's discretion, then it will be referred to the Metabolic Program Directors for resolution. In the event that the Metabolic Program Directors are unable to reach agreement on any matter, the issue will be referred for resolution to an executive vice president of CuraGen and to the Bayer TRA head for diabetes and obesity and, in the event of an inability of these individuals to reach agreement, to the president of CuraGen and to the head of worldwide pharmaceutical research at Bayer. If these two individuals are unable to resolve the matter and the matter relates to a Designated Scientific Issue, the Parties will resolve that matter through the use of an expedited mediation process, in which the Parties first try to agree on a mutually acceptable scientist to serve as the mediator. Failing mutual agreement on a single scientist, each Party will appoint a scientist not affiliated with such Party and the two so selected will pick a third unaffiliated scientist. The mediator(s) will review the disputed matter on an expedited basis, considering the relevant data, standards established by this Agreement and the Research Plan and relevant precedents. The decision of the mediator(s) will be binding on the Parties. Notwithstanding the foregoing, Bayer will retain the sole right to determine whether a Qualified Target, Compound or Development Compound should continue to be developed. Section 2.5 Qualified Target Production Phase. --------------------------------- (a) General. During the Screening Term, CuraGen will use commercially reasonable efforts to produce from its metabolic disease research program a total of eighty (80) Qualified Targets which pass Bayer's high-throughput screening ("Screened Qualified Targets"). Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 19 All then-current technologies of CuraGen shall be brought to bear, including without limitation CuraGen's GeneCalling, SeqCalling, and PathCalling technologies utilizing disease models, drug response models, large scale data mining (genomic, transcript and pathways) and human genetics. Each year over the first [___________] Contract Years of the Screening Term, CuraGen will use commercially reasonable efforts to produce from its metabolic disease research program Screenable Qualified Targets, and in any event a minimum of [___________] Screenable Qualified Targets in such Contract Year (the "Qualified Target Production Phase"). After CuraGen produces a Target Candidate or a QT, CuraGen shall promptly submit it to Bayer. No QT may be delivered by CuraGen to Bayer if it is a Restricted Target unless agreed upon by Bayer. If CuraGen delivers fewer than [___________] Screenable Qualified Targets in any such Contract Year, it shall deliver additional Qualified Targets (above any amounts due to be delivered in such Contract Year) in the following Contract Year until the deficit has been filled. If CuraGen delivers more than [___________] Screenable Qualified Targets in any of the first [___________] Contract Years, then to the extent such excess is not credited to correct a delivery deficit in the preceding Contract Year, the excess will be counted toward subsequent Contract Years' minimums. Once eighty (80) Qualified Targets have been screened, CuraGen may upon mutual agreement of the Parties continue to deliver Screenable Qualified Targets but shall not be required to do so. (b) Bayer's Right to Extend CuraGen's Obligation to Provide QTs. Bayer shall have the option to require CuraGen to use commercially reasonable efforts to produce a minimum of [___________] Screenable Qualified Targets in [_______] if, at the end of[___________], Bayer has not completed eighty (80) screens of Qualified Targets, such extension to continue until the earlier of (i) such time as Bayer has completed eighty (80) screens of Qualified Targets or (ii) the end of[___________]. Bayer shall exercise the foregoing option by providing written notice of such extension to CuraGen no later than the end of [___________]. (c) Bayer's Right to End Screening Term. Bayer shall have the right to terminate the Screening Term if (i) by the end of [___________] fewer than [__] Screenable Qualified Targets have been provided to Bayer, (ii) by the end of [___________] fewer than [__] Screenable Qualified Targets have been provided to Bayer or (iii) by the end of [___________] fewer than [__] Screenable Qualified Targets have been provided to Bayer. In order to exercise its right to terminate under this subsection, Bayer shall provide written notice of such termination to CuraGen within [_____] after the end of the applicable Contract Year, such termination to be effective immediately upon provision of such notice. Notwithstanding the termination of the Screening Term, the Metabolic Program shall continue with respect to any Screened Qualified Targets. (d) CuraGen's Right to End Screening Term. CuraGen shall have the right to terminate the Screening Term if (i) by the end of [___________] more than [__] Qualified Targets have been provided to Bayer and by the end of [___________] fewer than [__] Qualified Targets have been screened by Bayer, (ii) by the end of [___________] more than [__] Qualified Targets have been provided to Bayer and by the end of [___________] fewer than [__] Qualified Targets have been screened by Bayer or (iii) by the end of Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 20 [___________] more than [__] Qualified Targets have been provided to Bayer and by the end of [___________] fewer than [__] Qualified Targets have been screened by Bayer. CuraGen shall not be entitled to terminate the Screening Term if Bayer has used commercially reasonable efforts to set up screens for the Qualified Targets. In order to exercise its right to terminate under this subsection, CuraGen shall provide written notice of such termination to Bayer within [___________] after the end of the applicable [___________], such termination to be effective immediately upon provision of such notice. Notwithstanding the termination of the Screening Term, the Metabolic Program shall continue with respect to any Screened Qualified Targets. (e) Identification of Restrictions. CuraGen shall use commercially reasonable efforts to identify at the earliest possible stage of the process of reviewing Target Candidates the proprietary status of any gene sequence encoding a Target Candidate (e.g., whether it is derived from public domain sources) as well as any potential restrictions that would limit or otherwise affect Bayer's right to exploit (i) QTs in all human diseases and conditions and (ii) Metabolic Program Drugs identified or developed using the Qualified Targets, and CuraGen shall promptly communicate their findings to Bayer. CuraGen will not [______________________________]. (f) Patent Review. Until a Compound associated with a QT is in the Pre- Clinical Development Phase, CuraGen shall use commercially reasonable efforts to monitor patent issuances and patent applications of Third Parties relevant to the associated QT and shall advise Bayer biweekly of the results of such efforts. In addition, when a QT is delivered by CuraGen to Bayer, CuraGen shall provide Bayer at that time with a written report relating to the following: CuraGen Patent Rights covering the QT; agreements between a Third Party and CuraGen or its Affiliates regarding the QT; and any patents or patent applications of Third Parties relevant to the QT which are known to CuraGen. (g) Returned Target. If, prior to a Compound being designated a Development Compound, Bayer or CuraGen learns or discovers that the use of the related Screened Qualified Target infringes one or more claims of an issued patent in the country in which the use of such Screened Qualified Target is expected to occur and such Screened Qualified Target has not reverted to CuraGen pursuant to Section 3.7(c), then Bayer shall have the right to return such Screened Qualified Target to CuraGen and that Screened Qualified Target shall no longer count as a Screened Qualified Target which CuraGen is obligated to deliver hereunder. Section 2.6 Target Screening Phase. ---------------------- (a) General. Bayer shall use commercially reasonable efforts to express the protein derived from the provided QTs, develop HTS Configured Assays and screen the Qualified Targets against Bayer's compounds (the "Target Screening Phase"). Assuming CuraGen delivers an adequate number of Qualified Targets, Bayer will evaluate at least [______] Qualified Targets each [_____________] and shall use commercially reasonable efforts to set up a screen for at least [______] Qualified Targets each [_____________]. CuraGen shall perform Predictive Toxicogenomic Screens and Pharmacogenomic Services as deemed necessary by the Metabolic Program Target Prosecution Team or a Metabolic Program Strategic Project Team. As deemed necessary by Bayer in its sole discretion, Bayer will perform assays to assess the Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 21 effectiveness of Lead Structures. Before initiation of assay development, CuraGen will, at the discretion of the Metabolic Program Target Selection Team and at CuraGen's cost, perform SNP mining and allele frequency analysis of SNPs of the Qualified Targets across relevant disease populations. (b) Orphan GPCRs. If CuraGen identifies an orphan GPCR, Bayer and CuraGen, at their discretion, will subject it to deorphaning strategies. If Bayer generates a Configured Assay on the GPCR, such GPCR shall be deemed to be a Screenable Qualified Target delivered by CuraGen to Bayer in the Contract Year in which Bayer generated the Configured Assay. (c) Selections of QTs. During the Screening Term, the Metabolic Program Target Selection Team shall review the Target Candidates presented by CuraGen on a continuing basis to identify those Qualified Targets which have the highest potential to develop a Metabolic Program Drug. Bayer shall at its sole discretion have the right to select as many QTs as it chooses to proceed to screening, subject to Section 2.6(a). (d) Hits and Lead Structures. Bayer shall use commercially reasonable efforts to find Hits, advance the Hits to Lead Structures and advance the Lead Structures to the Strategic Project Phase using the guidelines set forth in the Strategic Project Manual. Section 2.7 Strategic Project Phase. ----------------------- (a) General. (i) Lead Optimization. Bayer shall use commercially reasonable efforts to advance the Lead Structures chosen in the Exploratory Research Phase meeting the minimum criteria set forth in the Strategic Project Manual (as modified by the Research Plan) into Development Candidates. (ii) Secondary Screening. Strategic Projects shall include, but shall not be limited to, [_________________________________________________]. (b) CuraGen Obligations. CuraGen shall provide additional GeneCalling expression profiling, characterize the pharmacogenomic properties of the Lead Structures in appropriate cellular, non-mammalian or animal disease models, and provide additional pharmacogenomic validation for the Qualified Target in appropriate human cellular models at each Metabolic Program Strategic Project Team's discretion. At each Metabolic Program Strategic Project Team's discretion, CuraGen shall provide at its cost Predictive Toxicogenomic Screens. (c) Operation. The operation of Strategic Projects and the Strategic Project Phase shall be governed by the Strategic Project Manual and the Research Plan. (d) Termination. Bayer may terminate a Strategic Project at any time and in its sole discretion upon providing written notice of same to CuraGen. Section 2.8 Pre-Clinical Development Phase. ------------------------------ Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 22 (a) Bayer shall use commercially reasonable efforts during the Pre- Clinical Development Phase to advance each Development Compound to Phase I using the guidelines set forth in the Development Manual; provided, however that the decision to advance any Development Compound to Phase I shall be up to Bayer in its sole discretion. (b) Bayer may end work on a Development Compound in the Pre-Clinical Development Phase at any time and in its sole discretion upon providing written notice of same to CuraGen. Section 2.9 Clinical Development Phase. -------------------------- (a) Bayer shall use commercially reasonable efforts during the Clinical Development Phase to advance each Development Compound from Phase I through the NDA Phase using the guidelines set forth in the Development Manual; provided, however that the decision to advance any Development Compound to any phase of the Clinical Development Phase shall be up to Bayer in its sole discretion. (b) Bayer may end work on a Development Compound in the Clinical Development Phase at any time and in its sole discretion upon providing written notice of same to CuraGen. Section 2.10 Commercialization Phase. ----------------------- Bayer shall use commercially reasonable efforts during the Commercialization Phase to successfully market each Metabolic Program Drug; provided, however that the decision how to market and whether to continue to market such Metabolic Program Drug shall be up to Bayer in its sole discretion. Article III ----------- Bayer and CuraGen Rights and Obligations ---------------------------------------- Section 3.1 License Grant with Respect to CuraGen Know-How and CuraGen ---------------------------------------------------------- Patent Rights. - ------------- (a) License. Subject to the terms and conditions of this Agreement, including without limitation, the financial obligations under Article IV, CuraGen hereby grants to Bayer and its Affiliates during the Term, a worldwide, exclusive license under CuraGen's rights to CuraGen Know-How and CuraGen Patent Rights, (i) to research, develop, make and use the QTs delivered hereunder and which have not reverted to CuraGen pursuant to Section 3.7 and (ii) to make, have made, manufacture, produce, develop, market, import, export, use, have used, offer for sale, sell and have sold Compounds, Development Compounds and Metabolic Program Drugs. (b) Sublicense Rights. Bayer and its Affiliates shall have the right to grant sublicenses of licenses granted to it in Section 3.1(a) of this Agreement to any Third Party; provided, however that Bayer shall ensure that each such Sublicensee shall consent to be bound by the terms of this Agreement as a Sublicensee and to the same extent as Bayer. Bayer agrees to inform CuraGen, in confidence, of each sublicense granted, and any modification or termination thereof, within [__________] after the modification, or termination of a sublicense. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 23 Section 3.2 License Grant with Respect to Bayer Know-How and Bayer Patent ------------------------------------------------------------- Rights. - ------ (a) Research License. During the Screening Term, Bayer hereby grants to CuraGen, a non-exclusive, royalty-free license, under Bayer Patent Rights and Bayer Know-How, solely to the extent necessary for CuraGen to perform its obligations under the Research Plan. (b) Commercialization License. Subject to the terms and conditions of this Agreement, during the Term, Bayer hereby grants to CuraGen and its Affiliates a royalty-free, worldwide, exclusive license (i) to make, have made, manufacture, produce, develop, market, import, export, use, have used, offer for sale, sell and have sold any Target Candidates or Qualified Targets that have reverted to CuraGen pursuant to Section 3.7 hereof and any Development Compounds that have reverted to CuraGen pursuant to Section 3.7 hereof only for use in the CFA and (ii) to use any Configured Assay owned by Bayer necessary or useful for the license granted in (i) above pursuant to Section 3.7(c) and (d) for research purposes only, such use to be subject to Section 3.3. (c) Sublicense Rights for Commercialization License. CuraGen and its Affiliates shall have the right to grant sublicenses of the license granted to it in Section 3.2(b) of this Agreement to any Third Party; provided, however that CuraGen shall ensure that each such Sublicensee shall consent to be bound by the terms of this Agreement as a Sublicensee and to the same extent as CuraGen. CuraGen agrees to inform Bayer, in confidence, of each sublicense granted, and any modification or termination thereof, within [__________] after the modification, or termination of a sublicense. Section 3.3 Use of Configured Assays. ------------------------ Neither CuraGen nor its Affiliates shall, without the written consent of Bayer, provide a Configured Assay owned by Bayer to any Third Party (other than a fee- for-service screen provider) and CuraGen agrees that Configured Assays will only be used to fulfill this Agreement and for no other purpose and further agrees not to cause or permit reverse engineering of any Configured Assay. Section 3.4 Retained Rights; Ownership. -------------------------- (a) Bayer Retained Rights. All of Bayer's rights to Bayer Know-How and Bayer Patent Rights not specifically licensed to CuraGen under this Agreement and Bayer's rights to Compounds which are not specifically licensed to CuraGen and are discovered by Bayer through the use of QTs under this Agreement, shall be retained by Bayer. (b) CuraGen Retained Rights. All of CuraGen's rights to CuraGen Know-How and CuraGen Patent Rights which are not specifically licensed to Bayer under this Agreement shall be retained by CuraGen. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 24 Section 3.5 CuraGen Co-Promotion Rights. ---------------------------- Promptly following the occurrence of a DP-5 approval with respect to any Metabolic Program Drug, the Parties agree to enter into good faith negotiations to conclude an agreement pursuant to which CuraGen will obtain rights to co- promote such Metabolic Program Drug in the United States. Such agreement will address relevant terms and conditions such as [______________________________________]. In any event, Bayer shall pre-approve and have sole authority to disapprove any Marketing Costs to be incurred by CuraGen in connection with a Metabolic Program Drug. Section 3.6 Ownership Rights. ---------------- (a) CuraGen Ownership. CuraGen owns and shall continue to own all Target Candidates and Qualified Targets. (b) Bayer Ownership. Bayer owns and shall continue to own all Development Candidates, Development Compounds and Metabolic Program Drugs. Bayer in its sole discretion shall have the right to sublicense to Third Parties any Development Compounds or Metabolic Program Drugs that have not reverted to CuraGen pursuant to Section 3.7 hereof. Section 3.7 CuraGen Reversionary Rights. --------------------------- (a) In the event that any Target Candidate is not accepted as a Qualified Target on or before [__________] from the date such Target Candidate is presented to the Program Directors for review in accordance with Section 2.2(e) hereof, all rights to such Target Candidate shall revert to CuraGen. (b) At the end of the Screening Term, rights to unscreened Qualified Targets will revert to CuraGen; provided, however that no unscreened Qualified Target will revert to CuraGen until Bayer has had at least [__________] to set up a screen for such Qualified Target, unless the Screening Term has been terminated pursuant to Section 2.5(d), in which case rights to such Qualified Targets shall immediately revert to CuraGen. (c) In the event Bayer does not advance a Compound to the Strategic Project Phase within [______________] of having screened the relevant Qualified Target (or [______________] if the Qualified Target has non-CFA indications), rights to such Qualified Target shall revert to CuraGen. Each Party shall promptly disclose to the other Party new evidence suggesting that a Screened Qualified Target which has reverted to CuraGen might be efficaciously advanced to the Strategic Project Phase. If Bayer subsequently notifies CuraGen that Bayer wishes to advance any Screened Qualified Target that has reverted to CuraGen to the Strategic Project Phase [________________________________________________________]. (d) If Bayer (i) discontinues a Strategic Project and discontinues all work with respect to the relevant Qualified Target or (ii) abandons a Development Candidate for all indications, CuraGen shall have rights to the relevant Qualified Target but not the related Compounds, subject to the conditions set forth in this subsection. If CuraGen has partially funded Development Costs with respect to a Development Compound and Bayer has decided to abandon such Development Compound for other than toxicological or adverse event reasons, then Bayer Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 25 shall provide CuraGen with an exclusive license to the Development Compound only for use in the CFA, and Bayer will also provide all existing essential data and information related to the Development Compound necessary for an IND, subject to the conditions set forth herein; provided, however that [_________________________________________________________]. Bayer shall use commercially reasonable efforts to promptly file a relevant patent application. If Bayer abandons a Development Compound for toxicological or adverse event reasons and CuraGen identifies a subset of a population for which Bayer would not have abandoned the Development Compound for toxicological or adverse event reasons and Bayer agrees that it would not have abandoned the Development Compound for such subset of a population for toxicological or adverse event reasons but rather for some other reason, Bayer shall grant CuraGen the license set forth in the preceding sentence; provided, however that the license shall be limited to such subset of a population. If CuraGen, an Affiliate of CuraGen or a Third Party develops the Development Compound, Bayer shall have the right to Royalty Payments or the right to receive a share of the Operating Income as set forth in Section 4.2. Each Party shall promptly disclose to the other Party new evidence suggesting that a Development Compound which has reverted to CuraGen could be further developed in the Metabolic Program. If Bayer subsequently notifies CuraGen that Bayer wishes to develop the Development Compound and CuraGen or an Affiliate has not transferred the Qualified Target or Development Compound to a Third Party, rights of the Qualified Target and Development Compound shall revert to Bayer under the Metabolic Program and shall remain with Bayer unless subsequently abandoned by Bayer; in such event, CuraGen shall provide Bayer with all existing essential data and information relating to the Development Compound. If Bayer exercises this right, Bayer shall reimburse CuraGen [_____] of the Development Costs CuraGen has incurred with respect to such Development Compound until the date Bayer exercised its right. CuraGen or an Affiliate shall offer Bayer a Right of First Negotiation before transferring any rights to a Qualified Target or Development Compound to a Third Party. Article IV ---------- Financial Provisions -------------------- Section 4.1 Costs of Metabolic Program. -------------------------- (a) Generally. (i) All costs and expenses of the Metabolic Program relating to the Qualified Target Production Phase [______________________________________]. (ii) All costs and expenses of the Metabolic Program relating to the Target Screening Phase and the Strategic Project Phase [______________________________________]. (iii) All Development Costs of the Metabolic Program relating to the Pre-Clinical Development Phase, Clinical Development Phase and Commercialization Phase [_____________________________________]. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 26 (iv) Each Contract Year, Bayer shall set an annual budget for the Development Costs for the Pre-Clinical Development Phase, Clinical Development Phase and Commercialization Phase of the Metabolic Program for those Compounds for which CuraGen has not opted out (the "Development Annual Budget"). Bayer shall receive input from CuraGen when setting the Development Annual Budget; provided, however that the Development Annual Budget shall be at Bayer's sole discretion. Each calendar month during such Contract Year, within [________] of the end of such calendar month CuraGen shall remit payment to Bayer for CuraGen's share of such Development Costs based on the Development Annual Budget. Each Contract Quarter during such Contract Year, within [____________] of the end of such Contract Quarter Bayer shall prepare and provide to CuraGen an accounting of Bayer's actual Pre-Clinical Development Phase, Clinical Development Phase and Commercialization Phase Development Costs for those Compounds for which CuraGen has not opted out ("Development Reconciliation"). Within [_____________] of the preparation of the Development Reconciliation, CuraGen shall remit payment to Bayer or Bayer shall remit payment to CuraGen an amount equal to the difference between CuraGen's share of the Development Annual Budget and the Development Reconciliation for such Contract Quarter. (b) CuraGen Opt-Out. (i) On or after the date that CuraGen has incurred [____________] in Development Costs in the Metabolic Program (excluding Development Costs which are associated with a line extension, new indication, new dosage, new formulation or new delivery mechanism of a Metabolic Program Drug and any other Development Costs expressly excluded in this Agreement) (the "Overflow Date"), Bayer shall send CuraGen written notice thereof. Within [____________] of CuraGen's receipt of such notice from Bayer, CuraGen at its sole discretion may, by written notice to Bayer, opt not to share the Development Costs for certain or all of the Development Compounds which are in the Pre-Clinical Development Phase or the Clinical Development Phase as of the Overflow Date; provided, however that CuraGen shall pay the Development Costs for such Development Compounds to complete the specific phase the Development Compounds are in as of the Overflow Date. For each Metabolic Program Drug developed from the Development Compound for which CuraGen has opted not to share additional Development Costs, CuraGen shall share the Operating Income for any Metabolic Program Drug developed from such Development Compound in accordance with Section 4.2, and CuraGen shall not have a further opportunity to share the Development Costs for such Development Compounds. For any Compound entering the Pre-Clinical Development Phase after the Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 27 Overflow Date, then within [____________] of such Compound entering the Pre-Clinical Development Phase, CuraGen at its sole discretion may, by written notice to Bayer, opt out of the Development Costs associated with such Compound. For each Metabolic Program Drug developed from each such Compound for which CuraGen has opted not to share Development Costs, CuraGen shall receive Royalty Payments in accordance with Section 4.2, and CuraGen shall not have a further opportunity to share Development Costs on such Compound. (ii) Subject to other provisions in this Agreement, including without limitation Section 4.1(b)(i) above, each Contract Year, CuraGen shall be obligated to participate in the Development Costs associated with [___________] Compounds entering the Pre-Clinical Development Phase. CuraGen may at any time voluntarily accept more than [_____] Compounds in such Contract Year. Beginning in [____________] and ending in [____________], if in any Contract Year Bayer advances fewer than [__________] Compounds to the Pre-Clinical Development Phase, then the difference between [_________] and the number of Compounds actually advanced by Bayer shall be applied to the number of Compounds CuraGen is obligated to accept in subsequent Contract Years (the "Compound Credits"). Such Compound Credits shall be cumulative for each Contract Year beginning in [____________]. The number of Compound Credits shall be reduced (but not below zero) each Contract year by the number of Compounds advanced by Bayer in excess [_________]. If more than [_____] Compounds have entered the Pre-Clinical Development Phase in a Contract Year and the excess over [__________] Compounds exceeds the number of Compound Credits, CuraGen at its sole discretion may, by giving written notice to Bayer, elect not to pay the Pre- Clinical Development Phase Development Costs and subsequent Development Costs associated with any or all of the excess Compounds entering the Pre-Clinical Development Phase in such Contract Year, in which case CuraGen shall receive Royalty Payments pursuant to Section 4.2 for any Metabolic Program Drugs developed from such Compounds. (iii) If CuraGen is not participating in the development of a Non- CFA Product pursuant to Section 2.2(b), then CuraGen shall have no further obligation to pay any Development Costs for such Non-CFA Product. If CuraGen is not so participating, then for each Metabolic Program Drug developed from such Non-CFA Product, CuraGen shall receive Royalty Payments pursuant to Section 4.2 for any such Metabolic Program Drugs. Section 4.2 Royalty Payments; Operating Income. ---------------------------------- (a) Royalty Payments. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 28 If Bayer or an Affiliate markets a Metabolic Program Drug and CuraGen did not fund any of the Development Costs with respect thereto, then CuraGen shall be entitled to Royalty Payments with respect to such drug. If CuraGen or an Affiliate markets a Metabolic Program Drug and CuraGen received reversionary rights pursuant to (i) Section 3.7(c) or (d) in connection with the related Qualified Target or (ii) Section 3.7(d) in connection with the related Development Compound before Bayer completed the Pre-Clinical Development Phase, then Bayer shall be entitled to Royalty Payments with respect to such drug. As used in this Agreement, "Royalty Payments" means the following: . [___]% of the first $[_______] of Annual Sales Volume . [___]% of the next $[_______] of Annual Sales Volume up to $[_______] . [___]% of the next $[_______] of Annual Sales Volume up to $[_______] . [___]% of the next $[_______] of Annual Sales Volume up to $[_______] . [___]% of the next $[_______] of Annual Sales Volume up to $[_______] . [___]% of Annual Sales Volume over $[_______] Royalty Payments will be owed from the date of the First Commercial Sale of a Royalty Product in a given country and continuing with respect to Net Sales of such Royalty Product sold in such country for a period of [_______]; provided, however, that such obligations to make the Royalty Payments shall continue for an additional period not to exceed [_______] following the [__________________] the date of such First Commercial Sale with respect to a Royalty Product that contains an active ingredient, the use or sale of which is covered by a Patent Right in such country that precludes the use or sale of such active ingredient by others in such country. With respect to any Metabolic Program Drug for which a Party is receiving Royalty Payments, the other Party will be entitled to 100% of the Operating Income. For purposes of determining the Annual Sales Volume category in which a given increment of Net Sales falls, all Net Sales of such Metabolic Program Drug in all countries during the given Contract Year shall be aggregated. The royalty rates set forth above shall apply to increments of Net Sales for all Royalty Products on a product-by-product basis according to the Annual Sales Volume categories in which such increments fall during any given Contract Year. For purposes of this Section 4.2, line extensions, new formulations and Combination Products in which the same active ingredient is present shall be the same Metabolic Program Drug as the original Metabolic Program Drug. (b) Operating Income. (i) If CuraGen opted out of the Development Costs relating to a Development Compound after completion of Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 29 (A) the Pre-Clinical Development Phase in accordance with Section 4.1(b) above, then [____________________________________] the Operating Income from each Metabolic Program Drug developed from such Development Compound. (B) Phase I in accordance with Section 4.1(b) above, then [____________________________________] the Operating Income from each Metabolic Program Drug developed from such Development Compound. (C) Phase II in accordance with Section 4.1(b) above, then [____________________________________] the Operating Income from each Metabolic Program Drug developed from such Development Compound. (D) Phase III in accordance with Section 4.1(b) above, then [____________________________________] the Operating Income from each Metabolic Program Drug developed from such Compound. (ii) If Bayer is developing a Development Compound associated with a Qualified Target and CuraGen has not opted out of the Development Costs relating to such Development Compound, then Bayer shall receive 56% and CuraGen shall receive 44% of the Operating Income from each Metabolic Program Drug developed from such Development Compound. (iii) If CuraGen receives reversionary rights pursuant to Section 3.7(c) relating to a Development Compound and Bayer abandoned such Development Compound after completion of (A) the Pre-Clinical Development Phase, then [_____________________________________] the Operating Income from each Metabolic Program Drug developed from such Compound. (B) Phase I, then [____________________________________] the Operating Income from each Metabolic Program Drug developed from such Compound. (C) Phase II, then [_____________________________________] the Operating Income from each Metabolic Program Drug developed from such Compound. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 30 (D) Phase III, then [_____________________________________] the Operating Income from each Metabolic Program Drug developed from such Compound. (iv) The Parties will share any Operating Income losses for an Operating Income Product (whether or not a Party has opted out of the Development Costs of such Operating Income Product) to the same extent that the Parties share the Operating Income if the Operating Income is positive. (v) If the cumulative Operating Income losses for an Operating Income Product exceed $[________], then CuraGen in its sole discretion may elect to have Bayer pay a specific dollar amount or all of CuraGen's subsequent share of the Operating Income losses for such Operating Income Product [________] of the end of the relevant Contract Quarter by giving written notice of same to Bayer. In such event, for each $[________] so paid by Bayer on behalf of CuraGen, CuraGen's share of the Operating Income for such Operating Income Product shall be permanently reduced [________] and Bayer's share of the Operating Income for such Operating Income Product shall be permanently increased [________]. At such time as CuraGen's share of the Operating Income would [_______________], then for such Operating Income Product, Bayer shall [____________________]. (c) Notwithstanding Section 4.2(a) and Section 4.2(b), if either Party sublicenses the development of a Compound to a Third Party before the Commercialization Phase and the other Party would otherwise have been entitled to Royalty Payments or Operating Income from the sale of any Metabolic Program Drug derived from such Compound, then the Development Costs of the sublicensing Party which are in excess of the Development Costs shared with the other Party shall be repaid from any revenue derived from such sublicense and, once such amounts are repaid, the sublicensing Party shall receive [_____] of any revenue derived from such sublicense and the other Party shall receive [_____] of such revenue. In such case, the other Party shall not be entitled to a Royalty Payment or a share of the Operating Income in connection with such Metabolic Program Drug. Section 4.3 Income Statement Reports. ------------------------ Each Contract Year, Bayer shall set an annual budget for the anticipated revenues and costs for each Operating Income Product (the "Commercialization Annual Budget"). Bayer shall receive input from CuraGen when setting the Commercialization Annual Budget; provided, however that the Commercialization Annual Budget shall be at Bayer's sole discretion. The budget shall be prepared in accordance with Bayer's internal budgetary principles. Each Contract Quarter during such Contract Year, within [________] days of the end of such Contract Quarter CuraGen shall remit payment to Bayer or Bayer shall remit payment to CuraGen for CuraGen's share of the Operating Income for each Operating Income Product based on the Commercialization Annual Budget. Within [________] of the end of such Contract Quarter, Bayer and CuraGen Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 31 shall each prepare a pro forma income statement showing all revenues and costs for each Operating Income Product under the Party's control ("Commercialization Reconciliation"). Within [_________] of the preparation of the Commercialization Reconciliation, CuraGen shall remit payment to Bayer or Bayer shall remit payment to CuraGen the difference between CuraGen's share of the Commercialization Annual Budget and the Commercialization Reconciliation for such Contract Quarter. Section 4.4 Royalty Reports. --------------- Each Party owing payments for Royalty Products (the "Royalty-Paying Party") shall deliver to the other Party (the "Royalty Recipient") within [__________] after the end of each calendar quarter, reasonably detailed written accountings of Net Sales of Royalty Products due to the Royalty Recipient, for such calendar quarter (the "Royalty Report"). Such quarterly reports shall indicate Net Sales on a country-by-country and product-by-product basis and the calculation of royalties from such Net Sales. When a Royalty-Paying Party delivers such accountings to the Royalty Recipient, the Royalty-Paying Party shall also deliver all royalty payments due under Section 4.2 to the Royalty Recipient for the calendar quarter. Section 4.5 Accounting. ---------- No more frequently than once during each calendar year during the Term and for [________] thereafter, each Party (the "Audited Party") shall permit the independent auditors of the other Party (the "Auditing Party") to whom the Audited Party has no reasonable objection and with reasonable notice at any time during normal business hours, accompanied at all times by a representative of the Audited Party, to inspect, audit and copy reasonable amounts of relevant accounts and records of the Audited Party, its Affiliates and Sublicensees, for the sole purpose of verifying the accuracy of the calculation of payments to the Auditing Party pursuant to Article IV and the reports which accompanied them. The independent auditors shall not disclose to the Auditing Party any information other than information relating solely to the accuracy of the accounting and payments made by the Audited Party pursuant to Article IV and shall be subject to confidentiality obligations. If such audit determines that payments are due to the Auditing Party, the Audited Party shall pay to the Auditing Party any such additional amounts within thirty (30) days of the date on which such auditor's written report is delivered to the Audited Party and the Auditing Party, unless such audit report is disputed by the Audited Party, in which case the dispute shall be resolved in accordance with Article X. If the auditor determines that the Audited Party's payments are in excess of those required under this Agreement, the Auditing Party shall remit the difference to the Audited Party of such amount within thirty (30) days of the later date on which such auditor's report is delivered to the Auditing Party and the Audited Party, unless such audit report is disputed by the Auditing Party, in which case the dispute shall be resolved in accordance with Article X. Any such inspection of records shall be at the Auditing Party's expense unless such audit discloses a deficiency in the payments made by the Audited Party (whether for itself or on behalf of its Affiliates and Sublicensees) of more than five percent (5%) of the payments made by the Audited Party, in which case the Audited Party shall bear the cost of such audit. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 32 Section 4.6 Currency and Method of Payments. ------------------------------- All payments under this Agreement shall be made in the United States in U.S. dollars by transfer to such bank account as CuraGen or Bayer (as applicable) may designate from time to time payable at such time as set forth in this Agreement or, if such time is not explicitly specified, within thirty (30) days of notice that such payments are due. With respect to amounts owed between the Parties, any amounts payable shall be expressed by the Parties in U.S. Dollars calculated in accordance with the billing Party's then-standard accounting principles consistently applied. Section 4.7 Tax Withholding. --------------- The Parties shall use all reasonable and legal efforts to reduce tax withholding on payments made to CuraGen and Bayer hereunder. Notwithstanding such efforts, if a Party concludes that tax withholdings under the laws of any country are required with respect to payments to the other Party, the Party shall withhold the required amount and pay it to the appropriate governmental authority. In such a case, the Party will promptly provide the other Party with original receipts or other evidence reasonably desirable and sufficient to allow the other Party to document such tax withholdings adequately for purposes of claiming foreign tax credits and similar benefits. Section 4.8 Blocked Payments. ---------------- In the event that, by reason of applicable laws or regulations in any country, it becomes impossible or illegal for a Party or its Affiliates or Sublicensees, to transfer, or have transferred on its behalf, royalties or other payments to the other Party, such royalties or other payments shall be deposited in local currency in the relevant country to the credit of the other Party in a recognized banking institution designated by the other Party or, if none is designated by the other Party within a period of thirty (30) days, in a recognized banking institution selected by the Party or its Affiliates or Sublicensees, as the case may be, and identified in a notice in writing given to the other Party. Section 4.9 Compassionate Use. ----------------- Bayer may make Metabolic Program Drugs available non-commercially to patients on compassionate use grounds. If Bayer makes Metabolic Program Drugs available on such a basis, the Cost of Goods Sold associated with such drugs shall be subtracted from the Operating Income calculated for such drug. Section 4.10 Accounting Terms. ---------------- Except as otherwise expressly provided herein, all accounting terms used in this Agreement shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered hereunder shall be prepared (x) with respect to Bayer, in accordance with Bayer's and its Affiliates' then-standard accounting principles consistently applied and (y) with respect to CuraGen, in accordance with U.S. GAAP consistently applied. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 33 Article V --------- Intellectual Property Ownership, Protection and Related Matters --------------------------------------------------------------- Section 5.1 Ownership --------- (a) Bayer acknowledges and agrees that CuraGen is and shall remain the sole owner of the CuraGen Know How and the CuraGen Patent Rights and that CuraGen shall be and remain the sole owner of the CuraGen Improvements and the CuraGen Improvement Rights. Bayer further acknowledges and agrees that neither Bayer nor any of its Affiliates shall have any rights in or to the CuraGen Patent Rights, the CuraGen Know-How, the CuraGen Improvements, or the CuraGen Improvement Rights, other than the rights specifically granted herein. CuraGen acknowledges and agrees that Bayer is and shall remain the sole owner of the Bayer Know How and the Bayer Patent Rights and that Bayer shall be and remain the sole owner of the Bayer Improvements and the Bayer Improvement Rights. CuraGen further acknowledges and agrees that neither CuraGen nor any of its Affiliates shall have any rights in or to the Bayer Patent Rights, the Bayer Know-How, the Bayer Improvements, or the Bayer Improvement Rights, other than the rights specifically granted herein. (b) Bayer shall own all Know-How and inventions made solely by its employees in the course of the Metabolic Program, and CuraGen shall own all Know-How and inventions made solely by its employees in the course of the Metabolic Program. All inventions and Know-How jointly developed by employees of Bayer and employees of CuraGen in the course of the Metabolic Program shall be owned jointly on the basis of an undivided one-half interest by Bayer and CuraGen, provided, however that either Party may sell, license or otherwise transfer such jointly-owned invention without the consent of the other Party only in a manner that is consistent with the licenses granted pursuant to this Agreement and is otherwise consistent with this Agreement. The Parties shall not be able to independently exploit a joint invention except with the consent of both Parties. The determination of inventorship shall be made in accordance with relevant U.S. patent laws. In the event of a dispute regarding inventorship or the ownership of Know-How, if the Parties are unable to resolve the inventorship dispute, mutually acceptable outside patent counsel not regularly employed by either Party shall resolve such dispute. Section 5.2 Prosecution and Maintenance of Patent Rights. -------------------------------------------- (a) General. Except as otherwise provided in Section 5.2(b) and Section 5.2(c), the responsibility for preparing, filing and prosecuting patent applications and for maintaining patents (and for managing any interference, opposition, or other similar proceedings relating to the foregoing) covering inventions made in the course of the Metabolic Program shall be the responsibility of the Party that makes said invention, provided, however that, with respect to inventions made jointly by the Parties, one of the Parties shall have such responsibility as determined by agreement of the Parties on a case-by- case basis, in which case such Party shall act as a representative for the other Party when preparing, filing and prosecuting patent applications and maintaining patents (and managing any interference, opposition, or other similar proceedings relating to the foregoing) covering the joint invention. All expenses incurred by a Party in the performance of its obligations with respect to an invention solely made by such Party Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 34 under this Section 5.2(a) shall be borne by such Party. If either Party elects not to participate financially in the further prosecution or maintenance of any Patent Right that covers a joint invention, such Party shall notify the other Party of such election at least [__________] prior to the last available date for action to preserve such Patent Right. If such other Party elects to continue prosecution or maintenance, such Patent Right shall become the exclusive property of such other Party and appropriate assignment documents shall be executed. All expenses incurred in the performance of the obligations under this Section 5.2(a) for joint inventions shall be shared equally between the Parties. (b) QTs. CuraGen shall have the responsibility for preparing, filing and prosecuting patent applications and for maintaining patents (and for managing any interference, opposition, or other similar proceedings relating to the foregoing) covering inventions pertaining to QTs. All expenses incurred by CuraGen in the performance of its obligations under this Section 5.2(b) shall be borne by CuraGen. (c) Products. Bayer shall have the responsibility for preparing, filing and prosecuting patent applications and for maintaining patents (and for managing any interference, opposition, or other similar proceedings relating to the foregoing) covering inventions pertaining to Metabolic Program Drugs. All expenses incurred by Bayer in the performance of its obligations under this Section 5.2(c) shall be borne by Bayer. Section 5.3 Cooperation. ----------- Each Party hereby agrees to (a) make its employees, agents and consultants available to the other Party (or to the other Party's authorized attorneys, agents or representatives), to the extent reasonably necessary to enable the appropriate Party to prepare, file and prosecute patent applications and maintain resulting patents that cover QTs and Metabolic Program Drugs (the "Designated Inventions"), (b) cooperate, if necessary and appropriate, with the other Party in gaining patent term extensions wherever applicable to Patent Rights that cover Designated Inventions, (c) cooperate, if necessary and appropriate, with the other Party in the protection of Patent Rights that cover Designated Inventions and (d) with respect to inventions made jointly by the Parties, make itself available for preparing, filing and prosecuting patent applications and for maintaining patents (and for managing any interference, opposition, or other similar proceedings relating to the foregoing) covering the joint invention. Section 5.4 Third Party Infringement. ------------------------ (a) Notice. Each Party shall give notice to the other of any suspected infringement of or claims, notices, challenges, actions, or proceedings relating to the validity or enforceability of any intellectual property rights relating to Metabolic Program Drugs. (b) Legal Proceedings. Bayer shall have the sole right to institute legal proceedings against any Third Party believed to be infringing the intellectual property rights relating to Metabolic Program Drugs, including, but not limited to, CuraGen Know-How and CuraGen Patent Rights. All costs relating to such legal proceedings shall be paid by Bayer and shall be Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 35 deducted from Net Sales for purposes of calculating Operating Income. Any monetary recovery collected in excess of Bayer's costs shall be deemed Net Sales (the "Recovered Bayer Net Sales") and, as such, shall contribute to the Annual Sales Volume for applicable Metabolic Program Drugs, on a product-by-product basis. (c) Cooperation; Settlements. In the event that Bayer takes action pursuant to subsection (b) above, CuraGen shall cooperate with Bayer to the extent reasonably possible, including the joining of suit if necessary or desirable. Bayer shall not settle or compromise any claim or proceeding relating to CuraGen Know-How or CuraGen Patent Rights without the prior written consent of CuraGen, such consent not to be unreasonably withheld, delayed or conditioned. Section 5.5 Third Party Intellectual Property. --------------------------------- (a) Notice. In the event that a Party becomes aware of any claim that the practice by Bayer of CuraGen Know-How or CuraGen Patent Rights that have been licensed to Bayer pursuant to Section 3.1, or that the practice by CuraGen of Bayer Know-How or Bayer Patent Rights that have been licensed to CuraGen pursuant to Section 3.2, infringes the intellectual property rights of any Third Party, such Party shall promptly notify the other Party. (b) Action. Bayer shall defend the Parties against any claim by a Third Party that the development, manufacture, use, sale, offer for sale, export or import of the Metabolic Program Drugs infringes Third Party intellectual property rights at Bayer's sole expense; provided, however that (1) in the event CuraGen elects not to join such an action, it shall reimburse Bayer [_______________] of Bayer's costs associated with the representation (such costs to include reasonable attorney's fees) and (2) in the event the development, manufacture, use, sale, offer for sale, export or import of the Metabolic Program Drug infringes Third Party intellectual property rights because the use of a Qualified Target infringes Third Party intellectual property rights, CuraGen shall (y) pay all costs associated with the representation (such costs to include reasonable attorney's fees) and all damages and royalties either Party is or the Parties are ordered to pay to a Third Party in connection with such claim and (z) shall have the right to participate in the defense of such claim. If both Parties are participating in such an action, each Party shall bear its own costs associated with the representation in connection with such action and CuraGen shall not take any position inconsistent with Bayer's position on such issues. (c) Settlement. Neither Party shall settle any action pursuant to this Section 5.5 without the other Party's consent, such consent not to be unreasonably withheld, delayed, or conditioned. (d) Damages. Subject to Section 5.5(b)(2), any damages that either Party is or the Parties are ordered to pay to a Third Party in connection with an action pursuant to Section 5.5(b) shall be borne equally by the Parties. (e) Recoveries. Any recoveries on an action pursuant to Section 5.5(b) shall go first to reimburse the expenses of the Parties in connection with such action and next [______________]. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 36 Article VI ---------- Confidentiality --------------- Section 6.1 Confidential Information. ------------------------ All Confidential Information disclosed by a Party to the other Party during the term of this Agreement shall not be used by the receiving Party or its Affiliate except in connection with the activities contemplated by this Agreement, shall be maintained in confidence by the receiving Party and its Affiliates (except to the extent reasonably necessary for regulatory approval of Metabolic Program Drugs developed by Bayer or CuraGen or any of their respective Affiliates or for the filing, prosecution and maintenance of Patent Rights), and shall not otherwise be disclosed by the receiving Party and its Affiliates to any other person, firm, or agency, governmental or private, without the prior written consent of the disclosing Party, except to the extent that the Confidential Information (as determined by competent documentation): (a) was known or used by the receiving Party or an Affiliate prior to its date of disclosure to the receiving Party; or (b) either before or after the date of the disclosure to the receiving Party or an Affiliate is lawfully disclosed to the receiving Party or an Affiliate by sources other than the disclosing Party rightfully in possession of the Confidential Information; or (c) either before or after the date of the disclosure to the receiving Party or an Affiliate becomes published or generally known to the public (including information known to the public through the sale of products in the ordinary course of business) through no fault or omission on the part of the receiving Party, an Affiliate or its Sublicensee; or (d) is independently developed by or for the receiving Party or an Affiliate without reference to or reliance upon the Confidential Information; or (e) is required to be disclosed by the receiving Party or an Affiliate to comply with applicable laws, by governmental or judicial order, to defend or prosecute litigation or to comply with governmental regulations; provided, however that the receiving Party or the Affiliate provides prior written notice of such disclosure to the disclosing Party and takes reasonable and lawful actions to avoid and/or minimize the degree of such disclosure. Section 6.2 Employee and Advisor Obligations. -------------------------------- Bayer and CuraGen each agree that they shall provide Confidential Information received from the other Party only to, their respective employees, consultants and advisors, and to the employees, consultants and advisors of such Party's Affiliates, who have a need to know and have an obligation to treat such information and materials as confidential. Each employee of Bayer, CuraGen or their respective Affiliates who participates in the Metabolic Program shall be (1) required to acknowledge in writing that the provisions of this Article VI shall be binding upon such employee or (2) as a condition to employment shall have agreed to treat all information as confidential. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 37 Section 6.3 Term. ---- All obligations of confidentiality imposed under this Article VI shall expire five (5) years following the Term of this Agreement. Section 6.4 Publications. ------------ The Parties acknowledge that scientific lead time is a key element of the value of the Metabolic Program and further agree that scientific publications must be strictly monitored to prevent any adverse effect of the premature publication of results of the Metabolic Program. Therefore, the Parties agree that each Party must consent to the publication of any results of the Metabolic Program and may withhold such consent at its sole discretion. Article VII ----------- Representations and Warranties ------------------------------ Section 7.1 Due Organization. ---------------- Bayer and CuraGen each represents and warrants to the other that it (i) is a company duly organized, validly existing, and in good standing under the laws of the States of Indiana and Delaware, respectively; (ii) is duly qualified as a corporation and in good standing under the laws of each jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, where the failure to be so qualified would have a material adverse effect on its financial condition or its ability to perform its obligations hereunder; (iii) has the requisite corporate power and authority and the legal right to conduct its business as now conducted and hereafter contemplated to be conducted; (iv) has all necessary licenses, permits, consents, or approvals from or by, and has made all necessary notices to, all governmental authorities having jurisdiction, to the extent required for such ownership and operation; and (v) is in compliance with its certificate of incorporation and by-laws. Section 7.2 Consents. -------- Bayer and CuraGen each represents and warrants to the other that all necessary consents, approvals and authorizations of all government authorities and other persons required to be obtained by such Party in connection with the execution, delivery and performance of this Agreement have been and shall be obtained, except with respect to approvals required under the HSR Act. Section 7.3 Execution, Delivery and Performance. ----------------------------------- Bayer and CuraGen each represents and warrants to the other that the execution, delivery and performance of this Agreement by such Party and all instruments and documents to be delivered by such Party hereunder (i) are within the corporate power of such Party; (ii) have been duly authorized by all necessary or proper corporate action; (iii) do not conflict with any provision of the certificate of incorporation or by-laws of such Party; (iv) will not violate any law or regulation or any order or decree of any court of governmental instrumentality; (v) will not Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 38 violate any terms of any indenture, mortgage, deed of trust, lease, agreement, or other instrument to which such Party is a party or by which such Party or any of its property is bound, which violation would have a material adverse effect on its financial condition or on its ability to perform its obligations hereunder; and (vi) do not require any filing or registration with or the consent or approval of any governmental body, agency, authority or any other Person, which has not been made or obtained previously, other than to the U.S. Department of Justice with respect to the HSR Act, to the FDA. Section 7.4 Legal, Valid and Binding Obligation. ----------------------------------- Bayer and CuraGen each represents and warrants to the other that this Agreement has been duly executed and delivered by such Party and constitutes a legal, valid and binding obligation of such Party, enforceable against such Party in accordance with its terms, except as such enforceability may be limited by applicable insolvency and other laws affecting creditors' rights generally or by the availability of equitable remedies. Section 7.5 No Conflict. ----------- Bayer and CuraGen each represents and warrants to the other that notwithstanding anything to the contrary in this Agreement, the execution and delivery of this Agreement, the performance of such Party's obligations hereunder and the conduct of the Metabolic Program (a) do not conflict with or violate any requirement of applicable laws or regulations and (b) do not and will not conflict with, violate or breach or constitute a default or require any consent under, any contractual obligations of such Party, except such consents as shall have been obtained prior to the Effective Date. Section 7.6 Employee Obligations. -------------------- Bayer and CuraGen each represents and warrants to the other that all of its employees, officers, and consultants have executed agreements or have existing obligations under law requiring, in the case of employees and officers, assignment to such Party of all inventions made during the course of and as the result of their association with such Party and obligating the individual to maintain as confidential such Party's Confidential Information as well as confidential information of a Third Party which such Party may receive, to the extent required to support such Party's obligations under this Agreement. Section 7.7 CuraGen Intellectual Property. ----------------------------- CuraGen represents and warrants to Bayer as follows: (a) Ownership of CuraGen Patent Rights and CuraGen Know-How. CuraGen owns the entire right, title and interest in or otherwise has the right to use or license in accordance with the terms of this Agreement the CuraGen Patent Rights and the CuraGen Know-How, and to CuraGen's Knowledge, no Third Party (including any government) has any license, claim or other right or interest in or to the CuraGen Patent Rights or the CuraGen Know-How. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 39 To CuraGen's Knowledge, the CuraGen Patent Rights and the CuraGen Know-How may be exclusively licensed and sublicensed as hereunder provided, in the case of the CuraGen Patent Rights and CuraGen Know-How without payment of any royalty, fee or incurring any other obligation to any Third Party (except with respect to any statutory march-in rights). To CuraGen's Knowledge, the conduct by CuraGen of the Metabolic Program in accordance with the Research Plan does not and will not infringe or conflict with the rights of any Third Party in respect of Know- How or issued patents or published patent applications owned by such Third Party. (b) Validity and Enforceability of Patents. The issued patents included in the CuraGen Patent Rights are valid and enforceable to CuraGen's Knowledge. (c) Investigation of Prior Art. CuraGen has made all reasonable inquiries and has diligently conducted a reasonably complete and thorough due diligence review and investigation of Third Party intellectual property rights and prior art as part of CuraGen's preparation and prosecution of the CuraGen Patent Rights, and has reviewed all relevant information and prior art obtained or derived from such due diligence review and investigation. CuraGen has disclosed all material prior art of which it has Knowledge and other material information obtained or derived from such due diligence review and investigation to Bayer as of the date hereof, in each case to the full extent requested by Bayer. (d) No Infringement of CuraGen Intellectual Property. CuraGen has no Knowledge of any infringement of the CuraGen Patent Rights, or any misappropriation of the CuraGen Know-How by any Third Party. (e) Work-For-Hire. To CuraGen's Knowledge, all of the research and development work performed in connection with any of the CuraGen Know-How prior to the Effective Date was performed solely under an obligation to assign to CuraGen or one of its Affiliates, and was performed in accordance with applicable law and in compliance with all applicable regulatory requirements, and all such rights have been properly assigned to CuraGen, including any and all rights of CuraGen's employees and the employees of CuraGen's Affiliates. (f) No Claims or Suits Regarding CuraGen Intellectual Property. There are no judicial, arbitral, regulatory or administrative proceedings or investigations, claims, actions or suits relating to the CuraGen Patent Rights or the CuraGen Know-How in any court or by or before any governmental body or agency, including product liability or compliance with good manufacturing practices or state or federal food and drug laws and, to CuraGen's Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 40 Knowledge, no such judicial, arbitral, regulatory or administrative proceedings or investigations, actions or suits have been threatened against CuraGen or its Affiliates. Section 7.8 Bayer Intellectual Property. --------------------------- Bayer represents and warrants to CuraGen as follows: (a) Ownership of Patent Rights and Bayer Know-How. Bayer owns the entire right, title and interest in or otherwise has the right to use or license in accordance with the terms of this Agreement the Bayer Patent Rights and the Bayer Know-How, and to Bayer's Knowledge, no Third Party (including any government) has any license, claim or other right or interest in or to the Bayer Patent Rights or the Bayer Know-How. To Bayer's Knowledge, the Bayer Patent Rights and the Bayer Know-How may be exclusively licensed as hereunder provided, in the case of the Bayer Patent Rights and Bayer Know-How without payment of any royalty, fee or incurring any other obligation to any Third Party (except with respect to any statutory march-in rights). To Bayer's Knowledge, the conduct by Bayer of the Metabolic Program in accordance with the Research Plan does not and will not infringe or conflict with the rights of any Third Party in respect of Know-How or issued patents or published patent applications owned by such Third Party. (b) Validity and Enforceability of Patents. The issued patents included in the Bayer Patent Rights are valid and enforceable to Bayer's Knowledge. (c) Investigation of Prior Art. Bayer has made all reasonable inquiries and has diligently conducted a reasonably complete and thorough due diligence review and investigation of Third Party intellectual property rights and prior art as part of Bayer's preparation and prosecution of the Bayer Patent Rights, and has reviewed all relevant information and prior art obtained or derived from such due diligence review and investigation. Bayer has disclosed all material prior art of which it has Knowledge and other material information obtained or derived from such due diligence review and investigation to CuraGen as of the date hereof, in each case to the full extent requested by CuraGen. (d) No Infringement of Bayer Intellectual Property. Bayer has no Knowledge of any infringement of the Bayer Patent Rights, or any misappropriation of the Bayer Know-How by any Third Party. (e) Work-For-Hire. To Bayer's Knowledge, all of the research and development work performed in connection with any of the Bayer Know-How prior to the Effective Date was performed solely under an Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 41 obligation to assign to Bayer or one of its Affiliates, and was performed in accordance with applicable law and in compliance with all applicable regulatory requirements, and all such rights have been properly assigned to Bayer, including any and all rights of Bayer's employees and the employees of Bayer's Affiliates. (f) No Claims or Suits Regarding Bayer Intellectual Property. There are no judicial, arbitral, regulatory or administrative proceedings or investigations, claims, actions or suits relating to the Bayer Patent Rights or the Bayer Know-How in any court or by or before any governmental body or agency, including product liability or compliance with good manufacturing practices or state or federal food and drug laws and, to Bayer's Knowledge, no such judicial, arbitral, regulatory or administrative proceedings or investigations, actions or suits have been threatened against Bayer or its Affiliates. Section 7.9 Contracts. --------- CuraGen represents and warrants to Bayer that it is not a party to any contract that, if terminated, would materially adversely affect CuraGen's ability to conduct the Metabolic Program in accordance with the Research Plan. Section 7.10 No Material Admissions. ---------------------- Each of Bayer and CuraGen represents and warrants to the other that such Party has not, up through and including the Effective Date, omitted to furnish to the other Party with any information in its control or possession or of which it has Knowledge concerning (a) its Patent Rights, (b) its Know-How, or (c) the activities contemplated by this Agreement, which in such Party's opinion would be material to the other Party's decision to enter into this Agreement and to undertake the commitments and obligations set forth herein. Section 7.11 No Warranties. ------------- EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN, THE PHARMACOGENOMICS AGREEMENT OR IN THE STOCK PURCHASE AGREEMENT, THE PARTIES MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, AND PARTICULARLY (1) THAT PRODUCTS WILL BE SUCCESSFULLY DEVELOPED HEREUNDER, AND IF DEVELOPED, WILL HAVE COMMERCIAL UTILITY OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND (2) AS TO ANY BIOLOGICAL MATERIALS PROVIDED UNDER THIS AGREEMENT. Section 7.12 Survival. -------- The representations and warranties set forth in this Agreement are made as of the date hereof and as of the Effective Date and shall survive the Effective Date. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 42 Article VIII ------------ Covenants --------- Section 8.1 No New Restrictions - CuraGen. ----------------------------- CuraGen agrees that, from and after the Execution Date, it shall not enter into any agreements, or transfer Know-How or any other assets to any of its Affiliates, that would, in either case, restrict or limit its or Bayer's rights or ability to conduct the Metabolic Program, as contemplated in the Research Plan as of the Effective Date. Section 8.2 Exclusivity - CuraGen. --------------------- During the Screening Term, CuraGen shall not engage in a program with a Third Party wherein it supplies, or assists any Third Party in supplying, Qualified Targets to such Third Party, except with respect to Qualified Targets for which CuraGen receives rights to develop under Section 3.7, in which case Bayer shall have a Right of First Negotiation with respect to development of such Qualified Target. Section 8.3 No Restrictions on Screening - Bayer. ------------------------------------ During the Screening Term, Bayer agrees that Bayer shall not enter into an agreement that would restrict or limit Bayer ability to screen [_______] Qualified Targets each [___________]. Section 8.4 Partnership for U.S. Federal Income Tax Purpose. ----------------------------------------------- The Parties agree and intend that the Metabolic Program shall be treated as a partnership for U.S. federal income tax purpose. For that purpose, the Parties agree to negotiate in good faith and to use commercially reasonable efforts to enter into a mutually agreeable partnership agreement with respect to the Metabolic Program on or prior to the Effective Date. This partnership agreement, which shall include without limitation, provisions on the allocation of partnership income, gain, loss, deduction or credit between the Parties, shall be substantially identical to the economic terms and tax implications contained in and resulting from this Agreement, with such changes as may be necessary or desirable to reflect a partnership for tax purposes rather than a contractual alliance. The Parties may agree to organize a separate state-law entity for the partnership. Article IX ---------- Term and Termination -------------------- Section 9.1 Term of the Agreement. --------------------- The Metabolic Program shall commence on the Effective Date and shall end at such time as no Compounds are in the Pre-Clinical Development Phase and Clinical Development Phase and there are no Metabolic Program Drugs generating Royalty Payments or Operating Income, unless the Agreement is terminated earlier (y) by Bayer or CuraGen pursuant to Section 9.2 or Section 9.3 or (z) pursuant to Section 9.4 (the "Term"). Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 43 Section 9.2 Termination For Material Breach. ------------------------------- Upon any material breach of this Agreement by either Party (in such capacity, the "Breaching Party"), the other Party (in such capacity, the "Non-Breaching Party") may terminate this Agreement by providing [____________] written notice to the Breaching Party, specifying the material breach. The termination shall become effective at the end of the [____________] period unless (a) the Breaching Party cures such breach during such [____________] period, or (b) if such breach is not susceptible to cure within [____________] of the receipt of written notice of the breach, the Breaching Party is diligently pursuing a cure (unless such breach, by its nature, is incurable, in which case the Agreement may be terminated immediately). The Parties shall use reasonable efforts to work together to cure any breach. In the event of a dispute concerning whether a material breach has occurred, such dispute shall be resolved in accordance with the provisions of Article X, and the [_________] cure period specified above shall be suspended during the period commencing upon the submission of such dispute for resolution under Section 10.1 to the Executive Officers and continuing until the resolution of such dispute under Section 10.1. Without limiting the generality of the foregoing, material failure by CuraGen or Bayer to maintain and make available adequate technical resources and personnel to perform its obligations under the Metabolic Program in accordance with the Research Plan shall be considered to be a material breach of this Agreement. Section 9.3 Termination Upon Change of Control. ---------------------------------- If a Change of Control with respect to CuraGen occurs, Bayer may, at its sole discretion, elect to terminate this Agreement by giving CuraGen written notice within [____________] after such Change of Control, such termination to be effective [____________] after provision of written notice of termination. If a Change of Control with respect to Bayer occurs, CuraGen may, at its sole discretion, elect to end the Screening Term by giving Bayer written notice within [____________] after such Change of Control, such termination to be effective upon Bayer's receipt of the written notice of termination; provided, however, that notwithstanding the end of the Screening Term, the Metabolic Program shall continue with respect to any QTs which have been screened. Section 9.4 No Effectiveness Upon HSR Denial or Termination of Stock -------------------------------------------------------- Purchase Agreement. - --------- -------- The Agreement shall not become effective (and accordingly shall immediately terminate) in the event that (a) the FTC and/or the DOJ shall seek a preliminary injunction under the HSR Act against CuraGen and Bayer to enjoin the transaction contemplated by this Agreement and Bayer elects not to contest the FTC and/or DOJ; (b) the HSR Clearance Date shall not have occurred on or prior to June 30, 2001; or (c) the Stock Purchase Agreement shall be terminated in accordance with Section 7.1 of the Stock Purchase Agreement. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 44 Section 9.5 Effect of Termination. --------------------- (a) General. In the event that this Agreement is terminated by either Party pursuant to Section 9.1, (i) the licenses set forth in Section 3.1 and Section 3.2 shall, except as provided below, survive such termination, subject to continued compliance with obligations related to such licenses, such as the royalty, operating income sharing and reporting provisions of Article IV and co- promotion rights of Section 3.5; and (ii) all obligations under Article IV accrued or owed as of the effective date of such termination shall remain effective and shall be paid promptly, except as set forth in the subsections below. (b) Effect of Termination For Material Breach (Section 9.2). (i) If this Agreement is terminated under Section 9.2 and CuraGen is the Breaching Party, the licenses granted by Bayer to CuraGen and its Affiliates under Section 3.2(a) and under Section 3.2(b) (other than with respect to Development Compounds which reverted to CuraGen pursuant to Section 3.7(d)) shall terminate as of the effective date of such termination, and all sublicenses granted by CuraGen or its Affiliates pursuant to Section 3.2(c) (other than with respect to Development Compounds which reverted to CuraGen pursuant to Section 3.7(d)) shall also terminate as of such date. If the termination under Section 9.2 occurs because CuraGen fails to pay the Development Costs which it owes for a Development Compound, CuraGen shall only receive Royalty Payments and not a share of the Operating Income for any Metabolic Program Drug developed from such Development Compound. (ii) If this Agreement is terminated under Section 9.2 and Bayer is the Breaching Party, the license granted by CuraGen to Bayer and its Affiliates under Section 3.1(a)(i) with respect to those QTs from which a Compound, Development Compound or Metabolic Program Drug have not been identified shall terminate as of the effective date of such termination and all sublicenses granted by Bayer or its Affiliates pursuant to Section 3.1(b) which relate to those licenses under Section 3.1(a)(i) with respect to those QTs from which a Compound, Development Compound or Metabolic Program Drug have not been identified shall also terminate as of such date. (c) Effect of Termination Upon Change in Control (Section 9.3). If this Agreement is terminated under Section 9.3 by Bayer, Bayer may, at its election, [__________________________________________________________________________ __]. (d) Effect of Termination Upon HSR Denial or Termination of Stock Purchase Agreement (Section 9.4). Notwithstanding anything to the contrary in this Agreement, in the event that this Agreement is terminated pursuant to Section 9.4, the licenses set forth in Section 3.1 and Section 3.2 shall automatically terminate. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 45 Section 9.6 Survival. -------- Upon expiration or termination of this Agreement for any reason, nothing in this Agreement shall be construed to release either Party from any obligations that matured prior to the effective date of expiration or termination; and the following provisions shall expressly survive any such expiration or termination: Article I, Section 3.1 (except as provided in Section 9.5), Section 3.2 (except as provided in Section 9.5), Article IV, Article V, Article VI, Article VII, Article VIII, Article IX, Article X and Article XI. Article X --------- Dispute Resolution ------------------ Section 10.1 General. ------- Unless otherwise provided for in this Agreement, any controversy, claim or dispute arising out of or relating to this Agreement shall be settled, if possible, through good faith negotiations between the Parties. If, however, the Parties are unable to settle such dispute after good faith negotiations, the matter shall be referred to the Executive Officers to be resolved by negotiation in good faith as soon as is practicable but in no event later than [___________] after referral. Section 10.2 Independent Experts. ------------------- Each Executive Officer shall have the right to engage the services of any number of independent experts in the field in question (each individual so engaged by each Executive Officer to be reasonably acceptable to the other Executive Officer in terms of independence and expertise and to be engaged under obligations of confidentiality) to assist the Executive Officers in making a joint determination in the best interests of the collaboration, and each Executive Officer shall be obligated to consider in good faith the analyses and opinions of any such independent experts engaged by either of them in making a determination. Section 10.3 SUBMISSION TO JURISDICTION; SELECTION OF A FORUM; WAIVER OF ---------------------------------------------------------- TRIAL BY JURY. - ------------- IF THE EXECUTIVE OFFICERS ARE UNABLE TO SETTLE THE DISPUTE AFTER GOOD FAITH NEGOTIATION IN THE MANNER SET FORTH IN Section 2.4(f) WITHIN [____________] OF REFERRAL OF THE DISPUTE TO THE EXECUTIVE OFFICERS, THEN EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT IT SHALL BRING ANY ACTION OR PROCEEDING IN RESPECT OF ANY CLAIM ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTAINED IN OR CONTEMPLATED BY THIS AGREEMENT (NOT INCLUDING A DESIGNATED SCIENTIFIC ISSUE), WHETHER IN TORT OR CONTRACT OR AT LAW OR IN EQUITY, EXCLUSIVELY IN COURTS OF THE STATE OF DELAWARE AND OF THE UNITED STATES IN DELAWARE (THE "CHOSEN COURTS") AND (A) IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE CHOSEN COURTS, (B) WAIVES ANY OBJECTION TO LAYING OF VENUE IN ANY SUCH ACTION OR PROCEEDING IN THE CHOSEN Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 46 COURTS, (C) WAIVES ANY OBJECTION THAT THE CHOSEN COURTS ARE AN INCONVENIENT FORUM OR DO NOT HAVE JURISDICTION OVER ANY PARTY HERETO, (D) AGREES THAT SERVICE OF PROCESS UPON SUCH PARTY IN ANY SUCH ACTION OR PROCEEDING SHALL BE EFFECTIVE IF NOTICE IS GIVEN IN ACCORDANCE WITH THIS AGREEMENT AND (E) WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY SUCH ACTION OR PROCEEDING. CURAGEN IRREVOCABLY DESIGNATES MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND POPEO, P.C., BOSTON, MASSACHUSETTS, ATTENTION: JEFFREY M. WIESEN AS ITS AGENT AND ATTORNEY-IN-FACT FOR THE ACCEPTANCE OF SERVICE OF PROCESS AND MAKING AN APPEARANCE ON ITS BEHALF IN ANY SUCH CLAIM OR PROCEEDING AND TAKING ALL SUCH ACTS AS MAY BE NECESSARY OR APPROPRIATE IN ORDER TO CONFER JURISDICTION OVER IT UPON THE CHOSEN COURTS AND CURAGEN STIPULATES THAT SUCH CONSENT AND APPOINTMENT IS IRREVOCABLE AND COUPLED WITH AN INTEREST. BAYER IRREVOCABLY DESIGNATES WILMER, CUTLER AND PICKERING, WASHINGTON, D.C., ATTENTION: RICHARD W. CASS AS ITS AGENT AND ATTORNEY-IN-FACT FOR THE ACCEPTANCE OF SERVICE OF PROCESS IN MAKING AN APPEARANCE ON ITS BEHALF IN ANY SUCH CLAIM OR PROCEEDING AND TAKING ALL SUCH ACTS AS MAY BE NECESSARY OR APPROPRIATE IN ORDER TO CONFER SUCH JURISDICTION OVER IT UPON THE CHOSEN COURTS AND BAYER STIPULATES THAT SUCH CONSENT AND APPOINTMENT IS IRREVOCABLE AND COUPLED WITH AN INTEREST. Section 10.4 Limitations of Remedies; Remedies Cumulative. --------------------------------------------- (a) Neither Party hereto shall be liable to the other for consequential or punitive damages claimed by such other Party resulting from such first Party's breach of its obligations, agreements, representations or warranties hereunder; provided, however that nothing in this Section 10.4 shall preclude any recovery by an indemnified Party against an indemnifying Party for Third Party claims or for fraud or willful misconduct. (b) Any remedies in this Agreement shall be cumulative to any other remedies which a Party may have. Section 10.5 Specific Performance. --------------------- Each of the Parties hereto acknowledges and agrees that the other Party will be damaged irreparably if any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each of the Parties agrees that the other Party shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in the manner set forth in Section 10.3, in addition to any other remedy to which it may be entitled, in law or in equity. Each Party's right to seek specific performance shall be in addition to, and not in lieu of, any other rights and remedies that may be available hereunder or otherwise. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 47 Article XI ---------- Miscellaneous Provisions ------------------------ Section 11.1 Product Liability Indemnification. --------------------------------- (a) Bayer. Bayer agrees to defend CuraGen and its Affiliates at its cost and expense, and will indemnify and hold CuraGen and its Affiliates and their respective directors, officers, employees and agents (the "CuraGen Indemnified Parties") harmless from and against any losses, costs, damages, fees or expenses arising out of any claim relating to (i) any breach by Bayer of any of its representations, warranties or obligations pursuant to this Agreement or (ii) personal, injury from the development, manufacture, use, sale or other disposition of any product or service offered by Bayer and/or its licensees or collaborators. In the event of any such claim against the CuraGen Indemnified Parties by any Third Party, CuraGen shall promptly notify Bayer in writing of the claim and Bayer shall manage and control, at its sole expense, the defense of the claim and its settlement. The CuraGen Indemnified Parties shall cooperate with Bayer and may, at their option and expense, be represented in any such action or proceeding. Bayer shall not be liable for any litigation costs or expenses incurred by the CuraGen Indemnified Parties without Bayer's prior written authorization. In addition, Bayer shall, not be responsible for the indemnification of any CuraGen Indemnified Party arising from any negligent or intentional acts by such party, or as the result of any settlement or compromise by the CuraGen Indemnified Parties without Bayer's prior written consent. (b) CuraGen. CuraGen agrees to defend Bayer and its Affiliates at its cost, and will indemnify and hold Bayer and its Affiliates and its respective directors, officers, employees and agents (the "Bayer Indemnified Parties") harmless from and against any losses, costs, damages, fees or expenses arising out of any claim relating to (i) any breach by CuraGen of any of its representations, warranties or obligations pursuant to this Agreement or (ii) personal injury from the development, manufacture, use, sale or other disposition of any product or service offered by CuraGen or its licensees or collaborators. In the event of any claim against the Bayer Indemnified Parties by, any Third Party, Bayer shall promptly notify CuraGen in writing of the claim and CuraGen shall manage and control, at its sole expense, the defense of the claim and its settlement. The Bayer Indemnified Parties shall cooperate with CuraGen and may, at their option and expense, be represented in any such action or proceeding. CuraGen shall not be liable for any litigation costs or expenses incurred, by the Bayer Indemnified Parties without CuraGen's prior written authorization. In addition, CuraGen shall not be responsible for the indemnification of any Bayer Indemnified Party arising from any negligent or intentional acts by such party, or as the result of any settlement or compromise by the Bayer Indemnified Parties without CuraGen's prior written consent. Section 11.2 Section 365(n) of the Bankruptcy Code. ------------------------------------- All rights and licenses granted under or pursuant to any section of this Agreement are, and shall otherwise be, deemed to be, for purposes of Section 365(n) of the Bankruptcy Code, licenses of rights to "intellectual property" as defined under Section 101(35A) of the Bankruptcy Code. The Parties shall retain and may fully exercise all of their respective rights and elections under the Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 48 Bankruptcy Code. Upon the bankruptcy of any Party, the non-bankrupt Party shall further be entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual property, and such, if not already in its or their possession, shall be promptly delivered to the non-bankrupt Party, unless the bankrupt Party elects to continue, and continues, to perform all of its obligations under this Agreement. Section 11.3 Governing Law. ------------- This Agreement shall be construed and the respective rights of the Parties hereto determined according to the substantive laws of the State of Delaware notwithstanding the provisions governing conflict of laws under such Delaware law to the contrary and without giving effect to the United Nations Convention on Contracts for the International Sale of Goods, the 1974 Convention on the Limitation Period in the International Sale of Goods (the "1974 Convention") and the Protocol amending the 1974 Convention, done at Vienna April 11, 1980, except matters of intellectual property law which shall be determined in accordance with the national intellectual property laws relevant to the intellectual property in question. Section 11.4 Assignment. ---------- Neither CuraGen nor Bayer may assign this Agreement in whole or in part without the consent of the other, except if such assignment occurs in connection with the sale or transfer of all or substantially all of the business and assets of CuraGen, on the one hand, or Bayer, on the other, to which the subject matter of this Agreement pertains. Notwithstanding the foregoing, any Party may assign its rights (but not its obligations) pursuant to this Agreement in whole or in part to an Affiliate of such Party. Section 11.5 Amendments. ---------- This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof, and supersedes an previous arrangements with respect to the subject matter hereof, whether written or oral. Any amendment or modification to this Agreement shall be made in writing signed by both Parties. Section 11.6 Notices. ------- Notices to CuraGen shall be addressed to: CuraGen Corporation 555 Long Wharf Drive, 11th floor New Haven, Connecticut 06511 Attention: Executive Vice President, Business Development Facsimile No.: (203) 401-3333 with a copy to: Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. One Financial Center Boston, Massachusetts 02111 Attention: Jeffrey M. Wiesen, Esq. Facsimile No.: (617) 542-2241 Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 49 Notices to Bayer shall be addressed to: Bayer Corporation 400 Morgan Lane West Haven, Connecticut 06516-4175 Attention: Legal Department Facsimile No.: (203) 812-2795 with a copy to: Wilmer, Cutler & Pickering 2445 M Street, NW Washington, DC 20037 Attention: Richard Cass, Esq. Facsimile No.: (202) 663-6363 Any Party may change its address by giving notice to the other Party in the manner herein provided. Any notice required or provided for by the terms of this Agreement shall be in writing and shall be (a) sent by registered or certified mail, return receipt requested, postage prepaid, (b) sent via a reputable overnight courier service, or (c) sent by facsimile transmission, in each case properly addressed in accordance with the paragraph above. The effective date of notice shall be the actual date of receipt by the Party receiving the same. Section 11.7 Exports. ------- The Parties acknowledge that the export of technical data, materials or products is subject to the exporting Party receiving any necessary export licenses and that the Parties cannot be responsible for any delays attributable to export controls that are beyond the reasonable control of either Party. Bayer and CuraGen agree not to export or reexport, directly or indirectly, any information, technical data, the direct product of such data, samples or equipment received or generated under this Agreement in violation of any governmental regulations that may be applicable. Bayer and CuraGen agree to obtain similar covenants from their Affiliates, Sublicensees and contractors with respect to the subject matter of this Section 11.7. Section 11.8 Force Majeure. ------------- No failure or omission by the Parties hereto in the performance of any obligation of this Agreement shall be deemed a breach of this Agreement or create any liability if the same shall arise from any cause or causes beyond the control of the Parties, including, but not limited to, the following: acts of God; acts or omissions of any government; any rules, regulations or orders issued by any governmental authority or by any officer, department, agency or instrumentality Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 50 thereof; fire; storm; flood; earthquake; accident; war; rebellion; insurrection; riot; and invasion and provided that such failure or omission resulting from one of the above causes is cured as soon as is practicable after the occurrence of one or more of the above-mentioned causes. Section 11.9 Public Announcements. -------------------- Any announcements or similar publicity with respect to the execution of this Agreement shall be agreed upon between the Parties in advance of such announcement. Each Party understands that this Agreement is likely to be of significant interest to investors, analysts and others, and that either Party therefore may make such public announcements with respect thereto. The Parties agree that any such announcement will not contain confidential business or technical information and, if disclosure of confidential business or technical information is required by law or regulation, will make reasonable efforts to minimize such disclosure and obtain confidential treatment for any such information which is disclosed to a governmental agency or group. Each Party agrees to provide to the other Party with a copy of any public announcement as soon as reasonably practicable under the circumstances prior to its scheduled release. Except under extraordinary circumstances, each Party shall provide the other with an advance copy of any press release at least five (5) business days prior to the scheduled disclosure. Each Party shall have the right to expeditiously review and recommend changes to any announcement regarding this Agreement or the subject matter of this Agreement; provided, however that such right of review and recommendation shall only apply for the first time that specific information is to be disclosed, and shall not apply to the subsequent disclosure of substantially similar information that has previously been disclosed. Except as otherwise required by law, the Party whose press release has been reviewed shall remove any information the reviewing Party reasonably deems to be inappropriate for disclosure. Section 11.10 Independent Contractors. ----------------------- It is understood and agreed that the relationship between the Parties hereunder is that of independent contractors and that nothing in this Agreement shall be construed as authorization for either CuraGen or Bayer to act as agent for the other. Notwithstanding Section 8.4, nothing in this Agreement shall be deemed to constitute a partnership or joint venture between the Parties. The Program Directors and members of Metabolic Program Project Teams shall remain employees of Bayer or CuraGen, as the case may be. Section 11.11 No Strict Construction. ---------------------- This Agreement has been prepared jointly and shall not be strictly construed against either Party. Section 11.12 Headings. -------- The captions or headings of the sections or other subdivisions hereof are inserted only as a matter of convenience or for reference and shall have so effect on the meaning of the provisions hereof. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 51 Section 11.13 No Implied Waivers; Rights Cumulative. ---------------------------------------- No failure on the part of CuraGen or Bayer to exercise, and no delay in exercising, any right, power, remedy or privilege under this Agreement, or provided by statute or at law or in equity or otherwise, shall impair, prejudice or constitute a waiver of any such right, power, remedy or privilege or be construed as a waiver of any breach of this Agreement or as an acquiescence therein, nor shall any single or partial exercise of any such right, power, remedy or privilege preclude any other or further exercise thereof or the exercise of any other right, power, remedy or privilege. Section 11.14 Severability. ------------ If any provision hereof should be held invalid, illegal or unenforceable in any respect in any jurisdiction, then, to the fullest extent permitted by law, (a) all other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in order to carry out the intentions of the Parties as nearly as may be possible and (b) such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of such provision in any other jurisdiction. To the extent permitted by applicable law, CuraGen and Bayer hereby waive any provision of law that would render any provision hereof prohibited or unenforceable in any respect. Section 11.15 Execution in Counterparts. ------------------------- This Agreement may be executed in, counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original, and all of which counterparts, taken together, shall constitute one and the same instrument. Section 11.16 HSR Filing. ---------- As soon as practicable after the Execution Date, each of Bayer and CuraGen shall promptly file any Notification and Report Forms and related materials that either such Party may be required to file with the FTC and the DOJ under the HSR Act, shall use its best efforts to obtain an early termination of the applicable waiting period, and shall promptly make any further filings or information submissions pursuant thereto, or responses to requests to additional information thereunder, that may be necessary, proper or advisable. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 52 IN WITNESS WHEREOF, the Parties hereto have caused this Metabolic Disorder Collaboration Agreement to be executed by their respective officers as of the Execution Date. BAYER CORPORATION By: /s/ John Amatruda ----------------- Name: John Amatruda Title: Vice President, Research CURAGEN CORPORATION By: /s/ Chris McLeod ---------------- Name: Chris McLeod Title: Executive Vice President Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 53 EX-10.25 3 dex1025.txt PHARMACOGENOMICS AGREEMENT EXHIBIT 10.25 EXECUTION COPY PHARMACOGENOMICS AGREEMENT BY AND BETWEEN CURAGEN CORPORATION AND BAYER AG DATED AS OF JANUARY 12, 2001 Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. BAYER and CURAGEN Pharmacogenomics Project Agreement TABLE OF CONTENTS ARTICLE I - BACKGROUND............................................................................ 1 ARTICLE II - DEFINITIONS.......................................................................... 2 2.00 - Terms..................................................................................... 2 2.01 - Affiliate................................................................................. 2 2.02 - BAYER Background Technology............................................................... 2 2.03 - BAYER Compound............................................................................ 3 2.04 - BAYER Data................................................................................ 3 2.05 - BAYER Licensed Patent Rights.............................................................. 3 2.06 - BAYER Licensed Technology................................................................. 3 2.07 - BAYER Facility............................................................................ 3 2.08 - BAYER Indemnified Parties................................................................. 3 2.09 - BAYER Patent Rights....................................................................... 3 2.10 - BAYER Product............................................................................. 3 2.11 - BAYER Program Technology.................................................................. 4 2.12 - BAYER Proprietary Material................................................................ 4 2.13 - BAYER Response............................................................................ 4 2.14 - BAYER SNP Target.......................................................................... 4 2.15 - BAYER Target.............................................................................. 4 2.16 - BAYER Technology.......................................................................... 4 2.17 - Biological Materials...................................................................... 5 2.18 - Breaching Party........................................................................... 5 2.19 - Change of Control......................................................................... 5 2.20 - Competitive Entity........................................................................ 5 2.21 - Confidential Information.................................................................. 5 2.22 - CURAGEN Deliverables...................................................................... 6 2.23 - CURAGEN Diagnostic Product................................................................ 6 2.24 - CURAGEN Discovery Tools................................................................... 6 2.25 - CURAGEN Discovery Tool Technology......................................................... 6 2.26 - CURAGEN Discovery Tool Improvements....................................................... 7 2.27 - CURAGEN Indemnified Parties............................................................... 7 2.28 - CURAGEN Licensed Patent Rights............................................................ 7 2.29 - CURAGEN Licensed Technology............................................................... 7 2.30 - CURAGEN Notice............................................................................ 7 2.31 - CURAGEN Patent Rights..................................................................... 7 2.32 - CURAGEN Program Technology................................................................ 7 2.33 - CURAGEN Proprietary DBs................................................................... 8 2.34 - CURAGEN Proprietary Material.............................................................. 8 2.35 - CURAGEN Screening Services................................................................ 8 2.35 - CURAGEN Services.......................................................................... 8 2.37 - CURAGEN Services Revenue.................................................................. 8 2.38 - CURAGEN Technology........................................................................ 9 2.39 - Designated Scientific Issue............................................................... 9 2.40 - Diagnostic Products....................................................................... 9 2.41 - DOJ....................................................................................... 10 2.42 - Effective Date............................................................................ 10 2.43 - FTE....................................................................................... 10 2.44 - HSR Act................................................................................... 10 2.45 - HSR Clearance Date........................................................................ 10 Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. A-i BAYER and CURAGEN Pharmacogenomics Project Agreement 2.46 - HSR Filing................................................................................ 10 2.47 - Infringement.............................................................................. 10 2.48 - Knowledge................................................................................. 11 2.49 - Marker Gene............................................................................... 11 2.50 - Metabolic Disorder Collaboration Agreement................................................ 11 2.51 - Optimized Product......................................................................... 11 2.52 - Party or Parties.......................................................................... 11 2.53 - Patent Rights............................................................................. 11 2.54 - Pharmacogenomics Data..................................................................... 12 2.55 - Pharmacogenomics Program.................................................................. 12 2.56 - Pharmacogenomics Program Term............................................................. 12 2.57 - Pharmacogenomics Project Plan............................................................. 12 2.58 - Predictive Toxicogenomics Technology...................................................... 13 2.59 - Production Phase.......................................................................... 13 2.60 - Production Phase Term..................................................................... 13 2.61 - Program Diagnostic Product................................................................ 13 2.62 - Program Director.......................................................................... 13 2.63 - Program Funding........................................................................... 13 2.64 - Project Teams............................................................................. 14 2.65 - Proteomics Feasibility Study.............................................................. 14 2.66 - Proteomics Technology..................................................................... 14 2.67 - Set-up Phase.............................................................................. 14 2.68 - Set-up Phase Term......................................................................... 14 2.69 - Stock Purchase Agreement.................................................................. 14 2.70 - Technology................................................................................ 15 2.71 - Terminating Party......................................................................... 15 2.72 - Third Party............................................................................... 15 2.73 - Toxicogenomics Reference Data............................................................. 15 2.74 - UNCITRAL.................................................................................. 15 ARTICLE III - PHARMACOGENOMICS PROGRAM............................................................ 16 3.00 - Pharmacogenomics Program.................................................................. 16 3.01 - Collaborative Efforts and Reports......................................................... 21 3.02 - Non-Exclusivity........................................................................... 22 3.03 - Program................................................................................... 22 3.04 - Executive Level Meeting................................................................... 23 3.05 - Decisions................................................................................. 23 3.06 - Expenses.................................................................................. 24 ARTICLE IV - LICENSES; PROGRAM DIAGNOSTIC PRODUCTS AND CURAGEN DIAGNOSTIC PRODUCTS................ 24 4.00 - License to BAYER.......................................................................... 24 4.01 - Licenses and Rights to CURAGEN............................................................ 24 4.02 - CURAGEN Diagnostic Products............................................................... 25 ARTICLE V - FUNDING OF PHARMACOGENOMICS PROGRAM................................................... 26 5.00 - Funding................................................................................... 26 5.01 - Compensation for Services................................................................. 26 ARTICLE VI - TREATMENT OF CONFIDENTIAL INFORMATION................................................ 26 6.00 - Confidential Information.................................................................. 27 6.01 - Publications.............................................................................. 28 6.02 - Press Release and Regulatory Filings...................................................... 28 Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. A-ii BAYER and CURAGEN Pharmacogenomics Project Agreement ARTICLE VII - INTELLECTUAL PROPERTY RIGHTS; FILING, PROSECUTION AND MAINTENANCE OF PATENT RIGHTS.. 29 7.00 - BAYER Intellectual Property Rights and BAYER Proprietary Material......................... 29 7.01 - CURAGEN Proprietary Material and Predictive Toxicogenomics Technology..................... 30 7.02 - Filing Prosecution and Maintenance of Patent Rights....................................... 30 7.03 - Amendment to Patent Rights................................................................ 33 7.04 - Actual or Threatened Infringement......................................................... 34 7.05 - Defense of Claims......................................................................... 35 7.06 - Cooperation............................................................................... 36 ARTICLE VIII - EXPIRATION AND TERMINATION........................................................ 36 8.00 - Term of the Agreement..................................................................... 36 8.01 -Termination by Mutual Agreement............................................................ 36 8.02 - Termination for Material Breach........................................................... 37 8.03 - Termination Following Bankruptcy.......................................................... 37 8.04 - Termination by BAYER...................................................................... 37 8.05 - Effect of Termination..................................................................... 38 8.06 - Obligations............................................................................... 39 8.07 - Remedies.................................................................................. 39 8.07 - Surviving Provisions...................................................................... 39 ARTICLE IX - BAYER GENE PROCESSING FACILITY; NON-COMPETE AGREEMENT................................ 40 9.00 - BAYER Facility............................................................................ 40 9.01 - Non-Competition........................................................................... 40 ARTICLE X - REPRESENTATIONS AND WARRANTIES; MISCELLANEOUS......................................... 40 10.00 - Due Organization......................................................................... 40 10.01 - Consents................................................................................. 41 10.02 - Execution, Delivery and Performance...................................................... 41 10.03 - Legal, Valid and Binding Obligation...................................................... 42 10.04 - No Conflict.............................................................................. 42 10.05 - Employee Obligations..................................................................... 42 10.06 - CURAGEN Intellectual Property............................................................ 43 10.07 - BAYER Intellectual Property.............................................................. 44 10.08 - Contracts................................................................................ 46 10.09 - No Material Omissions.................................................................... 46 10.10 - No Warranties............................................................................ 47 10.11 - Survival................................................................................. 47 10.12 - Liability................................................................................ 47 10.13 - Notices.................................................................................. 47 10.14 - Dispute Resolution and Arbitration....................................................... 49 10.15 - Currency................................................................................. 50 10.16 - Limitations.............................................................................. 50 10.17 - No Implied Waiver; Rights Cumulative..................................................... 50 10.18 - Assignment............................................................................... 51 10.19 - Force Majeure............................................................................ 51 10.20 - No Strict Construction................................................................... 51 10.21 - Severability............................................................................. 51 10.22 - Independent Contractor................................................................... 52 10.23 - BAYER Indemnification of CURAGEN......................................................... 52 10.24 - CURAGEN Indemnification of BAYER......................................................... 53 10.25 - Captions and Headings.................................................................... 53 10.26 - Amendments............................................................................... 53 Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. A-iii BAYER and CURAGEN Pharmacogenomics Project Agreement 10.27 - HSR Matters.............................................................................. 54 10.28 - Intellectual Property Right Bankruptcy Code.............................................. 54 10.29 - HSR Filing............................................................................... 54 10.30 - Governing Law............................................................................ 55 10.31 - Counterparts............................................................................. 55 Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. A-iv BAYER and CURAGEN Pharmacogenomics Project Agreement APPENDICES APPENDIX A - PHARMACOGENOMICS PROGRAM PLAN APPENDIX B - MINIMUM LEVELS OF SERVICES APPENDIX C - CRITERIA FOR PROTEOMICS FEASIBILITY STUDY APPENDIX D - COMMERCIAL TERMS FOR EXCLUSIVE LICENSE TO CURAGEN DIAGNOSTIC PRODUCTS APPENDIX E - SOFTWARE LICENSE APPENDIX F - ARBITRATION PROCEDURES SCHEDULES SCHEDULE 10.06(A) - OWNERSHIP OF CURAGEN LICENSED PATENT RIGHTS AND CURAGEN LICENSED TECHNOLOGY Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. A-v PHARMACOGENOMICS PROGRAM AGREEMENT This Agreement is made as of the 12th day of January 2001 ( the "Execution Date"), by and between BAYER AG, a corporation organized and existing under the laws of the Federal Republic of Germany and having its principal place of business at D 51368 Leverkusen, Federal Republic of Germany ("BAYER") and CURAGEN CORPORATION, a Delaware corporation having its principal place of business at 555 Long Wharf Drive, 11th Floor, New Haven, Connecticut 06511, USA ("CURAGEN"). ARTICLE I - BACKGROUND WHEREAS, CURAGEN has developed a comprehensive suite of functional genomics technologies and processes (including GeneCalling/TM/, PathCalling/TM/, SNPCalling/TM/ and RTQ PCR, and bioinformatics software (including GeneScape(R) and CuraTools/TM/) (collectively, the "CURAGEN Discovery Tools"); and WHEREAS, CURAGEN has developed proprietary databases composed of rat genes, human genes and human cSNPs (collectively the "CURAGEN Proprietary DBs"); and WHEREAS, BAYER and CURAGEN wish to initiate a Pharmacogenomics Program (as defined herein below) using the CURAGEN Discovery Tools and CURAGEN Proprietary DBs to identify genes related to toxicity and to develop screens for the early prediction of the toxicity of drugs or compounds, primarily to aid in the selection of lead drug candidates and optimization of drugs and secondarily to develop potential diagnostic tests; and WHEREAS, BAYER wishes to obtain access to the data and certain rights to inventions made in the performance of the Pharmacogenomics Program pursuant to this Agreement; and WHEREAS, CURAGEN and Bayer Corporation, BAYER's direct wholly-owned subsidiary ("Bayer Corporation"), also wish to collaborate in the discovery and development of targets and assays and to develop small molecule drugs for the treatment of metabolic disorders pursuant to the terms of a Metabolic Disorder Collaboration Agreement dated as of the date hereof by and between CURAGEN and Bayer Corporation (the "Metabolic Disorder Collaboration Agreement"); and Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. BAYER and CURAGEN Pharmacogenomics Project Agreement WHEREAS, BAYER has also agreed to make an equity investment in CURAGEN common stock, in the aggregate amount of $85 million, such investment to be made pursuant to the terms of a Stock Purchase Agreement dated as of the date hereof by and between CURAGEN and BAYER (the "Stock Purchase Agreement"). NOW THEREFORE, in consideration of the foregoing premises, BAYER and CURAGEN agree to undertake the foregoing, under the terms and conditions set forth in this Agreement. ARTICLE II - DEFINITIONS 2.00 - Terms Terms used in this Agreement (other than the names of parties and article headings) that are set forth with an initial capital letter have the meanings established for such terms in the succeeding paragraphs of this Article II, or as otherwise specifically defined hereinafter. 2.01 - Affiliate Shall mean any person, corporation, firm, limited liability company, partnership or other entity, which directly or indirectly controls or is controlled by or is under common control with a Party. For purposes of this definition, "control" shall mean (a) in the case of corporate entities, direct or indirect ownership of at least fifty percent (50%) of the stock or shares having the right to vote for the election of directors, and (b) in the case of non-corporate entities, direct or indirect ownership of at least fifty percent (50%) of the equity interest with the power to direct the management and policies of such non-corporate entities. 2.02 - BAYER Background Technology Shall mean any Technology owned or otherwise controlled by BAYER or its Affiliates as of the Effective Date which is necessary for CURAGEN to practice the licenses granted by BAYER to CURAGEN pursuant to Section 4.01(a) or 4.01(b) of this Agreement. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 2 BAYER and CURAGEN Pharmacogenomics Project Agreement 2.03 - BAYER Compound Shall mean any proprietary chemical entity or substance of BAYER or its Affiliates that is provided by BAYER to CURAGEN or otherwise identified by BAYER to CURAGEN for testing, screening or analysis under the Pharmacogenomics Program. 2.04 - BAYER Data Shall mean all data, other than Toxicogenomics Reference Data, generated by or on behalf of CURAGEN in the conduct of the Pharmacogenomics Program through the testing, screening and/or use by CURAGEN of any BAYER Target, BAYER SNP Target, BAYER Compound or any other BAYER Proprietary Material. 2.05 - BAYER Licensed Patent Rights Shall have the meaning set forth in Section 10.07(a) of this Agreement. 2.06 - BAYER Licensed Technology Shall have the meaning set forth in Section 10.07(a) of this Agreement. 2.07 - BAYER Facility Shall have the meaning set forth in Section 9.00(a) below. 2.08 - BAYER Indemnified Parties Shall have the meaning set forth in Section 10.24 below. 2.09 - BAYER Patent Rights Shall mean Patent Rights with respect to BAYER Technology. 2.10 - BAYER Product Shall mean, collectively, an Optimized Product and a Program Diagnostic Product. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 3 BAYER and CURAGEN Pharmacogenomics Project Agreement 2.11 - BAYER Program Technology Shall mean, collectively (a) the Marker Genes and (b) the Pharmacogenomics Data. 2.12 - BAYER Proprietary Material Shall mean any tangible proprietary substances and materials of BAYER or its Affiliates, including, without limitation, the BAYER Compounds, the BAYER SNP Targets and the BAYER Targets, provided by BAYER to CURAGEN or otherwise identified by BAYER to CURAGEN for the purpose of conducting the Pharmacogenomics Program, including any tangible substances or materials produced by either Party in the conduct of the Pharmacogenomics Program which are derived in whole or in part from BAYER Proprietary Material or BAYER Technology. 2.13 - BAYER Response Shall have the meaning set forth in Section 4.02 of this Agreement. 2.14 - BAYER SNP Target Shall mean any gene target provided by BAYER to CURAGEN or otherwise identified by BAYER to CURAGEN for the purpose of conducting SNP analysis under the Pharmacogenomics Program. 2.15 - BAYER Target Shall mean any druggable target provided by BAYER to CURAGEN or otherwise identified by BAYER to CURAGEN for the purpose of conducting analysis activities under the Pharmacogenomics Program. 2.16 - BAYER Technology Shall mean, collectively, the BAYER Program Technology and the BAYER Background Technology. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 4 BAYER and CURAGEN Pharmacogenomics Project Agreement 2.17 - Biological Materials Shall have the meaning set forth in Section 3.00(a)(iii) of this Agreement. 2.18 - Breaching Party Shall have the meaning set forth in Section 8.02 of this Agreement. 2.19 - Change of Control Shall mean (a) a merger or consolidation of CURAGEN which results in the voting securities of CURAGEN outstanding immediately prior thereto ceasing to represent at least [___________] of the combined voting power of the surviving entity immediately after such merger or consolidation; (b) the sale of all or substantially all of the assets of CURAGEN (including any sale by CURAGEN of all or substantially all of the assets constituting the CURAGEN Discovery Tools); or (c) any "person", as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), together with any of such persons "affiliates" or "associates", as such terms are used in the Exchange Act, becoming the beneficial owner of [___________] or more of the combined voting power of the outstanding securities of CURAGEN (other than CURAGEN, any trustee or other fiduciary holding securities under an employee benefit plan of CURAGEN or any corporation owned directly or indirectly by the stockholders of CURAGEN in substantially the same proportion as their ownership of stock of CURAGEN). 2.20 - Competitive Entity Shall mean any Third Party that is engaged in the business of [___________________]. 2.21 - Confidential Information Shall mean all materials, Technology or other information, including, without limitation, proprietary information and materials (whether or not patentable) regarding a Party's Technology, products, business information or objectives, which is designated as confidential in writing by the disclosing Party, whether by letter or by the use of an appropriate stamp or legend, Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 5 BAYER and CURAGEN Pharmacogenomics Project Agreement prior to or at the time any such material, trade secret or other information is disclosed by the disclosing Party to the other Party. Notwithstanding the foregoing to the contrary, materials, Technology or other information which is orally, electronically or visually disclosed by a Party, or is disclosed in writing without an appropriate letter, stamp or legend, shall constitute Confidential Information of a Party (a) if the disclosing Party, within thirty (30) days after such disclosure, delivers to the other Party a written document or documents describing the materials, Technology or other information and referencing the place and date of such oral, visual, electronic or written disclosure and the names of the persons to whom such disclosure was made, or (b) such information is of the type that is customarily considered to be confidential information by persons engaged in activities that are substantially similar to the activities being engaged in by the Parties pursuant to this Agreement. 2.22 - CURAGEN Deliverables Shall have the meaning set forth in Section 3.00(b)(ii) below. 2.23 - CURAGEN Diagnostic Product Shall mean any human diagnostic product or service discovered, conceived or reduced to practice by CURAGEN in the conduct of the Pharmacogenomics Program independent of any BAYER Proprietary Materials or BAYER Data. 2.24 - CURAGEN Discovery Tools Shall have the meaning set forth in the recitals to this Agreement. 2.25 - CURAGEN Discovery Tool Technology Shall mean any Technology owned or otherwise controlled by CURAGEN as of the Effective Date which is necessary to practice the license to the CURAGEN Discovery Tools granted to BAYER pursuant to Section 9.00(a) of this Agreement. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 6 BAYER and CURAGEN Pharmacogenomics Project Agreement 2.26 - CURAGEN Discovery Tool Improvements Shall mean any improvements to the CURAGEN Discovery Tool Technology made by CURAGEN or by 454 Corporation, CURAGEN's majority-owned subsidiary, or any other Affiliate of CURAGEN, during the Pharmacogenomics Program Term, both within and outside of the conduct of the Pharmacogenomics Program, to the extent CURAGEN has the right to license or sublicense such improvements without violating any agreement with 454 Corporation or any Third Party. 2.27 - CURAGEN Indemnified Parties- Shall have the meaning set forth in Section 10.23 below. 2.28 - CURAGEN Licensed Patent Rights Shall have the meaning set forth in Section 10.06(a) of this Agreement. 2.29 - CURAGEN Licensed Technology Shall have the meaning set forth in Section 10.06(a) of this Agreement. 2.30 - CURAGEN Notice Shall have the meaning set forth in Section 4.02. 2.31 - CURAGEN Patent Rights Shall mean Patent Rights with respect to CURAGEN Technology. 2.32 - CURAGEN Program Technology Shall mean any Technology, other than BAYER Program Technology and CURAGEN Discovery Tool Improvements, developed or conceived by employees of or consultants to CURAGEN during the Pharmacogenomics Program Term in the conduct of Pharmacogenomics Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 7 BAYER and CURAGEN Pharmacogenomics Project Agreement Program. CURAGEN Program Technology shall include, without limitation, the Predictive Toxicogenomics Technology and the Proteomics Technology. 2.33 - CURAGEN Proprietary DBs Shall have the meaning set forth in the recitals to this Agreement. 2.34 - CURAGEN Proprietary Material Shall mean any tangible proprietary substances and materials of CURAGEN or its Affiliates provided by CURAGEN for the purpose of conducting the Pharmacogenomics Program. 2.35 - CURAGEN Screening Services Shall mean any services provided by CURAGEN or any of its Affiliates to Third Parties which are designed to test compounds, targets and/or products identified or provided by such Third Parties, and which use a Marker Gene or Toxicogenomics Reference Data. 2.36 - CURAGEN Services Shall mean any services provided by CURAGEN or any of its Affiliates to Third Parties through the use of CURAGEN Discovery Tools, the primary purpose of which is to provide access to any information comprising the Toxicogenomics Reference Data, other than information that would provide a Third Party with any pathology information. 2.37 - CURAGEN Services Revenue Shall mean the aggregate gross revenues received by CURAGEN or its Affiliates in connection with its providing of CURAGEN Screening Services or CURAGEN Services less, to the extent such CURAGEN Screening Services or CURAGEN Services are provided by CURAGEN to Third Parties in arm's length transactions, the following: Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 8 BAYER and CURAGEN Pharmacogenomics Project Agreement (a) trade, early settlement, cash and quantity discounts or rebates actually allowed or taken; (b) credits or allowances actually given or made for CURAGEN Screening Services or CURAGEN Services or for retroactive price reductions (including legally mandated types of rebates); and (c) sales, transfer, value added and other excise taxes levied on the sale or delivery of CURAGEN Screening Services or CURAGEN Services to the extent included in the gross invoiced sales price, other than franchise or income tax of any kind whatsoever. 2.38 - CURAGEN Technology Shall mean, collectively, the CURAGEN Program Technology, the CURAGEN Discovery Tool Technology and the CURAGEN Discovery Tool Improvements. 2.39 - Designated Scientific Issue Shall mean any scientific matters related to the Pharmacogenomics Program including, without limitation, all interpretations of the Pharmacogenomics Program Plan but not including any dispute as to whether the performance criteria set forth in Section 3.00(b)(iii) have been achieved. Notwithstanding the foregoing, it is hereby agreed that Designated Scientific Issues shall not include any matters specifically left to the discretion, consent or approval of BAYER under this Agreement. 2.40 - Diagnostic Products Shall mean, collectively, Program Diagnostic Products and CURAGEN Diagnostic Products. In the singular form, "Diagnostic Product" shall mean either a Program Diagnostic Product or a CURAGEN Diagnostic Product, as appropriate. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 9 BAYER and CURAGEN Pharmacogenomics Project Agreement 2.41 - DOJ Shall mean the United States Department of Justice. 2.42 - Effective Date Shall mean the later of the HSR Clearance Date and the Closing Date as defined in the Stock Purchase Agreement. 2.43 - FTE Shall mean a full time equivalent person year (consisting of a total of one thousand eight hundred eighty (1,880) hours per year) of scientific or technical work. 2.44 - HSR Act Shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (15 U.S.C. Sec. 18a), and the rules and regulations promulgated thereunder. 2.45 - HSR Clearance Date Shall mean the earlier of (a) the date on which the FTC shall notify BAYER and CURAGEN of early termination of the applicable waiting period under the HSR Act or (b) the day after the date on which the applicable waiting period under the HSR Act expires. 2.46 - HSR Filing Shall mean filings by BAYER and CURAGEN with the FTC and the Antitrust Division of the DOJ of a Notification and Report Form for Certain Mergers and Acquisitions (as that term is defined in the HSR Act) with respect to the matters set forth in this Agreement, the Metabolic Disorder Collaboration Agreement and the Stock Purchase Agreement, together with all required documentary attachments thereto. 2.47 - Infringement Shall have the meaning set forth in Section 7.04(a) of this Agreement. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 10 BAYER and CURAGEN Pharmacogenomics Project Agreement 2.48 - Knowledge For purposes of this Agreement, the term "Knowledge" shall mean the knowledge, after due and reasonable investigation, [_________________________________________________]. 2.49 - Marker Gene Shall mean any gene discovered by CURAGEN in the conduct of the Pharmacogenomics Program whose expression or pattern of expression is predictive of (a) toxicity or efficacy and is therefore useful for screening drug candidates to assess toxicity or efficacy or (b) disease, disease predisposition or patient response and therefore has diagnostic applications, including disease diagnosis, patient selection and treatment monitoring, including, in any case, any part of the CURAGEN Program Technology pertinent thereto. 2.50 - Metabolic Disorder Collaboration Agreement Shall have the meaning set forth in the recitals to this Agreement. 2.51 - Optimized Product Shall mean any compound or target (including without limitation any BAYER Target or BAYER Compound), other than a Program Diagnostic Product, that results from a compound or target that is selected, optimized, screened or tested within or outside of the Pharmacogenomics Program. 2.52 - Party or Parties Shall mean BAYER or CURAGEN or both, as appropriate. 2.53 - Patent Rights Shall mean the rights and interests in and to (a) issued patents and pending patent applications without limitation to any country, including, but not limited to, all provisional Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 11 BAYER and CURAGEN Pharmacogenomics Project Agreement applications, substitutions, continuations, continuations-in-part, divisions, and renewals, all letters patent granted thereon, and all reissues, reexaminations and extensions thereof, and supplemental protection certificates relating thereto whether owned solely or jointly by a Party or licensed in by a Party, with the right to grant sublicenses and (b) copyrights with respect to data. 2.54 - Pharmacogenomics Data Shall mean, collectively, the Toxicogenomics Reference Data and the BAYER Data. 2.55 - Pharmacogenomics Program Shall mean a research and development program pursuant to which CURAGEN shall use the CURAGEN Discovery Tools and CURAGEN Proprietary DBs (a) during the Set-Up Phase, to identify Marker Genes, to develop the Predictive Toxicogenomics Technology and conduct the Proteomics Feasibility Study, (b) during the Production Phase, to conduct toxicogenomic and pharmacogenomic testing and analysis of BAYER SNP Targets, BAYER Targets and BAYER Compounds using BAYER Technology or CURAGEN Technology and (c) during the Pharmacogenomics Program Term, to identify Marker Genes for the purpose of [___________]. 2.56 - Pharmacogenomics Program Term Shall mean the term of the Pharmacogenomics Program, which shall commence on the Effective Date and continue for a period of [___________], unless earlier terminated pursuant to Article VIII below or extended by extension of the Set-up Phase in accordance with Section 3.00(b)(i) below. The Pharmacogenomics Program Term shall include the Set-Up Phase Term (as such term may be extended pursuant to Section 3.00(b)(i) below), and the Production Phase Term. 2.57 - Pharmacogenomics Program Plan Shall mean the written description of the research to be performed by CURAGEN and BAYER under the Pharmacogenomics Program as more fully described in Appendix A attached hereto and as such plan may be updated or amended from time to time by the Parties. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 12 BAYER and CURAGEN Pharmacogenomics Project Agreement 2.58 - Predictive Toxicogenomics Technology Shall mean a toxicology screening Technology for the early prediction of the toxicity of drugs or compounds that is developed by CURAGEN pursuant to Section 3.00(b)(i) and which is designed primarily to aid in the selection of lead drug candidates and the optimization of drugs. 2.59 - Production Phase Shall have the meaning provided in Section 3.00(c)(i) below. 2.60 - Production Phase Term Shall mean the term of the production phase of the Pharmacogenomics Program, which shall commence upon the submission by BAYER to CURAGEN of the initial BAYER Compound or BAYER Target, as the case may be, as provided in Section 3.00(c) (i) below and continue for a period of [___________] from the Effective Date, as the same period may be extended, if the Set-Up Phase Term is extended in accordance with Section 3.00(b)(i) below. 2.61 - Program Diagnostic Product Shall mean any human diagnostic product or service, other than a CURAGEN Diagnostic Product, discovered, conceived or reduced to practice by either Party or their respective Affiliates in the conduct of the Pharmacogenomics Program including, without limitation, any product designed to (a) identify predisposition to a particular disease or to confirm the presence or absence of a Marker Gene, (b) predict drug response or therapeutic effectiveness, (c) monitor drug response or (d) stratify patient groups. 2.62 - Program Director Shall have the meaning set forth in Section 3.03 (a) below. 2.63 - Program Funding Shall have the meaning set forth in Section 5.00(a) of this Agreement Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 13 BAYER and CURAGEN Pharmacogenomics Project Agreement 2.64 - Project Teams Shall have the meaning set forth in Section 3.03(b) below. 2.65 - Proteomics Feasibility Study Shall mean a study on proteomics feasibility to be conducted by CURAGEN in accordance with the criteria set forth in Appendix C attached hereto that demonstrates, to the reasonable satisfaction of BAYER, the feasibility of [__________________________________]. 2.66 - Proteomics Technology Shall mean all Patent Rights and Technology that arise directly from the activities conducted by CURAGEN under the Proteomics Feasibility Study related to antibody generation. 2.67 - Set-up Phase Shall have the meaning set forth in Section 3.00(b)(i) below. 2.68 - Set-up Phase Term Shall mean the term of the Set-up Phase of the Pharmacogenomics Program, which shall commence on the Effective Date and shall continue until the earlier of (i) the completion of the Set-Up Phase and (ii) a period [___________]; provided, that, the Set-up Phase Term, at BAYER's option, shall be extended for [___________] in accordance with Section 3.00(b)(i) below. 2.69 - Stock Purchase Agreement Shall have the meaning set forth in the recitals to this Agreement. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 14 BAYER and CURAGEN Pharmacogenomics Project Agreement 2.70 - Technology Shall mean all (a) inventions, discoveries, improvements, trade secrets and proprietary methods and materials, whether or not patentable, including but not limited to, samples of, the methods of production or use of, and structural and functional information pertaining to, chemical compounds, proteins or other biological substances, (b) information, data and formulations (including any negative results), and (c) techniques and trade secrets. "Technology" of a Party includes Technology owned by a Party or licensed to that Party with a right to grant sublicenses without violating the terms of any agreement or arrangement with any Third Party. 2.71 - Terminating Party Shall have the meaning set forth in Section 8.02 of this Agreement. 2.72 - Third Party Shall mean any person, corporation, firm, limited liability company, partnership, or other entity, which is not a Party or an Affiliate of a Party. 2.73 - Toxicogenomics Reference Data Shall mean the data generated or used by CURAGEN in the Set-up Phase of the Pharmacogenomics Program, including without limitation [________________________]. 2.74 - UNCITRAL Shall have the meaning set forth in Section 10.14 of this Agreement. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 15 BAYER and CURAGEN Pharmacogenomics Project Agreement ARTICLE III - PHARMACOGENOMICS PROGRAM 3.00 - Pharmacogenomics Program (a) General. (i) Description of Program. BAYER and CURAGEN hereby agree to conduct the Pharmacogenomics Program so as to collaborate on toxicogenomic and pharmacogenomic technologies for use in (A) the identification of gene-based toxicity markers, development and operation of toxicity assays, the generation and maintenance of databases [__________________________________________]; and (B) gene expression profiling of animal and human cells in [______________] to assess and predict their pharmacological effectiveness. It is expected that the Pharmacogenomics Program will consist of two primary phases, designated herein as the Set-up Phase and the Production Phase. (ii) Conduct of Program. Each Party agrees to (A) undertake the responsibilities assigned to such Party in the Pharmacogenomics Program Plan, including, but not limited to, the dedication of resources appropriate to such efforts and (B) make available to the other Party those resources set forth in the Pharmacogenomics Program Plan. In addition, each Party agrees to carry out all work done in the course of the Pharmacogenomics Program in material compliance with all applicable federal, state or local laws, regulations and guidelines governing the conduct of such work, including, without limitation, all applicable export and import control laws. (iii) Biological Materials. For purposes of facilitating the conduct of the Pharmacogenomics Program, each Party shall provide to the other Party, at its sole expense, such animal or human tissues, cells, blood samples and other materials ("Biological Materials") specified from time to time in the Pharmacogenomics Program Plan. The Parties agree that: (A) all Biological Materials provided by one Party to the other shall be used solely for research purposes in the Pharmacogenomics Program; (B) the Party providing such Biological Materials shall obtain (or cause its Third Party collaborators to obtain or certify that they have obtained) all appropriate and required consents from the source of such Biological Materials; and Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 16 BAYER and CURAGEN Pharmacogenomics Project Agreement (C) Biological Materials provided by one Party to the other shall not be made available by the receiving Party to any Third Party except pursuant to the Pharmacogenomics Program or upon the prior written consent of the Party providing such Biological Materials. (b) Set-up Phase. (i) General. During the Set-up Phase of the Pharmacogenomics Program (the "Set-up Phase"), CURAGEN shall use reasonable commercial efforts, in accordance with the Pharmacogenomics Program Plan, to (A) create a database of Marker Genes and (B) develop the Predictive Toxicogenomics Technology [__________________________________________]. The Set-up Phase shall commence on the Effective Date and continue for the duration of the Set-up Phase Term, unless earlier terminated in accordance with Section 3.00(c)(iv)(A) below. Notwithstanding the foregoing, it is hereby acknowledged and agreed that the Set-up Phase Term shall, at BAYER's option, be extended [________________] if the activities to be conducted in the Set-up Phase, as described in the Pharmacogenomics Program Plan, are not completed on or before expiration of [________________]. (ii) CURAGEN Obligations and Deliverables. Subject to the payment by BAYER of the Program Funding in accordance with Section 5.01 hereof and the execution and delivery by the Parties of, and the closing of the transaction contemplated by, the Stock Purchase Agreement, CURAGEN shall use reasonable commercial efforts to deliver to BAYER, as promptly as practicable and in any event on or before the expiration of the Set-up Phase Term: (A) the Predictive Toxicogenomics Technology meeting the specifications set forth in Section 3.00(b)(i) above; (B) the Toxicogenomics Reference Data; and (C) the Proteomics Feasibility Study (collectively, the "CURAGEN Deliverables"). (iii) Performance Criteria. During the Set-up Phase, CURAGEN shall use reasonable commercial efforts to achieve the following performance criteria within the following time frames: (A) Demonstration to BAYER's reasonable satisfaction, on or before [___________________________________], [_____________________________________]. (B) Demonstration to BAYER's reasonable satisfaction, on or before [___________________________________], [_____________________________________]. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 17 BAYER and CURAGEN Pharmacogenomics Project Agreement In the event that the Parties disagree as to whether any of the foregoing performance criteria have been achieved, the matter shall not be treated as a Designated Scientific Issue in accordance with Section 3.05 of this Agreement. (iv) Effect of Criteria. (A) In the event that CURAGEN fails to achieve the performance criteria set forth in Section 3.00(b)(iii)(A) above within the applicable time frame, BAYER shall have the right to terminate this Agreement pursuant to Section 3.00(c)(iv) below. (B) In the event that CURAGEN achieves the performance criteria set forth in Section 3.00(b)(iii)(B) above within the applicable time frame, the Parties shall promptly enter into good faith discussions, based on the price specifications set forth in Appendix B (plus a profit factor), for a period of [___________] from the date the performance criteria is achieved for an amendment to this Agreement to expand the scope of the Pharmacogenomics Program, which amendment is expected to include, inter alia, a description of the additional proteomics research and development activities to be performed by CURAGEN. If the Parties are unable to agree upon and execute a written amendment within such [___________] period covering such expanded activities, as such period may be extended by written agreement of the Parties, no such additional proteomics activities will be undertaken by CURAGEN in connection with the Pharmacogenomics Program. (c) Production Phase. (i) General. During the production phase of the Pharmacogenomics Program (the "Production Phase") CURAGEN shall (A) conduct toxicogenomic and pharmacogenomic testing and analysis of BAYER SNP Targets, BAYER Targets and BAYER Compounds using CURAGEN Discovery Tools and (B) analyze and use Marker Genes to screen BAYER Compounds for toxicity using the Predictive Toxicogenomics Technology for the purpose of optimizing and developing BAYER Products, all in accordance with the Pharmacogenomics Program Plan. The Production Phase shall commence on the date of submission by BAYER to CURAGEN of the initial BAYER Target or BAYER Compound, as the case may be, as provided in Section 3.00(c)(ii) below and shall continue for the duration of the Production Phase Term, unless earlier terminated in accordance with Article VIII below. The Production Phase Term Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 18 BAYER and CURAGEN Pharmacogenomics Project Agreement shall be extended to reflect such additional period(s) as the Set-Up Phase Term may be extended pursuant to Section 3.00(b)(i). (ii) BAYER Obligations. During each full year of the Production Phase Term, BAYER shall submit a minimum of [______________] and a maximum of [______________] BAYER SNP Targets for SNP analysis by CURAGEN as described in Section 3.00(c)(iii)(A) and BAYER Targets for pathway analysis by CURAGEN as described in Section 3.00(c)(iii)(B) and a minimum of [______________] and a maximum of [______________] BAYER Compounds for screening with the Predictive Toxicogenomics Technology as described in Section 3.00(c)(i) (B) above. (iii) CURAGEN Obligations. During the Production Phase Term, CURAGEN shall perform the following services for BAYER in consideration of BAYER's payment of the applicable fees for such services: (A) SNP Analysis. Upon the submission by BAYER to CURAGEN of each BAYER SNP Target, CURAGEN shall use its SNPCalling technology to identify single nucleotide polymorphisms for such BAYER SNP Target (using a minimum of [______________]) and allele frequency determinations for identified haplotypes across a panel of [______________]. So long as BAYER submits BAYER SNP Targets at an average rate no greater than [______________] BAYER SNP Target per week during the Production Phase Term, CURAGEN will complete the SNP Calling services for each BAYER SNP Target within [______________] of receipt by CURAGEN of each BAYER SNP Target, consisting of [__________________________________________________]. For purposes of this Section 3.00(c)(iii)(A), "submission" of a BAYER SNP Target shall mean the receipt by CURAGEN of a BAYER SNP Target in a vector proposed by BAYER and reasonably acceptable to CURAGEN. (B) Pathway Analyses. Upon the submission of a BAYER Target by BAYER to CURAGEN, CURAGEN shall provide the following analyses to BAYER: (1) Pathway Analysis. CURAGEN shall perform pathway analysis of each BAYER Target, which will involve [_________________________]. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 19 BAYER and CURAGEN Pharmacogenomics Project Agreement (2) RTQ PCR Analysis. CURAGEN shall perform RTQ PCR analysis of each BAYER Target, which will involve [_________________________]. For purposes of this Section 3.00(c)(iii)(B), "submission" shall mean the receipt of BAYER Target in a vector proposed by BAYER and reasonably acceptable to CURAGEN. (C) Predictive Toxicogenomics Screening and Expression Analyses. Upon the submission by BAYER to CURAGEN of a BAYER Compound during the Production Phase, CURAGEN shall provide the following services to BAYER: (1) Predictive Toxicogenomics Screening. CURAGEN shall perform predictive toxicogenomics screening of BAYER Compounds using the Predictive Toxicogenomics Technology developed in the Set-up Phase. CURAGEN will begin predictive toxicity screening at any time following CURAGEN's achievement of the performance criteria described in Section 3.00 (b) (iii)(A) above. The Parties hereby agree that such predictive toxicity screening activities may involve lead optimization of BAYER Compounds by BAYER and/or screening of selected BAYER Compounds by CURAGEN. (2) GeneCalling Expression Profiling. CURAGEN shall provide GeneCalling expression profiling of the effect of BAYER Compounds on Marker Genes and will provide comparative data to BAYER using the Pharmacogenomics Data developed in the Set-up Phase. (D) Reports on Results of Services. Promptly upon completion of any of the services provided by CURAGEN to BAYER pursuant to this Section 3.00(c)(iii), CURAGEN shall provide to BAYER a report summarizing the analysis and results thereof. The form of such report will be agreed upon by the Parties and will be made available by CURAGEN to BAYER through its GeneScape(R) software. In addition, CURAGEN will work with BAYER to [______________]. (iv) Early Termination of this Agreement. (A) BAYER may terminate this Agreement (a) at any time on or [_________________________________________], upon not less than Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 20 BAYER and CURAGEN Pharmacogenomics Project Agreement [___________] written notice to CURAGEN, if CURAGEN fails to achieve the performance criteria described in Section 3.00(b)(iii)(A) of this Agreement or (b) if CURAGEN has failed to deliver the CURAGEN Deliverables as of the date of expiration of the Set-Up Phase. (B) BAYER may terminate this Agreement upon not less than [___________] prior written notice, if (1) [______________________________________]; (2) CURAGEN fails to cure such failure within [___________] of CURAGEN's receipt of written notice from BAYER of such failure; and (3) [____________________]. (d) Priority of Services. Subject to the payment by BAYER of the Program Funding described in Article V of this Agreement, CURAGEN shall provide, at its sole expense, the personnel and resources necessary to provide the services contemplated by the Pharmacogenomics Program Plan. In connection therewith, if at any time during the Production Phase Term, CURAGEN experiences capacity constraints in providing the commercial services of the types provided to BAYER that CURAGEN also offers to Third Parties, then CURAGEN hereby agrees [_______________________________________________________________]. 3.01 - Collaborative Efforts and Reports (a) Cooperation of the Parties. The Parties agree that the successful execution of the Pharmacogenomics Program will require the collaborative use of both Parties' areas of expertise. In connection therewith, CURAGEN shall furnish BAYER quarterly summary written reports within ten (10) business days after the end of each quarter during the Pharmacogenomics Program Term, describing the progress of its activities in reasonable detail, including a summary of the progress of the Pharmacogenomics Program by CURAGEN. From time to time during the Set-up Phase Term, upon the reasonable advance written request of BAYER, CURAGEN will provide to BAYER an update of the status of the Pharmacogenomics Program. (b) Use of Personnel. Scientists at CURAGEN and BAYER shall cooperate in the performance of the Pharmacogenomics Program and, subject to any confidentiality obligations to Third Parties, shall exchange information and materials (including BAYER Proprietary Material) Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 21 BAYER and CURAGEN Pharmacogenomics Project Agreement as necessary to carry out the Pharmacogenomics Program. Each Party will attempt to accommodate any reasonable request of the other Party to send or receive personnel for purposes of collaborating or exchanging information under the Pharmacogenomics Program. Such visits and/or access will have defined purposes and be scheduled in advance. Each Party will bear its own travel and lodging costs related to such meetings. (c) Access to GeneScape Software. During the Pharmacogenomics Program Term, CURAGEN will provide BAYER with non-exclusive access to its GeneScape software to enable BAYER to view data associated with the Pharmacogenomics Program. BAYER hereby acknowledges and agrees that such access shall be granted pursuant to the terms of the software license set forth on Appendix E attached hereto and in accordance with Section 3.00(c)(iii)(D) above. 3.02 - Non-Exclusivity Except as expressly set forth in this Agreement, nothing contained in this Agreement shall in any way restrict CURAGEN's right to perform research for, or to collaborate with, any Third Parties to the extent that any such research or collaboration would not conflict with the provisions hereof. The foregoing notwithstanding, it is clearly understood and agreed that CURAGEN is not permitted to use, share or otherwise disclose the results of any research or collaboration conducted hereunder, except as otherwise permitted hereby. 3.03 - Program Directors and Project Teams (a) Appointment of Program Directors. Within thirty (30) business days of the Effective Date, BAYER and CURAGEN shall each appoint a senior research scientist or executive (each, a "Program Director") to each serve as an executive director to oversee jointly the operations of the Pharmacogenomics Program and to make recommendations to the Parties for modifications of, or amendments to, the Pharmacogenomics Program Plan. During the Pharmacogenomics Program Term, the BAYER Program Director shall be permitted to reside at CURAGEN, at BAYER's sole expense, for at least six (6) months of each year in order to facilitate conducting the Pharmacogenomics Program. The Program Directors will (i) commit Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 22 BAYER and CURAGEN Pharmacogenomics Project Agreement substantially all of his/her working hours to the Pharmacogenomics Program and (ii) have access to the offices and data related to the Pharmacogenomics Program and personnel of the other Party to the extent necessary to facilitate the close and direct collaboration of the Parties contemplated by the Pharmacogenomics Program Plan related to the Pharmacogenomics Program. (b) Project Teams. The Program Directors shall each appoint personnel to serve on project teams ("Project Teams") to supervise and/or perform the various tasks required under the Pharmacogenomics Program. The Project Team will consist of an equal number of representatives of each Party. Each Party shall have the right to replace its representatives at any time during the term of this Agreement by providing written notice to the other Party. During the Pharmacogenomics Program Term, BAYER and CURAGEN will each commit to the Pharmacogenomics Program the FTE levels for their respective Project Team Members set forth in the Pharmacogenomics Program Plan. 3.04 - Executive Level Meetings The President of CURAGEN and the Head of Worldwide Pharmaceutical Research for BAYER shall meet at least annually but more or less frequently if appropriate or necessary and upon mutual agreement of both Parties, with such meetings to be held alternating in New Haven, Connecticut, USA, or Wuppertal, Germany, unless the Parties agree otherwise. Meetings may also be held by conference telephone or videoconference upon mutual agreement. 3.05 - Decisions Each Project Team shall decide matters directly related to the scope of its responsibilities by the mutual consensus of its members. If any matter cannot be resolved on a consensus basis, then such matter will be referred to the Program Directors for resolution at a Program Director Meeting. In the event that the Program Directors are unable to reach agreement on any matter within thirty (30) days, the issue will be referred for resolution to the president of CURAGEN and the Head of Worldwide Pharmaceutical Research at BAYER. If these two individuals are unable to resolve the matter within thirty (30) days (a) if the matter does not relate to a Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 23 BAYER and CURAGEN Pharmacogenomics Project Agreement Designated Scientific Issue, either Party may refer the matter to binding arbitration in accordance with Section 10.14 and (b) if the matter relates to a Designated Scientific Issue, the Parties will resolve that matter through the use of an expedited mediation process, which shall be mediated by a scientist mutually acceptable to both Parties. If the Parties are unable to agree on a single scientist to serve as mediator within twenty (20) days, each Party will appoint an unaffiliated scientist who shall together select a third unaffiliated scientist to serve as mediator. The selected mediator will review the Designated Scientific Issue on an expedited basis, considering the relevant data, the standards established by this Agreement and the Pharmacogenomics Program Plan and relevant precedents. The decision of the mediator will be binding on the Parties. 3.06 - Expenses CURAGEN and BAYER shall each bear all expenses related to the activities of their respective Project Directors and Project Team members contemplated by this Agreement. Notwithstanding the foregoing, it is hereby agreed that CURAGEN shall bear all expenses related to the use by the BAYER Program Director of CURAGEN's facility in accordance with Section 3.03(a) above. ARTICLE IV - LICENSES; PROGRAM DIAGNOSTIC PRODUCTS; CURAGEN DIAGNOSTIC PRODUCTS- 4.00 -Licenses to BAYER (a) Commercialization Licenses to BAYER. CURAGEN hereby grants to BAYER and its Affiliates [_______________________________________________________________]. (b) Royalties. It is hereby acknowledged and agreed by the Parties that [__________________________________________________________________________]. 4.01 - Licenses to CURAGEN (a) Research License to CURAGEN. BAYER hereby grants to CURAGEN, during the Pharmacogenomics Program Term, [______________________________________]. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 24 BAYER and CURAGEN Pharmacogenomics Project Agreement (b) Commercialization Licenses to CURAGEN. BAYER hereby grants to CURAGEN [_______________________________________________________________]. (c) Royalties. It is hereby acknowledged and agreed by the Parties that [_________________________________________________________________________]. (d) Use of BAYER Technology by CURAGEN. Except as expressly permitted by Sections 4.01(a) and (b) of this Agreement, CURAGEN shall not transfer or disclose to any Third Party or otherwise use BAYER Technology or BAYER Proprietary Material for any purpose and keep the same confidential. (e) Withholding. The Party paying royalties under Section 4.00 or Section 4.01 (the "Royalty Paying Party") shall have the right to withhold from the royalty payments the tax which the Party receiving such royalties (the "Royalty Receiving Party") is liable under the appropriate local tax laws and for the payments of which the Royalty Paying Party is responsible. The Royalty Receiving Party shall immediately be sent tax receipts by the Royalty Paying Party certifying the payments of the tax, so that the Royalty Receiving Party may use it for claiming a credit on the tax payable by the Royalty Receiving Party in Germany on such payments. No deduction shall be made nor shall a reduced amount be deducted if the Royalty Receiving Party furnishes a document from the appropriate tax authorities to the Royalty Paying Party by the time of the payments certifying that the payments are exempt from tax or subject to a reduced tax rate according to the convention for the avoidance of double taxation between the Federal Republic of Germany and the United States of America. Except for such withholding taxes, any taxes, assessments, fees and charges imposed against payments due the Royalty Receiving Party hereunder shall be borne by the Royalty Paying Party. 4.02 - Diagnostic Products In the event that CURAGEN shall discover or develop a Diagnostic Product during the Pharmacogenomics Program Term, it shall provide prompt written notice of same (the "CURAGEN Notice") to BAYER together with a description of such Diagnostic Product specifying whether such Diagnostic Product is a CURAGEN Diagnostic Product or a Program Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 25 BAYER and CURAGEN Pharmacogenomics Project Agreement Diagnostic Product and any other information available to CURAGEN which CURAGEN reasonably determines may be useful to BAYER to evaluate the commercial potential of such Diagnostic Product. [__________________________________________________________]. ARTICLE V - FUNDING OF PHARMACOGENOMICS PROGRAM 5.00 - Funding (a) Program Funding. Subject to the terms and conditions of this Agreement, BAYER shall be obligated to commit thirty nine million dollars ($39,000,000) to fund the Pharmacogenomics Program (the "Program Funding"), subject to reasonable adjustment [______________________________________________________________________]. (b) Set-up Phase Funding. Subject to the terms and conditions of this Agreement, BAYER shall pay CURAGEN an aggregate of [_____________________________] to fund the Set-up Phase of the Pharmacogenomics Program, [___________] of which shall be payable in the [__________] the Set-up Phase in advance in quarterly installments on the first day of each calendar quarter during the Set-up Phase and [___________] of which is payable upon the delivery by CURAGEN of the CURAGEN Deliverables. The Parties hereby acknowledge and agree that the Set-up Phase Funding may be adjusted from time to time during the Set-up Phase Term to reflect any changes in the Pharmacogenomics Program agreed to by the Parties. Notwithstanding the foregoing, CURAGEN hereby acknowledges and agrees that it shall be obligated to perform obligations related to [________________________]. (c) Production Phase Funding and Costs. Subject to the terms and conditions of this Agreement, BAYER shall pay CURAGEN an aggregate [_____________________________] to fund the Production Phase of the Pharmacogenomics Program. [____________________]. 5.01 - Service Price Adjustment. CURAGEN hereby acknowledges and agrees that such prices shall be adjusted [_____________________________________________________________________]. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 26 BAYER and CURAGEN Pharmacogenomics Project Agreement ARTICLE VI - TREATMENT OF CONFIDENTIAL INFORMATION 6.00 - Confidential Information All Confidential Information disclosed by a Party or its Affiliates to the other Party or its Affiliates during the term of this Agreement shall not be used by the receiving Party except in connection with the activities contemplated by this Agreement, shall be maintained in confidence by the receiving Party (except to the extent reasonably necessary for regulatory approval of BAYER Products developed by BAYER or any of its Affiliates or for the filing, prosecution and maintenance of Patent Rights), and shall not otherwise be disclosed by the receiving Party to any other person, firm, or agency, governmental or private, without the prior written consent of the disclosing Party, except to the extent that the Confidential Information (as determined by competent documentation): (i) was known or used by the receiving Party or its Affiliates prior to its date of disclosure to the receiving Party; or (ii) either before or after the date of the disclosure to the receiving Party or its Affiliates is lawfully disclosed to the receiving Party or its Affiliates by sources other than the disclosing Party or its Affiliates rightfully in possession of the Confidential Information; or (iii) either before or after the date of the disclosure to the receiving Party or its Affiliates becomes published or generally known to the public (including information known to the public through the sale of products in the ordinary course of business) through no fault or omission on the part of the receiving Party or its Affiliates or its sublicensees; or (iv) is independently developed by or for the receiving Party or any of its Affiliates without reference to or reliance upon the Confidential Information; or (v) is required to be disclosed by the receiving Party or its Affiliates to comply with applicable laws, by governmental or judicial order, to defend or prosecute litigation or to comply with governmental regulations, provided that the receiving Party or its Affiliate, as appropriate, provides prior written notice of such Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 27 BAYER and CURAGEN Pharmacogenomics Project Agreement disclosure to the disclosing Party and takes reasonable and lawful actions to avoid and/or minimize the degree of such disclosure. Such obligations of confidentiality and non-use shall remain in effect for a period of five (5) years after the termination or expiration of this Agreement. 6.01 - Publications Neither Party shall publish or otherwise publicly disclose the results of any work or activities conducted under this Agreement without prior written consent of the other Party. The publishing Party, upon the other Party's written approval, shall acknowledge contributions by the other Party in any publication. In order to safeguard intellectual property rights and Confidential Information, the Party wishing to publish such intellectual property and/or Confidential Information shall first submit a draft of any proposed manuscript to the other Party for review, comment and consideration of appropriate patent application preparation activity at least sixty (60) business days prior to any submission for publication or other public disclosure. The other Party will advise the Party seeking publication as to whether a patent application will be prepared and filed or whether trade secret protection should be pursued or whether Confidential Information should be deleted. Both Parties will discuss in good faith to determine the appropriate timing and content of any such publications. The other Party can request that the publishing Party delays publication for up to an additional sixty (60) business days for the purpose of preparation of an appropriate patent application(s) or redrafting to delete Confidential Information. 6.02 - Press Release and Regulatory Filings The Parties shall agree upon a press release with respect to the execution of this Agreement. Except as required by law or by a stock exchange or quotation system, any subsequent announcements or similar publicity shall be agreed upon between the Parties as set forth below. Each Party understands that this Agreement is likely to be of significant interest to investors, analysts and others, and that either Party therefore may make such public announcements with respect thereto. The Parties agree that any such announcement will not Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 28 BAYER and CURAGEN Pharmacogenomics Project Agreement contain confidential business or technical information and, if disclosure of confidential business or technical information is required by law or regulation, will make reasonable efforts to minimize such disclosure and obtain confidential treatment for any such information which is disclosed to a governmental agency or group. Each Party agrees to provide to the other Party with a copy of any public announcement as soon as reasonably practicable under the circumstances prior to its scheduled release. Except under extraordinary circumstances, each Party shall provide the other with an advance copy of any press release at least five (5) business days prior to the scheduled disclosure. Each Party shall have the right to expeditiously review and recommend changes to any announcement regarding this Agreement or the subject matter of this Agreement; provided, however that such right of review and recommendation shall only apply for the first time that specific information is to be disclosed, and shall not apply to the subsequent disclosure of substantially similar information that has previously been disclosed. Except as otherwise required by law or by a stock exchange or quotation system, the Party whose press release has been reviewed shall remove any information the reviewing Party reasonably deems to be inappropriate for disclosure. ARTICLE VII - INTELLECTUAL PROPERTY RIGHTS; FILING, PROSECUTION AND MAINTENANCE OF PATENT RIGHTS 7.00 - BAYER Intellectual Property Rights (a) BAYER Technology. BAYER shall have sole and exclusive ownership of all right, title and interest on a worldwide basis in and to any and all BAYER Technology, with full rights to license or sublicense, subject to the obligations under Article IV and Article VIII as set forth herein. Without limiting the foregoing, BAYER shall be the sole owner of all Patent Rights, trade secret rights, Technology and any other intellectual property rights in the BAYER Technology, including the exclusive right to exclude others from making, using, selling, offering for sale or importing the BAYER Technology and any BAYER Products derived therefrom. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 29 BAYER and CURAGEN Pharmacogenomics Project Agreement (b) BAYER Proprietary Material. The BAYER Proprietary Material shall remain the property of BAYER. CURAGEN's rights to use the BAYER Proprietary Material will be governed by the provisions of this Agreement. (c) Further Assurances. CURAGEN agrees to execute all documents, including, but not limited to, any assignments, deemed reasonably necessary by BAYER to assign to BAYER all of CURAGEN's ownership rights with respect to the BAYER Technology and any BAYER Products derived therefrom. 7.01 - CURAGEN Intellectual Property Rights (a) CURAGEN Technology. CURAGEN shall have sole and exclusive ownership of all right, title and interest on a worldwide basis in and to any and all CURAGEN Technology, with full rights to license or sublicense, subject to the obligations under Article IV, VIII and IX as set forth herein. Without limiting the foregoing, except as otherwise provided herein, CURAGEN shall be the sole owner of all Patent Rights, all trade secret rights, all Technology and any other intellectual property rights in the CURAGEN Technology including the exclusive right to exclude others from making, using, selling, offering for sale or importing the CURAGEN Technology or any products derived from any CURAGEN Technology. (b) CURAGEN Proprietary Material. CURAGEN Discovery Tools; CURAGEN Proprietary DBs. The CURAGEN Proprietary Material, the CURAGEN Discovery Tools and the CURAGEN Proprietary DBs shall remain the property of CURAGEN. BAYER's rights to use the CURAGEN Proprietary Material, CURAGEN Discovery Tools and CURAGEN Proprietary DBs will be governed by the provisions of this Agreement. (c) Further Assurances. BAYER agrees to execute all documents, including, but not limited to, any assignments deemed reasonably necessary by CURAGEN to assign to CURAGEN all of BAYER's ownership rights with respect to the CURAGEN Technology. 7.02 - Filing, Prosecution and Maintenance of Patent Rights During the Pharmacogenomics Program Term, with respect to any Patent Rights arising under the Pharmacogenomics Program, the following provisions shall apply. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 30 BAYER and CURAGEN Pharmacogenomics Project Agreement (a) Responsibility for Filing and Prosecution of Patents. (i) Subject to subsection (ii) of this Section 7.02(a), CURAGEN, at its sole expense and acting through patent attorneys or agents of its choice, shall prepare, file prosecute and maintain all Patent Rights relating to the CURAGEN Technology, the Marker Genes and any CURAGEN Diagnostic Products that have reverted to CURAGEN in accordance with Section 4.02 of this Agreement. In the event that any invention shall be made that constitutes CURAGEN Program Technology or that relates to Marker Genes and which CURAGEN believes should be patented, CURAGEN shall notify BAYER accordingly and shall consult with BAYER with respect to its strategy for seeking patent protection for the said invention. CURAGEN shall give reasonable consideration to any suggestions or recommendations of BAYER concerning the preparation and filing of patent applications covering the said invention and the countries in which applications should be filed. CURAGEN shall notify BAYER of its proposed filing at least sixty (60) days prior to the deadline for filing. BAYER agrees to provide reasonable assistance and cooperation to CURAGEN to facilitate the preparation and filing of any such patent applications. In the event that BAYER wishes a patent application to be filed in respect of the said invention in a particular country in which CURAGEN does not propose to file, then the costs of filing and prosecuting that application in that country shall be borne entirely by BAYER, who shall be entitled to use for that purpose patent attorneys or agents of its choice. (ii) Subject to subsection (i) of this Section 7.02(a), BAYER, at its sole expense and acting through patent attorneys or agents of its choice, shall prepare, file, prosecute and maintain all Patent Rights relating to the BAYER Technology (other than with respect to Marker Genes), Program Diagnostic Products, any CURAGEN Diagnostic Products that are deemed to be a Program Diagnostic Product under Section 4.02 of this Agreement and, to the extent not covered in a patent filed pursuant to subsection (i) above, all Patent Rights relating to BAYER Products. In the event that any invention shall be made that constitutes BAYER Program Technology (other than with respect to Marker Genes), or that covers a BAYER Product and which BAYER believes should be patented, BAYER shall notify CURAGEN accordingly and shall consult with Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 31 BAYER and CURAGEN Pharmacogenomics Project Agreement CURAGEN with respect to its strategy for seeking patent protection for the said invention. BAYER shall give reasonable consideration to any suggestions or recommendations of CURAGEN concerning the preparation and filing of patent applications covering the said inventions and the countries in which applications should be filed. BAYER shall notify CURAGEN of BAYER's proposed filing at least sixty (60) days prior to the deadline for filing. CURAGEN agrees to provide reasonable assistance and co-operation to BAYER to facilitate the preparation and filing of any such patent applications. In the event that CURAGEN wishes a patent application to be filed in respect of the said invention in a particular country in which BAYER does not propose to file, then the costs of filing and prosecuting that application in that country shall be borne entirely by CURAGEN who shall be entitled to use for that purpose patent attorneys or agents of its choice. (b) Information and Cooperation. (i) The filing Party shall keep the other Party regularly informed of the status of the Patent Rights for which the filing Party is responsible in accordance with this Section 7.02 and shall provide the other Party at least once per fiscal year with an updated list of the patents and patent applications comprising its Patent Rights. The filing Party shall additionally notify the other Party of the grant, lapse, revocation, surrender or abandonment of any patent or patent application included among the Patent Rights for which the filing Party is responsible. (ii) Except as otherwise agreed by the Parties, the filing Party shall provide copies to the other Party of all filings and correspondence with the patent offices, administrative boards or courts which the filing Party sends or receives in connection with filing, prosecution, maintenance and defense of the Patent Rights for which the filing Party is responsible. The filing Party shall provide copies of filings and correspondence under the preceding sentence sufficiently in advance of the due date so as to give the other Party sufficient time to comment and shall give good faith consideration to the other Party's comments, which comments shall be offered promptly. The filing Party shall seek the advice of the other Party with respect to strategy for the Patent Rights Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 32 BAYER and CURAGEN Pharmacogenomics Project Agreement for which it is responsible and shall give reasonable consideration to any suggestions or recommendations of the other Party concerning the preparation, filing, prosecution, maintenance and defense of such Patent Rights. If the Parties disagree on a particular approach to take with respect to the filing, prosecution or defense of any Patent Rights relating to BAYER Products, CURAGEN shall have the right to request BAYER to take whatever action is possible to protect the interests of CURAGEN, provided that the protection afforded to BAYER is not diminished. (c) Abandonment. If a filing Party decides to abandon or to allow to lapse any of its Patent Rights or, in the case of BAYER, any Patent Rights relating to a BAYER Product, and, in the case of CURAGEN, any Patent Rights relating to a Marker Gene, the filing Party shall inform the other Party at least forty-five (45) days prior to the effective date of such decision and the other Party shall be given the opportunity to assume responsibility for continuing the prosecution of such Patent Rights or paying any required fees to maintain such Patent Rights or defending such Patent Rights at the other Party's sole expense and through patent attorneys or agents of its choice. The other Party shall not become an assignee of such Patent Rights as a result of its said assumption of responsibility. Upon transfer of a Party's responsibility for prosecuting, maintaining and defending any of its Patent Rights to the other Party under the preceding sentence, the transferring Party shall promptly deliver to the other Party all necessary files related to the Patent Rights with respect to which responsibility has been transferred and shall take all actions and execute all documents reasonably necessary for the other Party to assume prosecution. 7.03 - Amendment to Patent Rights The Parties shall mutually agree prior to either Party taking any action which would amend any patent application or patent within its Patent Rights licensed to the other Party under this Agreement so as to irrevocably limit or materially change the lawful scope of such Patent Rights; provided, however, that such obligation shall not apply to any Patent Rights being Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 33 BAYER and CURAGEN Pharmacogenomics Project Agreement prosecuted by one Party in which the other Party has no rights (either by ownership or license) hereunder. 7.04 - Actual or Threatened Infringement. (a) In the event either Party becomes aware of any possible infringement or unauthorized possession, knowledge or use of any BAYER Patent Rights or CURAGEN Patent Rights (an "Infringement"), that Party shall promptly notify the other Party and provide it with full details. (b) Except as set forth in Section 7.04(c), the Party owning the affected Patent Rights shall be primarily responsible for enforcing them against the infringer at the owning Party's expense and the other Party shall co-operate fully with the owning Party in taking such action. In the event that the owning Party is unwilling to enforce its Patent Rights against the infringer, it shall authorize the other Party, at the other Party's request and expense, to institute proceedings against the infringer on behalf of the owning Party and, in any such case, the other Party shall retain any damages awarded against the infringer. (c) Notwithstanding the foregoing (i) if any Infringement primarily affects a BAYER Product or any Marker Gene, BAYER shall be primarily responsible at its expense for enforcing such affected Patent Rights against the infringer and (ii) if any Infringement primarily affects the CURAGEN Screening Services or CURAGEN Services, CURAGEN shall be primarily responsible at its expense for enforcing the affected Patent Rights against the infringer. (d) In any suit under this Section 7.04, the Party bringing the suit shall have the right first to reimburse itself out of any sums recovered in such suit or in its settlement for all reasonable costs and expenses, including reasonable attorney's fees, related to such suit or settlement. The remainder is next to be used to reimburse the other Party for its costs and expenses so incurred, if any, and then (i) in the event of an action brought by CURAGEN under this Section 7.04, any amounts recovered shall be added by CURAGEN to its Net Sales in the payment period in which it is received from the infringing Party and (ii) in the event of an action brought by BAYER under this Section 7.04, any amounts recovered shall be added by BAYER to its Net Sales in the payment period in which it is received from the infringing Party. Each Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 34 BAYER and CURAGEN Pharmacogenomics Project Agreement Party shall always have the right to be represented by counsel of its own selection and at its own expense in any suit instituted under this Section by the other Party for Infringement. (e) No suit under Section 7.04 may be settled by the Party bringing the action without the other Party's consent, which shall not be unreasonably withheld or delayed. 7.05 - Defense of Claims (a) Except as provided in Section 7.05(b) below, in the event that any action, suit or proceeding is brought against CURAGEN or BAYER or any Affiliate, licensee or sublicensee of BAYER, alleging the infringement of the intellectual property rights of a Third Party by reason of the discovery, development, manufacture, use, sale, offer for sale or importation of a BAYER Product or use of BAYER Patent Rights or BAYER Technology in the discovery, development, manufacture, use, sale, offer for sale, or importation of a BAYER Product, BAYER will have the obligation to defend itself and CURAGEN in such action, suit or proceeding at its own expense. CURAGEN shall have the right to separate counsel at its own expense in any such action or proceeding. (b) In the event that any action, suit or proceeding is brought against BAYER or CURAGEN, or any Affiliate, licensee or sublicensee of CURAGEN, alleging the infringement of the intellectual property rights of a Third Party by reason of (i) the discovery, development, manufacture, use, sale, offer for sale, or importation of a BAYER Product that is dominated by CURAGEN Patent Rights, (ii) the development, use, sale or offer for sale of CURAGEN Services or CURAGEN Screening Services or (iii) the use of CURAGEN Patent Rights, CURAGEN Licensed Technology or BAYER Patent Rights in the development, use, sale or offer for sale of CURAGEN Services or CURAGEN Screening Services, CURAGEN will have the obligation to defend itself and BAYER in such action, suit or proceeding at its own expense. BAYER shall have the right to separate counsel at its own expense in any such action or proceeding. (c) The Parties will cooperate with each other in the defense of any such suit, action or proceeding. The Parties will give each other prompt written notice of the Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 35 BAYER and CURAGEN Pharmacogenomics Project Agreement commencement of any such suit, action or proceeding or claim of infringement and will furnish each other a copy of each communication relating to the alleged infringement. Neither Party shall compromise, litigate, settle or otherwise dispose of any such suit, action or proceeding which involves the use of the other's Technology or Patent Rights without the other Party's advice and prior consent; provided that the Party not defending the suit shall not unreasonably withhold its consent to any settlement which does not have a material adverse effect on its business. If the defending Party agrees that the other Party should institute or join any suit, action or proceeding pursuant to this Section, the defending Party may at its expense, join the other Party as a Party to the suit, action or proceeding, and the Party so joined shall execute all documents and take all other actions, including giving testimony, which may reasonably be required in connection with the prosecution of such suit, action or proceeding. 7.06 - Cooperation Each Party shall, at the expense of the Party bringing any suit, execute all papers and perform such other acts as may be reasonably required to maintain any infringement suit brought in accordance with Section 7.04 or 7.05 above (including giving legal consent for bringing such suit, and agreeing to be named as either a plaintiff or defendant, or otherwise joined in such suit), and at its option and expense, may be represented in such suit by counsel of its choice. ARTICLE VIII - EXPIRATION AND TERMINATION 8.00 - Term of the Agreement This Agreement shall become effective on the Effective Date and terminate upon the expiration of the Pharmacogenomics Program Term, unless both Parties agree to extend the period or unless the Agreement is earlier terminated in accordance with the terms and conditions hereof. 8.01 -Termination by Mutual Agreement The Parties have the right to terminate this Agreement and the Pharmacogenomics Program at any time by mutual agreement in writing. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 36 BAYER and CURAGEN Pharmacogenomics Project Agreement 8.02 - Termination for Material Breach This Agreement may be terminated by a Party (the "Terminating Party") upon any material breach of this Agreement by the other Party (the "Breaching Party"), effective [___________] after giving written notice to the Breaching Party of such termination in the case of a payment breach and [___________] days after giving written notice to the Breaching Party of such termination in the case of any other material breach, which notice shall describe such breach in reasonable detail. The foregoing notwithstanding, if the default or breach is cured or shown to be non-existent within the aforesaid [______________] period, the notice shall be deemed automatically withdrawn and of no effect. 8.03 - Termination Following Bankruptcy If either Party makes an assignment for the benefit of creditors, appoints or suffers appointment of a receiver or trustee over all or substantially all of its property, files a petition under any bankruptcy or insolvency act or has any such petition filed against it which is not discharged within [____________] of the filing thereof, then the other Party may terminate this Agreement by notice to such Party. 8.04 - Termination by BAYER (a) Completion of Production Phase. BAYER shall have the right to terminate this Agreement [_________________________________________________]. (b) Change of Control of CURAGEN. In the event of a Change of Control of CURAGEN involving a Competitive Entity, CURAGEN shall deliver promptly to BAYER written notice setting forth the date and circumstances of the Change of Control and the identity of the Competitive Entity. Upon receipt of such notice, or upon delivery to CURAGEN of written notice by BAYER that BAYER has otherwise determined that a Change of Control involving a Competitive Entity has occurred, and for a period of [___________] thereafter, BAYER shall have the right to terminate this Agreement effective upon the expiration of [_____________] period. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 37 BAYER and CURAGEN Pharmacogenomics Project Agreement 8.05 - Effect of Termination (a) General. Except as set forth in Section 8.05(b) or (c), upon termination of this Agreement, (i) CURAGEN shall continue to have the rights and licenses described in Section 4.01(b) above, and (ii) BAYER shall continue to have the rights and licenses described in Section 4.00 above, subject, in each case, to continued compliance with obligations related to such licenses, such as the royalty provisions of Article IV. (b) Termination Prior to Expiration of Set-Up Phase. In the event that BAYER terminates this Agreement pursuant to Section 3.00 (c)(iv) (A) (a), all the licenses (other than the license granted pursuant to Section 4.01 (b) (ii)) granted by BAYER to CURAGEN shall terminate and CURAGEN shall use commercially reasonable efforts to deliver any portion of the CURAGEN Deliverables which CURAGEN has produced and not yet delivered to BAYER; [_________________________________________________________]. If BAYER terminates this Agreement pursuant to Section 3.00 (c) (iv) (A) (b), (i) all the licenses granted by BAYER to CURAGEN under this Agreement, other than those granted pursuant to Section 4.01, shall terminate, (ii) CURAGEN shall use commercially reasonable efforts to deliver any portion of the CURAGEN Deliverables which CURAGEN has produced and not yet delivered to BAYER and (iii) if, within [___________] of such termination, CURAGEN sells, assigns, delivers, transfers, leases, licenses, sublicenses or otherwise provides services in connection with such CURAGEN Deliverables to a Third Party, CURAGEN will pay to BAYER, [_____________________________________________________________]. (c) Termination for Material Breach. Notwithstanding subsection (a) above, upon termination of this Agreement under Section 8.02 all relevant licenses granted by the Terminating Party to the Breaching Party hereunder shall automatically terminate, and if the Breaching Party is CURAGEN, CURAGEN shall be deemed, without further action, to have forfeited its license from BAYER to commercialize CURAGEN Screening Services and CURAGEN Services. Notwithstanding the foregoing, the Parties hereby agree that nothing in this Section 8.05(c) shall affect BAYER's ownership rights with respect to BAYER Targets, Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 38 BAYER and CURAGEN Pharmacogenomics Project Agreement BAYER Proprietary Materials, BAYER Compounds and BAYER SNP Targets or CURAGEN's ownership rights with respect to CURAGEN Proprietary Materials. (d) Additional Rights Upon Termination. Upon termination of this Agreement for any reason, other than because of a breach by BAYER pursuant to Section 8.02, (i) CURAGEN shall (A) be deemed to have granted to BAYER and its Affiliates, without any further action by the Parties, a non-exclusive, perpetual, royalty-free, worldwide license under CURAGEN's interest in the Predictive Toxicogenomics Technology and the Proteomics Technology for the purpose of manufacturing, having manufactured using, selling developing and/or having developed, BAYER Products and (B) grant to BAYER a non-exclusive, perpetual license under CURAGEN's interest in the Discovery Tool Technology and Discovery Tool Improvements for the purpose of developing BAYER Products on terms financially equivalent to those CURAGEN is then receiving from its most favored Third Party customers and subscribers, as negotiated by the Parties in good faith and (ii) CURAGEN shall provide BAYER with any copies of the Pharmacogenomics Data that CURAGEN did not previously deliver to BAYER prior to the termination of the Pharmacogenomics Program. The license in (d)(i)(B) above shall include the terms of the software license as set forth in Appendix E attached hereto. 8.06 - Obligations Upon any termination of this Agreement, the Parties shall remain liable for all obligations accruing prior to the date of termination. 8.07 - Remedies If either Party shall fail to perform or observe its material obligations, or otherwise breaches any of its material obligations under this Agreement, in addition to any right to terminate this Agreement, the non-defaulting Party shall have the right to any other relief or remedies available under law or equity. 8.08 - Surviving Provisions Except as provided in Subsections 8.05(b) and (c) and Section 10.27, the rights and obligations set forth in Articles IV (other than 4.01(a)) VI, VII, IX and X and Sections 8.05, 8.06, 8.07, and 8.08 shall survive expiration or termination of this Agreement. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 39 BAYER and CURAGEN Pharmacogenomics Project Agreement ARTICLE IX - BAYER GENE PROCESSING FACILITY; NON-COMPETE AGREEMENT 9.00 - BAYER Facility (a) Upon BAYER's written request, which request shall not be made at any time earlier than one (1) year prior to the expiration of the Pharmacogenomics Program Term, or upon any termination of the Pharmacogenomics Program for any reason other than (i) by CURAGEN pursuant to Section 8.02 for breach of this Agreement by BAYER [or (ii) by BAYER pursuant to Section 3.00(c)(iv) above], CURAGEN [___________________________________________]. The license described in Section 9.00(a)(ii) above shall include the terms of the software license as set forth in Appendix E attached hereto. (b) BAYER shall pay CURAGEN for its consulting services described above [____________________________________]. 9.01 - Non-Competition. In consideration of the performance by CURAGEN of the services and the grant to BAYER of the licenses described in this Article IX, BAYER hereby agrees that during the period [___________________________________________________________________]. ARTICLE X - REPRESENTATIONS AND WARRANTIES; MISCELLANEOUS 10.00 - Due Organization. BAYER and CURAGEN each represents and warrants to the other that as of the Effective Date it (a) is a company duly organized, validly existing, and in good standing under the laws of the jurisdiction of organization; (b) is duly qualified as a corporation and in good standing under the laws of each jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, where the failure to be so qualified would Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 40 BAYER and CURAGEN Pharmacogenomics Project Agreement have a material adverse effect on its financial condition or its ability to perform its obligations hereunder; (c) has the requisite corporate power and authority and the legal right to conduct its business as now conducted and hereafter contemplated to be conducted; (d) has all necessary licenses, permits, consents, or approvals from or by, and has made all necessary notices to, all governmental authorities having jurisdiction, to the extent required for such ownership and operation; and (e) is in compliance with its certificate of incorporation (or equivalent organizational document) as applicable, and by- laws. 10.01 - Consents. BAYER and CURAGEN each represents and warrants to the other that all necessary consents, approvals and authorizations of all government authorities and other persons required to be obtained by such Party in connection with the execution, delivery and performance of this Agreement have been and shall be obtained, except with respect to approvals required under the HSR Act. 10.02 - Execution, Delivery and Performance. BAYER and CURAGEN each represents and warrants to the other that the execution, delivery and performance of this Agreement by such Party and all instruments and documents to be delivered by such Party hereunder (a) are within the corporate power of such Party; (b) have been duly authorized by all necessary or proper corporate action; (c) do not conflict with any provision of the certificate of incorporation (or equivalent organizational document), as applicable, or by-laws of such Party; (d) will not violate any law or regulation or any order or decree of any court of governmental instrumentality; (e) will not violate any terms of any indenture, mortgage, deed of trust, lease, agreement, or other instrument to which such Party is a party or by which such Party or any of its property is bound, which violation would have a material adverse effect on its financial condition or on its ability to perform its obligations hereunder; and (f) do not require any filing or registration with or the consent or approval of any governmental body, agency, authority or any other Person, which has not been made or obtained previously, other than to the U.S. Department of Justice with respect to the HSR Act, to the FDA or equivalent regulatory agency in a country or group of countries other than the United States. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 41 BAYER and CURAGEN Pharmacogenomics Project Agreement 10.03 - Legal, Valid and Binding Obligation. BAYER and CURAGEN each represents and warrants to the other that this Agreement has been duly executed and delivered by such Party and constitutes a legal, valid and binding obligation of such Party, enforceable against such Party in accordance with its terms, except as such enforceability may be limited by applicable insolvency and other laws affecting creditors' rights generally or by the availability of equitable remedies. 10.04 - No Conflict. BAYER and CURAGEN each represents and warrants to the other that notwithstanding anything to the contrary in this Agreement, the execution and delivery of this Agreement, the performance of such Party's obligations hereunder and the conduct of the Pharmacogenomics Program (a) do not conflict with or violate any requirement of applicable laws or regulations and (b) do not and will not conflict with, violate or breach or constitute a default or require any consent under, any contractual obligations of such Party, except such consents as shall have been obtained prior to the Effective Date. 10.05 - Employee Obligations. BAYER and CURAGEN each represents and warrants to the other that all of its employees, officers, and consultants have executed agreements or have existing obligations under law requiring, in the case of employees and officers, assignment to such Party of all inventions made during the course of and as the result of their association with such Party and obligating the individual to maintain as confidential such Party's Confidential Information as well as confidential information of a Third Party which such Party may receive, to the extent required to support such Party's obligations under this Agreement. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 42 BAYER and CURAGEN Pharmacogenomics Project Agreement 10.06 - CURAGEN Intellectual Property. CURAGEN further hereby represents and warrants to BAYER as follows: (a) Ownership of CURAGEN Licensed Patent Rights and CURAGEN Licensed Technology. CURAGEN owns or otherwise has the right to use or license in accordance with the terms of this Agreement, the CURAGEN Patent Rights used by CURAGEN or licensed to BAYER hereunder (the "CURAGEN Licensed Patent Rights") and the CURAGEN Technology used by CURAGEN or licensed to BAYER hereunder (the "CURAGEN Licensed Technology"), and except as set forth on Schedule 10.06(a), to CURAGEN's Knowledge, no Third Party (including any government) has any license, claim or other right or interest in or to such CURAGEN Licensed Patent Rights or CURAGEN Licensed Technology. To CURAGEN's Knowledge, such CURAGEN Licensed Patent Rights and CURAGEN Licensed Technology may be exclusively licensed and sublicensed as hereunder provided, in the case of the CURAGEN Licensed Patent Rights and CURAGEN Licensed Technology without payment of any royalty, fee or incurring any other obligation to any Third Party (except with respect to any statutory march-in rights). To CURAGEN's Knowledge, the conduct by CURAGEN of the Pharmacogenomics Program in accordance with the Pharmacogenomics Program Plan does not infringe or conflict with the rights of any Third Party in respect of Technology or issued patents or published patent applications owned by such Third Party. (b) Validity and Enforceability of Patents. The issued patents included in the CURAGEN Licensed Patent Rights are valid and enforceable to CURAGEN's Knowledge. (c) Investigation of Prior Art. CURAGEN has made all reasonable inquiries and has diligently conducted a reasonably complete investigation of Third Party prior art as part of CURAGEN's preparation and prosecution of the CURAGEN Licensed Patent Rights, and has reviewed all relevant information and prior art obtained or derived from such investigation. CURAGEN has disclosed all material prior art of which it has Knowledge related to the CURAGEN Licensed Patent Rights and other Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 43 BAYER and CURAGEN Pharmacogenomics Project Agreement material information obtained or derived from such investigation to BAYER as of the date hereof, in each case to the full extent requested by BAYER. (d) No Infringement of CURAGEN Intellectual Property. CURAGEN has no Knowledge of any infringement of the CURAGEN Licensed Patent Rights, or any misappropriation of the CURAGEN Licensed Technology by any Third Party. (e) Work-For-Hire. To CURAGEN's Knowledge, all of the research and development work performed in connection with any of the CURAGEN Licensed Technology prior to the Execution Date or Effective Date, as applicable, was performed solely under an obligation to assign to CURAGEN or one of its Affiliates, and was performed in accordance with applicable law and in compliance with all applicable regulatory requirements, and all such rights have been properly assigned to CURAGEN, including any and all rights of CURAGEN's employees and the employees of CURAGEN's Affiliates. (f) No Claims or Suits Regarding CURAGEN Intellectual Property. There are no judicial, arbitral, regulatory or administrative proceedings or, to CURAGEN's Knowledge, investigations, claims, actions or suits relating to the CURAGEN Licensed Patent Rights or the CURAGEN Licensed Technology in any court or by or before any governmental body or agency, including product liability or compliance with good manufacturing practices or state or federal food and drug laws and, to CURAGEN's Knowledge, no such judicial, arbitral, regulatory or administrative proceedings or investigations, actions or suits have been threatened against CURAGEN or its Affiliates. 10.07 - BAYER Intellectual Property BAYER further hereby represents and warrants to CURAGEN as follows: (a) Ownership of BAYER Licensed Patent Rights and BAYER Licensed Technology. BAYER owns or otherwise has the right to use or license in accordance with the terms of this Agreement the Patent Rights of BAYER licensed to CURAGEN hereunder (the "BAYER Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 44 BAYER and CURAGEN Pharmacogenomics Project Agreement Licensed Patent Rights") and the Technology of BAYER licensed to CURAGEN hereunder (the "BAYER Licensed Technology"), and to BAYER's Knowledge, no Third Party (including any government) has any license, claim or other right or interest in or to the BAYER Licensed Patent Rights or the BAYER Licensed Technology. To BAYER's Knowledge, the BAYER Licensed Patent Rights and the BAYER Licensed Technology may be exclusively licensed as hereunder provided, in the case of the BAYER Licensed Patent Rights and BAYER Licensed Technology without payment of any royalty, fee or incurring any other obligation to any Third Party (except with respect to any statutory march-in rights). To BAYER's Knowledge, the conduct by BAYER of the Pharmacogenomics Program Plan does not infringe or conflict with the rights of any Third Party in any material respect of Technology or issued patents owned by such Third Party. (b) Validity and Enforceability of Patents. The issued patents included in the BAYER Licensed Patent Rights are valid and enforceable to BAYER's Knowledge. (c) Investigation of Prior Art. BAYER has made all reasonable inquiries and has diligently conducted a reasonably complete investigation of Third Party prior art as part of BAYER's preparation and prosecution of the BAYER Licensed Patent Rights, and has reviewed all relevant information and prior art obtained or derived from such investigation. BAYER has disclosed all material prior art of which it has Knowledge related to the BAYER Licensed Patent Rights and other material information obtained or derived from such investigation to CURAGEN as of the date hereof, in each case to the full extent requested by CURAGEN. (d) No Infringement of BAYER Intellectual Property. BAYER has no Knowledge of any infringement of the BAYER Licensed Patent Rights, or any misappropriation of the BAYER Licensed Technology by any Third Party. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 45 BAYER and CURAGEN Pharmacogenomics Project Agreement (e) Work-For-Hire. To BAYER's Knowledge, all of the research and development work performed in connection with any of the BAYER Licensed Technology prior to the Execution Date or Effective Date was performed solely under an obligation to assign to BAYER or one of its Affiliates, and was performed in accordance with applicable law and in compliance with all applicable regulatory requirements, and all such rights have been properly assigned to BAYER, including any and all rights of BAYER's employees and the employees of BAYER's Affiliates. (f) No Claims or Suits Regarding BAYER Intellectual Property. There are no judicial, arbitral, regulatory or administrative proceedings or to BAYER's Knowledge, investigations, claims, actions or suits relating to the BAYER Licensed Patent Rights or the BAYER Licensed Technology in any court or by or before any governmental body or agency, including product liability or compliance with good manufacturing practices or state or federal food and drug laws and, to BAYER's Knowledge, no such judicial, arbitral, regulatory or administrative proceedings or investigations, actions or suits have been threatened against BAYER or its Affiliates. 10.08 - Contracts (a) CURAGEN represents and warrants to BAYER that it is not a party to any contract that, if terminated, would materially adversely affect CURAGEN's ability to conduct the Pharmacogenomics Program in accordance with the Pharmacogenomics Program Plan. (b) BAYER represents and warrants to CURAGEN that it is not a party to any contract that, if terminated, would materially adversely affect BAYER's ability to conduct the Pharmacogenomics Program in accordance with the Pharmacogenomics Program Plan. 10.09 - No Material Omissions. Each of BAYER and CURAGEN represents and warrants to the other that such Party has not, up through and including the Effective Date, omitted to furnish to the other Party with any information in its control or possession or of which it has Knowledge concerning (a) its Patent Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 46 BAYER and CURAGEN Pharmacogenomics Project Agreement Rights, (b) its Technology, or (c) the activities contemplated by this Agreement, which in such Party's opinion would be material to the other Party's decision to enter into this Agreement and to undertake the commitments and obligations set forth herein. 10.10 - No Warranties EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN OR IN THE STOCK PURCHASE AGREEMENT OR IN THE METABOLIC DISORDER COLLABORATION AGREEMENT, THE PARTIES MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, AND PARTICULARLY (1) THAT PRODUCTS WILL BE SUCCESSFULLY DEVELOPED HEREUNDER, AND IF DEVELOPED, WILL HAVE COMMERCIAL UTILITY OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND (2) AS TO ANY BIOLOGICAL MATERIALS PROVIDED UNDER THIS AGREEMENT. 10.11 - Survival The representations and warranties set forth in this Agreement are made as of the Execution Date and the Effective Date and shall survive the Effective Date. 10.12 - Liability NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE, NEITHER PARTY WILL BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR (I) ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES OR LOST PROFITS OR (II) COST OF PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY OR SERVICES, NOTWITHSTANDING THAT A PARTY WAS AWARE OF THE POSSIBILITY OF SUCH DAMAGES. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 47 BAYER and CURAGEN Pharmacogenomics Project Agreement 10.13 - Notices Any notices, requests, deliveries, approvals or consents required or permitted to be given under this Agreement to BAYER or CURAGEN shall be in writing and shall be personally delivered or sent by facsimile (with written confirmation to follow via courier or certified mail as set forth below), overnight courier providing evidence of receipt or certified mail, return receipt requested, postage prepaid, in each case to the respective address specified below (or to such address as may be specified in writing to the other Party hereto): If to CURAGEN: 555 Long Wharf Drive, 11th Floor New Haven, CT 06511 Attn: Executive Vice President, Business Development Telephone: (203) 401-3330 Facsimile: (203) 401-3333 With a copy to: Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. One Financial Center Boston, MA 02111 USA Attn: Jeffrey M. Wiesen, Esq. Telephone: (617) 542-6000 Facsimile: (617) 542-2241 If to BAYER: BAYER AG D 51368 Leverkusen Federal Republic of Germany Attention: General Counsel Telephone: 011 49 214 30 81805 Facsimile: 011 49 214 30 50848 With a copy to: Wilmer, Cutler & Pickering 2445 M Street NW Washington, DC 20037 Attention: Richard W. Cass, Esq. Telephone: (202) 663-6503 Facsimile: (202) 663-6363 Such notices shall be deemed to have been sufficiently given on: a) the date sent if delivered in person, b) the next business day after dispatch in the case of transmission by Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 48 BAYER and CURAGEN Pharmacogenomics Project Agreement facsimile, c) three (3) business days after dispatch in the case of overnight courier or d) five (5) business days after deposit in the US mail in the case of certified mail. 10.14 - Dispute Resolution and Arbitration (a) All disputes arising out of this Agreement and referred to arbitration shall be finally resolved by arbitration conducted in the English language in London, England in accordance with the arbitration Rules of the United Nations Commission on International Trade Law ("UNCITRAL"). Each Party shall appoint an arbitrator and the two arbitrators so appointed shall jointly appoint a third arbitrator; provided, however that if they cannot agree (or if any one Party refuses to appoint an arbitrator), than this third arbitrator shall be appointed by the UNCITRAL. If a Party fails to appoint an arbitrator within thirty (30) days after a dispute is referred to arbitration, the UNCITRAL shall appoint an arbitrator for such Party. The UNCITRAL shall be the administrator of the arbitration proceedings. (b) The arbitrators shall rule on each disputed issue within [___________] after the third arbitrator has accepted the appointment to serve as an arbitrator; provided, however that if the arbitrators are unable to render a decision within such [___________], they shall render such decision as soon thereafter as is practicable. The arbitrators shall issue a written decision in order to explain the basis of the ruling. The arbitrators shall not have the authority to award consequential or punitive damages. (c) The arbitrators shall be paid reasonable fees plus expenses. These fees and expenses, along with the reasonable legal fees and expenses of the prevailing Party (including all expert witness fees and expenses), the fees and expenses of a court reported, and any expenses for a hearing room, shall be paid as follows: (i) If the arbitrators rule in favor of one Party on all disputed issues in the arbitration, the losing Party shall pay 100% of such fees and expenses. (ii) If the arbitrators rule in favor of one Party on some issues and the other Party on other issues the arbitrators shall issue with the ruling a written determination as to how such fees and expenses shall be allocated between Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 49 BAYER and CURAGEN Pharmacogenomics Project Agreement the Parties. The arbitrators shall allocate fees and expenses in a way that bears a reasonable relationship to the outcome of the arbitration, with the Party prevailing on more issues, or on issues of greater value or gravity, recovering a relatively larger share of its legal fees and expenses. (d) Any decision or award of the arbitrators shall be final, conclusive, and binding on the Parties to the dispute, and judgment may be entered on any award in any court of competent jurisdiction. To the extent lawful, the Parties include any right of application or appeal to the English or other courts in connection with any question of law arising in the arbitration or in connection with any award or decision made by the arbitrators, except as is necessary to recognize or enforce such award or decision. 10.15 - Currency Unless otherwise indicated, all monetary amounts referred to in this Agreement are in United States currency. Payment shall be made by wire transfer or other mutually acceptable means to a bank account designated by CURAGEN. 10.16 - Limitations Except as expressly set forth in this Agreement, neither Party grants to the other Party any right or license to any of its respective intellectual property. 10.17 - No Implied Waiver; Rights Cumulative No failure on the part of CURAGEN or BAYER to exercise, and no delay in exercising, any right, power, remedy or privilege under this Agreement, or provided by statute or at law or in equity or otherwise, shall impair, prejudice or constitute a waiver of any such right, power, remedy or privilege or be construed as a waiver of any breach of this Agreement or as an acquiescence therein, nor shall any single or partial exercise of any such right, power, remedy or privilege preclude any other or further exercise thereof or the exercise of any other right, power, remedy or privilege. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 50 BAYER and CURAGEN Pharmacogenomics Project Agreement 10.18 - Assignment Neither CURAGEN nor BAYER may assign this Agreement in whole or in part without the consent of the other, except if such assignment occurs in connection with the sale or transfer of all or substantially all of the business and assets of CURAGEN, on the one hand, or BAYER, on the other, to which the subject matter of this Agreement pertains. Notwithstanding the foregoing, any Party may assign its rights (but not its obligations) pursuant to this Agreement in whole or in part to an Affiliate of such Party. 10.19 - Force Majeure No failure or omission by the Parties hereto in the performance of any obligation of this Agreement shall be deemed a breach of this Agreement or create any liability if the same shall arise from any cause or causes beyond the control of the Parties, including, but not limited to, the following: acts of God; acts or omissions of any government; any rules, regulations or orders issued by any governmental authority or by any officer, department, agency or instrumentality thereof; fire; storm; flood; earthquake; accident; war; rebellion; insurrection; riot; and invasion and provided that such failure or omission resulting from one of the above causes is cured as soon as is practicable after the occurrence of one or more of the above-mentioned causes. 10.20 - No Strict Construction This Agreement has been prepared jointly and shall not be strictly construed against any Party. 10.21 - Severability If any provision hereof should be held invalid, illegal or unenforceable in any respect in any jurisdiction, then, to the fullest extent permitted by law, (a) all other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in order to carry out the intentions of the Parties as nearly as may be possible and (b) such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of such provision in any other jurisdiction. To the extent permitted by applicable law, CURAGEN and Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 51 BAYER and CURAGEN Pharmacogenomics Project Agreement BAYER hereby waive any provision of law that would render any provision hereof prohibited or unenforceable in any respect. 10.22 - Independent Contractor It is understood an agreed that the relationship between the Parties hereunder is that of independent contractors and that nothing in this Agreement shall be construed as authorization for either CURAGEN or BAYER to act as agent for the other. The Program Directors and members of Product Teams shall remain employees of BAYER or CURAGEN, as the case may be. 10.23 - BAYER Indemnification of CURAGEN BAYER agrees to defend CURAGEN and its Affiliates at its cost and expense, and will indemnify and hold CURAGEN and its Affiliates and their respective directors, officers, employees and agents (the "CURAGEN Indemnified Parties") harmless from and against any losses, costs, damages, fees or expenses arising out of any claim relating to (i) any breach by BAYER of any of its representations, warranties or obligations pursuant to this Agreement or (ii) personal injury from the development, manufacture, use, sale or other disposition of any product or service offered by BAYER and/or its licensees or collaborators unless the claim relates to patent infringement by CURAGEN. In the event of any such claim against the CURAGEN Indemnified Parties by any Third Party, CURAGEN shall promptly notify BAYER in writing of the claim and BAYER shall manage and control, at its sole expense, the defense of the claim and its settlement. The CURAGEN Indemnified Parties shall cooperate with BAYER and may, at their option and expense, be represented in any such action or proceeding. BAYER shall not be liable for any litigation costs or expenses incurred by the CURAGEN Indemnified Parties without BAYER's prior written authorization. In addition, BAYER shall, not be responsible for the indemnification of any CURAGEN Indemnified Party arising from any negligent or intentional acts by such party, or as the result of any settlement or compromise by the CURAGEN Indemnified Parties without BAYER's prior written consent. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 52 BAYER and CURAGEN Pharmacogenomics Project Agreement 10.24 - CURAGEN Indemnification of BAYER CURAGEN agrees to defend BAYER and its Affiliates at its cost, and will indemnify and hold BAYER and its Affiliates and its respective directors, officers, employees and agents (the "BAYER Indemnified Parties") harmless from and against any losses, costs, damages, fees or expenses arising out of any claim relating to (i) any breach by CURAGEN of any of its representations, warranties or obligations pursuant to this Agreement or (ii) personal injury from the development, manufacture, use, sale or other disposition of any product or service offered by CURAGEN or its licensees or collaborators unless the claim relates to patent infringement by BAYER. In the event of any claim against the BAYER Indemnified Parties by, any Third Party, BAYER shall promptly notify CURAGEN in writing of the claim and CURAGEN shall manage and control, at its sole expense, the defense of the claim and its settlement. The BAYER Indemnified Parties shall cooperate with CURAGEN and may, at their option and expense, be represented in any such action or proceeding. CURAGEN shall not be liable for any litigation costs or expenses incurred, by the BAYER Indemnified Parties without CURAGEN's prior written authorization. In addition, CURAGEN shall not be responsible for the indemnification of any BAYER Indemnified Party arising from any negligent or intentional acts by such party, or as the result of any settlement or compromise by the BAYER Indemnified Parties without CURAGEN's prior written consent. 10.25 - Captions and Headings The captions and headings appearing in this Agreement have been inserted for reference and as a matter of convenience and in no way define, limit or enlarge the scope or meaning of this Agreement or any provision. 10.26 - Amendments Any amendment to this Agreement shall only be effective if the amendment is in writing and is signed by all the Parties to this Agreement. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 53 BAYER and CURAGEN Pharmacogenomics Project Agreement 10.27 - HSR Matters The Agreement shall not become effective (and accordingly shall immediately terminate) in the event that (a) the FTC and/or the DOJ shall seek a preliminary injunction under the HSR Act against CURAGEN and BAYER to enjoin the transaction contemplated by this Agreement and BAYER elects not to contest the FTC and/or DOJ; (b) the HSR Clearance Date shall not have occurred on or prior to June 30, 2001; or (c) the Stock Purchase Agreement shall be terminated in accordance with Section 7.1 of the Stock Purchase Agreement. Notwithstanding anything to the contrary in this Agreement, if this Agreement is terminated pursuant to this Section 10.27, all of the licenses granted hereunder shall automatically terminate. 10.28 - Intellectual Property Rights Under Bankruptcy Code All rights and licenses granted under or pursuant to any section of this Agreement are, and shall otherwise be, deemed to be, for purposes of Section 365(n) of the Bankruptcy Code, licenses of rights to "intellectual property" as defined under Section 101(35A) of the Bankruptcy Code. The Parties shall retain and may fully exercise all of their respective rights and elections under the Bankruptcy Code. Upon the bankruptcy of any Party, the non-bankrupt Party shall further be entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual property, and such, if not already in its or their possession, shall be promptly delivered to the non-bankrupt Party, unless the bankrupt Party elects to continue, and continues, to perform all of its obligations under this Agreement. 10.29 - HSR Filing As soon as practicable after the Execution Date, each of BAYER and CURAGEN shall promptly file any Notification and Report Forms and related materials that either such Party may be required to file with the FTC and the DOJ under the HSR Act, shall use its best efforts to obtain an early termination of the applicable waiting period, and shall promptly make any further filings or information submissions pursuant thereto, or responses to requests to additional information thereunder, that may be necessary, proper or advisable. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 54 BAYER and CURAGEN Pharmacogenomics Project Agreement 10.30 - Governing Law This Agreement shall be construed and the respective rights of the Parties hereto determined according to the substantive laws of the State of Delaware notwithstanding the provisions governing conflict of laws under such Delaware law to the contrary and without giving effect to the United Nations Convention on Contracts for the International Sale of Goods, the 1974 Convention on the Limitation Period in the International Sale of Goods (the "1974 Convention") and the Protocol amending the 1974 Convention, done at Vienna April 11, 1980, except matters of intellectual property law which shall be determined in accordance with the national intellectual property laws relevant to the intellectual property in question. 10.31 - Counterparts This Agreement may be executed in counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same Agreement. [Remainder of page intentionally left blank] Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 55 BAYER and CURAGEN Pharmacogenomics Project Agreement IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first set forth above by their duly authorized representatives in two (2) originals. BAYER AG CURAGEN CORPORATION By: /s/ W. Hartwig By: /s/ Christopher K. McLeod ------------------------------ --------------------------------------- Name Name Christopher K. McLeod and Title: EVP, W. Hartwig and Title: Executive Vice President ---------------------- ---------------------------- Date: Jan. 12, 2001 Date: Jan. 12, 2001 ---------------------------- ---------------------------------- By: /s/ A. Buchmeier Name A. Buchmeier and Title: Senior Counsel ----------------------- Date: January 12, 2001 ---------------------------- Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 56 BAYER and CURAGEN Pharmacogenomics Project Agreement APPENDIX A ---------- Pharmacogenomics Program Plan Rationale During the preclinical phase of drug development, candidates fail to advance in the development process due to evidence of toxicity or lack of efficacy. The experiments defined in this Pharmacogenomics Program Plan are designed to complement BAYER's drug development capabilities in a way that will ultimately improve the quality and yield of drugs delivered to the market. The plan is organized into two sections; a SETUP PHASE, where the goals are to create an assay to eliminate toxic compounds early in preclinical development (Predictive Toxicogenomics Screen, PTS), and a PRODUCTION PHASE, where this assay and genomics technologies are applied to enhance the drug development process. It is anticipated that the experimental plan will be modified by the Pharmacogenomics Project Team (PPT) on a regular basis to optimize the quality, speed, and cost of research deliverables. [______________] [_________] [____________________________________________________________]. [_________] [____________________________________________________________]. [____________________________________________________________]. [____________________________________________________________]. [____________________________________________________________]. [____________________________________________________________]. [____________________________________________________________]. [____________________________________________________________]. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. A-1 BAYER and CURAGEN Pharmacogenomics Project Agreement [_____________________________________] [____________________________________________________________]:

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[_______________] [____________________________________________________________]. [____________________________________________________________]. [_____________________________________] [____________________________________________________________]: Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. A-2 BAYER and CURAGEN Pharmacogenomics Project Agreement

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[_______________] [_____________________________________________________________]. [_____________________________________________________________]. [_____________________________________________________________________] [_________] [_____________________________________________________________]. [_____________________________________________________________]. [_________] [_____________________________________________________________________] Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. A-3 BAYER and CURAGEN Pharmacogenomics Project Agreement [_________] [_____________________________________________________________________] [_________] [_____________________________________________________________]. [__________________________________________________________]. [_____________________________________________________________]. [________________] [_________] [_________________________________________________________________]: [_______________________________________________________]. [____________] [_______________________________________________________]. [_______________________________________________________]. [____________] [_______________________________________________________]. [_______________________________________________________]. [_____________________________________________________________]. [___________________________________________________________________]. [___________] [_________________________________________________________________]. [_________________________________________________________________]. [___________] [_________________________________________________________________]. [_________________________________________________________________]. [_________________________________________________________________]. [_________________________________________________________________]. [___________] Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. A-4 BAYER and CURAGEN Pharmacogenomics Project Agreement [_________________________________________________________________]. [_________________________________________________________________]. [_________________________________________________________________]. [___________] [_________________________________________________________________]. [__________________________________________________________________]. [__________________________________________________________________]. [___________________________________________] [___________________________________________] [___________________________________________] [__________________________________________________________________]. [__________________________________________________________________]. [__________________________________________________________________]. [___________] [___________]: [__________________________________________________________________]. [__________________________________________________________________]. [________________________] [__________________________________________________________________]: [____________________] - [_________________________________________]. [____________________] - [_________________________________________]. [____________________] - [_________________________________________]. [____________________] - [_________________________________________]. [____________________] - [_________________________________________]. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. A-5 BAYER and CURAGEN Pharmacogenomics Project Agreement [________________________________________________________________]. [____________________] - [_________________________________________]. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. A-6 BAYER and CURAGEN Pharmacogenomics Project Agreement APPENDIX B ---------- MINIMUM USAGE OF SERVICES - ------------------------- Service Minimum Level - ------- ------------- [__________________] [______________] [__________________] [______________] [__________________] [______________] [__________________] [______________]

UNIT PRICES - ----------- Annual Base Level ------------------ Service from which Adjusted* Initial Unit Price (2001) - ------- -------------------- ------------------------- [___________________] [________________] [___________________] [___________________] [________________] [___________________] [___________________] [________________] [___________________] [___________________] [________________] [___________________]

* [_________________________________]. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. B-1 BAYER and CURAGEN Pharmacogenomics Project Agreement APPENDIX C ---------- CRITERIA FOR PROTEOMICS FEASIBILITY STUDY [_______________________________________________________________]; [_______________________________________________________________]; [_______________________________________________________________]; [_______________________________________________________________]; [_______________________________________________________________]; [_______________________________________________________________]. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. C-1 BAYER and CURAGEN Pharmacogenomics Project Agreement APPENDIX D ---------- COMMERCIAL TERMS OF EXCLUSIVE LICENSE TO DIAGNOSTIC PRODUCTS [_____________________________________] [_______________________________________________________________________]: [_________________________________________________________________]; [_________________________________________________________________]; [_________________________________________________________________]; [_________________________________________________________________]; [_________________________________________________________________]. [_________________________________________________________________]. [_________________________________________________________________]. . [____________________]: [__________________________________________________]. [____________________]: [__________________________________________________]. [____________________]: [__________________________________________________]. [____________________]: [__________________________________________________]. [____________________]: [__________________________________________________]. [____________________]: [__________________________________________________]. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. D-1 BAYER and CURAGEN Pharmacogenomics Project Agreement APPENDIX E ---------- [__________________________________________________________]: [__________________________________________________________]. [__________________________________________________________]. E-1 EX-10.26 4 dex1026.txt STOCK PURCHASE AGREEMENT EXHIBIT 10.26 ---------------------------------------------------------- STOCK PURCHASE AGREEMENT dated as of January 12, 2001 by and between BAYER AG a corporation of the Federal Republic of Germany and CURAGEN CORPORATION a Delaware corporation ---------------------------------------------------------- STOCK PURCHASE AGREEMENT This Stock Purchase Agreement (the "Agreement") is made as of January 12, 2001 by and between CuraGen Corporation, a Delaware corporation (the "Company"), and Bayer AG, a corporation organized under the laws of the Federal Republic of Germany ("Purchaser"). WHEREAS, the Company and Purchaser are parties to that certain Agreement, dated as of the date hereof (the "Pharmacogenomics Agreement"), which contains the terms and conditions on which the parties have agreed to collaborate on toxicogenomic and pharmacogenomic services for use in the development of drugs; and WHEREAS, Bayer Corporation, an Indiana corporation and a wholly-owned subsidiary of Purchaser, and the Company are parties to that certain Agreement, dated as of the date hereof (the "Metabolic Disorder Collaboration Agreement," and, together with the Pharmacogenomics Agreement, the "Collaboration Agreements"), which contains the terms and conditions on which the parties have agreed to collaborate on drug discovery and development for metabolic disorders; and WHEREAS, in connection with the execution of these Collaboration Agreements, Purchaser wishes to purchase from the Company, and the Company wishes to sell to Purchaser, shares of the Company's Common Stock on the terms and subject to the conditions set forth herein; WHEREAS, in connection with such sale and purchase of shares of Common Stock, the Company and Purchaser wish to enter into a registration rights agreement (the "Registration Rights Agreement"), substantially in the form attached hereto as Exhibit A. NOW, THEREFORE, in consideration of the premises and the mutual covenants set forth herein, the Company and Purchaser agree as follows: ARTICLE 1. PURCHASE AND SALE OF SHARES Section 1.1 Purchase and Sale. Subject to the terms and conditions of ----------------- this Agreement, the Company agrees to issue and sell to Purchaser and Purchaser agrees to purchase from the Company 3,112,482 shares of the Company's Common Stock (the "Shares"), at a purchase price of $27.3094 per share (which purchase price reflects the average closing price of the Company's Shares during the twenty (20) day trading period preceding the date of this Agreement) for an aggregate purchase price of eighty-five million fifteen dollars and ninety-three cents ($85,000,015.93) (the "Purchase Price"). Section 1.2 Closing Date. The closing of the purchase and sale of the ------------ Shares hereunder (the "Closing") shall be held at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Boston, Massachusetts, at 10:00 a.m., Boston time, on the third Business Day following the first date on which all the conditions to Closing set forth in Article 6 have been satisfied or waived, or at such other, place, time and date as the Company and Purchaser shall agree. The Company shall give Purchaser three (3) Business Days prior notice of the date the Closing is scheduled to occur. The date of the Closing is hereinafter referred to as the "Closing Date." 2 Section 1.3 Transactions at Closing. At the Closing, subject to the ----------------------- terms and conditions of this Agreement, (a) the Company shall issue and sell to Purchaser and Purchaser shall purchase the Shares; (b) the Company shall deliver to Purchaser a certificate representing the Shares, registered in the name of Purchaser against payment of the Purchase Price by wire transfer of immediately available funds to an account or accounts previously designated by the Company no less than five (5) Business Days prior to the Closing Date; and (c) the Company and Purchaser shall enter into the Registration Rights Agreement. ARTICLE 2. REPRESENTATIONS AND WARRANTIES Section 2.1 Representations and Warranties of the Company. The Company --------------------------------------------- hereby represents and warrants to Purchaser as follows: (a) Corporate Organization. The Company is a corporation duly ---------------------- organized, validly existing and in good standing under the laws of the State of Delaware. The Subsidiary is duly organized and validly existing and, if applicable, is in good standing, under the laws of the jurisdiction of its incorporation or organization. Each of the Company and its Subsidiary is duly qualified or licensed and, if applicable, is in good standing as a foreign corporation, in each jurisdiction in which the properties owned, leased or operated, or the business conducted, by it require such qualification or licensing, except for any such failure so to qualify or be in good standing which, individually or in the aggregate, would not have a Material Adverse Effect on the Company and its Subsidiary, taken as a whole. The Subsidiary has the requisite power and authority to carry on its business as it is now being conducted. The Company has heretofore made available to Purchaser complete and correct copies of the Certificate of Incorporation of the Company (the "Company Charter") and the By-laws of the Company (the "Company By-Laws") and the certificate of incorporation and by-laws, or the comparable organizational documents, of its Subsidiary, each as amended to date and currently in full force and effect. (b) Corporate Authority. The Company has the requisite corporate ------------------- power and authority to execute, deliver and perform this Agreement and the Registration Rights Agreement and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and the Registration Rights Agreement by the Company, the issuance and sale by the Company of the Shares and the performance by the Company of the other transactions contemplated hereby and thereby have been duly authorized by the Company's Board of Directors, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or the Registration Rights Agreement or for the Company to consummate the transactions so contemplated herein and therein. This Agreement is, and the Registration Rights Agreement, when executed or delivered will be, valid and binding agreements of the Company, enforceable against the Company in accordance with their respective terms, assuming that this Agreement and the Registration Rights Agreement are valid and binding agreements of Purchaser, subject as to enforcement of remedies to applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting generally the enforcement of creditors' rights and subject to a court's discretionary authority with respect to the granting of a decree ordering specific performance or other equitable remedies. 3 (c) No Violations; Consents and Approvals. ------------------------------------- (i) Neither the execution, delivery or performance by the Company of this Agreement or the Registration Rights Agreement or the consummation by the Company of the transactions contemplated hereby or thereby (A) will result in a violation or breach of the Company Charter or the Company By-Laws or the charter or by-laws of the Company's Subsidiary or (B) will result in a violation or breach of (or give rise to any right of termination, revocation, cancellation or acceleration under or increased payments under), or constitute a default (with or without due notice or lapse of time or both) under, or result in the creation of any lien, mortgage, charge, encumbrance or security interest of any kind (a "Lien") upon any of the properties or assets of the Company or its Subsidiary under, (1) any of the terms, conditions or provisions of any note, bond, mortgage, indenture, contract, agreement, obligation, instrument, offer, commitment, understanding or other arrangement (each a "Contract") or of any license, waiver, exemption, order, franchise, permit or concession (each a "Permit") to which the Company of its Subsidiary is a party or by which any of their properties or assets may be bound, or (2) subject to the governmental filings and other matters referred to in clause (ii) below, any judgment, order, decree, statute, law, regulation or rule applicable to the Company or its Subsidiary, except, in the case of clause (B), for violations, breaches, defaults, rights of cancellation, termination, revocation, acceleration or increased payments or Liens that would not, individually or in the aggregate, have a Material Adverse Effect on the Company and its Subsidiary, taken as a whole. (ii) Except for filings as may be required under, and other applicable requirements of (x) the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and (y) Regulation D of the Securities Act of 1933, as amended (the "Securities Act"), no consent, approval, order or authorization of, or registration, declaration or filing with, any government or any court, administrative agency or commission or other governmental authority or agency, federal, state or local (a "Governmental Entity"), is required with respect to the Company in connection with the execution, delivery or performance by the Company of this Agreement or the consummation by the Company of the transactions contemplated hereby (except where the failure to obtain such consents, approvals, orders or authorizations, or to make such filings would not, individually or in the aggregate, have a Material Adverse Effect on the Company and its Subsidiary, taken as a whole). (d) Capital Stock. The authorized capital stock of the Company ------------- consists of (i) 250,000,000 shares of Common Stock, $.01 par value per share, of which an aggregate 44,050,017 shares of Common Stock were issued and outstanding as of December 31, 2000, (ii) 3,000,000 shares of Nonvoting Common Stock, $.01 par value per share, of which an aggregate 1,270,272 shares of Nonvoting Common Stock were issued and outstanding as of December 31, 2000, (iii) 5,000,000 shares of Preferred Stock, $.01 par value per share, of which none were issued and outstanding as of December 31, 2000. As of December 31, 2000, the Company had reserved 30,000 shares of Common Stock pursuant to outstanding warrants, and 7,000,000 shares of Common Stock for issuance pursuant to the 1997 Employee, Director and Consultant Stock Plan (the "1997 Stock Plan"). As of December 31, 2000, the Company had reserved another 937,500 shares of Common Stock pursuant to warrants associated with the formation of 454 Corporation. All of the outstanding shares of Common Stock and Nonvoting Common Stock have been duly authorized and validly issued, and are fully paid and nonassessable. As of 4 December 31, 2000, the Company had completed an offering of 6% Convertible Subordinated Debentures due 2007 in the aggregate amount of $150,000,000, these Debentures being convertible into shares of the Company's Common Stock. Except for the Common Stock, Nonvoting Common Stock, Convertible Subordinated Debentures and the above referenced Options and Warrants, the Company has outstanding no bonds, debentures, notes or other obligations or securities the holders of which have the right to vote (or are convertible or exchangeable into or exercisable for securities having the right to vote) with the stockholders of the Company on any matter. Except as discussed in this paragraph or in Section 2.1(e), as of the date of this Agreement, there are no securities convertible into or exchangeable for, or options, warrants, calls, subscriptions, rights, contracts, commitments, arrangements or understandings of any kind to which the Company or its Subsidiary is a party or by which any of them is bound obligating the Company or its Subsidiary contingently or otherwise to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other voting securities of the Company or of its Subsidiary. There are no outstanding agreements of the Company or its Subsidiary to repurchase, redeem or otherwise acquire any shares of capital stock of the Company or its Subsidiary. (e) Subsidiary. Schedule 2.1(e) contains a complete and correct ---------- description of the shares of stock or other equity interests that are authorized, or issued and outstanding, of the Company's Subsidiary. Series A and Series B of the Subsidiary's Preferred Stock are convertible into common stock of the Subsidiary. The Company has no equity interests with a value of $100,000 or more in any Person other than its Subsidiary, and there are no commitments on the part of the Company or its Subsidiary to contribute additional capital in respect of any equity interest in any Person. Each of the outstanding shares of capital stock of the Subsidiary has been duly authorized and validly issued, and is fully paid and nonassessable. Except as set forth on Schedule 2.1(e), all of the outstanding shares of capital stock of the Subsidiary are owned, either directly or indirectly, by the Company free and clear of all Liens. (f) SEC Filings. The Company has timely filed all reports, ----------- schedules, forms, statements and other documents required to be filed by it with the SEC under the Securities Act and the Exchange Act since March 17, 1998 (the "Company SEC Documents"). As of its filing date, each Company SEC Document filed, as amended or supplemented, if applicable, (i) complied in all material respects with the applicable requirements of the Securities Act or the Exchange Act, as applicable, and the rules and regulations thereunder and (ii) did not, at the time it was filed, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (g) Absence of Certain Events and Changes. Except as disclosed in ------------------------------------- the Company SEC Documents filed with the SEC and publicly available prior to the date hereof, or as otherwise contemplated or permitted by this Agreement, since September 30, 2000, the Company and its Subsidiary have conducted their respective businesses in the ordinary course consistent with past practice and there has not been any event, change or development which, individually or in the aggregate, would have a Material Adverse Effect on the Company and its Subsidiary, taken as a whole. 5 (h) Compliance with Applicable Law. Except as disclosed in the ------------------------------ Company SEC Documents, each of the Company and its Subsidiary is in compliance with all statutes, laws, regulations, rules, judgments, orders and decrees of all Governmental Entities applicable to it that relate to its respective business, and neither the Company nor its Subsidiary has received any notice alleging noncompliance except, with reference to all the foregoing, where the failure to be in compliance would not, individually or in the aggregate, have a Material Adverse Effect on the Company and its Subsidiary, taken as a whole. This Section 2.1(h) does not relate to employee benefits matters (for which Section 2.1(l) is applicable), environmental matters, (for which Section 2.1(m) is applicable) or tax matters (for which Section 2.1(k) is applicable). The Company and its Subsidiary have all Permits that are required in order to permit it to carry on its business as it is presently conducted, except where the failure to have such Permits or rights would not, individually or in the aggregate, have a Material Adverse Effect on the Company and its Subsidiary, taken as a whole. To the Knowledge of the Company, all such Permits are in full force and effect and the Company and its Subsidiary are in compliance with the terms of such Permits, except where the failure to be in full force and effect or in compliance would not, individually or in the aggregate, have a Material Adverse Effect on the Company and its Subsidiary, taken as a whole. (i) Litigation. Except as disclosed in the Company SEC Documents ---------- filed with the SEC and publicly available prior to the date hereof, there are no civil, criminal or administrative actions, suits, or proceedings pending or, to the Knowledge of the Company, threatened, against the Company or its Subsidiary that, individually or in the aggregate, are likely to have a Material Adverse Effect on the Company and its Subsidiary, taken as a whole. Except as disclosed in the Company SEC Documents filed with the SEC and publicly available prior to the date hereof, there are no outstanding judgments, orders, decrees, or injunctions of any Governmental Entity against the Company or its Subsidiary that, insofar as can reasonably be foreseen, individually or in the aggregate, in the future would have a Material Adverse Effect on the Company and its Subsidiary, taken as a whole. (j) Contracts. --------- (i) The Company has filed as exhibits to the Company SEC Documents all material agreements required to be filed under the rules and regulations of the SEC (the "Material Contracts"). (ii) All Material Contracts are legal, valid, binding, in full force and effect and enforceable against the Company, unless otherwise disclosed in the Company's SEC Documents except to the extent that any failure to be enforceable, individually or in the aggregate, would not reasonably be expected to have or result in a Material Adverse Effect on the Company and its Subsidiary, taken as a whole, provided that no representation is made as to the -------- enforceability of any non-competition provision in any employment agreement and subject as to enforcement of remedies to applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting generally the enforcement of creditors' rights and subject to a court's discretionary authority with respect to the granting of a decree ordering specific performance or other equitable remedies. Unless otherwise disclosed in the Company's SEC documents, there does not exist under any Material Contract any violation, breach or event 6 of default, or event or condition that, after notice or lapse of time or both, would constitute a violation, breach or event of default thereunder, on the part of the Company or its Subsidiary or, to the Knowledge of the Company or its Subsidiary, any other Person, other than such violations, breaches or events of default as would not, individually or in the aggregate, have a Material Adverse Effect on the Company and its Subsidiary, taken as a whole. The enforceability of all Material Contracts will not be adversely affected in any manner by the execution, delivery or performance of this Agreement or the Registration Rights Agreement or the consummation of the transactions contemplated hereby or thereby, and no Material Contract contains any change in control or other terms or conditions that will become applicable or inapplicable as a result of the consummation of such transactions. Except as set forth on Schedule 2.1(j), neither the Company nor the Subsidiary are a party to any contract prohibiting or materially restricting the ability of the Company or its Subsidiary to conduct its business, to engage in any business or operate in any geographical area or compete with any person. (k) Taxes. (A) all Tax Returns required to be filed by or on behalf ----- of each of the Company and its Subsidiary have been filed except to the extent that a failure to file, individually or in the aggregate, would not have a Material Adverse Effect on the Company and its Subsidiary, taken as a whole; (B) all such filed Tax Returns are complete and accurate in all respects, other than any incompleteness or any inaccuracy that would not, individually or in the aggregate, have a Material Adverse Effect on the Company and its Subsidiary, taken as a whole, and all Taxes shown to be due on such Tax Returns have been paid; (C) no written claim (other than a claim that has been finally settled) has been made by a taxing authority that any of the Company or its Subsidiary is subject to an obligation to file Tax Returns or to pay or collect Taxes imposed by any jurisdiction in which either the Company or its Subsidiary does not file Tax Returns or pay or collect Taxes, other than any such claim that would not have a Material Adverse Effect on the Company and its Subsidiary, taken as a whole, or for which adequate reserves have been provided on the balance sheets contained in the Company SEC Documents filed with the SEC and publicly available prior to the date hereof; (D) there is no deficiency with respect to any Taxes which would, individually or in the aggregate, have a Material Adverse Effect on the Company and its Subsidiary, taken as a whole, other than any such deficiency for which adequate reserves have been provided on the balance sheet contained in the financial statements in the SEC Company Documents filed with the SEC and publicly available prior to the date hereof; and (E) all material assessments for Taxes due with respect to completed and settled examinations or concluded litigation have been paid which, individually or in the aggregate, exceed $100,000. As used in this Agreement, "Taxes" shall include any and all taxes, sums or amounts assessed or assessable, levied and due by any U.S. or non-U.S. national, federal, state or county or other local governmental authority or agency, including without limitation, real and personal property taxes, income taxes, whether measured by gross or net income or profit, franchise, excise, sales and use taxes, value added taxes, employee withholding, social security, unemployment taxes and any other taxes required to be paid by the Company or any Subsidiary, including interest and penalties in respect thereof whether disputed or not, and whether accrued, contingent, due, absolute, deferred, unknown or other, together with any and all penalties, interests and additions to all such taxes, sums or amounts. "Tax Returns" shall mean all returns, consolidated or otherwise (including without limitation any declaration, report, claim for refund or information return), required to be filed with any governmental authority with respect to Taxes. "Taxable" shall mean subject to Tax. 7 (i) Each of the Company and its Subsidiary has duly and timely withheld all Taxes required to be withheld in connection with its business and assets, and such withheld Taxes have been either duly and timely paid to the proper governmental authorities or properly set aside in accounts for such purpose, except to the extent that any failure to do so would not have a Material Adverse Effect on the Company and its Subsidiary, taken as a whole. (ii) (A) all taxable periods of each of the Company and its Subsidiary ending before December 31, 1995 are closed or no longer subject to audit; (B) neither the Company nor its Subsidiary is currently under any audit by any taxing authority as to which such taxing authority has asserted in writing any claim which, if adversely determined, could have a Material Adverse Effect on the Company and its Subsidiary, taken as a whole; and (C) no waiver of the statute of limitations is in effect with respect to any taxable year of the Company or its Subsidiary. (iii) (A) none of the Company or its Subsidiary is a party to or bound by or has any obligation under any Tax allocation, sharing, indemnification or similar agreement or arrangement with any Person which might result in a Material Adverse Effect to the Company or Subsidiary which entered into such agreement or arrangement; and (B) none of the Company or its Subsidiary is or has been at any time a member of any group of companies filing a consolidated, combined or unitary income tax return other than any such group the common parent of which is the Company. (l) Employee Benefit Plans and Related Matters; ERISA. ------------------------------------------------- (i) Employee Benefit Plans. Each Employee Benefit Plan that ---------------------- provides for equity-based compensation or that has associated costs that are expected to be material to the Company or its Subsidiary in the aggregate and that is expected to provide for contributions to be made by the Company or its Subsidiary or their Employees after the date hereof or to permit the accrual of additional benefits by any Employee of the Company or its Subsidiary after the date hereof has been filed with the SEC as a material contract (collectively, the "Plans"). (ii) Qualification. Except to the extent that failure to meet ------------- the requirements of Section 401(a) of the Code would not result in any material liability as to which adequate reserves have not been established, each Employee Benefit Plan intended to be qualified under section 401(a) of the Code, and the trust (if any) forming a part thereof, (A) has received a favorable determination letter or opinion letter from the IRS as to its qualification under the Code and to the effect that each such trust is exempt from taxation under section 501(a) of the Code, and nothing has occurred since the date of such determination letter that could adversely affect such qualification or tax- exempt status (other than changes in legal requirements applicable to such Employee Benefit Plan necessitating amendments for which the applicable remedial amendment period has not yet expired)or (B) a timely application for such a favorable determination letter or opinion letter was filed and the Company has no reason to believe that such a favorable determination letter or opinion letter will not be granted. 8 (iii) Compliance; Liability. --------------------- (A) No liability has been or is reasonably expected to be incurred under or pursuant to Title I or IV of ERISA or the penalty, excise Tax or joint and several liability provisions of the Code relating to employee benefit plans that is or would be material to the Company and its Subsidiary, taken as a whole. (B) Each of the Employee Benefit Plans has been operated and administered in all respects in compliance with its terms, all applicable laws and all applicable collective bargaining agreements, except for any failure so to comply that, individually and in the aggregate, could not reasonably be expected to result in a material liability or obligation on the part of the Company and its Subsidiary in the aggregate. There are no pending or threatened claims by or on behalf of any of the Employee Benefit Plans, by any Employee or otherwise involving any such Employee Benefit Plan or the assets of any Employee Benefit Plan (other than routine claims for benefits or actions seeking qualified domestic relations orders or qualified medical child support orders, all of which have been fully reserved for on the regularly prepared balance sheets of the Company or its Subsidiary, as applicable to the extent required by GAAP) which would reasonably be expected to result in any material liability to the Company and its Subsidiary in the aggregate. (C) Except to the extent that it would not give rise to a material liability or obligation on the part of the Company and it Subsidiary in the aggregate, no Employee is or will become entitled to post-employment benefits of any kind by reason of employment with the Company or its Subsidiary, including, without limitation, death or medical benefits (whether or not insured), other than (x) coverage mandated by section 4980B of the Code or other applicable laws, (y) retirement benefits payable under any Plan qualified under section 401 (a) of the Code or (z) accrued deferred compensation. The consummation of the transactions hereunder and under the Registration Rights Agreement will not result in an increase in the amount of compensation or benefits or the acceleration of the vesting or timing of payment of any compensation or benefits payable to or in respect of any Employee by any of the Company or its Subsidiary. (iv) Employees, Labor Matters, etc. Neither the Company nor its ----------------------------- Subsidiary is a party to or bound by any collective bargaining agreement, and there are no labor unions or other organizations representing, or to the Knowledge of the Company purporting to represent or attempting to represent any employees employed by the Company or its Subsidiary. Since September 30, 2000, there has not occurred or , to the Knowledge of the Company, been threatened any strike, slowdown, picketing, work stoppage, concerted refusal to work overtime or other similar labor activity with respect to any employees of the Company or its Subsidiary. There are no labor disputes currently subject to any grievance procedure, arbitration or litigation and there is no petition to the National Labor Relations Board or a similar state authority or recognized private arbitration firm or service pending or, to the Knowledge of the Company, threatened with respect to any employee of the Company or its Subsidiary that individually or in the aggregate, are likely to have a Material Adverse Effect on the Company and its Subsidiary, taken as a whole). The Company and its Subsidiary has complied with all applicable laws pertaining to the employment or termination of employment of their respective employees, including, without limitation, all such laws relating to labor relations, equal employment 9 opportunities, fair employment practices, prohibited discrimination or distinction and other similar employment activities, except for any failure so to comply that, individually and in the aggregate, could not reasonably be expected to result in a Material Adverse Effect on the Company and its Subsidiary, taken as a whole. (m) Environmental Matters. Except as disclosed in the Company SEC --------------------- Documents filed with the SEC and publicly available prior to the date hereof and except for such matters that, individually or in the aggregate, would not have a Material Adverse Effect on the Company and its Subsidiary, taken as a whole, (i) the Company and its Subsidiary are in compliance with all applicable Environmental Laws (as defined below), (ii) the Company and its Subsidiary have all Permits required under Environmental Laws for the operation of their respective businesses as presently conducted ("Environmental Permits"), (iii) neither the Company nor its Subsidiary has received notice from any Governmental Entity asserting that either the Company or its Subsidiary may be in violation of, or liable under, any Environmental Law, and (iv) there are no actions, proceedings or claims pending (or, to the Knowledge of the Company or its Subsidiary, threatened) seeking to impose any liability on Environmental Permits or Hazardous Substances (as defined below). For purposes of this Agreement, "Environmental Law" means any federal, state or local law, statute, regulation or decree relating to (x) the protection of the environment or (y) the use, storage, treatment, generation, transportation, processing, handling, release or disposal of Hazardous Substances in each case as in effect on the date hereof. "Hazardous Substance" means any waste, substance, material, pollutant or contaminant listed, defined, designated or classified as hazardous, toxic or radioactive, or otherwise regulated, under any Environmental Law. (n) Delaware Law. The provisions of Section 203 of the Delaware ------------ General Corporation law (the "DGCL") will not be applicable to Purchaser or its Affiliates as a result of the transactions contemplated by this Agreement. (o) Status of Shares. The Shares being issued at the Closing have ---------------- been duly authorized by all necessary corporate action on the part of the Company, and at Closing such Shares will have been validly issued and, assuming payment therefor has been made, will be fully paid and nonassessable, and the issuance of such Shares will not be subject to preemptive rights of any other stockholder of the Company. The Shares will be eligible for listing on the Nasdaq Stock Market. (p) Intellectual Property. The Intellectual Property that is owned by --------------------- the Company or its Subsidiary is owned free from any Liens (other than Permitted Liens), except where the failure to be free from liens would not have a Material Adverse Effect on the Company and its Subsidiary, taken as a whole. All material Intellectual Property Licenses are in full force and effect in accordance with their terms, and are free and clear of any Liens (other than Permitted Liens), except where the failure to be free from Liens or to be in full force and effect would not have a Material Adverse Effect on the Company and its Subsidiary, taken as a whole. To the Knowledge of the Company, the conduct of the business of the Company and its Subsidiary does not infringe or conflict with the rights of any third party in respect of any Intellectual Property, except where such conduct would not materially affect the ability of the Company and its Subsidiary to conduct their business as presently conducted. To the Knowledge of the Company, none of the Company Intellectual Property is being infringed by 10 any third party except where such infringement would not have a Material Adverse Effect on Company and its Subsidiary, taken as a whole. There is no claim or demand of any Person pertaining to, or any proceeding which is pending or, to the Knowledge of the Company, threatened, that challenges the rights of the Company or its Subsidiary in respect of any Company Intellectual Property, or that claims that any default exists under any Intellectual Property License, except where such claim, demand or proceeding would not materially affect the ability of the Company and its Subsidiary to conduct their business as presently conducted. For purposes of this Agreement, "Company Intellectual Property" means the Intellectual Property that is owned by the Company and its Subsidiary and the Intellectual Property subject to written or oral licenses, agreements or arrangements pursuant to which its use by the Company or its Subsidiary is permitted by any Person. (q) Brokers or Finders. No agent, broker, investment banker or ------------------ other firm is or will be entitled to any broker's or finder's fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement. Section 2.2 Representations and Warranties of Purchaser. Purchaser hereby ------------------------------------------- represents and warrants to the Company as follows: (a) Organization. Purchaser is a corporation duly organized and ------------ validly existing and in good standing under the laws of the Federal Republic of Germany, with all requisite power and authority to own, lease and operate its properties and to conduct its business as now being conducted. (b) Authority. Purchaser has the requisite corporate power and --------- authority to execute, deliver and perform its obligations under this Agreement and the Registration Rights Agreement and to consummate the transactions contemplated hereby and thereby. All necessary corporate action required to have been taken by or on behalf of Purchaser by applicable law or otherwise to authorize the approval, execution, delivery and performance by Purchaser of this Agreement and the Registration Rights Agreement and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized, and no other proceedings on its part are or will be necessary to authorize this Agreement or the Registration Rights Agreement or for it to consummate such transactions. This Agreement is, and the Registration Rights Agreement, when executed and delivered will be, valid and binding agreements of Purchaser, enforceable against Purchaser in accordance with their respective terms, assuming that this Agreement and the Registration Rights Agreement are valid and binding agreements of the Company, subject as to enforcement of remedies to applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting generally the enforcement of creditors' rights and subject to a court's discretionary authority with respect to the granting of a decree ordering specific performance or other equitable remedies. (c) Conflicting Agreements and Other Matters. Neither the ---------------------------------------- execution, delivery or performance by Purchaser of this Agreement or the Registration Rights Agreement or the consummation by Purchaser of the transactions contemplated hereby or thereby (A) will result in a violation or breach of the organizational documents or agreements of Purchaser or (B) will result in a violation or breach of (or give rise to any right of termination, revocation, cancellation or acceleration under or increased payments under), or constitute a default (with or 11 without due notice or lapse of time or both) under, or result in the creation of any Lien upon any of the properties or assets of Purchaser under, (1) any of the terms, conditions or provisions of any Contract or of any Permit to which Purchaser is a party or by which any of its properties or assets may be bound, or (2) subject to the governmental filings and other matters referred to in Section 2.1(c)(ii) above, any judgment, order, decree, statute, law, regulation or rule applicable to Purchaser, except, in the case of clause (B), for violations, breaches, defaults, rights of cancellation, termination, revocation, acceleration or increased payments or Liens that would not, individually or in the aggregate, have a Material Adverse Effect on Purchaser. (d) Acquisition for Investment. (i) Purchaser is acquiring the -------------------------- Shares for its own account for the purpose of investment and not with a view to or for sale in connection with any distribution thereof, and Purchaser has no present intention to effect, or any present or contemplated plan, agreement, undertaking, arrangement, obligation, indebtedness, or commitment providing for, any distribution of Shares, (ii) Purchaser is an "accredited investor" as defined in Rule 501(a) under the Securities Act, (iii) Purchaser has carefully reviewed the representations concerning the Company contained in this Agreement and has made detailed inquiry concerning the Company, its business and its personnel, and (iv) Purchaser has sufficient knowledge and experience in finance and business that it is capable of evaluating the risks and merits of its investment in the Company and is able financially to bear the risks thereof. (e) Brokers or Finders. No agent, broker, investment banker or ------------------ other firm is or will be entitled to any broker's or finder's fee or any other commission or similar fee from Purchaser in connection with any of the transactions contemplated by this Agreement. ARTICLE 3. LIMITATIONS ON PURCHASES OF ADDITIONAL EQUITY SECURITIES Section 3.1 Purchases of Equity Securities. ------------------------------ (a) Prior to December 31, 2003, except as permitted by Section 3.1(b), (c) or (d), Purchaser and its Affiliates will not (and will not assist or encourage others to) directly or indirectly in any manner: (i) acquire, announce an intention to acquire, or agree to acquire, directly or indirectly, alone or in concert with others, by purchase, gift or otherwise, any direct or indirect beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) or interest in any securities or direct or indirect rights, warrants or options to acquire, or securities convertible into or exchangeable for, any securities of the Company; (ii) make, or in any way participate in, directly or indirectly, alone or in concert with others, any "solicitation" of "proxies" to vote (as such terms are used in the proxy rules of the SEC promulgated pursuant to Section 14 of the Exchange Act); (iii) form, join or in any way participate in a "group" within the meaning of Section 13(d)(3) of the Exchange Act with respect to any voting securities of the Company; or (iv) acquire, announce an intention to acquire, or agree to acquire, directly or indirectly, alone or in concert with others, by purchase, exchange or otherwise, (i) any 12 of the assets, tangible or intangible, of the Company or (ii) direct or indirect rights, warrants or options to acquire any assets of the Company, other than in the ordinary course of business; (v) enter into any arrangement or understanding with others to do any of the actions restricted or prohibited under clauses (i), (ii), (iii) or (iv) of this Section 3.1(a); or (vi) otherwise act in concert with others, to seek to offer to the Company or any of its stockholders any business combination, restructuring, recapitalization or similar transaction to or with the Company or otherwise seek in concert with others, to control, change or influence the management, board of directors or policies of the Company or nominate any person as a director of the Company who is not nominated by the then incumbent directors, or propose any matter to be voted upon by the stockholders of the Company; (b) Nothing herein shall prevent Purchaser from purchasing any securities of the Company pursuant to the terms of this Agreement and Purchaser shall not be treated as having breached any covenant in this Agreement solely as a result of such purchase. (c) Nothing herein shall prevent Purchaser from purchasing additional Equity Securities of the Company if (i) prior thereto Purchaser has not sold any Shares (other than to an Affiliate of Purchaser who has not sold such Shares) and (ii) after such purchase, Purchaser and its Affiliates would own 9.9 percent (9.9%) or less of the Total Voting Power of all Voting Securities of the Company then outstanding. (d) This Section 3.1 shall terminate and Purchaser and its Affiliates shall have the right to acquire any securities of the Company without regard to the limitation on share ownership set forth in Section 3.1 in the event that: (i) the Company has entered into (A) an agreement relating to a merger, business combination, consolidation or any such similar transaction, following which the then holders of the Voting Securities would cease to hold a majority of the voting securities of the surviving corporation or (B) an agreement to sell all or substantially all its assets; provided, however, that -------- ------- the limitation shall (1) continue or be reinstated if the majority of the directors of the Company who have held that position for at least nine (9) months prior to the entering into of the merger agreement or other agreement referred to in section (A) continue as a majority of the directors of the surviving company after the transaction or (2) be reinstated if such merger agreement or other agreements referred to in sections (A) or (B) is subsequently terminated or the transactions contemplated thereunder are not consummated; or (ii) a tender or exchange offer (other than a tender or exchange offer that the Company's Board of Directors has recommended be rejected) is made by any Person or 13D Group (as hereinafter defined) (other than an Affiliate of, or any Person acting in concert with, Purchaser) to acquire Voting Securities which, if added to the Voting Securities (if any) already owned by such Person or 13D Group, would result, if consummated in accordance with its terms, in the Beneficial Ownership by such Person or 13D Group of more than 30% of the Total Voting Power of all Voting Securities of the Company then outstanding, provided -------- that the limitation shall be reinstated if such tender or exchange offer is - ---- withdrawn or terminated without such Person or 13D Group acquiring such 30% ownership level; or 13 (iii) it is publicly disclosed or Purchaser otherwise learns that Voting Securities representing more than 35% of the Total Voting Power of all Voting Securities of the Company then outstanding are Beneficially Owned by any Person or 13D Group (other than an Affiliate of, or any person acting in concert with, Purchaser); or (iv) a proxy contest (or similar incident) is made by any Person or 13D Group (other than an Affiliate of, or any Person acting in concert with, Purchaser) to elect individuals who at the beginning of any calendar year did not constitute the majority of the members of the Board of Directors of the Company then in office and the Purchaser, upon the advice of legal counsel and financial advisors, reasonably believes in good faith, that such proxy contest will result in the election of individuals who will constitute a majority of members of the Board of Directors of the Company, but who did not, at the beginning of the calendar year, constitute the majority of the members of the Board of Directors of the Company then in office, provided that the limitation -------- ---- shall be reinstated if such proxy contest or similar incident is terminated or withdrawn without affecting the change in the Board of Directors referred to above. (e) As used herein, the term "13D Group" shall mean any group of Persons formed for the purpose of acquiring, holding, voting or disposing of Voting Securities which would be required under Section 13(d) of the Exchange Act and the rules and regulations thereunder (as now in effect and based on present legal interpretations thereof) to file a statement on Schedule 13D with the SEC as a "person" within the meaning of Section 13(d)(3) of the Exchange Act. Ownership of Voting Securities under Section 3.1(d) above and Section 4.1(d) below shall be determined in accordance with Rule 13d-3 of the Exchange Act as currently in effect. ARTICLE 4. TRANSFER OF SHARES Section 4.1 Limitations on Transfer. ----------------------- (a) Prior to June 30, 2002, Purchaser will not, directly or indirectly, sell, transfer or otherwise dispose of any Shares (except to any Affiliate of Purchaser, provided, however, that such Affiliate shall agree to be -------- ------- bound by the terms of this Agreement). (b) After June 30, 2002 and prior to June 30, 2003, Purchaser will not, directly or indirectly, sell, transfer or otherwise dispose of more than fifty percent (50%) of the acquired Shares (as adjusted to reflect any stock splits, stock dividends and similar recapitalizations) (except to an Affiliate of Purchaser, provided, however, that such Affiliate shall agree to be bound by --------- ------- the terms of this Agreement). (c) The limitation on Share transfer set forth in this Section 4.1 shall terminate and Purchaser and its Affiliates shall have the right, directly or indirectly, to sell, transfer or otherwise dispose of any Shares without regard to any limitation on Share transfer set forth in Section 4.1 in the event that: (i) the Company has entered into (A) an agreement relating to a merger, business combination, consolidation or any such similar transaction, following which the then holders of the Voting Securities would cease to hold a majority of the voting securities of 14 the surviving corporation or (B) an agreement to sell all or substantially all its assets; provided, however, the limitation shall (1) be reinstated if the -------- ------- majority of the directors of the Company, who have held that position for at least nine (9) months prior to the entering into of the merger agreement or other agreement referred to in Section (A) continue as a majority of the directors of the surviving company after the transaction or (2) be reinstated if such merger agreement or other agreements referred to in sections (A) or (B) is subsequently terminated or the transactions contemplated thereunder are not consummated; (ii) a tender or exchange offer which has been approved or recommended by the Company's Board of Directors is made by any Person or 13D Group (other than an Affiliate of, or any Person acting in concert with, Purchaser) to acquire Voting Securities which, if added to the Voting Securities (if any) already owned by such Person or 13D Group, would result, if consummated in accordance with its terms, in the Beneficial Ownership by such Person or 13D Group of more than 50% of the Total Voting Power of all Voting Securities of the Company then outstanding, provided that the limitation shall be reinstated if -------- ---- such tender or exchange offer is withdrawn or terminated without such Person or 13D Group acquiring such 50% ownership level; or (iii) a tender or exchange offer, which the Company's Board of Directors has not approved or recommended, is made by any Person or 13D Group (other than an Affiliate of, or any Person acting in concert with, Purchaser) to acquire Voting Securities which, if added to the Voting Securities (if any) already owned by such Person or 13D Group, would result, if consummated in accordance with its terms, in the Beneficial Ownership by such Person or 13D Group of more than 50% of the Total Voting Power of all Voting Securities of the Company then outstanding and the Purchaser, upon the advice of legal counsel and financial advisors, reasonably believes in good faith, taking into account the conditions of the offer, that such tender or exchange offer will result in Voting Securities being purchased, provided that the limitation shall be -------- ---- reinstated if such tender or exchange offer is withdrawn or terminated without such Person or 13D Group acquiring such 50% ownership level. Section 4.2 Convertible Securities. ---------------------- (a) Notwithstanding the provisions of Section 4.1, Purchaser or Affiliates of Purchaser may issue Convertible Securities; provided, however, -------- ------- that any exercise or exchanges for Shares pursuant to the terms and conditions of the Convertible Securities shall not occur until such sale, transfer and disposition of the Shares would be permitted under Section 4.1. ARTICLE 5. COVENANTS AND ADDITIONAL AGREEMENTS Section 5.1 Ordinary Course. During the period from the date of this --------------- Agreement and continuing until the Closing, the Company agrees as to itself and its Subsidiary that, except to the extent that Purchaser otherwise consents in writing, the Company and its Subsidiary shall conduct their respective businesses in the ordinary course in substantially the same manner as presently conducted. Section 5.2 Access and Information. So long as this Agreement remains in ---------------------- effect, prior to the Closing, the Company will (and will cause its Subsidiary and each of their respective 15 accountants, counsel, consultants, officers, directors, employees, agents and representatives of or to the Subsidiary, to) give Purchaser and its Representatives, reasonable access during reasonable business hours to all of their respective properties, assets, books, contracts, reports and records relating to the Company and its Subsidiary, and furnish to them all such documents, records and information with respect to the properties, assets and business of the Company and its Subsidiary, as Purchaser shall from time to time reasonably request. The Company will keep Purchaser generally informed as to the business of the Company and its Subsidiary. Section 5.3 Further Actions. --------------- (a) Each of the Company and Purchaser shall use reasonable best efforts to take or cause to be taken all actions, and to do or cause to be done all other things, necessary, proper or advisable in order to fulfill and perform its obligations in respect of this Agreement and the Registration Rights Agreement, or otherwise to consummate and make effective the transactions contemplated hereby and thereby. (b) Each of the Company and Purchaser shall, as promptly as practicable, (i) make, or cause to be made, all filings and submissions (including but not limited to under the HSR Act) required under any law applicable to it or its Subsidiary, and give such reasonable undertakings as may be required in connection therewith, and (ii) use all reasonable efforts to obtain or make, or cause to be obtained or made, all Permits, if any, necessary to be obtained or made by it or its Subsidiary, in each case in connection with this Agreement and the Registration Rights Agreement, the sale and transfer of the Shares pursuant hereto and the consummation of the other transactions contemplated hereby or thereby. (c) Each of the Company and Purchaser shall coordinate and cooperate with the other party in exchanging such information and supplying such reasonable assistance as may be reasonably requested by such other party in connection with the filings and other actions contemplated by this Agreement and the Registration Rights Agreement. (d) At all times prior to the Closing Date, the Company and Purchaser shall notify each other in writing of any fact, condition, event or occurrence that could reasonably be expected to result in the failure of any of the conditions contained in Article 6 to be satisfied, promptly upon becoming aware of the same. Section 5.4 Further Assurances. Following the Closing Date, the Company ------------------ shall, from time to time, execute and deliver such additional instruments, documents, conveyances or assurances and take such other actions as shall be necessary, or otherwise reasonably be requested by Purchaser, to confirm and assure the rights and obligations provided for in this Agreement and the Registration Rights Agreement and render effective the consummation of the transactions contemplated hereby and thereby, or otherwise to carry out the intent and purposes of this Agreement. ARTICLE 6. CONDITIONS PRECEDENT Section 6.1 Each Party's Obligations. The obligations of the Company and ------------------------ Purchaser to consummate the transactions contemplated to occur at the Closing shall be subject to the 16 satisfaction prior to the Closing of each of the following conditions, each of which may be waived only if it is legally permissible to do so: (a) HSR Act and Other Approvals. Any applicable waiting period --------------------------- under the HSR Act relating to the transactions contemplated hereby shall have expired or been terminated, and all other material authorizations, consents, orders or approvals of, or regulations, declarations or filings with, or expirations of applicable waiting periods imposed by, any Governmental Entity (including, without limitation, any foreign antitrust filing) necessary for the consummation of the transactions contemplated hereby, shall have been obtained or filed or shall have occurred. (b) No Litigation, Injunctions, or Restraints. No statute, rule, ----------------------------------------- regulation, executive order, decree, temporary restraining order, preliminary or permanent injunction or other order enacted, entered, promulgated, enforced or issued by any Governmental Entity or other legal restraint or prohibition preventing the consummation of the transactions contemplated by this Agreement and the Registration Rights Agreement shall be in effect. (c) Collaboration Agreements. The Collaboration Agreements shall ------------------------ have become effective in accordance with the terms and conditions thereof. (d) Nasdaq Listing. The Shares shall have been approved for listing -------------- on the Nasdaq Stock Market, subject only to official notice of issuance. Section 6.2 Conditions to the Obligations of the Company. The obligations -------------------------------------------- of the Company to consummate the transactions contemplated to occur at the Closing shall be subject to the satisfaction or waiver thereof prior to the Closing of each of the following conditions: (a) Representations and Warranties. The representations and ------------------------------ warranties of Purchaser that are qualified as to materiality shall be true and correct, and those that are not so qualified shall be true and correct in all material respects, as of the date of this Agreement and as of the time of the Closing as though made at and as of such time, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties that are qualified as to materiality shall be true and correct, and those that are not so qualified shall be true and correct in all material respects, on and as of such earlier date) and the Company shall have received a certificate signed by an authorized officer of Purchaser to such effect. (b) Registration Rights Agreement. Purchaser shall have executed ----------------------------- and delivered the Registration Rights Agreement. (c) Performance of the Obligations of Purchaser. Purchaser shall ------------------------------------------- have performed or complied in all material respects with all obligations and covenants required to be performed or complied with by Purchaser under this Agreement and the Company shall have received a certificate signed by an authorized officer of Purchaser to such effect. Section 6.3 Conditions to the Obligations of Purchaser. The obligations ------------------------------------------ of Purchaser to consummate the transactions contemplated to occur at the Closing shall be subject to the satisfaction or waiver thereof prior to the Closing of each of the following conditions: 17 (a) Representations and Warranties. The representations and ------------------------------ warranties of the Company set forth in this Agreement that are qualified as to materiality shall be true and correct, and those that are not so qualified shall be true and correct in all material respects, as of the date of this Agreement and as of the time of the Closing as though made at and as of such time, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties that are qualified as to materiality shall be true and correct, and those that are not so qualified shall be true and correct in all material respects, on and as of such earlier date), and Purchaser shall have received a certificate signed by the chief executive officer and chief financial officer of the Company to such effect. (b) Opinion of the Company's Counsel. Purchaser shall have -------------------------------- received the opinion dated as of the Closing of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., counsel to the Company, in form and substance reasonably satisfactory to Purchaser and Purchaser's counsel. (c) Registration Rights Agreement. The Company shall have executed ----------------------------- and delivered the Registration Rights Agreement. (d) Performance of the Obligations of the Company. The Company --------------------------------------------- shall have performed or complied in all material respects with all obligations and covenants required to be performed or complied with by the Company under this Agreement and the Purchaser shall have received a certificate signed by the chief executive officer and chief financial officer of the Company to such effect. (e) Corporate Proceedings. All corporate proceedings of the --------------------- Company in connection with the transactions contemplated by this Agreement and the Registration Rights Agreement, and all documents and instruments incident thereto, shall be satisfactory in form and substance to Purchaser and its counsel, and Purchaser and its counsel shall have received all such documents and instruments, or copies thereof, certified if requested, as may be reasonably requested. ARTICLE 7. TERMINATION Section 7.1 Termination. This Agreement may be terminated at any time ----------- prior to the Closing: (a) by mutual written consent of Purchaser and the Company; (b) by Purchaser or the Company: (i) if the Closing shall not have occurred prior to June 30, 2001, provided, that the right to terminate this Agreement pursuant to this -------- clause (i) shall not be available to any party whose failure to fulfill any obligation under this Agreement results in the failure of the Closing to occur; (ii) if there shall be any statute, law, regulation or rule that makes consummating the transactions contemplated hereby illegal or if any court or other Governmental Entity of competent jurisdiction shall have issued a judgment, order, decree or 18 ruling, or shall have taken such other action restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby and such judgment, order, decree or ruling shall have become final and non- appealable; or (iii) if either one of the Collaboration Agreements shall have terminated or not become effective in accordance with the terms and conditions thereof; (c) by Purchaser: (i) if the Company shall have failed to perform in any material respect any of its obligations hereunder or shall have breached in any respect any representation or warranty contained herein qualified by materiality or shall have breached in any material respect any representation or warranty not so qualified, and the Company has failed to perform such obligation or cure such breach, within 30 days of its receipt of written notice thereof from Purchaser, and such failure to perform shall not have been waived in accordance with the terms of this Agreement; or (ii) if any of the conditions set forth in Section 6.1 or 6.3 shall become impossible to fulfill (other than as a result of any breach by Purchaser of the terms of this Agreement) and shall not have been waived in accordance with the terms of this Agreement; (d) by the Company: (i) if Purchaser shall have failed to perform in any material respect any of its obligations hereunder or shall have breached in any respect any representation or warranty contained herein qualified by materiality or shall have breached any material respect any representation or warranty not so qualified, and Purchaser has failed to perform such obligation or cure such breach, within 30 days of its receipt of written notice thereof from the Company, and such failure to perform shall not have been waived in accordance with the terms of this Agreement; or (ii) if any of the conditions set forth in Section 6.1 or 6.2 shall become impossible to fulfill (other than as a result of any breach by the Company of the terms of this Agreement) and shall not have been waived in accordance with the terms of this Agreement; Section 7.2 Effect of Termination. In the event of termination of this --------------------- Agreement by either the Company or Purchaser as provided in Section 7.1, this Agreement shall forthwith become void and have no effect, without any liability or obligation on the part of Purchaser or the Company, other than the provisions of this Section 7.2, Article 8 and Section 10.9, and except to the extent that such termination results from the willful and material breach by a party of any of its representations, warranties, covenants or agreements set forth in this Agreement. ARTICLE 8. INDEMNIFICATION Section 8.1 Indemnification of Purchaser and Company. The Company ---------------------------------------- covenants and agrees to indemnify and hold harmless each of Purchaser, its Affiliates (other than the Company and its Subsidiary), and their respective officers, directors, partners, employees, agents, advisers and representatives (collectively, the "Purchaser Indemnitees") from and against, and to pay or 19 reimburse the Purchaser Indemnitees for, any and all claims, demands, liabilities, obligations, losses, costs, expenses, fines or damages (whether absolute, accrued, conditional or otherwise and whether or not resulting from third party claims), including interest and penalties with respect thereto and all expenses incurred in the investigation or defense of any of the same or in asserting, preserving or enforcing any of their respective rights hereunder (collectively, "Losses"), resulting from or based on (or allegedly resulting from or based on) any breach by the Company of any representation, warranty, covenant or obligation of the Company hereunder. The Losses described in this Section 8.1 are herein referred to as "Purchaser Indemnifiable Losses." The Company shall reimburse the Purchaser Indemnitees for any legal or other expenses incurred by such Purchaser Indemnitees in connection with investigating or defending any such Purchaser Indemnifiable Losses as such expenses are incurred. Each Purchaser agrees, severally and not jointly, to indemnify and hold harmless the Company, its Affiliates (other than Purchaser), and their respective officers, directors, partners, employees, agents, advisers and representatives (collectively, the "Company Indemnitees") from and against, and to pay or reimburse the Company Indemnitees for, any Losses, resulting from or based on (or allegedly resulting from or based on) any breach by Purchaser of any representation, warranty, covenant or obligation of Purchaser hereunder. The Losses described in this Section 8.1 are herein referred to as "Company Indemnifiable Losses," and together with the Purchaser Indemnifiable Losses, are referred to herein as the "Indemnifiable Losses." Purchaser shall reimburse the Company Indemnitees for any legal or other expenses incurred by such Company Indemnitees in connection with investigating or defending any such Company Indemnifiable Losses as such expenses are incurred. Section 8.2 Indemnification Procedures. In case any proceeding or written -------------------------- assertion of claim (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section 8.1 above (the "Indemnitee"), promptly after receipt such Indemnitee shall, if a claim in respect thereof is to be made against the Company or the Purchaser, as the case may be (the "Indemnifying Person"), notify the Indemnifying Person in writing of the commencement or the written assertion thereof. Failure by a Indemnitee to so notify the Indemnifying Person shall relieve the Indemnifying Person from the obligation to indemnify such Indemnitee only to the extent that the Indemnifying Person suffers actual and material prejudice as a result of such failure but in no event shall such failure to notify the Indemnifying Person (i) constitute prejudice suffered by the Indemnifying Person if it has otherwise received notice of the actions giving rise to such obligation to indemnify or (ii) relieve it from any liability or obligation that it may otherwise have to such Indemnitee. In case any such action or claim shall be brought or asserted against any Indemnitee and it shall notify the Indemnifying Person of the commencement or assertion thereof, the Indemnifying Person shall be entitled to participate in or assume the defense of such action or claim at any time, provided, however, that (a) if the -------- ------- Indemnifying Person does not assume the defense, it shall not, in connection with any one such action or proceeding or separate but substantially similar actions or proceedings arising out of the same general allegations, be liable for the fees and expenses of more than one separate firm of attorneys at any time for all Indemnitees, except to the extent that local counsel, in addition to regular counsel, is required in order to effectively defend against such action or proceeding and (b) if the Indemnifying Person assumes the defense, it must select an attorney that is satisfactory to the Indemnitee, after which it will not be liable for the attorney's fees of the Indemnitee. Indemnitee shall not enter into any settlement of any such 20 claim without the prior consent of the Indemnifying Person, such consent not to be unreasonably withheld or delayed. In no event shall the Indemnifying Person be liable under this Article 8, and the Indemnifying Person's obligation to defend, indemnify and hold harmless the Indemnitee shall not apply to: (a) any special, incidental or consequential damages resulting from or based upon any breach by the Indemnifying Person of any representation, warranty, covenant or obligation of such Indemnifying Person hereunder, (b) any Indemnifiable Losses until the aggregate amount of such Losses exceeds $5,000,000, and (c) any Indemnifiable Losses in excess of $50,000,000. The remedies set forth in this Article 8 are cumulative and shall not be construed to restrict or otherwise affect any other remedies that may be available to a Indemnitee or a Party under any other agreement, pursuant to statutory or common law or equity. Notwithstanding anything to the contrary in this Agreement, any claim for indemnification under this Article 8 must be brought prior to the second anniversary of the Closing Date, except for claims relating to the representations and warranties in Sections 2.1(k) and 2.1 (m) which can be brought any time prior to the expiration of the applicable statute of limitations. Section 8.3 Survival of Representations and Warranties. The ------------------------------------------ representations and warranties of the Company and Purchaser contained in this Agreement shall expire for all purposes on the second anniversary of the Closing Date, except for the representations and warranties contained in Sections 2.1(k) and 2.1(m) which shall expire for all purposes upon expiration of the applicable statute of limitations. ARTICLE 9. INTERPRETATION; DEFINITIONS Section 9.1 Interpretation. As used in this Agreement, unless the context -------------- otherwise requires: (a) any reference to the Company and its Subsidiary means the Company and its Subsidiary; (b) words of any gender include all genders; (c) words using the singular or plural number also include the plural or singular number, respectively; and (d) the terms "hereof" "herein", and "hereby" and derivative or similar words refer to this entire Agreement. Section 9.2 Definitions. For purposes of this Agreement, the following ----------- terms shall have the following meanings: (a) "13D Group" is defined in Section 3.1(e). --------- (b) "Affiliate" shall have the meaning set forth in Rule 12b-2 under --------- the Exchange Act (as in effect on the date of this Agreement). (c) "Agreement" is defined in the recitals to this agreement. --------- 21 (d) "Beneficially Owned," "Beneficial Ownership" or any like ------------------ -------------------- expression with respect to any securities means having "beneficial ownership" of such securities (as determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing. (e) "Business Day" means any day on which banking institutions are ------------ open in the City of Boston. (f) "Closing" is defined in Section 1.2. ------- (g) "Closing Date" is defined in Section 1.2. ------------ (h) "Code" means the Internal Revenue Code of 1986, as amended, ---- and the regulations promulgated thereunder, as amended. (i) "Collaboration Agreements" is defined in the recitals to this ------------------------ Agreement. (j) "Common Stock" means the Voting Common Stock, $.01 par value ------------ per share, of the Company. (k) "Company" is defined in the recitals to this Agreement. ------- (l) "Company Intellectual Property" is defined in Section 2.1(p). ----------------------------- (m) "Company SEC Documents" is defined in Section 2.1(f). --------------------- (n) "Contract" is defined in Section 2.1(c). -------- (o) "Convertible Securities" means equity, debt or other securities ---------------------- of Purchaser or an Affiliate of Purchaser that are exercisable or exchangeable for Shares. (p) "Employee" means any employee or former employee of the Company -------- or its Subsidiary or any beneficiary or dependent of any such employee or former employee. (q) "Employee Benefit Plans" means all defined contribution, defined ---------------------- benefit, welfare benefit, bonus, incentive compensation, stock option, stock purchase, stock appreciation right, stock bonus, incentive, deferred compensation, insurance, medical, dental, vision, life, death benefit, fringe benefit or other employee benefit plans, programs, policies or arrangements, including without limitation, any employment, consulting, offer, secondment, severance or other termination agreement, whether or not an employee benefit plan within the meaning of section 3(3) of ERISA, maintained by the Company or its Subsidiary. (r) "Environmental Laws" is defined in Section 2.1(m). ------------------ (s) "Environmental Permits" is defined in Section 2.1(m). --------------------- (t) "ERISA" means the Employee Retirement Income Security Act of ----- 1974, as amended. 22 (u) "Exchange Act" means the Securities Exchange Act of 1934, as ------------ amended, or any successor federal statute and the rules and regulations of the SEC promulgated thereunder, all as the same shall be in effect from time to time. (v) "GAAP" means United States generally accepted accounting ---- principles. (w) "Governmental Entity" is defined in Section 2.1(c). ------------------- (x) "Hazardous Substance" is defined in Section 2.1(m). ------------------- (y) "HSR Act" is defined in Section 2.1(c). ------- (z) "Indemnifying Person" is defined in Section 8.2. ------------------- (aa) "Intellectual Property" means trademarks, trade names, trade --------------------- dress, service marks, copyrights, domain names, and similar rights (including registrations and applications to register or renew the registration of any of the foregoing), patents and patent applications, trade secrets, ideas, inventions, improvements, practices, processes, formulas, designs, know-how, confidential business and technical information, computer software, firmware, data and documentation, licenses of or agreements relating to any of the foregoing, rights of privacy and publicity, moral rights, and any other similar intellectual property rights and tangible embodiments of any of the foregoing (in any medium including electronic media.) (bb) "Intellectual Property License" means any license, permit, ----------------------------- authorization, approval, Contract or consent granted, issued by or with any Person relating to the use of Intellectual Property. (cc) "IRS" means the Internal Revenue Service. --- (dd) "Knowledge of the Company," "Knowledge of the Company or its ------------------------ ------------------------------- Subsidiary" or any like expression means to the actual knowledge of Jonathan - ----------- M. Rothberg, Chief Executive Officer, President and Chairman of the Board; David. M. Wurzer, Executive Vice-President, Treasurer and Chief Financial Officer; Christopher K. McLeod, Executive Vice-President; Hovan Asdourian, Senior Vice-President, Business Development; and Michael McKenna, Ph.D., Vice- President, Operations. (ee) "Lien" is defined in Section 2.1(c). ---- (ff) "Losses" is defined in Section 8.1. ------ (gg) "Material Adverse Effect" on or with respect to an entity (or ----------------------- group of entities taken as a whole) means any state of facts, event, change or effect that has had, or would reasonably be expected to have, a material adverse effect on (a) the business, results of operations or financial condition of such entity (or, if with respect thereto, of such group of entities taken as a whole), other than any state of facts, event, change or effect attributable to changes (x) in general economic or market conditions or (y) generally affecting the biotechnology or pharmaceutical industries, or (b) the ability of such entity (or group of entities) 23 to consummate the transactions contemplated under this Agreement or the Registration Rights Agreement. (hh) "Material Contract" is defined in Section 2.1(j). ----------------- (ii) "Nonvoting Common Stock" means the Nonvoting Common Stock, $.01 ---------------------- par value per share, of the Company. (jj) "Permit" is defined in Section 2.1(c). ------ (kk) "Permitted Liens" means those Liens (A) securing debt that is --------------- reflected on the balance sheets or the notes thereto contained in the Company SEC Documents filed with the SEC and publicly available prior to the date hereof, (B) for Taxes not yet due or payable or being contested in good faith and for which adequate reserves have been established in accordance with GAAP, (C) that constitute mechanics', carriers', workmens' or like liens, liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course, (D) Liens incurred or deposits made in the ordinary course of business consistent with past practice in connection with workers' compensation, unemployment insurance and social security, retirement and other legislation and (E) easements, covenants, declarations, rights or way, encumbrances, or similar restrictions in connection with real property owned by the Company of its Subsidiary that do not materially impair the use of such real property by the Company and its Subsidiary, and in the case of Liens described in clauses (B), (C), (D) or (E) that, individually or in the aggregate, would not have a material Adverse Effect on the Company and its Subsidiary, taken as a whole. (ll) "Person" means any individual, partnership, joint venture, ------ corporation, limited liability company, trust, unincorporated organization, government or department or agency of a government or other entity. (mm) "Plans" is defined in Section 2.1(l). ----- (nn) "Purchase Price" is defined in Section 1.1. -------------- (oo) "Purchaser" is defined in the recitals to this Agreement. --------- (pp) "Purchaser Indemnifiable Losses" is defined in Section 8.1. ------------------------------ (qq) "Purchaser Indemnitees" is defined in Section 8.1. --------------------- (rr) "Registration Rights Agreement" is defined in the recitals to ----------------------------- this Agreement. (ss) "Representative" means an agent or employee of Purchaser, or of -------------- an independent public accounting firm, law firm, or other consulting company or advisor of Purchaser. (tt) "SEC" means the Securities and Exchange Commission. --- 24 (uu) "Securities Act" means the Securities Act of 1933, as amended, -------------- or any successor federal statute, and the rules and regulations of the SEC promulgated thereunder, all as the same shall be in effect from time to time. (vv) "Shares" is defined in Section 1.1. ------ (ww) "Subsidiary" means, as to any Person, any corporation if at ---------- least a majority of the shares of stock of which having general voting power under ordinary circumstances to elect a majority of the Board of Directors of such corporation (irrespective of whether or not at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency) is, at the time as of which the determination is being made, owned by such Person, or its Subsidiary or by such Person and its Subsidiary and includes 454 Corporation. (xx) "Taxes" is defined in Section 2.1(k). ----- (yy) "Tax Returns" is defined in Section 2.1(k). ----------- (zz) "Total Voting Power" means at any time the total combined ------------------ voting power in the general election of directors of all the Voting Securities then outstanding. (aaa) "Voting Securities" means at any time, shares of any class of ----------------- capital stock of the Company which are then entitled to vote generally in the election of directors. ARTICLE 10. MISCELLANEOUS Section 10.1 Severability. If any term, provision, covenant or ------------ restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants, and restrictions without including any of such which may be hereafter declared invalid, void or unenforceable. Section 10.2 Specific Enforcement. Purchaser, on the one hand, and the -------------------- Company, on the other, acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions hereof in any court of the United States or any state thereof having jurisdiction, this being in addition to any other remedy to which they may be entitled at law or equity. Section 10.3 Entire Agreement. This Agreement (including the documents ---------------- set forth in the Exhibits and Schedules hereto) and the Collaboration Agreement contain the entire understanding of the parties with respect to the transactions contemplated hereby. Section 10.4 Counterparts. This Agreement may be executed in one or more ------------ counterparts, all of which shall be considered one and the same agreement, and shall become 25 effective when one or more of the counterparts have been signed by each party and delivered to the other parties, it being understood that all parties need not sign the same counterpart. Section 10.5 Notices. All notices and other communications required or ------- permitted under this Agreement shall be effective upon receipt and shall be in writing and may be delivered in person, by telecopy, overnight delivery service or registered or certified United States mail, addressed to the Company or the Purchaser, as the case may be, at their respective addresses set forth below: If to the Company: If to Purchaser: CuraGen Corporation BAYER AG 555 Long Wharf Drive D 51368 11th Floor Leverkeusen New Haven, Connecticut 06511 Federal Republic of Germany Attn: Chief Executive Officer Attn: General Counsel Telephone (203) 401-3330 Telephone: 011 49 214 30 81803 Facsimile: (203) 401-3333 Facsimile: 011 49 214 30 50848 With copies to: With copies to: CuraGen Corporation Bayer Corporation, Inc. 555 Long Wharf Drive 400 Morgan Lane 11th Floor West Haven, CT New Haven, Connecticut 06511 Attn: Legal Department Attn: Legal Department Telephone: (203) 812-2401 Telephone (203) 401-3330 Facsimile: (203) 812-2795 Facsimile: (203) 401-3333 and to: and to: Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Wilmer, Cutler & Pickering One Financial Center 2445 M Street Boston, Massachusetts 02111 Washington, D.C. 20037 Attn: Michael L. Fantozzi Attn: Richard W. Cass Telephone (617) 542-6000 Telephone (202) 663-6503 Facsimile: (617) 542-2241 Facsimile: (202) 663-6363 All notices and other communications shall be effective upon the earlier of actual receipt thereof by the person to whom notice is directed or (a) in the case of notices and communications sent by personal delivery or telecopy, one business day after such notice or communication arrives at the applicable address or was successfully sent to the applicable telecopy number, (b) in the case of notices and communications sent by overnight delivery service, at noon (local time) on the second business day following the day such notice or communications was delivered to such delivery service, and (c) in the case of notices and communications sent by United States mail, 26 seven days after such notice or communication shall have been deposited in the United States mail. Any notice delivered to a party hereunder shall be sent simultaneously, by the same means, to such party's counsel as set forth above. Section 10.6 Amendments. This Agreement may be amended as to Purchaser ---------- their successors and assigns (determined as provided in Section 10.8), and the Company may take any action herein prohibited, or omit to perform any act required to be performed by it, if the Company shall obtain the written consent of Purchaser. This Agreement may not be waived, changed, modified, or discharged orally, but only by an agreement in writing signed by the party or parties against whom enforcement of any waiver, change, modification or discharge is sought or by parties with the right to consent to such waiver, change, modification or discharge on behalf of such party. Section 10.7 Cooperation. Purchaser and the Company agree to take, or ----------- cause to be taken, all such further or other actions as shall reasonably be necessary to make effective and consummate the transactions contemplated by this Agreement, including, without limitation, making all required filings under the HSR Act, if any. Section 10.8 Successors and Assigns. All covenants and agreements ---------------------- contained herein shall bind and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that Purchaser may -------- ------- assign its rights hereunder (including its right to purchase the Shares) to an Affiliate of Purchaser, provided that such Affiliate agrees in writing to be bound by the terms and conditions set forth herein, and the Company may not assign any of its rights under this Agreement without the written consent of Purchaser, which consent shall not be unreasonably withheld. Section 10.9 Expenses and Remedies. Whether or not the Closing takes --------------------- place, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the party incurring such expense; provided, however, that the Parties shall share equally the cost of any -------- ------- filing fees under the HSR Act. Section 10.10 Transfer of Shares. Purchaser understands and agrees that ------------------ the Shares have not been registered under the Securities Act or the securities laws of any state and that they may be sold or otherwise disposed of only in one or more transactions registered under the Securities Act and, where applicable, such laws or as to which an exemption from the registration requirements of the Securities Act and, where applicable, such laws is available. Purchaser acknowledges that except as provided in the Registration Rights Agreement, Purchaser has no right to require the Company to register the Shares and understands and agrees that each certificate representing the Shares (other than, with respect to the first legend, Shares that are no longer subject to the provisions of Article 4 and other than, with respect to the second legend, Shares which have been transferred in a transaction registered under the Securities Act or exempt from the registration requirements of the Securities Act pursuant to Rule 144 thereunder or any similar rule or regulation) shall bear the following legends: "THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS RESTRICTED BY AN AGREEMENT ON FILE AT THE OFFICE OF THE CORPORATION. 27 "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS." and Purchaser agrees to transfer the Shares only in accordance with the provisions of such legends. Section 10.11 Governing Law. This Agreement shall be governed by and ------------- construed and enforced in accordance with the laws of the State of Delaware without regard to conflicts of law principles. Section 10.12 Publicity. The Company and Purchaser will consult and --------- cooperate with each other before issuing, and provide each other the opportunity to review and comment upon, any press release or otherwise making any public statement with respect to the transactions contemplated by this Agreement. Section 10.13 No Third Party Beneficiaries. Nothing contained in this ---------------------------- Agreement is intended to confer upon any Person other than the parties hereto and their respective successors and permitted assigns, any benefit, right or remedies under or by reason of this Agreement; provided, however, that the -------- ------- parties hereto hereby acknowledge and agree that the Purchaser Indemnities (other than Purchaser) are third party beneficiaries of Article 8 of this Agreement. Section 10.14 Consent to Jurisdiction. Each of the Company and Purchaser ----------------------- irrevocably submits to the personal exclusive jurisdiction of the United States District Court for the District of Delaware for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby (and, to the extent permitted under applicable rules of procedure, agrees not to commence any action, suit or proceeding relating hereto except in such court). Each of the Company and Purchaser further agrees that service of any process, summons, notice or document hand delivered or sent by registered mail to such party's respective address set forth in Section 10.5 will be effective service of process for any action, suit or proceeding in Delaware with respect to any matters to which it has submitted to jurisdiction as set forth in the immediately preceding sentence. Each of the Company and Purchaser irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in the United States District court for the District of Delaware, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in such court that any such action, suit or proceeding brought in such court has been brought in an inconvenient forum. Signature Page Follows 28 IN WITNESS WHEREOF, PURCHASER and the COMPANY have caused this Agreement to be executed as of the day and year first above written. BAYER AG By: /s/ W. Hartwig -------------------------------------- Name: W. Hartwig Title: EVP By: /s/ A. Buchmeier -------------------------------------- Name: A. Buchmeier Title: Senior Counsel CURAGEN CORPORATION By: /s/ Christopher K. McLeod -------------------------------------- Name: Christopher K. McLeod Title: Executive Vice President 29 SCHEDULE 2.1(e) Capitalization of 454 Corporation - --------------------------------- Preferred Stock Series: 15,000,000 shares authorized, $.01 par value Series A - 6,000,000 shares issued and outstanding Series A issued to CuraGen Corporation for $20,000,000 cash and $177,827 of fixed assets Series B - 4,000,000 shares issued and outstanding 5,000,000 shares undesignated Common Stock: 20,000,000 shares authorized No shares of Common Stock are issued or outstanding 2000 Employee, Director and Consultant Stock Plan: 2,500,000 shares of common stock authorized 907,206 option outstanding

Preferred Cash Contributed Shares Par at Par Issuance Fixed Total Issued Value Value Proceeds Assets Proceeds Series A Preferred Stock Issued to CuraGen Corporation 6,000,000 $ 0.01 60,000 20,000,000 177,827 20,177,827 Series B Preferred Stock Issued to Various Investors at $5.00 per share 4,000,000 $ 0.01 40,000 20,000,000 0 20,000,000 Summary Total Preferred Shares Outstanding 10,000,000 100,000 40,000,000 177,827 40,177,827 Par value of stock (100,000) Equity Offering Expenses (844,532) ------------------------------------------------------------------------------------------------- Total 100,000 40,000,000 177,827 39,233,295

30 SCHEDULE 2.1(j) Contracts prohibiting or materially restricting the ability of the Company or - ----------------------------------------------------------------------------- its Subsidiary to conduct its business, to engage in any business or operate in - ------------------------------------------------------------------------------- any geographical area or compete with any person: - ------------------------------------------------- The Technology Transfer and License Agreement by and between CuraGen Corporation and 454 Corporation dated June 6, 2000 sets forth the following limitations. Defined terms have the same meaning as the Technology Transfer and License Agreement. Section 2.1.7. The Subsidiary agrees that (i) prior to the closing of a Qualified Public Offering, the Subsidiary will not engage independently or with any Third Party in any business, venture or activity outside the 454 Field, and (ii) after the closing of a Qualified Public Offering, 454 shall not engage independently or with any Third Party in any business, venture or activity within the CuraGen Field. 31 EXHIBIT A CURAGEN CORPORATION REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is made as of January 12, 2001 by and between CuraGen Corporation, a Delaware corporation (the "Company"), and Bayer AG, a corporation organized under the laws of the Federal Republic of Germany ("Purchaser"). WHEREAS, the Company and Purchaser have entered into a Stock Purchase Agreement, dated as of January 12, 2001 (the "Stock Purchase Agreement"), pursuant to which the Purchaser has agreed to purchase 3,112,482 Shares of Voting Common Stock, par value $.01 per share, of the Company, upon the terms and conditions set forth therein; and WHEREAS, in order to induce the Purchaser to enter into the Stock Purchase Agreement, the Company has agreed to provide the registration rights set forth in this Agreement for the benefit of Purchaser and its direct and indirect transferees upon the terms and conditions set forth herein; and WHEREAS, the execution and delivery of this Agreement is a condition to the Purchaser's obligations pursuant to the Stock Purchase Agreement. NOW, THEREFORE, in consideration of the premises and the mutual covenants set forth herein, the Company and Purchaser agree as follows: ARTICLE 1. DEFINITIONS Capitalized terms used herein without definition shall have the meanings assigned to such terms in the Stock Purchase Agreement. For the purposes of this Agreement: (a) "Commission" means the U.S. Securities and Exchange Commission or any other governmental authority from time to time administering the Securities Act. (b) "Common Stock" means the Voting Common Stock, par value $.01 per share, of the Company. (c) "DTC" means the Depository Trust Company. (d) "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any successor federal statute and the rules and the regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time. (e) "Holder" means any Person owning or having the right to acquire Registrable Securities, including an Affiliate or any successor, assignee or transferee of Purchaser or a Holder that has received Registrable Securities in accordance with Article 13 hereof. (f) "NASD" means the National Association of Securities Dealers, Inc. (g) "Person" means any natural person, firm, partnership, association, corporation, company, joint venture, unincorporated association, trust, business trust, government or department or agency of a government, limited liability company or other entity. (h) "Prospectus" means the prospectus included in any Registration Statement (including without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering or any portion of the Registrable Securities covered by such Registration Statement and all other amendments and supplements to the prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such prospectus. (i) "Registrable Securities" means (a) the Shares of Common Stock received by the Purchaser pursuant to the Stock Purchase Agreement and (b) any capital stock or other securities of the Company issued or issuable with respect to the Shares, (i) upon any conversion or exchange thereof, (ii) by way of stock dividend or other distribution, stock split or reverse stock split, or (iii) in connection with a combination of shares, recapitalization, merger, consolidation, exchange offer or other reorganization. As to any particular Registrable Securities, once issued such securities shall cease to be Registrable Securities when (A) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such Registration Statement, (B) such securities become eligible to be distributed to the public in reliance upon Rule 144 (or any successor provision) under the Securities Act, provided that at the time such securities are proposed to be disposed of, they may be sold under Rule 144 without any limitation on the amount of such securities which may be sold or (C) they shall have ceased to be outstanding. (j) "Registration Expenses" means all fees and expenses incident to the performance of or compliance with the provisions of this Agreement, whether or not any Registration Statement is filed or becomes effective, including, without limitation, all (a) registration and filing fees (including, without limitation, (i) fees with respect to filings required to be made and other expenses associated with the NASD and any other applicable exchange in connection with an underwritten offering), and (ii) fees and expenses of compliance with state securities or blue sky laws (including, without limitation, fees and distributions of counsel for the underwriter or underwriters in connection with blue sky qualifications of the Registrable Securities and determination of eligibility of the Registrable Securities for investment under the laws of such jurisdictions as are provided in Section 5(e)), (b) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities in a form eligible for deposit with DTC and of printing prospectuses), (c) fees and disbursements of all independent certified public accountants referred to in Article 5 (including, without limitation, the reasonable expenses of any special audit and "cold comfort" letters required by or incident to such performance), (d) the fees and expenses of any "qualified independent underwriter" or other independent appraiser participating in an offering pursuant to the NASD Rules of Conduct and the corresponding rules of any other applicable exchange, (e) liability insurance under the 2 Securities Act or any other securities laws, if the Company desires such insurance, (f) fees and expenses of all attorneys, advisers, appraisers and other persons retained by the Company or any Subsidiary of the Company, (g) internal expenses of the Company and its Subsidiaries (including, without limitation, all salaries and expenses of officers and employees of the Company and its Subsidiaries, other general overhead expenses of the Company and its Subsidiaries, and other expenses for the performance of legal or accounting duties), (h) the expense of any annual audit and the preparation of historical and pro forma financial statements or other data normally prepared by the Company in the ordinary course of business, (i) the expenses relating to printing, word processing and distributing all Registration Statements, underwriting agreements, securities sales agreements, and any other documents necessary in order to comply with this Agreement, (j) any fees and disbursements of any other underwriters and broker-dealers customarily paid by issuers or sellers of securities, and (k) the fees and disbursements of not more than one (1) counsel (together with appropriate local counsel) chosen by the Holders of a majority of the Registrable Securities to be included in such Registration Statement; provided, however, that in all cases in which the Company is required to pay Registration Expenses hereunder, Registration Expenses shall exclude any underwriting discounts, selling commissions or any transfer taxes payable in respect of the sale of the Registrable Securities by the Holders thereof. (k) "Registration Statement" means any registration statement of the Company that covers any of the Registrable Securities pursuant to the provisions of this Agreement, and all amendments and supplements to any such registration statement, including post-effective amendments, in each case including the Prospectus, all exhibits and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. (l) "Rule 144" means Rule 144 (or any successor provision) under the Securities Act. (m) "Securities Act" means the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time. (n) "Special Registration" means the registration of share of equity securities and/or options or other rights in respect thereof to be offered solely to directors, members of management, employees, consultants or sales agents, distributors or similar representatives of the Company or its direct or indirect Subsidiaries, solely on Form S-8 or any successor form, a registration on Form S-4 with respect to any merger, consolidation or acquisition, or a registration on another form not available for registering Registrable Securities for sale to the public. (o) "underwritten registration" or "underwritten offering" means a registration in which securities of the Company (including Registrable Securities) are sold to an underwriter for reoffering to the public. 3 ARTICLE 2. DEMAND REGISTRATION (a) Request for Registration. Subject to the provisions of Section 2(d) and Article 8, at any time or from time to time on or after June 30, 2002, Holders of Registrable Securities shall have the right to make a written request (the "Initiating Holders") that the Company effect a registration under the Securities Act of all or part of its Registrable Securities of the Holders making such request; provided, however, that Purchaser or a Purchaser Affiliate may demand registration beginning six months after the date hereof for Registrable Securities that may be acquired upon the exercise of Convertible Securities, so long as any exercise or exchanges of Convertible Securities for Registrable Securities pursuant to the terms and conditions of the Convertible Securities shall not occur until a sale, transfer or disposition of the Registrable Securities would be permitted under Section 4.1 of the Stock Purchase Agreement. A request for registration pursuant to this Article 2 (a "Demand Registration") shall specify the approximate number of Registrable Securities requested to be registered, the anticipated per share price range for such offering and the intended method or disposition thereof by such Initiating Holders. (b) Obligation to Effect Registration. Within five (5) days after receipt by the Company of any request for Demand Registration, the Company shall promptly give written notice of such requested registration to all Holders. Such Holders shall have the right, by giving written notice to the Company within twenty (20) days after the Company provides its notice, to elect to have included in such registration such of their Registrable Securities as such Holders may request in such notice of election. Thereupon, the Company shall, as expeditiously as possible, use reasonable best efforts to effect the registration under the Securities Act of all Registrable Securities that the Company has been requested to so register; provided, that if the underwriter (if any) managing the offering determines that, because of marketing factors, all of the Registrable Securities requested to be registered by all Holders may not be included in the offering, then all Holders who have requested registration shall participate in the offering in accordance with Section 2(h). (c) Registration Statement Form. Registrations under this Article 2 shall be on such appropriate form of Registration Statement of the Commission as shall be selected by the Company and available to it under the Securities Act. The Company agrees to include in any such Registration Statement all information which, in the opinion of counsel to the Company, is required to be included therein under the Securities Act. (d) Limitations on Registration. The Company shall not be required to effect more than two (2) Demand Registrations pursuant to this Article 2. In addition, the Company shall not be required to effect any such registration (other than on Form S-3 or any other successor form relating to secondary offerings) during the period starting with the date sixty (60) days prior to the Company's estimated date of filing of, and ending on the date ninety (90) days immediately following the effective date of, any registration statement (other than a Special Registration) pertaining to the securities of the Company, provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective. The Company shall not be required to effect the Demand Registration if the Holders propose to sell Registrable Securities that have a market value at the time of such demand of less than $3,000,000. 4 (e) Inclusion of Other Securities. The Registration Statement filed pursuant to the request of the Holders may, subject to the provisions of Section 2(h), include other securities of the Company with respect to which registration rights have been granted, and may include securities of the Company being sold for the account of the Company. If the Company shall request inclusion in any registration, securities being sold for its own account, or if other persons shall request inclusion in any registration pursuant to Section 2.(h), the Holders shall offer to include such securities in the underwriting. (f) Effective Registration Statement. A Demand Registration shall not be deemed to have been effected unless a Registration Statement covering all of the Registrable Securities requested to be included in such registration by the Holders thereof and as reduced, if necessary, in accordance with Section 2(g) hereto has been declared effective by the Commission and remains continually effective for the period specified in Section 5(b). (g) Suspension. In addition to the limitations in Section 2(d), if the Board of Directors of the Company, in its good faith judgment, determines that any registration under the Securities Act of Registrable Securities should not be made or continued because it would materially interfere with any material financing, acquisition, corporation reorganization, merger, or other transaction involving the Company or any of its subsidiaries (a "Valid Business Reason"), (i) the Company may postpone filing a Registration Statement relating to a Demand Registration until such Valid Business Reason no longer exists, but in no event for more than one hundred twenty (120) days, and (ii) in case a Registration Statement has been filed relating to a Demand Registration, the Company may cause such Registration Statement to be withdrawn and its effectiveness terminated or may postpone amending or supplementing such Registration Statement until such Valid Business Reason no longer exists, but in no event for more than one hundred twenty (120) days (the "Postponement Period"); provided, however, that in no event shall the Company be permitted to postpone or withdraw a Registration Statement within 120 days after the expiration of any Postponement Period. (h) Allocation. If any Demand Registration involves an underwritten offering and the managing underwriter of such offering shall advise the Company that, in its view, the number of Registrable Securities and other shares of common stock of the Company with registration rights (the "Section 2 Other Shares") requested to be included in such registration exceeds the largest number that can be sold in an orderly manner in such offering within a price range acceptable to the Holders of Registrable Securities requesting the registration, the Company shall include in such registration: (i) first, to each Initiating Holder, pro rata on the basis of the number of shares of Registrable Securities held by such Initiating Holders that such Initiating Holders had requested to be included in the registration, provided, however, if any Initiating Holder does not request inclusion of the maximum number of shares of Registrable Securities allocated to him pursuant to the above-described procedure, the remaining portion of his allocation shall be reallocated among the remaining Initiating Holders whose allocations did not satisfy their requests pro rata on the basis of the number of shares of Registrable Securities held by such remaining Initiating Holders that such Holders had requested to be included in the registration, and this procedure shall be repeated until all of the shares of Registrable Securities which may be included in the registration on behalf of the Initiating Holders have been so allocated, 5 (ii) thereafter, to the selling holders of the non-requesting Registrable Securities and Section 2 Other Shares, pro rata on the basis of the number of shares of Registrable Securities and Section 2 Other Shares held by such Holders and other selling stockholders that such Holders and other selling stockholders had requested to be included in the registration; provided, however, that if any Holder or other selling stockholder does not request inclusion of the maximum number of shares of Registrable Securities and Section 2 Other Shares allocated to him pursuant to the above-described procedure, the remaining portion of his allocation shall be reallocated among those requesting Holders and other selling stockholders whose allocations did not satisfy their requests pro rata on the basis of the number of shares of Registrable Securities and Section 2 Other Shares held by such Holders and other selling stockholders that such Holders and other selling stockholders had requested to be included in the registration, and this procedure shall be repeated until all of the shares of Registrable Securities and Section 2 Other Shares which may be included in the registration on behalf of the Holders and other selling stockholders have been so allocated, and (iii) thereafter to the Company. The Company shall not limit the number of Registrable Securities to be included in a registration pursuant to this Section 2(h) in order to include shares held by stockholders with no registration rights or to include founder's stock or any other shares of stock issued to employees, officers, directors, or consultants pursuant to the Company's employee stock option plans in order to include in such registration securities registered for the Company's own account. ARTICLE 3. PIGGYBACK REGISTRATION (a) Inclusion in Piggyback Registration. If the Company at any time on or after June 30, 2002 proposes to register any of its securities under the Securities Act (other than pursuant to Article 2 or a Special Registration), whether or not for sale for its own account, (a "Company Registration"), it shall each such time, prior to such filing, give prompt written notice to all Holders of Registrable Securities of its intention to do so and, upon the written request of any Holder of Registrable Securities given to the Company within twenty (20) days after the Company has provided such notice (which request shall state the intended method of disposition of such Registrable Securities), the Company shall use reasonable best efforts to cause all Registrable Securities that the Company has been requested by the Holders thereof to register to be so registered under the Securities Act to the extent necessary to permit their disposition in accordance with the intended methods of distribution specified in the request of such Holder or Holders; provided, that if at any time after giving written notice of its intention to register any securities and prior to the effective date of the Registration Statement filed in connection with such registration, the Company shall determine for any reason not to register such securities, the Company may, at its election, give written notice of such determination to each Holder that was previously notified of such registration, and, thereupon, shall not register any Registrable Securities in connection with such registration (but shall nevertheless pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of any Holders to request that a registration be effect under Article 2 and provided further, that no registration effected under this Article 3 shall relieve the Company from its obligations to effect Registration upon request under Article 2. 6 (b) Terms of Underwriting. In connection with any offering under this Article 3 involving an underwritten offering, the Company shall not be required to include any Registrable Securities in such offering unless the Holder thereof accepts the terms and enters into an underwriting agreement, if any, of the underwriting as agreed upon between the Company and the underwriters selected by it provided that such terms must be reasonably satisfactory in substance and form to the Holder and consistent with this Agreement, and then only in such quantity as will not, in the opinion of the managing underwriter, jeopardize the success of the offering by the Company. (c) Allocation. If any Company Registration involves an underwritten offering and the managing underwriter of such offering shall advise the Company that, in its view, the number of securities requested to be included in such registration exceeds the largest number that can be sold in an orderly manner in such offering within a price range acceptable to the Company, the Company shall include in such registration: (i) in the event of a Company initiated registration, first to the Company for securities being sold for its own account, or (ii) in the event of a demand registration by holders of other shares of common stock of the Company with registration rights ("Section 3 Other Shares"), first to the demanding holders of such Section 3 Other Shares. Thereafter the number of shares to be included in the registration shall be allocated as set forth in Section 3(c)(iii). If any person does not agree to the terms of any such underwriting, such person shall be excluded therefrom by written notice from the Company or the underwriter. Any Registrable Securities or other securities excluded or withdrawn from such underwriting shall be withdrawn from such registration. If shares are so withdrawn from the registration or if the number of shares of Registrable Securities to be included in such registration was previously reduced as a result of marketing factors, the Company shall then offer to all persons who have retained the right to include securities in the registration the right to include additional securities in the registration in an aggregate amount equal to the number of shares so withdrawn, with such shares to be allocated among the persons requesting additional inclusion in accordance with Section 3(c). (iii) For purposes of this Section 3, in any circumstance in which all of the Registrable Securities and non-demanding Section 3 Other Shares requested to be included in a registration on behalf of the Holders or non- demanding selling stockholders cannot be so included as a result of limitations of the aggregate number of shares of Registrable Securities and Section 3 Other Shares that may be so included, the number of shares of Registrable Securities and non-demanding Section 3 Other Shares that may be so included shall be allocated among the Holders and non-demanding selling stockholders requesting inclusion of shares such that the selling holders of the Registrable Securities and non-demanding Section 3 Other Shares shall have their shares included pro rata on the basis of the number of shares of Registrable Securities and Section 3 Other Shares held by such Holders and non-demanding selling stockholders that such Holders and non-demanding selling stockholders had requested to be included in the registration; provided, however, that such allocation shall not operate to reduce the aggregate number of Registrable Securities and Section 3 Other Shares to be included in such registration. If any Holder or non-demanding selling stockholder does not request inclusion of the maximum number of shares of Registrable Securities and Section 3 Other Shares allocated to such person 7 pursuant to the above-described procedure, the remaining portion of such person's allocation shall be reallocated among those requesting Holders and other non-demanding selling stockholders whose allocations did not satisfy their requests pro rata on the basis of the number of shares of Registrable Securities and Section 3 Other Shares held by such Holders and other non-demanding selling stockholders that such Holders and other non-demanding selling stockholders had requested to be included in the registration, and this procedure shall be repeated until all of the shares of Registrable Securities and Section 3 Other Shares which may be included in the registration on behalf of the Holders and other non-demanding selling stockholders have been so allocated. The Company shall not limit the number of Registrable Securities to be included in a registration pursuant to this Agreement in order to include shares held by stockholders with no registration rights or to include founder's stock or any other shares of stock issued to employees, officers, directors, or consultants pursuant to the Company's employee stock option plans. ARTICLE 4. ALLOCATION OF EXPENSES The Company will pay all Registration Expenses of all registrations under this Agreement. ARTICLE 5. OBLIGATIONS OF THE COMPANY If and whenever the Company is required to use best efforts to effect the registration under the Securities Act of any Registrable Securities pursuant to Articles 2 and 3 of this Agreement, the Company shall: (a) file with the Commission, as soon as practicable, a Registration Statement with respect to such Registrable Securities, make all required filings with the NASD and any other applicable exchange, and use best efforts to cause such Registration Statement to become effective at the earliest possible date and remain effective; (b) prepare and file with the Commission such amendments and supplements to the Registration Statement and the Prospectus used in connection therewith and such other documents as may be necessary to keep the Registration Statement effective until the earlier of (i) one hundred twenty (120) days after the effective date of such Registration Statement or (ii) the consummation of the disposition by the Holders of all the Registrable Securities covered by such Registration Statement and otherwise comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement; (c) furnish to counsel (if any) selected by the Holders of a majority of the Registrable Securities covered by such Registration Statement and to counsel for the underwriters in any underwritten offering copies of all documents proposed to be filed with the Commission in connection with such registration a reasonable time prior to the proposed filing thereof and give reasonable consideration in good faith to any comments of such Holders, counsel and underwriters. (d) furnish to each seller of such securities, without charge, such number of conformed copies of such Registration Statement and of each such amendment and supplement thereto (in each case, including all exhibits (including all exhibits incorporated by reference), financial statements, schedules, and all documents incorporated therein, deemed to be 8 incorporated therein by reference or filed therewith, except that the Company shall not be obligated to furnish any seller of securities with more than two copies of such exhibits and documents), such numbers of copies of the Prospectus included in such Registration Statement (including each preliminary prospectus) in conformity with the requirements of the Securities Act, and such other documents, as such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller; (e) use its reasonable best efforts to register or qualify and cooperate with the Holders of Registrable Securities, the underwriters and their respective counsels in connection with the registration or qualification (or exemption from such registration or qualification) of the securities covered by such Registration Statement under such other securities or blue sky laws of such jurisdictions as each seller shall request; provided, however, that where Registrable Securities are offered other than through an underwritten offering, the Company agrees to cause its counsel to perform blue sky investigations and file registrations and qualification required to be filed pursuant to this Section 5(e); keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be effective hereunder and do any and all other acts and things which may be necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the securities owned by such seller, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it is not so qualified, subject itself to taxation in any jurisdiction wherein it is not so subject, or take any action which would subject it to general service of process in any jurisdiction wherein it is not so subject; (f) in connection with an underwritten public offering only, furnish to each seller in a signed counterpart, addressed to the sellers, of (i) an opinion of counsel for the Company experienced in securities law matters, dated the effective date of the Registration Statement, and (ii) a "cold comfort" letter signed by the independent public accountants who have issued an audit report on the Company's financial statements included in the Registration Statement, subject to such seller having executed and delivered to the independent public accountants such certificates and documents as such accountants shall reasonably request, covering substantially the same matters with respect to the Registration Statement (and the Prospectus included therein) and, in the case of such accountants' letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to the underwriters in underwritten public offerings of securities; (g) (i) notify each Holder of Registrable Securities subject to such Registration Statement if such Registration Statement, at the time it or any amendment thereto became effective, (x) contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading upon discovery by the Company of such material misstatement or omission or (y) upon discovery by the Company of the happening of any event as a result of which the Company believes there 9 would be such a material misstatement or omission, and, as promptly as practicable, prepare and file with the Commission a post-effective amendment to such Registration Statement and use reasonable best efforts to cause such post- effective amendment to become effective such that such Registration Statement, as so amended, shall not contain an untrue statement or a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (ii) notify each Holder of Registrable Securities subject to such Registration Statement, at any time when a Prospectus related therefor is required to be delivered under the Securities Act, if the Prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading upon discovery by the Company of such material misstatement or omission or upon the discovery by the Company of the happening of any event as a result of which the Company believes that there would be a material misstatement or omission, and, as promptly as is practicable, prepare and furnish to such Holder a reasonable number of copies of a supplement to or an amendment of such Prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (h) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement of the Company complying with the provisions of Section 11(a) of the Securities Act and Rule 158 under the Securities Act (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Securities are sold to an underwriter or to underwriters in a firm commitment or best efforts underwritten offering, and (ii) if not sold to an underwriter or to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Company after the effective date of the relevant Registration Statement, which statements shall cover said 12-month periods; (i) promptly notify each Holder of Registrable Securities covered by such Registration Statement, their counsel and the underwriters (i) when such Registration Statement, or any post-effective amendment to such Registration Statement, shall have become effective, or any amendment of or supplement to the Prospectus used in connection therewith shall be filed, (ii) of any request by the Commission to amend such Registration Statement or to amend or supplement such Prospectus or for additional information, (iii) of the issuance by the Commission of any stop order suspending the effectiveness of such Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or the initiation or threatening of any proceedings for any of such purposes, (iv) of the suspension of the qualification of such securities for offering or sale in any jurisdiction, or of the institution of any proceedings for any of such purposes and (v) if at any time when a Prospectus is to be required by the Securities Act to be delivered in connection with the sale of the Registrable Securities, the representations and warranties of the Company contained in any agreement (including the 10 underwriting agreement contemplated in Section 6(b) below), to the knowledge of the Company, cease to be true and correct in any material respect; (j) use its reasonable best efforts to prevent the issuance of any order suspending the effectiveness of the Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Registrable Securities covered thereby for sale in any jurisdiction, and, if any such order is issued, to use its reasonable best efforts obtain the withdrawal of any such order at the earliest possible moment; (k) if requested by the managing underwriter, if any, (i) promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriter, if any, reasonably requests to be included therein to comply with applicable law, and (ii) make all required filings of such prospectus supplement or such post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment; (l) cooperate with the Holders and the managing underwriter, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold, which certificates shall not bear any restrictive legends whatsoever and shall be in a form eligible for deposit with DTC, and enable such Registrable Securities to be in such denominations and registered in such names as the underwriters, if any, or Holders may reasonably request at least two (2) business days prior to any sale of Registrable Securities in a firm commitment underwritten public offering; (m) use its reasonable best efforts to cause the Registrable Securities covered by a Registration Statement to be registered with, and to obtain the consent or approval of, each governmental agency or authority, whether federal, state, local or foreign, which may be required to effect such registration or the offering or sale in connection therewith or to enable the sellers to offer, or to consummate the disposition of, the Registrable Securities subject to such Registration Statement, except as may be required solely as a consequence of the nature of such seller's business, in which case the Company will cooperate with all reasonable respects with the filing of the Registration Statement and the granting of such approvals; (n) prior to the effective date of the Registration Statement, (i) provide the registrar for the Common Stock or such other Registrable Securities with printed certificates for such securities in a form eligible for deposit with DTC and (ii) provide a CUSIP number for such securities. (o) The Company agrees not to file or make any amendment to any Registration Statement with respect to any Registrable Securities, or any amendment of or supplement to the Prospectus used in connection therewith, which refers to any seller of any securities covered thereby by name, or otherwise identifies such seller as the holder of any securities of the Company, without the consent of such seller, such consent not to be unreasonably withheld, except that no such consent shall be required for any disclosure that is required by law. 11 ARTICLE 6. UNDERWRITTEN OFFERINGS The provisions of this Article 6 do not establish additional registration rights but instead set forth procedures applicable, in addition to those set forth in Articles 2, 3 and 5, to any registration that is an underwritten offering. (a) Underwritten Offerings Exclusive. Whenever a request for Demand Registration is for an underwritten offering, only securities that are to be distributed by the underwriters may be included in the Registration. (b) Underwriting Agreement. If requested by the underwriters for any underwritten offering by Holders pursuant to a request for Demand Registration, the Company shall enter into an underwriting agreement with such underwriters for such offering, such agreement to be reasonably satisfactory in substance and form to the Company and Holders of a majority of the Registrable Securities to be covered by such registration and to the underwriters and to contain such representations and warranties by the Company and such other terms and provisions as are customarily contained in agreements of this type, including, but not limited to, indemnities to the effect and to the extent provided in Article 10, provisions for the delivery of customary officers' certificates, opinions of counsel and accountants' "cold comfort" letters, and hold-back arrangements. The Holders of Registrable Securities to be distributed by such underwriters shall be parties to such underwriting agreement and may, at their option, require that any or all the representations and warranties by, and the agreements on the part of, the Company to and for the benefit of such underwriters be made to and for the benefit of such Holders and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreements shall also be conditions precedent to the obligations of such Holders. Each Holder of Registrable Securities shall furnish to the Company such information regarding such Holder and the distribution proposed by such Holder as the Company may reasonably request and as shall be reasonably required in connection with any registration, qualification, or compliance referred to in this Agreement, except to the extent that the furnishing of such information would violate any law or any contractual arrangement. The Company shall not be obligated to register the Registrable Securities of any Holder who fails promptly to provide to the Company such information as the Company may reasonably request at the time to enable the Company to comply with applicable laws or regulations or to facilitate preparation of the registration statement, including any information that the Holder fails to provide on the basis that such information would violate any law or any contractual arrangement. (c) Selection of Underwriters. The Company shall have the right to select any underwriters to administer the any underwritten offerings hereunder, subject to the consent of the Holders of a majority of the Registrable Securities to be registered pursuant to such offering, which shall not be unreasonably withheld. At least one of the underwriters chosen by the Company shall be an underwriter of nationally-recognized standing. (d) Hold Back Agreements. If and whenever the Company proposes to register any of its securities under the Securities Act, whether or not for its own account (other than pursuant to a Special Registration), or is required to use its best efforts to effect the 12 registration of any Registrable Securities under the Securities Act pursuant to Articles 2 or 3, each Holder, if requested by the managing underwriter in an underwritten offering, agrees by acquisition of such Registrable Securities not to effect (other than pursuant to such registration) any public sale or distribution, including, without limitation, any sale pursuant to Rule 144, of any Registrable Securities, any other equity securities of the Company or any securities convertible into or exchangeable or exercisable for any equity securities of the Company during the twenty (20) days prior to, and for ninety (90) days after the effective date of such registration (it being understood that in the case of an offering under a shelf registration statement under Rule 415, that the effective date shall be the date of the pricing of such offering), and the Company agrees to cause each director and executive officer of the Company to enter into a similar agreement with the Company. ARTICLE 7. PREPARATION, REASONABLE INVESTIGATION In connection with the preparation and filing of each Registration Statement registering Registrable Securities under the Securities Act, the Company shall give the Holders of Registrable Securities to be so registered and their underwriters, if any, and their respective counsel and accountants, the opportunity to participate in the preparation of such Registration Statement, each Prospectus included therein or filed with the Commission, and each amendment thereof or supplement thereto, and shall give each of them such access to all pertinent financial, corporate, and other documents and properties of the Company and its Subsidiaries, and such opportunities to discuss the business of the Company with its officers, directors, employees and the independent public accountants who have issued audit reports on its financial statements as shall be necessary, in the opinion of such Holders' and such underwriters' respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act. ARTICLE 8. OTHER REGISTRATIONS If and whenever the Company is required to use its best efforts to effect the registration under the Securities Act of any Registrable Securities pursuant to Articles 2 or 3, and if such registration shall not have been withdrawn or abandoned, the Company shall not be obligated to and shall not file any Registration Statement with respect to any of its securities (including Registrable Securities) under the Securities Act (other than a Special Registration), whether of its own accord or at the request or demand of any holder or holders of such securities, until a period of 180 days shall have elapsed from the effective date of such previous registration, provided that the Company shall not be excused from filing a Registration Statement by virtue of this Article 8 more than once in a 360 day period. ARTICLE 9. CERTAIN OBLIGATIONS OF HOLDERS (a) The Company may require each Holder of any Registrable Securities as to which any registration is being effected to furnish to the Company such information regarding such Holder and the intended method of disposition of such securities as the Company may from time to time reasonably request and as shall be required to effect the registration of such Holder's Registrable Securities. Each such Holder agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. 13 (b) Each Holder of Registrable Securities covered by a Registration Statement agrees that, upon receipt of any notice from the Company pursuant to Section 5(g), such Holder will promptly discontinue the disposition of Registrable Securities pursuant to such Registration Statement until such Holder shall have received, in the case of clause (i) of Section 5(g), notice from the Company that such Registration Statement has been amended, as contemplated by Section 5(g), and, in the case of clause (ii) of Section 5(g), copies of the supplemented or amended Prospectus contemplated by Section 5(g). If so directed by the Company, each Holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies, in such Holder's possession of the Prospectus covering such Registrable Securities at the time of receipt of such notice. In the event that the Company shall give any such notice, the period mentioned in Section 5(b) shall be extended by the number of days during the period from and including the date of the giving of such notice to and including the date when each seller of any Registrable Securities covered by such Registration Statement shall have received copies of the supplemented or amended Prospectus covering such Registrable Securities contemplated by Section 5(g). ARTICLE 10. INDEMNIFICATION AND CONTRIBUTION (a) In the event of any registration of any of the Registrable Securities under the Securities Act pursuant to this Agreement, the Company will indemnify and hold harmless the seller of such securities, its directors, officers, and employees, each other Person who participates as an underwriter, broker or dealer in the offering or sale of such securities, and each other person, if any, who controls such seller, underwriter, broker, dealer or any such participating Person within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities, joint or several, to which such seller or any such director, officer, employee, underwriter, broker, dealer, participating Person, or controlling Person may become subject under the Securities Act, the Exchange Act, state securities or blue sky laws, or otherwise, insofar as such losses, claims, damages, or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement under which such Registrable Securities were registered under the Securities Act, any preliminary prospectus, or Prospectus contained in the Registration Statement, or any amendment or supplement to such Registration Statement, or arise out of or are based upon the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and the Company shall reimburse such seller and each such director, officer, employee, underwriter, broker, dealer, participating Person, and controlling Person in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding as such expenses are incurred; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon any untrue statement or omission made in such Registration Statement, preliminary prospectus, or Prospectus, or any such amendment or supplement, in reliance upon and in conformity with information furnished to the Company, in writing, by or on behalf of such seller, underwriter, participating Person or controlling Person specifically for use in the preparation thereof. The indemnity agreement contained in this Article 10(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld). 14 (b) In the event of any registration of any of the Registrable Securities under the Securities Act pursuant to this Agreement, each seller of such securities, severally and not jointly, will indemnify and hold harmless the Company, each of its directors and officers and each underwriter (if any) and each person, if any, who controls the Company or any such underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities, joint or several, to which the Company, such directors and officers, underwriters, or controlling Persons may become subject under the Securities Act, Exchange Act, state securities or blue sky laws, or otherwise, insofar as such losses, claims, damages, or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement under which such securities were registered under the Securities Act, any preliminary prospectus or Prospectus contained in the Registration Statement, or any amendment or supplement to the Registration Statement, or arise out of or are based upon any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, if the statement or omission was made in reliance upon and in conformity with information relating to such seller furnished in writing to the Company by or on behalf of such seller expressly for use in connection with the preparation of such Registration Statement, preliminary prospectus, Prospectus, amendment, or supplement; provided, however, that the liability of each such seller hereunder shall be in proportion to and limited to the gross amount received by such seller from the sale of Registrable Securities sold in connection with such registration. (c) Each party entitled to indemnification under this Article 10 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom; provided, that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld); and, provided, further, that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Article 10, except to the extent that the Indemnifying Party is adversely affected by such failure. The Indemnified Party may participate in such defense at such party's expense; provided, however, that the Indemnifying Party shall pay such expense if representation of such Indemnified Party by the counsel retained by the Indemnifying Party would be inappropriate due to actual or potential differing interests or conflicts between the Indemnified Party and any other party represented by such counsel in such proceeding. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect of such claim or litigation, and no Indemnified Party shall consent to entry of any judgment or settle such claim or litigation without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld. (d) If for any reason the foregoing indemnity is unavailable, or is insufficient to hold harmless an Indemnified Party, other than by reason of the exceptions provided in this Article 10, then the Indemnifying Party shall, in lieu of indemnifying such Indemnified Party, 15 contribute to the amount paid or payable by the Indemnifying Party as a result of such losses, claims, damages liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and the Indemnified Party on the other in connection with the statements or omissions which resulted in such losses, claims, damages, or liabilities, as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Holders of Registrable Securities covered by the Registration Statement in question and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (e) The Company and the Holders agree that it would not be just and equitable if contribution pursuant to this Article 10 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in Section 10(d). The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages and liabilities referred to in Section 10(d) shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such claim or litigation. Notwithstanding anything to the contrary in this Article 10, (A) no such Holder will be required to contribute any amount in excess of the proceeds it received from the sale of its Registrable Securities pursuant to such Registration Statement, (B) 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 and (C) no party shall be liable for contribution under this Article 10 except to the extent and under such circumstances as such party would have been liable to indemnify under this Article 10 if such indemnification were enforceable under applicable law. Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect to which a claim for contribution may be made against another party or parties under this Article, notify such party or parties from whom contribution may be sought, but the omission so to notify such party or parties from whom contribution may be sought shall not relieve such party from any other obligation it or they may have thereunder or otherwise under this Article. No party shall be liable for contribution with respect to any action, suit, proceeding or claim settled without its prior written consent, which consent shall not be unreasonably withheld. ARTICLE 11. INDEMNIFICATION WITH RESPECT TO UNDERWRITTEN OFFERING In the event that Registrable Securities are sold pursuant to a Registration Statement in an underwritten offering, the Company agrees to enter into an underwriting agreement containing customary representations and warranties with respect to the business and operations of an issuer of the securities being registered and customary covenants and agreements to be performed by such issuer, including without limitation customary provisions with respect to indemnification by the Company of the underwriters of such offering. 16 ARTICLE 12. REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934 With a view to making available to the Holders the benefits of Rule 144 promulgated under the Securities Act and any other rule or regulation of the Commission that may at any time permit a Holder to sell Registrable Securities of the Company to the public without Registration, the Company agrees to use its reasonable best efforts to: (a) Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act; (b) file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (c) furnish to any Holder, so long as such Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144 under the Securities Act, any other such applicable reporting requirements under the Securities Act and all applicable reporting requirements under the Exchange Act, (ii) a copy of the most recent animal or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the Commission which permits the selling of any such securities without Registration or pursuant to such form. ARTICLE 13. SUCCESSORS, ASSIGNS AND TRANSFEREES This Agreement shall be binding upon and shall inure to the benefit of each party hereto, and their respective successors, assigns and transferees. The Purchaser or any other Holder under this Agreement may assign its rights under this Agreement only to any Affiliate or to other successors, assigns and transferees of the Purchaser or any such Holder of not less than 250,000 shares of Registrable Securities (subject to adjustment for stock splits, stock dividends and the like); provided, however, that the Company is given written notice from the Purchaser or any such Holder at the time of such transfer stating the name and address of the transferee or assign and identifying the securities with respect to which the rights hereunder are being transferred. As a condition to the effectiveness of any transfer permitted hereunder (i) the transferee or assign shall agree, in writing, to be bound by the provisions of this Agreement, and (ii) the Company shall be given written notice at the time of or within a reasonable time after said transfer or assignment, stating the name and address of said transferee or assign and identifying the securities with respect to which such registration rights are being assigned. Provided that the Purchaser or any Holder and any transferee or assignee has complied with the foregoing conditions, this Agreement shall survive any transfer of Registrable Securities to and shall inure to the benefit of an Affiliate or such other successors, assigns and transferees of the Purchase or any such Holder. In addition, and whether or not any express transfer or assignment shall have been made, the provisions of this Agreement which are for the benefits of the parties hereto other than the Company shall also be for the benefit of and enforceable by any subsequent Holder of Registrable Securities. 17 ARTICLE 14. MISCELLANEOUS (a) No Inconsistent Agreements. The Company will not hereafter enter into any agreement with respect to its securities which is inconsistent with or violates the rights granted to the Holders in this Agreement. (b) Specific Performance; Other Rights. The parties recognize that various of the rights of the Purchaser and any other Holder under this Agreement are unique and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, the parties agree that each of the Purchaser and any such Holder shall, in addition to such other remedies as may be available to it at law or in equity, have the right to enforce its rights hereunder by actions for injunctive relief and specific performance in any court of the United States or any state thereof having jurisdiction, to the extent permitted by law. The Company hereby waives any requirement for security or the posting of any bond in connection with any temporary or permanent award of injunctive, mandatory or other equitable relief (c) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants, and restrictions without including any of such which may be hereafter declared invalid, void or unenforceable. (d) Notices. All notices and other communications required or permitted under this Agreement shall be effective upon receipt and shall be in writing and may be delivered in person, by telecopy, overnight delivery service or registered or certified United States mail, addressed to the Company or the Purchaser (or to any other Holder not a party hereto on the date hereof, to the address of such Holder in the stock record books of the Company), as the case may be, at their respective addresses set forth below: If to the Company: If to Purchaser CuraGen Corporation BAYER AG 555 Long Wharf Drive D 51368 11th Floor Leverkusen New Haven, Connecticut 06511 Federal Republic of Germany Attn: Chief Executive Officer Attn: General Counsel Telephone (203) 401-3330 Telephone: 011 49 214 30 81803 Facsimile: (203) 401-3333 Facsimile: 011 49 214 30 50848 18 With copies to: With copies to: CuraGen Corporation Bayer Corporation, Inc. 555 Long Wharf Drive 400 Morgan Lane 11th Floor West Haven, CT New Haven, Connecticut 06511 Attn: Legal Department Attn: Legal Department Telephone: (203) 812-2401 Telephone (203) 401-3330 Facsimile: (203) 812-2795 Facsimile: (203) 401-3333 and to: and to: Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Wilmer, Cutler & Pickering One Financial Center 2445 M Street Boston, Massachusetts 02111 Washington, D.C. 20037 Attn: Michael Fantozzi Attn: Richard W. Cass Telephone (617) 542-6000 Telephone: (202) 663-6503 Facsimile: (617) 542-2241 Facsimile: (202) 663-6363 All notices and other communications shall be effective upon the earlier of actual receipt thereof by the person to whom notice is directed or (a) in the case of notices and communications sent by personal delivery or telecopy, one business day after such notice or communication arrives at the applicable address or was successfully sent to the applicable telecopy number, (b) in the case of notices and communications sent by overnight delivery service, at noon (local time) on the second business day following the day such notice or communications was delivered to such delivery service, and (c) in the case of notices and communications sent by United States mail, seven days after such notice or communication shall have been deposited in the United States mail. Any notice delivered to a party hereunder shall be sent simultaneously, by the same means, to such party's counsel as set forth above. (e) Entire Agreement. This Agreement contain the entire understanding of the parties with respect to the matters covered hereby. (f) Amendments and Waivers. This Agreement may be amended as to the Holders and their successors and assigns (determined as provided in Article 13), and the Company may take any action herein prohibited, or omit to perform any act required to be performed by it, only if the Company shall obtain the written consent of the Holders of 75% of the Registrable Securities. This Agreement may not be waived, changed, modified, or discharged orally, but only by an agreement in writing signed by the party or parties against whom enforcement of any waiver, change, modification or discharge is sought or by parties with the right to consent to such waiver, change, modification or discharge on behalf of such party; provided, however, that any consent required by the Holders shall require the consent in writing of no less than the Holders of 75% of the Registrable Securities. (g) Headings; Counterparts. Headings in this Agreement are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. This Agreement may 19 be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument, and shall become effective when one or more of the counterparts have been signed by each party and delivered to the other parties, it being understood that all parties need not sign the same counterpart. (h) Gender. Whenever used herein the singular number shall include the plural, the plural shall include the singular, and the use of any gender shall include all genders. (i) Further Assurances. Each of the parties hereto agrees to execute and deliver those writings and documents reasonably required to more fully carry out the purposes of this Agreement and the transactions contemplated hereby. (j) Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware without regard to conflicts of law principles. (k) No Third Party Beneficiaries. Except as provided by Articles 10 and 13, nothing contained in this Agreement is intended to confer upon any Person other than the parties hereto and their respective successors and permitted assigns and transferees, any benefit, right or remedies under or by reason of this Agreement. (l) Consent to Jurisdiction. Each of the parties hereto irrevocably submits to the personal exclusive jurisdiction of the United States District Court for the District of Delaware for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby (and, to the extent permitted under applicable rules of procedure, agrees not to commence any action, suit or proceeding relating hereto except in such court). Each of the parties hereto further agrees that service of any process, summons, notice or document hand delivered or sent by registered mail to such party's respective address set forth in Section 14(e) will be effective service of process for any action, suit or proceeding in Delaware with respect to any matters to which it has submitted to jurisdiction as set forth in the immediately preceding sentence. Each of the parties hereto irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in the United States District court for the District of Delaware, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in such court that any such action, suit or proceeding brought in such court has been brought in an inconvenient forum. Signature Page Follows 20 IN WITNESS WHEREOF, PURCHASER and the COMPANY have caused this Agreement to be executed as of the day and year first above written. BAYER AG By: ________________________________ Name: Title: By: ________________________________ Name: Title: CURAGEN CORPORATION By: /s/ Christopher K. McLeod ------------------------------- Name: Christopher K. McLeod Title: Executive Vice President 21 EX-10.27 5 dex1027.txt RESTATED COLLABORATION AGREEMENT EXHIBIT 10.27 RESTATED COLLABORATION AGREEMENT THIS RESTATED COLLABORATION AGREEMENT (this "Agreement"), dated as of November 27, 2000, is made between ABGENIX, INC., a Delaware corporation ("ABX"), having a place of business at 7601 Dumbarton Circle, Fremont, California 94555, and CURAGEN CORPORATION, a Delaware corporation ("CuraGen"), having a place of business at 555 Long Wharf Drive, New Haven, Connecticut 06511, with respect to the following facts: RECITALS A. The parties entered into the Collaboration Agreement effective as of December 8, 1999 (the "Original Agreement"). B. The parties desire to amend the Original Agreement in certain respects, and for convenience to restate the Original Agreement, on the terms and conditions set forth below. NOW THEREFORE, in consideration of the foregoing premises and the mutual covenants set forth below, the parties amend the Original Agreement and agree as follows: 1. DEFINITIONS For purposes of this Agreement, the terms set forth in this Article 1 shall have the respective meanings set forth below: 1.1 "ABX In-License" shall mean a license, sublicense or other agreement under which ABX acquired rights to the ABX Patent Rights or ABX Know- How. 1.2 "ABX Know-How" shall mean, collectively, all inventions, discoveries, data, information, methods, techniques, technology and other results, whether or not patentable but which are not generally known, regarding ABX Technology and Information. All ABX Know-How shall be Confidential Information of ABX. 1.3 "ABX Licensed Antigens" shall mean all ABX Optioned Antigens for which ABX has exercised an option to obtain a commercial license pursuant to Article 7 below, and "ABX Licensed Antigen" shall mean any one of the ABX Licensed Antigens. 1.4 "ABX Optioned Antigens" shall mean all antigens which are selected from the Eligible Antigens by ABX pursuant to Article 5 below, for which CuraGen has the right to grant ABX the commercial license under Article 7 below, and which are not Licensed Antigens, and "ABX Optioned Antigen" shall mean any one of the ABX Optioned Antigens. 1.5 "ABX Patent Rights" shall mean, collectively, (a) all patents and patent applications listed on Exhibit A and any foreign counterparts claiming priority thereof; (b) all patent applications heretofore or hereafter filed in any country which claim (and only to the extent they claim) ABX Technology and Information or the use thereof; (c) all patents that have issued or in the Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. future issue from any of the foregoing patent applications, including without limitation utility models, design patents and certificates of invention; and (d) all divisionals, continuations, continuations-in-part, reissues, renewals, supplemental protection certificates, extensions or additions to any such patents and patent applications. 1.6 "ABX Product" shall mean, with respect to any ABX Licensed Antigen, any product comprising (a) an Antibody which binds to such ABX Licensed Antigen; or (b) Genetic Material that encodes such an Antibody wherein, in respect of each ABX Product, said Genetic Material does not encode multiple antibodies. 1.7 "ABX Technology and Information" shall mean, collectively, [_____________________________]. 1.8 "Affiliate" shall mean, with respect to any person or entity, any other person or entity which controls, is controlled by or is under common control with such person or entity. A person or entity shall be regarded as in control of another entity if it owns or controls at least fifty percent (50%) of the equity securities of the subject entity entitled to vote in the election of directors (or, in the case of an entity that is not a corporation, for the election of the corresponding managing authority). 1.9 "Antibody" shall mean a composition comprising (a) a whole antibody, or any fragment thereof, derived from the XenoMouse Animals hereunder; or (b) a whole antibody, or any fragment thereof, which is derived from a whole antibody or any fragment thereof, which itself is derived from the XenoMouse Animals hereunder or which is derived from the Genetic Material encoding or derived from, or the amino acid sequences of or derived from, a whole antibody or any fragment thereof, which itself is derived from the XenoMouse Animals hereunder. 1.10 "Antibody Cells" shall mean all cells that contain, express, or secrete antibodies or Genetic Materials that encode antibodies. 1.11 "Antibody Equivalent" shall mean [______________________]. 1.12 "Antigen Specific Materials and Information" shall mean with respect to an Antigen, collectively, [_________________________]. 1.13 "Antigens" shall mean, collectively, the Research Antigens, Eligible Antigens, Optioned Antigens and Licensed Antigens, and "Antigen" shall mean any one of the Antigens. 1.14 "BLA" shall mean a Biologics License Application, Product License Application, New Drug Application, or similar application for marketing approval of a product for use in the Therapeutic Field submitted to the FDA, or its foreign equivalent. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 2 1.15 "Commercial Field" shall mean, collectively, the Therapeutic Field and the Diagnostic Field. 1.16 "Confidential Information" shall mean, with respect to a party, all information of any kind whatsoever, and all tangible and intangible embodiments thereof of any kind whatsoever, which is disclosed by such party to the other party pursuant to this Agreement, and (if disclosed in writing or other tangible medium) is marked or identified in writing as confidential at the time of disclosure to the receiving party or (if otherwise disclosed or if not so marked or identified in writing) is identified as confidential at the time of disclosure to the receiving party and is summarized and identified as confidential in writing or by electronic means within thirty (30) days after such disclosure. Notwithstanding the foregoing, Confidential Information of a party shall not include information which, and only to the extent, the receiving party can establish by written documentation or electronic records (a) has been publicly known prior to disclosure of such information by the disclosing party to the receiving party; (b) has become publicly known without fault on the part of the receiving party, subsequent to disclosure of such information by the disclosing party to the receiving party; (c) has been received by the receiving party at any time from a source, other than the disclosing party, rightfully having possession of and the right to disclose such information free of confidentiality obligations; (d) has been otherwise known by the receiving party free of confidentiality obligations prior to disclosure of such information by the disclosing party to the receiving party; or (e) has been independently developed (as demonstrated by contemporaneous written or electronic evidence maintained in the ordinary course of business of the receiving party) by employees or agents of the receiving party without access to or use of such information disclosed by the disclosing party to the receiving party. 1.17 "CuraGen Databases" shall mean, collectively, all data, information and materials (other than Research Program Technology and Information) related to human Genetic Materials and the expression products thereof which as of the Effective Date are contained in CuraGen's SeqCalling Database or which at any time during the term of this Agreement are added thereto. For purposes hereof, the CuraGen SeqCalling Database shall include without limitation the following data, information, and materials possessed, acquired or developed by CuraGen as of the Effective Date or at any time during the term of this Agreement, the acquisition or development of which has not been sponsored or directed by a commercial Third Party to whom rights in such data, information, and materials have been granted in advance: (i) sequence data with respect to human Genetic Materials (including expressed sequences) and expression products thereof; (ii) the tissue or cellular distribution relating to such Genetic Materials, their expression and expression products; (iii) literature publications and patent status (i.e., information related to CuraGen filing dates, priority of claim(s) and any related patents and patent applications, and any information known by CuraGen regarding Third Party patents and patent applications) related to such Genetic Materials and expression products; (iv) the biological function of such Genetic Materials and expression products; (v) clones, expression products, proteins, cell lines and vectors related to such Genetic Materials and expression products, and (vi) all of the data, information, and materials described in the foregoing clauses (i) to (v) with respect to any homologs of such Genetic Materials and expression products. As of the Effective Date, the CuraGen SeqCalling Database includes [_______________________________]. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 3 1.18 "CuraGen Exclusive Antigen" shall mean an antigen (other than a Research Antigen) or Research Antigen that is designated by CuraGen as a CuraGen Exclusive Antigen in accordance with Section 4.8. 1.19 "CuraGen Know-How" shall mean, collectively, all inventions, discoveries, data, information, methods, techniques, technology and other results, whether or not patentable but which are not generally known, regarding CuraGen Technology and Information. All CuraGen Know-How shall be Confidential Information of CuraGen. 1.20 "CuraGen Licensed Antigen" shall mean all CuraGen Optioned Antigens for which CuraGen has exercised an option to obtain a commercial license pursuant to Article 7 below, and "CuraGen Licensed Antigen" shall mean any one of the CuraGen Licensed Antigens. 1.21 "CuraGen Optioned Antigens" shall mean all antigens which are selected from the Eligible Antigens by CuraGen pursuant to Article 5 below, for which ABX has the right to grant CuraGen the commercial license under Article 7 below, and which are not Licensed Antigens, and "CuraGen Optioned Antigen" shall mean any one of the CuraGen Optioned Antigens. 1.22 "CuraGen Patent Rights" shall mean, collectively, (a) all patent applications heretofore or hereafter filed in any country which claim (and only to the extent they claim) CuraGen Technology and Information or the use thereof; (b) all patents that have issued or in the future issue from any of the foregoing patent applications, including without limitation utility models, design patents and certificates of invention; and (c) all divisionals, continuations, continuations-in-part, reissues, renewals, supplemental protection certificates, extensions or additions to any such patents and patent applications. 1.23 "CuraGen Product" shall mean, with respect to any CuraGen Licensed Antigen, any product comprising (a) an Antibody which binds to such CuraGen Licensed Antigen, or (b) Genetic Material that encodes such an Antibody wherein, in respect of each CuraGen Product, said Genetic Material does not encode multiple antibodies. 1.24 "CuraGen Technology and Information" shall mean, collectively, [______________________________]. 1.25 "Derived" or "derived" shall mean obtained, developed, created, synthesized, designed, derived or resulting from, based upon or otherwise generated (whether directly or indirectly, or in whole or in part). 1.26 "Diagnostic Field" shall mean the use of Products for the following human medical purposes: the detection, diagnosis and monitoring of any disease, predisposition, state or condition in humans or the selection of a particular patient(s) to receive a particular therapeutic treatment(s). Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 4 1.27 "Effective Date" shall mean December 8, 1999. 1.28 "Eligible Antigen" shall mean a Research Antigen which satisfies the criteria of Exhibit B as determined by the JMC pursuant to Section 3.2 below or the arbitrator pursuant to Section 3.5 below, and which is not an Optioned Antigen. 1.29 "Excluded ABX Technology" shall mean, collectively, [____________________________]. 1.30 "Excluded CuraGen Technology" shall mean, collectively, [____________________________]. 1.31 "FDA" shall mean the United States Food and Drug Administration or its successor agency. 1.32 "First Commercial Sale" shall mean, with respect to each Product in each country, the date of first commercial sale (other than for purposes of obtaining regulatory approval) of such Product by a party hereto, its Sublicensee or their respective Affiliates to an unaffiliated Third Party in such country. 1.33 "Gene Therapy" shall mean the treatment or prevention of a disease by means of Ex Vivo or In Vivo delivery (via viral or nonviral gene transfer systems) of compositions comprising either (a) Genetic Material that encodes an Antibody, wherein such Antibody serves a material function in the treatment or prevention of such disease; (b) Genetic Material that encodes a moiety other than an Antibody, wherein the moiety serves a material function in the treatment or prevention of such disease and wherein such composition incorporates an Antibody (or Genetic Material that encodes such Antibody), which Antibody is used as a targeting vehicle for the composition; or (c) Genetic Material that encodes an Antibody that serves a material function in the treatment or prevention of such disease, wherein such composition also incorporates an Antibody (or Genetic Material that encodes such Antibody) which Antibody is used as a targeting vehicle for the composition. "Ex Vivo" delivery shall mean the introduction, outside of the body of a human, of such compositions into a cell, tissue, organoid, or organ, followed by the administration of the cell, tissue, organoid, or organ which contains such introduced compositions into the body of the same (autologous) or different (allogeneic) human, without limitation as to the formulation, anatomic site, or route of administration or the use of encapsulation or other devices for such administration. "In Vivo" delivery shall mean the introduction of such compositions into an individual, without limitation as to the formulation, anatomic site, or route of administration or the use of encapsulation or other devices for such administration. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 5 1.34 "Genetic Material" shall mean a nucleic acid, including DNA, RNA, and nucleic acid complementary and reverse complementary to such nucleotide sequences or nucleic acid, whether coding or noncoding and whether intact or a fragment. 1.35 "GenPharm Cross License Agreement" shall mean that certain Cross License Agreement entered into by and between ABX, JTI, XT, Cell Genesys, Inc., and GenPharm International, Inc., effective as of March 26, 1997, as the same may be amended from time to time. 1.36 "Human Antibody Equivalent" shall mean [_______________________]. 1.37 "IND" shall mean an Investigational New Drug application filed with the FDA, or any similar filing with any foreign regulatory authority, to commence human clinical testing of any Product in any country. 1.38 "JMC" shall mean the joint management committee comprising representatives of ABX and CuraGen described in Section 3.1 below. 1.39 "JTI" shall mean Japan Tobacco Inc., a Japanese corporation. 1.40 Licensed Antigens" shall mean, collectively, the ABX Licensed Antigens and CuraGen Licensed Antigens, and "Licensed Antigen" shall mean any one of the Licensed Antigens. 1.41 "Licensed ABX Intellectual Property" shall mean ABX's rights in the ABX Patent Rights, ABX Know-How, Research Program Patent Rights and Research Program Know-How; provided, however, that the Licensed ABX Intellectual Property (a) is all to the extent and only to the extent that ABX has the right to grant (sub)licenses thereunder (including without limitation to the extent permitted under the applicable ABX In-Licenses); (b) is expressly subject to the ABX In- Licenses; and (c) shall exclude the Excluded ABX Technology. 1.42 "Licensed CuraGen Intellectual Property" shall mean CuraGen's rights in the CuraGen Patent Rights, CuraGen Know-How, Research Program Patent Rights and Research Program Know-How; provided, however, that the Licensed CuraGen Intellectual Property (a) is all to the extent and only to the extent that CuraGen has the right to grant (sub)licenses thereunder; and (b) shall exclude the Excluded CuraGen Technology. 1.43 "Licensed Intellectual Property" shall mean, collectively, the Licensed ABX Intellectual Property and the Licensed CuraGen Intellectual Property. 1.44 "Net Sales" shall mean, with respect to a Product, the gross sales price charged by a party, its Sublicensees and their respective Affiliates for sales of such Product to non-Affiliate customers, less [_____________________________]. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 6 1.45 "Non-Mining Antigen" shall mean an antigen first developed, identified or acquired by CuraGen, (other than through research efforts in connection with the CuraGen Databases), whether from hypothesis driven research or otherwise, that (i) CuraGen reasonably believes is not the subject of any Third Party intellectual property rights (or the parties mutually believe, as evidenced by written agreement, that a license to all applicable Third Party intellectual property rights can be reasonably obtained), (ii) CuraGen reasonably believes could be subject (or the parties mutually believe, as evidenced by written agreement, that the antibodies to which could be subject) to a proprietary position of CuraGen, (iii) CuraGen reasonably believes would be available hereunder as a Research Antigen, and (iv) CuraGen reasonably believes is reasonably likely to have potential as a target for antibody-based therapeutics. 1.46 "Non-Mining Research Antigen" shall mean a Research Antigen that is a Non-Mining Antigen. 1.47 "Optioned Antigens" shall mean, collectively, the ABX Optioned Antigens and CuraGen Optioned Antigens, and "Optioned Antigen" shall mean any one of the Optioned Antigens. 1.48 "Patent Claim" shall mean a claim of a pending patent application or issued and unexpired patent included within the Licensed Intellectual Property which has not been held unenforceable or invalid by a court or other governmental agency of competent jurisdiction, unappealable or unappealed within the time allowed for appeal and which has not been admitted to be invalid or unenforceable through reissue, disclaimer or otherwise. 1.49 "Person" shall mean an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein. 1.50 "Phase I Clinical Trial" shall mean a human clinical trial in any country that is intended to initially evaluate the safety and/or pharmacological effect of a Product in subjects, or that would otherwise satisfy requirements of 21 CFR 312.21(a), or its foreign equivalent. 1.51 "Phase II Clinical Trial" shall mean a human clinical trial in any country that is intended to initially evaluate the effectiveness of a Product for a particular indication or indications in patients with the disease or indication under study, or that would otherwise satisfy requirements of 21 CFR 312.21(b) , or its foreign equivalent. 1.52 "Phase III Clinical Trial" shall mean a pivotal human clinical trial in any country the results of which could be used to establish safety and efficacy of a Product as a basis for a marketing approval application submitted to the FDA, or that would otherwise satisfy requirements of 21 CFR 312.21(c), or its foreign equivalent. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 7 1.53 "PMA" shall mean a Pre-Market Approval Application, 510(k) notice or similar application for marketing approval of a product for use in the Diagnostic Field submitted to the FDA, or its foreign equivalent. 1.54 "Products" shall mean, collectively, the ABX Products and the CuraGen Products, and "Product" shall mean any one of the Products. 1.55 "Program Year" shall mean any period commencing on the Effective Date or any anniversary thereof, and continuing through the first anniversary thereof, during the term of the Research Program. 1.56 "Research Antigens" shall mean, collectively, the antigens which are selected by the JMC, ABX or CuraGen pursuant to Section 4.3 below for use in the Research Program, for which ABX and CuraGen have the right to grant the other party the commercial license under Article 7 below, and which are not Optioned Antigens or Licensed Antigens, and "Research Antigen" shall mean any one of the Research Antigens. 1.57 "Research Field" shall mean the use of materials derived from XenoMouse Animals that are immunized with Research Antigens solely for the creation, identification, analysis, research, characterization and preclinical development of potential Products for use in the Commercial Field. 1.58 "Research Program" shall mean the collaborative research program described in Section 4.4 below 1.59 "Research Program Know-How" shall mean, collectively, all inventions, discoveries, data, information, methods, techniques, technology and other results, whether or not patentable but which are not generally known, regarding Research Program Technology and Information or the use thereof. 1.60 "Research Program Technology and Information" shall mean, with respect to an Antigen, collectively, [_____________________________]. 1.61 "Research Program Patent Rights" shall mean, collectively, (a) all patent applications hereafter filed in any country which claim Research Program Technology and Information or the use thereof; (b) all patents that have issued or in the future issue from any of the foregoing patent applications, including without limitation utility models, design patents and certificates of invention; and (c) all divisionals, continuations, continuations-in-part, reissues, renewals, supplemental protection certificates, extensions or additions to any such patents and patent applications. 1.62 "Royalty Commencement Date" shall mean, with respect to each Product in each country, the date of the First Commercial Sale of such Product in such country. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 8 1.63 "Sublicense" shall mean, with respect to a Product, an agreement or arrangement pursuant to which a (sub)license or distribution right regarding such Product has been granted to a Sublicensee. 1.64 "Sublicense Income" shall mean, with respect to a Product, the aggregate cash consideration, and the fair market value of the non-cash consideration, received by a party or its Affiliate in connection with the Sublicense of such Product, excluding consideration received (a) in reimbursement of such party's or its Affiliate's cost to perform research, development or similar services conducted for such Product after the grant of such Sublicense, (b) in reimbursement of patent or other out-of-pocket expenses on such Product, or (c) in consideration for the purchase of any securities of such party or its Affiliates at a price equal to no more than 120% of the then fair market value of such securities). 1.65 "Sublicensee" shall mean a Third Party that is granted (a) a (sub)license under the Licensed Intellectual Property to develop, make, use, offer for sale, sell or import a Product in the Commercial Field; or (b) a right to distribute a Product in the Commercial Field, provided that such Third Party is responsible for marketing and promotion of such Product within the applicable territory. 1.66 "Technology and Information" shall mean, collectively, the ABX Technology and Information, CuraGen Technology and Information and Research Program Technology and Information. 1.67 "Therapeutic Field" shall mean the use of Products for the following human medical purposes: the prevention or treatment of any disease, state or condition in humans. 1.68 "Third Party" shall mean any Person other than ABX, CuraGen and their respective Affiliates. 1.69 "XenoMouse Animals" shall mean the transgenic mice capable of producing human antibodies when immunized by ABX with an antigen. 1.70 "XT" shall mean Xenotech, L.P., a California limited partnership. 1.71 "XT Master Research License and Option Agreement" shall mean that certain Master Research License and Option Agreement entered into by and among XT, JTI and Cell Genesys, Inc. effective as of June 28, 1996, and subsequently assigned to ABX by Cell Genesys, Inc., as the same may be amended from time to time. 1.72 "XT/ABX Product License Agreement" shall mean a license agreement between XT and ABX entered into pursuant to the XT Master Research and License Agreement granting to ABX a license (with the right to grant sublicenses) to commercialize Products in one or more territories. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 9 2. REPRESENTATIONS AND WARRANTIES Each party hereby represents and warrants to the other party as follows: 2.1 Existence. Such party is duly organized, validly existing and in --------- good standing under the laws of the state in which it is organized. 2.2 Authorization and Enforcement of Obligations. Such party: (a) has -------------------------------------------- the requisite power and authority and the legal right to enter into this Agreement and to perform its obligations hereunder; and (b) has taken all requisite action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder. This Agreement has been duly executed and delivered on behalf of such party, and constitutes a legal, valid, binding obligation enforceable against such party in accordance with its terms except as enforcement may be limited by equitable remedies or defenses and applicable bankruptcy laws. 2.3 No Consents. All necessary consents, approvals and authorizations ----------- of all governmental authorities and other persons required to be obtained by such party in connection with this Agreement have been obtained. 2.4 No Conflict. The execution and delivery of this Agreement and the ----------- performance of such party's obligations hereunder (a) do not conflict with or violate any requirement of applicable laws or regulations; and (b) do not conflict with, or constitute a default under, any contractual obligation of it. 2.5 ABX In-Licenses. ABX has made available to counsel to CuraGen --------------- correct copies of ABX In-Licenses, as in effect on the Effective Date. 2.6 Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS ---------- AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES OF ANY KIND REGARDING TECHNOLOGY AND INFORMATION, PRODUCTS OR LICENSED INTELLECTUAL PROPERTY EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT OR VALIDITY. ALL TECHNOLOGY AND INFORMATION IS PROVIDED "AS IS." 3. JOINT MANAGEMENT COMMITTEE 3.1 Composition. The JMC shall comprise three (3) named representatives ----------- of CuraGen and three (3) named representatives of ABX. Each party shall notify the other party in writing of its initial representatives to the JMC within ten (10) days after the Effective Date, and may substitute one or more representatives from time to time effective upon written notice to the other party. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 10 3.2 Responsibilities. The JMC shall be responsible for (a) selecting antigens from the CuraGen Databases as Research Antigens; (b) monitoring and reporting the progress of the Research Program; (c) recommending to the parties any modifications to the Research Program with respect to any or all of the Research Antigens; (d) facilitating open and frequent exchange of information between the parties regarding the Research Program; (e) reviewing the data and information regarding Research Antigens and determining whether a Research Antigen satisfies the criteria set forth in Exhibit B; and (f) making selections of Eligible Antigens under Article 5 below; and (g) discussing and making recommendations regarding the application of CuraGen's capacity and resources to generate potential antibody targets other than from the CuraGen Databases. 3.3 Meetings. The JMC shall meet in person (unless otherwise agreed on -------- a meeting-by-meeting basis) not less than once each calendar quarter during the term of the Research Program, on such dates and at such times and places as agreed to by CuraGen and ABX, alternating between Fremont, California and New Haven, Connecticut, or such other locations as the parties mutually agree. For all other meetings, the JMC may meet by telephonic or video conference or in person, as the parties mutually agree. Each party shall have the right to have one (or such greater number as the parties mutually agree) employee or agent who is not a member of the JMC attend each meeting of the JMC as a non-voting observer. Each party shall be responsible for all its own personnel, travel and related expenses relating to JMC meetings. The first meeting of the JMC shall take place at the offices of Abgenix as soon as practicable after the Effective Date, but in no event later than thirty (30) days after the Effective Date. 3.3.1 Within thirty (30) days following each JMC meeting, the party hosting the meeting (or entitled to host the meeting, if held by telephonic or video conference or at a location other than Fremont, California or New Haven, Connecticut) shall prepare and provide to the other party mutually acceptable, reasonably detailed written minutes describing (a) all matters reviewed or considered by the JMC; (b) all discussions regarding potential and actual Antigens; and (c) all determinations and actions of the JMC and the reasons therefor. Such minutes shall be the Confidential Information of both ABX and CuraGen; provided, however, that to the extent that such minutes relate to the Optioned Antigens and Licensed Antigens of a party they shall be the Confidential Information solely of such party. 3.3.2 Not less than ten (10) days prior to each regularly scheduled quarterly meeting of the JMC, each party shall provide the other party with all data and information, not previously disclosed to the other party, regarding the activities of such party to identify potential Research Antigens and all other activities of such party under the Research Program. 3.3.3 Not less than ten (10) days prior to each regularly scheduled meeting of the JMC, CuraGen shall provide ABX with (a) a reasonably detailed written report describing the activities under all of CuraGen's internal research programs for the generation of, or that actually generate, potential antibody targets (other than from the CuraGen Databases) and the results thereof, together with CuraGen's capacity and resources (and its projected capacity and resources) to conduct such research activities and the Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 11 utilization thereof, and (b) copies of all data and information available to CuraGen, that was not previously provided to ABX, regarding each Non-Mining Antigen (other than CuraGen Exclusive Antigens, Optioned Antigens and Licensed Antigens) that previously has been disclosed to ABX and antibodies thereto. 3.3.4 Not less than five (5) days prior to each regularly scheduled meeting of the JMC, each party shall provide the other party with a list of the potential antigens of interest, identified from those antigens proposed by the parties under Section 4.2, that such party desires to discuss at such JMC meeting for potential use in the Research Program. 3.4 Actions. ABX and CuraGen each shall be entitled to cast one vote on ------- matters before the JMC. Decisions of the JMC shall be made by unanimous approval. 3.5 Disagreements. All disagreements within the JMC shall be resolved ------------- in the following manner: 3.5.1 Promptly upon receipt of written notice (a "Dispute Notice") from one party to the other of a disagreement to be resolved under this Paragraph 3.5, the JMC representatives of each party promptly shall present the disagreement to the chief executive officer of such party. 3.5.2 The chief executive officers of each party thereafter shall meet to discuss each party's view and to explain the basis for their respective positions of such disagreement, and in good faith shall attempt to resolve such disagreement among themselves. 3.5.3 If, within thirty (30) days after receipt of a Dispute Notice as to whether a Research Antigen satisfies the criteria of Exhibit B, the chief executive officers of each party cannot resolve such disagreement, then upon written notice from one party to the other party, such disagreement shall be settled as follows. Within forty five (45) days after receipt of such Dispute Notice, the parties shall attempt to mutually agree upon a single independent Third Party arbitrator, who shall be a scientific professional in the antibody field, to resolve such disagreement. If the parties are unable to mutually agree upon one such person, then each party shall appoint one independent Third Party scientific professional in the antibody field prior to the expiration of such forty five (45) day period, and within sixty (60) days after receipt of such Dispute Notice, such person(s) shall select a single independent Third Party arbitrator, who shall be a scientific professional in the antibody field, to resolve such disagreement. Each party shall present all information presented to the JMC and all other information as such party reasonably desires regarding such disagreement. Within ninety (90) days after receipt of such Dispute Notice, such arbitrator shall determine whether such Research Antigen satisfies the criteria of Exhibit B and provide written notice to the parties regarding such determination. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 12 4. RESEARCH ANTIGEN IDENTIFICATION AND RESEARCH 4.1 Maintenance and Enhancement of CuraGen Databases; Disclosure of --------------------------------------------------------------- Non-Mining Antigens. CuraGen shall continue to seek appropriate samples of human - ------------------- tissues and to analyze Genetic Material therefrom using CuraGen's proprietary methods and techniques, as well as publicly available methods and techniques, to identify human sequences and gene assemblies, and expression products thereof, that are not found in publicly available databases. CuraGen shall engage in the foregoing efforts for as long as, and to the extent that, CuraGen reasonably believes that, in its prudent business judgment, such efforts are yielding an appropriate return of expressed sequences that are not found in publicly available databases. CuraGen shall update the CuraGen Databases at least once every month to incorporate (i) the data, information and materials generated by the foregoing efforts that have not been sponsored or directed by a commercial Third Party to whom rights in such data, information, and materials have been granted prior to November 27, 2000, and (ii) those publicly available ESTs that CuraGen determines in its prudent judgment have sufficient reliability. Promptly upon physically cloning or acquiring a full-length gene encoding a potential Non-Mining Antigen, CuraGen shall give to ABX written notice of such gene and antigen including the applicable DNA sequence, the Clone ID number (if any is known), the name(s) by which such antigen is known and any other information available to CuraGen regarding such gene, antigen or their function or use. 4.2 Searches for Research Antigens. During the term of the Research ------------------------------ Program, CuraGen shall have primary responsibility for the screening of the CuraGen Databases and shall conduct searches thereof to identify and recommend to the JMC potential antigens of interest hereunder. CuraGen shall recommend to the JMC [___] antigens of interest (whether or not the genes encoding such antigens are contained in the CuraGen Databases) that, based on the data and information in the CuraGen Databases and such other data and information as CuraGen may have acquired or developed, (i) CuraGen reasonably believes is not the subject of any Third Party intellectual property rights (or the parties mutually believe, as evidenced by written agreement, that a license to all applicable Third Party intellectual property rights can be reasonably obtained), (ii) CuraGen reasonably believes could be subject (or the parties mutually believe, as evidenced by written agreement, that the antibodies to which could be subject) to a proprietary position of CuraGen, (iii) CuraGen reasonably believes would be available hereunder as Research Antigen, and (iv) CuraGen reasonably believes is reasonably likely to have potential as a target for antibody-based therapeutics. CuraGen will use its best efforts to recommend to the JMC at least [_______________] such antigens of interest from the CuraGen Databases. ABX shall have the right, but not the obligation, to recommend to the JMC antigens of interest from the CuraGen Databases and the Non-Mining Antigens that ABX reasonably believes, are not the subject of any Third Party intellectual property rights, would be available hereunder as Research Antigens and are reasonably likely to have potential as targets for antibody-based therapeutics. 4.2.1 During the six (6) month period after the Effective Date, CuraGen may restrict its screening of the CuraGen Databases to searches for potential antigens of interest that are useful in the field of [____________________________________________________]. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 13 4.2.2 From and after the date six (6) months after the Effective Date and during the term of the Research Program, CuraGen shall provide ABX, upon its request, with access to and use of the CuraGen Databases solely (i) to conduct research to identify potential Research Antigens, (ii) to research and develop Antibodies to Research Antigens and (iii) to research, develop, make, have made, use, import, offer to sell and sell ABX Products in accordance this Agreement. Such access shall be both remote access at ABX's facilities and direct access at CuraGen's facilities. CuraGen hereby grants ABX the nonexclusive license (or sublicense, as the case may be) under CuraGen's patent rights, copyrights and other intellectual property rights in the CuraGen Databases and all methods and techniques utilized by CuraGen to produce, maintain, access and search the CuraGen Databases solely to use the CuraGen Databases for such purposes. 4.2.3 CuraGen shall provide ABX with all the most current software, documentation and information available to CuraGen as reasonably necessary or useful to enable ABX to fully utilize the CuraGen Databases and formulate and conduct searches thereof as provided in Sections 4.2.3, 4.2.5 and 4.2.6. CuraGen shall provide not less than three (3) ABX employees with all training and technical assistance as reasonably necessary or useful to enable ABX to fully utilize the CuraGen Databases and formulate and conduct searches thereof as provided in Sections 4.2.3, 4.2.5 and 4.2.6. 4.2.4 At the reasonable request of ABX at any time after the date six (6) months after the Effective Date and during the term of the Research Program, CuraGen additionally shall permit up to three (3) ABX employees to participate in the formulation and conduct of searches, and other use, of the CuraGen Databases by CuraGen employees directed toward the collaborative search for and identification of potential Research Antigens. 4.2.5 CuraGen shall permit up to three (3) ABX employees access to CuraGen's facilities and equipment at all times during normal business hours at any time after the date six (6) months after the Effective Date and during the term of the Research Program to conduct searches of and use the CuraGen Databases on behalf of ABX. 4.2.6 During each visit by ABX employees to utilize the CuraGen Databases, at the request of ABX, CuraGen shall provide such ABX employees in person access to one or more CuraGen employees skilled in the formulation of searches and search criteria and in the use of the CuraGen Databases to provide prompt on site technical assistance to enable such ABX employees to fully utilize the CuraGen Databases and formulate and conduct searches thereof. 4.2.7 ABX shall not permit any ABX employee who has direct access to a non-public database of a Third Party to have direct access to the CuraGen Databases. For purposes hereof, "direct access" to a database shall mean first- person access to the data contained in such database and the proprietary search methods, tools, algorithms, and software associated with it; provided, however, that access to the results of searches run by another person or access to the data in a database, without the means to search such data by the proprietary search methods, tools, algorithms, and software associated with such database, shall not constitute "direct access" to a database. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 14 4.2.8 At the reasonable request of ABX at any time during the term of the Research Program, CuraGen shall conduct searches of the CuraGen Databases based on criteria selected by ABX and shall provide the results thereof to ABX. 4.2.9 During the Research Program, CuraGen shall operate and maintain research programs (that are not directed to the CuraGen Databases), with reasonable capacity and resources dedicated thereto, for the identification of potential antibody targets in the [________________] that will be available for use in the Research Program. During the Research Program, CuraGen shall use its best efforts to identify and recommend to the JMC [________________] Non- Mining Antigens per Program Year until such time as the JMC has selected [_________________] Non-Mining Research Antigens (other than antigens selected as Research Antigens under Section 4.3.2 and (CuraGen Exclusive Antigens) in the aggregate. 4.3 Research Antigen Selection. -------------------------- 4.3.1 During the term of the Research Program, based upon the data and information provided by the parties regarding potential antigens of interest, the JMC shall select at any JMC meeting, from those antigens proposed by the parties under Section 4.2, potential antigens of interest for use in the Research Program. With respect to each potential antigen which is selected, by the action of the JMC, for use under the Research Program, within thirty (30) days after the date of such JMC meeting, each party shall notify the other party in writing if such party does not have the right to grant the other party a commercial license under Article 7 below for such antigen. Subject to Section 4.3.6, unless a party timely notifies the other party in writing that it does not have the right to grant the other party a commercial license under Article 7 below for such antigen, such antigen thereafter shall be a Research Antigen. 4.3.2 During the term of the Research Program, CuraGen shall have the right to select at any JMC meeting, from those antigens proposed by the parties under Section 4.2, potential antigens of interest for use in the Research Program. CuraGen shall not select any antigen (other than antigens designated as CuraGen Exclusive Antigens at the time of selection) for which it does not have the right to grant ABX a commercial license under Article 7 below for such antigen. With respect to each potential antigen which is selected, by CuraGen but not by the action of the JMC, for use under the Research Program, within thirty (30) days after the date of such JMC meeting, ABX shall notify CuraGen in writing if ABX does not have the right to grant CuraGen a commercial license under Article 7 below for such antigen. Subject to Section 4.3.6, unless ABX timely notifies CuraGen in writing that it does not have the right to grant CuraGen a commercial license under Article 7 below for such antigen, such antigen thereafter shall be a Research Antigen. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 15 4.3.3 During the term of the Research Program, ABX shall have the right to select at any JMC meeting, from those antigens proposed by the parties under Section 4.2, potential antigens of interest for use in the Research Program. ABX shall not select any antigen for which it does not have the right to grant CuraGen a commercial license under Article 7 below for such antigen. With respect to each potential antigen which is selected, by ABX but not by the action of the JMC, for use under the Research Program, within thirty (30) days after the date of such JMC meeting, CuraGen shall notify ABX in writing if CuraGen does not have the right to grant ABX a commercial license under Article 7 below for such antigen. Subject to Section 4.3.6, unless CuraGen timely notifies ABX in writing that it does not have the right to grant ABX a commercial license under Article 7 below for such antigen, such antigen thereafter shall be a Research Antigen. 4.3.4 In addition to the rights of the parties to select antigens under Sections 4.3.1, 4.3.2 and 4.3.3 above, during the term of the Research Program, ABX shall have the right to select at any JMC meeting additional potential antigens of interest, from those proposed by the parties under Section 4.2, for use in the Research Program. ABX shall not select any antigen for which it does not have the right to grant CuraGen a commercial license under Article 7 below for such antigen. With respect to each potential antigen which is selected, by ABX but not by the action of the JMC, for use under the Research Program, within thirty (30) days after the date of such JMC meeting, CuraGen shall notify ABX in writing if CuraGen does not have the right to grant ABX a commercial license under Article 7 below for such antigen. Subject to Section 4.3.6, unless CuraGen timely notifies ABX in writing that it does not have the right to grant ABX a commercial license under Article 7 below for such antigen, such antigen thereafter shall be a Research Antigen. 4.3.5 If fewer than [___________] antigens (other than Non-Mining Antigens) in the aggregate have become Research Antigens pursuant to Sections 4.3.1, 4.3.2, and 4.3.3 by the fifth anniversary of the Effective Date other than as a result of a lack of diligence by CuraGen, CuraGen shall have the right to select at any JMC meeting thereafter additional potential antigens of interest, from those antigens proposed by the parties under Section 4.2 (other than Non-Mining Antigens), for use in the Research Program; provided, however, that the total number of antigens for which CuraGen may exercise its rights pursuant to this Section 4.3.5 shall equal (i) [___________] minus (ii) the aggregate number of antigens (other than Non-Mining Antigens) that have become Research Antigens pursuant to Sections 4.3.1, 4.3.2, and 4.3.3 on or prior to the fifth anniversary of the Effective Date. CuraGen shall act in a reasonable and prudent manner in the exercise of the foregoing right. In addition, CuraGen shall not select any antigen for which it does not have the right to grant ABX a commercial license under Article 7 below for such antigen (other than in the case of antigens that are designated as CuraGen Exclusive Antigens at the time of selection). With respect to each potential antigen which is selected, by CuraGen but not by the action of the JMC, for use under the Research Program, within thirty (30) days after the date of such JMC meeting, ABX shall notify CuraGen in writing if ABX does not have the right to grant CuraGen a commercial license under Article 7 below for such antigen. Unless ABX timely notifies CuraGen in writing that it does not have the right to grant CuraGen a commercial license under Article 7 below for such antigen, such antigen thereafter shall be a Research Antigen. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 16 4.3.6 Notwithstanding anything to the contrary in this Agreement, (a) not more than two hundred fifty (250) antigens in the aggregate may become Research Antigens under Sections 4.3.1, 4.3.2, 4.3.3 and 4.3.5 above; (b) not more than [___________] antigens may become Research Antigens under Section 4.3.2 above in the aggregate, of which not more than [___________] may be Non-Mining Antigens; (c) not more than [___________] antigens may become Research Antigens under Section 4.3.2 above in any one Program Year; (d) not more than [___________] antigens may become Research Antigens under Section 4.3.3 above in the aggregate, of which not more than [__________] may be Non-Mining Antigens; and (e) not more than [___________] antigens may become Research Antigens under Section 4.3.3 above in any one Program Year. No antigen for use in the prevention, treatment, detection, diagnosis or monitoring of any disease or condition other than [________] in humans may become a Research Antigen prior to the date six (6) months after the Effective Date, without CuraGen's approval. 4.3.7 Notwithstanding anything to the contrary in this Agreement, if a party gives written notice to the other party at any time stating that such party does not have the right to grant the other party a commercial license under Article 7 below for a Research Antigen, then effective thirty (30) days after the receipt by the other party of such notice, such antigen shall cease to be a Research Antigen and both parties shall destroy all Antigen Specific Materials and Information pertaining to such antigen. A party shall give such written notice to the other party promptly upon the occurrence of the event giving rise to such party's not having the right to grant the other party a commercial license under Article 7, to the extent such party has the right to do so. 4.4 Research Program. ---------------- 4.4.1 Research Plan. During the term of the Research Program, each party shall use its commercially reasonable efforts to perform its obligations set forth in Exhibit C within the time schedules contemplated therein. The JMC may recommend changes to the allocation of responsibilities set forth in Exhibit C, from time to time; provided, however, that such changes shall only be effective if in a written amendment duly executed by both parties. Other than the activities specified in Exhibit C as being the responsibility of one party or another, the JMC shall allocate the responsibility for each such activity between the parties, taking into account the skills of each party, in an effort to divide the resources and internal costs reasonably required to be dedicated by each party to the conduct of such activities [_______________]. In the event that any activities with respect to Research Antigens (other than CuraGen Exclusive Antigens), other than those specified in Exhibit C as being the responsibility of one party or another, require any payments to a Third Party for goods or services (e.g., specific animal models), such payments shall be shared [_______________], provided that all such goods and services and payments Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 17 therefor are approved by the JMC prior to incurring any such expense. Notwithstanding anything to the contrary in this Agreement, all activities with respect to Research Antigens that are CuraGen Exclusive Antigens, other than the generation and biochemical characterization of Antibodies as described and allocated to ABX in Exhibit C, shall be the sole and exclusive responsibility of CuraGen, at its sole cost and expense. With respect to each Research Antigen, during the term of the Research Program, each party may conduct, in its sole discretion, such additional preclinical research in the Research Field as such party reasonably desires to evaluate its interest in such Research Antigen, provided that, the preceding right shall not apply to ABX in the case of Research Antigens that are CuraGen Exclusive Antigens, and provided further that prior to commencing such additional preclinical research with respect to Research Antigens that are not CuraGen Exclusive Antigens, such party shall give prior written notice to the other party of the nature and scope of such additional preclinical research regarding such Research Antigen and shall provide the other party with all results of such research, which research shall be deemed to have been part of the Research Program. Each party shall provide the personnel, materials, equipment and other resources required to conduct its obligations hereunder; provided, however, that CuraGen shall transfer to ABX all information and materials available to CuraGen that are useful in the conduct of all assays conducted by or on behalf of CuraGen in connection with the Research Program. ABX shall reimburse CuraGen for all reasonable out-of-pocket expenses incurred in effecting such transfer. CuraGen grants to ABX the nonexclusive, worldwide license (without the right to grant sublicenses) to practice and use all such assays both (a) for use in the Research Program, and (b) for research purposes (unrelated to the Research Program or CuraGen) related to the research and development of antigens and/or antibodies. ABX shall make the antibody generation/isolation technologies of Immgenics, Inc. available for use by ABX in the performance of its obligations under Exhibit C. Each party shall perform its obligations hereunder in accordance with high scientific and professional standards, and in compliance in all material respects with the requirements of applicable laws and regulations. Each party shall provide reasonable assistance required by the other party in connection with the performance of the Research Program. Each party shall have the right, at reasonable times during normal business hours and upon reasonable notice, to visit the facilities of the other party where the other party is conducting its obligations under the Research Program to observe such activities. 4.4.2 Access. Without limiting the generality of Section 4.4.1, ------ each party shall permit up to three (3) employees of the other party access to such party's facilities, upon reasonable advance notice, at all times during normal business hours during the term of the Research Program Term to work with the employees of such party in the development and use of assays pursuant to the Research Program. Each party shall provide such employees of the other party in person access to one or more employees of such party skilled in the development and use of such assays to enable such employees of such other party to utilize such assays and develop similar assays for use in the Research Program and, in the case of ABX, as contemplated under Section 4.4.1; provided, however, except as otherwise provided in Section 4.4.1, that no license (or sublicense, as the case may be) to any intellectual property relating to such assays is granted hereby, whether expressly or by implication. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 18 4.4.3 Term of the Research Program. Unless this Agreement is ---------------------------- earlier terminated, the term of the Research Program shall commence on the Effective Date and shall continue through the sixth anniversary of the Effective Date. 4.5 Research Records and Reports. ---------------------------- 4.5.1 Research Records. Each party shall maintain records, in ---------------- sufficient detail and in good scientific manner appropriate for patent purposes, which shall be complete and accurate and shall fully and properly reflect all work done and results achieved in the performance of the activities under the Research Program. Each party shall have the right, during normal business hours and upon reasonable notice, to inspect and copy all such records of the other party to the extent reasonably required for the performance of its obligations under this Agreement. Each party shall maintain such records and the information of the other party contained therein in confidence in accordance with Article 11 below. 4.5.2 Research Reports and Information. Each party shall keep the -------------------------------- other informed of the progress of its own activities under the Research Program. At a minimum, within thirty (30) days following the last day of each calendar quarter during the term of the Research Program, each party shall prepare, and provide to the other party, a reasonably detailed written summary report which shall describe the work performed by such party to date under the Research Program. 4.6 Exclusivity. ----------- 4.6.1 Except as otherwise expressly permitted under this Agreement, during the term of the Research Program, CuraGen shall not, [_________________________]. 4.6.2 For a period commencing on November 27, 2000, and ending on the earlier of (i) the [_______________] anniversary of the Effective Date, and (ii) the effective date of a termination of the Research Program and the options, licenses and rights of ABX under this Agreement by CuraGen pursuant to Section 14.2.3 upon an uncured material breach of a material obligation by ABX, CuraGen shall not [____________________________________] (a) [_____________________________________________]. (b) [_____________________________________________]. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 19 (c) [__________________________________________________]. (d) [__________________________________________________]. (e) [__________________________________________________]. 4.6.3 Except as otherwise expressly permitted under this Agreement, for a period ending on the earlier of(a) the [_________] anniversary of the Effective Date, and (b) the effective date of a termination of the Research Program and the options, licenses and rights of ABX under this Agreement by CuraGen pursuant to Section 14.2.3 upon an uncured material breach of a material obligation by ABX, CuraGen shall not, and shall not grant any license (or sublicense, as the case may be), immunity or other right to any Person to, research, develop, make, have made, use, import, offer to sell or sell any Antibody Equivalent to an Antigen (or any mutein or fragment thereof) for use in the Commercial Field from and after the date on which a XenoMouse Animal was first immunized with such Antigen; provided, however, that the foregoing limitation shall not apply to antigens as to which ABX has notified CuraGen that it does not have the right to grant CuraGen a commercial license under Article 7 unless ABX has agreed to pay CuraGen the amounts provided hereunder upon the development and commercialization of an antibody product targeting such antigen as if it were an ABX Product hereunder in return for the licenses from CuraGen for such product as if it were an ABX Product hereunder. For the avoidance of doubt, nothing in this Agreement shall preclude CuraGen from granting any license (or sublicense, as the case may be), immunity or other right to any Person to research, develop, make, have made, use, import, offer to sell or sell any Antibody Equivalent to an antigen contained in the CuraGen Databases (or any mutein or fragment thereof) for any purpose other than for use in the prevention, treatment, detection, diagnosis or monitoring of, or the determination of a predisposition for, or the selection of a particular Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 20 patient(s) to receive a particular therapeutic treatment(s) for, [_______________], unless and until a XenoMouse Animal has been immunized with such antigen under this Agreement. 4.6.4 Except as otherwise expressly permitted under this Agreement, during the term of this Agreement, ABX shall not, and shall not grant any license (or sublicense, as the case may be), immunity or other right to any Person to, research, develop, make, have made, use, import, offer to sell or sell any Antibody Equivalent to a CuraGen Optioned Antigen (or any mutein or fragment thereof), for so long as such antigen remains a CuraGen Optioned Antigen, or a CuraGen Licensed Antigen (or any mutein or fragment thereof) for use in the Commercial Field. 4.6.5 Except as otherwise expressly permitted under this Agreement, during the term of this Agreement, CuraGen shall not, and shall not grant any license (or sublicense, as the case may be), immunity or other right to any Person to, research, develop, make, have made, use, import, offer to sell or sell any Antibody Equivalent to an ABX Optioned Antigen (or any mutein or fragment thereof), for so long as such antigen remains an ABX Optioned Antigen, or an ABX Licensed Antigen (or any mutein or fragment thereof) for use in the Commercial Field. 4.6.6 For a period commencing on November 27, 2000, and ending on December 27, 2000, CuraGen shall not enter into any agreement with any other Person under which [___________________________________________________] 4.7 Research Program Licenses. ------------------------- 4.7.1 Subject to the terms and conditions of this Agreement, ABX hereby grants to CuraGen a nonexclusive license (or sublicense, as the case may be) under the Licensed ABX Intellectual Property, without right to grant Sublicenses, in the Research Field solely to conduct its obligations under the Research Program and to conduct additional preclinical research as permitted under Section 4.4.1. Except as expressly set forth in this Agreement or otherwise expressly agreed in writing by the parties, CuraGen shall not use the Licensed ABX Intellectual Property or any ABX Technology and Information or any Research Program Technology and Information for any use other than those uses expressly licensed under this Section 4.7.1. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 21 4.7.2 Subject to the terms and conditions of this Agreement, CuraGen hereby grants to ABX a nonexclusive license (or sublicense, as the case may be) under the Licensed CuraGen Intellectual Property, without right to grant Sublicenses, in the Research Field solely to conduct its obligations under the Research Program and to conduct additional preclinical research as permitted under Section 4.4.1. Except as expressly set forth in this Agreement or otherwise expressly agreed in writing by the parties, ABX shall not use the Licensed CuraGen Intellectual Property or any CuraGen Technology and Information or any Research Program Technology and Information for any use other than those uses expressly licensed under this Section 4.7.2. 4.8 CuraGen Exclusive Antigens. -------------------------- 4.8.1 Right to Designate. ------------------ (a) CuraGen shall earn the right (a "Designation Right") to designate one (1) Non-Mining Antigen as a CuraGen Exclusive Antigen, in accordance with the process described in Section 4.8.2, after [______________] Non-Mining Antigens (other than CuraGen Exclusive Antigens) have been selected as Research Antigens under Section 4.3. Thereafter, CuraGen shall earn another Designation Right for a Non-Mining Antigen (i) after [_______________________] Non-Mining Antigens (other than CuraGen Exclusive Antigens) have been selected as Research Antigens under Section 4.3, and (ii) after [_____________________] Non-Mining Antigens (other than CuraGen Exclusive Antigens) have been selected as Research Antigens under Section 4.3. For the avoidance of doubt, it is acknowledged [_______________________________________________________________]. (b) CuraGen shall earn the right (a "Designation Right") to designate one (1) antigen (other than a Non-Mining Antigen) as a CuraGen Exclusive Antigen, in accordance with the process described in Section 4.8.2, after [________________________] antigens (other than Non-Mining Antigens and CuraGen Exclusive Antigens) have been selected as Research Antigens under Section 4.3. For the avoidance of doubt, it is acknowledged [________________]. 4.8.2 Designation Process. ------------------- (a) CuraGen shall have the right to designate any antigen that has been included on a list furnished under Section 3.3.4 as a CuraGen Exclusive Antigen as the first order of business at a JMC meeting, provided that such Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 22 designation is made prior to the discussion or any action by the JMC relating to such antigen. CuraGen shall not have the right to designate under Section 4.8.1(b) more than [________] antigens (that are not Non-Mining Antigens) in the aggregate as CuraGen Exclusive Antigens, or to designate under Section 4.8.1(a) more than [____________________] Non-Mining Antigens in the aggregate as CuraGen Exclusive Antigens. Any antigen (whether or not a Non-Mining Antigen) designated as a CuraGen Exclusive Antigen under this Section 4.8 shall be counted against the number of antigens that CuraGen is entitled to select under Section 4.3.2. In addition, (i) CuraGen may not designate more than [_____] Non-Mining Antigens as CuraGen Exclusive Antigens in any Program Year based on Designation Rights earned under Section 4.8.1(a) on the basis of Non-Mining Antigens designated as Research Antigens by CuraGen pursuant to Section 4.3.2; and (ii) CuraGen may not designate more than [_______] antigens other than Non-Mining Antigens as CuraGen Exclusive Antigens in any Program Year based on Designation Rights earned under Section 4.8.1(b) on the basis of antigens other than Non-Mining Antigens designated as Research Antigens by CuraGen pursuant to Section 4.3.2. (b) The parties acknowledge that [______________________________]. (c) If CuraGen fails (or, by operation of the limitation of Section 4.8.1(a), is unable) to exercise its right to designate a Non-Mining Antigen as a CuraGen Exclusive Antigen in the same Program Year in which the Designation Right was earned under Section 4.8.1(a), CuraGen may carry forward such unused Designation Right to subsequent Program Years; provided, however, that CuraGen may not exercise the unused Designation Right to designate more than [_______] Non-Mining Antigens as CuraGen Exclusive Antigens in any one (1) subsequent Program Year (other than the [______] Program Year). (d) If CuraGen fails (or, by operation. of the limitation of Section 4.8.1(b), is unable) to exercise its right to designate an antigen (other than a Non-Mining Antigen) as a CuraGen Exclusive Antigen in the same Program Year in which the right was earned under Section 4.8.1(b), CuraGen may carry forward such unused Designation Right to the subsequent Program Years; provided, however, that CuraGen may not exercise the unused Designation Right to designate more than [_________] antigen (other than a Non-Mining Antigen) as a CuraGen Exclusive Antigen in any [____] subsequent Program Year (other than the [____] Program Year). (e) Once an antigen is designated as a CuraGen Exclusive Antigen and, provided that within thirty (30) days after the date of the JMC meeting in which such CuraGen Exclusive Antigen is designated by CuraGen, ABX does not notify CuraGen in writing that ABX does not have the right to grant CuraGen a commercial license under Article 7 below for such antigen, (i) such antigen shall be a Research Antigen, but shall not be part of the Pool (as defined in Section 5.2); (ii) CuraGen shall have the exclusive right to select such Research Antigen as an Optioned Antigen or Licensed Antigen regardless of whether such Research Antigen is an Eligible Antigen; and (iii) ABX shall have no right to select such Research Antigen as an Optioned Antigen or Licensed Antigen. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 23 4.8.3 Selection of CuraGen Exclusive Antigens as Optioned Antigens. CuraGen shall have the right to select any Research Antigen that is a CuraGen Exclusive Antigen as an Optioned Antigen regardless of whether such CuraGen Exclusive Antigen is an Eligible Antigen. CuraGen shall make any such selection by giving express written notice to ABX at any time during the first [____] years after the Effective Date. CuraGen's right to make such selections under this Section 4.8.3 shall be outside, and in addition to, the selection process for Optioned Antigens under Section 5.2. 4.8.4 If ABX notifies CuraGen in writing that ABX does not have the right to grant CuraGen a commercial license under Article 7 below for an antigen that CuraGen designates as a CuraGen Exclusive Antigen, then such antigen shall not count against the quantity limitations on CuraGen Exclusive Antigens set forth in this Section 4.8. 4.8.5 Co-Development Rights in CuraGen Exclusive Antigens. [_____________________________________________________________________________]. 5. SELECTION OF OPTIONED ANTIGENS 5.1 Eligible Antigens. Not less than ten (10) days prior to each ----------------- regularly scheduled meeting of the JMC, each party shall provide the other party with a dossier for each Research Antigen that it proposes to be considered as a Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 24 potential Eligible Antigen. Such dossier shall contain all information reasonably available to such party demonstrating whether such Research Antigen satisfies the criteria set forth in Exhibit B. At such regularly scheduled meeting of the JMC, the JMC shall consider whether such Research Antigen satisfies the criteria set forth in Exhibit B. A Research Antigen shall be an Eligible Antigen at such time as it is determined to satisfy the criteria set forth in Exhibit B, as determined by the JMC under Section 3.2 above or the arbitrator under Section 3.5 above. Notwithstanding anything to the contrary in this Agreement, if a party gives written notice to the other party at any time stating that such party does not have the right to grant the other party a commercial license under Article 7 below for an Eligible Antigen, then effective thirty (30) days after the receipt by the other party of such notice, such antigen shall cease to be an Eligible Antigen and both parties shall destroy all Antigen Specific Materials and Information pertaining to such Eligible Antigen. 5.2 Selection of Optioned Antigens. During the first eight (8) years ------------------------------ after the Effective Date, each party shall have the right, in its sole discretion, to select Optioned Antigens from the list of Eligible Antigens at the time in question (the "Pool") as follows: 5.2.1 [______________________________]. 5.2.2 [______________________________]. 5.2.3 [______________________________]. 5.2.4 [______________________________]. 5.2.5 [______________________________]. 5.2.6 [______________________________]. 5.2.7 [______________________________]. 5.2.8 [______________________________]. 5.2.9 With respect to each Eligible Antigen which is selected by CuraGen as a CuraGen Optioned Antigen pursuant to this Section 5.2, ABX shall notify CuraGen in writing, within thirty (30) days of receipt of the notice of selection from CuraGen, if ABX does not have the right to grant CuraGen a commercial license under Article 7 below for such Eligible Antigen. Unless ABX timely notifies CuraGen in writing that ABX does not have the right to grant CuraGen a commercial license under Article 7 below for such antigen, ABX shall use its good faith efforts to nominate such Eligible Antigen under the XTIABX Master Research and License Agreement and to obtain the right thereunder to obtain an XT/ABX Product License Agreement with respect to CuraGen Products to such Eligible Antigen. If ABX is successful in nominating such Eligible Antigen and in obtaining the right to obtain an XT/ABX Product License Agreement for CuraGen Products to such Eligible Antigen, the ABX shall give prompt written notice to CuraGen. Effective upon such notice, such Eligible Antigen shall be a CuraGen Optioned Antigen. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 25 5.2.10 With respect to each Eligible Antigen which is selected by ABX as an ABX Optioned Antigen pursuant to this Section 5.2, CuraGen shall notify ABX in writing, within thirty (30) days of receipt of the notice of selection from ABX, if CuraGen does not have the right to grant ABX a commercial license under Article 7 below for such Eligible Antigen. Unless CuraGen timely notifies ABX in writing that CuraGen does not have the right to grant ABX a commercial license under Article 7 below for such antigen, such Eligible Antigen thereafter shall be an ABX Optioned Antigen upon the expiration of such thirty (30) day period. 5.2.11 At such time as an Eligible Antigen becomes an Optioned Antigen of one of the parties (the "Optioning Party"), the other party shall deliver to the Optioning Party all Antigen Specific Materials and Information in its possession pertaining to such Optioned Antigen and all related Confidential Information of such other party, and such Antigen Specific Materials and Information and Confidential Information shall thereafter be the Confidential Information of the Optioning Party. 6. RESEARCH FIELD LICENSES FOR OPTIONED ANTIBODIES 6.1 Research Field Licenses. ----------------------- 6.1.1 Subject to the terms and conditions of this Agreement, ABX hereby grants to CuraGen a nonexclusive license (or sublicense, as the case may be) under the Licensed ABX Intellectual Property, without right to grant Sublicenses, (a) to research, develop, make and use (but not to transfer, sell, lease, offer to sell or lease, or otherwise transfer title to or an interest in) Antibody Cells that contain, express or secrete Antibodies to the CuraGen Optioned Antigens solely for use in the Research Field, and (b) to research, develop, make and use (but not to transfer, sell, lease, offer to sell or lease, or otherwise transfer title to or an interest in) Antibodies that bind to the CuraGen Optioned Antigens and Genetic Material that encodes such Antibodies, solely for use in the Research Field for the research and development of potential CuraGen Products. Except as expressly agreed in this Agreement or otherwise expressly agreed in writing by the parties, CuraGen shall not use the Licensed ABX Intellectual Property, the ABX Technology and Information or the Research Program Technology and Information for any use other than those uses expressly licensed under this Section 6.1.1. 6.1.2 Subject to the terms and conditions of this Agreement, CuraGen hereby grants to ABX a nonexclusive license (or sublicense, as the case may be) under the Licensed CuraGen Intellectual Property, without right to grant Sublicenses, (a) to research, develop, make and use (but not to transfer, sell, lease, offer to sell or lease, or otherwise transfer title to or an interest in) Antibody Cells that contain, express or secrete Antibodies to the ABX Optioned Antigens solely for use in the Research Field, and (b) to research, develop, make and use (but not to transfer, sell, lease, offer to sell or lease, or otherwise transfer title to or an interest in) Antibodies that bind to the ABX Optioned Antigens and Genetic Material that encodes such Antibodies, solely for use in the Research Field for the research and development of potential ABX Products. Except as expressly agreed in this Agreement or otherwise expressly agreed in writing by the parties, ABX shall not use the Licensed CuraGen Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 26 Intellectual Property, the CuraGen Technology and Information or the Research Program Technology and Information for any use other than those uses expressly licensed under this Section 6.1.2. 6.1.3 The licenses (or sublicenses, as the case may be) granted under this Section 6.1 shall terminate with respect to each Optioned Antigen on the first anniversary of the date on which such antigen became an Optioned Antigen; provided, however, if a party has timely exercised its option under Article 7 below to obtain a license (or sublicense, as the case may be) for Products to such Optioned Antigen, such license (or sublicense, as the case may be) shall remain in effect for Products to such Optioned Antigen for the term of the applicable license (or sublicense, as the case may be) under Article 7 below. If a party does not timely exercise its option under Article 7 below to obtain a license (or sublicense, as the case may be) for Products to an Optioned Antigen and the other party does not timely exercise its standby option under Section 7.1.2 or 7.2.2, as the case may be, for Products to such Optioned Antigen, such Antigen shall cease to be an Optioned Antigen but shall be restored as an Eligible Antigen. 6.2 Research and Preclinical Development. ------------------------------------ 6.2.1 As between ABX and CuraGen, ABX shall have the sole right and responsibility, at its sole expense, to conduct research and preclinical development of Antibodies that bind to the ABX Optioned Antigens and Genetic Material that encodes such Antibodies for use in the research and development of potential ABX Products in the Research Field. 6.2.2 As between ABX and CuraGen, CuraGen shall have the sole right and responsibility, at its sole expense, to conduct research and preclinical development of Antibodies that bind to the CuraGen Optioned Antigens and Genetic Material that encodes such Antibodies for use in the research and development of potential CuraGen Products in the Research Field. 6.2.3 Each party shall conduct such research and preclinical development in accordance with high scientific and professional standards, and in compliance in all material respects with the requirements of applicable laws and regulations. 7. COMMERCIAL FIELD LICENSES FOR LICENSED ANTIGENS 7.1 CuraGen Products. ---------------- 7.1.1 Options for CuraGen Optioned Antigens. Subject to the terms and conditions of this Agreement, ABX hereby grants to CuraGen exclusive, non- transferable options to obtain a license (or sublicense, as the case may be) under Section 7.1.3 below for CuraGen Products to each CuraGen Optioned Antigen, with each such option being exercisable in accordance with the provisions of this Section 7.1.1 until the earliest of(a) the first anniversary of the date on Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 27 which such antigen became a CuraGen Optioned Antigen; (b) such time as ABX no longer would be obligated to grant a license (or sublicense, as the case may be) under Section 7.1.3 below for such CuraGen Products, and (c) the eighth anniversary of the Effective Date. (a) If CuraGen desires to exercise its option for CuraGen Products to such CuraGen Optioned Antigen, CuraGen shall so notify ABX in writing. (b) As soon as reasonably practicable after receipt of such notice, ABX shall exercise its option under the XT/ABX Master Research and License Agreement to obtain the XT/ABX Product License Agreement for CuraGen Products to such CuraGen Optioned Antigen. ABX shall notify CuraGen at such time as ABX has obtained the XT/ABX Product License Agreement for CuraGen Products to such CuraGen Optioned Antigen. Effective upon such notice, such CuraGen Optioned Antigen shall be a CuraGen Licensed Antigen, and the exclusive license (or sublicense, as the case may be) grant under Section 7.1.3 below for CuraGen Products to such CuraGen Licensed Antigen shall then be effective. (c) CuraGen's option for CuraGen Products to any CuraGen Optioned Antigen is subject to ABX successfully obtaining an XT/ABX Product License Agreement for CuraGen Products to such CuraGen Optioned Antigen. 7.1.2 Standby Options for ABX Optioned Antigens. If ABX fails to timely exercise its option under Section 7.2.1 below for any ABX Optioned Antigen, within ten (10) days after the written request by CuraGen, ABX shall provide CuraGen with copies of, or access to, all data and information of ABX regarding such ABX Optioned Antigen and Antibodies thereto. Except as otherwise expressly provided in this Agreement or the parties otherwise expressly agree in writing, CuraGen shall have the right to use such data and information for the sole purpose of evaluating its interest in exercising its option under this Section 7.1.2 for such ABX Optioned Antigen. Subject to the terms and conditions of this Agreement, ABX hereby grants to CuraGen exclusive, non-transferable options to obtain a license (or sublicense, as the case may be) under Section 7.1.3 below for CuraGen Products to each ABX Optioned Antigen for which ABX john gggkkkkk fails to timely exercise its option under Section 7.2.1 below, with each such option being exercisable in accordance with the provisions of this Section 7.1.2 commencing on the expiration of ABX's option under Section 7.2.1 below until the earliest of(a) the date six (6) months thereafter, (b) such time as ABX no longer would be obligated to grant a license (or sublicense, as the case may be) under Section 7.1.3 below for such CuraGen Products, and (c) the eighth anniversary of the Effective Date. (a) If CuraGen desires to exercise its option for (2ura(Jen products to such ABX Optioned Antigen, CuraGen shall so notify ABX in writing. (b) Within thirty (30) days after receipt of such notice, ABX shall notify CuraGen in writing if ABX does not have the right to grant CuraGen the license (or sublicense, as the case may be) under Section 7.1.3 below for CuraGen products to such ABX Optioned Antigen. If ABX does not have such a right, ABX shall have no obligation to grant CuraGen the license (or sublicense, as the case may be) under Section 7.1.3 below for CuraGen Products to such ABX Optioned Antigen. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 28 (c) Unless ABX timely notifies CuraGen in writing that it does not have such a right, ABX shall use its good faith efforts to nominate such ABX Optioned Antigen under the XT/ABX Master Research and License Agreement and obtain the right thereunder to obtain an XT/ABX Product License Agreement with respect to CuraGen Products to such ABX Optioned Antigen. (d) If ABX is successful in nominating such ABX Optioned Antigen and in obtaining the right to obtain an XT/ABX Product License Agreement for CuraGen Products to such ABX Optioned Antigen, then ABX shall give prompt written notice to CuraGen and as soon as reasonably practicable thereafter shall exercise its option under the XT/ABX Master Research and License Agreement to obtain the XT/ABX Product License Agreement for CuraGen Products to such ABX Optioned Antigen. ABX shall notify CuraGen at such time as ABX has obtained the XT/ABX Product License Agreement for CuraGen Products to such ABX Optioned Antigen. Effective upon such notice, such antigen shall be a CuraGen Licensed Antigen, and the exclusive license (or sublicense, as the case may be) grant under Section 7.1.3 below for CuraGen Products to such CuraGen Licensed Antigen. (e) CuraGen's option for CuraGen Products to any ABX Optioned Antigen is subject to ABX successfully obtaining the right under the XT/ABX Master Research and License Agreement to obtain an XT/ABX Product License Agreement for CuraGen Products to such ABX Optioned Antigen. 7.1.3 Commercial Field License. Subject to the terms and ------------------------ conditions of this Agreement, ABX hereby grants to CuraGen an exclusive worldwide license (or sublicense, as the case may be) (with the right to grant Sublicenses) under Licensed ABX Intellectual Property to research, develop, make, have made, use, import, offer to sell and sell CuraGen Products in the Commercial Field. CuraGen shall provide ABX with a copy of each Sublicense promptly after executing the same; provided, however, that CuraGen shall have the right to redact any confidential financial terms or confidential research, development or commercialization plans from the copy provided to ABX. Any Sublicense shall be subject and subordinate to the terms and conditions of this Agreement, and CuraGen shall remain responsible for all payments due to ABX hereunder. 7.2 ABX Products. ------------ 7.2.1 Options for ABX Optioned Antigens. Subject to the terms and conditions of this Agreement, CuraGen hereby grants to ABX exclusive, non- transferable options to obtain a license (or sublicense, as the case may be) under Section 7.2.3 below for ABX Products to each ABX Optioned Antigen, with each such option being exercisable in accordance with the provisions of this Section until the earliest of (a) the first anniversary of the date on which such antigen became a ABX Optioned Antigen, (b) such time as CuraGen no longer would be obligated to grant a license (or sublicense, as the case may be) under Section 7.2.3 below for such ABX Products, and (c) the eighth anniversary of the Effective Date. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 29 (a) If ABX desires to exercise its option for ABX Products to such ABX Optioned Antigen, ABX shall so notify CuraGen in writing. (b) Effective upon such notice, such antigen shall be an ABX Licensed Antigen, and the exclusive license (or sublicense, as the case may be) grant under Section 7.2.3 below for ABX Products to such ABX Licensed Antigen shall be effective. 7.2.2 Standby Options for CuraGen Optioned Antigens. If CuraGen --------------------------------------------- fails to timely exercise its option under Section 7.1.1 above for any CuraGen Optioned Antigen, within ten (10) days after the written request by ABX, CuraGen shall provide ABX with copies of, or access to, all data and information of CuraGen regarding such CuraGen Optioned Antigen and Antibodies thereto. Except as otherwise expressly provided in this Agreement or the parties otherwise expressly agree in writing, ABX shall have the right to use such data and information for the sole purpose of evaluating its interest in exercising its option under this Section 7.2.2 for such CuraGen Optioned Antigen. Subject to the terms and conditions of this Agreement, CuraGen hereby grants to ABX non- exclusive, non-transferable options to obtain a license (or sublicense, as the case may be) under Section 7.2.3 below for ABX Products to each CuraGen Optioned Antigen for which CuraGen fails to timely exercise its option under Section 7.1.1 above, with each such option being exercisable in accordance with the provisions of this Section 7.2.2 commencing on the expiration of CuraGen's option under Section 7.1 .1 above until the earliest of (a) the date six (6) months thereafter, (b) such time as CuraGen no longer would be obligated to grant a license (or sublicense, as the case may be) under Section 7.2.3 below for such ABX Products, and (c) the eighth anniversary of the Effective Date. (a) If ABX desires to exercise its option for ABX products to such CuraGen Optioned Antigen, ABX shall so notify CuraGen in writing. (b) Within thirty (30) days after receipt of such notice, CuraGen shall notify ABX in writing if CuraGen does not have the right to grant ABX the license (or sublicense, as the case may be) under Section 7.2.3 below for ABX products to such CuraGen Optioned Antigen. If CuraGen does not have such a right, CuraGen shall have no obligation to grant ABX the license (or sublicense, as the case may be) under Section 7.2.3 below for ABX Products to such CuraGen Optioned Antigen. (c) Unless CuraGen timely notifies ABX in writing that it does not have such a right, effective upon the expiration of such thirty (30) day period, such antigen shall be an ABX Licensed Antigen, and the exclusive license (or sublicense, as the case may be) grant under Section 7.2.3 below for ABX Products to such ABX Licensed Antigen shall be effective upon the expiration of such thirty (30) day period. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 30 7.2.3 Commercial Field License. Subject to the terms and ------------------------ conditions of this Agreement, CuraGen hereby grants to ABX an exclusive worldwide license (or sublicense, as the case may be) (with the right to grant Sublicenses) under Licensed CuraGen Intellectual Property to research, develop, make, have made, use, import, offer to sell and sell ABX Products in the Commercial Field. ABX shall provide CuraGen with a copy of each Sublicense promptly after executing the same; provided, however, that ABX shall have the right to redact any confidential financial terms or confidential research, development or commercialization plans from the copy provided to CuraGen. Any Sublicense shall be subject and subordinate to the terms and conditions of this Agreement, and ABX shall remain responsible for all payments due to CuraGen hereunder. 7.3 No Other Rights. No rights other than those expressly set forth in --------------- this Agreement are granted to either party hereunder, and no additional rights shall be granted to either party by implication, estoppel or otherwise. 7.4 Further Restrictions. -------------------- 7.4.1 Notwithstanding anything to the contrary in this Agreement, neither a party, nor its Sublicensees hereunder nor their respective Affiliates shall submit an IND for, or otherwise commence human clinical testing of, any Product to any Antigen unless and until such party has obtained a commercial license under this Article 7 for Products to such Antigen. 7.4.2 For purposes of this Agreement, if(a) JT or ABX has nominated an antigen pursuant to the XT Master Research and License Agreement, (b) XT has granted a license pursuant to the XT Master Research and License Agreement with respect to an antigen, (c) ABX has an obligation to so nominate an antigen or XT or ABX has an obligation to so grant a license (or sublicense, as the case may be), (d) ABX has otherwise granted exclusive rights to antibodies to an antigen to a Third Party without breach of the exclusivity provisions of Section 4.6, or (e) ABX has an active research and development program ongoing for antibodies to an antigen (that was not provided by CuraGen hereunder) that is independent of its efforts hereunder and does not and did not involve access to, or otherwise make use of, the CuraGen Databases, then ABX shall not have the right to grant CuraGen a license (or sublicense, as the case may be) hereunder to use such antigen in the Research Field or a license (or sublicense, as the case may be) regarding the related CuraGen Products in the Commercial Field. 7.4.3 For purposes of this Agreement, if CuraGen has granted exclusive rights to antibodies to an antigen to a Third Party without breach of the exclusivity provisions of Section 4.6, then CuraGen shall not have the right to grant ABX a license (or sublicense, as the case may be) hereunder to use such antigen in the Research Field or a license (or sublicense, as the case may be) regarding the related ABX Products in the Commercial Field. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 31 8. PAYMENTS -------- 8.1 Research Funding. CuraGen shall pay to ABX aggregate research ---------------- funding of [______________________________]. Such research funding shall be payable in twenty (20) equal quarterly installments of [______________________________] each, due on or before each of January 3, 2000, and each March 8, June 8, September 8 and December 8 thereafter, until the last such payment on September 8, 2004. 8.2 Certain Fees. ------------ 8.2.1 Each party shall pay to the other party a non-refundable, non-creditable technology access fee of [______________________________] for each Eligible Antigen it selects under Article 5 above that becomes an Optioned Antigen within ten (10) days after such Eligible Antigen becomes an Optioned Antigen. 8.2.2 Each party shall pay to the other party a non-refundable, non-creditable exercise fee of [______________________________] for each Optioned Antigen for which it exercised an option to obtain a commercial license under Article 7 above within ten (10) days after such Optioned Antigen becomes a Licensed Antigen. 8.2.3 With respect to each Licensed Antigen for which a party exercised an option to obtain a commercial license under Article 7 above, but for which it was not required to pay an option fee under Section 8.2.1 above because it was not selected as an Optioned Antigen by such party under Article 5 above, such party shall pay to the other party, in lieu of the amounts set forth in Sections 8.2.1 and 8.2.2, a non-refundable, non-creditable exercise fee of [______________________________] for such Licensed Antigen within ten (10) days after such antigen becomes a Licensed Antigen. 8.3 Milestone Payments. ------------------ 8.3.1 In the Therapeutic Field. Subject, in the case of Sublicenses, to Section 8.4.3(c) below, within thirty (30) days following the achievement of each of the following milestones with respect to each CuraGen Product for use in the Therapeutic Field, on a CuraGen Product-by-CuraGen Product basis, CuraGen shall give written notice to ABX thereof and shall pay to ABX the corresponding milestone payments described below. Subject, in the case of Sublicenses, to Section 8.4.3(a) below, within thirty (30) days following the achievement of each of the following milestones with respect to each ABX Product for use in the Therapeutic Field, on an ABX Product-by-ABX Product basis, ABX shall give written notice to CuraGen thereof and shall pay to CuraGen the corresponding milestone payments described below. [_______] [______________________________] [_______] [______________________________] Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 32 [_______] [______________________________] [_______] [______________________________] [_______] [______________________________] If, at the time when any milestone payment listed in this Section 8.3.1, with respect to a Product for use in the Therapeutic Field, is due from a party, such party has not paid all other milestone payments (if any) previously listed in this Section 8.3.1 with respect to such Product, then at such time such party shall pay all such unpaid milestone payments (if any) previously listed in this Section 8.3.1 with respect to such Product. If, at the time of the First Commercial Sale by a party, its Affiliate or their respective Sublicensee of a Product for use in the Therapeutic Field, such party has not paid all milestone payments (if any) listed in this Section 8.3.1 with respect to such Product, then at such time such party shall pay all such unpaid milestone payments (if any) listed in this Section 8.3.1 with respect to such Product. If at any time a party abandons the development of a Product after the payment to the other party of one or more milestone payments under this Section 8.3.1 and subsequently commences or continues the development of another Product directed to the same Licensed Antigen as the abandoned Product, then such party shall have no obligation to pay to the other party a milestone payment upon the occurrence of a milestone event for the subsequent Product for which such party previously has paid to the other party a milestone payment under this Section 8.3.1 for the abandoned Product. 8.3.2 In the Diagnostic Field. Subject, in the case of ----------------------- Sublicenses, to Section 8.4.3(d) below, within thirty (30) days following the achievement of each of the following milestones with respect to each CuraGen Product for use in the Diagnostic Field, on a CuraGen Product-by-CuraGen Product basis, CuraGen shall give written notice to ABX thereof and shall pay to ABX the corresponding milestone payments described below. Subject, in the case of Sublicenses, to Section 8.4.3(b) below, within thirty (30) days following the achievement of each of the following milestones with respect to each ABX Product for use in the Diagnostic Field, on an ABX Product-by-ABX Product basis, ABX shall give written notice to CuraGen thereof and shall pay to CuraGen the corresponding milestone payments described below. [_______] [______________________________] [_______] [______________________________] [_______] [______________________________] If, at the time when any milestone payment listed in this Section 8.3.2, with respect to a Product for use in the Diagnostic Field, is due from a party, such party has not paid all other milestone payments (if any) previously listed Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 33 in this Section 8.3.2 with respect to such Product, then at such time such party shall pay all such unpaid milestone payments (if any) previously listed in this Section 8.3.2 with respect to such Product. If, at the time of the First Commercial Sale by a party, its Affiliate or permitted (sub)licensee of a Product for use in the Diagnostic Field, such party has not paid all milestone payments (if any) listed in this Section 8.3.2 with respect to such Product, then at such time such party shall pay all such unpaid milestone payments (if any) listed in this Section 8.3.2 with respect to such Product. If at any time a party abandons the development of a Product after the payment to the other party of one or more milestone payments under this Section 8.3.2 and subsequently commences or continues the development of another Product directed to the same Licensed Antigen as the abandoned Product, then such party shall have no obligation to pay to the other party a milestone payment upon the occurrence of a milestone event for the subsequent Product for which such party previously has paid to the other party a milestone payment under this Section 8.3.2 for the abandoned Product. 8.4 Royalties. --------- 8.4.1 Notice of Royalty Commencement Date. Within thirty (30) days ----------------------------------- following the Royalty Commencement Date for each CuraGen Product in each country, CuraGen shall give written notice to ABX thereof. Within thirty (30) days following the Royalty Commencement Date for each ABX Product in each country, ABX shall give written notice to CuraGen thereof. 8.4.2 Royalties on Net Sales. (a) Subject, in the case of Sublicenses, to Sections 8.4.3(a) and (b) below, ABX shall pay to CuraGen royalties equal to [_______________________________]. (b) Subject, in the case of Sublicenses, to Sections 8.4.3(c) and (d) below, CuraGen shall pay to ABX royalties equal to [_______________________________]. 8.4.3 Royalties on Sublicense Income. (a) In the event that ABX grants a Sublicense with respect to any ABX Product for use in the Therapeutic Field, ABX shall notify CuraGen in writing, within fifteen (15) days of the grant of such Sublicense, whether ABX elects to pay to CuraGen (i) the milestone payments set forth in Section 8.3.1 upon the occurrence with respect to such ABX Product of the milestone events set forth therein and the royalties set forth in Section 8.4.2 based on Net Sales of such ABX Product or (ii) the following payments and royalties equal to the following percentage of Sublicense Income received by ABX and its Affiliates in connection with such Sublicense for each ABX Product for use in the Therapeutic Field: [_________] [________________________________] Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 34 [_________] [________________________________] [_________] [________________________________] Notwithstanding the foregoing, the royalties owing by ABX under this Section 8.4.3(a) in any calendar quarter, with respect to Net Sales by such Sublicensee and its Affiliates of any ABX Product for use in the Therapeutic Field, shall not be less than [____________________] of Net Sales by such Sublicensee and its Affiliates of such ABX Product in such calendar quarter. Once made, the election of the basis of payment hereunder may not be changed, and ABX shall pay the amounts determined in accordance with its election. (b) In the event that ABX grants a Sublicense with respect to any ABX Product for use in the Diagnostic Field, ABX shall notify CuraGen in writing, within fifteen (15) days of the grant of such Sublicense, whether ABX elects to pay to CuraGen (i) the milestone payments set forth in Section 8.3.2 upon the occurrence with respect to such ABX Product of the milestone events set forth therein and the royalties set forth in Section 8.4.2 based on Net Sales of such ABX Product or (ii) the following payments and royalties equal to the following percentage of Sublicense Income received by ABX and its Affiliates in connection with such Sublicense for each ABX Product for use in the Diagnostic Field: [_________] [________________________________] [_________] [________________________________] [_________] [________________________________] Notwithstanding the foregoing, the royalties owing by ABX under this Section 8.4.3(b) in any calendar quarter, with respect to Net Sales by such Sublicensee and its Affiliates of any ABXProduct for use in the Diagnostic Field, shall not be less than [______________________] of Net Sales by such Sublicensee and its Affiliates of such ABX Product in such calendar quarter. Once made, the election of the basis of payment hereunder may not be changed, and ABX shall pay the amounts determined in accordance with its election. (c) In the event that CuraGen grants a Sublicense with respect to any CuraGen Product for use in the Therapeutic Field, CuraGen shall notify ABX in writing, within fifteen (15) days of the grant of such Sublicense, whether CuraGen elects to pay to ABX (i) the milestone payments set forth in Section 8.3.1 upon the occurrence with respect to such CuraGen Product of the milestone events set forth therein and the royalties set forth in Section 8.4.2 based on Net Sales of such CuraGen Product or (ii) the following payments and royalties equal to the following percentage of Sublicense Income received by CuraGen and its Affiliates in connection with the Sublicense for each CuraGen Product for use in the Therapeutic Field: [_________] [________________________________] Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 35 [_________] [________________________________] [_________] [________________________________] Notwithstanding the foregoing, the royalties owing by CuraGen under this Section 8.4.3(c) in any calendar quarter, with respect to Net Sales by such Sublicensee and its Affiliates of any CuraGen Product for use in the Therapeutic Field, shall not be less than the [________________] of Net Sales by such Sublicensee and its Affiliates of such CuraGen Product in such calendar quarter, [________________________________________]. Once made, the election of the basis of payment hereunder may not be changed, and CuraGen shall pay the amounts determined in accordance with its election. (d) In the event that CuraGen grants a Sublicense with respect to any CuraGen Product for use in the Diagnostic Field, CuraGen shall notify ABX in writing, within fifteen (15) days of the grant of such Sublicense, whether CuraGen elects to pay to ABX (i) the milestone payments set forth in Section 8.3.2 upon the occurrence with respect to such CuraGen Product of the milestone events set forth therein and the royalties set forth in Section 8.4.2 based on Net Sales of such CuraGen Product or (ii) the following payments and royalties equal to the following percentage of Sublicense Income received by CuraGen and its Affiliates in connection with the Sublicense for such CuraGen Product for use in the Diagnostic Field: [_________] [________________________________] [_________] [________________________________] [_________] [________________________________] Notwithstanding the foregoing, the royalties owing by CuraGen under this Section 8.4.3(d) in any calendar quarter, with respect to Net Sales by such Sublicensee and its Affiliates of any CuraGen Product for use in the Diagnostic Field, shall not be less than the [_____________] of Net Sales by such Sublicensee and its Affiliates of such CuraGen Product in such calendar quarter, [________________________________________________]. Once made, the election of the basis of payment hereunder may not be changed, and CuraGen shall pay the amounts determined in accordance with its election. (e) Length of Royalty Obligations. Each party's obligations to pay royalties (including without limitation percentages of Sublicense Income) with respect to each Product in each country shall commence on the Royalty Commencement Date for such Product in such country, and shall continue for such Product in such country until [________________]. 8.4.4 Discounting. If a party, its Sublicensees or their ----------- respective Affiliates sells a Product to a Third Party who also purchases other products or services from such party, its Sublicensees or their respective Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 36 Affiliates, and such party, its Sublicensees or their respective Affiliates discounts the purchase price of such Product to a greater degree than it generally discounts the price of its other products or services to such customer, then in such case the Net Sales for the sale of such Product to such Third Party shall equal the arm's length pnce that Third Parties would generally pay for the Product alone when not purchasing any other product or service from such party, its Sublicensee or their respective Affiliates. For purposes of this provision "discounting" includes establishing the list price at a lower-than- normal level. 9. ACCOUNTING AND RECORDS 9.1 Royalty Reports and Payments. Commencing with the first calendar ---------------------------- quarter in which the Royalty Commencement Date for a Product occurs, CuraGen in the case of CuraGen Products, and ABX in the case of ABX Products (the "Payor") shall make written reports to the other party (the "Payee") within sixty (60) days after the end of each calendar quarter, stating in each such report the number, description, and aggregate Net Sales of such Product sold during the calendar quarter, and the calculation of the royalties and other amounts payable under Article 8 above. Concurrently with the making of such reports, the Payor shall pay to the Payee all royalties payable under Article 8 above. 9.2 Records; Inspection. The Payor shall keep (and cause its ------------------- Affiliates, Sublicensees and Sublicensees' Affiliates to keep) complete, true and a00ccurate books of account and records for the purpose of determining the royalties payable to the Payee under this Agreement. Such books and records shall be kept at the principal place of business of the Payor, its Sublicensee or their respective Affiliates, as the case may be, for at least three years following the end of the calendar quarter to which they pertain. Such records of the Payor and its Affiliates shall be open for inspection during such three-year period by independent accountants chosen by the Payee, and subject to the approval of the Payor, which approval shall not be unreasonably withheld or delayed, (which accountants, in the case of ABX, may also represent XI) for the purpose of verifying the royalty statements. The Payor shall require each of its Sublicensees to maintain similar books and records and to open such records for inspection during the same three-year period by a representative of the Payor reasonably satisfactory to the Payee on behalf of, and as required by, the Payee for the purpose of verifying the royalty statements. All such inspections may be made no more than once each calendar year at reasonable times mutually agreed by the Payor and the Payee. The independent accountants chosen by the Payee will be obliged to execute a reasonable confidentiality agreement prior to commencing any such inspection. Inspections conducted under this Section 9.2 shall be at the expense of the Payee, unless a variation or error producing an increase exceeding five percent (5%) of the amount stated for any period is established in the course of any such inspection, whereupon all costs relating to the audit of such period will be paid by the Payor. 9.3 Payment Method. All payments by the Payor to the Payee hereunder -------------- shall be in United States Dollars in immediately available funds and shall be made by wire transfer from a United States bank located in the United States to such bank account as designated by the Payee to the Payor. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 37 9.4 Currency Conversion. If any currency conversion shall be required ------------------- in connection with the calculation of royalties hereunder, such conversion shall be made using the selling exchange rate for conversion of the foreign currency into United States Dollars, quoted for current transactions reported under the heading "Currency Trading -- Exchange Rates" in The Wall Street Journal in the United States for the last business day of the calendar quarter to which such payment pertains. If The Wall Street Journal ceases to be published, then the rate of exchange to be used shall be that reported in such other business publication of national circulation in the United States as the parties reasonably agree. 9.5 Late Payments. Any payments due from the Payor that are not paid on ------------- the date such payments are due under this Agreement shall bear interest at the lesser of(i) the Prime Rate as reported under the heading "Money Rates" in The Wall Street Journal in the United States on the date such payment is due, plus an additional two percent (2%), or (ii) the maximum rate permitted by applicable law, in each case calculated on the number of days such payment is delinquent. This Section 9.5 shall in no way limit any other remedies available to any party. If The Wall Street Journal ceases to be published, then the prime rate to be used shall be that reported in such other business publication of national circulation in the United States as the parties reasonably agree. 9.6 Withholding Taxes. Each party shall be entitled to deduct from the ----------------- royalties owing to the other party hereunder the amount of any withholding taxes, value-added taxes or other taxes, levies or charges with respect to such amounts, other than United States taxes, payable by such party, or any taxes required to be withheld by such party, to the extent such party pays to the appropriate governmental authority on behalf of the other party such taxes, levies or charges. The withholding party shall use reasonable efforts to minimize any such taxes, levies or charges required to be withheld on behalf of the other party by such party. The withholding party promptly shall deliver to the other party proof of payment of all such taxes, levies and other charges, together with copies of all communications from or with such governmental authority with respect thereto, and shall reasonably assist the other party in obtaining a refund thereof (to the extent permitted under applicable law) or to obtain a foreign tax credit therefor. 10. DILIGENCE 10.1 Diligence Obligation of CuraGen. ------------------------------- 10.1.1 CuraGen shall use commercially reasonable efforts to actively research, develop and obtain regulatory approvals as expeditiously as reasonably practicable to market in major markets throughout the world at least one CuraGen Product to each CuraGen Licensed Antigen, and following such approval to maximize N~t Sales of such CuraGen Product. 10.1.2 Without limiting Section 10.1.1, CuraGen, its Sublicensees or their respective Affiliates shall file an JIND with the FDA for at least one CuraGen Product to each CuraGen Licensed Antigen within three (3) years after Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 38 the effective date of the applicable XT/ABX Product License Agreement. After the filing of an IND for at least one CuraGen Product to a CuraGen Licensed Antigen, CuraGen, its Sublicensees or their respective Affiliates, shall have an active IND and actively and diligently conduct clinical trials in pursuit of regulatory approval for at least one such CuraGen Product in the United States until at least one such CuraGen Product may be sold commercially in the United States. 10.1.3 During the term of this Agreement and for a period of five (5) years thereafter, CuraGen shall keep complete and accurate records of its activities conducted under this Agreement regarding the commercialization of CuraGen Products and the results thereof. Within thirty (30) days after the end of each semi-annual period during the term of this Agreement, CuraGen shall prepare and provide ABX with a reasonably detailed written report of such activities and results, through such date. 10.2 Diligence Obligation of ABX. --------------------------- 10.2.1 ABX shall use commercially reasonable efforts to actively research, develop and obtain regulatory approvals as expeditiously as reasonably practicable to market in major markets throughout the world at least one ABX Product to each ABX Licensed Antigen, and following such approval to maximize Net Sales of such ABX Product. 10.2.2 Without limiting Section 10.2.1, ABX, its Sublicensees or their respective Affiliates shall file an IND with the FDA for at least one ABX Product to each ABX Licensed Antigen within three (3) years after the effective date of the applicable XT/ABX Product License Agreement. After the filing of an IND for at least one ABX Product to a ABX Licensed Antigen, ABX, its Sublicensees or their respective Affiliates, shall have an active IND and actively and diligently conduct clinical trials in pursuit of regulatory approval for at least one such ABX Product in the United States until at least one such ABX Product may be sold commercially in the United States. 10.2.3 During the term of this Agreement and for a period of five (5) years thereafter, ABX shall keep complete and accurate records of its activities conducted under this Agreement regarding the commercialization of ABX Products and the results thereof. Within thirty (30) days after the end of each semi-annual period during the term of this Agreement, ABX shall prepare and provide CuraGen with a reasonably detailed written report of such activities and results, through such date. 10.3 Standards of Performance. The development and commercialization of ------------------------ a Product hereunder by a party, its Sublicensees and their respective Affiliates shall be performed in accordance with high scientific and professional standards, and in compliance in all material respects with the requirements of applicable laws and regulations. ABX, its Sublicensees and their respective Affiliates shall be solely responsible for providing the personnel, materials, equipment, and other resources for the development and commercialization of ABX Products hereunder. CuraGen, its Sublicensees and their respective Affiliates shall be solely responsible for providing the personnel, materials, equipment, and other resources for the development and commercialization of CuraGen Products hereunder. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 39 10.4 Gene Therapy Applications. Each party's intention as of the ------------------------- Effective Date is to commercialize a Product hereunder for an application other than Gene Therapy before commercializing a Product hereunder for a Gene Therapy application. It is understood, however, that either party may or may not also intend to develop and sell Products for use in Gene Therapy, and that such Gene Therapy application may ultimately be commercialized before a Product is commercialized hereunder for a non-Gene Therapy application. 11. CONFIDENTIALITY 11.1 Confidential Information. During the term of this Agreement and ------------------------ for a period of five (5) years following the expiration or earlier termination hereof, each party shall maintain in confidence the Confidential Information of the other party, and shall not disclose, use or grant the use of the Confidential Information of the other party except on a need-to-know basis to such party's directors, officers employees, consultants and collaborators, and to the Third Party licensors of the Licensed Intellectual Property, to the extent such disclosure is reasonably necessary or required in connection with such party's activities as expressly authorized by this Agreement. To the extent that disclosure by a party to any Person is authorized by this Agreement, prior to disclosure, a party shall obtain written agreement of such Person to hold in confidence and not disclose, use or grant the use of the Confidential Information of the other party except as expressly permitted under this Agreement. Each party shall notify the other promptly upon discovery of any unauthorized use or disclosure of the other party's Confidential Information. Upon the expiration or earlier termination of this Agreement, each party shall return to the other party all tangible items regarding the Confidential Information of the other party and all copies thereof, except for Confidential Information pertaining to any Licensed Antigen and related Products for which, and for so long as, such party retains a license (or sublicense, as the case may be) hereunder; provided, however, that each party shall have the right to retain one (1) copy for its legal files for the sole purpose of determining its obligations hereunder. 11.2 Terms of Agreement. Neither party shall disclose any terms or ------------------ conditions of this Agreement to any Third Party without the prior consent of the other party; provided, however, that either party may disclose the terms or conditions of this Agreement, (a) on a need-to-know basis to its legal and financial advisors to the extent such disclosure is reasonably necessary in connection with such party's activities as expressly permitted by this Agreement or for the conduct of its business; (b) to the Third Party licensors of the Licensed Intellectual Property; (c) to a Third Party in connection with (i) an equity investment or other form of financing in such party by a Third Party; (ii) a merger, consolidation or similar transaction entered into by such party; or (iii) the sale of all or substantially all of the assets of such party; and (d) as may, in the reasonable opinion of such party's counsel, be required by applicable law, regulation or court order, including without limitation, a disclosure in connection with such party's filing of a registration statement or other filing with the United States Securities and Exchange Commission (in which event such party will first consult with the other party, to the extent Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 40 reasonably practicable, with respect to such disclosure). Notwithstanding the foregoing, (i) the parties will jointly issue a press release in mutually agreed form promptly after execution hereof and (ii) prior to execution of this Agreement CuraGen and ABX shall agree upon the substance of information that can be used to describe the terms of this transaction, and CuraGen and ABX may disclose such information, as modified by mutual agreement from time to time, without the other party's consent. 12. TECHNOLOGY, INFORMATION AND INTELLECTUAL PROPERTY ------------------------------------------------- 12.1 Ownership. --------- 12.1.1 ABX shall solely own all right, title and interest in the ABX Technology and Information and in all patent rights and other intellectual property rights therein. CuraGen shall not (and shall not attempt or purport to) file or prosecute any patent application in any country which claims or purports to claim the ABX Technology and Information, unless the parties otherwise expressly agree in writing. ABX shall solely own all right, title and interest in the Excluded ABX Technology and in all patent rights and other intellectual property rights therein. CuraGen shall not (and shall not attempt or purport to) file or prosecute any patent application in any country which claims or purports to claim the Excluded ABX Technology. 12.1.2 CuraGen shall solely own all right, title and interest in the CuraGen Technology and Information and in all patent rights and other intellectual property rights therein. ABX shall not (and shall not attempt or purport to) file or prosecute any patent application in any country which claims or purports to claim the CuraGen Technology and Information, unless the parties otherwise expressly agree in writing. CuraGen shall solely own all right, title and interest in the Excluded CuraGen Technology and in all patent rights and other intellectual property rights therein. ABX shall not (and shall not attempt or purport to) file or prosecute any patent application in any country which claims or purports to claim the Excluded CuraGen Technology. 12.1.3 ABX shall solely own all right, title and interest in Research Program Technology and Information conceived, reduced to practice or otherwise derived solely by Persons on behalf of ABX, together with all patent rights and other intellectual property rights therein and, subject to the provisions of this Agreement, shall have the right to freely exploit, transfer, license, or encumber its rights thereto. CuraGen shall solely own all right, title and interest in Research Program Technology and Information conceived, reduced to practice or otherwise derived solely by Persons on behalf of CuraGen, together with all patent rights and other intellectual property rights therein and, subject to the provisions of this Agreement, shall have the right to freely exploit, transfer, license, or encumber its rights thereto. The parties jointly shall own all right, title and interest in Research Program Technology and Information conceived, reduced to practice or otherwise derived jointly by Persons on behalf of ABX and by Persons on behalf of CuraGen, together with all patent rights and other intellectual property rights therein. Each party shall have the right, subject to the provisions of this Agreement, to freely exploit, transfer, license or encumber its rights in any jointly-owned Research Program Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 41 Technology and Information (and all patent rights and other intellectual property rights therein) without the consent of, or payment or accounting to, the other party. 12.1.4 The transfer of physical possession of any Technology and Information owned by, and the physical possession and use of any Technology and Information by, CuraGen or ABX, as the case may be, shall not be (nor be construed as) a sale, lease, offer to sell or lease, or other transfer of title of such Technology and Information to CuraGen or ABX, as the case may be. 12.1.5 During the term of this Agreement, neither party shall (and neither party shall attempt or purport to) assign, sell, have sold, lease, offer to sell or lease, otherwise transfer title to, or otherwise distribute or license, sublicense or otherwise commercialize or exploit, any Research Program Technology and Information, except as otherwise set forth-herein or the parties otherwise expressly agree in writing. 12.2 Assignment and Disclosure. Each party shall cause all employees ------------------------- and others conducting work on its behalf under this Agreement to promptly disclose to the other party all Technology and Information in which the other party has an ownership interest, and to assign any and all right, title and interest in all Technology and Information and all patent rights and other intellectual property rights therein in accordance with this Agreement. Each party shall maintain records in sufficient detail and in good scientific manner appropriate for patent purposes to properly reflect all work done and results achieved in conducting its work hereunder, and shall respond to reasonable requests of the other party for information regarding Technology and Information in which the other party has an ownership interest. 12.3 Research Program Patent Rights. ------------------------------ 12.3.1 Prosecution and Maintenance. --------------------------- (a) Subject to the provisions of Section 12.3.1(d) below, ABX shall have the right (but not the obligation), at its sole expense, to prepare, file, prosecute and maintain the ABX Patent Rights. (b) CuraGen shall have the right (but not the obligation), at its sole expense, to prepare, file, prosecute and maintain the CuraGen Patent Rights. (c) Subject to the provisions of Section 12.3.1(d) and (e) below, (i) ABX shall have the right (but not the obligation), at its sole expense, to prepare, file, prosecute and maintain the Research Program Patent Rights owned solely by ABX; (ii) CuraGen shall have the right (but not the obligation), at its sole expense, to prepare, file, prosecute and maintain the Research Program Patent Rights owned solely by CuraGen; and (iii) CuraGen shall have the right (but not the obligation) to prepare, file, prosecute and maintain the Research Program Patent Rights owned jointly by the parties, and ABX shall reimburse CuraGen on demand for one-half the reasonable expenses thereof. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 42 (d) Upon the effective date of a commercial license under Article 7 for CuraGen Products to a CuraGen Licensed Antigen, and for so long as such license remains in effect, (i) CuraGen shall have the right (but not the obligation) to assume control of the preparation, filing, prosecution and maintenance of the Research Program Patent Rights that specifically and solely claim such CuraGen Licensed Antigen or the use thereof (ii) CuraGen shall have the right (but not the obligation) to assume control of the preparation, filing, prosecution and maintenance of the ABX Patent Rights that specifically and solely claim the use of such CuraGen Antigen or Antibodies to such CuraGen Licensed Antigen or the use thereof; (iii) CuraGen shall reimburse ABX on demand for all previously unreimbursed expenses of the preparation, filing, prosecution and maintenance of such ABX Patent Rights and Research Program Patent Rights; and (iv) CuraGen shall be solely responsible for the expenses of the preparation, filing, prosecution and maintenance of such ABX Patent Rights and Research Program Patent Rights thereafter. in the event there are any Research Program Patent Rights or ABX Patent Rights with such claims and other claims, ABX shall file such divisional or other applications, to the extent legally permitted, as may be necessary to separate such claims into a separate application, which CuraGen shall then have the right to control as aforesaid. If the claims cannot be so separated ABX will take no action with respect to any such claim that would materially narrow the scope thereof without CuraGen's express written consent, which consent shall not be unreasonably withheld or delayed. (e) Upon the effective date of a commercial license under Article 7 for ABX Products to an ABX Licensed Antigen, and for so long as such license remains in effect, (i) ABX shall have the right (but not the obligation) to assume control of the preparation, filing, prosecution and maintenance of the Research Program Patent Rights that specifically and solely claim such ABX Licensed Antigen or the use thereof; (ii) ABX shall have the right (but not the obligation) to assume control of the preparation, filing, prosecution and maintenance of the CuraGen Patent Rights that specifically and solely claim antibodies to such ABX Licensed Antigen or the use thereof; (iii) ABX shall reimburse CuraGen on demand for all previously unreimbursed expenses of the preparation, filing, prosecution and maintenance of such Research Program Patent Rights and CuraGen Patent Rights; and (iv) ABX shall be solely responsible for the expenses of the preparation, filing, prosecution and maintenance of such Research Program Patent Rights and CuraGen Patent Rights thereafter. In the event there are any Research Program Patent Rights or CuraGen Patent Rights with such claims and other claims, CuraGen shall file such divisional or other applications, to the extent legally permitted, as may be necessary to separate such claims into a separate application, which ABX shall then have the right to control as aforesaid. If the claims cannot be so separated CuraGen will take no action with respect to any such claim that would materially narrow the scope thereof without ABX's express written consent, which consent shall not be unreasonably withheld or delayed. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 43 (f) With respect to each patent application and patent within the Licensed Intellectual Property Rights or Research Program Patent Rights that specifically and solely claims a Licensed Antigen, an Antibody to a Licensed Antigen or the use thereof and with respect to each other patent and patent application within the Research, Program Patent Rights owned jointly by the parties, the controlling party shall (i) provide the non-controlling party with any patent application filed by the controlling party prior to filing in order to provide the non-controlling party with an opportunity to comment thereon, and consider in good faith reasonable comments by the non-controlling party thereon; (ii) provide the non-controlling party with any patent application filed by the controlling party promptly after such filing; and (iii) provide the non- controlling party promptly with copies of all substantive communications received from or filed in patent office(s) with respect to such filings and consider in good faith reasonable comments by the non-controlling party thereon. (g) The non-controlling party shall assist the controlling party, upon the controlling party's request, and to the extent commercially reasonable, in preparing, filing or maintaining the patent applications and patents within the Research Program Patent Rights and Licensed Intellectual Property Rights. 12.3.2 Enforcement. ----------- (a) Subject to the provisions of Section 12.3.2(e) below, ABX shall have the right (but not the obligation), at its sole expense, to control the enforcement of the ABX Patent Rights; provided, however, that CuraGen shall have the right (but not the obligation), at its sole expense, to control the enforcement of those ABX Patent Rights (if any) for which CuraGen assumes control of the preparation, filing, prosecution and maintenance under Section 12.3.1(d) above. (b) Subject to the provisions of Section 12.3.2(e) below, CuraGen shall have the right (but not the obligation), at its sole expense, to control the enforcement of the CuraGen Patent Rights; provided, however, that ABX shall have the right (but not the obligation), at its sole expense, to control the enforcement of those CuraGen Patent Rights (if any) for which ABX assumes control of the preparation, filing, prosecution and maintenance under Section 12.3.1(e) above. (c) Subject to the provisions of Section 12.3.2(e) below, the controlling party identified under Section 12.3.1 above shall have the first right (but not the obligation), at its sole expense, to enforce the Research Program Patent Rights. (d) With respect to each patent within the Licensed Intellectual Property Rights or Research Program Patent Rights that specifically and solely claims a Licensed Antigen, an Antibody to a Licensed Antigen or the use thereof, the controlling party shall keep the non-controlling party informed and consider in good faith the reasonable comments of the non-controlling party, both prior to and during any such enforcement. The non-controlling party shall assist the controlling party, upon request and at the controlling party's sole expense, and to the extent commercially reasonable, in taking any action to enforce such Licensed Intellectual Property Rights or Research Program Patent Rights to the extent the non-controlling party has the right to do so. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 44 (e) If the controlling party fails to abate an infringement of any patent within the Licensed Intellectual Property Rights or Research Program Patent Rights that specifically and solely claims a Licensed Antigen, an Antibody to a Licensed Antigen or the use thereof, or to file an action to abate such infringement, within ninety (90) days after a written request from the non- controlling party to do so, or if the controlling party discontinues the prosecution of any such action after filing patent, the non-controlling party at its expense may, in its discretion, undertake such action as it determines appropriate to enforce the Research Program Patent Rights. In such case, the controlling party shall assist the non-controlling party, upon request and at the non-controlling party's sole expense, and to the extent commercially reasonable, in taking any action to enforce such patent within the Licensed Intellectual Property Rights or Research Program Patent Rights to the extent the controlling party has the right to do so. (f) All monies recovered upon the final judgment or settlement of any such action regarding the Licensed Intellectual Property Rights or Research Program Patent Rights that specifically and solely claims a Licensed Antigen, an Antibody to a Licensed Antigen or the use thereof shall be used (i) first, to reimburse the costs and expenses (including reasonable attorneys' fees and costs) of the controlling party and the non-controlling party, and (ii) the remainder, [____________________________________]. 12.4 Patent Marking. Each party shall mark, and shall cause its -------------- Sublicensees and their respective Affiliates to mark all Products, sold pursuant to this Agreement by such party, its Sublicensees and their respective Affiliates in accordance with the requirements of applicable laws and regulations in the country or countries of manufacture and sale thereof. 12.5 Limitation. Notwithstanding any other provision in this Article ---------- 12, (a) ABX shall not be obligated to prepare, file, prosecute, and maintain patents and patent applications, or to bring or pursue enforcement proceedings or defend declaratory judgment actions regarding the Licensed ABX Intellectual Property if, and to the extent that, ABX is not entitled to do so under one or more ABX In-Licenses, and (b) any rights conveyed under this Article 12 permitting CuraGen to prepare, file, prosecute and maintain certain patents and patent applications, or to bring and pursue enforcement proceedings, or defend declaratory judgment actions, regarding the Licensed ABX Intellectual Property, shall be subject to all applicable ABX In-Licenses, and are conveyed only to the extent permitted under such agreements. 12.6 Use and Transfer Restrictions. Each party shall use the Technology ----------------------------- and Information owned by the other party solely for purposes of conducting its obligations or exercising its rights under this Agreement, at its facilities, under commercially and scientifically reasonable containment conditions, and not for any other commercial, business or other use or purpose, without the prior Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 45 express written consent of the other party. Except as otherwise provided in this Agreement, (a) a party shall not transfer or provide access to the Technology and Information owned by the other party to any Affiliate or Third Party; (b) a party shall not transfer or transport the Technology and Information owned by the other party from its facilities to any other location; (c) a party shall limit access to the Technology and Information owned by the other party to those of its employees working on its premises, to the extent such access is reasonably necessary to conduct its obligations or exercise its rights under this Agreement; and (d) a party shall not (and shall not attempt or purport to) assign, sell, have sold, lease, offer to sell or lease, otherwise transfer title to, or otherwise distribute or license, sublicense or otherwise commercialize or exploit, any Technology and Information owned by the other party or any interest therein. 12.7 Grant Backs. ----------- 12.7.1 It is the intent of the parties that this Agreement shall not restrict ABX's freedom to practice and commercialize the Licensed ABX Intellectual Property, the XenoMouse Animals and the ABX Technology and Information, except as expressly set forth herein. CuraGen hereby grants to ABX a royalty-free, perpetual, irrevocable, exclusive, worldwide license (with the right to grant sublicenses) under CuraGen's rights in the Research Program Patent Rights and Research Program Know-How to research, develop, make, have made, use, offer for sale, sell and import Human Antibody Equivalents and products comprising Human Antibody Equivalents (other than CuraGen Products) for all uses. CuraGen hereby grants to ABX a royalty-free, perpetual, irrevocable, nonexclusive worldwide license (with the right to grant sublicenses) under CuraGen's rights in the Research Program Patent Rights and Research Program Know-How to research, develop, make and use Antibody Equivalents (other than Human Antibody Equivalents) solely in connection with the research, development, making, having made, using, offering for sale, selling and importing of Human Antibody Equivalents and products comprising Human Antibody Equivalents (other than CuraGen Products) for all uses. CuraGen hereby grants to ABX a royalty- free, perpetual, irrevocable, nonexclusive, worldwide license (with the right to grant sublicenses) under those certain one or more CuraGen Patent Rights, which have a common claim of priority and relate to the same antigen and in which the claims within such CuraGen Patent Rights are supported by information or data derived from the use of the ABX Technology and Information and/or Research Program Technology and Information, solely in connection with the research, development, making, having made, using, offering for sale, selling and importing of Human Antibody Equivalents and products comprising Human Antibody Equivalents (other than CuraGen Products) for all uses. 12.7.2 It is the intent of the parties that this Agreement shall not restrict CuraGen's freedom to practice and commercialize the Licensed CuraGen Intellectual Property, the CuraGen Databases, and the CuraGen Technology and Information, except as expressly set forth herein. ABX hereby grants to CuraGen a royalty-free, perpetual, irrevocable, exclusive, worldwide license (with the right to grant sublicenses) under ABX's rights in the Research Program Patent Rights and Research Program Know-How to research, develop, make, have made, use, offer for sale, sell and import Antibody Equivalents (other than Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 46 Human Antibody Equivalents) and compositions other than Antibody Equivalents, and products (other than ABX Products) comprising Antibody Equivalents (other than Human Antibody Equivalents) and compositions other than Antibody Equivalents, for all uses; provided, however, that ABX reserves, for itself and its sublicensees, the right under ABX's rights in the Research Program Patent Rights and Research Program Know-How to exercise its license rights granted under Section 12.7.1 above. ABX hereby grants to CuraGen a royalty-free, perpetual, irrevocable, nonexclusive, worldwide license (with the right to grant sublicenses) under those certain one or more ABX Patent Rights, which have a common claim of priority and relate to the same antigen and in which the claims within such ABX Patent Rights are supported by information or data derived from the use of the CuraGen Technology and Information and/or Research Program Technology and Information, solely in connection with the research, development, making, having made, using, offering for sale, selling and importing of Antibody Equivalents (other than Human Antibody Equivalents) and compositions other than Antibody Equivalents, and products (other than ABX Products) comprising Antibody Equivalents (other than Human Antibody Equivalents) and compositions other than Antibody Equivalents, for all uses. 13. INDEMNIFICATION 13.1 ABX. ABX shall indemnify and hold harmless CuraGen, and its ---- directors, officers, employees and agents, from and against all losses, liabilities, damages and expenses, including reasonable attorneys' fees and costs (collectively, "Liabilities"), resulting from any claims, demands, actions or other proceedings by any Third Party arising from (a) the material breach of any representation, warranty or covenant by ABX under this Agreement, (b) any use, handling or storage by ABX, its Sublicensees (other than CuraGen) and their respective Affiliates of the CuraGen Technology and Information or the Research Program Technology and Information, (c) the manufacture, use, sale, handling or storage by ABX, its Sublicensees (other than CuraGen) and their respective Affiliates of ABX Products (without regard to culpable conduct), or (d) any use by ABX, its Sublicensees (other than CuraGen) and their respective Affiliates of the Confidential Information of CuraGen; provided, however, that ABX shall not be obligated to indemnify or hold harmless CuraGen for such Liabilities to the extent that such Liabilities arise from the gross negligence or willful misconduct of CuraGen. 13.2 CuraGen. CuraGen shall indemnify and hold harmless ABX, and its ------- directors, officers, employees and agents, from and against all Liabilities resulting from any claims, demands, actions or other proceedings by any Third Party arising from (a) the material breach of any representation, warranty or covenant by CuraGen under this Agreement, (b) any use, handling or storage by CuraGen, its Sublicensees (other than ABX) and their respective Affiliates of the ABX Technology and Information or the Research Program Technology and Information, (c) the manufacture, use, sale, handling or storage by CuraGen, its Sublicensees (otheE than ABX) and their respective Affiliates of CuraGen Products (without regard to culpable conduct), or (d) any use by CuraGen, its Sublicensees (other than ABX) and their respective Affiliates of the Confidential Information of ABX; provided, however, that CuraGen shall not be obligated to indemnify or hold harmless ABX for such Liabilities to the extent that such Liabilities arise from the gross negligence or willful misconduct of ABX. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 47 13.3 Procedure. If a party (an "Indemnitee") intends to claim --------- indemnification under this Article 13, it shall promptly notify the indemnifying party (the "Indemnitor") in writing of any claim, demand, action or other proceeding for which the Indemnitee intends to claim such indemnification, and the Indemnitor shall have the right to participate in, and, to the extent the Indemnitor so desires, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an Indemnitee shall have the right to retain its own counsel, with the fees and expenses to be paid by the Indemnitor, if representation of such Indemnitee by the counsel retained by the Indemnitor would be inappropriate due to actual or potential differing interests between such Indemnitee and any other party represented by such counsel in such proceeding. The indemnity agreement in this Article 13 shall not apply to amounts paid in settlement of any claim, demand, action or other proceeding if such settlement is effected without the consent of the Indemnitor, which consent shall not be withheld or delayed unreasonably. The failure to deliver written notice to the Indemnitor within a reasonable time after the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such Indemnitor of any liability to the Indemnitee under this Article 13, but the omission so to deliver written notice to the Indemnitor shall not relieve it of any liability that it may have to any party claiming indemnification otherwise than under this Article 13. The party claiming indemnification under this Article 13, its employees and agents, shall reasonably cooperate with the Indemnitor and its legal representatives in the investigation of any claim, demand, action or other proceeding covered by this indemnification. 13.4 Insurance. Each party shall maintain insurance, including product --------- liability insurance, with respect to the research, development, manufacture and sale of Products hereunder by such party, its Sublicensees and their respective Affiliates in such amount as such party customarily maintains with respect to the research, development, manufacture and sale of its other products. Each party shall maintain such insurance for so long as such party, its Sublicensees and their respective Affiliates continues to research, develop, manufacture or sell any Products hereunder, and thereafter for so long as such party customarily maintains insurance covering the research, development, manufacture and sale of its other products. 14. TERM AND TERMINATION 14.1 Term. The term of this Agreement shall commence on the Effective ---- Date and, unless earlier terminated, shall continue in full force and effect until the expiration of the parties' respective royalty obligations pursuant to this Agreement. 14.2 Termination. ----------- 14.2.1 If CuraGen breaches its obligations under Section 8.2, 8.3 or 8.4 above, or materially breaches its obligations under Section 10.1 above, with respect to any Antigen or to CuraGen Products to any CuraGen Licensed Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 48 Antigen, and such breach shall have continued for ten (10) days, in the case of breaches under Section 8.2, 8.3, or 8.4, or for thirty (30) days, in the case of material breaches under Section 10.1, after written notice of such breach was provided to CuraGen by ABX, ABX shall have the right at its option to terminate the licenses (or sublicenses, as the case may be) under this Agreement with respect to such Antigen or to CuraGen Products to such CuraGen Licensed Antigen (as applicable) effective at the end of such ten (10) day or thirty (30) day period, as the case may be, without otherwise affecting the other licenses (or sublicenses, as the case may be) granted under this Agreement or the other remaining provisions of this Agreement. In the event of such termination by ABX, the Antigen which was the subject of the termination shall be subject to ABX's standby option under Section 7.2.2, CuraGen's obligation to provide data and information under Section 7.2.2 shall apply to all data and information in existence at the time of the termination, the six-month period in which to exercise such option shall commence on the date of termination, and no payment shall be due under Section 8.2.3 upon the exercise by ABX of such option. 14.2.2 If ABX breaches its obligations under Section 8.2, 8.3 or 8.4 above, or materially breaches its obligations under Section 10.2 above, with respect to any Antigen or to ABX Products to any ABX Licensed Antigen, and such breach shall have continued for ten (10) days, in the case of breaches under Section 8.2, 8.3, or 8.4, or for thirty (30) days, in the case of material breaches under Section 10.2, after written notice of such breach was provided to ABX by CuraGen, CuraGen shall have the right at its option to terminate the licenses (or sublicenses, as the case may be) under this Agreement with respect to such Antigen or to ABX Products to such ABX Licensed Antigen (as applicable) effective at the end of such ten (10) day or thirty (30) day period, as the case may be, without otherwise affecting the other licenses (or sublicenses, as the case may be) granted under this Agreement or the other remaining provisions of this Agreement. In the event of such termination by CuraGen, the Antigen which was the subject of the termination shall be subject to CuraGen's standby option under Section 7.1.2, ABX's obligation to provide data and information under Section 7.1.2 shall apply to all data and information in existence at the time of the termination, the six-month period in which to exercise such option shall commence on the date of termination, and no payment shall be due under Section 8.2.3 upon the exercise by CuraGen of such option. 14.2.3 If a party shall have materially breached any of its material obligations hereunder (other than under Sections 8.2, 8.3, 8.4, 10.1 and 10.2 above), and such breach shall have continued for thirty (30) days after written notice of such breach was provided to the breaching party by the nonbreaching party, the nonbreaching party shall have the right (at its option), effective at the end of such thirty (30) day period, to terminate the Research Program and all options, licenses, and rights to obtain additional options and licenses granted to the breaching party under this Agreement; provided, however, that any commercial licenses previously granted to the breaching party under Article 7 above (and any related continuing research licenses to the breaching party under Section 6.1 above), all licenses granted to the breaching party under Section 12.7 above, and all options, licenses, and rights to obtain additional options and licenses granted to the nonbreaching party under this Agreement shall survive any such termination by the nonbreaching party under this Section 14.2.3. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 49 14.3 Effect of Expiration or Termination. 14.3.1 Expiration or termination of this Agreement shall be without prejudice to any rights which shall have accrued to the benefit of a party prior to such expiration or termination. Without limiting the foregoing, the license rights granted under Section 4.4.1 and the provisions of Sections 4.6.3 and 8.1 and Articles 9, 11, 12, 13, 14 and 15 shall survive any expiration or termination of this Agreement. 14.3.2 In the event of termination of the Research Program and the options, licenses and rights of ABX under this Agreement by CuraGen pursuant to Section 14.2.3 upon an uncured material breach of a material obligation by ABX, then the payments remaining to be paid to ABX under Section 8.1 shall be reduced [______________________]. Such reduction shall be applied against the payments remaining to be paid to ABX under Section 8.1 on a last-to-be-paid first-reduced basis. 14.3.3 In the event of expiration of this Agreement prior to the fifth anniversary of the Effective Date, termination of this Agreement for any reason, or termination of the Research Program and the options, licenses and rights of CuraGen by ABX pursuant to Section 14.2.3 above, then all payments remaining to be paid to ABX under Section 8.1 shall be immediately due and payable on or before the date thirty (30) days following the effective date of such expiration or termination. 14.3.4 Following the expiration under Section 8.4.3(e) of CuraGen's obligation to pay royalties to ABX hereunder with respect to a CuraGen Product (provided that CuraGen's option, license or other rights with respect to such CuraGen Product have not been previously terminated), CuraGen shall have a fully-paid up, non-exclusive license (or sublicense, as the case may be) (with the right to grant sublicenses) under the ABX Know-How and Research Program Know-How solely to make, have made, use, offer for sale, sell and import such CuraGen Product for use in the Commercial Field. Following the expiration under Section 8.4.3(e) of ABX's obligation to pay royalties to CuraGen hereunder with respect to an ABX Product (provided that ABX's option, license or other rights with respect to such ABX Product have not been previously terminated), ABX shall have a fully-paid up, non-exclusive license (or sublicense, as the case may be) (with the right to grant sublicenses) under the CuraGen Know-How and Research Program Know-How solely to make, have made, use, offer for sale, sell and import such ABX Product for use in the Commercial Field. 14.3.5 Upon termination of this Agreement, or upon termination of the licenses (or sublicenses, as the case may be) hereunder for any CuraGen Product, CuraGen, its Sublicensees and their respective Affiliates shall have the right to sell or otherwise dispose (consistent with all applicable laws and regulations and subject to Articles 8 and 9 above) of the stock of any CuraGen Product then on hand. Upon termination of this Agreement, or upon termination of the licenses (or sublicenses, as the case may be) hereunder for any ABX Product, ABX, its Sublicensees and their respective Affiliates shall have the right to sell or otherwise dispose (consistent with all applicable laws and regulations and subject to Articles 8 and 9 above) of the stock of any ABX Product then on hand. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 50 14.3.6 Upon termination of this Agreement by ABX, or upon termination by ABX of the licenses (or sublicenses, as the case may be) hereunder for any CuraGen Product, any Sublicense granted by CuraGen hereunder shall survive, provided that upon request by ABX, such Sublicensee promptly agrees in writing that such Sublicensee shall be bound by the terms of such Sublicense for the benefit of ABX and ABX shall have all of the rights of CuraGen under such Sublicense, but ABX shall not be bound by any obligation of CuraGen thereunder except to the extent it is already bound to an equivalent obligation hereunder. Upon termination of this Agreement by CuraGen, or upon termination by CuraGen of the licenses (or sublicenses, as the case may be) hereunder for any ABX Product, any Sublicense granted by ABX hereunder shall survive, provided that upon request by CuraGen, such Sublicensee promptly agrees in writing that such Sublicensee shall be bound by the terms of such Sublicense for the benefit of CuraGen and CuraGen shall have all of the rights of ABX under such Sublicense, but CuraGen shall not be bound by any obligation of ABX thereunder except to the extent it is already bound to an equivalent obligation hereunder. 14.3.7 Except as otherwise expressly agreed in writing by the parties, promptly upon the expiration or earlier termination of the Research Program, each party shall destroy all remaining Research Program Technology and Information and Antigen Specific Materials and Information; in each case except to the extent such party retains an option or license (or sublicense, as the case may be) thereto hereunder; that survives such expiration or termination. 14.3.8 Except as otherwise expressly agreed in writing by the parties, promptly upon the expiration or earlier termination of this Agreement, (a) CuraGen shall destroy or return to ABX (as ABX `shall direct) all remaining ABX Technology and Information; (b) ABX shall destroy or return to CuraGen (as CuraGen shall direct) all remaining CuraGen Technology and Information; and (c) each party shall destroy all remaining Research Program Technology and Information and Antigen Specific Materials and Information; in each case except to the extent such party retains a license (or sublicense, as the case may be) thereto hereunder; that survives such expiration or termination. 14.3.9 Except as otherwise expressly agreed in writing by the parties, promptly upon the termination of the license (or sublicense, as the case may be)s granted to CuraGen hereunder regarding any Antigen, CuraGen shall destroy or return to AB-X (as ABX shall direct) all remaining ABX Technology and Information regarding such Antigen, Antibodies to such Antigens and Products to such Antigen, and shall destroy all remaining Research Program Technology and Information and Antigen Specific Materials and Information regarding such Antigen, Antibodies to such Antigens and Products to such Antigen. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 51 14.3.10 Except as otherwise expressly agreed in writing by the parties, promptly upon the termination of the license (or sublicense, as the case may be)s granted to ABX hereunder regarding any Antigen, ABX shall destroy or return to CuraGen (as CuraGen shall direct) all remaining CuraGen Technology and Information regarding such Antigen, Antibodies to such Antigens and Products to such Antigen, and shall destroy all remaining Research Program Technology and Information and Antigen Specific Materials and Information regarding such Antigen, Antibodies to such Antigens and Products to such Antigen. 15. MISCELLANEOUS 15.1 Governing Laws. This Agreement shall be governed by, interpreted -------------- and construed in accordance with the laws of the State of Delaware, without regard to conflicts of law principles. 15.2 Waiver. No waiver by any party hereto of any breach or default of ------ any of the covenants or agreements herein set forth shall be deemed a waiver as to any subsequent and/or similar breach or default. 15.3 Assignments. Neither this Agreement nor any right or obligation ----------- hereunder may be assigned or delegated, in whole or part, by either party without the prior express written consent of the other; provided, however, that either party may, without the written consent of the other, assign this Agreement and its rights and delegate its obligations hereunder in connection with the transfer or sale of all or substantially all of its business, or in the event of its merger, consolidation, change in control or similar transaction. Any permitted assignee shall assume all obligations of its assignor under this Agreement. Any purported assignment in violation of this Section 15.3 shall be void. 15.4 Independent Contractors. The relationship of the parties hereto ----------------------- is that of independent contractors. The parties hereto shall not be deemed to be agents, partners or joint venturers of the others for any purpose as a result of this Agreement or the transactions contemplated thereby. 15.5 Further Actions. Each party agrees to execute, acknowledge and --------------- deliver such further instruments and to do all such other acts as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement. 15.6 Notices. All requests and notices required or permitted to be ------- given to the parties hereto shall be given in writing, shall expressly reference the section(s) of this Agreement to which they pertain, and shall be delivered to the other party, effective on receipt, at the appropriate address as set forth below or to such other addresses as may be designated in writing by the parties from time to time during the term of this Agreement. If to ABX: Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 52 Abgenix, Inc. 7601 Dumbarton Circle Fremont, California 94555 Attn: President with a copy to: Gray Cary Ware & Freidenrich LLP 4365 Executive Drive, Suite 1600 San Diego, California 92121-2189 Attn: Mark R. Wicker If to CuraGen: CuraGen Corporation 555 Long Wharf Drive New Haven, Connecticut 06511 Attn: President with a copy to: Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C. One Financial Center Boston, Massachusetts 02111 Attn: Jeffrey M. Wiesen 15.7 No Implied Licenses. Only licenses (or sublicenses, as the case ------------------- may be) and rights granted expressly herein shall be of legal force and effect. No license (or sublicense, as the case may be) or other right shall be created hereunder by implication, estoppel or otherwise. By way of clarification and not limitation, no license (or sublicense, as the case may be) is granted hereunder to CuraGen to have in its possession any XenoMouse Animals or to conduct immunizations thereof. 15.8 Compliance with Laws. Each party shall use the Technology and -------------------- Information of the other party and the Research Program Technology and Information in compliance in all material respects with all applicable laws, guidelines and regulations which are applicable to such Technology and Information or the use thereof, including without limitation any biosafety procedures and all safety precautions accompanying such Technology and Information. Except as otherwise expressly agreed in this Agreement or otherwise expressly agreed in writing by the parties, neither party shall administer the Technology and Information of the other party or the Research Program Technology and Information to humans under any circumstances. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 53 15.9 Export Laws. Notwithstanding anything to the contrary contained ----------- herein, all obligations of ABX and CuraGen are subject to prior compliance with United States export regulations and such other United States laws and regulations as may be applicable, and to obtaining all necessary approvals required by the applicable agencies of the government of the United States. Each party shall be responsible for obtaining such approvals as required of it, and shall use efforts consistent with prudent business judgment to obtain such approvals. Each party shall cooperate reasonably with the other party and provide reasonable assistance to the other party as may be reasonably necessary to obtain any required approvals. 15.10 Force Majeure. Nonperformance of a party (other than for the ------------- payment of money) shall be excused to the extent that performance is rendered impossible by strike, fire, earthquake, flood, governmental acts or orders or restrictions, failure of suppliers, or any other reason where failure to perform, is beyond the reasonable control and not caused by the negligence, intentional conduct or misconduct of the nonperforming party. 15.11 No Consequential Damages. IN NO EVENT SHALL A PARTY HERETO BE ------------------------ LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS AGREEMENT OR THE EXERCISE OF ITS RIGHTS HEREUNDER, INCLUDING WITHOUT LIMITATION LOST PROFITS ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF SUCH DAMAGES. NOTHING IN THIS SECTION 15.11 IS INTENDED TO LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF EITHER PARTY. 15.12 Third Party Rights. Notwithstanding anything to the contrary in ------------------ this Agreement, the grant of rights by ABX under this Agreement shall be subject to and limited in all respects by the terms of the applicable ABX In-License(s) pursuant to which ABX acquired any Licensed ABX Intellectual Property, and all rights or sublicenses granted under this Agreement shall be limited to the extent that ABX may grant such rights and sublicenses under such ABX In- Licenses. Additionally, and without limiting the foregoing, the rights granted to CuraGen hereunder, including without limitation any grant of "exclusive" rights, shall be subject to the rights granted to or retained by GenPharm under the GenPharm Cross License Agreement. 15.13 Complete Agreement. This Agreement constitutes the entire ------------------ agreement between the parties regarding the subject matter hereof, and all prior representations, understandings and agreements regarding the subject matter hereof (including without limitation, the Original Agreement and the letter dated July 5, 2000, from Christopher McLeod to Raymond Withy) either written or oral, expressed or implied, are superseded and of no effect. 15.14 Counterparts. This Agreement may be executed in counterparts, ------------ each of which shall be deemed to be an original and both together shall be deemed to be one and the same agreement. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 54 15.15 Headings. The captions to the several Articles and Sections -------- hereof are not a part of this Agreement, but are included merely for convenience of reference only and shall not affect its meaning or interpretation. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 55 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective duly authorized officers as of the day and year first above written. ABGENIX, INC. By: /s/ Raymond M. Withy ---------------------------------- (Signature) Raymond M. Withy ---------------------------------- (Printed Name) Chief Business Officer ---------------------------------- (Title) CURAGEN CORPORATION By: /s/ Christopher K. McLeod ---------------------------------- (Signature) Christopher K. McLeod --------------------- (Printed Name) Executive Vice President ------------------------ (Title) Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 56 EXHIBIT A [__________________] 1. [__________________________] A. [___________________________________________________]:

[_____] [________] [_______] [________] [________] - ----------------------------------------------------------------------------------------------------------------------- [__________] [____________] [_____________] [_______________] [____________________] - ----------------------------------------------------------------------------------------------------------------------- [__________] [____________] [_____________] [_______________] [____________________] - ----------------------------------------------------------------------------------------------------------------------- [__________] [____________] [_____________] [_______________] [____________________] - ----------------------------------------------------------------------------------------------------------------------- [__________] [____________] [_____________] [_______________] [____________________] - ----------------------------------------------------------------------------------------------------------------------- [__________] [____________] [_____________] [_______________] [____________________] - ----------------------------------------------------------------------------------------------------------------------- [__________] [____________] [_____________] [_______________] [____________________] - ----------------------------------------------------------------------------------------------------------------------- [__________] [____________] [_____________] [_______________] [____________________] - ----------------------------------------------------------------------------------------------------------------------- [__________] [____________] [_____________] [_______________] [____________________] - ----------------------------------------------------------------------------------------------------------------------- [__________] [____________] [_____________] [_______________] [____________________] - ----------------------------------------------------------------------------------------------------------------------- [__________] [____________] [_____________] [_______________] [____________________] - ----------------------------------------------------------------------------------------------------------------------- [__________] [____________] [_____________] [_______________] [____________________] - ----------------------------------------------------------------------------------------------------------------------- [__________] [____________] [_____________] [_______________] [____________________] - ----------------------------------------------------------------------------------------------------------------------- [__________] [____________] [_____________] [_______________] [____________________] - ----------------------------------------------------------------------------------------------------------------------- [__________] [____________] [_____________] [_______________] [____________________] - ----------------------------------------------------------------------------------------------------------------------- [__________] [____________] [_____________] [_______________] [____________________] - ----------------------------------------------------------------------------------------------------------------------- [__________] [____________] [_____________] [_______________] [____________________] - ----------------------------------------------------------------------------------------------------------------------- [__________] [____________] [_____________] [_______________] [____________________] - ----------------------------------------------------------------------------------------------------------------------- [__________] [____________] [_____________] [_______________] [____________________] - ----------------------------------------------------------------------------------------------------------------------- [__________] [____________] [_____________] [_______________] [____________________] - -----------------------------------------------------------------------------------------------------------------------

B. [__________________________________________________________________]: [______________________________________________________________________]. D. [__________________________________________________________________]: [______________________________________________________________________]. E. [__________________________________________________________________]: [______________________________________________________________________]. II. [_______________________________] A. [______________________________________________________________________]. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 57 B. [______________________________________________________________________]. C. [________________________________________________________________]: [____________________________________________________________________]. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 58 EXHIBIT B ELIGIBLE ANTIGEN CRITERIA A Research Antigen shall become an Eligible Antigen if it meets the following criteria: 1. [_______________________________________________________________]. 2. [_______________________________________________________________]. Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 59 EXHIBIT C RESEARCH PLAN CURAGEN/ABGENIX RESEARCH PLAN [ATTACHED] Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 60 EXHIBIT D THIRD PARTY AGREEMENTS Collaboration Agreements between CuraGen and [_________________________________] [_________________________________] [_________________________________] [_________________________________] [_________________________________] [_________________________________] TRADOCS:1445129.1(%Z2H01!.DOC) Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential Investment under Rule 406 of the Securities Act. 61 EX-11.1 6 dex111.txt SCHEDULE OF COMPUTATION OF NET LOSS PER SHARE EXHIBIT 11 CURAGEN CORPORATION AND SUBSIDIARY COMPUTATION OF NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS

YEAR ENDED DECEMBER 31, ----------------------------------------------- 1998 1999 2000 ------------- ------------- ------------ Net loss before income tax benefit and minority interest $ (18,428,485) $ (25,762,760) $(28,706,377) Income tax benefit -- -- 1,400,000 Minority interest -- -- 327,990 ------------- ------------- ------------ Net loss before preferred dividends (18,428,485) (25,762,760) (26,978,387) Preferred dividends (508,435) -- -- ------------- ------------- ------------ Net loss attributable to common stockholders $ (18,936,920) $ (25,762,760) $(26,978,387) ============= ============= ============ Basic and diluted net loss per share attributable to common stockholders $ (0.78) $ (0.89) $ (0.70) ============= ============= ============ Weighted average number of shares used in computing basic and diluted net loss per share attributable to common stockholders 24,402,012 28,801,984 38,747,819 ============= ============= ============

EX-21.1 7 dex211.txt SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21.1 SUBSIDIARIES OF THE REGISTRANT GeneScape Corporation 454 Corporation EX-23.1 8 dex231.txt CONSENT OF DELOITTE & TOUCHE LLP EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statements No. 333-56829 and No. 333-89465 of CuraGen Corporation on Forms S-8, and Registration Statements No. 333-32756, 333-47600, and 333-90321 of CuraGen Corporation on Forms S-3 of our report dated January 23, 2001 in this Annual Report on Form 10-K of CuraGen Corporation for the year ended December 31, 2000. /s/ DELOITTE & TOUCHE LLP Hartford, Connecticut March 26, 2001 -----END PRIVACY-ENHANCED MESSAGE-----

EX-10.24

                                                                  EXHIBIT 10.24

                                                                 EXECUTION COPY





                  METABOLIC DISORDER COLLABORATION AGREEMENT


                                By and Between


                               BAYER CORPORATION


                                      and


                             CURAGEN CORPORATION.



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.


                               TABLE OF CONTENTS


                                                                                                      Page
                                                                                                  
ARTICLE I DEFINITIONS................................................................................   1
- -----------------------
      Section 1.1        Definitions.................................................................   1
      -----------        -----------
      Section 1.2        Additional Definitions......................................................  13
      -----------        ----------------------
ARTICLE II METABOLIC PROGRAM; RESEARCH PLAN..........................................................  14
- -------------------------------------------
      Section 2.1        Research Plan...............................................................  14
      -----------        -------------
      Section 2.2        Metabolic Program - General.................................................  14
      -----------        ---------------------------
      Section 2.3        Technology Access...........................................................  16
      -----------        -----------------
      Section 2.4        Management of Metabolic Program.............................................  16
      -----------        -------------------------------
      Section 2.5        Qualified Target Production Phase...........................................  19
      -----------        ---------------------------------
      Section 2.6        Target Screening Phase......................................................  21
      -----------        ----------------------
      Section 2.7        Strategic Project Phase.....................................................  22
      -----------        -----------------------
      Section 2.8        Pre-Clinical Development Phase..............................................  22
      -----------        ------------------------------
      Section 2.9        Clinical Development Phase..................................................  23
      -----------        --------------------------
      Section 2.10       Commercialization Phase.....................................................  23
      ------------       -----------------------
ARTICLE III BAYER AND CURAGEN RIGHTS AND OBLIGATIONS.................................................  23
- -----------------------------------------------------
      Section 3.1        License Grant with Respect to CuraGen Know-How and CuraGen Patent Rights....  23
      -----------        ------------------------------------------------------------------------
      Section 3.2        License Grant with Respect to Bayer Know-How and Bayer Patent Rights........  24
      -----------        --------------------------------------------------------------------
      Section 3.3        Use of Configured Assays....................................................  24
      -----------        ------------------------
      Section 3.4        Retained Rights; Ownership..................................................  24
      -----------        --------------------------
      Section 3.5        CuraGen Co-Promotion Rights.................................................  24
      -----------        ---------------------------
      Section 3.6        Ownership Rights............................................................  25
      -----------        ----------------
      Section 3.7        CuraGen Reversionary Rights.................................................  25
      -----------        ---------------------------
ARTICLE IV FINANCIAL PROVISIONS......................................................................  26
- -------------------------------
      Section 4.1        Costs of Metabolic Program..................................................  26
      -----------        --------------------------
      Section 4.2        Royalty Payments; Operating Income..........................................  28
      -----------        ----------------------------------
      Section 4.3        Income Statement Reports....................................................  31
      -----------        ------------------------
      Section 4.4        Royalty Reports.............................................................  32
      -----------        ---------------
      Section 4.5        Accounting..................................................................  32
      -----------        ----------
      Section 4.6        Currency and Method of Payments.............................................  33
      -----------        -------------------------------
      Section 4.7        Tax Withholding.............................................................  33
      -----------        ---------------
      Section 4.8        Blocked Payments............................................................  33
      -----------        ----------------
      Section 4.9        Compassionate Use...........................................................  33
      -----------        -----------------
      Section 4.10       Accounting Terms............................................................  33
      ------------       ----------------


Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       i


                                                                                                  
ARTICLE V INTELLECTUAL PROPERTY OWNERSHIP, PROTECTION AND RELATED MATTERS............................  34
- -------------------------------------------------------------------------
      Section 5.1        Ownership...................................................................  34
      -----------        ---------
      Section 5.2        Prosecution and Maintenance of Patent Rights................................  34
      -----------        --------------------------------------------
      Section 5.3        Cooperation.................................................................  35
      -----------        -----------
      Section 5.4        Third Party Infringement....................................................  35
      -----------        ------------------------
      Section 5.5        Third Party Intellectual Property...........................................  36
      -----------        ---------------------------------
ARTICLE VI CONFIDENTIALITY...........................................................................  37
- --------------------------
      Section 6.1        Confidential Information....................................................  37
      -----------        ------------------------
      Section 6.2        Employee and Advisor Obligations............................................  37
      -----------        --------------------------------
      Section 6.3        Term........................................................................  38
      -----------        ----
      Section 6.4        Publications................................................................  38
      -----------        ------------
ARTICLE VII REPRESENTATIONS AND WARRANTIES...........................................................  38
- ------------------------------------------
      Section 7.1        Due Organization............................................................  38
      -----------        ----------------
      Section 7.2        Consents....................................................................  38
      -----------        --------
      Section 7.3        Execution, Delivery and Performance.........................................  38
      -----------        -----------------------------------
      Section 7.4        Legal, Valid and Binding Obligation.........................................  39
      -----------        -----------------------------------
      Section 7.5        No Conflict.................................................................  39
      -----------        -----------
      Section 7.6        Employee Obligations........................................................  39
      -----------        --------------------
      Section 7.7        CuraGen Intellectual Property...............................................  39
      -----------        -----------------------------
      Section 7.8        Bayer Intellectual Property.................................................  41
      -----------        ---------------------------
      Section 7.9        Contracts...................................................................  42
      -----------        ---------
      Section 7.10       No Material Admissions......................................................  42
      ------------       ----------------------
      Section 7.11       No Warranties...............................................................  42
      ------------       -------------
      Section 7.12       Survival....................................................................  42
      ------------       --------
ARTICLE VIII COVENANTS...............................................................................  43
- -----------------------
      Section 8.1        No New Restrictions - CuraGen...............................................  43
      -----------        -----------------------------
      Section 8.2        Exclusivity - CuraGen.......................................................  43
      -----------        ---------------------
      Section 8.3        No Restrictions on Screening - Bayer........................................  43
      -----------        ------------------------------------
      Section 8.4        Partnership for Tax Purposes................................................  43
      -----------        ----------------------------
ARTICLE IX TERM AND TERMINATION......................................................................  43
- -------------------------------
      Section 9.1        Term of the Agreement.......................................................  43
      -----------        ---------------------
      Section 9.2        Termination For Material Breach.............................................  44
      -----------        -------------------------------
      Section 9.3        Termination Upon Change of Control..........................................  44
      -----------        ----------------------------------
      Section 9.4        No Effectiveness Upon HSR Denial or Termination of Stock Purchase Agreement.  44
      -----------        ---------------------------------------------------------------------------
      Section 9.5        Effect of Termination.......................................................  44
      -----------        ---------------------
      Section 9.6        Survival....................................................................  46
      -----------        --------



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      ii


                                                                                                  
ARTICLE X DISPUTE RESOLUTION.........................................................................  46
- ----------------------------
      Section 10.1       General.....................................................................  46
      ------------       -------
      Section 10.2       Independent Experts.........................................................  46
      ------------       -------------------
      Section 10.3       SUBMISSION TO JURISDICTION; SELECTION OF A FORUM; WAIVER OF TRIAL BY JURY...  46
      ------------       -------------------------------------------------------------------------
      Section 10.4       Limitations of Remedies; Remedies Cumulative................................  47
      ------------       --------------------------------------------
      Section 10.5       Specific Performance........................................................  47
      ------------       --------------------
ARTICLE XI MISCELLANEOUS PROVISIONS..................................................................  48
- -----------------------------------
      Section 11.1       Product Liability Indemnification...........................................  48
      ------------       ---------------------------------
      Section 11.2       Section 365(n) of the Bankruptcy Code.......................................  48
      ------------       -------------------------------------
      Section 11.3       Governing Law...............................................................  49
      ------------       -------------
      Section 11.4       Assignment..................................................................  49
      ------------       ----------
      Section 11.5       Amendments..................................................................  49
      ------------       ----------
      Section 11.6       Notices.....................................................................  49
      ------------       -------
      Section 11.7       Exports.....................................................................  50
      ------------       -------
      Section 11.8       Force Majeure...............................................................  50
      ------------       -------------
      Section 11.9       Public Announcements........................................................  51
      ------------       --------------------
      Section 11.10      Independent Contractors.....................................................  51
      -------------      -----------------------
      Section 11.11      No Strict Construction......................................................  51
      -------------      ----------------------
      Section 11.12      Headings....................................................................  51
      -------------      --------
      Section 11.13      No Implied Waivers; Rights Cumulative.......................................  52
      -------------      -------------------------------------
      Section 11.14      Severability................................................................  52
      -------------      ------------
      Section 11.15      Execution in Counterparts...................................................  52
      -------------      -------------------------
      Section 11.16      HSR Filing..................................................................  52
      -------------      ----------


EXHIBITS
- --------

Exhibit A   Bayer's Development Manual
Exhibit B   Bayer's procedures for the Global Development Project Team
Exhibit C   Research Plan
Exhibit D   Bayer's Strategic Project Manual
Exhibit E  CuraGen's technology access licenses


Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.


                                      iii


                   METABOLIC DISORDER COLLABORATION AGREEMENT



     THIS METABOLIC DISORDER COLLABORATION AGREEMENT (the "Agreement"), dated
this 12th day of January, 2001 (the "Execution Date"), is by and between Bayer
Corporation, a corporation organized and existing under the laws of the State of
Indiana and having an office at 400 Morgan Lane, West Haven, Connecticut  06516-
4175 ("Bayer"), which is a wholly-owned subsidiary of Bayer AG, a corporation
organized and existing under the laws of Germany and having its principal office
at D 51368 Leverkusen, Germany ("Bayer AG"), and CuraGen Corporation, a
corporation organized and existing under the laws of the State of Delaware and
having its principal office at 555 Long Wharf Drive, 11th floor, New Haven,
Connecticut 06511 ("CuraGen").

                                  INTRODUCTION
                                  ------------

     1.  CuraGen is engaged in the business of target discovery.

     2.  Bayer is in the business of discovering, developing and marketing
pharmaceuticals.

     3.  Bayer AG and CuraGen are parties to that certain Pharmacogenomics
Agreement ("Pharmacogenomics Agreement") of even date herewith to collaborate on
toxicogenomic and pharmacogenomic services for use in (a) the identification of
gene-based toxicity markers, development and operation of the toxicity assays,
the generation and maintenance of databases related to the impact of small
molecules on toxicity markers and toxicity marker association with specific
histopathologies, prediction of relative toxicity of Compounds; and (b) gene
expression profiling of animal and human cells in the presence of Compounds to
assess and predict their pharmacological effectiveness.

     4.  Bayer AG and CuraGen are parties to that certain Stock Purchase
Agreement of even date herewith wherein Bayer AG has agreed to make an $85
million dollar equity investment in CuraGen.

     5.  Bayer and CuraGen are interested in collaborating in the discovery and
development of targets and assays to identify, develop and commercialize small
molecule drugs for the treatment of metabolic disorders.

     NOW, THEREFORE, CuraGen and Bayer agree as follows:

                                   Article I
                                   ---------
                                  Definitions
                                  -----------

     Section 1.1  Definitions.
                  -----------
When used in this Agreement, each of the following terms shall have the meanings
set forth in this Section 1.1:


Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.




"Affiliate" means any corporation, company, partnership, joint venture and/or
firm which controls, is controlled by, comes into control by during the Term, or
is under common control with a Party.  For purposes of this definition,
"control" shall mean (a) in the case of corporate entities, direct or indirect
ownership of at least fifty percent (50%) of the stock or shares having the
right to vote for the election of directors, and (b) in the case of non-
corporate entities, direct or indirect ownership of at least fifty percent (50%)
of the equity interest with the power to direct the management and policies of
such non-corporate entities.

"Annual Sales Volume" means total worldwide Net Sales of a Metabolic Program
Drug during a Contract Year.

"Bayer Know-How" means Know-How owned or otherwise controlled by Bayer or its
Affiliates, and in which Bayer or an Affiliate has a licensable or sublicensable
interest and which Bayer or an Affiliate can license to CuraGen, relating to (a)
Bayer's generic toxicogenomic database; (b) Bayer's drug discovery programs and
(c) Bayer's drug development program.

"Bayer Patent Rights" means a Patent Right owned or otherwise controlled by
Bayer or an Affiliate (singly or jointly with CuraGen) in which Bayer or an
Affiliate has a licensable or sublicensable interest and which Bayer or an
Affiliate can license to CuraGen, covering an invention that is part of the
Bayer Know-How.

"CFA" or "Collaborative Focus Area" means metabolic disorders, primarily obesity
and Type 2 diabetes.

"Change of Control" means (a) a merger or consolidation of a Party which results
in the voting securities of such Party outstanding immediately prior thereto
ceasing to represent at least forty percent (40%) of the combined voting power
of the surviving entity immediately after such merger or consolidation; (b) the
sale of all or substantially all of the assets of a Party (including a sale by
Bayer or Bayer AG of all or substantially all of the assets consisting of
Bayer's metabolic business); or (c) any "person", as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), together with any of such persons "affiliates" or "associates",
as such terms are used in the Exchange Act, becoming the beneficial owner of
forty percent (40%) or more of the combined voting power of the outstanding
securities of a Party (other than such Party, any trustee or other fiduciary
holding securities under an employee benefit plan of such Party or any
corporation owned directly or indirectly by the stockholders of such Party in
substantially the same proportion as their ownership of stock of such Party).
For purposes of this definition only, "Party" shall mean either CuraGen or Bayer
AG.

"Claim" means either:  (a) a claim of an issued and unexpired patent which has
not been held permanently revoked, unenforceable or invalid by a decision of a
court or other governmental agency of competent jurisdiction, unappealable or
unappealed within the time allowed for appeal, and which has not been admitted
to be invalid or unenforceable through reissue or disclaimer or otherwise; or
(b) a claim of a pending patent application which claim was filed and is being
prosecuted in good faith and has not been abandoned or finally disallowed
without the





Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       2


possibility of appeal or refiling of the application; provided, however, that
such patent application shall not have been pending for more than five (5) years
unless it is the subject of an interference or its prosecution has been stayed
or suspended for reasons that are beyond the control of the owner of the patent
application containing such claim.

"Clinical Development Phase" means Phase I, Phase II, Phase III, NDA Phase and
Registration Phase.

"Combination Product" means any pharmaceutical product which comprises the
Metabolic Program Drug and other compounds having independent therapeutic
activity.

"Commercialization Phase" means the phase subsequent to a Development Compound's
initial NDA Approval.

"Compound" means a compound which interacts with a Qualified Target.

"Confidential Information" means all materials, Know-How or other information,
including, without limitation, proprietary information and materials (whether or
not patentable) regarding a Party's technology, products, business information
or objectives, which is designated as confidential in writing by the disclosing
Party, whether by letter or by the use of an appropriate stamp or legend, prior
to or at the time any such material, trade secret or other information is
disclosed by the disclosing Party to the other Party.  Notwithstanding the
foregoing to the contrary, materials, Know-How or other information which is
orally, electronically or visually disclosed by a Party, or is disclosed in
writing without an appropriate letter, stamp or legend, shall constitute
Confidential Information of a Party (a) if the disclosing Party, within thirty
(30) days after such disclosure, delivers to the other Party a written document
or documents describing the materials, Know-How or other information and
referencing the place and date of such oral, visual, electronic or written
disclosure and the names of the persons to whom such disclosure was made, or (b)
such information is of the type that is customarily considered to be
confidential information by persons engaged in activities that are substantially
similar to the activities being engaged in by the Parties pursuant to this
Agreement.

"Configured Assay" means an assay embodying or based upon a QT that
[____________________________________________], as further defined in the
Research Plan.

"Contract Quarter" means the period beginning on the Effective Date and ending
on March 31, 2001, and each succeeding calendar quarter thereafter during the
Term.

"Contract Year" means the period beginning on the Effective Date and ending on
December 31, 2001 ("Contract Year 1"), and each succeeding twelve (12) month
period thereafter during the Term (referred to as the "Contract Year 2",
"Contract Year 3", etc.).

"Cost of Goods Sold" means the costs which are incurred by a Party or its
Affiliates attributable to the manufacture of a Metabolic Program Drug
determined in a manner consistent with the Commercialization Annual Budget
prepared by Bayer.  Cost of Goods Sold shall exclude Development Costs,
Marketing Costs and Selling Costs.




Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       3


"Cost of Net Capital Invested" means the Net Capital Invested calculated at the
end of a Contract Quarter (i) divided by four (4) and (ii) multiplied by
[_________________________________].

"CuraGen Know-How" means Know-How owned or otherwise controlled by CuraGen or an
Affiliate, and in which CuraGen has a licensable or sublicensable interest and
which CuraGen or an Affiliate can license to Bayer, relating to (a) a QT, (b)
the use of a QT to discover and develop Metabolic Program Drugs, and (c) the
treatment of diseases and/or conditions with Metabolic Program Drugs that
interact with a QT.

"CuraGen Patent Rights" means a Patent Right owned or otherwise controlled by
CuraGen or an Affiliate (singly or jointly with Bayer), and in which CuraGen or
an Affiliate has a licensable or sublicensable interest, covering an invention
that is part of the CuraGen Know-How.

"CuraTools" means the suite of bioinformatics algorithms available in GeneScape
for genomic analysis.

"Designated Scientific Issue" means the following issues: whether (a) a Target
Candidate has met the criteria to qualify as a QT, including, but not limited
to, [_________________________________]; and (b) a QT is [____________________].
Notwithstanding the foregoing, it is hereby agreed that Designated Scientific
Issues shall not include any matters explicitly left to the discretion, consent
or approval of Bayer under this Agreement.

"Development Candidate" means a Compound designated by Bayer
[_____________________].

"Development Compound" means a Compound which is in the Pre-Clinical Development
Phase or Clinical Development Phase.

"Development Costs" means the costs incurred by a Party (or for its account by
an Affiliate or a Third Party) which are generally consistent with the
Development Annual Budget prepared by Bayer and are specifically attributable to
the development of a Development Compound.  Development Costs shall include,
without limitation, (a) the cost of pre-clinical and clinical studies,
[_______________________________________________________________], (b) all
direct labor, benefits and payroll taxes and direct operating costs and supplies
(i.e. reagents) as well as appropriate allocations of supervisory,
bioinformatics and engineering labor, benefits and payroll taxes; facility
rental (or depreciation) and operating costs (i.e. electricity, heating,
maintenance, property taxes and insurance); capital equipment rental or
depreciation and maintenance costs; license fees, database subscription charges
and royalties; external grants and internal costs for monitoring; and
registration costs, all to the extent attributable to the development of  a
Development Compound and (c) all costs incurred for marketing purposes of a
Development Compound prior to NDA Approval.

"Development Manual" means Bayer's procedures for developing Development
Compounds attached hereto as Exhibit A, as the same may be amended or
supplemented by Bayer from time to time.





Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       4


"DOJ" means the United States Department of Justice.

"DP" or "Decision Point" means as follows:

 .  [______________________________________________________________________].
 .  [______________________________________________________________________].
 .  [______________________________________________________________________].
 .  [______________________________________________________________________].
 .  [______________________________________________________________________].

"Effective Date" means the later of the HSR Clearance Date and the Closing Date
as defined in the Stock Purchase Agreement.

"Executive Officers" means the Head of Worldwide Pharmaceutical Research of
Bayer (or an executive of Bayer designated by Bayer) and the Chief Executive
Officer of CuraGen (or an officer of CuraGen designated by CuraGen).

"Exploratory Research Phase" means the phase consisting of the Qualified Target
Production Phase, Target Screening Phase and Lead Compound Evaluation Phase.

"First Commercial Sale" means, for each Metabolic Program Drug, the first
commercial sale in a country as part of a nationwide introduction by a Party,
its Affiliates or its Sublicensees to Third Parties.  Sales for test marketing,
clinical trial purposes or compassionate or similar use shall not be considered
to constitute a First Commercial Sale.

"FDA" means the United States Food and Drug Administration or an equivalent
governmental agency in Europe or Japan.

"FTC" means the United States Federal Trade Commission.

"GeneCalling" means CuraGen's technology for analyzing differential gene
expression.

"GeneScape" means CuraGen's set of computer programs executable through a
standard internet browser (i.e. Netscape Communicator or Microsoft Internet
Explorer), including LIMS and CuraTools, and their user documentation, together
with all modifications made to such computer programs during the term of this
Agreement.

"Global Development Project Team" means the global development project team
created by Bayer for a Compound, the procedures for which are as set forth in
Exhibit B, as the same may be amended or supplemented by Bayer from time to
time.

"GPCR" means a G protein coupled receptor.



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       5


"Hit" means a Small Molecule which interacts in an assay employing a QT to give
a designated effect.

"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (15 U.S.C. Sec. 18a), and the rules and regulations promulgated
thereunder.

"HSR Clearance Date" means the earlier of (a) the date on which the FTC shall
notify Bayer and CuraGen of early termination of the applicable waiting period
under the HSR Act or (b) the day after the date on which the applicable waiting
period under the HSR Act expires.

"HSR Filing" means filings by Bayer and CuraGen with the FTC and the Antitrust
Division of the DOJ of a Notification and Report Form for Certain Mergers and
Acquisitions (as that term is defined in the HSR Act) with respect to the
matters set forth in this Agreement, the Pharmacogenomics Agreement and the
Stock Purchase Agreement, together with all required documentary attachments
thereto.

"HTS" means high throughput screening.

"Improvement Rights" means a Party's entire right, title and interest in and to
(including without limitation any Claims claiming) such Party's Improvements.

"Improvements" means all patented inventions, trade secrets and Know-How solely
made, created, developed, conceived or reduced to practice by a Party and/or its
Affiliates pursuant to activities relating to this Agreement during the Term
that (i)(A) have application to the manufacture, use, development, import,
export and/or sale of a Metabolic Program Drug, and (B) are dominated by such
Party's Patent Rights or (ii) are actually used to manufacture, use or sell a
Metabolic Program Drug.  A Party's Improvements shall exclude its interest in
any Joint Inventions.

"IND" means an investigational new drug application filed with the FDA.

"IRC" means [_________________________________________________________].

"IPDC" means [________________________________________________________].

"Joint Invention" means (A) all patentable inventions (i) jointly invented (as
determined in accordance with United States patent law) by Bayer (or its
Affiliates) and CuraGen (or its Affiliates) pursuant to their activities
relating to this Agreement during the Term, and (ii) covered by any Claim; and
(B) all Know-How that Bayer (or its Affiliates) and CuraGen (or its Affiliates)
jointly make, create, develop, discover, conceive or reduce to practice pursuant
to their activities relating to this Agreement during the Term other than those
in inventions described in (A).

"Knowledge" means the knowledge, after due and reasonable investigation, of any
officer of the Party.



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       6


"Know-How" means any information, data and materials, including, without
limitation, biological materials, such as cell lines, RNA, DNA, DNA fragments,
organisms, Proteins, polypeptides, plasmids and vectors not covered by a Claim,
that are owned or otherwise controlled by a Party or an Affiliate of a Party or
jointly by the Parties and/or their respective Affiliates.

"Lead Compound Evaluation Phase" means the phase in which all work necessary to
produce and evaluate a potential lead compound occurs.

"Lead Structures" means Compounds identified in the Target Screening Phase of
the Metabolic Program that meet pre-defined criteria set forth in the Research
Plan, and the expansion series developed within a Strategic Project.

"LIMS" means laboratory information management system.

"Marketing Cost" means the costs incurred by a Party or its Affiliates which are
attributable to the promotion, advertising and marketing of a Metabolic Program
Drug determined in a manner consistent with such Party's standard practices.
Marketing Costs shall include without limitation all costs related to Phase IV
studies but shall exclude Cost of Goods Sold, Development Costs and Selling
Costs.

"Metabolic Program" means the collaboration by Bayer and CuraGen on the
discovery and development of Metabolic Program Drugs in the CFA based on the
Qualified Targets provided by CuraGen, carried out in accordance with the
Research Plan.

"Metabolic Program Drug" means any therapeutic agent, the active ingredient in
which is a Small Molecule that (a) is identified on the basis of its interaction
with a Qualified Target in a Small Molecule or other screening assay, or (b) is
designed or developed using medicinal chemistry, combinatorial chemistry,
rational design techniques or other techniques to interact with a Qualified
Target.  The term "Metabolic Program Drug" shall include Non-CFA Products and,
except as expressly provided to the contrary in Section 2.2(f), shall not
include any pharmaceutical product in which the active ingredient is (i) a
natural Protein, (ii) a vaccine, (iii) any antibody (whether polyclonal or
monoclonal, multiple or single chain, whole or fragment), any soluble receptor,
or fusion protein and the nucleic acid encoding any of the foregoing or (iv) a
nucleic acid sequence encoding an expressed gene.

"Metabolic Program Project Team" means, as applicable, the Metabolic Program
Target Prosecution Team, the Metabolic Program Target Selection Team, the
Metabolic Program Strategic Project Team or the Global Development Project Team.

"MSC" means [________________________________________________________].

"NDA" means a new drug application submitted for a Development Compound or
Protein Product in the Metabolic Program to the FDA.



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       7


"NDA Approval" means approval of a Development Compound or Protein Product in
the Metabolic Program by the FDA, including, where appropriate, price approval
necessary for commercialization in a country.

"NDA Phase" means the phase in which a NDA is submitted for a Development
Compound or Protein Product in the Metabolic Program to the FDA.

"Net Capital Invested" means the total of (i) inventories and trade receivables
minus trade payables plus (ii) fixed assets
[____________________________________________________].

"Net Sales" means with respect to a Metabolic Program Drug, the gross amount
invoiced by a Party, its Affiliates and/or its Sublicensees on sales of the
Metabolic Program Drug to Third Parties, less the following items:

     Trade, cash and quantity discounts actually allowed and taken with respect
     to such sales;

     Tariffs, duties, excises, sales taxes or other taxes imposed upon and paid
     directly with respect to the import, export, production, sale, delivery or
     use of the Metabolic Program Drug (excluding national, state or local taxes
     based on income);

     Amounts repaid or credited by reason of rejections, defects, recalls, or
     returns or because of chargebacks, refunds, rebates or retroactive price
     reductions; and

     An allowance for distribution expenses (such as freight, transportation and
     insurance expenses) and any other customary deductions attributable to the
     sale of a Metabolic Program Drug and determined in a manner consistent with
     such Party's standard practices.

Such amounts shall be determined from the books and records of the applicable
Party, its Affiliates and/or its Sublicensees.

Sales of Metabolic Program Drugs between a Party and its Affiliates or
Sublicensees, or among such Affiliates and Sublicensees, shall not be considered
Net Sales, but in such cases the Royalty Payments or Operating Income shall be
calculated on the Net Sales by such Affiliates or Sublicensees to a Third Party
who is not a Sublicensee.  The obligation to pay Royalty Payments is imposed
only once with respect to the same unit of a Metabolic Program Drug.

In the event the Metabolic Program Drug is sold as part of a Combination
Product, the Net Sales from the Combination Product, for the purposes of
determining Royalty Payments or Operating Income, shall be determined by
multiplying the Net Sales of the Combination Product (as defined in the standard
Net Sales definition), during the applicable reporting period, by the fraction,
A/A+B, where A is the average sale price of the Metabolic Program Drug when sold
separately in similar quantities in finished form and B is the average sale
price of the other compounds having independent therapeutic activity included in
the Combination Product when sold separately in similar quantities in finished
form, in each case in the same country as the Combination Product during the
applicable reporting period or, if sales of both the Metabolic




Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       8


Program Drug and the other compounds having independent therapeutic activity did
not occur in such period, then in the most recent reporting period in which
sales of both occurred in the same country as the Combination Product. In the
event that such average sale price cannot be determined for both the Metabolic
Program Drug and all other compounds having independent therapeutic activity
included in the Combination Product, Net Sales for the purposes of determining
Royalty Payments or Operating Income shall be calculated by multiplying the Net
Sales of the Combination Product by the fraction of C/C+D where C is the fair
market value of the Metabolic Program Drug and D is the fair market value of all
other compounds having independent therapeutic activity included in the
Combination Product. In such event, the selling Party shall in good faith make a
determination of the respective fair market values of the Metabolic Program Drug
and all other compounds having independent therapeutic activity included in the
Combination Product, and shall notify the other Party of such determination and
provide the other Party with data to support such determination. The other Party
shall have the right to review such determination and supporting data, and to
notify the selling Party if it disagrees with such determination. If the other
Party does not agree with such determination and if the Parties are unable to
agree in good faith as to such respective fair market values, then such matter
shall be resolved in accordance with Article X.

"Non-CFA" means any human disease or condition that is not included within the
CFA.

"Novel Protein" means a nucleic acid sequence of the full length coding sequence
of the protein it encodes where such sequence is significantly different from
nucleic acid sequences in the Public Domain.  The full length coding sequence
will only be considered "significantly different if:
[_________________________________________________________________________].

"Operating Income" means Net Sales (but excluding Net Sales of Sublicensees) of
a Party and its Affiliates plus any revenues from any single-country co-
marketing and outlicensing or sublicensing revenue from Third Parties minus (i)
Development Costs (A) for which a Party has opted out and (B) which are
associated with a line extension, new indication, new dosage, new formulation or
new delivery mechanism of a Metabolic Program Drug, (ii) Marketing Costs, (iii)
Cost of Goods Sold, (iv) Selling Costs, (v) Overhead Costs, (vi) Cost of Net
Capital Invested, and (vii) miscellaneous costs appearing in the
Commercialization Annual Budget attributable to the Operating Income Product.

"Operating Income Product" means a Metabolic Program Drug with respect to which
the Parties are sharing Operating Income.

"Overhead Costs" means all operating expenses incurred by a Party or its
Affiliates in support of the activities which are part of Cost of Goods Sold,
Marketing Costs and Selling Costs to the extent not already counted therein
determined in a manner consistent with such Party's standard practices.  Cost
elements generally included are:

       .  direct labor wages, related payroll taxes and employee benefits
       .  indirect labor wages, related payroll taxes and employee benefits
       .  depreciation




Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       9


       .  taxes, other than income, franchise and sales related taxes
       .  insurance
       .  rent
       .  repairs and maintenance
       .  supplies, scrap and inventory expenses
       .  utilities
       .  factory administration expenses
       .  other similar allocable cost elements of factory overhead
       .  allocation of general and administrative expenses attributable to the
          Metabolic Program determined in a manner consistent with such Party's
          standard practices; provided, however that general and administrative
          expenses of other business units of such Party shall not be allocated.

"Party" means Bayer or CuraGen.

"Parties" means Bayer and CuraGen.

"Patent Right" means a patent or patent application and all divisions,
continuations, continuations-in-part, reissues, reexaminations, extensions,
supplementary protection certificates and foreign counterparts thereof that are
owned or otherwise controlled by a Party.

"PathCalling" means CuraGen's yeast two-hybrid system for identifying protein
interactions.

"Pharmacogenomics Agreement" means the Pharmacogenomics Agreement dated on the
date hereof by and between CuraGen and Bayer AG.

"Pharmacogenomic Services" means (i) services relating to gene expression
profiling of animal and human cells in the presence of compounds to assess and
predict their pharmacological effectiveness and (ii) genotyping to identify the
genetic variations (SNPs and haplotypes) that predict differential drug response
and toxicity.

"Phase I" means the development phase in which human clinical trials to
determine the safety of a Development Compound are conducted.

"Phase II" means the development phase in which human clinical trials to
initially determine the efficacy of a Development Compound are conducted.

"Phase III" means the development phase in which large-scale human clinical
trials to obtain data necessary for submission to obtain regulatory approval of
a Development Compound are conducted.

"Phase IV" means any human trials of a Metabolic Program Drug which are not
planned to be included in the NDA filing with the FDA but which are in support
of marketing activities.



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       10


"Pre-Clinical Development Phase" means the pre-clinical development phase
commencing with the acceptance by Bayer of a pre-clinical Development Candidate
and ending at the decision to advance a Development Compound to Phase I.

"Predictive Toxicogenomic Screen" means processing a Compound through the
predictive toxicity assay developed in the set-up phase of the Pharmacogenomics
Agreement.

"Program Director" means the research executive appointed by each Party to serve
as such Party's principal coordinator and liaison for the Metabolic Program.

"Protein" means a compound composed of a variety of amino acids joined by amide
linkages, including allelic variants thereof and post-translationally modified
variants thereof (e.g., glycosylated Proteins); provided, however that a Protein
shall not include (a) any peptide that is comprised of [_______] or fewer amino
acids and (b) any antibody (whether polyclonal or monoclonal, multiple or single
chain, whole or fragment), any soluble receptor, or fusion protein and the
nucleic acid encoding any of the foregoing.

"Protein Product" means a product (i) that interacts with a QT (ii) that is
derived from a Protein and (iii) that is in pre-clinical or clinical development
or is being commercialized.

"Public Domain" as used with reference to a nucleic acid sequence, means that
such sequence has been made available to the general public in any manner,
including without limitation (a) in a published scientific paper, (b) in an
issued patent or a published patent application, or (c) in a public nucleic acid
or protein database (e.g., GenBank, DBEST, etc.).

"Qualified Target" or "QT" means
[_______________________________________________].

"Qualified Target Class" means the following:
[___________________________________________].  Bayer shall furnish to CuraGen
all essential information available to Bayer with respect to such signature
motifs.

"Registration Phase" means the development phase subsequent to the first NDA
filing for a Development Compound up to the Development Compound's initial NDA
Approval.

"Research Plan" means the research plan attached as Exhibit C to this Agreement,
as such plan may be updated or amended pursuant to Section 2.1.

"Research Phase" means the Exploratory Research Phase and the Strategic Project
Phase.

"Restricted Target" means a Target Candidate to which CuraGen is prevented from
granting to Bayer the exclusive right under CuraGen Know-How or CuraGen Patent
Rights to exploit Metabolic Program Drugs identified using such Target Candidate
for the treatment of human diseases and conditions in the CFA.

"Right of First Negotiation" means that if CuraGen or an Affiliate wishes to
transfer rights to a Protein, Protein Product, Qualified Target, Development
Candidate or Development Compound





Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       11


to a Third Party, CuraGen shall notify Bayer (a "Proposed Transfer"). Within
[_____________] of receipt of such notice, Bayer shall notify CuraGen whether it
wishes to enter into negotiations with respect to such Proposed Transfer. If
Bayer does not respond within such [_____________] period, or if Bayer notifies
CuraGen that it will not exercise its Right of First Negotiation with respect to
such Proposed Transfer, CuraGen or its Affiliates shall have no further
obligation to Bayer with respect to such Proposed Transfer. If Bayer notifies
CuraGen that it is exercising its Right of First Negotiation, Bayer and CuraGen
or its Affiliate shall enter into good faith negotiations for a transfer of the
Protein, Protein Product, Qualified Target, Development Candidate or Development
Compound to Bayer, on terms and conditions mutually agreeable to the Parties.
CuraGen or an Affiliate shall not discuss, negotiate with, transfer, or grant
any license or other right to any Third Party until [_____________] have elapsed
since Bayer gave notice of its decision to exercise its Right of First
Negotiation with respect to such Proposed Transfer.

"Royalty Product" means a Metabolic Program Drug for which a Party is receiving
Royalty Payments.

"Screenable Qualified Target" or "Screenable QT" means a Qualified Target which
is amenable to a Configured Assay for HTS.

"Screening Term" means the period commencing on the Effective Date and ending
on the date Bayer has completed eighty (80) screens of Qualified Targets, unless
terminated earlier (y) by Bayer pursuant to Section 2.5(c) or (z) by CuraGen
pursuant to Section 2.5(d); provided, however that the Screening Term shall in
any event end on the [__________] anniversary of the Effective Date.

"Selling Cost" means the costs which are incurred by a Party or its Affiliates
which are after the First Commercial Sale of a Metabolic Program Drug and which
are attributable to the sale of such Metabolic Program Drug determined in a
manner consistent with such Party's standard practices.  Selling Costs shall
exclude Cost of Goods Sold, Development Costs and Marketing Costs.

"SeqCalling" means CuraGen's technology for identifying the mRNA transcripts in
a specific tissue.

"Small Molecule" means a compound that is non-peptidic or, if peptidic, is
comprised of no more than ten (10) amino acids, including, without limitation, a
compound that is a natural product or is developed using medicinal,
combinatorial, computational or other chemistry technologies.

"Stock Purchase Agreement" means the Stock Purchase Agreement between Bayer AG
and CuraGen dated as of the Execution Date.

"Strategic Project" means a project undertaken to work with the Lead Structures
[________________________________________________________].



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       12


"Strategic Project Phase" means the phase during which Bayer works with a Lead
Structure or Lead Structures
[________________________________________________________].

"Strategic Project Manual" means Bayer's publication "[______________________]"
attached hereto as Exhibit D, as the same may be amended or supplemented by
Bayer from time to time.

"Sublicensee" shall mean any Third Party to whom a sublicense has been validly
granted pursuant to this Agreement.

"Target Candidate" means any potential Qualified Target in CuraGen's database to
be submitted by CuraGen pursuant to Section 2.5 of this Agreement.

"Third Party" means any person who is not a Party or an Affiliate under this
Agreement.

"Toxicogenomic Reference Data" means the data generated by CuraGen in the set-up
phase of the Pharmacogenomics Agreement consisting of
[____________________________________].

"TRA" means Bayer's therapeutic research area.

"Unrecognized Protein" means a nucleic acid sequence of the full length coding
region where [__________] percent or more of the protein sequence is present in
the Public Domain but nevertheless is unrecognized because (a)
[____________________________________] is not already present in the Public
Domain (either because the Public Domain contains no annotation or where the
Program Directors agree that the Public Domain annotation is in error), and (b)
there is no documented annotation in the Public Domain relating the gene to the
CFA.

     Section 1.2    Additional Definitions.
                    ----------------------
Each of the following definitions is set forth in the section of this
Agreement indicated below:

     Definitions                                  Section
     -----------                                  -------

     Agreement                                    Preamble
     Audited Party                                Section 4.5
     Auditing Party                               Section 4.5
     Bayer                                        Preamble
     Bayer Indemnified Parties                    Section 11.1(b)
     Biological Materials                         Section 2.2(d)
     Breaching Party                              Section 9.2
     Commercialization Annual Budget              Section 4.1(a)
     Commercialization Reconciliation             Section 4.1(a)
     Compound Credit                              Section 4.1(b)
     CuraGen                                      Preamble
     CuraGen Indemnified Parties                  Section 11.1(a)
     Designated Inventions                        Section 5.3
     Development Annual Budget                    Section 4.1(a)(iii)




Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       13


     Development Reconciliation                   Section 4.1(a)(iii)
     Execution Date                               Preamble
     Metabolic Program Strategic Project Team     Section 2.4(d)
     Metabolic Program Target Prosecution Team    Section 2.4(c)
     Metabolic Program Target Selection Team      Section 2.4(b)
     Non-Breaching Party                          Section 9.2
     Non-CFA Product                              Section 2.2(b)
     Overflow Date                                Section 4.1(b)(i)
     Pharmacogenomic Project Agreement            Preamble
     Project Manager                              Section 2.4(e)
     Proposed Transfer                            Section 3.7
     Qualified Target Production Phase            Section 2.5
     Recovered Bayer Net Sales                    Section 5.4(a)
     Recovered CuraGen Net Sales                  Section 5.4(a)
     Royalty-Paying Party                         Section 4.4
     Royalty Payment                              Section 4.2(a)
     Royalty Recipient                            Section 4.4
     Screened Qualified Target                    Section 2.5(a)
     Strategic Project Leader                     Section 2.4(d)
     Target Screening Phase                       Section 2.6(a)
     Term                                         Section 9.1

                                  Article II
                                  ----------
                       Metabolic Program; Research Plan
                       --------------------------------

     Section 2.1  Research Plan.
                  -------------

The Parties shall use commercially reasonable efforts to conduct the Metabolic
Program in accordance with the Research Plan.  The Program Directors will review
the Research Plan on at least an annual basis and submit any proposed
modifications or updates to the Parties for their approval; provided, however
that any such modifications or updates shall not become effective until approved
by both Parties in writing.  The Parties agree to review and consider any such
proposed modifications or updates on an expedited basis.  Each Party agrees to
use commercially reasonable efforts to (i) undertake the responsibilities
assigned to such Party in the Research Plan, including, but not limited to, the
dedication of resources appropriate to such efforts and (ii) make available to
the other Party those resources set forth in the Research Plan.

     Section 2.2  Metabolic Program - General.
                  ---------------------------
     (a)  General.  Each Party agrees to use commercially reasonable efforts to
carry out all work done in the course of the Metabolic Program in material
compliance with all applicable federal, state or local laws, regulations and
guidelines governing the conduct of such work, including, without limitation,
all applicable export and import control laws.


Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       14


     (b)  Non-CFA QTs, Compounds and Products.  If a QT is used in a Non-CFA
indication and if a Compound identified in the Metabolic Program using such QT
is developed for a Non-CFA indication only (a "Non-CFA Product"), Bayer may at
its sole discretion perform research on or with such QT outside the CFA and
continue to develop such Non-CFA Product as a Metabolic Program Drug. In such
event, if Bayer offers CuraGen the opportunity to share Development Costs and
share the Operating Income or if CuraGen has identified the Non-CFA indication
by giving written notice to Bayer, CuraGen may, at its election exercised by
giving written notice to Bayer either within [___________] of Bayer's offer or
within [___________] of CuraGen's notice, as appropriate, share the Development
Costs relating to the Non-CFA Product as provided in Section 4.1(a)(ii) and
thereby receive a share of Operating Income as provided in Section 4.2(b) in
lieu of receiving Royalty Payments pursuant to Section 4.2(a); provided, however
that CuraGen's payment of the Development Costs associated with such Non-CFA
Product shall [_____________________________________________________]. If Bayer
does not offer CuraGen the opportunity to share Development Costs and share the
Operating Income or if CuraGen did not identify the non-CFA indication, then
CuraGen shall receive Royalty Payments pursuant to Section 4.2(a) with respect
to such Metabolic Program Drug without regard to the opt-out criteria in Section
4.1(b).

     (c)  CFA and Non-CFA Indication.  If a Compound is developed for both a
Non-CFA indication and a CFA indication, the Compound shall be developed in the
Metabolic Program and deemed to be a Metabolic Program Drug. The Development
Costs associated with a Compound developed both for a Non-CFA indication and a
CFA indication shall count toward the calculation of CuraGen's [___________]
opt-out right under Section 4.1(b)(ii).

     (d)  Biological Materials.  For the purposes of facilitating the conduct of
the Metabolic Program, each Party shall provide to the other Party, at its sole
expense, such animal or human tissues, cells, blood samples and other materials
("Biological Materials") specified from time to time in the Research Plan. The
Parties agree that: (i) all Biological Materials provided by one Party to the
other shall be used solely for research purposes in the Metabolic Program; (ii)
the Party providing such Biological Materials shall obtain (or cause its Third
Party collaborators to obtain or certify that they have obtained) all
appropriate and required consents from the source of such Biological Materials;
and (iii) Biological Materials provided by one Party to the other shall not be
made available by the receiving Party to any Third Party except pursuant to the
Metabolic Program or upon the prior written consent of the Party providing such
Biological Materials.

     (e)  Disclosure of CuraGen Know-How.  During the Screening Term, CuraGen
(consistent with its applicable confidential disclosure obligations, if any)
shall promptly disclose to Bayer (i) all CuraGen know-how specified in the
Research Plan, and (ii) all CuraGen know-how not specified in the Research Plan
which CuraGen reasonably believes to be applicable to Target Candidates, QTs or
otherwise pertinent to the Metabolic Program. Without limiting the generality of
the foregoing, promptly following the Effective Date, the Program Directors
shall review CuraGen know-how in existence as of the Effective Date relevant to
the Metabolic Program to identify any potential Qualified Targets, with the
intention of placing all such Qualified Targets in the Metabolic Program.



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       15


     (f)  Restrictions on CuraGen's Right to Develop Proteins. CuraGen may
develop and commercialize (either alone or with any Affiliate or Third Party)
any Proteins outside the Metabolic Program subject to the following conditions:

           (i)   During the Term, CuraGen shall have the obligation to promptly
                 report to Bayer that it is developing a Protein Product which
                 interacts with a QT which has been accepted into the Metabolic
                 Program.

           (ii)  During the Term, if (A) CuraGen discovers a Protein, (B)
                 CuraGen does not have a Protein Product relating to such
                 Protein in development and (C) Bayer has a Development Compound
                 that has received DP-1 approval and interacts with the same QT
                 as such Protein, then
                 [__________________________________________________________].
                 CuraGen shall receive 56% and Bayer shall receive 44% of the
                 Operating Income for such Protein Product.

           (iii) During the Term, if, prior to the time CuraGen has filed an
                 NDA, it is determined that
                 [_____________________________________________]. CuraGen shall
                 receive 56% and Bayer shall receive 44% of the Operating Income
                 for such Protein Product.
                  [______________________________________________].
           (iv)  During the Term, if, prior to DP-1 approval for a Compound in
                 the Metabolic Program,
                 [_________________________________________].

           (v)   During the Term, [___________________________________________].

           (vi)  For purposes of clarity, it is hereby acknowledged and agreed
                 that nothing in this Section 2.2(f) is intended to restrict or
                 otherwise affect in any way CuraGen's right to develop and
                 commercialize antibodies (whether polyclonal or monoclonal,
                 multiple or single chain, whole or fragment), soluble
                 receptors, and fusion proteins and the nucleic acid encoding
                 any of the foregoing within or outside of the CFA.

     Section 2.3  Technology Access.
                  -----------------

During the Term, CuraGen will provide Bayer and/or its Affiliates with GeneScape
access, including CuraTools and LIMS technology, to enable Bayer to view data
associated with the Metabolic Program.  CuraGen will also provide Bayer with
access to CuraGen's proprietary GeneCalling and PathCalling experiments that are
part of the Metabolic Program and to the public genomic, EST and protein
databases maintained within GeneScape.  Such access shall be granted pursuant to
the terms of the licenses set forth in Exhibit E attached hereto.

     Section 2.4  Management of Metabolic Program.
                  -------------------------------
     (a)  Program Directors.  Each of Bayer and CuraGen shall appoint at its
sole discretion a research scientist to serve as a Program Director for the
Metabolic Program who will be replaceable at the will of such Party. The Bayer
Metabolic Program Director will commit substantially all of his/her time to the
Program and will be in residence at CuraGen for the equivalent of at least six
(6) months of each year in order to facilitate close and direct collaboration.
The Bayer Metabolic Program Director will have access to the offices and



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       16


personnel of CuraGen to the extent necessary to facilitate close and direct
collaboration. The CuraGen Metabolic Program Director will commit substantially
all of his/her time to the Program. The CuraGen Metabolic Program Director will
have access to the offices and personnel of Bayer to the extent necessary to
facilitate close and direct collaboration. The Program Directors will jointly
oversee the conduct of the Metabolic Program and will be responsible for
recommending to the Parties any changes to the Metabolic Research Plan.
Additional individuals from both Parties will be involved as each Party
determines is appropriate. The Program Directors will work with the Metabolic
Program Project Teams described below to recommend the operational decisions
required to implement the Research Plan. The Program Directors shall oversee the
process of acceptance of Qualified Targets from CuraGen's metabolic disease
research program through analysis of data generated by such research, and of the
disease/therapeutic hypotheses of Target Candidates, and shall designate the
Qualified Targets based on recommendations of the Metabolic Program Target
Selection Team. To ensure that the process of selection is orderly and
efficient, the criteria for Qualified Target selection will be guided by the
definitions set forth in the Research Plan, unless such a Qualified Target is
otherwise approved by the Bayer Program Director. The Program Directors shall
provide jointly-prepared monthly spreadsheets to the Parties within
[_____________] days after the end of each calendar month and jointly-prepared
semi-annual reports within [_____________] after the end of each April and
October summarizing the information included in the monthly spreadsheets for
such calendar year. The formats for such spreadsheets and reports shall be
agreed upon by the Program Directors.

     (b)  Metabolic Program Target Selection Team.  The Metabolic Program
Directors, in consultation with Bayer, will appoint a Metabolic Program Target
Selection Team, consisting of an equal number of representatives from both Bayer
and CuraGen. The Metabolic Program Target Selection Team will provide to the
Metabolic Program [_______________________________]. In addition to the
Metabolic Program Directors, Bayer and CuraGen will commit to the Metabolic
Program Target Selection Team [_______________________], and Bayer will commit
[_______________________________]. The composition and makeup of the team will
be reviewed yearly and recommendations for change will be made jointly by the
Program Directors as they deem necessary. CuraGen shall grant the Metabolic
Program Target Selection Team the technology access set forth in Section 2.3 for
the purposes of reviewing and selecting Qualified Targets and for any further
purposes of the Metabolic Program, as well as access to CuraGen personnel to
enable the Team to identify Target Candidates. The Metabolic Program Target
Selection Team will make recommendations to the Metabolic Program Directors
concerning Target Candidates and Qualified Targets that should move forward in
the program. The Bayer Metabolic Program Director shall decide which Target
Candidates and Qualified Targets shall move forward and shall so notify the
Metabolic Program Target Selection Team. The Metabolic Program Target Selection
Team will be responsible for the following:

           (i)  Determining which of the tissue banks at CuraGen and Bayer will
                serve as resources for reagents
                [________________________________________].


Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       17


           (ii)   Recommending potential Qualified Targets to be investigated
                  further using CuraGen's technologies, information systems,
                  model systems, databases, and disease expertise to generate
                  Qualified Targets. The Metabolic Program Target Selection Team
                  will review such data, and as the program evolves, determine
                  whether to conduct extended studies.

           (iii)  Ensuring that the QTs are delivered as sequenced full-length
                  cDNA in vectors of Bayer's choice which shall be reasonably
                  acceptable to CuraGen.

     (c)  Metabolic Program Target Prosecution Teams.  Bayer and CuraGen will
appoint two Metabolic Program Target Prosecution Teams, one for obesity and one
for diabetes, each of which shall consist of appropriate scientists from Bayer
and CuraGen. Each Metabolic Program Target Prosecution Team will be headed by a
Bayer representative, will include the Metabolic Program Directors from Bayer
and CuraGen and will report directly to the respective directors of diabetes and
obesity research at Bayer. Each Metabolic Program Target Prosecution Team will
be responsible for the following:

           (i)    after selection of each Qualified Target, preparing a detailed
                  target project plan;

           (ii)   managing the Exploratory Research Phase,
                  [_______________________];

           (iii)  before initiation of assay development, requesting CuraGen to
                  do SNP mining and allele frequency analysis of SNPs across
                  relevant disease populations approved by the Metabolic Program
                  Target Prosecution Team; and

           (iv)   through the Bayer and CuraGen Metabolic Program Directors,
                  directing CuraGen to conduct Predictive Toxicogenomics Screens
                  of Compounds derived from HTS and lead optimization.

           Bayer in its sole discretion shall have the right to decide
     whether or not to continue to attempt to screen a QT.

     (d)  Metabolic Program Strategic Project Team.  Each Metabolic Program
Strategic Project Team will be chaired by a Bayer-approved leader ("Strategic
Project Leader"). The composition of each Metabolic Program Strategic Project
Team will vary as the Strategic Project proceeds and will be decided by the
Strategic Project Leader. Each Metabolic Program Strategic Project Team will be
composed of representatives of Bayer, the number of which will be determined by
Bayer in its discretion, and a minimum of two (2) representatives of CuraGen.
The duties and responsibilities of each Metabolic Program Strategic Project Team
shall be as set forth in the Strategic Project Manual. While CuraGen's
representatives to each Metabolic Program Strategic Project Team will have the
right to participate in all meetings of such Metabolic Program Strategic Project
Team, Bayer in its sole discretion shall have the right to make all decisions
relating to the Strategic Project Phase.




Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       18


     (e)  Global Development Project Team.  Each Global Development Project Team
will be chaired by a Bayer-approved leader ("Project Manager"). The composition
of each Global Development Project Team will vary and will be decided by the
Project Manager. Each Global Development Project Team will be composed of
representatives of Bayer, the number of which will be determined by Bayer in its
discretion. During the Pre-Clinical Development Phase, Clinical Development
Phase and Commercialization Phase, CuraGen shall appoint two (2) representatives
to each Global Development Project Team relating to (i) Development Compounds in
connection with which CuraGen is participating in the Development Costs and (ii)
Metabolic Program Drugs in connection with which CuraGen has not opted out of
the Development Costs. CuraGen's representatives to such Global Development
Project Teams shall have the right to participate in all meetings of such Global
Development Project Teams and shall be provided with the opportunity to be
informed of and comment on the development, clinical, regulatory and marketing
activities related to the relevant Development Compounds or Metabolic Program
Drugs; provided, however that Bayer shall have the right to make all decisions
relating to such Global Development Project Teams and shall have the right to
make all decisions relating to such Development Compounds and Metabolic Program
Drugs. During the Clinical Development Phase and Commercialization Phase,
CuraGen shall be permitted to appoint one (1) representative to reside at Bayer,
at CuraGen's sole discretion, for at least six (6) months of each year.

     (f)  Consensus Determinations; Dispute Resolution.  The Metabolic Program
Target Selection Team and Metabolic Program Target Prosecution Teams will decide
matters appropriate to the scope of their responsibilities on a consensus basis.
If a matter cannot be resolved on a consensus basis, and the matter is not left
to Bayer's discretion, then it will be referred to the Metabolic Program
Directors for resolution. In the event that the Metabolic Program Directors are
unable to reach agreement on any matter, the issue will be referred for
resolution to an executive vice president of CuraGen and to the Bayer TRA head
for diabetes and obesity and, in the event of an inability of these individuals
to reach agreement, to the president of CuraGen and to the head of worldwide
pharmaceutical research at Bayer. If these two individuals are unable to resolve
the matter and the matter relates to a Designated Scientific Issue, the Parties
will resolve that matter through the use of an expedited mediation process, in
which the Parties first try to agree on a mutually acceptable scientist to serve
as the mediator. Failing mutual agreement on a single scientist, each Party will
appoint a scientist not affiliated with such Party and the two so selected will
pick a third unaffiliated scientist. The mediator(s) will review the disputed
matter on an expedited basis, considering the relevant data, standards
established by this Agreement and the Research Plan and relevant precedents. The
decision of the mediator(s) will be binding on the Parties. Notwithstanding the
foregoing, Bayer will retain the sole right to determine whether a Qualified
Target, Compound or Development Compound should continue to be developed.

     Section 2.5  Qualified Target Production Phase.
                  ---------------------------------
     (a)  General.  During the Screening Term, CuraGen will use commercially
reasonable efforts to produce from its metabolic disease research program a
total of eighty (80) Qualified Targets which pass Bayer's high-throughput
screening ("Screened Qualified Targets").




Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       19


All then-current technologies of CuraGen shall be brought to bear, including
without limitation CuraGen's GeneCalling, SeqCalling, and PathCalling
technologies utilizing disease models, drug response models, large scale data
mining (genomic, transcript and pathways) and human genetics. Each year over the
first [___________] Contract Years of the Screening Term, CuraGen will use
commercially reasonable efforts to produce from its metabolic disease research
program Screenable Qualified Targets, and in any event a minimum of
[___________] Screenable Qualified Targets in such Contract Year (the "Qualified
Target Production Phase"). After CuraGen produces a Target Candidate or a QT,
CuraGen shall promptly submit it to Bayer. No QT may be delivered by CuraGen to
Bayer if it is a Restricted Target unless agreed upon by Bayer. If CuraGen
delivers fewer than [___________] Screenable Qualified Targets in any such
Contract Year, it shall deliver additional Qualified Targets (above any amounts
due to be delivered in such Contract Year) in the following Contract Year until
the deficit has been filled. If CuraGen delivers more than [___________]
Screenable Qualified Targets in any of the first [___________] Contract Years,
then to the extent such excess is not credited to correct a delivery deficit in
the preceding Contract Year, the excess will be counted toward subsequent
Contract Years' minimums. Once eighty (80) Qualified Targets have been screened,
CuraGen may upon mutual agreement of the Parties continue to deliver Screenable
Qualified Targets but shall not be required to do so.

     (b)  Bayer's Right to Extend CuraGen's Obligation to Provide QTs.  Bayer
shall have the option to require CuraGen to use commercially reasonable efforts
to produce a minimum of [___________] Screenable Qualified Targets in [_______]
if, at the end of[___________], Bayer has not completed eighty (80) screens of
Qualified Targets, such extension to continue until the earlier of (i) such time
as Bayer has completed eighty (80) screens of Qualified Targets or (ii) the end
of[___________]. Bayer shall exercise the foregoing option by providing written
notice of such extension to CuraGen no later than the end of [___________].

     (c)  Bayer's Right to End Screening Term.  Bayer shall have the right to
terminate the Screening Term if (i) by the end of [___________] fewer than [__]
Screenable Qualified Targets have been provided to Bayer, (ii) by the end of
[___________] fewer than [__] Screenable Qualified Targets have been provided to
Bayer or (iii) by the end of [___________] fewer than [__] Screenable Qualified
Targets have been provided to Bayer. In order to exercise its right to terminate
under this subsection, Bayer shall provide written notice of such termination to
CuraGen within [_____] after the end of the applicable Contract Year, such
termination to be effective immediately upon provision of such notice.
Notwithstanding the termination of the Screening Term, the Metabolic Program
shall continue with respect to any Screened Qualified Targets.

     (d)  CuraGen's Right to End Screening Term.

CuraGen shall have the right to terminate the Screening Term if (i) by the end
of [___________] more than [__]  Qualified Targets have been provided to Bayer
and by the end of [___________] fewer than [__] Qualified Targets have been
screened by Bayer, (ii) by the end of [___________] more than [__]  Qualified
Targets have been provided to Bayer and by the end of [___________] fewer than
[__]  Qualified Targets have been screened by Bayer or (iii) by the end of






Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       20


[___________] more than [__] Qualified Targets have been provided to Bayer and
by the end of [___________] fewer than [__] Qualified Targets have been screened
by Bayer.  CuraGen shall not be entitled to terminate the Screening Term if
Bayer has used commercially reasonable efforts to set up screens for the
Qualified Targets.  In order to exercise its right to terminate under this
subsection, CuraGen shall provide written notice of such termination to Bayer
within [___________] after the end of the applicable [___________], such
termination to be effective immediately upon provision of such notice.
Notwithstanding the termination of the Screening Term, the Metabolic Program
shall continue with respect to any Screened Qualified Targets.

     (e)  Identification of Restrictions.  CuraGen shall use commercially
reasonable efforts to identify at the earliest possible stage of the process of
reviewing Target Candidates the proprietary status of any gene sequence encoding
a Target Candidate (e.g., whether it is derived from public domain sources) as
well as any potential restrictions that would limit or otherwise affect Bayer's
right to exploit (i) QTs in all human diseases and conditions and (ii) Metabolic
Program Drugs identified or developed using the Qualified Targets, and CuraGen
shall promptly communicate their findings to Bayer. CuraGen will not
[______________________________].

     (f)  Patent Review.  Until a Compound associated with a QT is in the Pre-
Clinical Development Phase, CuraGen shall use commercially reasonable efforts to
monitor patent issuances and patent applications of Third Parties relevant to
the associated QT and shall advise Bayer biweekly of the results of such
efforts. In addition, when a QT is delivered by CuraGen to Bayer, CuraGen shall
provide Bayer at that time with a written report relating to the following:
CuraGen Patent Rights covering the QT; agreements between a Third Party and
CuraGen or its Affiliates regarding the QT; and any patents or patent
applications of Third Parties relevant to the QT which are known to CuraGen.

     (g)  Returned Target.  If, prior to a Compound being designated a
Development Compound, Bayer or CuraGen learns or discovers that the use of the
related Screened Qualified Target infringes one or more claims of an issued
patent in the country in which the use of such Screened Qualified Target is
expected to occur and such Screened Qualified Target has not reverted to CuraGen
pursuant to Section 3.7(c), then Bayer shall have the right to return such
Screened Qualified Target to CuraGen and that Screened Qualified Target shall no
longer count as a Screened Qualified Target which CuraGen is obligated to
deliver hereunder.

     Section 2.6    Target Screening Phase.
                    ----------------------

     (a)  General.  Bayer shall use commercially reasonable efforts to express
the protein derived from the provided QTs, develop HTS Configured Assays and
screen the Qualified Targets against Bayer's compounds (the "Target Screening
Phase"). Assuming CuraGen delivers an adequate number of Qualified Targets,
Bayer will evaluate at least [______] Qualified Targets each [_____________] and
shall use commercially reasonable efforts to set up a screen for at least
[______] Qualified Targets each [_____________]. CuraGen shall perform
Predictive Toxicogenomic Screens and Pharmacogenomic Services as deemed
necessary by the Metabolic Program Target Prosecution Team or a Metabolic
Program Strategic Project Team. As deemed necessary by Bayer in its sole
discretion, Bayer will perform assays to assess the



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       21


effectiveness of Lead Structures. Before initiation of assay development,
CuraGen will, at the discretion of the Metabolic Program Target Selection Team
and at CuraGen's cost, perform SNP mining and allele frequency analysis of SNPs
of the Qualified Targets across relevant disease populations.

     (b)  Orphan GPCRs.  If CuraGen identifies an orphan GPCR, Bayer and
CuraGen, at their discretion, will subject it to deorphaning strategies. If
Bayer generates a Configured Assay on the GPCR, such GPCR shall be deemed to be
a Screenable Qualified Target delivered by CuraGen to Bayer in the Contract Year
in which Bayer generated the Configured Assay.

     (c)  Selections of QTs.  During the Screening Term, the Metabolic Program
Target Selection Team shall review the Target Candidates presented by CuraGen on
a continuing basis to identify those Qualified Targets which have the highest
potential to develop a Metabolic Program Drug. Bayer shall at its sole
discretion have the right to select as many QTs as it chooses to proceed to
screening, subject to Section 2.6(a).

     (d)  Hits and Lead Structures.  Bayer shall use commercially reasonable
efforts to find Hits, advance the Hits to Lead Structures and advance the Lead
Structures to the Strategic Project Phase using the guidelines set forth in the
Strategic Project Manual.


     Section 2.7    Strategic Project Phase.
                    -----------------------
     (a)  General.

           (i)   Lead Optimization.  Bayer shall use commercially reasonable
                 efforts to advance the Lead Structures chosen in the
                 Exploratory Research Phase meeting the minimum criteria set
                 forth in the Strategic Project Manual (as modified by the
                 Research Plan) into Development Candidates.

           (ii)  Secondary Screening.  Strategic Projects shall include, but
                 shall not be limited to,
                 [_________________________________________________].

     (b)  CuraGen Obligations.  CuraGen shall provide additional GeneCalling
expression profiling, characterize the pharmacogenomic properties of the Lead
Structures in appropriate cellular, non-mammalian or animal disease models, and
provide additional pharmacogenomic validation for the Qualified Target in
appropriate human cellular models at each Metabolic Program Strategic Project
Team's discretion. At each Metabolic Program Strategic Project Team's
discretion, CuraGen shall provide at its cost Predictive Toxicogenomic Screens.

     (c)  Operation.  The operation of Strategic Projects and the Strategic
Project Phase shall be governed by the Strategic Project Manual and the Research
Plan.

     (d)  Termination.  Bayer may terminate a Strategic Project at any time and
in its sole discretion upon providing written notice of same to CuraGen.

     Section 2.8  Pre-Clinical Development Phase.
                  ------------------------------




Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       22


     (a)  Bayer shall use commercially reasonable efforts during the Pre-
Clinical Development Phase to advance each Development Compound to Phase I using
the guidelines set forth in the Development Manual; provided, however that the
decision to advance any Development Compound to Phase I shall be up to Bayer in
its sole discretion.

     (b)  Bayer may end work on a Development Compound in the Pre-Clinical
Development Phase at any time and in its sole discretion upon providing written
notice of same to CuraGen.

     Section 2.9  Clinical Development Phase.
                  --------------------------
     (a)  Bayer shall use commercially reasonable efforts during the Clinical
Development Phase to advance each Development Compound from Phase I through
the NDA Phase using the guidelines set forth in the Development Manual;
provided, however that the decision to advance any Development Compound to
any phase of the Clinical Development Phase shall be up to Bayer in its
sole discretion.

     (b)  Bayer may end work on a Development Compound in the Clinical
Development Phase at any time and in its sole discretion upon providing written
notice of same to CuraGen.

     Section 2.10  Commercialization Phase.
                   -----------------------

Bayer shall use commercially reasonable efforts during the Commercialization
Phase to successfully market each Metabolic Program Drug; provided, however that
the decision how to market and whether to continue to market such Metabolic
Program Drug shall be up to Bayer in its sole discretion.

                                  Article III
                                  -----------
                   Bayer and CuraGen Rights and Obligations
                   ----------------------------------------

     Section 3.1  License Grant with Respect to CuraGen Know-How and CuraGen
                  ----------------------------------------------------------
Patent Rights.
- -------------

     (a)  License.  Subject to the terms and conditions of this Agreement,
including without limitation, the financial obligations under Article IV,
CuraGen hereby grants to Bayer and its Affiliates during the Term, a worldwide,
exclusive license under CuraGen's rights to CuraGen Know-How and CuraGen Patent
Rights, (i) to research, develop, make and use the QTs delivered hereunder and
which have not reverted to CuraGen pursuant to Section 3.7 and (ii) to make,
have made, manufacture, produce, develop, market, import, export, use, have
used, offer for sale, sell and have sold Compounds, Development Compounds and
Metabolic Program Drugs.

     (b)  Sublicense Rights.  Bayer and its Affiliates shall have the right to
grant sublicenses of licenses granted to it in Section 3.1(a) of this Agreement
to any Third Party; provided, however that Bayer shall ensure that each such
Sublicensee shall consent to be bound by the terms of this Agreement as a
Sublicensee and to the same extent as Bayer. Bayer agrees to inform CuraGen, in
confidence, of each sublicense granted, and any modification or termination
thereof, within [__________] after the modification, or termination of a
sublicense.



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       23


     Section 3.2  License Grant with Respect to Bayer Know-How and Bayer Patent
                  -------------------------------------------------------------
Rights.
- ------
     (a)  Research License.  During the Screening Term, Bayer hereby grants to
CuraGen, a non-exclusive, royalty-free license, under Bayer Patent Rights
and Bayer Know-How, solely to the extent necessary for CuraGen to perform
its obligations under the Research Plan.

     (b)  Commercialization License.  Subject to the terms and conditions of
this Agreement, during the Term, Bayer hereby grants to CuraGen and its
Affiliates a royalty-free, worldwide, exclusive license (i) to make, have made,
manufacture, produce, develop, market, import, export, use, have used, offer for
sale, sell and have sold any Target Candidates or Qualified Targets that have
reverted to CuraGen pursuant to Section 3.7 hereof and any Development Compounds
that have reverted to CuraGen pursuant to Section 3.7 hereof only for use in the
CFA and (ii) to use any Configured Assay owned by Bayer necessary or useful for
the license granted in (i) above pursuant to Section 3.7(c) and (d) for research
purposes only, such use to be subject to Section 3.3.

     (c)  Sublicense Rights for Commercialization License.  CuraGen and its
Affiliates shall have the right to grant sublicenses of the license granted
to it in Section 3.2(b) of this Agreement to any Third Party; provided,
however that CuraGen shall ensure that each such Sublicensee shall consent
to be bound by the terms of this Agreement as a Sublicensee and to the same
extent as CuraGen. CuraGen agrees to inform Bayer, in confidence, of each
sublicense granted, and any modification or termination thereof, within
[__________] after the modification, or termination of a sublicense.

     Section 3.3  Use of Configured Assays.
                  ------------------------

Neither CuraGen nor its Affiliates shall, without the written consent of Bayer,
provide a Configured Assay owned by Bayer to any Third Party (other than a fee-
for-service screen provider) and CuraGen agrees that Configured Assays will only
be used to fulfill this Agreement and for no other purpose and further agrees
not to cause or permit reverse engineering of any Configured Assay.

     Section 3.4  Retained Rights; Ownership.
                  --------------------------
     (a)  Bayer Retained Rights.  All of Bayer's rights to Bayer Know-How and
Bayer Patent Rights not specifically licensed to CuraGen under this Agreement
and Bayer's rights to Compounds which are not specifically licensed to CuraGen
and are discovered by Bayer through the use of QTs under this Agreement, shall
be retained by Bayer.

     (b)  CuraGen Retained Rights.  All of CuraGen's rights to CuraGen Know-How
and CuraGen Patent Rights which are not specifically licensed to Bayer under
this Agreement shall be retained by CuraGen.





Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       24


     Section 3.5  CuraGen Co-Promotion Rights.
                  ----------------------------

Promptly following the occurrence of a DP-5 approval with respect to any
Metabolic Program Drug, the Parties agree to enter into good faith negotiations
to conclude an agreement pursuant to which CuraGen will obtain rights to co-
promote such Metabolic Program Drug in the United States. Such agreement will
address relevant terms and conditions such as
[______________________________________].  In any event, Bayer shall pre-approve
and have sole authority to disapprove any Marketing Costs to be incurred by
CuraGen in connection with a Metabolic Program Drug.

     Section 3.6    Ownership Rights.
                    ----------------

     (a)  CuraGen Ownership.  CuraGen owns and shall continue to own all Target
Candidates and Qualified Targets.

     (b)  Bayer Ownership.  Bayer owns and shall continue to own all Development
Candidates, Development Compounds and Metabolic Program Drugs.  Bayer in
its sole discretion shall have the right to sublicense to Third Parties any
Development Compounds or Metabolic Program Drugs that have not reverted to
CuraGen pursuant to Section 3.7 hereof.

     Section 3.7  CuraGen Reversionary Rights.
                  ---------------------------
     (a)  In the event that any Target Candidate is not accepted as a Qualified
Target on or before [__________] from the date such Target Candidate is
presented to the Program Directors for review in accordance with Section 2.2(e)
hereof, all rights to such Target Candidate shall revert to CuraGen.

     (b)  At the end of the Screening Term, rights to unscreened Qualified
Targets will revert to CuraGen; provided, however that no unscreened Qualified
Target will revert to CuraGen until Bayer has had at least [__________] to set
up a screen for such Qualified Target, unless the Screening Term has been
terminated pursuant to Section 2.5(d), in which case rights to such Qualified
Targets shall immediately revert to CuraGen.

     (c)  In the event Bayer does not advance a Compound to the Strategic
Project Phase within [______________] of having screened the relevant Qualified
Target (or [______________] if the Qualified Target has non-CFA indications),
rights to such Qualified Target shall revert to CuraGen. Each Party shall
promptly disclose to the other Party new evidence suggesting that a Screened
Qualified Target which has reverted to CuraGen might be efficaciously advanced
to the Strategic Project Phase. If Bayer subsequently notifies CuraGen that
Bayer wishes to advance any Screened Qualified Target that has reverted to
CuraGen to the Strategic Project Phase
[________________________________________________________].

     (d)  If Bayer (i) discontinues a Strategic Project and discontinues all
work with respect to the relevant Qualified Target or (ii) abandons a
Development Candidate for all indications, CuraGen shall have rights to the
relevant Qualified Target but not the related Compounds, subject to the
conditions set forth in this subsection. If CuraGen has partially funded
Development Costs with respect to a Development Compound and Bayer has decided
to abandon such Development Compound for other than toxicological or adverse
event reasons, then Bayer




Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       25


shall provide CuraGen with an exclusive license to the Development Compound only
for use in the CFA, and Bayer will also provide all existing essential data and
information related to the Development Compound necessary for an IND, subject to
the conditions set forth herein; provided, however that
[_________________________________________________________]. Bayer shall use
commercially reasonable efforts to promptly file a relevant patent application.
If Bayer abandons a Development Compound for toxicological or adverse event
reasons and CuraGen identifies a subset of a population for which Bayer would
not have abandoned the Development Compound for toxicological or adverse event
reasons and Bayer agrees that it would not have abandoned the Development
Compound for such subset of a population for toxicological or adverse event
reasons but rather for some other reason, Bayer shall grant CuraGen the license
set forth in the preceding sentence; provided, however that the license shall be
limited to such subset of a population. If CuraGen, an Affiliate of CuraGen or a
Third Party develops the Development Compound, Bayer shall have the right to
Royalty Payments or the right to receive a share of the Operating Income as set
forth in Section 4.2. Each Party shall promptly disclose to the other Party new
evidence suggesting that a Development Compound which has reverted to CuraGen
could be further developed in the Metabolic Program. If Bayer subsequently
notifies CuraGen that Bayer wishes to develop the Development Compound and
CuraGen or an Affiliate has not transferred the Qualified Target or Development
Compound to a Third Party, rights of the Qualified Target and Development
Compound shall revert to Bayer under the Metabolic Program and shall remain with
Bayer unless subsequently abandoned by Bayer; in such event, CuraGen shall
provide Bayer with all existing essential data and information relating to the
Development Compound. If Bayer exercises this right, Bayer shall reimburse
CuraGen [_____] of the Development Costs CuraGen has incurred with respect to
such Development Compound until the date Bayer exercised its right. CuraGen or
an Affiliate shall offer Bayer a Right of First Negotiation before transferring
any rights to a Qualified Target or Development Compound to a Third Party.

                                  Article IV
                                  ----------
                             Financial Provisions
                             --------------------

     Section 4.1  Costs of Metabolic Program.
                  --------------------------
     (a)  Generally.

           (i)    All costs and expenses of the Metabolic Program relating to
                  the Qualified Target Production Phase
                  [______________________________________].

           (ii)   All costs and expenses of the Metabolic Program relating to
                  the Target Screening Phase and the Strategic Project Phase
                  [______________________________________].

           (iii)  All Development Costs of the Metabolic Program relating to the
                  Pre-Clinical Development Phase, Clinical Development Phase and
                  Commercialization Phase
                  [_____________________________________].



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       26


           (iv)  Each Contract Year, Bayer shall set an annual budget for the
                 Development Costs for the Pre-Clinical Development Phase,
                 Clinical Development Phase and Commercialization Phase of the
                 Metabolic Program for those Compounds for which CuraGen has not
                 opted out (the "Development Annual Budget"). Bayer shall
                 receive input from CuraGen when setting the Development Annual
                 Budget; provided, however that the Development Annual Budget
                 shall be at Bayer's sole discretion. Each calendar month during
                 such Contract Year, within [________] of the end of such
                 calendar month CuraGen shall remit payment to Bayer for
                 CuraGen's share of such Development Costs based on the
                 Development Annual Budget. Each Contract Quarter during such
                 Contract Year, within [____________] of the end of such
                 Contract Quarter Bayer shall prepare and provide to CuraGen an
                 accounting of Bayer's actual Pre-Clinical Development Phase,
                 Clinical Development Phase and Commercialization Phase
                 Development Costs for those Compounds for which CuraGen has not
                 opted out ("Development Reconciliation"). Within
                 [_____________] of the preparation of the Development
                 Reconciliation, CuraGen shall remit payment to Bayer or Bayer
                 shall remit payment to CuraGen an amount equal to the
                 difference between CuraGen's share of the Development Annual
                 Budget and the Development Reconciliation for such Contract
                 Quarter.

     (b)  CuraGen Opt-Out.

           (i)   On or after the date that CuraGen has incurred [____________]
                 in Development Costs in the Metabolic Program (excluding
                 Development Costs which are associated with a line extension,
                 new indication, new dosage, new formulation or new delivery
                 mechanism of a Metabolic Program Drug and any other Development
                 Costs expressly excluded in this Agreement) (the "Overflow
                 Date"), Bayer shall send CuraGen written notice thereof. Within
                 [____________] of CuraGen's receipt of such notice from Bayer,
                 CuraGen at its sole discretion may, by written notice to Bayer,
                 opt not to share the Development Costs for certain or all of
                 the Development Compounds which are in the Pre-Clinical
                 Development Phase or the Clinical Development Phase as of the
                 Overflow Date; provided, however that CuraGen shall pay the
                 Development Costs for such Development Compounds to complete
                 the specific phase the Development Compounds are in as of the
                 Overflow Date. For each Metabolic Program Drug developed from
                 the Development Compound for which CuraGen has opted not to
                 share additional Development Costs, CuraGen shall share the
                 Operating Income for any Metabolic Program Drug developed from
                 such Development Compound in accordance with Section 4.2, and
                 CuraGen shall not have a further opportunity to share the
                 Development Costs for such Development Compounds. For any
                 Compound entering the Pre-Clinical Development Phase after the




Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       27


                  Overflow Date, then within [____________] of such Compound
                  entering the Pre-Clinical Development Phase, CuraGen at its
                  sole discretion may, by written notice to Bayer, opt out of
                  the Development Costs associated with such Compound. For each
                  Metabolic Program Drug developed from each such Compound for
                  which CuraGen has opted not to share Development Costs,
                  CuraGen shall receive Royalty Payments in accordance with
                  Section 4.2, and CuraGen shall not have a further opportunity
                  to share Development Costs on such Compound.

           (ii)   Subject to other provisions in this Agreement, including
                  without limitation Section 4.1(b)(i) above, each Contract
                  Year, CuraGen shall be obligated to participate in the
                  Development Costs associated with [___________] Compounds
                  entering the Pre-Clinical Development Phase. CuraGen may at
                  any time voluntarily accept more than [_____] Compounds in
                  such Contract Year. Beginning in [____________] and ending in
                  [____________], if in any Contract Year Bayer advances fewer
                  than [__________] Compounds to the Pre-Clinical Development
                  Phase, then the difference between [_________] and the number
                  of Compounds actually advanced by Bayer shall be applied to
                  the number of Compounds CuraGen is obligated to accept in
                  subsequent Contract Years (the "Compound Credits"). Such
                  Compound Credits shall be cumulative for each Contract Year
                  beginning in [____________]. The number of Compound Credits
                  shall be reduced (but not below zero) each Contract year by
                  the number of Compounds advanced by Bayer in excess
                  [_________]. If more than [_____] Compounds have entered the
                  Pre-Clinical Development Phase in a Contract Year and the
                  excess over [__________] Compounds exceeds the number of
                  Compound Credits, CuraGen at its sole discretion may, by
                  giving written notice to Bayer, elect not to pay the Pre-
                  Clinical Development Phase Development Costs and subsequent
                  Development Costs associated with any or all of the excess
                  Compounds entering the Pre-Clinical Development Phase in such
                  Contract Year, in which case CuraGen shall receive Royalty
                  Payments pursuant to Section 4.2 for any Metabolic Program
                  Drugs developed from such Compounds.

           (iii)  If CuraGen is not participating in the development of a Non-
                  CFA Product pursuant to Section 2.2(b), then CuraGen shall
                  have no further obligation to pay any Development Costs for
                  such Non-CFA Product. If CuraGen is not so participating, then
                  for each Metabolic Program Drug developed from such Non-CFA
                  Product, CuraGen shall receive Royalty Payments pursuant to
                  Section 4.2 for any such Metabolic Program Drugs.

     Section 4.2  Royalty Payments; Operating Income.
                  ----------------------------------
     (a)  Royalty Payments.






Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       28


If Bayer or an Affiliate markets a Metabolic Program Drug and CuraGen did not
fund any of the Development Costs with respect thereto, then CuraGen shall be
entitled to Royalty Payments with respect to such drug.  If CuraGen or an
Affiliate markets a Metabolic Program Drug and CuraGen received reversionary
rights pursuant to (i) Section 3.7(c) or (d) in connection with the related
Qualified Target or (ii) Section 3.7(d) in connection with the related
Development Compound before Bayer completed the Pre-Clinical Development Phase,
then Bayer shall be entitled to Royalty Payments with respect to such drug.  As
used in this Agreement, "Royalty Payments" means the following:

      .  [___]% of the first $[_______] of Annual Sales Volume
      .  [___]% of the next $[_______] of Annual Sales Volume up to $[_______]
      .  [___]% of the next $[_______] of Annual Sales Volume up to $[_______]
      .  [___]% of the next $[_______] of Annual Sales Volume up to $[_______]
      .  [___]% of the next $[_______] of Annual Sales Volume up to $[_______]
      .  [___]% of Annual Sales Volume over $[_______]

     Royalty Payments will be owed from the date of the First Commercial Sale of
a Royalty Product in a given country and continuing with respect to Net Sales of
such Royalty Product sold in such country for a period of [_______]; provided,
however, that such obligations to make the Royalty Payments shall continue for
an additional period not to exceed [_______] following the [__________________]
the date of such First Commercial Sale with respect to a Royalty Product that
contains an active ingredient, the use or sale of which is covered by a Patent
Right in such country that precludes the use or sale of such active ingredient
by others in such country.

     With respect to any Metabolic Program Drug for which a Party is receiving
Royalty Payments, the other Party will be entitled to 100% of the Operating
Income.

     For purposes of determining the Annual Sales Volume category in which a
given increment of Net Sales falls, all Net Sales of such Metabolic Program Drug
in all countries during the given Contract Year shall be aggregated.  The
royalty rates set forth above shall apply to increments of Net Sales for all
Royalty Products on a product-by-product basis according to the Annual Sales
Volume categories in which such increments fall during any given Contract Year.
For purposes of this Section 4.2, line extensions, new formulations and
Combination Products in which the same active ingredient is present shall be the
same Metabolic Program Drug as the original Metabolic Program Drug.

     (b)  Operating Income.

           (i)   If CuraGen opted out of the Development Costs relating to a
                 Development Compound after completion of



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       29


                  (A)  the Pre-Clinical Development Phase in accordance with
                       Section 4.1(b) above, then
                       [____________________________________] the Operating
                       Income from each Metabolic Program Drug developed from
                       such Development Compound.

                  (B)  Phase I in accordance with Section 4.1(b) above, then
                       [____________________________________] the Operating
                       Income from each Metabolic Program Drug developed from
                       such Development Compound.

                  (C)  Phase II in accordance with Section 4.1(b) above, then
                       [____________________________________] the Operating
                       Income from each Metabolic Program Drug developed from
                       such Development Compound.

                  (D)  Phase III in accordance with Section 4.1(b) above, then
                       [____________________________________] the Operating
                       Income from each Metabolic Program Drug developed from
                       such Compound.

           (ii)   If Bayer is developing a Development Compound associated with
                  a Qualified Target and CuraGen has not opted out of the
                  Development Costs relating to such Development Compound, then
                  Bayer shall receive 56% and CuraGen shall receive 44% of the
                  Operating Income from each Metabolic Program Drug developed
                  from such Development Compound.

           (iii)  If CuraGen receives reversionary rights pursuant to Section
                  3.7(c) relating to a Development Compound and Bayer abandoned
                  such Development Compound after completion of

                  (A)  the Pre-Clinical Development Phase, then
                       [_____________________________________] the Operating
                       Income from each Metabolic Program Drug developed from
                       such Compound.

                  (B)  Phase I, then [____________________________________] the
                       Operating Income from each Metabolic Program Drug
                       developed from such Compound.

                  (C)  Phase II, then [_____________________________________]
                       the Operating Income from each Metabolic Program Drug
                       developed from such Compound.






Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       30


                  (D)  Phase III, then [_____________________________________]
                       the Operating Income from each Metabolic Program Drug
                       developed from such Compound.

           (iv)  The Parties will share any Operating Income losses for an
                 Operating Income Product (whether or not a Party has opted out
                 of the Development Costs of such Operating Income Product) to
                 the same extent that the Parties share the Operating Income if
                 the Operating Income is positive.

           (v)   If the cumulative Operating Income losses for an Operating
                 Income Product exceed $[________], then CuraGen in its sole
                 discretion may elect to have Bayer pay a specific dollar amount
                 or all of CuraGen's subsequent share of the Operating Income
                 losses for such Operating Income Product [________] of the end
                 of the relevant Contract Quarter by giving written notice of
                 same to Bayer. In such event, for each $[________] so paid by
                 Bayer on behalf of CuraGen, CuraGen's share of the Operating
                 Income for such Operating Income Product shall be permanently
                 reduced [________] and Bayer's share of the Operating Income
                 for such Operating Income Product shall be permanently
                 increased [________]. At such time as CuraGen's share of the
                 Operating Income would [_______________], then for such
                 Operating Income Product, Bayer shall [____________________].

     (c)  Notwithstanding Section 4.2(a) and Section 4.2(b), if either Party
sublicenses the development of a Compound to a Third Party before the
Commercialization Phase and the other Party would otherwise have been entitled
to Royalty Payments or Operating Income from the sale of any Metabolic Program
Drug derived from such Compound, then the Development Costs of the sublicensing
Party which are in excess of the Development Costs shared with the other Party
shall be repaid from any revenue derived from such sublicense and, once such
amounts are repaid, the sublicensing Party shall receive [_____] of any revenue
derived from such sublicense and the other Party shall receive [_____] of such
revenue. In such case, the other Party shall not be entitled to a Royalty
Payment or a share of the Operating Income in connection with such Metabolic
Program Drug.

     Section 4.3  Income Statement Reports.
                  ------------------------

Each Contract Year, Bayer shall set an annual budget for the anticipated
revenues and costs for each Operating Income Product (the "Commercialization
Annual Budget").  Bayer shall receive input from CuraGen when setting the
Commercialization Annual Budget; provided, however that the Commercialization
Annual Budget shall be at Bayer's sole discretion.  The budget shall be prepared
in accordance with Bayer's internal budgetary principles.  Each Contract Quarter
during such Contract Year, within [________] days of the end of such Contract
Quarter CuraGen shall remit payment to Bayer or Bayer shall remit payment to
CuraGen for CuraGen's share of the Operating Income for each Operating Income
Product based on the Commercialization Annual Budget.  Within [________] of the
end of such Contract Quarter, Bayer and CuraGen




Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       31


shall each prepare a pro forma income statement showing all revenues and costs
for each Operating Income Product under the Party's control ("Commercialization
Reconciliation"). Within [_________] of the preparation of the Commercialization
Reconciliation, CuraGen shall remit payment to Bayer or Bayer shall remit
payment to CuraGen the difference between CuraGen's share of the
Commercialization Annual Budget and the Commercialization Reconciliation for
such Contract Quarter.

     Section 4.4  Royalty Reports.
                  ---------------

Each Party owing payments for Royalty Products (the "Royalty-Paying Party")
shall deliver to the other Party (the "Royalty Recipient") within [__________]
after the end of each calendar quarter, reasonably detailed written accountings
of Net Sales of Royalty Products due to the Royalty Recipient, for such calendar
quarter (the "Royalty Report").  Such quarterly reports shall indicate Net Sales
on a country-by-country and product-by-product basis and the calculation of
royalties from such Net Sales.  When a Royalty-Paying Party delivers such
accountings to the Royalty Recipient, the Royalty-Paying Party shall also
deliver all royalty payments due under Section 4.2 to the Royalty Recipient for
the calendar quarter.

     Section 4.5    Accounting.
                    ----------

No more frequently than once during each calendar year during the Term and for
[________] thereafter, each Party (the "Audited Party") shall permit the
independent auditors of the other Party (the "Auditing Party") to whom the
Audited Party has no reasonable objection and with reasonable notice at any time
during normal business hours, accompanied at all times by a representative of
the Audited Party, to inspect, audit and copy reasonable amounts of relevant
accounts and records of the Audited Party, its Affiliates and Sublicensees, for
the sole purpose of verifying the accuracy of the calculation of payments to the
Auditing Party pursuant to Article IV and the reports which accompanied them.
The independent auditors shall not disclose to the Auditing Party any
information other than information relating solely to the accuracy of the
accounting and payments made by the Audited Party pursuant to Article IV and
shall be subject to confidentiality obligations.  If such audit determines that
payments are due to the Auditing Party, the Audited Party shall pay to the
Auditing Party any such additional amounts within thirty (30) days of the date
on which such auditor's written report is delivered to the Audited Party and the
Auditing Party, unless such audit report is disputed by the Audited Party, in
which case the dispute shall be resolved in accordance with Article X.  If the
auditor determines that the Audited Party's payments are in excess of those
required under this Agreement, the Auditing Party shall remit the difference to
the Audited Party of such amount within thirty (30) days of the later date on
which such auditor's report is delivered to the Auditing Party and the Audited
Party, unless such audit report is disputed by the Auditing Party, in which case
the dispute shall be resolved in accordance with Article X.  Any such inspection
of records shall be at the Auditing Party's expense unless such audit discloses
a deficiency in the payments made by the Audited Party (whether for itself or on
behalf of its Affiliates and Sublicensees) of more than five percent (5%) of the
payments made by the Audited Party, in which case the Audited Party shall bear
the cost of such audit.




Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       32


     Section 4.6  Currency and Method of Payments.
                  -------------------------------

All payments under this Agreement shall be made in the United States in U.S.
dollars by transfer to such bank account as CuraGen or Bayer (as applicable) may
designate from time to time payable at such time as set forth in this Agreement
or, if such time is not explicitly specified, within thirty (30) days of notice
that such payments are due.  With respect to amounts owed between the Parties,
any amounts payable shall be expressed by the Parties in U.S. Dollars calculated
in accordance with the billing Party's then-standard accounting principles
consistently applied.

     Section 4.7  Tax Withholding.
                  ---------------

The Parties shall use all reasonable and legal efforts to reduce tax withholding
on payments made to CuraGen and Bayer hereunder.  Notwithstanding such efforts,
if a Party concludes that tax withholdings under the laws of any country are
required with respect to payments to the other Party, the Party shall withhold
the required amount and pay it to the appropriate governmental authority.  In
such a case, the Party will promptly provide the other Party with original
receipts or other evidence reasonably desirable and sufficient to allow the
other Party to document such tax withholdings adequately for purposes of
claiming foreign tax credits and similar benefits.

     Section 4.8  Blocked Payments.
                  ----------------

In the event that, by reason of applicable laws or regulations in any country,
it becomes impossible or illegal for a Party or its Affiliates or Sublicensees,
to transfer, or have transferred on its behalf, royalties or other payments to
the other Party, such royalties or other payments shall be deposited in local
currency in the relevant country to the credit of the other Party in a
recognized banking institution designated by the other Party or, if none is
designated by the other Party within a period of thirty (30) days, in a
recognized banking institution selected by the Party or its Affiliates or
Sublicensees, as the case may be, and identified in a notice in writing given to
the other Party.

     Section 4.9    Compassionate Use.
                    -----------------

Bayer may make Metabolic Program Drugs available non-commercially to patients on
compassionate use grounds.  If Bayer makes Metabolic Program Drugs available on
such a basis, the Cost of Goods Sold associated with such drugs shall be
subtracted from the Operating Income calculated for such drug.

     Section 4.10  Accounting Terms.
                   ----------------

Except as otherwise expressly provided herein, all accounting terms used in this
Agreement shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered hereunder shall be
prepared (x) with respect to Bayer, in accordance with Bayer's and its
Affiliates' then-standard accounting principles consistently applied and (y)
with respect to CuraGen, in accordance with U.S. GAAP consistently applied.





Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       33


                                   Article V
                                   ---------
        Intellectual Property Ownership, Protection and Related Matters
        ---------------------------------------------------------------

     Section 5.1  Ownership
                  ---------
     (a)  Bayer acknowledges and agrees that CuraGen is and shall remain the
sole owner of the CuraGen Know How and the CuraGen Patent Rights and that
CuraGen shall be and remain the sole owner of the CuraGen Improvements and the
CuraGen Improvement Rights. Bayer further acknowledges and agrees that neither
Bayer nor any of its Affiliates shall have any rights in or to the CuraGen
Patent Rights, the CuraGen Know-How, the CuraGen Improvements, or the CuraGen
Improvement Rights, other than the rights specifically granted herein. CuraGen
acknowledges and agrees that Bayer is and shall remain the sole owner of the
Bayer Know How and the Bayer Patent Rights and that Bayer shall be and remain
the sole owner of the Bayer Improvements and the Bayer Improvement Rights.
CuraGen further acknowledges and agrees that neither CuraGen nor any of its
Affiliates shall have any rights in or to the Bayer Patent Rights, the Bayer
Know-How, the Bayer Improvements, or the Bayer Improvement Rights, other than
the rights specifically granted herein.

     (b)  Bayer shall own all Know-How and inventions made solely by its
employees in the course of the Metabolic Program, and CuraGen shall own all
Know-How and inventions made solely by its employees in the course of the
Metabolic Program. All inventions and Know-How jointly developed by employees of
Bayer and employees of CuraGen in the course of the Metabolic Program shall be
owned jointly on the basis of an undivided one-half interest by Bayer and
CuraGen, provided, however that either Party may sell, license or otherwise
transfer such jointly-owned invention without the consent of the other Party
only in a manner that is consistent with the licenses granted pursuant to this
Agreement and is otherwise consistent with this Agreement. The Parties shall not
be able to independently exploit a joint invention except with the consent of
both Parties. The determination of inventorship shall be made in accordance with
relevant U.S. patent laws. In the event of a dispute regarding inventorship or
the ownership of Know-How, if the Parties are unable to resolve the inventorship
dispute, mutually acceptable outside patent counsel not regularly employed by
either Party shall resolve such dispute.

     Section 5.2  Prosecution and Maintenance of Patent Rights.
                  --------------------------------------------
     (a)  General.  Except as otherwise provided in Section 5.2(b) and
Section 5.2(c), the responsibility for preparing, filing and prosecuting patent
applications and for maintaining patents (and for managing any interference,
opposition, or other similar proceedings relating to the foregoing) covering
inventions made in the course of the Metabolic Program shall be the
responsibility of the Party that makes said invention, provided, however that,
with respect to inventions made jointly by the Parties, one of the Parties shall
have such responsibility as determined by agreement of the Parties on a case-by-
case basis, in which case such Party shall act as a representative for the other
Party when preparing, filing and prosecuting patent applications and maintaining
patents (and managing any interference, opposition, or other similar proceedings
relating to the foregoing) covering the joint invention. All expenses incurred
by a Party in the performance of its obligations with respect to an invention
solely made by such Party




Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       34


under this Section 5.2(a) shall be borne by such Party. If either Party elects
not to participate financially in the further prosecution or maintenance of any
Patent Right that covers a joint invention, such Party shall notify the other
Party of such election at least [__________] prior to the last available date
for action to preserve such Patent Right. If such other Party elects to continue
prosecution or maintenance, such Patent Right shall become the exclusive
property of such other Party and appropriate assignment documents shall be
executed. All expenses incurred in the performance of the obligations under this
Section 5.2(a) for joint inventions shall be shared equally between the Parties.

     (b)  QTs.  CuraGen shall have the responsibility for preparing, filing and
prosecuting patent applications and for maintaining patents (and for managing
any interference, opposition, or other similar proceedings relating to the
foregoing) covering inventions pertaining to QTs. All expenses incurred by
CuraGen in the performance of its obligations under this Section 5.2(b) shall be
borne by CuraGen.

     (c)  Products.  Bayer shall have the responsibility for preparing, filing
and prosecuting patent applications and for maintaining patents (and for
managing any interference, opposition, or other similar proceedings relating to
the foregoing) covering inventions pertaining to Metabolic Program Drugs. All
expenses incurred by Bayer in the performance of its obligations under this
Section 5.2(c) shall be borne by Bayer.

     Section 5.3  Cooperation.
                  -----------

Each Party hereby agrees to (a) make its employees, agents and consultants
available to the other Party (or to the other Party's authorized attorneys,
agents or representatives), to the extent reasonably necessary to enable the
appropriate Party to prepare, file and prosecute patent applications and
maintain resulting patents that cover QTs and Metabolic Program Drugs (the
"Designated Inventions"), (b) cooperate, if necessary and appropriate, with the
other Party in gaining patent term extensions wherever applicable to Patent
Rights that cover Designated Inventions, (c) cooperate, if necessary and
appropriate, with the other Party in the protection of Patent Rights that cover
Designated Inventions and (d) with respect to inventions made jointly by the
Parties, make itself available for preparing, filing and prosecuting patent
applications and for maintaining patents (and for managing any interference,
opposition, or other similar proceedings relating to the foregoing) covering the
joint invention.

     Section 5.4  Third Party Infringement.
                  ------------------------

     (a)  Notice.  Each Party shall give notice to the other of any suspected
infringement of or claims, notices, challenges, actions, or proceedings
relating to the validity or enforceability of any intellectual property
rights relating to Metabolic Program Drugs.


     (b)  Legal Proceedings.  Bayer shall have the sole right to institute legal
proceedings against any Third Party believed to be infringing the intellectual
property rights relating to Metabolic Program Drugs, including, but not limited
to, CuraGen Know-How and CuraGen Patent Rights. All costs relating to such legal
proceedings shall be paid by Bayer and shall be



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       35


deducted from Net Sales for purposes of calculating Operating Income. Any
monetary recovery collected in excess of Bayer's costs shall be deemed Net Sales
(the "Recovered Bayer Net Sales") and, as such, shall contribute to the Annual
Sales Volume for applicable Metabolic Program Drugs, on a product-by-product
basis.

     (c)  Cooperation; Settlements.  In the event that Bayer takes action
pursuant to subsection (b) above, CuraGen shall cooperate with Bayer to the
extent reasonably possible, including the joining of suit if necessary or
desirable. Bayer shall not settle or compromise any claim or proceeding relating
to CuraGen Know-How or CuraGen Patent Rights without the prior written consent
of CuraGen, such consent not to be unreasonably withheld, delayed or
conditioned.

     Section 5.5  Third Party Intellectual Property.
                  ---------------------------------
     (a)  Notice.  In the event that a Party becomes aware of any claim that the
practice by Bayer of CuraGen Know-How or CuraGen Patent Rights that have been
licensed to Bayer pursuant to Section 3.1, or that the practice by CuraGen of
Bayer Know-How or Bayer Patent Rights that have been licensed to CuraGen
pursuant to Section 3.2, infringes the intellectual property rights of any Third
Party, such Party shall promptly notify the other Party.

     (b)  Action.  Bayer shall defend the Parties against any claim by a Third
Party that the development, manufacture, use, sale, offer for sale, export or
import of the Metabolic Program Drugs infringes Third Party intellectual
property rights at Bayer's sole expense; provided, however that (1) in the event
CuraGen elects not to join such an action, it shall reimburse Bayer
[_______________] of Bayer's costs associated with the representation (such
costs to include reasonable attorney's fees) and (2) in the event the
development, manufacture, use, sale, offer for sale, export or import of the
Metabolic Program Drug infringes Third Party intellectual property rights
because the use of a Qualified Target infringes Third Party intellectual
property rights, CuraGen shall (y) pay all costs associated with the
representation (such costs to include reasonable attorney's fees) and all
damages and royalties either Party is or the Parties are ordered to pay to a
Third Party in connection with such claim and (z) shall have the right to
participate in the defense of such claim. If both Parties are participating in
such an action, each Party shall bear its own costs associated with the
representation in connection with such action and CuraGen shall not take any
position inconsistent with Bayer's position on such issues.

     (c)  Settlement.  Neither Party shall settle any action pursuant to this
Section 5.5 without the other Party's consent, such consent not to be
unreasonably withheld, delayed, or conditioned.

     (d)  Damages.  Subject to Section 5.5(b)(2), any damages that either Party
is or the Parties are ordered to pay to a Third Party in connection with an
action pursuant to Section 5.5(b) shall be borne equally by the Parties.

     (e)  Recoveries.  Any recoveries on an action pursuant to Section 5.5(b)
shall go first to reimburse the expenses of the Parties in connection with such
action and next [______________].




Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       36


                                  Article VI
                                  ----------
                                Confidentiality
                                ---------------

     Section 6.1  Confidential Information.
                  ------------------------

All Confidential Information disclosed by a Party to the other Party during the
term of this Agreement shall not be used by the receiving Party or its Affiliate
except in connection with the activities contemplated by this Agreement, shall
be maintained in confidence by the receiving Party and its Affiliates (except to
the extent reasonably necessary for regulatory approval of Metabolic Program
Drugs developed by Bayer or CuraGen or any of their respective Affiliates or for
the filing, prosecution and maintenance of Patent Rights), and shall not
otherwise be disclosed by the receiving Party and its Affiliates to any other
person, firm, or agency, governmental or private, without the prior written
consent of the disclosing Party, except to the extent that the Confidential
Information (as determined by competent documentation):

     (a)  was known or used by the receiving Party or an Affiliate prior to its
date of disclosure to the receiving Party; or

     (b)  either before or after the date of the disclosure to the receiving
Party or an Affiliate is lawfully disclosed to the receiving Party or an
Affiliate by sources other than the disclosing Party rightfully in possession of
the Confidential Information; or

     (c)  either before or after the date of the disclosure to the receiving
Party or an Affiliate becomes published or generally known to the public
(including information known to the public through the sale of products in the
ordinary course of business) through no fault or omission on the part of the
receiving Party, an Affiliate or its Sublicensee; or

     (d)  is independently developed by or for the receiving Party or an
Affiliate without reference to or reliance upon the Confidential Information; or

     (e)  is required to be disclosed by the receiving Party or an Affiliate to
comply with applicable laws, by governmental or judicial order, to defend or
prosecute litigation or to comply with governmental regulations; provided,
however that the receiving Party or the Affiliate provides prior written notice
of such disclosure to the disclosing Party and takes reasonable and lawful
actions to avoid and/or minimize the degree of such disclosure.

     Section 6.2  Employee and Advisor Obligations.
                  --------------------------------

Bayer and CuraGen each agree that they shall provide Confidential Information
received from the other Party only to, their respective employees, consultants
and advisors, and to the employees, consultants and advisors of such Party's
Affiliates, who have a need to know and have an obligation to treat such
information and materials as confidential.  Each employee of Bayer, CuraGen or
their respective Affiliates who participates in the Metabolic Program shall be
(1) required to acknowledge in writing that the provisions of this Article VI
shall be binding upon such employee or (2) as a condition to employment shall
have agreed to treat all information as confidential.




Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       37


     Section 6.3  Term.
                  ----
All obligations of confidentiality imposed under this Article VI shall expire
five (5) years following the Term of this Agreement.

     Section 6.4  Publications.
                  ------------

The Parties acknowledge that scientific lead time is a key element of the value
of the Metabolic Program and further agree that scientific publications must be
strictly monitored to prevent any adverse effect of the premature publication of
results of the Metabolic Program.  Therefore, the Parties agree that each Party
must consent to the publication of any results of the Metabolic Program and may
withhold such consent at its sole discretion.

                                  Article VII
                                  -----------
                        Representations and Warranties
                        ------------------------------

     Section 7.1  Due Organization.
                  ----------------

Bayer and CuraGen each represents and warrants to the other that it (i) is a
company duly organized, validly existing, and in good standing under the laws of
the States of Indiana and Delaware, respectively; (ii) is duly qualified as a
corporation and in good standing under the laws of each jurisdiction where its
ownership or lease of property or the conduct of its business requires such
qualification, where the failure to be so qualified would have a material
adverse effect on its financial condition or its ability to perform its
obligations hereunder; (iii) has the requisite corporate power and authority and
the legal right to conduct its business as now conducted and hereafter
contemplated to be conducted; (iv) has all necessary licenses, permits,
consents, or approvals from or by, and has made all necessary notices to, all
governmental authorities having jurisdiction, to the extent required for such
ownership and operation; and (v) is in compliance with its certificate of
incorporation and by-laws.

     Section 7.2  Consents.
                  --------

Bayer and CuraGen each represents and warrants to the other that all necessary
consents, approvals and authorizations of all government authorities and other
persons required to be obtained by such Party in connection with the execution,
delivery and performance of this Agreement have been and shall be obtained,
except with respect to approvals required under the HSR Act.

     Section 7.3    Execution, Delivery and Performance.
                    -----------------------------------

Bayer and CuraGen each represents and warrants to the other that the execution,
delivery and performance of this Agreement by such Party and all instruments and
documents to be delivered by such Party hereunder (i) are within the corporate
power of such Party; (ii) have been duly authorized by all necessary or proper
corporate action; (iii) do not conflict with any provision of the certificate of
incorporation or by-laws of such Party; (iv) will not violate any law or
regulation or any order or decree of any court of governmental instrumentality;
(v) will not




Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       38


violate any terms of any indenture, mortgage, deed of trust, lease, agreement,
or other instrument to which such Party is a party or by which such Party or any
of its property is bound, which violation would have a material adverse effect
on its financial condition or on its ability to perform its obligations
hereunder; and (vi) do not require any filing or registration with or the
consent or approval of any governmental body, agency, authority or any other
Person, which has not been made or obtained previously, other than to the U.S.
Department of Justice with respect to the HSR Act, to the FDA.

     Section 7.4  Legal, Valid and Binding Obligation.
                  -----------------------------------

Bayer and CuraGen each represents and warrants to the other that this Agreement
has been duly executed and delivered by such Party and constitutes a legal,
valid and binding obligation of such Party, enforceable against such Party in
accordance with its terms, except as such enforceability may be limited by
applicable insolvency and other laws affecting creditors' rights generally or by
the availability of equitable remedies.

     Section 7.5  No Conflict.
                  -----------

Bayer and CuraGen each represents and warrants to the other that notwithstanding
anything to the contrary in this Agreement, the execution and delivery of this
Agreement, the performance of such Party's obligations hereunder and the conduct
of the Metabolic Program (a) do not conflict with or violate any requirement of
applicable laws or regulations and (b) do not and will not conflict with,
violate or breach or constitute a default or require any consent under, any
contractual obligations of such Party, except such consents as shall have been
obtained prior to the Effective Date.

     Section 7.6  Employee Obligations.
                  --------------------

Bayer and CuraGen each represents and warrants to the other that all of its
employees, officers, and consultants have executed agreements or have existing
obligations under law requiring, in the case of employees and officers,
assignment to such Party of all inventions made during the course of and as the
result of their association with such Party and obligating the individual to
maintain as confidential such Party's Confidential Information as well as
confidential information of a Third Party which such Party may receive, to the
extent required to support such Party's obligations under this Agreement.

     Section 7.7    CuraGen Intellectual Property.
                    -----------------------------

CuraGen represents and warrants to Bayer as follows:

     (a)  Ownership of CuraGen Patent Rights and CuraGen Know-How.

CuraGen owns the entire right, title and interest in or otherwise has the right
to use or license in accordance with the terms of this Agreement the CuraGen
Patent Rights and the CuraGen Know-How, and to CuraGen's Knowledge, no Third
Party (including any government) has any license, claim or other right or
interest in or to the CuraGen Patent Rights or the CuraGen Know-How.




Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       39


To CuraGen's Knowledge, the CuraGen Patent Rights and the CuraGen Know-How may
be exclusively licensed and sublicensed as hereunder provided, in the case of
the CuraGen Patent Rights and CuraGen Know-How without payment of any royalty,
fee or incurring any other obligation to any Third Party (except with respect to
any statutory march-in rights). To CuraGen's Knowledge, the conduct by CuraGen
of the Metabolic Program in accordance with the Research Plan does not and will
not infringe or conflict with the rights of any Third Party in respect of Know-
How or issued patents or published patent applications owned by such Third
Party.

     (b)  Validity and Enforceability of Patents.

The issued patents included in the CuraGen Patent Rights are valid and
enforceable to CuraGen's Knowledge.

     (c)  Investigation of Prior Art.


CuraGen has made all reasonable inquiries and has diligently conducted a
reasonably complete and thorough due diligence review and investigation of Third
Party intellectual property rights and prior art as part of CuraGen's
preparation and prosecution of the CuraGen Patent Rights, and has reviewed all
relevant information and prior art obtained or derived from such due diligence
review and investigation.  CuraGen has disclosed all material prior art of which
it has Knowledge and other material information obtained or derived from such
due diligence review and investigation to Bayer as of the date hereof, in each
case to the full extent requested by Bayer.

     (d)  No Infringement of CuraGen Intellectual Property.

CuraGen has no Knowledge of any infringement of the CuraGen Patent Rights, or
any misappropriation of the CuraGen Know-How by any Third Party.

     (e)  Work-For-Hire.

To CuraGen's Knowledge, all of the research and development work performed in
connection with any of the CuraGen Know-How prior to the Effective Date was
performed solely under an obligation to assign to CuraGen or one of its
Affiliates, and was performed in accordance with applicable law and in
compliance with all applicable regulatory requirements, and all such rights have
been properly assigned to CuraGen, including any and all rights of CuraGen's
employees and the employees of CuraGen's Affiliates.

     (f)  No Claims or Suits Regarding CuraGen Intellectual Property.

There are no judicial, arbitral, regulatory or administrative proceedings or
investigations, claims, actions or suits relating to the CuraGen Patent Rights
or the CuraGen Know-How in any court or by or before any governmental body or
agency, including product liability or compliance with good manufacturing
practices or state or federal food and drug laws and, to CuraGen's



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       40


Knowledge, no such judicial, arbitral, regulatory or administrative proceedings
or investigations, actions or suits have been threatened against CuraGen or its
Affiliates.

     Section 7.8    Bayer Intellectual Property.
                    ---------------------------

Bayer represents and warrants to CuraGen as follows:

     (a)  Ownership of Patent Rights and Bayer Know-How.

Bayer owns the entire right, title and interest in or otherwise has the right to
use or license in accordance with the terms of this Agreement the Bayer Patent
Rights and the Bayer Know-How, and to Bayer's Knowledge, no Third Party
(including any government) has any license, claim or other right or interest in
or to the Bayer Patent Rights or the Bayer Know-How.  To Bayer's Knowledge, the
Bayer Patent Rights and the Bayer Know-How may be exclusively licensed as
hereunder provided, in the case of the Bayer Patent Rights and Bayer Know-How
without payment of any royalty, fee or incurring any other obligation to any
Third Party (except with respect to any statutory march-in rights).  To Bayer's
Knowledge, the conduct by Bayer of the Metabolic Program in accordance with the
Research Plan does not and will not infringe or conflict with the rights of any
Third Party in respect of Know-How or issued patents or published patent
applications owned by such Third Party.

     (b)  Validity and Enforceability of Patents.

The issued patents included in the Bayer Patent Rights are valid and enforceable
to Bayer's Knowledge.

     (c)  Investigation of Prior Art.

Bayer has made all reasonable inquiries and has diligently conducted a
reasonably complete and thorough due diligence review and investigation of Third
Party intellectual property rights and prior art as part of Bayer's preparation
and prosecution of the Bayer Patent Rights, and has reviewed all relevant
information and prior art obtained or derived from such due diligence review and
investigation.  Bayer has disclosed all material prior art of which it has
Knowledge and other material information obtained or derived from such due
diligence review and investigation to CuraGen as of the date hereof, in each
case to the full extent requested by CuraGen.

     (d)  No Infringement of Bayer Intellectual Property.

Bayer has no Knowledge of any infringement of the Bayer Patent Rights, or any
misappropriation of the Bayer Know-How by any Third Party.

     (e)  Work-For-Hire.

To Bayer's Knowledge, all of the research and development work performed in
connection with any of the Bayer Know-How prior to the Effective Date was
performed solely under an




Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       41


obligation to assign to Bayer or one of its Affiliates, and was performed in
accordance with applicable law and in compliance with all applicable regulatory
requirements, and all such rights have been properly assigned to Bayer,
including any and all rights of Bayer's employees and the employees of Bayer's
Affiliates.

     (f)  No Claims or Suits Regarding Bayer Intellectual Property.

There are no judicial, arbitral, regulatory or administrative proceedings or
investigations, claims, actions or suits relating to the Bayer Patent Rights or
the Bayer Know-How in any court or by or before any governmental body or agency,
including product liability or compliance with good manufacturing practices or
state or federal food and drug laws and, to Bayer's Knowledge, no such judicial,
arbitral, regulatory or administrative proceedings or investigations, actions or
suits have been threatened against Bayer or its Affiliates.

     Section 7.9  Contracts.
                  ---------

CuraGen represents and warrants to Bayer that it is not a party to any contract
that, if terminated, would materially adversely affect CuraGen's ability to
conduct the Metabolic Program in accordance with the Research Plan.

     Section 7.10  No Material Admissions.
                   ----------------------

Each of Bayer and CuraGen represents and warrants to the other that such Party
has not, up through and including the Effective Date, omitted to furnish to the
other Party with any information in its control or possession or of which it has
Knowledge concerning (a) its Patent Rights, (b) its Know-How, or (c) the
activities contemplated by this Agreement, which in such Party's opinion would
be material to the other Party's decision to enter into this Agreement and to
undertake the commitments and obligations set forth herein.

     Section 7.11  No Warranties.
                   -------------

EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN, THE PHARMACOGENOMICS AGREEMENT
OR IN THE STOCK PURCHASE AGREEMENT, THE PARTIES MAKE NO REPRESENTATIONS AND
EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, AND PARTICULARLY
(1) THAT PRODUCTS WILL BE SUCCESSFULLY DEVELOPED HEREUNDER, AND IF DEVELOPED,
WILL HAVE COMMERCIAL UTILITY OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE AND (2) AS TO ANY BIOLOGICAL MATERIALS PROVIDED UNDER THIS AGREEMENT.

     Section 7.12  Survival.
                   --------
The representations and warranties set forth in this Agreement are made as of
the date hereof and as of the Effective Date and shall survive the Effective
Date.




Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       42


                                 Article VIII
                                 ------------
                                   Covenants
                                   ---------

     Section 8.1    No New Restrictions - CuraGen.
                    -----------------------------

CuraGen agrees that, from and after the Execution Date, it shall not enter into
any agreements, or transfer Know-How or any other assets to any of its
Affiliates, that would, in either case, restrict or limit its or Bayer's rights
or ability to conduct the Metabolic Program, as contemplated in the Research
Plan as of the Effective Date.

     Section 8.2    Exclusivity - CuraGen.
                    ---------------------

During the Screening Term, CuraGen shall not engage in a program with a Third
Party wherein it supplies, or assists any Third Party in supplying, Qualified
Targets to such Third Party, except with respect to Qualified Targets for which
CuraGen receives rights to develop under Section 3.7, in which case Bayer shall
have a Right of First Negotiation with respect to development of such Qualified
Target.

     Section 8.3    No Restrictions on Screening - Bayer.
                    ------------------------------------

During the Screening Term, Bayer agrees that Bayer shall not enter into an
agreement that would restrict or limit Bayer ability to screen [_______]
Qualified Targets each [___________].

     Section 8.4    Partnership for U.S. Federal Income Tax Purpose.
                    -----------------------------------------------

The Parties agree and intend that the Metabolic Program shall be treated as a
partnership for U.S. federal income tax purpose.  For that purpose, the Parties
agree to negotiate in good faith and to use commercially reasonable efforts to
enter into a mutually agreeable partnership agreement with respect to the
Metabolic Program on or prior to the Effective Date.  This partnership
agreement, which shall include without limitation, provisions on the allocation
of partnership income, gain, loss, deduction or credit between the Parties,
shall be substantially identical to the economic terms and tax implications
contained in and resulting from this Agreement, with such changes as may be
necessary or desirable to reflect a partnership for tax purposes rather than a
contractual alliance.  The Parties may agree to organize a separate state-law
entity for the partnership.

                                  Article IX
                                  ----------
                             Term and Termination
                             --------------------

     Section 9.1  Term of the Agreement.
                  ---------------------

The Metabolic Program shall commence on the Effective Date and shall end at such
time as no Compounds are in the Pre-Clinical Development Phase and Clinical
Development Phase and there are no Metabolic Program Drugs generating Royalty
Payments or Operating Income, unless the Agreement is terminated earlier (y) by
Bayer or CuraGen pursuant to Section 9.2 or Section 9.3 or (z) pursuant to
Section 9.4 (the "Term").



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       43


     Section 9.2  Termination For Material Breach.
                  -------------------------------

Upon any material breach of this Agreement by either Party (in such capacity,
the "Breaching Party"), the other Party (in such capacity, the "Non-Breaching
Party") may terminate this Agreement by providing [____________] written notice
to the Breaching Party, specifying the material breach.  The termination shall
become effective at the end of the [____________] period unless (a) the
Breaching Party cures such breach during such  [____________] period, or (b) if
such breach is not susceptible to cure within [____________] of the receipt of
written notice of the breach, the Breaching Party is diligently pursuing a cure
(unless such breach, by its nature, is incurable, in which case the Agreement
may be terminated immediately).  The Parties shall use reasonable efforts to
work together to cure any breach.  In the event of a dispute concerning whether
a material breach has occurred, such dispute shall be resolved in accordance
with the provisions of Article X, and the [_________] cure period specified
above shall be suspended during the period commencing upon the submission of
such dispute for resolution under Section 10.1 to the Executive Officers and
continuing until the resolution of such dispute under Section 10.1.  Without
limiting the generality of the foregoing, material failure by CuraGen or Bayer
to maintain and make available adequate technical resources and personnel to
perform its obligations under the Metabolic Program in accordance with the
Research Plan shall be considered to be a material breach of this Agreement.

     Section 9.3  Termination Upon Change of Control.
                  ----------------------------------

If a Change of Control with respect to CuraGen occurs, Bayer may, at its sole
discretion, elect to terminate this Agreement by giving CuraGen written notice
within [____________] after such Change of Control, such termination to be
effective [____________] after provision of written notice of termination.  If a
Change of Control with respect to Bayer occurs, CuraGen may, at its sole
discretion, elect to end the Screening Term by giving Bayer written notice
within [____________] after such Change of Control, such termination to be
effective upon Bayer's receipt of the written notice of termination; provided,
however, that notwithstanding the end of the Screening Term, the Metabolic
Program shall continue with respect to any QTs which have been screened.

     Section 9.4  No Effectiveness Upon HSR Denial or Termination of Stock
                  --------------------------------------------------------
Purchase Agreement.
- --------- --------

The Agreement shall not become effective (and accordingly shall immediately
terminate) in the event that (a) the FTC and/or the DOJ shall seek a preliminary
injunction under the HSR Act against CuraGen and Bayer to enjoin the transaction
contemplated by this Agreement and Bayer elects not to contest the FTC and/or
DOJ; (b) the HSR Clearance Date shall not have occurred on or prior to June 30,
2001; or (c) the Stock Purchase Agreement shall be terminated in accordance with
Section 7.1 of the Stock Purchase Agreement.



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       44


     Section 9.5  Effect of Termination.
                  ---------------------
     (a)  General.  In the event that this Agreement is terminated by either
Party pursuant to Section 9.1, (i) the licenses set forth in Section 3.1 and
Section 3.2 shall, except as provided below, survive such termination, subject
to continued compliance with obligations related to such licenses, such as the
royalty, operating income sharing and reporting provisions of Article IV and co-
promotion rights of Section 3.5; and (ii) all obligations under Article IV
accrued or owed as of the effective date of such termination shall remain
effective and shall be paid promptly, except as set forth in the subsections
below.

     (b)  Effect of Termination For Material Breach (Section 9.2).

          (i)  If this Agreement is terminated under Section 9.2 and CuraGen is
               the Breaching Party, the licenses granted by Bayer to CuraGen and
               its Affiliates under Section 3.2(a) and under Section 3.2(b)
               (other than with respect to Development Compounds which reverted
               to CuraGen pursuant to Section 3.7(d)) shall terminate as of the
               effective date of such termination, and all sublicenses granted
               by CuraGen or its Affiliates pursuant to Section 3.2(c) (other
               than with respect to Development Compounds which reverted to
               CuraGen pursuant to Section 3.7(d)) shall also terminate as of
               such date. If the termination under Section 9.2 occurs because
               CuraGen fails to pay the Development Costs which it owes for a
               Development Compound, CuraGen shall only receive Royalty Payments
               and not a share of the Operating Income for any Metabolic Program
               Drug developed from such Development Compound.

          (ii) If this Agreement is terminated under Section 9.2 and Bayer is
               the Breaching Party, the license granted by CuraGen to Bayer and
               its Affiliates under Section 3.1(a)(i) with respect to those QTs
               from which a Compound, Development Compound or Metabolic Program
               Drug have not been identified shall terminate as of the effective
               date of such termination and all sublicenses granted by Bayer or
               its Affiliates pursuant to Section 3.1(b) which relate to those
               licenses under Section 3.1(a)(i) with respect to those QTs from
               which a Compound, Development Compound or Metabolic Program Drug
               have not been identified shall also terminate as of such date.

     (c)  Effect of Termination Upon Change in Control (Section 9.3).  If this
Agreement is terminated under Section 9.3 by Bayer, Bayer may, at its election,
[__________________________________________________________________________ __].

     (d)  Effect of Termination Upon HSR Denial or Termination of Stock Purchase
Agreement (Section 9.4). Notwithstanding anything to the contrary in this
Agreement, in the event that this Agreement is terminated pursuant to Section
9.4, the licenses set forth in Section 3.1 and Section 3.2 shall automatically
terminate.



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       45


     Section 9.6  Survival.
                  --------

Upon expiration or termination of this Agreement for any reason, nothing in this
Agreement shall be construed to release either Party from any obligations that
matured prior to the effective date of expiration or termination; and the
following provisions shall expressly survive any such expiration or termination:
Article I, Section 3.1 (except as provided in Section 9.5), Section 3.2 (except
as provided in Section 9.5), Article IV, Article V, Article VI, Article VII,
Article VIII, Article IX, Article X and Article XI.

                                   Article X
                                   ---------
                              Dispute Resolution
                              ------------------

     Section 10.1  General.
                   -------

Unless otherwise provided for in this Agreement, any controversy, claim or
dispute arising out of or relating to this Agreement shall be settled, if
possible, through good faith negotiations between the Parties.  If, however, the
Parties are unable to settle such dispute after good faith negotiations, the
matter shall be referred to the Executive Officers to be resolved by negotiation
in good faith as soon as is practicable but in no event later than [___________]
after referral.

     Section 10.2  Independent Experts.
                   -------------------

Each Executive Officer shall have the right to engage the services of any number
of independent experts in the field in question (each individual so engaged by
each Executive Officer to be reasonably acceptable to the other Executive
Officer in terms of independence and expertise and to be engaged under
obligations of confidentiality) to assist the Executive Officers in making a
joint determination in the best interests of the collaboration, and each
Executive Officer shall be obligated to consider in good faith the analyses and
opinions of any such independent experts engaged by either of them in making a
determination.

     Section 10.3  SUBMISSION TO JURISDICTION; SELECTION OF A FORUM; WAIVER OF
                   ----------------------------------------------------------
TRIAL BY JURY.
- -------------

IF THE EXECUTIVE OFFICERS ARE UNABLE TO SETTLE THE DISPUTE AFTER GOOD FAITH
NEGOTIATION IN THE MANNER SET FORTH IN Section 2.4(f) WITHIN [____________] OF
REFERRAL OF THE DISPUTE TO THE EXECUTIVE OFFICERS, THEN EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT IT SHALL BRING ANY
ACTION OR PROCEEDING IN RESPECT OF ANY CLAIM ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR THE TRANSACTIONS CONTAINED IN OR CONTEMPLATED BY THIS AGREEMENT
(NOT INCLUDING A DESIGNATED SCIENTIFIC ISSUE), WHETHER IN TORT OR CONTRACT OR AT
LAW OR IN EQUITY, EXCLUSIVELY IN COURTS OF THE STATE OF DELAWARE AND OF THE
UNITED STATES IN DELAWARE (THE "CHOSEN COURTS") AND (A) IRREVOCABLY SUBMITS TO
THE EXCLUSIVE JURISDICTION OF THE CHOSEN COURTS, (B) WAIVES ANY OBJECTION TO
LAYING OF VENUE IN ANY SUCH ACTION OR PROCEEDING IN THE CHOSEN



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       46


COURTS, (C) WAIVES ANY OBJECTION THAT THE CHOSEN COURTS ARE AN INCONVENIENT
FORUM OR DO NOT HAVE JURISDICTION OVER ANY PARTY HERETO, (D) AGREES THAT SERVICE
OF PROCESS UPON SUCH PARTY IN ANY SUCH ACTION OR PROCEEDING SHALL BE EFFECTIVE
IF NOTICE IS GIVEN IN ACCORDANCE WITH THIS AGREEMENT AND (E) WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY SUCH ACTION
OR PROCEEDING. CURAGEN IRREVOCABLY DESIGNATES MINTZ, LEVIN, COHN, FERRIS,
GLOVSKY AND POPEO, P.C., BOSTON, MASSACHUSETTS, ATTENTION: JEFFREY M. WIESEN AS
ITS AGENT AND ATTORNEY-IN-FACT FOR THE ACCEPTANCE OF SERVICE OF PROCESS AND
MAKING AN APPEARANCE ON ITS BEHALF IN ANY SUCH CLAIM OR PROCEEDING AND TAKING
ALL SUCH ACTS AS MAY BE NECESSARY OR APPROPRIATE IN ORDER TO CONFER JURISDICTION
OVER IT UPON THE CHOSEN COURTS AND CURAGEN STIPULATES THAT SUCH CONSENT AND
APPOINTMENT IS IRREVOCABLE AND COUPLED WITH AN INTEREST. BAYER IRREVOCABLY
DESIGNATES WILMER, CUTLER AND PICKERING, WASHINGTON, D.C., ATTENTION: RICHARD W.
CASS AS ITS AGENT AND ATTORNEY-IN-FACT FOR THE ACCEPTANCE OF SERVICE OF PROCESS
IN MAKING AN APPEARANCE ON ITS BEHALF IN ANY SUCH CLAIM OR PROCEEDING AND TAKING
ALL SUCH ACTS AS MAY BE NECESSARY OR APPROPRIATE IN ORDER TO CONFER SUCH
JURISDICTION OVER IT UPON THE CHOSEN COURTS AND BAYER STIPULATES THAT SUCH
CONSENT AND APPOINTMENT IS IRREVOCABLE AND COUPLED WITH AN INTEREST.

     Section 10.4  Limitations of Remedies; Remedies Cumulative.
                   ---------------------------------------------
     (a)  Neither Party hereto shall be liable to the other for consequential or
punitive damages claimed by such other Party resulting from such first Party's
breach of its obligations, agreements, representations or warranties hereunder;
provided, however that nothing in this Section 10.4 shall preclude any recovery
by an indemnified Party against an indemnifying Party for Third Party claims or
for fraud or willful misconduct.

     (b)  Any remedies in this Agreement shall be cumulative to any other
remedies which a Party may have.

     Section 10.5  Specific Performance.
                   ---------------------

Each of the Parties hereto acknowledges and agrees that the other Party will be
damaged irreparably if any of the provisions of this Agreement are not performed
in accordance with their specific terms or otherwise are breached.  Accordingly,
each of the Parties agrees that the other Party shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in the manner set forth in Section 10.3, in addition to any
other remedy to which it may be entitled, in law or in equity.  Each Party's
right to seek specific performance shall be in addition to, and not in lieu of,
any other rights and remedies that may be available hereunder or otherwise.



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       47


                                  Article XI
                                  ----------
                           Miscellaneous Provisions
                           ------------------------

     Section 11.1  Product Liability Indemnification.
                   ---------------------------------
     (a)  Bayer.  Bayer agrees to defend CuraGen and its Affiliates at its cost
and expense, and will indemnify and hold CuraGen and its Affiliates and their
respective directors, officers, employees and agents (the "CuraGen Indemnified
Parties") harmless from and against any losses, costs, damages, fees or expenses
arising out of any claim relating to (i) any breach by Bayer of any of its
representations, warranties or obligations pursuant to this Agreement or (ii)
personal, injury from the development, manufacture, use, sale or other
disposition of any product or service offered by Bayer and/or its licensees or
collaborators. In the event of any such claim against the CuraGen Indemnified
Parties by any Third Party, CuraGen shall promptly notify Bayer in writing of
the claim and Bayer shall manage and control, at its sole expense, the defense
of the claim and its settlement. The CuraGen Indemnified Parties shall cooperate
with Bayer and may, at their option and expense, be represented in any such
action or proceeding. Bayer shall not be liable for any litigation costs or
expenses incurred by the CuraGen Indemnified Parties without Bayer's prior
written authorization. In addition, Bayer shall, not be responsible for the
indemnification of any CuraGen Indemnified Party arising from any negligent or
intentional acts by such party, or as the result of any settlement or compromise
by the CuraGen Indemnified Parties without Bayer's prior written consent.

     (b)  CuraGen.  CuraGen agrees to defend Bayer and its Affiliates at its
cost, and will indemnify and hold Bayer and its Affiliates and its respective
directors, officers, employees and agents (the "Bayer Indemnified Parties")
harmless from and against any losses, costs, damages, fees or expenses arising
out of any claim relating to (i) any breach by CuraGen of any of its
representations, warranties or obligations pursuant to this Agreement or (ii)
personal injury from the development, manufacture, use, sale or other
disposition of any product or service offered by CuraGen or its licensees or
collaborators. In the event of any claim against the Bayer Indemnified Parties
by, any Third Party, Bayer shall promptly notify CuraGen in writing of the claim
and CuraGen shall manage and control, at its sole expense, the defense of the
claim and its settlement. The Bayer Indemnified Parties shall cooperate with
CuraGen and may, at their option and expense, be represented in any such action
or proceeding. CuraGen shall not be liable for any litigation costs or expenses
incurred, by the Bayer Indemnified Parties without CuraGen's prior written
authorization. In addition, CuraGen shall not be responsible for the
indemnification of any Bayer Indemnified Party arising from any negligent or
intentional acts by such party, or as the result of any settlement or compromise
by the Bayer Indemnified Parties without CuraGen's prior written consent.

     Section 11.2  Section 365(n) of the Bankruptcy Code.
                   -------------------------------------

All rights and licenses granted under or pursuant to any section of this
Agreement are, and shall otherwise be, deemed to be, for purposes of Section
365(n) of the Bankruptcy Code, licenses of rights to "intellectual property" as
defined under Section 101(35A) of the Bankruptcy Code.  The Parties shall retain
and may fully exercise all of their respective rights and elections under the




Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       48


Bankruptcy Code.  Upon the bankruptcy of any Party, the non-bankrupt Party shall
further be entitled to a complete duplicate of (or complete access to, as
appropriate) any such intellectual property, and such, if not already in its or
their possession, shall be promptly delivered to the non-bankrupt Party, unless
the bankrupt Party elects to continue, and continues, to perform all of its
obligations under this Agreement.

     Section 11.3  Governing Law.
                   -------------

This Agreement shall be construed and the respective rights of the Parties
hereto determined according to the substantive laws of the State of Delaware
notwithstanding the provisions governing conflict of laws under such Delaware
law to the contrary and without giving effect to the United Nations Convention
on Contracts for the International Sale of Goods, the 1974 Convention on the
Limitation Period in the International Sale of Goods (the "1974 Convention") and
the Protocol amending the 1974 Convention, done at Vienna April 11, 1980, except
matters of intellectual property law which shall be determined in accordance
with the national intellectual property laws relevant to the intellectual
property in question.

     Section 11.4  Assignment.
                   ----------

Neither CuraGen nor Bayer may assign this Agreement in whole or in part without
the consent of the other, except if such assignment occurs in connection with
the sale or transfer of all or substantially all of the business and assets of
CuraGen, on the one hand, or Bayer, on the other, to which the subject matter of
this Agreement pertains.  Notwithstanding the foregoing, any Party may assign
its rights (but not its obligations) pursuant to this Agreement in whole or in
part to an Affiliate of such Party.

     Section 11.5  Amendments.
                   ----------

This Agreement constitutes the entire agreement between the Parties with respect
to the subject matter hereof, and supersedes an previous arrangements with
respect to the subject matter hereof, whether written or oral.  Any amendment or
modification to this Agreement shall be made in writing signed by both Parties.

     Section 11.6  Notices.
              -------
     Notices to CuraGen shall be addressed to:

          CuraGen Corporation
          555 Long Wharf Drive, 11th floor
          New Haven, Connecticut  06511
          Attention:  Executive Vice President, Business Development
          Facsimile No.:  (203) 401-3333

     with a copy to:

          Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
          One Financial Center
          Boston, Massachusetts 02111
          Attention:  Jeffrey M. Wiesen, Esq.
          Facsimile No.:  (617) 542-2241




Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       49


     Notices to Bayer shall be addressed to:

          Bayer Corporation
          400 Morgan Lane
          West Haven, Connecticut  06516-4175
          Attention:  Legal Department
          Facsimile No.:  (203) 812-2795

     with a copy to:

          Wilmer, Cutler & Pickering
          2445 M Street, NW
          Washington, DC 20037
          Attention:  Richard Cass, Esq.
          Facsimile No.:  (202) 663-6363

     Any Party may change its address by giving notice to the other Party in the
manner herein provided.  Any notice required or provided for by the terms of
this Agreement shall be in writing and shall be (a) sent by registered or
certified mail, return receipt requested, postage prepaid, (b) sent via a
reputable overnight courier service, or (c) sent by facsimile transmission, in
each case properly addressed in accordance with the paragraph above.  The
effective date of notice shall be the actual date of receipt by the Party
receiving the same.

     Section 11.7  Exports.
                   -------

The Parties acknowledge that the export of technical data, materials or products
is subject to the exporting Party receiving any necessary export licenses and
that the Parties cannot be responsible for any delays attributable to export
controls that are beyond the reasonable control of either Party.  Bayer and
CuraGen agree not to export or reexport, directly or indirectly, any
information, technical data, the direct product of such data, samples or
equipment received or generated under this Agreement in violation of any
governmental regulations that may be applicable.  Bayer and CuraGen agree to
obtain similar covenants from their Affiliates, Sublicensees and contractors
with respect to the subject matter of this Section 11.7.

     Section 11.8  Force Majeure.
                   -------------

No failure or omission by the Parties hereto in the performance of any
obligation of this Agreement shall be deemed a breach of this Agreement or
create any liability if the same shall arise from any cause or causes beyond the
control of the Parties, including, but not limited to, the following: acts of
God; acts or omissions of any government; any rules, regulations or orders
issued by any governmental authority or by any officer, department, agency or
instrumentality



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       50


thereof; fire; storm; flood; earthquake; accident; war; rebellion; insurrection;
riot; and invasion and provided that such failure or omission resulting from one
of the above causes is cured as soon as is practicable after the occurrence of
one or more of the above-mentioned causes.

     Section 11.9  Public Announcements.
                   --------------------

Any announcements or similar publicity with respect to the execution of this
Agreement shall be agreed upon between the Parties in advance of such
announcement.  Each Party understands that this Agreement is likely to be of
significant interest to investors, analysts and others, and that either Party
therefore may make such public announcements with respect thereto.  The Parties
agree that any such announcement will not contain confidential business or
technical information and, if disclosure of confidential business or technical
information is required by law or regulation, will make reasonable efforts to
minimize such disclosure and obtain confidential treatment for any such
information which is disclosed to a governmental agency or group.  Each Party
agrees to provide to the other Party with a copy of any public announcement as
soon as reasonably practicable under the circumstances prior to its scheduled
release.  Except under extraordinary circumstances, each Party shall provide the
other with an advance copy of any press release at least five (5) business days
prior to the scheduled disclosure.  Each Party shall have the right to
expeditiously review and recommend changes to any announcement regarding this
Agreement or the subject matter of this Agreement; provided, however that such
right of review and recommendation shall only apply for the first time that
specific information is to be disclosed, and shall not apply to the subsequent
disclosure of substantially similar information that has previously been
disclosed.  Except as otherwise required by law, the Party whose press release
has been reviewed shall remove any information the reviewing Party reasonably
deems to be inappropriate for disclosure.

     Section 11.10  Independent Contractors.
                    -----------------------

It is understood and agreed that the relationship between the Parties hereunder
is that of independent contractors and that nothing in this Agreement shall be
construed as authorization for either CuraGen or Bayer to act as agent for the
other.  Notwithstanding Section 8.4, nothing in this Agreement shall be deemed
to constitute a partnership or joint venture between the Parties.  The Program
Directors and members of Metabolic Program Project Teams shall remain employees
of Bayer or CuraGen, as the case may be.

     Section 11.11  No Strict Construction.
                    ----------------------

This Agreement has been prepared jointly and shall not be strictly construed
against either Party.

     Section 11.12  Headings.
                    --------

The captions or headings of the sections or other subdivisions hereof are
inserted only as a matter of convenience or for reference and shall have so
effect on the meaning of the provisions hereof.



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       51


     Section 11.13  No Implied Waivers; Rights Cumulative.
                    ----------------------------------------

No failure on the part of CuraGen or Bayer to exercise, and no delay in
exercising, any right, power, remedy or privilege under this Agreement, or
provided by statute or at law or in equity or otherwise, shall impair, prejudice
or constitute a waiver of any such right, power, remedy or privilege or be
construed as a waiver of any breach of this Agreement or as an acquiescence
therein, nor shall any single or partial exercise of any such right, power,
remedy or privilege preclude any other or further exercise thereof or the
exercise of any other right, power, remedy or privilege.

     Section 11.14  Severability.
                    ------------

If any provision hereof should be held invalid, illegal or unenforceable in any
respect in any jurisdiction, then, to the fullest extent permitted by law, (a)
all other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in order to carry out the
intentions of the Parties as nearly as may be possible and (b) such invalidity,
illegality or unenforceability shall not affect the validity, legality or
enforceability of such provision in any other jurisdiction.  To the extent
permitted by applicable law, CuraGen and Bayer hereby waive any provision of law
that would render any provision hereof prohibited or unenforceable in any
respect.

     Section 11.15  Execution in Counterparts.
                    -------------------------

This Agreement may be executed in, counterparts, each of which counterparts,
when so executed and delivered, shall be deemed to be an original, and all of
which counterparts, taken together, shall constitute one and the same
instrument.

     Section 11.16  HSR Filing.
                    ----------

As soon as practicable after the Execution Date, each of Bayer and CuraGen shall
promptly file any Notification and Report Forms and related materials that
either such Party may be required to file with the FTC and the DOJ under the HSR
Act, shall use its best efforts to obtain an early termination of the applicable
waiting period, and shall promptly make any further filings or information
submissions pursuant thereto, or responses to requests to additional information
thereunder, that may be necessary, proper or advisable.



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       52


     IN WITNESS WHEREOF, the Parties hereto have caused this Metabolic Disorder
Collaboration Agreement to be executed by their respective officers as of the
Execution Date.


BAYER CORPORATION


By:  /s/ John Amatruda
     -----------------
     Name:  John Amatruda
     Title:  Vice President, Research


CURAGEN CORPORATION


By:  /s/ Chris McLeod
     ----------------
     Name:  Chris McLeod
     Title:  Executive Vice President






Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       53

EX-10.25

                                                                  EXHIBIT 10.25

                                                                 EXECUTION COPY




                           PHARMACOGENOMICS AGREEMENT

                       BY AND BETWEEN CURAGEN CORPORATION

                                  AND BAYER AG

                                  DATED AS OF

                                JANUARY 12, 2001



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.


BAYER and CURAGEN Pharmacogenomics Project Agreement

                               TABLE OF CONTENTS

                                                                                                 
ARTICLE I - BACKGROUND............................................................................   1

ARTICLE II - DEFINITIONS..........................................................................   2
 2.00 - Terms.....................................................................................   2
 2.01 - Affiliate.................................................................................   2
 2.02 - BAYER Background Technology...............................................................   2
 2.03 - BAYER Compound............................................................................   3
 2.04 - BAYER Data................................................................................   3
 2.05 - BAYER Licensed Patent Rights..............................................................   3
 2.06 - BAYER Licensed Technology.................................................................   3
 2.07 - BAYER Facility............................................................................   3
 2.08 - BAYER Indemnified Parties.................................................................   3
 2.09 - BAYER Patent Rights.......................................................................   3
 2.10 - BAYER Product.............................................................................   3
 2.11 - BAYER Program Technology..................................................................   4
 2.12 - BAYER Proprietary Material................................................................   4
 2.13 - BAYER Response............................................................................   4
 2.14 - BAYER SNP Target..........................................................................   4
 2.15 - BAYER Target..............................................................................   4
 2.16 - BAYER Technology..........................................................................   4
 2.17 - Biological Materials......................................................................   5
 2.18 - Breaching Party...........................................................................   5
 2.19 - Change of Control.........................................................................   5
 2.20 - Competitive Entity........................................................................   5
 2.21 - Confidential Information..................................................................   5
 2.22 - CURAGEN Deliverables......................................................................   6
 2.23 - CURAGEN Diagnostic Product................................................................   6
 2.24 - CURAGEN Discovery Tools...................................................................   6
 2.25 - CURAGEN Discovery Tool Technology.........................................................   6
 2.26 - CURAGEN Discovery Tool Improvements.......................................................   7
 2.27 - CURAGEN Indemnified Parties...............................................................   7
 2.28 - CURAGEN Licensed Patent Rights............................................................   7
 2.29 - CURAGEN Licensed Technology...............................................................   7
 2.30 - CURAGEN Notice............................................................................   7
 2.31 - CURAGEN Patent Rights.....................................................................   7
 2.32 - CURAGEN Program Technology................................................................   7
 2.33 - CURAGEN Proprietary DBs...................................................................   8
 2.34 - CURAGEN Proprietary Material..............................................................   8
 2.35 - CURAGEN Screening Services................................................................   8
 2.35 - CURAGEN Services..........................................................................   8
 2.37 - CURAGEN Services Revenue..................................................................   8
 2.38 - CURAGEN Technology........................................................................   9
 2.39 - Designated Scientific Issue...............................................................   9
 2.40 - Diagnostic Products.......................................................................   9
 2.41 - DOJ.......................................................................................  10
 2.42 - Effective Date............................................................................  10
 2.43 - FTE.......................................................................................  10
 2.44 - HSR Act...................................................................................  10
 2.45 - HSR Clearance Date........................................................................  10



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      A-i


BAYER and CURAGEN Pharmacogenomics Project Agreement

                                                                                                 
 2.46 - HSR Filing................................................................................  10
 2.47 - Infringement..............................................................................  10
 2.48 - Knowledge.................................................................................  11
 2.49 - Marker Gene...............................................................................  11
 2.50 - Metabolic Disorder Collaboration Agreement................................................  11
 2.51 - Optimized Product.........................................................................  11
 2.52 - Party or Parties..........................................................................  11
 2.53 - Patent Rights.............................................................................  11
 2.54 - Pharmacogenomics Data.....................................................................  12
 2.55 - Pharmacogenomics Program..................................................................  12
 2.56 - Pharmacogenomics Program Term.............................................................  12
 2.57 - Pharmacogenomics Project Plan.............................................................  12
 2.58 - Predictive Toxicogenomics Technology......................................................  13
 2.59 - Production Phase..........................................................................  13
 2.60 - Production Phase Term.....................................................................  13
 2.61 - Program Diagnostic Product................................................................  13
 2.62 - Program Director..........................................................................  13
 2.63 - Program Funding...........................................................................  13
 2.64 - Project Teams.............................................................................  14
 2.65 - Proteomics Feasibility Study..............................................................  14
 2.66 - Proteomics Technology.....................................................................  14
 2.67 - Set-up Phase..............................................................................  14
 2.68 - Set-up Phase Term.........................................................................  14
 2.69 - Stock Purchase Agreement..................................................................  14
 2.70 - Technology................................................................................  15
 2.71 - Terminating Party.........................................................................  15
 2.72 - Third Party...............................................................................  15
 2.73 - Toxicogenomics Reference Data.............................................................  15
 2.74 - UNCITRAL..................................................................................  15

ARTICLE III - PHARMACOGENOMICS PROGRAM............................................................  16
 3.00 - Pharmacogenomics Program..................................................................  16
 3.01 - Collaborative Efforts and Reports.........................................................  21
 3.02 - Non-Exclusivity...........................................................................  22
 3.03 - Program...................................................................................  22
 3.04 - Executive Level Meeting...................................................................  23
 3.05 - Decisions.................................................................................  23
 3.06 - Expenses..................................................................................  24

ARTICLE IV - LICENSES; PROGRAM DIAGNOSTIC PRODUCTS AND CURAGEN DIAGNOSTIC PRODUCTS................  24
 4.00 - License to BAYER..........................................................................  24
 4.01 - Licenses and Rights to CURAGEN............................................................  24
 4.02 - CURAGEN Diagnostic Products...............................................................  25

ARTICLE V - FUNDING OF PHARMACOGENOMICS PROGRAM...................................................  26
 5.00 - Funding...................................................................................  26
 5.01 - Compensation for Services.................................................................  26

ARTICLE VI - TREATMENT OF CONFIDENTIAL INFORMATION................................................  26
 6.00 - Confidential Information..................................................................  27
 6.01 - Publications..............................................................................  28
 6.02 - Press Release and Regulatory Filings......................................................  28



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                     A-ii


BAYER and CURAGEN Pharmacogenomics Project Agreement

                                                                                                 
ARTICLE VII - INTELLECTUAL PROPERTY RIGHTS; FILING, PROSECUTION AND MAINTENANCE OF PATENT RIGHTS..  29
 7.00 - BAYER Intellectual Property Rights and BAYER Proprietary Material.........................  29
 7.01 - CURAGEN Proprietary Material and Predictive Toxicogenomics Technology.....................  30
 7.02 - Filing Prosecution and Maintenance of Patent Rights.......................................  30
 7.03 - Amendment to Patent Rights................................................................  33
 7.04 - Actual or Threatened Infringement.........................................................  34
 7.05 - Defense of Claims.........................................................................  35
 7.06 - Cooperation...............................................................................  36

ARTICLE VIII -  EXPIRATION AND TERMINATION........................................................  36
 8.00 - Term of the Agreement.....................................................................  36
 8.01 -Termination by Mutual Agreement............................................................  36
 8.02 - Termination for Material Breach...........................................................  37
 8.03 - Termination Following Bankruptcy..........................................................  37
 8.04 - Termination by BAYER......................................................................  37
 8.05 - Effect of Termination.....................................................................  38
 8.06 - Obligations...............................................................................  39
 8.07 - Remedies..................................................................................  39
 8.07 - Surviving Provisions......................................................................  39

ARTICLE IX - BAYER GENE PROCESSING FACILITY; NON-COMPETE AGREEMENT................................  40
 9.00 - BAYER Facility............................................................................  40
 9.01 - Non-Competition...........................................................................  40

ARTICLE X - REPRESENTATIONS AND WARRANTIES; MISCELLANEOUS.........................................  40
10.00 - Due Organization.........................................................................  40
10.01 - Consents.................................................................................  41
10.02 - Execution, Delivery and Performance......................................................  41
10.03 - Legal, Valid and Binding Obligation......................................................  42
10.04 - No Conflict..............................................................................  42
10.05 - Employee Obligations.....................................................................  42
10.06 - CURAGEN Intellectual Property............................................................  43
10.07 - BAYER Intellectual Property..............................................................  44
10.08 - Contracts................................................................................  46
10.09 - No Material Omissions....................................................................  46
10.10 - No Warranties............................................................................  47
10.11 - Survival.................................................................................  47
10.12 - Liability................................................................................  47
10.13 - Notices..................................................................................  47
10.14 - Dispute Resolution and Arbitration.......................................................  49
10.15 - Currency.................................................................................  50
10.16 - Limitations..............................................................................  50
10.17 - No Implied Waiver; Rights Cumulative.....................................................  50
10.18 - Assignment...............................................................................  51
10.19 - Force Majeure............................................................................  51
10.20 - No Strict Construction...................................................................  51
10.21 - Severability.............................................................................  51
10.22 - Independent Contractor...................................................................  52
10.23 - BAYER Indemnification of CURAGEN.........................................................  52
10.24 - CURAGEN Indemnification of BAYER.........................................................  53
10.25 - Captions and Headings....................................................................  53
10.26 - Amendments...............................................................................  53



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                     A-iii


BAYER and CURAGEN Pharmacogenomics Project Agreement

                                                                                                 
10.27 - HSR Matters..............................................................................  54
10.28 - Intellectual Property Right Bankruptcy Code..............................................  54
10.29 - HSR Filing...............................................................................  54
10.30 - Governing Law............................................................................  55
10.31 - Counterparts.............................................................................  55



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                     A-iv


BAYER and CURAGEN Pharmacogenomics Project Agreement

APPENDICES
     APPENDIX A - PHARMACOGENOMICS PROGRAM PLAN
     APPENDIX B - MINIMUM LEVELS OF SERVICES
     APPENDIX C - CRITERIA FOR PROTEOMICS FEASIBILITY STUDY
     APPENDIX D - COMMERCIAL TERMS FOR EXCLUSIVE LICENSE TO CURAGEN DIAGNOSTIC
                  PRODUCTS
     APPENDIX E - SOFTWARE LICENSE
     APPENDIX F - ARBITRATION PROCEDURES

SCHEDULES

     SCHEDULE 10.06(A) - OWNERSHIP OF CURAGEN LICENSED PATENT RIGHTS AND CURAGEN
                         LICENSED TECHNOLOGY

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      A-v


                       PHARMACOGENOMICS PROGRAM AGREEMENT

     This Agreement is made as of the 12th day of January 2001 ( the "Execution
Date"), by and between BAYER AG, a corporation organized and existing under the
laws of the Federal Republic of Germany and having its principal place of
business at D 51368 Leverkusen, Federal Republic of Germany ("BAYER") and
CURAGEN CORPORATION, a Delaware corporation having its principal place of
business at 555 Long Wharf Drive, 11th Floor, New Haven, Connecticut 06511, USA
("CURAGEN").

ARTICLE I - BACKGROUND

     WHEREAS, CURAGEN has developed a comprehensive suite of functional genomics
technologies and processes (including GeneCalling/TM/, PathCalling/TM/,
SNPCalling/TM/ and RTQ PCR, and bioinformatics software (including GeneScape(R)
and CuraTools/TM/) (collectively, the "CURAGEN Discovery Tools"); and

     WHEREAS, CURAGEN has developed proprietary databases composed of rat genes,
human genes and human cSNPs (collectively the "CURAGEN Proprietary DBs"); and

     WHEREAS, BAYER and CURAGEN wish to initiate a Pharmacogenomics Program (as
defined herein below) using the CURAGEN Discovery Tools and CURAGEN Proprietary
DBs to identify genes related to toxicity and to develop screens for the early
prediction of the toxicity of drugs or compounds, primarily to aid in the
selection of lead drug candidates and optimization of drugs and secondarily to
develop potential diagnostic tests; and

     WHEREAS, BAYER wishes to obtain access to the data and certain rights to
inventions made in the performance of the Pharmacogenomics Program pursuant to
this Agreement; and

     WHEREAS, CURAGEN and Bayer Corporation, BAYER's direct wholly-owned
subsidiary ("Bayer Corporation"), also wish to collaborate in the discovery and
development of targets and assays and to develop small molecule drugs for the
treatment of metabolic disorders pursuant to the terms of a Metabolic Disorder
Collaboration Agreement dated as of the date hereof by and between CURAGEN and
Bayer Corporation (the "Metabolic Disorder Collaboration Agreement"); and

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.


BAYER and CURAGEN Pharmacogenomics Project Agreement

     WHEREAS, BAYER has also agreed to make an equity investment in CURAGEN
common stock, in the aggregate amount of $85 million, such investment to be made
pursuant to the terms of a Stock Purchase Agreement dated as of the date hereof
by and between CURAGEN and BAYER (the "Stock Purchase Agreement").

     NOW THEREFORE, in consideration of the foregoing premises, BAYER and
CURAGEN agree to undertake the foregoing, under the terms and conditions set
forth in this Agreement.

ARTICLE II - DEFINITIONS

2.00 - Terms

     Terms used in this Agreement (other than the names of parties and article
headings) that are set forth with an initial capital letter have the meanings
established for such terms in the succeeding paragraphs of this Article II, or
as otherwise specifically defined hereinafter.

2.01 - Affiliate

     Shall mean any person, corporation, firm, limited liability company,
partnership or other entity, which directly or indirectly controls or is
controlled by or is under common control with a Party.  For purposes of this
definition, "control" shall mean (a) in the case of corporate entities, direct
or indirect ownership of at least fifty percent (50%) of the stock or shares
having the right to vote for the election of directors, and (b) in the case of
non-corporate entities, direct or indirect ownership of at least fifty percent
(50%) of the equity interest with the power to direct the management and
policies of such non-corporate entities.

2.02 - BAYER Background Technology

     Shall mean any Technology owned or otherwise controlled by BAYER or
its Affiliates as of the Effective Date which is necessary for CURAGEN to
practice the licenses granted by BAYER to CURAGEN pursuant to Section 4.01(a) or
4.01(b) of this Agreement.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       2


BAYER and CURAGEN Pharmacogenomics Project Agreement

2.03 - BAYER Compound

     Shall mean any proprietary chemical entity or substance of BAYER or
its Affiliates that is provided by BAYER to CURAGEN or otherwise identified by
BAYER to CURAGEN for testing, screening or analysis under the Pharmacogenomics
Program.

2.04 - BAYER Data

     Shall mean all data, other than Toxicogenomics Reference Data, generated by
or on behalf of CURAGEN in the conduct of the Pharmacogenomics Program through
the testing, screening and/or use by CURAGEN of any BAYER Target, BAYER SNP
Target, BAYER Compound or any other BAYER Proprietary Material.

2.05 - BAYER Licensed Patent Rights

     Shall have the meaning set forth in Section 10.07(a) of this Agreement.

2.06 - BAYER Licensed Technology

     Shall have the meaning set forth in Section 10.07(a) of this Agreement.

2.07 - BAYER Facility

     Shall have the meaning set forth in Section 9.00(a) below.

2.08 - BAYER Indemnified Parties

     Shall have the meaning set forth in Section 10.24 below.

2.09 - BAYER Patent Rights

     Shall mean Patent Rights with respect to BAYER Technology.

2.10 - BAYER Product

     Shall mean, collectively, an Optimized Product and a Program Diagnostic
Product.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       3


BAYER and CURAGEN Pharmacogenomics Project Agreement

2.11 - BAYER Program Technology

     Shall mean, collectively (a) the Marker Genes and (b) the Pharmacogenomics
Data.

2.12 - BAYER Proprietary Material

     Shall mean any tangible proprietary substances and materials of BAYER or
its Affiliates, including, without limitation, the BAYER Compounds, the BAYER
SNP Targets and the BAYER Targets, provided by BAYER to CURAGEN or otherwise
identified by BAYER to CURAGEN for the purpose of conducting the
Pharmacogenomics Program, including any tangible substances or materials
produced by either Party in the conduct of the Pharmacogenomics Program which
are derived in whole or in part from BAYER Proprietary Material or BAYER
Technology.

2.13 - BAYER Response

     Shall have the meaning set forth in Section 4.02 of this Agreement.

2.14 - BAYER SNP Target

     Shall mean any gene target provided by BAYER to CURAGEN or otherwise
identified by BAYER to CURAGEN for the purpose of conducting SNP analysis under
the Pharmacogenomics Program.

2.15 - BAYER Target

     Shall mean any druggable target provided by BAYER to CURAGEN or otherwise
identified by BAYER to CURAGEN for the purpose of conducting analysis activities
under the Pharmacogenomics Program.

2.16 - BAYER Technology

     Shall mean, collectively, the BAYER Program Technology and the BAYER
Background Technology.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       4


BAYER and CURAGEN Pharmacogenomics Project Agreement

2.17 - Biological Materials

     Shall have the meaning set forth in Section 3.00(a)(iii) of this Agreement.

2.18 - Breaching Party

     Shall have the meaning set forth in Section 8.02 of this Agreement.

2.19 - Change of Control

     Shall mean (a) a merger or consolidation of CURAGEN which results in the
voting securities of CURAGEN outstanding immediately prior thereto ceasing to
represent at least [___________] of the combined voting power of the surviving
entity immediately after such merger or consolidation; (b) the sale of all or
substantially all of the assets of CURAGEN (including any sale by CURAGEN of all
or substantially all of the assets constituting the CURAGEN Discovery Tools); or
(c) any "person", as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), together with
any of such persons "affiliates" or "associates", as such terms are used in the
Exchange Act, becoming the beneficial owner of [___________] or more of the
combined voting power of the outstanding securities of CURAGEN (other than
CURAGEN, any trustee or other fiduciary holding securities under an employee
benefit plan of CURAGEN or any corporation owned directly or indirectly by the
stockholders of CURAGEN in substantially the same proportion as their ownership
of stock of CURAGEN).

2.20 - Competitive Entity

     Shall mean any Third Party that is engaged in the business of
[___________________].

2.21 - Confidential Information

     Shall mean all materials, Technology or other information, including,
without limitation, proprietary information and materials (whether or not
patentable) regarding a Party's Technology, products, business information or
objectives, which is designated as confidential in writing by the disclosing
Party, whether by letter or by the use of an appropriate stamp or legend,

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       5


BAYER and CURAGEN Pharmacogenomics Project Agreement

prior to or at the time any such material, trade secret or other information is
disclosed by the disclosing Party to the other Party. Notwithstanding the
foregoing to the contrary, materials, Technology or other information which is
orally, electronically or visually disclosed by a Party, or is disclosed in
writing without an appropriate letter, stamp or legend, shall constitute
Confidential Information of a Party (a) if the disclosing Party, within thirty
(30) days after such disclosure, delivers to the other Party a written document
or documents describing the materials, Technology or other information and
referencing the place and date of such oral, visual, electronic or written
disclosure and the names of the persons to whom such disclosure was made, or (b)
such information is of the type that is customarily considered to be
confidential information by persons engaged in activities that are substantially
similar to the activities being engaged in by the Parties pursuant to this
Agreement.

2.22 - CURAGEN Deliverables

     Shall have the meaning set forth in Section 3.00(b)(ii) below.

2.23 - CURAGEN Diagnostic Product

     Shall mean any human diagnostic product or service discovered, conceived or
reduced to practice by CURAGEN in the conduct of the Pharmacogenomics Program
independent of any BAYER Proprietary Materials or BAYER Data.

2.24 - CURAGEN Discovery Tools

     Shall have the meaning set forth in the recitals to this Agreement.

2.25 - CURAGEN Discovery Tool Technology

     Shall mean any Technology owned or otherwise controlled by CURAGEN as of
the Effective Date which is necessary to practice the license to the CURAGEN
Discovery Tools granted to BAYER pursuant to Section 9.00(a) of this Agreement.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       6


BAYER and CURAGEN Pharmacogenomics Project Agreement

2.26 - CURAGEN Discovery Tool Improvements

     Shall mean any improvements to the CURAGEN Discovery Tool Technology
made by CURAGEN or by 454 Corporation, CURAGEN's majority-owned subsidiary, or
any other Affiliate of CURAGEN, during the Pharmacogenomics Program Term, both
within and outside of the conduct of the Pharmacogenomics Program, to the extent
CURAGEN has the right to license or sublicense such improvements without
violating any agreement with 454 Corporation or any Third Party.

2.27 - CURAGEN Indemnified Parties-

     Shall have the meaning set forth in Section 10.23 below.

2.28 - CURAGEN Licensed Patent Rights

     Shall have the meaning set forth in Section 10.06(a) of this Agreement.

2.29 - CURAGEN Licensed Technology

     Shall have the meaning set forth in Section 10.06(a) of this Agreement.

2.30 - CURAGEN Notice

     Shall have the meaning set forth in Section 4.02.

2.31 - CURAGEN Patent Rights

     Shall mean Patent Rights with respect to CURAGEN Technology.

2.32 - CURAGEN Program Technology

     Shall mean any Technology, other than BAYER Program Technology and CURAGEN
Discovery Tool Improvements, developed or conceived by employees of or
consultants to CURAGEN during the Pharmacogenomics Program Term in the conduct
of Pharmacogenomics

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       7


BAYER and CURAGEN Pharmacogenomics Project Agreement

Program. CURAGEN Program Technology shall include, without limitation, the
Predictive Toxicogenomics Technology and the Proteomics Technology.

2.33 - CURAGEN Proprietary DBs

     Shall have the meaning set forth in the recitals to this Agreement.

2.34 - CURAGEN Proprietary Material

     Shall mean any tangible proprietary substances and materials of CURAGEN or
its Affiliates provided by CURAGEN for the purpose of conducting the
Pharmacogenomics Program.

2.35 - CURAGEN Screening Services

     Shall mean any services provided by CURAGEN or any of its Affiliates to
Third Parties which are designed to test compounds, targets and/or products
identified or provided by such Third Parties, and which use a Marker Gene or
Toxicogenomics Reference Data.

2.36 - CURAGEN Services

     Shall mean any services provided by CURAGEN or any of its Affiliates
to Third Parties through the use of CURAGEN Discovery Tools, the primary purpose
of which is to provide access to any information comprising the Toxicogenomics
Reference Data, other than information that would provide a Third Party with any
pathology information.

2.37 - CURAGEN Services Revenue

     Shall mean the aggregate gross revenues received by CURAGEN or its
Affiliates in connection with its providing of CURAGEN Screening Services or
CURAGEN Services less, to the extent such CURAGEN Screening Services or CURAGEN
Services are provided by CURAGEN to Third Parties in arm's length transactions,
the following:

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       8


BAYER and CURAGEN Pharmacogenomics Project Agreement

     (a)  trade, early settlement, cash and quantity discounts or rebates
          actually allowed or taken;

     (b)  credits or allowances actually given or made for CURAGEN Screening
          Services or CURAGEN Services or for retroactive price reductions
          (including legally mandated types of rebates); and

     (c)  sales, transfer, value added and other excise taxes levied on the sale
          or delivery of CURAGEN Screening Services or CURAGEN Services to the
          extent included in the gross invoiced sales price, other than
          franchise or income tax of any kind whatsoever.

2.38 - CURAGEN Technology

     Shall mean, collectively, the CURAGEN Program Technology, the CURAGEN
Discovery Tool Technology and the CURAGEN Discovery Tool Improvements.

2.39 - Designated Scientific Issue

     Shall mean any scientific matters related to the Pharmacogenomics Program
including, without limitation, all interpretations of the Pharmacogenomics
Program Plan but not including any dispute as to whether the performance
criteria set forth in Section 3.00(b)(iii) have been achieved.  Notwithstanding
the foregoing, it is hereby agreed that Designated Scientific Issues shall not
include any matters specifically left to the discretion, consent or approval of
BAYER under this Agreement.

2.40 - Diagnostic Products

     Shall mean, collectively, Program Diagnostic Products and CURAGEN
Diagnostic Products.  In the singular form, "Diagnostic Product" shall mean
either a Program Diagnostic Product or a CURAGEN Diagnostic Product, as
appropriate.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       9


BAYER and CURAGEN Pharmacogenomics Project Agreement

2.41 - DOJ

     Shall mean the United States Department of Justice.

2.42 - Effective Date

     Shall mean the later of the HSR Clearance Date and the Closing Date as
defined in the Stock Purchase Agreement.

2.43 - FTE

     Shall mean a full time equivalent person year (consisting of a total of one
thousand eight hundred eighty (1,880) hours per year) of scientific or technical
work.

2.44 - HSR Act

     Shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (15 U.S.C. Sec. 18a), and the rules and regulations promulgated
thereunder.

2.45 - HSR Clearance Date

     Shall mean the earlier of (a) the date on which the FTC shall notify BAYER
and CURAGEN of early termination of the applicable waiting period under the HSR
Act or (b) the day after the date on which the applicable waiting period under
the HSR Act expires.

2.46 - HSR Filing

     Shall mean filings by BAYER and CURAGEN with the FTC and the Antitrust
Division of the DOJ of a Notification and Report Form for Certain Mergers and
Acquisitions (as that term is defined in the HSR Act) with respect to the
matters set forth in this Agreement, the Metabolic Disorder Collaboration
Agreement and the Stock Purchase Agreement, together with all required
documentary attachments thereto.

2.47 - Infringement

     Shall have the meaning set forth in Section 7.04(a) of this Agreement.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      10


BAYER and CURAGEN Pharmacogenomics Project Agreement

2.48 - Knowledge

     For purposes of this Agreement, the term "Knowledge" shall mean the
knowledge, after due and reasonable investigation,
[_________________________________________________].

2.49 - Marker Gene

     Shall mean any gene discovered by CURAGEN in the conduct of the
Pharmacogenomics Program whose expression or pattern of expression is predictive
of (a) toxicity or efficacy and is therefore useful for screening drug
candidates to assess toxicity or efficacy or (b) disease, disease predisposition
or patient response and therefore has diagnostic applications, including disease
diagnosis, patient selection and treatment monitoring, including, in any case,
any part of the CURAGEN Program Technology pertinent thereto.

2.50 - Metabolic Disorder Collaboration Agreement

     Shall have the meaning set forth in the recitals to this Agreement.

2.51 - Optimized Product

     Shall mean any compound or target (including without limitation any BAYER
Target or BAYER Compound), other than a Program Diagnostic Product, that results
from a compound or target that is selected, optimized, screened or tested within
or outside of the Pharmacogenomics Program.

2.52 - Party or Parties

     Shall mean BAYER or CURAGEN or both, as appropriate.

2.53 - Patent Rights

     Shall mean the rights and interests in and to (a) issued patents and
pending patent applications without limitation to any country, including, but
not limited to, all provisional

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      11


BAYER and CURAGEN Pharmacogenomics Project Agreement

applications, substitutions, continuations, continuations-in-part, divisions,
and renewals, all letters patent granted thereon, and all reissues,
reexaminations and extensions thereof, and supplemental protection certificates
relating thereto whether owned solely or jointly by a Party or licensed in by a
Party, with the right to grant sublicenses and (b) copyrights with respect to
data.

2.54 - Pharmacogenomics Data

     Shall mean, collectively, the Toxicogenomics Reference Data and the BAYER
Data.

2.55 - Pharmacogenomics Program

     Shall mean a research and development program pursuant to which CURAGEN
shall use the CURAGEN Discovery Tools and CURAGEN Proprietary DBs (a) during the
Set-Up Phase, to identify Marker Genes, to develop the Predictive Toxicogenomics
Technology and conduct the Proteomics Feasibility Study, (b) during the
Production Phase, to conduct toxicogenomic and pharmacogenomic testing and
analysis of BAYER SNP Targets, BAYER Targets and BAYER Compounds using BAYER
Technology or CURAGEN Technology and (c) during the Pharmacogenomics Program
Term, to identify Marker Genes for the purpose of [___________].

2.56 - Pharmacogenomics Program Term

     Shall mean the term of the Pharmacogenomics Program, which shall commence
on the Effective Date and continue for a period of [___________], unless earlier
terminated pursuant to Article VIII below or extended by extension of the Set-up
Phase in accordance with Section 3.00(b)(i) below.  The Pharmacogenomics Program
Term shall include the Set-Up Phase Term (as such term may be extended pursuant
to Section 3.00(b)(i) below), and the Production Phase Term.

2.57 - Pharmacogenomics Program Plan

     Shall mean the written description of the research to be performed by
CURAGEN and BAYER under the Pharmacogenomics Program as more fully described in
Appendix A attached hereto and as such plan may be updated or amended from time
to time by the Parties.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      12


BAYER and CURAGEN Pharmacogenomics Project Agreement

2.58 - Predictive Toxicogenomics Technology

     Shall mean a toxicology screening Technology for the early prediction of
the toxicity of drugs or compounds that is developed by CURAGEN pursuant to
Section 3.00(b)(i) and which is designed primarily to aid in the selection of
lead drug candidates and the optimization of drugs.

2.59 - Production Phase

     Shall have the meaning provided in Section 3.00(c)(i) below.

2.60 - Production Phase Term

     Shall mean the term of the production phase of the Pharmacogenomics
Program, which shall commence upon the submission by BAYER to CURAGEN of the
initial BAYER Compound or BAYER Target, as the case may be, as provided in
Section 3.00(c) (i) below and continue for a period of [___________] from the
Effective Date, as the same period may be extended, if the Set-Up Phase Term is
extended in accordance with Section 3.00(b)(i) below.

2.61 - Program Diagnostic Product

     Shall mean any human diagnostic product or service, other than a CURAGEN
Diagnostic Product, discovered, conceived or reduced to practice by either Party
or their respective Affiliates in the conduct of the Pharmacogenomics Program
including, without limitation, any product designed to (a) identify
predisposition to a particular disease or to confirm the presence or absence of
a Marker Gene, (b) predict drug response or therapeutic effectiveness, (c)
monitor drug response or (d) stratify patient groups.

2.62 - Program Director

     Shall have the meaning set forth in Section 3.03 (a) below.

2.63 - Program Funding

     Shall have the meaning set forth in Section 5.00(a) of this Agreement

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      13


BAYER and CURAGEN Pharmacogenomics Project Agreement

2.64 - Project Teams

     Shall have the meaning set forth in Section 3.03(b) below.

2.65 - Proteomics Feasibility Study

     Shall mean a study on proteomics feasibility to be conducted by CURAGEN in
accordance with the criteria set forth in Appendix C attached hereto that
demonstrates, to the reasonable satisfaction of BAYER, the feasibility of
[__________________________________].

2.66 - Proteomics Technology

     Shall mean all Patent Rights and Technology that arise directly from the
activities conducted by CURAGEN under the Proteomics Feasibility Study related
to antibody generation.

2.67 - Set-up Phase

     Shall have the meaning set forth in Section 3.00(b)(i) below.

2.68 - Set-up Phase Term

     Shall mean the term of the Set-up Phase of the Pharmacogenomics Program,
which shall commence on the Effective Date and shall continue until the earlier
of (i) the completion of the Set-Up Phase and (ii) a period [___________];
provided, that, the Set-up Phase Term, at BAYER's option, shall be extended for
[___________] in accordance with Section 3.00(b)(i) below.

2.69 - Stock Purchase Agreement

     Shall have the meaning set forth in the recitals to this Agreement.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      14


BAYER and CURAGEN Pharmacogenomics Project Agreement

2.70 - Technology

     Shall mean all (a) inventions, discoveries, improvements, trade secrets
and proprietary methods and materials, whether or not patentable, including but
not limited to, samples of, the methods of production or use of, and structural
and functional information pertaining to, chemical compounds, proteins or other
biological substances, (b) information, data and formulations (including any
negative results), and (c) techniques and trade secrets.  "Technology" of a
Party includes Technology owned by a Party or licensed to that Party with a
right to grant sublicenses without violating the terms of any agreement or
arrangement with any Third Party.

2.71 - Terminating Party

     Shall have the meaning set forth in Section 8.02 of this Agreement.

2.72 - Third Party

     Shall mean any person, corporation, firm, limited liability company,
partnership, or other entity, which is not a Party or an Affiliate of a Party.

2.73 - Toxicogenomics Reference Data

     Shall mean the data generated or used by CURAGEN in the Set-up Phase of
the Pharmacogenomics Program, including without limitation
[________________________].

2.74 - UNCITRAL

     Shall have the meaning set forth in Section 10.14 of this Agreement.


Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      15


BAYER and CURAGEN Pharmacogenomics Project Agreement

ARTICLE III - PHARMACOGENOMICS PROGRAM

3.00 - Pharmacogenomics Program

     (a)  General.

          (i)    Description of Program. BAYER and CURAGEN hereby agree to
conduct the Pharmacogenomics Program so as to collaborate on toxicogenomic and
pharmacogenomic technologies for use in (A) the identification of gene-based
toxicity markers, development and operation of toxicity assays, the generation
and maintenance of databases [__________________________________________]; and
(B) gene expression profiling of animal and human cells in [______________] to
assess and predict their pharmacological effectiveness. It is expected that the
Pharmacogenomics Program will consist of two primary phases, designated herein
as the Set-up Phase and the Production Phase.

          (ii)   Conduct of Program.  Each Party agrees to (A) undertake the
responsibilities assigned to such Party in the Pharmacogenomics Program Plan,
including, but not limited to, the dedication of resources appropriate to such
efforts and (B) make available to the other Party those resources set forth in
the Pharmacogenomics Program Plan.  In addition, each Party agrees to carry out
all work done in the course of the Pharmacogenomics Program in material
compliance with all applicable federal, state or local laws, regulations and
guidelines governing the conduct of such work, including, without limitation,
all applicable export and import control laws.

          (iii)  Biological Materials.  For purposes of facilitating the conduct
of the Pharmacogenomics Program, each Party shall provide to the other Party, at
its sole expense, such animal or human tissues, cells, blood samples and other
materials ("Biological Materials") specified from time to time in the
Pharmacogenomics Program Plan.  The Parties agree that: (A) all Biological
Materials provided by one Party to the other shall be used solely for research
purposes in the Pharmacogenomics Program; (B) the Party providing such
Biological Materials shall obtain (or cause its Third Party collaborators to
obtain or certify that they have obtained) all appropriate and required consents
from the source of such Biological Materials; and

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      16


BAYER and CURAGEN Pharmacogenomics Project Agreement

(C) Biological Materials provided by one Party to the other shall not be made
available by the receiving Party to any Third Party except pursuant to the
Pharmacogenomics Program or upon the prior written consent of the Party
providing such Biological Materials.

     (b)  Set-up Phase.

          (i)    General. During the Set-up Phase of the Pharmacogenomics
Program (the "Set-up Phase"), CURAGEN shall use reasonable commercial efforts,
in accordance with the Pharmacogenomics Program Plan, to (A) create a database
of Marker Genes and (B) develop the Predictive Toxicogenomics Technology
[__________________________________________]. The Set-up Phase shall commence on
the Effective Date and continue for the duration of the Set-up Phase Term,
unless earlier terminated in accordance with Section 3.00(c)(iv)(A) below.
Notwithstanding the foregoing, it is hereby acknowledged and agreed that the
Set-up Phase Term shall, at BAYER's option, be extended [________________] if
the activities to be conducted in the Set-up Phase, as described in the
Pharmacogenomics Program Plan, are not completed on or before expiration of
[________________].

          (ii)   CURAGEN Obligations and Deliverables. Subject to the payment by
BAYER of the Program Funding in accordance with Section 5.01 hereof and the
execution and delivery by the Parties of, and the closing of the transaction
contemplated by, the Stock Purchase Agreement, CURAGEN shall use reasonable
commercial efforts to deliver to BAYER, as promptly as practicable and in any
event on or before the expiration of the Set-up Phase Term: (A) the Predictive
Toxicogenomics Technology meeting the specifications set forth in Section
3.00(b)(i) above; (B) the Toxicogenomics Reference Data; and (C) the Proteomics
Feasibility Study (collectively, the "CURAGEN Deliverables").

          (iii)  Performance Criteria.  During the Set-up Phase, CURAGEN shall
use reasonable commercial efforts to achieve the following performance criteria
within the following time frames:

                 (A) Demonstration to BAYER's reasonable satisfaction, on or
before [___________________________________],
[_____________________________________].

                 (B) Demonstration to BAYER's reasonable satisfaction, on or
before [___________________________________],
[_____________________________________].

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      17


BAYER and CURAGEN Pharmacogenomics Project Agreement

     In the event that the Parties disagree as to whether any of the foregoing
performance criteria have been achieved, the matter shall not be treated as a
Designated Scientific Issue in accordance with Section 3.05 of this Agreement.

          (iv)   Effect of Criteria.

                 (A) In the event that CURAGEN fails to achieve the performance
criteria set forth in Section 3.00(b)(iii)(A) above within the applicable time
frame, BAYER shall have the right to terminate this Agreement pursuant to
Section 3.00(c)(iv) below.

                 (B) In the event that CURAGEN achieves the performance criteria
set forth in Section 3.00(b)(iii)(B) above within the applicable time frame, the
Parties shall promptly enter into good faith discussions, based on the price
specifications set forth in Appendix B (plus a profit factor), for a period of
[___________] from the date the performance criteria is achieved for an
amendment to this Agreement to expand the scope of the Pharmacogenomics Program,
which amendment is expected to include, inter alia, a description of the
additional proteomics research and development activities to be performed by
CURAGEN. If the Parties are unable to agree upon and execute a written amendment
within such [___________] period covering such expanded activities, as such
period may be extended by written agreement of the Parties, no such additional
proteomics activities will be undertaken by CURAGEN in connection with the
Pharmacogenomics Program.

     (c)  Production Phase.

          (i)    General.  During the production phase of the Pharmacogenomics
Program (the "Production Phase") CURAGEN shall (A) conduct toxicogenomic and
pharmacogenomic testing and analysis of BAYER SNP Targets, BAYER Targets and
BAYER Compounds using CURAGEN Discovery Tools and (B) analyze and use Marker
Genes to screen BAYER Compounds for toxicity using the Predictive Toxicogenomics
Technology for the purpose of optimizing and developing BAYER Products, all in
accordance with the Pharmacogenomics Program Plan.  The Production Phase shall
commence on the date of submission by BAYER to CURAGEN of the initial BAYER
Target or BAYER Compound, as the case may be, as provided in Section 3.00(c)(ii)
below and shall continue for the duration of the Production Phase Term, unless
earlier terminated in accordance with Article VIII below.  The Production Phase
Term

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      18


BAYER and CURAGEN Pharmacogenomics Project Agreement

shall be extended to reflect such additional period(s) as the Set-Up Phase Term
may be extended pursuant to Section 3.00(b)(i).

          (ii)   BAYER Obligations. During each full year of the Production
Phase Term, BAYER shall submit a minimum of [______________] and a maximum of
[______________] BAYER SNP Targets for SNP analysis by CURAGEN as described in
Section 3.00(c)(iii)(A) and BAYER Targets for pathway analysis by CURAGEN as
described in Section 3.00(c)(iii)(B) and a minimum of [______________] and a
maximum of [______________] BAYER Compounds for screening with the Predictive
Toxicogenomics Technology as described in Section 3.00(c)(i) (B) above.

          (iii)  CURAGEN Obligations. During the Production Phase Term, CURAGEN
shall perform the following services for BAYER in consideration of BAYER's
payment of the applicable fees for such services:

                 (A) SNP Analysis. Upon the submission by BAYER to CURAGEN of
          each BAYER SNP Target, CURAGEN shall use its SNPCalling technology to
          identify single nucleotide polymorphisms for such BAYER SNP Target
          (using a minimum of [______________]) and allele frequency
          determinations for identified haplotypes across a panel of
          [______________]. So long as BAYER submits BAYER SNP Targets at an
          average rate no greater than [______________] BAYER SNP Target per
          week during the Production Phase Term, CURAGEN will complete the SNP
          Calling services for each BAYER SNP Target within [______________] of
          receipt by CURAGEN of each BAYER SNP Target, consisting of
          [__________________________________________________]. For purposes of
          this Section 3.00(c)(iii)(A), "submission" of a BAYER SNP Target shall
          mean the receipt by CURAGEN of a BAYER SNP Target in a vector proposed
          by BAYER and reasonably acceptable to CURAGEN.

                 (B) Pathway Analyses. Upon the submission of a BAYER Target by
          BAYER to CURAGEN, CURAGEN shall provide the following analyses to
          BAYER:

                     (1) Pathway Analysis. CURAGEN shall perform pathway
            analysis of each BAYER Target, which will involve
            [_________________________].

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      19


BAYER and CURAGEN Pharmacogenomics Project Agreement

                     (2) RTQ PCR Analysis. CURAGEN shall perform RTQ PCR
            analysis of each BAYER Target, which will involve
            [_________________________].

                         For purposes of this Section 3.00(c)(iii)(B),
            "submission" shall mean the receipt of BAYER Target in a vector
            proposed by BAYER and reasonably acceptable to CURAGEN.

          (C)  Predictive Toxicogenomics Screening and Expression Analyses. Upon
          the submission by BAYER to CURAGEN of a BAYER Compound during the
          Production Phase, CURAGEN shall provide the following services to
          BAYER:

               (1) Predictive Toxicogenomics Screening. CURAGEN shall perform
            predictive toxicogenomics screening of BAYER Compounds using the
            Predictive Toxicogenomics Technology developed in the Set-up Phase.
            CURAGEN will begin predictive toxicity screening at any time
            following CURAGEN's achievement of the performance criteria
            described in Section 3.00 (b) (iii)(A) above. The Parties hereby
            agree that such predictive toxicity screening activities may involve
            lead optimization of BAYER Compounds by BAYER and/or screening of
            selected BAYER Compounds by CURAGEN.

               (2) GeneCalling Expression Profiling. CURAGEN shall provide
            GeneCalling expression profiling of the effect of BAYER Compounds on
            Marker Genes and will provide comparative data to BAYER using the
            Pharmacogenomics Data developed in the Set-up Phase.

          (D)  Reports on Results of Services. Promptly upon completion of any
          of the services provided by CURAGEN to BAYER pursuant to this Section
          3.00(c)(iii), CURAGEN shall provide to BAYER a report summarizing the
          analysis and results thereof. The form of such report will be agreed
          upon by the Parties and will be made available by CURAGEN to BAYER
          through its GeneScape(R) software. In addition, CURAGEN will work with
          BAYER to [______________].

          (iv) Early Termination of this Agreement.

          (A)  BAYER may terminate this Agreement (a) at any time on or
          [_________________________________________], upon not less than

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      20


BAYER and CURAGEN Pharmacogenomics Project Agreement

          [___________] written notice to CURAGEN, if CURAGEN fails to achieve
          the performance criteria described in Section 3.00(b)(iii)(A) of this
          Agreement or (b) if CURAGEN has failed to deliver the CURAGEN
          Deliverables as of the date of expiration of the Set-Up Phase.

          (B)  BAYER may terminate this Agreement upon not less than
          [___________] prior written notice, if (1)
          [______________________________________]; (2) CURAGEN fails to cure
          such failure within [___________] of CURAGEN's receipt of written
          notice from BAYER of such failure; and (3) [____________________].

     (d)  Priority of Services. Subject to the payment by BAYER of the Program
Funding described in Article V of this Agreement, CURAGEN shall provide, at its
sole expense, the personnel and resources necessary to provide the services
contemplated by the Pharmacogenomics Program Plan. In connection therewith, if
at any time during the Production Phase Term, CURAGEN experiences capacity
constraints in providing the commercial services of the types provided to BAYER
that CURAGEN also offers to Third Parties, then CURAGEN hereby agrees
[_______________________________________________________________].

3.01 - Collaborative Efforts and Reports

     (a)  Cooperation of the Parties.  The Parties agree that the successful
execution of the Pharmacogenomics Program will require the collaborative use of
both Parties' areas of expertise. In connection therewith, CURAGEN shall furnish
BAYER quarterly summary written reports within ten (10) business days after the
end of each quarter during the Pharmacogenomics Program Term, describing the
progress of its activities in reasonable detail, including a summary of the
progress of the Pharmacogenomics Program by CURAGEN.  From time to time during
the Set-up Phase Term, upon the reasonable advance written request of BAYER,
CURAGEN will provide to BAYER an update of the status of the Pharmacogenomics
Program.

     (b)  Use of Personnel.  Scientists at CURAGEN and BAYER shall cooperate in
the performance of the Pharmacogenomics Program and, subject to any
confidentiality obligations to Third Parties, shall exchange information and
materials (including BAYER Proprietary Material)

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      21


BAYER and CURAGEN Pharmacogenomics Project Agreement

as necessary to carry out the Pharmacogenomics Program. Each Party will attempt
to accommodate any reasonable request of the other Party to send or receive
personnel for purposes of collaborating or exchanging information under the
Pharmacogenomics Program. Such visits and/or access will have defined purposes
and be scheduled in advance. Each Party will bear its own travel and lodging
costs related to such meetings.

     (c)  Access to GeneScape Software.  During the Pharmacogenomics Program
Term, CURAGEN will provide BAYER with non-exclusive access to its GeneScape
software to enable BAYER to view data associated with the Pharmacogenomics
Program.  BAYER hereby acknowledges and agrees that such access shall be granted
pursuant to the terms of the software license set forth on Appendix E attached
hereto and in accordance with Section 3.00(c)(iii)(D) above.

3.02 - Non-Exclusivity

     Except as expressly set forth in this Agreement, nothing contained in this
Agreement shall in any way restrict CURAGEN's right to perform research for, or
to collaborate with, any Third Parties to the extent that any such research or
collaboration would not conflict with the provisions hereof.  The foregoing
notwithstanding, it is clearly understood and agreed that CURAGEN is not
permitted to use, share or otherwise disclose the results of any research or
collaboration conducted hereunder, except as otherwise permitted hereby.

3.03 - Program Directors and Project Teams

     (a)  Appointment of Program Directors.  Within thirty (30) business days of
the Effective Date, BAYER and CURAGEN shall each appoint a senior research
scientist or executive (each, a "Program Director") to each serve as an
executive director to oversee jointly the operations of the Pharmacogenomics
Program and to make recommendations to the Parties for modifications of, or
amendments to, the Pharmacogenomics Program Plan.  During the Pharmacogenomics
Program Term, the BAYER Program Director shall be permitted to reside at
CURAGEN, at BAYER's sole expense, for at least six (6) months of each year in
order to facilitate conducting the Pharmacogenomics Program.  The Program
Directors will (i) commit

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      22


BAYER and CURAGEN Pharmacogenomics Project Agreement

substantially all of his/her working hours to the Pharmacogenomics Program and
(ii) have access to the offices and data related to the Pharmacogenomics Program
and personnel of the other Party to the extent necessary to facilitate the close
and direct collaboration of the Parties contemplated by the Pharmacogenomics
Program Plan related to the Pharmacogenomics Program.

     (b)  Project Teams.  The Program Directors shall each appoint personnel to
serve on project teams ("Project Teams") to supervise and/or perform the various
tasks required under the Pharmacogenomics Program.  The Project Team will
consist of an equal number of representatives of each Party.  Each Party shall
have the right to replace its representatives at any time during the term of
this Agreement by providing written notice to the other Party.  During the
Pharmacogenomics Program Term, BAYER and CURAGEN will each commit to the
Pharmacogenomics Program the FTE levels for their respective Project Team
Members set forth in the Pharmacogenomics Program Plan.

3.04 - Executive Level Meetings

     The President of CURAGEN and the Head of Worldwide Pharmaceutical Research
for BAYER shall meet at least annually but more or less frequently if
appropriate or necessary and upon mutual agreement of both Parties, with such
meetings to be held alternating in New Haven, Connecticut, USA, or Wuppertal,
Germany, unless the Parties agree otherwise.  Meetings may also be held by
conference telephone or videoconference upon mutual agreement.

3.05 - Decisions

     Each Project Team shall decide matters directly related to the scope of its
responsibilities by the mutual consensus of its members.  If any matter cannot
be resolved on a consensus basis, then such matter will be referred to the
Program Directors for resolution at a Program Director Meeting.  In the event
that the Program Directors are unable to reach agreement on any matter within
thirty (30) days, the issue will be referred for resolution to the president of
CURAGEN and the Head of Worldwide Pharmaceutical Research at BAYER.  If these
two individuals are unable to resolve the matter within thirty (30) days (a) if
the matter does not relate to a

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      23


BAYER and CURAGEN Pharmacogenomics Project Agreement

Designated Scientific Issue, either Party may refer the matter to binding
arbitration in accordance with Section 10.14 and (b) if the matter relates to a
Designated Scientific Issue, the Parties will resolve that matter through the
use of an expedited mediation process, which shall be mediated by a scientist
mutually acceptable to both Parties. If the Parties are unable to agree on a
single scientist to serve as mediator within twenty (20) days, each Party will
appoint an unaffiliated scientist who shall together select a third unaffiliated
scientist to serve as mediator. The selected mediator will review the Designated
Scientific Issue on an expedited basis, considering the relevant data, the
standards established by this Agreement and the Pharmacogenomics Program Plan
and relevant precedents. The decision of the mediator will be binding on the
Parties.

3.06 - Expenses

     CURAGEN and BAYER shall each bear all expenses related to the activities of
their respective Project Directors and Project Team members contemplated by this
Agreement.  Notwithstanding the foregoing, it is hereby agreed that CURAGEN
shall bear all expenses related to the use by the BAYER Program Director of
CURAGEN's facility in accordance with Section 3.03(a) above.

ARTICLE IV - LICENSES; PROGRAM DIAGNOSTIC PRODUCTS; CURAGEN DIAGNOSTIC PRODUCTS-

4.00 -Licenses to BAYER

     (a)  Commercialization Licenses to BAYER.  CURAGEN hereby grants to BAYER
and its Affiliates
[_______________________________________________________________].

     (b)  Royalties.  It is hereby acknowledged and agreed by the Parties that
[__________________________________________________________________________].

4.01 - Licenses to CURAGEN

     (a)  Research License to CURAGEN.  BAYER hereby grants to CURAGEN, during
the Pharmacogenomics Program Term, [______________________________________].

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      24


BAYER and CURAGEN Pharmacogenomics Project Agreement

     (b)  Commercialization Licenses to CURAGEN.  BAYER hereby grants to CURAGEN
[_______________________________________________________________].

     (c)  Royalties.  It is hereby acknowledged and agreed by the Parties that
[_________________________________________________________________________].

     (d)  Use of BAYER Technology by CURAGEN.  Except as expressly permitted by
Sections 4.01(a) and (b) of this Agreement, CURAGEN shall not transfer or
disclose to any Third Party or otherwise use BAYER Technology or BAYER
Proprietary Material for any purpose and keep the same confidential.

     (e)  Withholding.  The Party paying royalties under Section 4.00 or Section
4.01 (the "Royalty Paying Party") shall have the right to withhold from the
royalty payments the tax which the Party receiving such royalties (the "Royalty
Receiving Party") is liable under the appropriate local tax laws and for the
payments of which the Royalty Paying Party is responsible.  The Royalty
Receiving Party shall immediately be sent tax receipts by the Royalty Paying
Party certifying the payments of the tax, so that the Royalty Receiving Party
may use it for claiming a credit on the tax payable by the Royalty Receiving
Party in Germany on such payments.  No deduction shall be made nor shall a
reduced amount be deducted if the Royalty Receiving Party furnishes a document
from the appropriate tax authorities to the Royalty Paying Party by the time of
the payments certifying that the payments are exempt from tax or subject to a
reduced tax rate according to the convention for the avoidance of double
taxation between the Federal Republic of Germany and the United States of
America. Except for such withholding taxes, any taxes, assessments, fees and
charges imposed against payments due the Royalty Receiving Party hereunder shall
be borne by the Royalty Paying Party.

4.02 - Diagnostic Products

         In the event that CURAGEN shall discover or develop a Diagnostic
Product during the Pharmacogenomics Program Term, it shall provide prompt
written notice of same (the "CURAGEN Notice") to BAYER together with a
description of such Diagnostic Product specifying whether such Diagnostic
Product is a CURAGEN Diagnostic Product or a Program

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      25


BAYER and CURAGEN Pharmacogenomics Project Agreement

Diagnostic Product and any other information available to CURAGEN which CURAGEN
reasonably determines may be useful to BAYER to evaluate the commercial
potential of such Diagnostic Product.
[__________________________________________________________].

ARTICLE V - FUNDING OF PHARMACOGENOMICS PROGRAM

5.00 - Funding

     (a)  Program Funding.  Subject to the terms and conditions of this
Agreement, BAYER shall be obligated to commit thirty nine million dollars
($39,000,000) to fund the Pharmacogenomics Program (the "Program Funding"),
subject to reasonable adjustment
[______________________________________________________________________].

     (b)  Set-up Phase Funding.  Subject to the terms and conditions of this
Agreement, BAYER shall pay CURAGEN an aggregate of
[_____________________________] to fund the Set-up Phase of the Pharmacogenomics
Program, [___________] of which shall be payable in the [__________] the Set-up
Phase in advance in quarterly installments on the first day of each calendar
quarter during the Set-up Phase and [___________] of which is payable upon the
delivery by CURAGEN of the CURAGEN Deliverables.  The Parties hereby acknowledge
and agree that the Set-up Phase Funding may be adjusted from time to time during
the Set-up Phase Term to reflect any changes in the Pharmacogenomics Program
agreed to by the Parties.  Notwithstanding the foregoing, CURAGEN hereby
acknowledges and agrees that it shall be obligated to perform obligations
related to [________________________].

     (c)  Production Phase Funding and Costs.  Subject to the terms and
conditions of this Agreement, BAYER shall pay CURAGEN an aggregate
[_____________________________] to fund the Production Phase of the
Pharmacogenomics Program.  [____________________].

5.01 - Service Price Adjustment.

     CURAGEN hereby acknowledges and agrees that such prices shall be adjusted
[_____________________________________________________________________].

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      26


BAYER and CURAGEN Pharmacogenomics Project Agreement

ARTICLE VI - TREATMENT OF CONFIDENTIAL INFORMATION

6.00 - Confidential Information

     All Confidential Information disclosed by a Party or its Affiliates to the
other Party or its Affiliates during the term of this Agreement shall not be
used by the receiving Party except in connection with the activities
contemplated by this Agreement, shall be maintained in confidence by the
receiving Party (except to the extent reasonably necessary for regulatory
approval of BAYER Products developed by BAYER or any of its Affiliates or for
the filing, prosecution and maintenance of Patent Rights), and shall not
otherwise be disclosed by the receiving Party to any other person, firm, or
agency, governmental or private, without the prior written consent of the
disclosing Party, except to the extent that the Confidential Information (as
determined by competent documentation):

     (i)    was known or used by the receiving Party or its Affiliates prior to
            its date of disclosure to the receiving Party; or

     (ii)   either before or after the date of the disclosure to the receiving
            Party or its Affiliates is lawfully disclosed to the receiving Party
            or its Affiliates by sources other than the disclosing Party or its
            Affiliates rightfully in possession of the Confidential Information;
            or

     (iii)  either before or after the date of the disclosure to the receiving
            Party or its Affiliates becomes published or generally known to the
            public (including information known to the public through the sale
            of products in the ordinary course of business) through no fault or
            omission on the part of the receiving Party or its Affiliates or its
            sublicensees; or

     (iv)   is independently developed by or for the receiving Party or any of
            its Affiliates without reference to or reliance upon the
            Confidential Information; or

     (v)    is required to be disclosed by the receiving Party or its Affiliates
            to comply with applicable laws, by governmental or judicial order,
            to defend or prosecute litigation or to comply with governmental
            regulations, provided that the receiving Party or its Affiliate, as
            appropriate, provides prior written notice of such

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      27


BAYER and CURAGEN Pharmacogenomics Project Agreement

            disclosure to the disclosing Party and takes reasonable and lawful
            actions to avoid and/or minimize the degree of such disclosure.

Such obligations of confidentiality and non-use shall remain in effect for a
period of five (5) years after the termination or expiration of this Agreement.

6.01 - Publications

     Neither Party shall publish or otherwise publicly disclose the results of
any work or activities conducted under this Agreement without prior written
consent of the other Party.  The publishing Party, upon the other Party's
written approval, shall acknowledge contributions by the other Party in any
publication.  In order to safeguard intellectual property rights and
Confidential Information, the Party wishing to publish such intellectual
property and/or Confidential Information shall first submit a draft of any
proposed manuscript to the other Party for review, comment and consideration of
appropriate patent application preparation activity at least sixty (60) business
days prior to any submission for publication or other public disclosure.  The
other Party will advise the Party seeking publication as to whether a patent
application will be prepared and filed or whether trade secret protection should
be pursued or whether Confidential Information should be deleted.  Both Parties
will discuss in good faith to determine the appropriate timing and content of
any such publications.  The other Party can request that the publishing Party
delays publication for up to an additional sixty (60) business days for the
purpose of preparation of an appropriate patent application(s) or redrafting to
delete Confidential Information.

6.02 - Press Release and Regulatory Filings

     The Parties shall agree upon a press release with respect to the execution
of this Agreement.  Except as required by law or by a stock exchange or
quotation system, any subsequent announcements or similar publicity shall be
agreed upon between the Parties as set forth below.  Each Party understands that
this Agreement is likely to be of significant interest to investors, analysts
and others, and that either Party therefore may make such public announcements
with respect thereto.  The Parties agree that any such announcement will not

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      28


BAYER and CURAGEN Pharmacogenomics Project Agreement

contain confidential business or technical information and, if disclosure of
confidential business or technical information is required by law or regulation,
will make reasonable efforts to minimize such disclosure and obtain confidential
treatment for any such information which is disclosed to a governmental agency
or group.  Each Party agrees to provide to the other Party with a copy of any
public announcement as soon as reasonably practicable under the circumstances
prior to its scheduled release.  Except under extraordinary circumstances, each
Party shall provide the other with an advance copy of any press release at least
five (5) business days prior to the scheduled disclosure.  Each Party shall have
the right to expeditiously review and recommend changes to any announcement
regarding this Agreement or the subject matter of this Agreement; provided,
however that such right of review and recommendation shall only apply for the
first time that specific information is to be disclosed, and shall not apply to
the subsequent disclosure of substantially similar information that has
previously been disclosed.  Except as otherwise required by law or by a stock
exchange or quotation system, the Party whose press release has been reviewed
shall remove any information the reviewing Party reasonably deems to be
inappropriate for disclosure.

ARTICLE VII - INTELLECTUAL PROPERTY RIGHTS; FILING, PROSECUTION AND MAINTENANCE
OF PATENT RIGHTS

7.00 - BAYER Intellectual Property Rights

     (a)  BAYER Technology. BAYER shall have sole and exclusive ownership of all
right, title and interest on a worldwide basis in and to any and all BAYER
Technology, with full rights to license or sublicense, subject to the
obligations under Article IV and Article VIII as set forth herein.  Without
limiting the foregoing, BAYER shall be the sole owner of all Patent Rights,
trade secret rights, Technology and any other intellectual property rights in
the BAYER Technology, including the exclusive right to exclude others from
making, using, selling, offering for sale or importing the BAYER Technology and
any BAYER Products derived therefrom.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      29


BAYER and CURAGEN Pharmacogenomics Project Agreement

     (b)  BAYER Proprietary Material. The BAYER Proprietary Material shall
remain the property of BAYER. CURAGEN's rights to use the BAYER Proprietary
Material will be governed by the provisions of this Agreement.

     (c)  Further Assurances. CURAGEN agrees to execute all documents,
including, but not limited to, any assignments, deemed reasonably necessary by
BAYER to assign to BAYER all of CURAGEN's ownership rights with respect to the
BAYER Technology and any BAYER Products derived therefrom.

7.01 - CURAGEN Intellectual Property Rights

     (a)  CURAGEN Technology. CURAGEN shall have sole and exclusive ownership of
all right, title and interest on a worldwide basis in and to any and all CURAGEN
Technology, with full rights to license or sublicense, subject to the
obligations under Article IV, VIII and IX as set forth herein. Without limiting
the foregoing, except as otherwise provided herein, CURAGEN shall be the sole
owner of all Patent Rights, all trade secret rights, all Technology and any
other intellectual property rights in the CURAGEN Technology including the
exclusive right to exclude others from making, using, selling, offering for sale
or importing the CURAGEN Technology or any products derived from any CURAGEN
Technology.

     (b)  CURAGEN Proprietary Material.  CURAGEN Discovery Tools; CURAGEN
Proprietary DBs. The CURAGEN Proprietary Material, the CURAGEN Discovery Tools
and the CURAGEN Proprietary DBs shall remain the property of CURAGEN.  BAYER's
rights to use the CURAGEN Proprietary Material, CURAGEN Discovery Tools and
CURAGEN Proprietary DBs will be governed by the provisions of this Agreement.

     (c)  Further Assurances. BAYER agrees to execute all documents, including,
but not limited to, any assignments deemed reasonably necessary by CURAGEN to
assign to CURAGEN all of BAYER's ownership rights with respect to the CURAGEN
Technology.

7.02 - Filing, Prosecution and Maintenance of Patent Rights

     During the Pharmacogenomics Program Term, with respect to any Patent Rights
arising under the Pharmacogenomics Program, the following provisions shall
apply.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      30


BAYER and CURAGEN Pharmacogenomics Project Agreement

     (a)  Responsibility for Filing and Prosecution of Patents.

          (i)    Subject to subsection (ii) of this Section 7.02(a), CURAGEN, at
its sole expense and acting through patent attorneys or agents of its choice,
shall prepare, file prosecute and maintain all Patent Rights relating to the
CURAGEN Technology, the Marker Genes and any CURAGEN Diagnostic Products that
have reverted to CURAGEN in accordance with Section 4.02 of this Agreement. In
the event that any invention shall be made that constitutes CURAGEN Program
Technology or that relates to Marker Genes and which CURAGEN believes should be
patented, CURAGEN shall notify BAYER accordingly and shall consult with BAYER
with respect to its strategy for seeking patent protection for the said
invention. CURAGEN shall give reasonable consideration to any suggestions or
recommendations of BAYER concerning the preparation and filing of patent
applications covering the said invention and the countries in which applications
should be filed. CURAGEN shall notify BAYER of its proposed filing at least
sixty (60) days prior to the deadline for filing. BAYER agrees to provide
reasonable assistance and cooperation to CURAGEN to facilitate the preparation
and filing of any such patent applications. In the event that BAYER wishes a
patent application to be filed in respect of the said invention in a particular
country in which CURAGEN does not propose to file, then the costs of filing and
prosecuting that application in that country shall be borne entirely by BAYER,
who shall be entitled to use for that purpose patent attorneys or agents of its
choice.

          (ii)   Subject to subsection (i) of this Section 7.02(a), BAYER, at
its sole expense and acting through patent attorneys or agents of its choice,
shall prepare, file, prosecute and maintain all Patent Rights relating to the
BAYER Technology (other than with respect to Marker Genes), Program Diagnostic
Products, any CURAGEN Diagnostic Products that are deemed to be a Program
Diagnostic Product under Section 4.02 of this Agreement and, to the extent not
covered in a patent filed pursuant to subsection (i) above, all Patent Rights
relating to BAYER Products. In the event that any invention shall be made that
constitutes BAYER Program Technology (other than with respect to Marker Genes),
or that covers a BAYER Product and which BAYER believes should be patented,
BAYER shall notify CURAGEN accordingly and shall consult with

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      31


BAYER and CURAGEN Pharmacogenomics Project Agreement

CURAGEN with respect to its strategy for seeking patent protection for the said
invention. BAYER shall give reasonable consideration to any suggestions or
recommendations of CURAGEN concerning the preparation and filing of patent
applications covering the said inventions and the countries in which
applications should be filed. BAYER shall notify CURAGEN of BAYER's proposed
filing at least sixty (60) days prior to the deadline for filing. CURAGEN agrees
to provide reasonable assistance and co-operation to BAYER to facilitate the
preparation and filing of any such patent applications. In the event that
CURAGEN wishes a patent application to be filed in respect of the said invention
in a particular country in which BAYER does not propose to file, then the costs
of filing and prosecuting that application in that country shall be borne
entirely by CURAGEN who shall be entitled to use for that purpose patent
attorneys or agents of its choice.

     (b)  Information and Cooperation.

          (i)    The filing Party shall keep the other Party regularly informed
of the status of the Patent Rights for which the filing Party is responsible in
accordance with this Section 7.02 and shall provide the other Party at least
once per fiscal year with an updated list of the patents and patent applications
comprising its Patent Rights. The filing Party shall additionally notify the
other Party of the grant, lapse, revocation, surrender or abandonment of any
patent or patent application included among the Patent Rights for which the
filing Party is responsible.

          (ii)   Except as otherwise agreed by the Parties, the filing Party
shall provide copies to the other Party of all filings and correspondence with
the patent offices, administrative boards or courts which the filing Party sends
or receives in connection with filing, prosecution, maintenance and defense of
the Patent Rights for which the filing Party is responsible. The filing Party
shall provide copies of filings and correspondence under the preceding sentence
sufficiently in advance of the due date so as to give the other Party sufficient
time to comment and shall give good faith consideration to the other Party's
comments, which comments shall be offered promptly. The filing Party shall seek
the advice of the other Party with respect to strategy for the Patent Rights

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      32


BAYER and CURAGEN Pharmacogenomics Project Agreement

for which it is responsible and shall give reasonable consideration to any
suggestions or recommendations of the other Party concerning the preparation,
filing, prosecution, maintenance and defense of such Patent Rights. If the
Parties disagree on a particular approach to take with respect to the filing,
prosecution or defense of any Patent Rights relating to BAYER Products, CURAGEN
shall have the right to request BAYER to take whatever action is possible to
protect the interests of CURAGEN, provided that the protection afforded to BAYER
is not diminished.

     (c)  Abandonment. If a filing Party decides to abandon or to allow to lapse
any of its Patent Rights or, in the case of BAYER, any Patent Rights relating to
a BAYER Product, and, in the case of CURAGEN, any Patent Rights relating to a
Marker Gene, the filing Party shall inform the other Party at least forty-five
(45) days prior to the effective date of such decision and the other Party shall
be given the opportunity to assume responsibility for continuing the prosecution
of such Patent Rights or paying any required fees to maintain such Patent Rights
or defending such Patent Rights at the other Party's sole expense and through
patent attorneys or agents of its choice.  The other Party shall not become an
assignee of such Patent Rights as a result of its said assumption of
responsibility.  Upon transfer of a Party's responsibility for prosecuting,
maintaining and defending any of its Patent Rights to the other Party under the
preceding sentence, the transferring Party shall promptly deliver to the other
Party all necessary files related to the Patent Rights with respect to which
responsibility has been transferred and shall take all actions and execute all
documents reasonably necessary for the other Party to assume prosecution.

7.03 - Amendment to Patent Rights

     The Parties shall mutually agree prior to either Party taking any action
which would amend any patent application or patent within its Patent Rights
licensed to the other Party under this Agreement so as to irrevocably limit or
materially change the lawful scope of such Patent Rights; provided, however,
that such obligation shall not apply to any Patent Rights being

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      33


BAYER and CURAGEN Pharmacogenomics Project Agreement

prosecuted by one Party in which the other Party has no rights (either by
ownership or license) hereunder.

7.04 - Actual or Threatened Infringement.

     (a)  In the event either Party becomes aware of any possible infringement
or unauthorized possession, knowledge or use of any BAYER Patent Rights or
CURAGEN Patent Rights (an "Infringement"), that Party shall promptly notify the
other Party and provide it with full details.

     (b)  Except as set forth in Section 7.04(c), the Party owning the affected
Patent Rights shall be primarily responsible for enforcing them against the
infringer at the owning Party's expense and the other Party shall co-operate
fully with the owning Party in taking such action.  In the event that the owning
Party is unwilling to enforce its Patent Rights against the infringer, it shall
authorize the other Party, at the other Party's request and expense, to
institute proceedings against the infringer on behalf of the owning Party and,
in any such case, the other Party shall retain any damages awarded against the
infringer.

     (c)  Notwithstanding the foregoing (i) if any Infringement primarily
affects a BAYER Product or any Marker Gene, BAYER shall be primarily responsible
at its expense for enforcing such affected Patent Rights against the infringer
and (ii) if any Infringement primarily affects the CURAGEN Screening Services or
CURAGEN Services, CURAGEN shall be primarily responsible at its expense for
enforcing the affected Patent Rights against the infringer.

     (d)  In any suit under this Section 7.04, the Party bringing the suit shall
have the right first to reimburse itself out of any sums recovered in such suit
or in its settlement for all reasonable costs and expenses, including reasonable
attorney's fees, related to such suit or settlement.  The remainder is next to
be used to reimburse the other Party for its costs and expenses so incurred, if
any, and then (i) in the event of an action brought by CURAGEN under this
Section 7.04, any amounts recovered shall be added by CURAGEN to its Net Sales
in the payment period in which it is received from the infringing Party and (ii)
in the event of an action brought by BAYER under this Section 7.04, any amounts
recovered shall be added by BAYER to its Net Sales in the payment period in
which it is received from the infringing Party.  Each

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      34


BAYER and CURAGEN Pharmacogenomics Project Agreement

Party shall always have the right to be represented by counsel of its own
selection and at its own expense in any suit instituted under this Section by
the other Party for Infringement.

     (e)  No suit under Section 7.04 may be settled by the Party bringing the
action without the other Party's consent, which shall not be unreasonably
withheld or delayed.

7.05 - Defense of Claims

     (a)  Except as provided in Section 7.05(b) below, in the event that any
action, suit or proceeding is brought against CURAGEN or BAYER or any Affiliate,
licensee or sublicensee of BAYER, alleging the infringement of the intellectual
property rights of a Third Party by reason of the discovery, development,
manufacture, use, sale, offer for sale or importation of a BAYER Product or use
of BAYER Patent Rights or BAYER Technology in the discovery, development,
manufacture, use, sale, offer for sale, or importation of a BAYER Product, BAYER
will have the obligation to defend itself and CURAGEN in such action, suit or
proceeding at its own expense.  CURAGEN shall have the right to separate counsel
at its own expense in any such action or proceeding.

     (b)  In the event that any action, suit or proceeding is brought against
BAYER or CURAGEN, or any Affiliate, licensee or sublicensee of CURAGEN, alleging
the infringement of the intellectual property rights of a Third Party by reason
of (i) the discovery, development, manufacture, use, sale, offer for sale, or
importation of a BAYER Product that is dominated by CURAGEN Patent Rights, (ii)
the development, use, sale or offer for sale of CURAGEN Services or CURAGEN
Screening Services or (iii) the use of CURAGEN Patent Rights, CURAGEN Licensed
Technology or BAYER Patent Rights in the development, use, sale or offer for
sale of CURAGEN Services or CURAGEN Screening Services, CURAGEN will have the
obligation to defend itself and BAYER in such action, suit or proceeding at its
own expense. BAYER shall have the right to separate counsel at its own expense
in any such action or proceeding.

     (c)  The Parties will cooperate with each other in the defense of any
such suit, action or proceeding.  The Parties will give each other prompt
written notice of the

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      35


BAYER and CURAGEN Pharmacogenomics Project Agreement

commencement of any such suit, action or proceeding or claim of infringement and
will furnish each other a copy of each communication relating to the alleged
infringement. Neither Party shall compromise, litigate, settle or otherwise
dispose of any such suit, action or proceeding which involves the use of the
other's Technology or Patent Rights without the other Party's advice and prior
consent; provided that the Party not defending the suit shall not unreasonably
withhold its consent to any settlement which does not have a material adverse
effect on its business. If the defending Party agrees that the other Party
should institute or join any suit, action or proceeding pursuant to this
Section, the defending Party may at its expense, join the other Party as a Party
to the suit, action or proceeding, and the Party so joined shall execute all
documents and take all other actions, including giving testimony, which may
reasonably be required in connection with the prosecution of such suit, action
or proceeding.

7.06 - Cooperation

     Each Party shall, at the expense of the Party bringing any suit, execute
all papers and perform such other acts as may be reasonably required to maintain
any infringement suit brought in accordance with Section 7.04 or 7.05 above
(including giving legal consent for bringing such suit, and agreeing to be named
as either a plaintiff or defendant, or otherwise joined in such suit), and at
its option and expense, may be represented in such suit by counsel of its
choice.

ARTICLE VIII - EXPIRATION AND TERMINATION

8.00 - Term of the Agreement

     This Agreement shall become effective on the Effective Date and terminate
upon the expiration of the Pharmacogenomics Program Term, unless both Parties
agree to extend the period or unless the Agreement is earlier terminated in
accordance with the terms and conditions hereof.

8.01 -Termination by Mutual Agreement

     The Parties have the right to terminate this Agreement and the
Pharmacogenomics Program at any time by mutual agreement in writing.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      36


BAYER and CURAGEN Pharmacogenomics Project Agreement

8.02 - Termination for Material Breach

     This Agreement may be terminated by a Party (the "Terminating Party") upon
any material breach of this Agreement by the other Party (the "Breaching
Party"), effective [___________] after giving written notice to the Breaching
Party of such termination in the case of a payment breach and [___________] days
after giving written notice to the Breaching Party of such termination in the
case of any other material breach, which notice shall describe such breach in
reasonable detail.  The foregoing notwithstanding, if the default or breach is
cured or shown to be non-existent within the aforesaid [______________] period,
the notice shall be deemed automatically withdrawn and of no effect.

8.03 - Termination Following Bankruptcy

     If either Party makes an assignment for the benefit of creditors, appoints
or suffers appointment of a receiver or trustee over all or substantially all of
its property, files a petition under any bankruptcy or insolvency act or has any
such petition filed against it which is not discharged within [____________] of
the filing thereof, then the other Party may terminate this Agreement by notice
to such Party.

8.04 - Termination by BAYER

     (a)  Completion of Production Phase.  BAYER shall have the right to
terminate this Agreement [_________________________________________________].

     (b)  Change of Control of CURAGEN.  In the event of a Change of Control of
CURAGEN involving a Competitive Entity, CURAGEN shall deliver promptly to BAYER
written notice setting forth the date and circumstances of the Change of Control
and the identity of the Competitive Entity.  Upon receipt of such notice, or
upon delivery to CURAGEN of written notice by BAYER that BAYER has otherwise
determined that a Change of Control involving a Competitive Entity has occurred,
and for a period of [___________] thereafter, BAYER shall have the right to
terminate this Agreement effective upon the expiration of [_____________]
period.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      37


BAYER and CURAGEN Pharmacogenomics Project Agreement

8.05 - Effect of Termination

     (a)  General.  Except as set forth in Section 8.05(b) or (c), upon
termination of this Agreement, (i) CURAGEN shall continue to have the rights and
licenses described in Section 4.01(b) above, and (ii) BAYER shall continue to
have the rights and licenses described in Section 4.00 above, subject, in each
case, to continued compliance with obligations related to such licenses, such as
the royalty provisions of Article IV.

     (b)  Termination Prior to Expiration of Set-Up Phase.  In the event that
BAYER terminates this Agreement pursuant to Section 3.00 (c)(iv) (A) (a), all
the licenses (other than the license granted pursuant to Section 4.01 (b) (ii))
granted by BAYER to CURAGEN shall terminate and CURAGEN shall use commercially
reasonable efforts to deliver any portion of the CURAGEN Deliverables which
CURAGEN has produced and not yet delivered to BAYER;
[_________________________________________________________].  If BAYER
terminates this Agreement pursuant to Section 3.00 (c) (iv) (A) (b),  (i) all
the licenses granted by BAYER to CURAGEN under this Agreement, other than those
granted pursuant to Section 4.01, shall terminate, (ii) CURAGEN shall use
commercially reasonable efforts to deliver any portion of the CURAGEN
Deliverables which CURAGEN has produced and not yet delivered to BAYER and (iii)
if, within [___________] of such termination, CURAGEN sells, assigns, delivers,
transfers, leases, licenses, sublicenses or otherwise provides services in
connection with such CURAGEN Deliverables to a Third Party, CURAGEN will pay to
BAYER, [_____________________________________________________________].

     (c)  Termination for Material Breach. Notwithstanding subsection (a) above,
upon termination of this Agreement under Section 8.02 all relevant licenses
granted by the Terminating Party to the Breaching Party hereunder shall
automatically terminate, and if the Breaching Party is CURAGEN, CURAGEN shall be
deemed, without further action, to have forfeited its license from BAYER to
commercialize CURAGEN Screening Services and CURAGEN Services. Notwithstanding
the foregoing, the Parties hereby agree that nothing in this Section 8.05(c)
shall affect BAYER's ownership rights with respect to BAYER Targets,

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      38


BAYER and CURAGEN Pharmacogenomics Project Agreement

BAYER Proprietary Materials, BAYER Compounds and BAYER SNP Targets or CURAGEN's
ownership rights with respect to CURAGEN Proprietary Materials.

     (d)  Additional Rights Upon Termination. Upon termination of this Agreement
for any reason, other than because of a breach by BAYER pursuant to Section
8.02, (i) CURAGEN shall (A) be deemed to have granted to BAYER and its
Affiliates, without any further action by the Parties, a non-exclusive,
perpetual, royalty-free, worldwide license under CURAGEN's interest in the
Predictive Toxicogenomics Technology and the Proteomics Technology for the
purpose of manufacturing, having manufactured using, selling developing and/or
having developed, BAYER Products and (B) grant to BAYER a non-exclusive,
perpetual license under CURAGEN's interest in the Discovery Tool Technology and
Discovery Tool Improvements for the purpose of developing BAYER Products on
terms financially equivalent to those CURAGEN is then receiving from its most
favored Third Party customers and subscribers, as negotiated by the Parties in
good faith and (ii) CURAGEN shall provide BAYER with any copies of the
Pharmacogenomics Data that CURAGEN did not previously deliver to BAYER prior to
the termination of the Pharmacogenomics Program. The license in (d)(i)(B) above
shall include the terms of the software license as set forth in Appendix E
attached hereto.

8.06 - Obligations

     Upon any termination of this Agreement, the Parties shall remain liable for
all obligations accruing prior to the date of termination.

8.07 - Remedies

     If either Party shall fail to perform or observe its material obligations,
or otherwise breaches any of its material obligations under this Agreement, in
addition to any right to terminate this Agreement, the non-defaulting Party
shall have the right to any other relief or remedies available under law or
equity.

8.08 - Surviving Provisions

     Except as provided in Subsections 8.05(b) and (c) and Section 10.27, the
rights and obligations set forth in Articles IV (other than 4.01(a)) VI, VII, IX
and X and Sections 8.05, 8.06, 8.07, and 8.08 shall survive expiration or
termination of this Agreement.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      39


BAYER and CURAGEN Pharmacogenomics Project Agreement

ARTICLE IX - BAYER GENE PROCESSING FACILITY; NON-COMPETE AGREEMENT

9.00 - BAYER Facility

     (a)  Upon BAYER's written request, which request shall not be made at
any time earlier than one (1) year prior to the expiration of the
Pharmacogenomics Program Term, or upon any termination of the Pharmacogenomics
Program for any reason other than (i) by CURAGEN pursuant to Section 8.02 for
breach of this Agreement by BAYER [or (ii) by BAYER pursuant to Section
3.00(c)(iv) above], CURAGEN [___________________________________________].  The
license described in Section 9.00(a)(ii) above shall include the terms of the
software license as set forth in Appendix E attached hereto.

     (b)  BAYER shall pay CURAGEN for its consulting services described above
[____________________________________].

9.01 - Non-Competition.

     In consideration of the performance by CURAGEN of the services and the
grant to BAYER of the licenses described in this Article IX, BAYER hereby agrees
that during the period
[___________________________________________________________________].

ARTICLE X - REPRESENTATIONS AND WARRANTIES; MISCELLANEOUS

10.00 - Due Organization.

     BAYER and CURAGEN each represents and warrants to the other that as of the
Effective Date it (a) is a company duly organized, validly existing, and in good
standing under the laws of the jurisdiction of organization; (b) is duly
qualified as a corporation and in good standing under the laws of each
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification, where the failure to be so qualified would

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      40


BAYER and CURAGEN Pharmacogenomics Project Agreement

have a material adverse effect on its financial condition or its ability to
perform its obligations hereunder; (c) has the requisite corporate power and
authority and the legal right to conduct its business as now conducted and
hereafter contemplated to be conducted; (d) has all necessary licenses, permits,
consents, or approvals from or by, and has made all necessary notices to, all
governmental authorities having jurisdiction, to the extent required for such
ownership and operation; and (e) is in compliance with its certificate of
incorporation (or equivalent organizational document) as applicable, and by-
laws.

10.01 - Consents.

     BAYER and CURAGEN each represents and warrants to the other that all
necessary consents, approvals and authorizations of all government authorities
and other persons required to be obtained by such Party in connection with the
execution, delivery and performance of this Agreement have been and shall be
obtained, except with respect to approvals required under the HSR Act.

10.02 - Execution, Delivery and Performance.

     BAYER and CURAGEN each represents and warrants to the other that the
execution, delivery and performance of this Agreement by such Party and all
instruments and documents to be delivered by such Party hereunder (a) are within
the corporate power of such Party; (b) have been duly authorized by all
necessary or proper corporate action; (c) do not conflict with any provision of
the certificate of incorporation (or equivalent organizational document), as
applicable, or by-laws of such Party; (d) will not violate any law or regulation
or any order or decree of any court of governmental instrumentality; (e) will
not violate any terms of any indenture, mortgage, deed of trust, lease,
agreement, or other instrument to which such Party is a party or by which such
Party or any of its property is bound, which violation would have a material
adverse effect on its financial condition or on its ability to perform its
obligations hereunder; and (f) do not require any filing or registration with or
the consent or approval of any governmental body, agency, authority or any other
Person, which has not been made or obtained previously, other than to the U.S.
Department of Justice with respect to the HSR Act, to the FDA or equivalent
regulatory agency in a country or group of countries other than the United
States.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      41


BAYER and CURAGEN Pharmacogenomics Project Agreement

10.03 - Legal, Valid and Binding Obligation.

     BAYER and CURAGEN each represents and warrants to the other that this
Agreement has been duly executed and delivered by such Party and constitutes a
legal, valid and binding obligation of such Party, enforceable against such
Party in accordance with its terms, except as such enforceability may be limited
by applicable insolvency and other laws affecting creditors' rights generally or
by the availability of equitable remedies.

10.04 - No Conflict.

     BAYER and CURAGEN each represents and warrants to the other that
notwithstanding anything to the contrary in this Agreement, the execution and
delivery of this Agreement, the performance of such Party's obligations
hereunder and the conduct of the Pharmacogenomics Program (a) do not conflict
with or violate any requirement of applicable laws or regulations and (b) do not
and will not conflict with, violate or breach or constitute a default or require
any consent under, any contractual obligations of such Party, except such
consents as shall have been obtained prior to the Effective Date.

10.05 - Employee Obligations.

     BAYER and CURAGEN each represents and warrants to the other that all of its
employees, officers, and consultants have executed agreements or have existing
obligations under law requiring, in the case of employees and officers,
assignment to such Party of all inventions made during the course of and as the
result of their association with such Party and obligating the individual to
maintain as confidential such Party's Confidential Information as well as
confidential information of a Third Party which such Party may receive, to the
extent required to support such Party's obligations under this Agreement.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      42


BAYER and CURAGEN Pharmacogenomics Project Agreement

10.06 - CURAGEN Intellectual Property.

     CURAGEN further hereby represents and warrants to BAYER as follows:

     (a)  Ownership of CURAGEN Licensed Patent Rights and CURAGEN Licensed
     Technology.

     CURAGEN owns or otherwise has the right to use or license in accordance
with the terms of this Agreement, the CURAGEN Patent Rights used by CURAGEN or
licensed to BAYER hereunder (the "CURAGEN Licensed Patent Rights") and the
CURAGEN Technology used by CURAGEN or licensed to BAYER hereunder (the "CURAGEN
Licensed Technology"), and except as set forth on Schedule 10.06(a), to
CURAGEN's Knowledge, no Third Party (including any government) has any license,
claim or other right or interest in or to such CURAGEN Licensed Patent Rights or
CURAGEN Licensed Technology.  To CURAGEN's Knowledge, such CURAGEN Licensed
Patent Rights and CURAGEN Licensed Technology may be exclusively licensed and
sublicensed as hereunder provided, in the case of the CURAGEN Licensed Patent
Rights and CURAGEN Licensed Technology without payment of any royalty, fee or
incurring any other obligation to any Third Party (except with respect to any
statutory march-in rights).  To CURAGEN's Knowledge, the conduct by CURAGEN of
the Pharmacogenomics Program in accordance with the Pharmacogenomics Program
Plan does not infringe or conflict with the rights of any Third Party in respect
of Technology or issued patents or published patent applications owned by such
Third Party.

     (b)  Validity and Enforceability of Patents.

     The issued patents included in the CURAGEN Licensed Patent Rights are valid
and enforceable to CURAGEN's Knowledge.

     (c)   Investigation of Prior Art.

     CURAGEN has made all reasonable inquiries and has diligently conducted a
reasonably complete investigation of Third Party prior art as part of CURAGEN's
preparation and prosecution of the CURAGEN Licensed Patent Rights, and has
reviewed all relevant information and prior art obtained or derived from such
investigation.  CURAGEN has disclosed all material prior art of which it has
Knowledge related to the CURAGEN Licensed Patent Rights and other

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      43


BAYER and CURAGEN Pharmacogenomics Project Agreement

material information obtained or derived from such investigation to BAYER as of
the date hereof, in each case to the full extent requested by BAYER.

     (d)  No Infringement of CURAGEN Intellectual Property.

     CURAGEN has no Knowledge of any infringement of the CURAGEN Licensed Patent
Rights, or any misappropriation of the CURAGEN Licensed Technology by any Third
Party.

     (e)  Work-For-Hire.

     To CURAGEN's Knowledge, all of the research and development work performed
in connection with any of the CURAGEN Licensed Technology prior to the Execution
Date or Effective Date, as applicable, was performed solely under an obligation
to assign to CURAGEN or one of its Affiliates, and was performed in accordance
with applicable law and in compliance with all applicable regulatory
requirements, and all such rights have been properly assigned to CURAGEN,
including any and all rights of CURAGEN's employees and the employees of
CURAGEN's Affiliates.

     (f)  No Claims or Suits Regarding CURAGEN Intellectual Property.

     There are no judicial, arbitral, regulatory or administrative proceedings
or, to CURAGEN's Knowledge, investigations, claims, actions or suits relating to
the CURAGEN Licensed Patent Rights or the CURAGEN Licensed Technology in any
court or by or before any governmental body or agency, including product
liability or compliance with good manufacturing practices or state or federal
food and drug laws and, to CURAGEN's Knowledge, no such judicial, arbitral,
regulatory or administrative proceedings or investigations, actions or suits
have been threatened against CURAGEN or its Affiliates.

10.07 - BAYER Intellectual Property

     BAYER further hereby represents and warrants to CURAGEN as follows:

     (a)  Ownership of BAYER Licensed Patent Rights and BAYER Licensed
Technology.

     BAYER owns or otherwise has the right to use or license in accordance with
the terms of this Agreement the Patent Rights of BAYER licensed to CURAGEN
hereunder (the "BAYER

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      44


BAYER and CURAGEN Pharmacogenomics Project Agreement

Licensed Patent Rights") and the Technology of BAYER licensed to CURAGEN
hereunder (the "BAYER Licensed Technology"), and to BAYER's Knowledge, no Third
Party (including any government) has any license, claim or other right or
interest in or to the BAYER Licensed Patent Rights or the BAYER Licensed
Technology. To BAYER's Knowledge, the BAYER Licensed Patent Rights and the BAYER
Licensed Technology may be exclusively licensed as hereunder provided, in the
case of the BAYER Licensed Patent Rights and BAYER Licensed Technology without
payment of any royalty, fee or incurring any other obligation to any Third Party
(except with respect to any statutory march-in rights). To BAYER's Knowledge,
the conduct by BAYER of the Pharmacogenomics Program Plan does not infringe or
conflict with the rights of any Third Party in any material respect of
Technology or issued patents owned by such Third Party.

     (b)  Validity and Enforceability of Patents.

     The issued patents included in the BAYER Licensed Patent Rights are valid
and enforceable to BAYER's Knowledge.

     (c)  Investigation of Prior Art.

     BAYER has made all reasonable inquiries and has diligently conducted a
reasonably complete investigation of Third Party prior art as part of BAYER's
preparation and prosecution of the BAYER Licensed Patent Rights, and has
reviewed all relevant information and prior art obtained or derived from such
investigation.  BAYER has disclosed all material prior art of which it has
Knowledge related to the BAYER Licensed Patent Rights and other material
information obtained or derived from such investigation to CURAGEN as of the
date hereof, in each case to the full extent requested by CURAGEN.

     (d)  No Infringement of BAYER Intellectual Property.

     BAYER has no Knowledge of any infringement of the BAYER Licensed Patent
Rights, or any misappropriation of the BAYER Licensed Technology by any Third
Party.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      45


BAYER and CURAGEN Pharmacogenomics Project Agreement

     (e)  Work-For-Hire.

     To BAYER's Knowledge, all of the research and development work performed in
connection with any of the BAYER Licensed Technology prior to the Execution Date
or Effective Date was performed solely under an obligation to assign to BAYER or
one of its Affiliates, and was performed in accordance with applicable law and
in compliance with all applicable regulatory requirements, and all such rights
have been properly assigned to BAYER, including any and all rights of BAYER's
employees and the employees of BAYER's Affiliates.

     (f)  No Claims or Suits Regarding BAYER Intellectual Property.

     There are no judicial, arbitral, regulatory or administrative proceedings
or to BAYER's Knowledge, investigations, claims, actions or suits relating to
the BAYER Licensed Patent Rights or the BAYER Licensed Technology in any court
or by or before any governmental body or agency, including product liability or
compliance with good manufacturing practices or state or federal food and drug
laws and, to BAYER's Knowledge, no such judicial, arbitral, regulatory or
administrative proceedings or investigations, actions or suits have been
threatened against BAYER or its Affiliates.

10.08 - Contracts

     (a)  CURAGEN represents and warrants to BAYER that it is not a party to any
contract that, if terminated, would materially adversely affect CURAGEN's
ability to conduct the Pharmacogenomics Program in accordance with the
Pharmacogenomics Program Plan.

     (b)  BAYER represents and warrants to CURAGEN that it is not a party to any
contract that, if terminated, would materially adversely affect BAYER's ability
to conduct the Pharmacogenomics Program in accordance with the Pharmacogenomics
Program Plan.

10.09 - No Material Omissions.

     Each of BAYER and CURAGEN represents and warrants to the other that such
Party has not, up through and including the Effective Date, omitted to furnish
to the other Party with any information in its control or possession or of which
it has Knowledge concerning (a) its Patent

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      46


BAYER and CURAGEN Pharmacogenomics Project Agreement

Rights, (b) its Technology, or (c) the activities contemplated by this
Agreement, which in such Party's opinion would be material to the other Party's
decision to enter into this Agreement and to undertake the commitments and
obligations set forth herein.

10.10 - No Warranties

     EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN OR IN THE STOCK PURCHASE
AGREEMENT OR IN THE METABOLIC DISORDER COLLABORATION AGREEMENT, THE PARTIES MAKE
NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED, AND PARTICULARLY (1) THAT PRODUCTS WILL BE SUCCESSFULLY DEVELOPED
HEREUNDER, AND IF DEVELOPED, WILL HAVE COMMERCIAL UTILITY OR MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE AND (2) AS TO ANY BIOLOGICAL MATERIALS PROVIDED
UNDER THIS AGREEMENT.

10.11 - Survival

     The representations and warranties set forth in this Agreement are made as
of the Execution Date and the Effective Date and shall survive the Effective
Date.

10.12 - Liability

     NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE, NEITHER PARTY
WILL BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY
CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR
(I) ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES OR LOST PROFITS
OR (II) COST OF PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY OR SERVICES,
NOTWITHSTANDING THAT A PARTY WAS AWARE OF THE POSSIBILITY OF SUCH DAMAGES.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      47


BAYER and CURAGEN Pharmacogenomics Project Agreement

10.13 - Notices

     Any notices, requests, deliveries, approvals or consents required or
permitted to be given under this Agreement to BAYER or CURAGEN shall be in
writing and shall be personally delivered or sent by facsimile (with written
confirmation to follow via courier or certified mail as set forth below),
overnight courier providing evidence of receipt or certified mail, return
receipt requested, postage prepaid, in each case to the respective address
specified below (or to such address as may be specified in writing to the other
Party hereto):

     If to CURAGEN:      555 Long Wharf Drive, 11th Floor
                         New Haven, CT  06511
                         Attn:  Executive Vice President, Business Development
                         Telephone: (203) 401-3330
                         Facsimile:  (203) 401-3333

     With a copy to:     Mintz, Levin, Cohn, Ferris,
                         Glovsky and Popeo, P.C.
                         One Financial Center
                         Boston, MA 02111
                         USA
                         Attn:  Jeffrey M. Wiesen, Esq.
                         Telephone:  (617) 542-6000
                         Facsimile:  (617) 542-2241

     If to BAYER:        BAYER AG
                         D 51368 Leverkusen
                         Federal Republic of Germany
                         Attention:  General Counsel
                         Telephone: 011 49 214 30 81805
                         Facsimile:  011 49 214 30 50848

     With a copy to:     Wilmer, Cutler & Pickering
                         2445 M Street NW
                         Washington, DC 20037
                         Attention:  Richard W. Cass, Esq.
                         Telephone:  (202) 663-6503
                         Facsimile: (202) 663-6363

     Such notices shall be deemed to have been sufficiently given on:  a) the
date sent if delivered in person, b) the next business day after dispatch in the
case of transmission by

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      48


BAYER and CURAGEN Pharmacogenomics Project Agreement

facsimile, c) three (3) business days after dispatch in the case of overnight
courier or d) five (5) business days after deposit in the US mail in the case of
certified mail.

10.14 - Dispute Resolution and Arbitration

     (a)  All disputes arising out of this Agreement and referred to arbitration
shall be finally resolved by arbitration conducted in the English language in
London, England in accordance with the arbitration Rules of the United Nations
Commission on International Trade Law ("UNCITRAL").  Each Party shall appoint an
arbitrator and the two arbitrators so appointed shall jointly appoint a third
arbitrator; provided, however that if they cannot agree (or if any one Party
refuses to appoint an arbitrator), than this third arbitrator shall be appointed
by the UNCITRAL.  If a Party fails to appoint an arbitrator within thirty (30)
days after a dispute is referred to arbitration, the UNCITRAL shall appoint an
arbitrator for such Party.  The UNCITRAL shall be the administrator of the
arbitration proceedings.

     (b)  The arbitrators shall rule on each disputed issue within [___________]
after the third arbitrator has accepted the appointment to serve as an
arbitrator; provided, however that if the arbitrators are unable to render a
decision within such [___________], they shall render such decision as soon
thereafter as is practicable.  The arbitrators shall issue a written decision in
order to explain the basis of the ruling.  The arbitrators shall not have the
authority to award consequential or punitive damages.

     (c)  The arbitrators shall be paid reasonable fees plus expenses.  These
fees and expenses, along with the reasonable legal fees and expenses of the
prevailing Party (including all expert witness fees and expenses), the fees and
expenses of a court reported, and any expenses for a hearing room, shall be paid
as follows:

          (i)    If the arbitrators rule in favor of one Party on all disputed
                 issues in the arbitration, the losing Party shall pay 100% of
                 such fees and expenses.

          (ii)   If the arbitrators rule in favor of one Party on some issues
                 and the other Party on other issues the arbitrators shall issue
                 with the ruling a written determination as to how such fees and
                 expenses shall be allocated between

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      49


BAYER and CURAGEN Pharmacogenomics Project Agreement

                 the Parties. The arbitrators shall allocate fees and expenses
                 in a way that bears a reasonable relationship to the outcome of
                 the arbitration, with the Party prevailing on more issues, or
                 on issues of greater value or gravity, recovering a relatively
                 larger share of its legal fees and expenses.

     (d)  Any decision or award of the arbitrators shall be final, conclusive,
and binding on the Parties to the dispute, and judgment may be entered on any
award in any court of competent jurisdiction.  To the extent lawful, the Parties
include any right of application or appeal to the English or other courts in
connection with any question of law arising in the arbitration or in connection
with any award or decision made by the arbitrators, except as is necessary to
recognize or enforce such award or decision.

10.15 - Currency

     Unless otherwise indicated, all monetary amounts referred to in this
Agreement are in United States currency.  Payment shall be made by wire transfer
or other mutually acceptable means to a bank account designated by CURAGEN.

10.16 - Limitations

     Except as expressly set forth in this Agreement, neither Party grants to
the other Party any right or license to any of its respective intellectual
property.

10.17 - No Implied Waiver; Rights Cumulative

     No failure on the part of CURAGEN or BAYER to exercise, and no delay in
exercising, any right, power, remedy or privilege under this Agreement, or
provided by statute or at law or in equity or otherwise, shall impair, prejudice
or constitute a waiver of any such right, power, remedy or privilege or be
construed as a waiver of any breach of this Agreement or as an acquiescence
therein, nor shall any single or partial exercise of any such right, power,
remedy or privilege preclude any other or further exercise thereof or the
exercise of any other right, power, remedy or privilege.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      50


BAYER and CURAGEN Pharmacogenomics Project Agreement

10.18 - Assignment

     Neither CURAGEN nor BAYER may assign this Agreement in whole or in part
without the consent of the other, except if such assignment occurs in connection
with the sale or transfer of all or substantially all of the business and assets
of CURAGEN, on the one hand, or BAYER, on the other, to which the subject matter
of this Agreement pertains.  Notwithstanding the foregoing, any Party may assign
its rights (but not its obligations) pursuant to this Agreement in whole or in
part to an Affiliate of such Party.

10.19 - Force Majeure

     No failure or omission by the Parties hereto in the performance of any
obligation of this Agreement shall be deemed a breach of this Agreement or
create any liability if the same shall arise from any cause or causes beyond the
control of the Parties, including, but not limited to, the following: acts of
God; acts or omissions of any government; any rules, regulations or orders
issued by any governmental authority or by any officer, department, agency or
instrumentality thereof; fire; storm; flood; earthquake; accident; war;
rebellion; insurrection; riot; and invasion and provided that such failure or
omission resulting from one of the above causes is cured as soon as is
practicable after the occurrence of one or more of the above-mentioned causes.

10.20 - No Strict Construction

     This Agreement has been prepared jointly and shall not be strictly
construed against any Party.

10.21 - Severability

     If any provision hereof should be held invalid, illegal or unenforceable in
any respect in any jurisdiction, then, to the fullest extent permitted by law,
(a) all other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in order to carry out the
intentions of the Parties as nearly as may be possible and (b) such invalidity,
illegality or unenforceability shall not affect the validity, legality or
enforceability of such provision in any other jurisdiction.  To the extent
permitted by applicable law, CURAGEN and

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      51


BAYER and CURAGEN Pharmacogenomics Project Agreement

BAYER hereby waive any provision of law that would render any provision hereof
prohibited or unenforceable in any respect.

10.22 - Independent Contractor

     It is understood an agreed that the relationship between the Parties
hereunder is that of independent contractors and that nothing in this Agreement
shall be construed as authorization for either CURAGEN or BAYER to act as agent
for the other.  The Program Directors and members of Product Teams shall remain
employees of BAYER or CURAGEN, as the case may be.

10.23 - BAYER Indemnification of CURAGEN

     BAYER agrees to defend CURAGEN and its Affiliates at its cost and expense,
and will indemnify and hold CURAGEN and its Affiliates and their respective
directors, officers, employees and agents (the "CURAGEN Indemnified Parties")
harmless from and against any losses, costs, damages, fees or expenses arising
out of any claim relating to (i) any breach by BAYER of any of its
representations, warranties or obligations pursuant to this Agreement or (ii)
personal injury from the development, manufacture, use, sale or other
disposition of any product or service offered by BAYER and/or its licensees or
collaborators unless the claim relates to patent infringement by CURAGEN.  In
the event of any such claim against the CURAGEN Indemnified Parties by any Third
Party, CURAGEN shall promptly notify BAYER in writing of the claim and BAYER
shall manage and control, at its sole expense, the defense of the claim and its
settlement.  The CURAGEN Indemnified Parties shall cooperate with BAYER and may,
at their option and expense, be represented in any such action or proceeding.
BAYER shall not be liable for any litigation costs or expenses incurred by the
CURAGEN Indemnified Parties without BAYER's prior written authorization.  In
addition, BAYER shall, not be responsible for the indemnification of any CURAGEN
Indemnified Party arising from any negligent or intentional acts by such party,
or as the result of any settlement or compromise by the CURAGEN Indemnified
Parties without BAYER's prior written consent.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      52


BAYER and CURAGEN Pharmacogenomics Project Agreement

10.24 - CURAGEN Indemnification of BAYER

     CURAGEN agrees to defend BAYER and its Affiliates at its cost, and will
indemnify and hold BAYER and its Affiliates and its respective directors,
officers, employees and agents (the "BAYER Indemnified Parties") harmless from
and against any losses, costs, damages, fees or expenses arising out of any
claim relating to (i) any breach by CURAGEN of any of its representations,
warranties or obligations pursuant to this Agreement or (ii) personal injury
from the development, manufacture, use, sale or other disposition of any product
or service offered by CURAGEN or its licensees or collaborators unless the claim
relates to patent infringement by BAYER.  In the event of any claim against the
BAYER Indemnified Parties by, any Third Party, BAYER shall promptly notify
CURAGEN in writing of the claim and CURAGEN shall manage and control, at its
sole expense, the defense of the claim and its settlement.  The BAYER
Indemnified Parties shall cooperate with CURAGEN and may, at their option and
expense, be represented in any such action or proceeding.  CURAGEN shall not be
liable for any litigation costs or expenses incurred, by the BAYER Indemnified
Parties without CURAGEN's prior written authorization.  In addition, CURAGEN
shall not be responsible for the indemnification of any BAYER Indemnified Party
arising from any negligent or intentional acts by such party, or as the result
of any settlement or compromise by the BAYER Indemnified Parties without
CURAGEN's prior written consent.

10.25 - Captions and Headings

     The captions and headings appearing in this Agreement have been inserted
for reference and as a matter of convenience and in no way define, limit or
enlarge the scope or meaning of this Agreement or any provision.

10.26 - Amendments

     Any amendment to this Agreement shall only be effective if the amendment is
in writing and is signed by all the Parties to this Agreement.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      53


BAYER and CURAGEN Pharmacogenomics Project Agreement

10.27 - HSR Matters

     The Agreement shall not become effective (and accordingly shall immediately
terminate) in the event that (a) the FTC and/or the DOJ shall seek a preliminary
injunction under the HSR Act against CURAGEN and BAYER to enjoin the transaction
contemplated by this Agreement and BAYER elects not to contest the FTC and/or
DOJ; (b) the HSR Clearance Date shall not have occurred on or prior to June 30,
2001; or (c) the Stock Purchase Agreement shall be terminated in accordance with
Section 7.1 of the Stock Purchase Agreement.  Notwithstanding anything to the
contrary in this Agreement, if this Agreement is terminated pursuant to this
Section 10.27, all of the licenses granted hereunder shall automatically
terminate.

10.28 - Intellectual Property Rights Under Bankruptcy Code

     All rights and licenses granted under or pursuant to any section of this
Agreement are, and shall otherwise be, deemed to be, for purposes of Section
365(n) of the Bankruptcy Code, licenses of rights to "intellectual property" as
defined under Section 101(35A) of the Bankruptcy Code.  The Parties shall retain
and may fully exercise all of their respective rights and elections under the
Bankruptcy Code.  Upon the bankruptcy of any Party, the non-bankrupt Party shall
further be entitled to a complete duplicate of (or complete access to, as
appropriate) any such intellectual property, and such, if not already in its or
their possession, shall be promptly delivered to the non-bankrupt Party, unless
the bankrupt Party elects to continue, and continues, to perform all of its
obligations under this Agreement.

10.29 - HSR Filing

     As soon as practicable after the Execution Date, each of BAYER and CURAGEN
shall promptly file any Notification and Report Forms and related materials that
either such Party may be required to file with the FTC and the DOJ under the HSR
Act, shall use its best efforts to obtain an early termination of the applicable
waiting period, and shall promptly make any further filings or information
submissions pursuant thereto, or responses to requests to additional information
thereunder, that may be necessary, proper or advisable.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      54


BAYER and CURAGEN Pharmacogenomics Project Agreement

10.30 - Governing Law

     This Agreement shall be construed and the respective rights of the Parties
hereto determined according to the substantive laws of the State of Delaware
notwithstanding the provisions governing conflict of laws under such Delaware
law to the contrary and without giving effect to the United Nations Convention
on Contracts for the International Sale of Goods, the 1974 Convention on the
Limitation Period in the International Sale of Goods (the "1974 Convention") and
the Protocol amending the 1974 Convention, done at Vienna April 11, 1980, except
matters of intellectual property law which shall be determined in accordance
with the national intellectual property laws relevant to the intellectual
property in question.

10.31 - Counterparts

     This Agreement may be executed in counterparts, each of which shall be
deemed to be an original and all of which together shall constitute one and the
same Agreement.

                  [Remainder of page intentionally left blank]

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      55


BAYER and CURAGEN Pharmacogenomics Project Agreement

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of
the date first set forth above by their duly authorized representatives in two
(2) originals.


BAYER AG                                CURAGEN CORPORATION
By:  /s/ W. Hartwig                     By: /s/ Christopher K. McLeod
    ------------------------------      ---------------------------------------

Name                                    Name         Christopher K. McLeod
and Title: EVP, W. Hartwig              and Title:   Executive Vice President
           ----------------------                  ----------------------------

Date: Jan. 12, 2001                     Date: Jan. 12, 2001
     ----------------------------            ----------------------------------



By: /s/ A. Buchmeier

Name       A. Buchmeier
and Title: Senior Counsel
          -----------------------

Date: January 12, 2001
     ----------------------------


Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      56


BAYER and CURAGEN Pharmacogenomics Project Agreement

                                   APPENDIX A
                                   ----------

                         Pharmacogenomics Program Plan


Rationale

     During the preclinical phase of drug development, candidates fail to
     advance in the development process due to evidence of toxicity or lack of
     efficacy. The experiments defined in this Pharmacogenomics Program Plan are
     designed to complement BAYER's drug development capabilities in a way that
     will ultimately improve the quality and yield of drugs delivered to the
     market. The plan is organized into two sections; a SETUP PHASE, where the
     goals are to create an assay to eliminate toxic compounds early in
     preclinical development (Predictive Toxicogenomics Screen, PTS), and a
     PRODUCTION PHASE, where this assay and genomics technologies are applied to
     enhance the drug development process. It is anticipated that the
     experimental plan will be modified by the Pharmacogenomics Project Team
     (PPT) on a regular basis to optimize the quality, speed, and cost of
     research deliverables.


[______________]


     [_________]


          [____________________________________________________________].



     [_________]


          [____________________________________________________________].

          [____________________________________________________________].

          [____________________________________________________________].

          [____________________________________________________________].

          [____________________________________________________________].

          [____________________________________________________________].

          [____________________________________________________________].

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      A-1


BAYER and CURAGEN Pharmacogenomics Project Agreement

     [_____________________________________]


          [____________________________________________________________]:




                                                                                        
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[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------

     [_______________]

          [____________________________________________________________].

          [____________________________________________________________].
[_____________________________________]


          [____________________________________________________________]:

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      A-2


BAYER and CURAGEN Pharmacogenomics Project Agreement




                                                                                        
- -----------------------------------------------------------------------------------------------------------------
                                                       [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------
[___________________]                                  [_____]        [_____]        [_____]        [_____]
- -----------------------------------------------------------------------------------------------------------------

     [_______________]

          [_____________________________________________________________].

          [_____________________________________________________________].

[_____________________________________________________________________]

     [_________]


          [_____________________________________________________________].

          [_____________________________________________________________].



   [_________]


[_____________________________________________________________________]

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      A-3


BAYER and CURAGEN Pharmacogenomics Project Agreement

     [_________]


[_____________________________________________________________________]


     [_________]

          [_____________________________________________________________].
             [__________________________________________________________].
          [_____________________________________________________________].


[________________]

     [_________]


     [_________________________________________________________________]:

          [_______________________________________________________].
          [____________]
               [_______________________________________________________].
               [_______________________________________________________].
          [____________]
               [_______________________________________________________].
               [_______________________________________________________].
          [_____________________________________________________________].

     [___________________________________________________________________].

[___________]

       [_________________________________________________________________].
       [_________________________________________________________________].

[___________]

       [_________________________________________________________________].
       [_________________________________________________________________].
       [_________________________________________________________________].
       [_________________________________________________________________].

  [___________]

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      A-4


BAYER and CURAGEN Pharmacogenomics Project Agreement

          [_________________________________________________________________].
          [_________________________________________________________________].
          [_________________________________________________________________].

     [___________]

          [_________________________________________________________________].

          [__________________________________________________________________].
          [__________________________________________________________________].

               [___________________________________________]
               [___________________________________________]
               [___________________________________________]


          [__________________________________________________________________].

          [__________________________________________________________________].

          [__________________________________________________________________].

     [___________]

          [___________]:

          [__________________________________________________________________].

          [__________________________________________________________________].

     [________________________]

          [__________________________________________________________________]:

          [____________________]  - [_________________________________________].

          [____________________]  - [_________________________________________].

          [____________________]  - [_________________________________________].

          [____________________]  - [_________________________________________].

          [____________________]  - [_________________________________________].

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      A-5


BAYER and CURAGEN Pharmacogenomics Project Agreement

          [________________________________________________________________].

          [____________________]  - [_________________________________________].




Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      A-6


BAYER and CURAGEN Pharmacogenomics Project Agreement

                                   APPENDIX B
                                   ----------


MINIMUM USAGE OF SERVICES
- -------------------------

Service                         Minimum Level
- -------                         -------------

[__________________]            [______________]
[__________________]            [______________]
[__________________]            [______________]
[__________________]            [______________]





UNIT PRICES
- -----------

                                          
                         Annual Base Level
                         ------------------
Service                  from which Adjusted*   Initial Unit Price (2001)
- -------                  --------------------   -------------------------

[___________________]    [________________]     [___________________]
[___________________]    [________________]     [___________________]
[___________________]    [________________]     [___________________]
[___________________]    [________________]     [___________________]



*  [_________________________________].

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      B-1


BAYER and CURAGEN Pharmacogenomics Project Agreement

                                   APPENDIX C
                                   ----------

                   CRITERIA FOR PROTEOMICS FEASIBILITY STUDY

          [_______________________________________________________________];

          [_______________________________________________________________];

          [_______________________________________________________________];

          [_______________________________________________________________];

          [_______________________________________________________________];

          [_______________________________________________________________].


Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      C-1


BAYER and CURAGEN Pharmacogenomics Project Agreement

                                   APPENDIX D
                                   ----------

         COMMERCIAL TERMS OF EXCLUSIVE LICENSE TO DIAGNOSTIC PRODUCTS

[_____________________________________]

[_______________________________________________________________________]:

     [_________________________________________________________________];

     [_________________________________________________________________];

     [_________________________________________________________________];

     [_________________________________________________________________];

     [_________________________________________________________________].


     [_________________________________________________________________].

     [_________________________________________________________________].

     .

[____________________]:  [__________________________________________________].

[____________________]:  [__________________________________________________].

[____________________]:  [__________________________________________________].

[____________________]:  [__________________________________________________].

[____________________]:  [__________________________________________________].

[____________________]:  [__________________________________________________].


Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                      D-1


BAYER and CURAGEN Pharmacogenomics Project Agreement

                                   APPENDIX E
                                   ----------

         [__________________________________________________________]:


         [__________________________________________________________].

         [__________________________________________________________].



                                      E-1

EX-10.26

                                                                   EXHIBIT 10.26

          ----------------------------------------------------------

                            STOCK PURCHASE AGREEMENT

                          dated as of January 12, 2001

                                 by and between

                                    BAYER AG
                a corporation of the Federal Republic of Germany

                                      and

                              CURAGEN CORPORATION
                             a Delaware corporation


          ----------------------------------------------------------


                            STOCK PURCHASE AGREEMENT

     This Stock Purchase Agreement (the "Agreement") is made as of January 12,
2001 by and between CuraGen Corporation, a Delaware corporation (the "Company"),
and Bayer AG, a corporation organized under the laws of the Federal Republic of
Germany ("Purchaser").

     WHEREAS, the Company and Purchaser are parties to that certain Agreement,
dated as of the date hereof (the "Pharmacogenomics Agreement"), which contains
the terms and conditions on which the parties have agreed to collaborate on
toxicogenomic and pharmacogenomic services for use in the development of drugs;
and

     WHEREAS, Bayer Corporation, an Indiana corporation and a wholly-owned
subsidiary of Purchaser, and the Company are parties to that certain Agreement,
dated as of the date hereof (the "Metabolic Disorder Collaboration Agreement,"
and, together with the Pharmacogenomics Agreement, the "Collaboration
Agreements"), which contains the terms and conditions on which the parties have
agreed to collaborate on drug discovery and development for metabolic disorders;
and

     WHEREAS, in connection with the execution of these Collaboration
Agreements, Purchaser wishes to purchase from the Company, and the Company
wishes to sell to Purchaser, shares of the Company's Common Stock on the terms
and subject to the conditions set forth herein;

     WHEREAS, in connection with such sale and purchase of shares of Common
Stock, the Company and Purchaser wish to enter into a registration rights
agreement (the "Registration Rights Agreement"), substantially in the form
attached hereto as Exhibit A.

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
set forth herein, the Company and Purchaser agree as follows:

                    ARTICLE 1.  PURCHASE AND SALE OF SHARES

     Section 1.1    Purchase and Sale.  Subject to the terms and conditions of
                    -----------------
this Agreement, the Company agrees to issue and sell to Purchaser and Purchaser
agrees to purchase from the Company 3,112,482 shares of the Company's Common
Stock (the "Shares"), at a purchase price of $27.3094 per share (which purchase
price reflects the average closing price of the Company's Shares during the
twenty (20) day trading period preceding the date of this Agreement) for an
aggregate purchase price of eighty-five million fifteen dollars and ninety-three
cents ($85,000,015.93) (the "Purchase Price").

     Section 1.2    Closing Date.  The closing of the purchase and sale of the
                    ------------
Shares hereunder (the "Closing") shall be held at the offices of Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, P.C., Boston, Massachusetts, at 10:00 a.m.,
Boston time, on the third Business Day following the first date on which all the
conditions to Closing set forth in Article 6 have been satisfied or waived, or
at such other, place, time and date as the Company and Purchaser shall agree.
The Company shall give Purchaser three (3) Business Days prior notice of the
date the Closing is scheduled to occur. The date of the Closing is hereinafter
referred to as the "Closing Date."

                                       2


     Section 1.3    Transactions at Closing.  At the Closing, subject to the
                    -----------------------
terms and conditions of this Agreement, (a) the Company shall issue and sell to
Purchaser and Purchaser shall purchase the Shares; (b) the Company shall deliver
to Purchaser a certificate representing the Shares, registered in the name of
Purchaser against payment of the Purchase Price by wire transfer of immediately
available funds to an account or accounts previously designated by the Company
no less than five (5) Business Days prior to the Closing Date; and (c) the
Company and Purchaser shall enter into the Registration Rights Agreement.

                  ARTICLE 2.  REPRESENTATIONS AND WARRANTIES

     Section 2.1    Representations and Warranties of the Company.  The Company
                    ---------------------------------------------
hereby represents and warrants to Purchaser as follows:

          (a)  Corporate Organization.  The Company is a corporation duly
               ----------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. The Subsidiary is duly organized and validly existing and, if
applicable, is in good standing, under the laws of the jurisdiction of its
incorporation or organization. Each of the Company and its Subsidiary is duly
qualified or licensed and, if applicable, is in good standing as a foreign
corporation, in each jurisdiction in which the properties owned, leased or
operated, or the business conducted, by it require such qualification or
licensing, except for any such failure so to qualify or be in good standing
which, individually or in the aggregate, would not have a Material Adverse
Effect on the Company and its Subsidiary, taken as a whole. The Subsidiary has
the requisite power and authority to carry on its business as it is now being
conducted. The Company has heretofore made available to Purchaser complete and
correct copies of the Certificate of Incorporation of the Company (the "Company
Charter") and the By-laws of the Company (the "Company By-Laws") and the
certificate of incorporation and by-laws, or the comparable organizational
documents, of its Subsidiary, each as amended to date and currently in full
force and effect.

          (b)  Corporate Authority.  The Company has the requisite corporate
               -------------------
power and authority to execute, deliver and perform this Agreement and the
Registration Rights Agreement and to consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance of this Agreement
and the Registration Rights Agreement by the Company, the issuance and sale by
the Company of the Shares and the performance by the Company of the other
transactions contemplated hereby and thereby have been duly authorized by the
Company's Board of Directors, and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or the Registration Rights
Agreement or for the Company to consummate the transactions so contemplated
herein and therein. This Agreement is, and the Registration Rights Agreement,
when executed or delivered will be, valid and binding agreements of the Company,
enforceable against the Company in accordance with their respective terms,
assuming that this Agreement and the Registration Rights Agreement are valid and
binding agreements of Purchaser, subject as to enforcement of remedies to
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting generally the enforcement of creditors' rights and subject to a
court's discretionary authority with respect to the granting of a decree
ordering specific performance or other equitable remedies.

                                       3



          (c)  No Violations; Consents and Approvals.
               -------------------------------------

               (i)  Neither the execution, delivery or performance by the
Company of this Agreement or the Registration Rights Agreement or the
consummation by the Company of the transactions contemplated hereby or thereby
(A) will result in a violation or breach of the Company Charter or the Company
By-Laws or the charter or by-laws of the Company's Subsidiary or (B) will result
in a violation or breach of (or give rise to any right of termination,
revocation, cancellation or acceleration under or increased payments under), or
constitute a default (with or without due notice or lapse of time or both)
under, or result in the creation of any lien, mortgage, charge, encumbrance or
security interest of any kind (a "Lien") upon any of the properties or assets of
the Company or its Subsidiary under, (1) any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, contract, agreement,
obligation, instrument, offer, commitment, understanding or other arrangement
(each a "Contract") or of any license, waiver, exemption, order, franchise,
permit or concession (each a "Permit") to which the Company of its Subsidiary is
a party or by which any of their properties or assets may be bound, or (2)
subject to the governmental filings and other matters referred to in clause (ii)
below, any judgment, order, decree, statute, law, regulation or rule applicable
to the Company or its Subsidiary, except, in the case of clause (B), for
violations, breaches, defaults, rights of cancellation, termination, revocation,
acceleration or increased payments or Liens that would not, individually or in
the aggregate, have a Material Adverse Effect on the Company and its Subsidiary,
taken as a whole.

               (ii)  Except for filings as may be required under, and other
applicable requirements of (x) the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), and (y) Regulation D of the Securities Act
of 1933, as amended (the "Securities Act"), no consent, approval, order or
authorization of, or registration, declaration or filing with, any government or
any court, administrative agency or commission or other governmental authority
or agency, federal, state or local (a "Governmental Entity"), is required with
respect to the Company in connection with the execution, delivery or performance
by the Company of this Agreement or the consummation by the Company of the
transactions contemplated hereby (except where the failure to obtain such
consents, approvals, orders or authorizations, or to make such filings would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company and its Subsidiary, taken as a whole).

          (d)  Capital Stock.  The authorized capital stock of the Company
               -------------
consists of (i) 250,000,000 shares of Common Stock, $.01 par value per share, of
which an aggregate 44,050,017 shares of Common Stock were issued and outstanding
as of December 31, 2000, (ii) 3,000,000 shares of Nonvoting Common Stock, $.01
par value per share, of which an aggregate 1,270,272 shares of Nonvoting Common
Stock were issued and outstanding as of December 31, 2000, (iii) 5,000,000
shares of Preferred Stock, $.01 par value per share, of which none were issued
and outstanding as of December 31, 2000. As of December 31, 2000, the Company
had reserved 30,000 shares of Common Stock pursuant to outstanding warrants, and
7,000,000 shares of Common Stock for issuance pursuant to the 1997 Employee,
Director and Consultant Stock Plan (the "1997 Stock Plan"). As of December 31,
2000, the Company had reserved another 937,500 shares of Common Stock pursuant
to warrants associated with the formation of 454 Corporation. All of the
outstanding shares of Common Stock and Nonvoting Common Stock have been duly
authorized and validly issued, and are fully paid and nonassessable. As of

                                       4


December 31, 2000, the Company had completed an offering of 6% Convertible
Subordinated Debentures due 2007 in the aggregate amount of $150,000,000, these
Debentures being convertible into shares of the Company's Common Stock. Except
for the Common Stock, Nonvoting Common Stock, Convertible Subordinated
Debentures and the above referenced Options and Warrants, the Company has
outstanding no bonds, debentures, notes or other obligations or securities the
holders of which have the right to vote (or are convertible or exchangeable into
or exercisable for securities having the right to vote) with the stockholders of
the Company on any matter. Except as discussed in this paragraph or in Section
2.1(e), as of the date of this Agreement, there are no securities convertible
into or exchangeable for, or options, warrants, calls, subscriptions, rights,
contracts, commitments, arrangements or understandings of any kind to which the
Company or its Subsidiary is a party or by which any of them is bound obligating
the Company or its Subsidiary contingently or otherwise to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other voting securities of the Company or of its Subsidiary. There are
no outstanding agreements of the Company or its Subsidiary to repurchase, redeem
or otherwise acquire any shares of capital stock of the Company or its
Subsidiary.

          (e)  Subsidiary.  Schedule 2.1(e) contains a complete and correct
               ----------
description of the shares of stock or other equity interests that are
authorized, or issued and outstanding, of the Company's Subsidiary. Series A and
Series B of the Subsidiary's Preferred Stock are convertible into common stock
of the Subsidiary. The Company has no equity interests with a value of $100,000
or more in any Person other than its Subsidiary, and there are no commitments on
the part of the Company or its Subsidiary to contribute additional capital in
respect of any equity interest in any Person. Each of the outstanding shares of
capital stock of the Subsidiary has been duly authorized and validly issued, and
is fully paid and nonassessable. Except as set forth on Schedule 2.1(e), all of
the outstanding shares of capital stock of the Subsidiary are owned, either
directly or indirectly, by the Company free and clear of all Liens.

          (f)  SEC Filings.  The Company has timely filed all reports,
               -----------
schedules, forms, statements and other documents required to be filed by it with
the SEC under the Securities Act and the Exchange Act since March 17, 1998 (the
"Company SEC Documents"). As of its filing date, each Company SEC Document
filed, as amended or supplemented, if applicable, (i) complied in all material
respects with the applicable requirements of the Securities Act or the Exchange
Act, as applicable, and the rules and regulations thereunder and (ii) did not,
at the time it was filed, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.

          (g)  Absence of Certain Events and Changes.  Except as disclosed in
               -------------------------------------
the Company SEC Documents filed with the SEC and publicly available prior to the
date hereof, or as otherwise contemplated or permitted by this Agreement, since
September 30, 2000, the Company and its Subsidiary have conducted their
respective businesses in the ordinary course consistent with past practice and
there has not been any event, change or development which, individually or in
the aggregate, would have a Material Adverse Effect on the Company and its
Subsidiary, taken as a whole.

                                       5


          (h)  Compliance with Applicable Law.  Except as disclosed in the
               ------------------------------
Company SEC Documents, each of the Company and its Subsidiary is in compliance
with all statutes, laws, regulations, rules, judgments, orders and decrees of
all Governmental Entities applicable to it that relate to its respective
business, and neither the Company nor its Subsidiary has received any notice
alleging noncompliance except, with reference to all the foregoing, where the
failure to be in compliance would not, individually or in the aggregate, have a
Material Adverse Effect on the Company and its Subsidiary, taken as a whole.
This Section 2.1(h) does not relate to employee benefits matters (for which
Section 2.1(l) is applicable), environmental matters, (for which Section 2.1(m)
is applicable) or tax matters (for which Section 2.1(k) is applicable). The
Company and its Subsidiary have all Permits that are required in order to permit
it to carry on its business as it is presently conducted, except where the
failure to have such Permits or rights would not, individually or in the
aggregate, have a Material Adverse Effect on the Company and its Subsidiary,
taken as a whole. To the Knowledge of the Company, all such Permits are in full
force and effect and the Company and its Subsidiary are in compliance with the
terms of such Permits, except where the failure to be in full force and effect
or in compliance would not, individually or in the aggregate, have a Material
Adverse Effect on the Company and its Subsidiary, taken as a whole.

          (i)  Litigation.  Except as disclosed in the Company SEC Documents
               ----------
filed with the SEC and publicly available prior to the date hereof, there are no
civil, criminal or administrative actions, suits, or proceedings pending or, to
the Knowledge of the Company, threatened, against the Company or its Subsidiary
that, individually or in the aggregate, are likely to have a Material Adverse
Effect on the Company and its Subsidiary, taken as a whole. Except as disclosed
in the Company SEC Documents filed with the SEC and publicly available prior to
the date hereof, there are no outstanding judgments, orders, decrees, or
injunctions of any Governmental Entity against the Company or its Subsidiary
that, insofar as can reasonably be foreseen, individually or in the aggregate,
in the future would have a Material Adverse Effect on the Company and its
Subsidiary, taken as a whole.

          (j)  Contracts.
               ---------

               (i)  The Company has filed as exhibits to the Company SEC
Documents all material agreements required to be filed under the rules and
regulations of the SEC (the "Material Contracts").

               (ii) All Material Contracts are legal, valid, binding, in full
force and effect and enforceable against the Company, unless otherwise disclosed
in the Company's SEC Documents except to the extent that any failure to be
enforceable, individually or in the aggregate, would not reasonably be expected
to have or result in a Material Adverse Effect on the Company and its
Subsidiary, taken as a whole, provided that no representation is made as to the
                              --------
enforceability of any non-competition provision in any employment agreement and
subject as to enforcement of remedies to applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting generally the enforcement
of creditors' rights and subject to a court's discretionary authority with
respect to the granting of a decree ordering specific performance or other
equitable remedies. Unless otherwise disclosed in the Company's SEC documents,
there does not exist under any Material Contract any violation, breach or event

                                       6


of default, or event or condition that, after notice or lapse of time or both,
would constitute a violation, breach or event of default thereunder, on the part
of the Company or its Subsidiary or, to the Knowledge of the Company or its
Subsidiary, any other Person, other than such violations, breaches or events of
default as would not, individually or in the aggregate, have a Material Adverse
Effect on the Company and its Subsidiary, taken as a whole. The enforceability
of all Material Contracts will not be adversely affected in any manner by the
execution, delivery or performance of this Agreement or the Registration Rights
Agreement or the consummation of the transactions contemplated hereby or
thereby, and no Material Contract contains any change in control or other terms
or conditions that will become applicable or inapplicable as a result of the
consummation of such transactions. Except as set forth on Schedule 2.1(j),
neither the Company nor the Subsidiary are a party to any contract prohibiting
or materially restricting the ability of the Company or its Subsidiary to
conduct its business, to engage in any business or operate in any geographical
area or compete with any person.

          (k)  Taxes.  (A) all Tax Returns required to be filed by or on behalf
               -----
of each of the Company and its Subsidiary have been filed except to the extent
that a failure to file, individually or in the aggregate, would not have a
Material Adverse Effect on the Company and its Subsidiary, taken as a whole; (B)
all such filed Tax Returns are complete and accurate in all respects, other than
any incompleteness or any inaccuracy that would not, individually or in the
aggregate, have a Material Adverse Effect on the Company and its Subsidiary,
taken as a whole, and all Taxes shown to be due on such Tax Returns have been
paid; (C) no written claim (other than a claim that has been finally settled)
has been made by a taxing authority that any of the Company or its Subsidiary is
subject to an obligation to file Tax Returns or to pay or collect Taxes imposed
by any jurisdiction in which either the Company or its Subsidiary does not file
Tax Returns or pay or collect Taxes, other than any such claim that would not
have a Material Adverse Effect on the Company and its Subsidiary, taken as a
whole, or for which adequate reserves have been provided on the balance sheets
contained in the Company SEC Documents filed with the SEC and publicly available
prior to the date hereof; (D) there is no deficiency with respect to any Taxes
which would, individually or in the aggregate, have a Material Adverse Effect on
the Company and its Subsidiary, taken as a whole, other than any such deficiency
for which adequate reserves have been provided on the balance sheet contained in
the financial statements in the SEC Company Documents filed with the SEC and
publicly available prior to the date hereof; and (E) all material assessments
for Taxes due with respect to completed and settled examinations or concluded
litigation have been paid which, individually or in the aggregate, exceed
$100,000. As used in this Agreement, "Taxes" shall include any and all taxes,
sums or amounts assessed or assessable, levied and due by any U.S. or non-U.S.
national, federal, state or county or other local governmental authority or
agency, including without limitation, real and personal property taxes, income
taxes, whether measured by gross or net income or profit, franchise, excise,
sales and use taxes, value added taxes, employee withholding, social security,
unemployment taxes and any other taxes required to be paid by the Company or any
Subsidiary, including interest and penalties in respect thereof whether disputed
or not, and whether accrued, contingent, due, absolute, deferred, unknown or
other, together with any and all penalties, interests and additions to all such
taxes, sums or amounts. "Tax Returns" shall mean all returns, consolidated or
otherwise (including without limitation any declaration, report, claim for
refund or information return), required to be filed with any governmental
authority with respect to Taxes. "Taxable" shall mean subject to Tax.

                                       7


               (i)   Each of the Company and its Subsidiary has duly and timely
withheld all Taxes required to be withheld in connection with its business and
assets, and such withheld Taxes have been either duly and timely paid to the
proper governmental authorities or properly set aside in accounts for such
purpose, except to the extent that any failure to do so would not have a
Material Adverse Effect on the Company and its Subsidiary, taken as a whole.

               (ii)  (A) all taxable periods of each of the Company and its
Subsidiary ending before December 31, 1995 are closed or no longer subject to
audit; (B) neither the Company nor its Subsidiary is currently under any audit
by any taxing authority as to which such taxing authority has asserted in
writing any claim which, if adversely determined, could have a Material Adverse
Effect on the Company and its Subsidiary, taken as a whole; and (C) no waiver of
the statute of limitations is in effect with respect to any taxable year of the
Company or its Subsidiary.

               (iii) (A) none of the Company or its Subsidiary is a party to or
bound by or has any obligation under any Tax allocation, sharing,
indemnification or similar agreement or arrangement with any Person which might
result in a Material Adverse Effect to the Company or Subsidiary which entered
into such agreement or arrangement; and (B) none of the Company or its
Subsidiary is or has been at any time a member of any group of companies filing
a consolidated, combined or unitary income tax return other than any such group
the common parent of which is the Company.

          (l)  Employee Benefit Plans and Related Matters; ERISA.
               -------------------------------------------------

               (i)   Employee Benefit Plans.  Each Employee Benefit Plan that
                     ----------------------
provides for equity-based compensation or that has associated costs that are
expected to be material to the Company or its Subsidiary in the aggregate and
that is expected to provide for contributions to be made by the Company or its
Subsidiary or their Employees after the date hereof or to permit the accrual of
additional benefits by any Employee of the Company or its Subsidiary after the
date hereof has been filed with the SEC as a material contract (collectively,
the "Plans").

               (ii)  Qualification.  Except to the extent that failure to meet
                     -------------
the requirements of Section 401(a) of the Code would not result in any material
liability as to which adequate reserves have not been established, each Employee
Benefit Plan intended to be qualified under section 401(a) of the Code, and the
trust (if any) forming a part thereof, (A) has received a favorable
determination letter or opinion letter from the IRS as to its qualification
under the Code and to the effect that each such trust is exempt from taxation
under section 501(a) of the Code, and nothing has occurred since the date of
such determination letter that could adversely affect such qualification or tax-
exempt status (other than changes in legal requirements applicable to such
Employee Benefit Plan necessitating amendments for which the applicable remedial
amendment period has not yet expired)or (B) a timely application for such a
favorable determination letter or opinion letter was filed and the Company has
no reason to believe that such a favorable determination letter or opinion
letter will not be granted.

                                       8


               (iii) Compliance; Liability.
                     ---------------------

                     (A)  No liability has been or is reasonably expected to be
incurred under or pursuant to Title I or IV of ERISA or the penalty, excise Tax
or joint and several liability provisions of the Code relating to employee
benefit plans that is or would be material to the Company and its Subsidiary,
taken as a whole.

                     (B)  Each of the Employee Benefit Plans has been operated
and administered in all respects in compliance with its terms, all applicable
laws and all applicable collective bargaining agreements, except for any failure
so to comply that, individually and in the aggregate, could not reasonably be
expected to result in a material liability or obligation on the part of the
Company and its Subsidiary in the aggregate. There are no pending or threatened
claims by or on behalf of any of the Employee Benefit Plans, by any Employee or
otherwise involving any such Employee Benefit Plan or the assets of any Employee
Benefit Plan (other than routine claims for benefits or actions seeking
qualified domestic relations orders or qualified medical child support orders,
all of which have been fully reserved for on the regularly prepared balance
sheets of the Company or its Subsidiary, as applicable to the extent required by
GAAP) which would reasonably be expected to result in any material liability to
the Company and its Subsidiary in the aggregate.

                     (C)  Except to the extent that it would not give rise to a
material liability or obligation on the part of the Company and it Subsidiary in
the aggregate, no Employee is or will become entitled to post-employment
benefits of any kind by reason of employment with the Company or its Subsidiary,
including, without limitation, death or medical benefits (whether or not
insured), other than (x) coverage mandated by section 4980B of the Code or other
applicable laws, (y) retirement benefits payable under any Plan qualified under
section 401 (a) of the Code or (z) accrued deferred compensation. The
consummation of the transactions hereunder and under the Registration Rights
Agreement will not result in an increase in the amount of compensation or
benefits or the acceleration of the vesting or timing of payment of any
compensation or benefits payable to or in respect of any Employee by any of the
Company or its Subsidiary.

               (iv)  Employees, Labor Matters, etc.  Neither the Company nor its
                     -----------------------------
Subsidiary is a party to or bound by any collective bargaining agreement, and
there are no labor unions or other organizations representing, or to the
Knowledge of the Company purporting to represent or attempting to represent any
employees employed by the Company or its Subsidiary. Since September 30, 2000,
there has not occurred or , to the Knowledge of the Company, been threatened any
strike, slowdown, picketing, work stoppage, concerted refusal to work overtime
or other similar labor activity with respect to any employees of the Company or
its Subsidiary. There are no labor disputes currently subject to any grievance
procedure, arbitration or litigation and there is no petition to the National
Labor Relations Board or a similar state authority or recognized private
arbitration firm or service pending or, to the Knowledge of the Company,
threatened with respect to any employee of the Company or its Subsidiary that
individually or in the aggregate, are likely to have a Material Adverse Effect
on the Company and its Subsidiary, taken as a whole). The Company and its
Subsidiary has complied with all applicable laws pertaining to the employment or
termination of employment of their respective employees, including, without
limitation, all such laws relating to labor relations, equal employment

                                       9


opportunities, fair employment practices, prohibited discrimination or
distinction and other similar employment activities, except for any failure so
to comply that, individually and in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect on the Company and its
Subsidiary, taken as a whole.

          (m)  Environmental Matters. Except as disclosed in the Company SEC
               ---------------------
Documents filed with the SEC and publicly available prior to the date hereof and
except for such matters that, individually or in the aggregate, would not have a
Material Adverse Effect on the Company and its Subsidiary, taken as a whole, (i)
the Company and its Subsidiary are in compliance with all applicable
Environmental Laws (as defined below), (ii) the Company and its Subsidiary have
all Permits required under Environmental Laws for the operation of their
respective businesses as presently conducted ("Environmental Permits"), (iii)
neither the Company nor its Subsidiary has received notice from any Governmental
Entity asserting that either the Company or its Subsidiary may be in violation
of, or liable under, any Environmental Law, and (iv) there are no actions,
proceedings or claims pending (or, to the Knowledge of the Company or its
Subsidiary, threatened) seeking to impose any liability on Environmental Permits
or Hazardous Substances (as defined below). For purposes of this Agreement,
"Environmental Law" means any federal, state or local law, statute, regulation
or decree relating to (x) the protection of the environment or (y) the use,
storage, treatment, generation, transportation, processing, handling, release or
disposal of Hazardous Substances in each case as in effect on the date hereof.
"Hazardous Substance" means any waste, substance, material, pollutant or
contaminant listed, defined, designated or classified as hazardous, toxic or
radioactive, or otherwise regulated, under any Environmental Law.

          (n)  Delaware Law.  The provisions of Section 203 of the Delaware
               ------------
General Corporation law (the "DGCL") will not be applicable to Purchaser or its
Affiliates as a result of the transactions contemplated by this Agreement.

          (o)  Status of Shares.  The Shares being issued at the Closing have
               ----------------
been duly authorized by all necessary corporate action on the part of the
Company, and at Closing such Shares will have been validly issued and, assuming
payment therefor has been made, will be fully paid and nonassessable, and the
issuance of such Shares will not be subject to preemptive rights of any other
stockholder of the Company. The Shares will be eligible for listing on the
Nasdaq Stock Market.

          (p)  Intellectual Property. The Intellectual Property that is owned by
               ---------------------
the Company or its Subsidiary is owned free from any Liens (other than Permitted
Liens), except where the failure to be free from liens would not have a Material
Adverse Effect on the Company and its Subsidiary, taken as a whole. All material
Intellectual Property Licenses are in full force and effect in accordance with
their terms, and are free and clear of any Liens (other than Permitted Liens),
except where the failure to be free from Liens or to be in full force and effect
would not have a Material Adverse Effect on the Company and its Subsidiary,
taken as a whole. To the Knowledge of the Company, the conduct of the business
of the Company and its Subsidiary does not infringe or conflict with the rights
of any third party in respect of any Intellectual Property, except where such
conduct would not materially affect the ability of the Company and its
Subsidiary to conduct their business as presently conducted. To the Knowledge of
the Company, none of the Company Intellectual Property is being infringed by

                                       10


any third party except where such infringement would not have a Material Adverse
Effect on Company and its Subsidiary, taken as a whole. There is no claim or
demand of any Person pertaining to, or any proceeding which is pending or, to
the Knowledge of the Company, threatened, that challenges the rights of the
Company or its Subsidiary in respect of any Company Intellectual Property, or
that claims that any default exists under any Intellectual Property License,
except where such claim, demand or proceeding would not materially affect the
ability of the Company and its Subsidiary to conduct their business as presently
conducted. For purposes of this Agreement, "Company Intellectual Property" means
the Intellectual Property that is owned by the Company and its Subsidiary and
the Intellectual Property subject to written or oral licenses, agreements or
arrangements pursuant to which its use by the Company or its Subsidiary is
permitted by any Person.

          (q)  Brokers or Finders.  No agent, broker, investment banker or
               ------------------
other firm is or will be entitled to any broker's or finder's fee or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement.

     Section 2.2  Representations and Warranties of Purchaser. Purchaser hereby
                  -------------------------------------------
represents and warrants to the Company as follows:

          (a)  Organization.  Purchaser is a corporation duly organized and
               ------------
validly existing and in good standing under the laws of the Federal Republic of
Germany, with all requisite power and authority to own, lease and operate its
properties and to conduct its business as now being conducted.

          (b)  Authority.  Purchaser has the requisite corporate power and
               ---------
authority to execute, deliver and perform its obligations under this Agreement
and the Registration Rights Agreement and to consummate the transactions
contemplated hereby and thereby. All necessary corporate action required to have
been taken by or on behalf of Purchaser by applicable law or otherwise to
authorize the approval, execution, delivery and performance by Purchaser of this
Agreement and the Registration Rights Agreement and the consummation by it of
the transactions contemplated hereby and thereby have been duly authorized, and
no other proceedings on its part are or will be necessary to authorize this
Agreement or the Registration Rights Agreement or for it to consummate such
transactions. This Agreement is, and the Registration Rights Agreement, when
executed and delivered will be, valid and binding agreements of Purchaser,
enforceable against Purchaser in accordance with their respective terms,
assuming that this Agreement and the Registration Rights Agreement are valid and
binding agreements of the Company, subject as to enforcement of remedies to
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting generally the enforcement of creditors' rights and subject to a
court's discretionary authority with respect to the granting of a decree
ordering specific performance or other equitable remedies.

          (c)  Conflicting Agreements and Other Matters.  Neither the
               ----------------------------------------
execution, delivery or performance by Purchaser of this Agreement or the
Registration Rights Agreement or the consummation by Purchaser of the
transactions contemplated hereby or thereby (A) will result in a violation or
breach of the organizational documents or agreements of Purchaser or (B) will
result in a violation or breach of (or give rise to any right of termination,
revocation, cancellation or acceleration under or increased payments under), or
constitute a default (with or

                                       11


without due notice or lapse of time or both) under, or result in the creation of
any Lien upon any of the properties or assets of Purchaser under, (1) any of the
terms, conditions or provisions of any Contract or of any Permit to which
Purchaser is a party or by which any of its properties or assets may be bound,
or (2) subject to the governmental filings and other matters referred to in
Section 2.1(c)(ii) above, any judgment, order, decree, statute, law, regulation
or rule applicable to Purchaser, except, in the case of clause (B), for
violations, breaches, defaults, rights of cancellation, termination, revocation,
acceleration or increased payments or Liens that would not, individually or in
the aggregate, have a Material Adverse Effect on Purchaser.

          (d)  Acquisition for Investment.  (i) Purchaser is acquiring the
               --------------------------
Shares for its own account for the purpose of investment and not with a view to
or for sale in connection with any distribution thereof, and Purchaser has no
present intention to effect, or any present or contemplated plan, agreement,
undertaking, arrangement, obligation, indebtedness, or commitment providing for,
any distribution of Shares, (ii) Purchaser is an "accredited investor" as
defined in Rule 501(a) under the Securities Act, (iii) Purchaser has carefully
reviewed the representations concerning the Company contained in this Agreement
and has made detailed inquiry concerning the Company, its business and its
personnel, and (iv) Purchaser has sufficient knowledge and experience in finance
and business that it is capable of evaluating the risks and merits of its
investment in the Company and is able financially to bear the risks thereof.

          (e)  Brokers or Finders.  No agent, broker, investment banker or
               ------------------
other firm is or will be entitled to any broker's or finder's fee or any other
commission or similar fee from Purchaser in connection with any of the
transactions contemplated by this Agreement.

     ARTICLE 3.  LIMITATIONS ON PURCHASES OF ADDITIONAL EQUITY SECURITIES

     Section 3.1  Purchases of Equity Securities.
                  ------------------------------

          (a)  Prior to December 31, 2003, except as permitted by Section
3.1(b), (c) or (d), Purchaser and its Affiliates will not (and will not assist
or encourage others to) directly or indirectly in any manner:

               (i)    acquire, announce an intention to acquire, or agree to
acquire, directly or indirectly, alone or in concert with others, by purchase,
gift or otherwise, any direct or indirect beneficial ownership (within the
meaning of Rule 13d-3 under the Exchange Act) or interest in any securities or
direct or indirect rights, warrants or options to acquire, or securities
convertible into or exchangeable for, any securities of the Company;

               (ii)   make, or in any way participate in, directly or
indirectly, alone or in concert with others, any "solicitation" of "proxies" to
vote (as such terms are used in the proxy rules of the SEC promulgated pursuant
to Section 14 of the Exchange Act);

               (iii)  form, join or in any way participate in a "group" within
the meaning of Section 13(d)(3) of the Exchange Act with respect to any voting
securities of the Company; or

               (iv)   acquire, announce an intention to acquire, or agree to
acquire, directly or indirectly, alone or in concert with others, by purchase,
exchange or otherwise, (i) any

                                       12


of the assets, tangible or intangible, of the Company or (ii) direct or indirect
rights, warrants or options to acquire any assets of the Company, other than in
the ordinary course of business;

               (v)    enter into any arrangement or understanding with others to
do any of the actions restricted or prohibited under clauses (i), (ii), (iii) or
(iv) of this Section 3.1(a); or

               (vi)   otherwise act in concert with others, to seek to offer to
the Company or any of its stockholders any business combination, restructuring,
recapitalization or similar transaction to or with the Company or otherwise seek
in concert with others, to control, change or influence the management, board of
directors or policies of the Company or nominate any person as a director of the
Company who is not nominated by the then incumbent directors, or propose any
matter to be voted upon by the stockholders of the Company;

          (b)  Nothing herein shall prevent Purchaser from purchasing any
securities of the Company pursuant to the terms of this Agreement and Purchaser
shall not be treated as having breached any covenant in this Agreement solely as
a result of such purchase.

          (c)  Nothing herein shall prevent Purchaser from purchasing additional
Equity Securities of the Company if (i) prior thereto Purchaser has not sold any
Shares (other than to an Affiliate of Purchaser who has not sold such Shares)
and (ii) after such purchase, Purchaser and its Affiliates would own 9.9 percent
(9.9%) or less of the Total Voting Power of all Voting Securities of the Company
then outstanding.

          (d)  This Section 3.1 shall terminate and Purchaser and its Affiliates
shall have the right to acquire any securities of the Company without regard to
the limitation on share ownership set forth in Section 3.1 in the event that:

               (i)   the Company has entered into (A) an agreement relating to a
merger, business combination, consolidation or any such similar transaction,
following which the then holders of the Voting Securities would cease to hold a
majority of the voting securities of the surviving corporation or (B) an
agreement to sell all or substantially all its assets; provided, however, that
                                                       --------  -------
the limitation shall (1) continue or be reinstated if the majority of the
directors of the Company who have held that position for at least nine (9)
months prior to the entering into of the merger agreement or other agreement
referred to in section (A) continue as a majority of the directors of the
surviving company after the transaction or (2) be reinstated if such merger
agreement or other agreements referred to in sections (A) or (B) is subsequently
terminated or the transactions contemplated thereunder are not consummated; or

               (ii)  a tender or exchange offer (other than a tender or exchange
offer that the Company's Board of Directors has recommended be rejected) is made
by any Person or 13D Group (as hereinafter defined) (other than an Affiliate of,
or any Person acting in concert with, Purchaser) to acquire Voting Securities
which, if added to the Voting Securities (if any) already owned by such Person
or 13D Group, would result, if consummated in accordance with its terms, in the
Beneficial Ownership by such Person or 13D Group of more than 30% of the Total
Voting Power of all Voting Securities of the Company then outstanding, provided
                                                                       --------
that the limitation shall be reinstated if such tender or exchange offer is
- ----
withdrawn or terminated without such Person or 13D Group acquiring such 30%
ownership level; or

                                       13


               (iii) it is publicly disclosed or Purchaser otherwise learns that
Voting Securities representing more than 35% of the Total Voting Power of all
Voting Securities of the Company then outstanding are Beneficially Owned by any
Person or 13D Group (other than an Affiliate of, or any person acting in concert
with, Purchaser); or

               (iv)  a proxy contest (or similar incident) is made by any Person
or 13D Group (other than an Affiliate of, or any Person acting in concert with,
Purchaser) to elect individuals who at the beginning of any calendar year did
not constitute the majority of the members of the Board of Directors of the
Company then in office and the Purchaser, upon the advice of legal counsel and
financial advisors, reasonably believes in good faith, that such proxy contest
will result in the election of individuals who will constitute a majority of
members of the Board of Directors of the Company, but who did not, at the
beginning of the calendar year, constitute the majority of the members of the
Board of Directors of the Company then in office, provided that the limitation
                                                  -------- ----
shall be reinstated if such proxy contest or similar incident is terminated or
withdrawn without affecting the change in the Board of Directors referred to
above.

          (e)  As used herein, the term "13D Group" shall mean any group of
Persons formed for the purpose of acquiring, holding, voting or disposing of
Voting Securities which would be required under Section 13(d) of the Exchange
Act and the rules and regulations thereunder (as now in effect and based on
present legal interpretations thereof) to file a statement on Schedule 13D with
the SEC as a "person" within the meaning of Section 13(d)(3) of the Exchange
Act. Ownership of Voting Securities under Section 3.1(d) above and Section
4.1(d) below shall be determined in accordance with Rule 13d-3 of the Exchange
Act as currently in effect.


                        ARTICLE 4.  TRANSFER OF SHARES

     Section 4.1  Limitations on Transfer.
                  -----------------------

          (a)  Prior to June 30, 2002, Purchaser will not, directly or
indirectly, sell, transfer or otherwise dispose of any Shares (except to any
Affiliate of Purchaser, provided, however, that such Affiliate shall agree to be
                        --------  -------
bound by the terms of this Agreement).

          (b)  After June 30, 2002 and prior to June 30, 2003, Purchaser will
not, directly or indirectly, sell, transfer or otherwise dispose of more than
fifty percent (50%) of the acquired Shares (as adjusted to reflect any stock
splits, stock dividends and similar recapitalizations) (except to an Affiliate
of Purchaser, provided, however, that such Affiliate shall agree to be bound by
              ---------  -------
the terms of this Agreement).

          (c)  The limitation on Share transfer set forth in this Section 4.1
shall terminate and Purchaser and its Affiliates shall have the right, directly
or indirectly, to sell, transfer or otherwise dispose of any Shares without
regard to any limitation on Share transfer set forth in Section 4.1 in the event
that:

               (i)   the Company has entered into (A) an agreement relating to a
merger, business combination, consolidation or any such similar transaction,
following which the then holders of the Voting Securities would cease to hold a
majority of the voting securities of

                                       14


the surviving corporation or (B) an agreement to sell all or substantially all
its assets; provided, however, the limitation shall (1) be reinstated if the
            --------  -------
majority of the directors of the Company, who have held that position for at
least nine (9) months prior to the entering into of the merger agreement or
other agreement referred to in Section (A) continue as a majority of the
directors of the surviving company after the transaction or (2) be reinstated if
such merger agreement or other agreements referred to in sections (A) or (B) is
subsequently terminated or the transactions contemplated thereunder are not
consummated;

               (ii)   a tender or exchange offer which has been approved or
recommended by the Company's Board of Directors is made by any Person or 13D
Group (other than an Affiliate of, or any Person acting in concert with,
Purchaser) to acquire Voting Securities which, if added to the Voting Securities
(if any) already owned by such Person or 13D Group, would result, if consummated
in accordance with its terms, in the Beneficial Ownership by such Person or 13D
Group of more than 50% of the Total Voting Power of all Voting Securities of the
Company then outstanding, provided that the limitation shall be reinstated if
                          -------- ----
such tender or exchange offer is withdrawn or terminated without such Person or
13D Group acquiring such 50% ownership level; or

               (iii)  a tender or exchange offer, which the Company's Board of
Directors has not approved or recommended, is made by any Person or 13D Group
(other than an Affiliate of, or any Person acting in concert with, Purchaser) to
acquire Voting Securities which, if added to the Voting Securities (if any)
already owned by such Person or 13D Group, would result, if consummated in
accordance with its terms, in the Beneficial Ownership by such Person or 13D
Group of more than 50% of the Total Voting Power of all Voting Securities of the
Company then outstanding and the Purchaser, upon the advice of legal counsel and
financial advisors, reasonably believes in good faith, taking into account the
conditions of the offer, that such tender or exchange offer will result in
Voting Securities being purchased, provided that the limitation shall be
                                   -------- ----
reinstated if such tender or exchange offer is withdrawn or terminated without
such Person or 13D Group acquiring such 50% ownership level.

     Section 4.2  Convertible Securities.
                  ----------------------

          (a)  Notwithstanding the provisions of Section 4.1, Purchaser or
Affiliates of Purchaser may issue Convertible Securities; provided, however,
                                                          --------  -------
that any exercise or exchanges for Shares pursuant to the terms and conditions
of the Convertible Securities shall not occur until such sale, transfer and
disposition of the Shares would be permitted under Section 4.1.

                ARTICLE 5.  COVENANTS AND ADDITIONAL AGREEMENTS

     Section 5.1  Ordinary Course.  During the period from the date of this
                  ---------------
Agreement and continuing until the Closing, the Company agrees as to itself and
its Subsidiary that, except to the extent that Purchaser otherwise consents in
writing, the Company and its Subsidiary shall conduct their respective
businesses in the ordinary course in substantially the same manner as presently
conducted.

     Section 5.2  Access and Information.  So long as this Agreement remains in
                  ----------------------
effect, prior to the Closing, the Company will (and will cause its Subsidiary
and each of their respective

                                       15


accountants, counsel, consultants, officers, directors, employees, agents and
representatives of or to the Subsidiary, to) give Purchaser and its
Representatives, reasonable access during reasonable business hours to all of
their respective properties, assets, books, contracts, reports and records
relating to the Company and its Subsidiary, and furnish to them all such
documents, records and information with respect to the properties, assets and
business of the Company and its Subsidiary, as Purchaser shall from time to time
reasonably request. The Company will keep Purchaser generally informed as to the
business of the Company and its Subsidiary.

     Section 5.3  Further Actions.
                  ---------------

          (a)  Each of the Company and Purchaser shall use reasonable best
efforts to take or cause to be taken all actions, and to do or cause to be done
all other things, necessary, proper or advisable in order to fulfill and perform
its obligations in respect of this Agreement and the Registration Rights
Agreement, or otherwise to consummate and make effective the transactions
contemplated hereby and thereby.

          (b)  Each of the Company and Purchaser shall, as promptly as
practicable, (i) make, or cause to be made, all filings and submissions
(including but not limited to under the HSR Act) required under any law
applicable to it or its Subsidiary, and give such reasonable undertakings as may
be required in connection therewith, and (ii) use all reasonable efforts to
obtain or make, or cause to be obtained or made, all Permits, if any, necessary
to be obtained or made by it or its Subsidiary, in each case in connection with
this Agreement and the Registration Rights Agreement, the sale and transfer of
the Shares pursuant hereto and the consummation of the other transactions
contemplated hereby or thereby.

          (c)  Each of the Company and Purchaser shall coordinate and cooperate
with the other party in exchanging such information and supplying such
reasonable assistance as may be reasonably requested by such other party in
connection with the filings and other actions contemplated by this Agreement and
the Registration Rights Agreement.

          (d)  At all times prior to the Closing Date, the Company and Purchaser
shall notify each other in writing of any fact, condition, event or occurrence
that could reasonably be expected to result in the failure of any of the
conditions contained in Article 6 to be satisfied, promptly upon becoming aware
of the same.

     Section 5.4  Further Assurances.  Following the Closing Date, the Company
                  ------------------
shall, from time to time, execute and deliver such additional instruments,
documents, conveyances or assurances and take such other actions as shall be
necessary, or otherwise reasonably be requested by Purchaser, to confirm and
assure the rights and obligations provided for in this Agreement and the
Registration Rights Agreement and render effective the consummation of the
transactions contemplated hereby and thereby, or otherwise to carry out the
intent and purposes of this Agreement.

                       ARTICLE 6.  CONDITIONS PRECEDENT

     Section 6.1  Each Party's Obligations.  The obligations of the Company and
                  ------------------------
Purchaser to consummate the transactions contemplated to occur at the Closing
shall be subject to the

                                       16


satisfaction prior to the Closing of each of the following conditions, each of
which may be waived only if it is legally permissible to do so:

          (a)  HSR Act and Other Approvals.  Any applicable waiting period
               ---------------------------
under the HSR Act relating to the transactions contemplated hereby shall have
expired or been terminated, and all other material authorizations, consents,
orders or approvals of, or regulations, declarations or filings with, or
expirations of applicable waiting periods imposed by, any Governmental Entity
(including, without limitation, any foreign antitrust filing) necessary for the
consummation of the transactions contemplated hereby, shall have been obtained
or filed or shall have occurred.

          (b)  No Litigation, Injunctions, or Restraints.  No statute, rule,
               -----------------------------------------
regulation, executive order, decree, temporary restraining order, preliminary or
permanent injunction or other order enacted, entered, promulgated, enforced or
issued by any Governmental Entity or other legal restraint or prohibition
preventing the consummation of the transactions contemplated by this Agreement
and the Registration Rights Agreement shall be in effect.

          (c)  Collaboration Agreements.  The Collaboration Agreements shall
               ------------------------
have become effective in accordance with the terms and conditions thereof.

          (d)  Nasdaq Listing.  The Shares shall have been approved for listing
               --------------
on the Nasdaq Stock Market, subject only to official notice of issuance.

     Section 6.2  Conditions to the Obligations of the Company. The obligations
                  --------------------------------------------
of the Company to consummate the transactions contemplated to occur at the
Closing shall be subject to the satisfaction or waiver thereof prior to the
Closing of each of the following conditions:

          (a)  Representations and Warranties.  The representations and
               ------------------------------
warranties of Purchaser that are qualified as to materiality shall be true and
correct, and those that are not so qualified shall be true and correct in all
material respects, as of the date of this Agreement and as of the time of the
Closing as though made at and as of such time, except to the extent such
representations and warranties expressly relate to an earlier date (in which
case such representations and warranties that are qualified as to materiality
shall be true and correct, and those that are not so qualified shall be true and
correct in all material respects, on and as of such earlier date) and the
Company shall have received a certificate signed by an authorized officer of
Purchaser to such effect.

          (b)  Registration Rights Agreement.  Purchaser shall have executed
               -----------------------------
and delivered the Registration Rights Agreement.

          (c)  Performance of the Obligations of Purchaser.  Purchaser shall
               -------------------------------------------
have performed or complied in all material respects with all obligations and
covenants required to be performed or complied with by Purchaser under this
Agreement and the Company shall have received a certificate signed by an
authorized officer of Purchaser to such effect.

     Section 6.3  Conditions to the Obligations of Purchaser.  The obligations
                  ------------------------------------------
of Purchaser to consummate the transactions contemplated to occur at the Closing
shall be subject to the satisfaction or waiver thereof prior to the Closing of
each of the following conditions:

                                       17


          (a)  Representations and Warranties.  The representations and
               ------------------------------
warranties of the Company set forth in this Agreement that are qualified as to
materiality shall be true and correct, and those that are not so qualified shall
be true and correct in all material respects, as of the date of this Agreement
and as of the time of the Closing as though made at and as of such time, except
to the extent such representations and warranties expressly relate to an earlier
date (in which case such representations and warranties that are qualified as to
materiality shall be true and correct, and those that are not so qualified shall
be true and correct in all material respects, on and as of such earlier date),
and Purchaser shall have received a certificate signed by the chief executive
officer and chief financial officer of the Company to such effect.

          (b)  Opinion of the Company's Counsel.  Purchaser shall have
               --------------------------------
received the opinion dated as of the Closing of Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C., counsel to the Company, in form and substance
reasonably satisfactory to Purchaser and Purchaser's counsel.

          (c)  Registration Rights Agreement.  The Company shall have executed
               -----------------------------
and delivered the Registration Rights Agreement.

          (d)  Performance of the Obligations of the Company.  The Company
               ---------------------------------------------
shall have performed or complied in all material respects with all obligations
and covenants required to be performed or complied with by the Company under
this Agreement and the Purchaser shall have received a certificate signed by the
chief executive officer and chief financial officer of the Company to such
effect.

          (e)  Corporate Proceedings.  All corporate proceedings of the
               ---------------------
Company in connection with the transactions contemplated by this Agreement and
the Registration Rights Agreement, and all documents and instruments incident
thereto, shall be satisfactory in form and substance to Purchaser and its
counsel, and Purchaser and its counsel shall have received all such documents
and instruments, or copies thereof, certified if requested, as may be reasonably
requested.


                            ARTICLE 7.  TERMINATION

     Section 7.1  Termination.  This Agreement may be terminated at any time
                  -----------
prior to the Closing:

          (a)  by mutual written consent of Purchaser and the Company;

          (b)  by Purchaser or the Company:

               (i)   if the Closing shall not have occurred prior to June 30,
2001, provided, that the right to terminate this Agreement pursuant to this
      --------
clause (i) shall not be available to any party whose failure to fulfill any
obligation under this Agreement results in the failure of the Closing to occur;

               (ii)  if there shall be any statute, law, regulation or rule that
makes consummating the transactions contemplated hereby illegal or if any court
or other Governmental Entity of competent jurisdiction shall have issued a
judgment, order, decree or

                                       18


ruling, or shall have taken such other action restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated hereby
and such judgment, order, decree or ruling shall have become final and non-
appealable; or

               (iii)  if either one of the Collaboration Agreements shall have
terminated or not become effective in accordance with the terms and conditions
thereof;

          (c)  by Purchaser:

               (i)   if the Company shall have failed to perform in any material
respect any of its obligations hereunder or shall have breached in any respect
any representation or warranty contained herein qualified by materiality or
shall have breached in any material respect any representation or warranty not
so qualified, and the Company has failed to perform such obligation or cure such
breach, within 30 days of its receipt of written notice thereof from Purchaser,
and such failure to perform shall not have been waived in accordance with the
terms of this Agreement; or

               (ii)  if any of the conditions set forth in Section 6.1 or 6.3
shall become impossible to fulfill (other than as a result of any breach by
Purchaser of the terms of this Agreement) and shall not have been waived in
accordance with the terms of this Agreement;

          (d)  by the Company:

               (i)   if Purchaser shall have failed to perform in any material
respect any of its obligations hereunder or shall have breached in any respect
any representation or warranty contained herein qualified by materiality or
shall have breached any material respect any representation or warranty not so
qualified, and Purchaser has failed to perform such obligation or cure such
breach, within 30 days of its receipt of written notice thereof from the
Company, and such failure to perform shall not have been waived in accordance
with the terms of this Agreement; or

               (ii)  if any of the conditions set forth in Section 6.1 or 6.2
shall become impossible to fulfill (other than as a result of any breach by the
Company of the terms of this Agreement) and shall not have been waived in
accordance with the terms of this Agreement;

     Section 7.2  Effect of Termination.  In the event of termination of this
                  ---------------------
Agreement by either the Company or Purchaser as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Purchaser or the Company, other than the provisions
of this Section 7.2, Article 8 and Section 10.9, and except to the extent that
such termination results from the willful and material breach by a party of any
of its representations, warranties, covenants or agreements set forth in this
Agreement.

                          ARTICLE 8.  INDEMNIFICATION

     Section 8.1  Indemnification of Purchaser and Company.  The Company
                  ----------------------------------------
covenants and agrees to indemnify and hold harmless each of Purchaser, its
Affiliates (other than the Company and its Subsidiary), and their respective
officers, directors, partners, employees, agents, advisers and representatives
(collectively, the "Purchaser Indemnitees") from and against, and to pay or

                                       19


reimburse the Purchaser Indemnitees for, any and all claims, demands,
liabilities, obligations, losses, costs, expenses, fines or damages (whether
absolute, accrued, conditional or otherwise and whether or not resulting from
third party claims), including interest and penalties with respect thereto and
all expenses incurred in the investigation or defense of any of the same or in
asserting, preserving or enforcing any of their respective rights hereunder
(collectively, "Losses"), resulting from or based on (or allegedly resulting
from or based on) any breach by the Company of any representation, warranty,
covenant or obligation of the Company hereunder. The Losses described in this
Section 8.1 are herein referred to as "Purchaser Indemnifiable Losses." The
Company shall reimburse the Purchaser Indemnitees for any legal or other
expenses incurred by such Purchaser Indemnitees in connection with investigating
or defending any such Purchaser Indemnifiable Losses as such expenses are
incurred.

     Each Purchaser agrees, severally and not jointly, to indemnify and hold
harmless the Company, its Affiliates (other than Purchaser), and their
respective officers, directors, partners, employees, agents, advisers and
representatives (collectively, the "Company Indemnitees") from and against, and
to pay or reimburse the Company Indemnitees for, any Losses, resulting from or
based on (or allegedly resulting from or based on) any breach by Purchaser of
any representation, warranty, covenant or obligation of Purchaser hereunder. The
Losses described in this Section 8.1 are herein referred to as "Company
Indemnifiable Losses," and together with the Purchaser Indemnifiable Losses, are
referred to herein as the "Indemnifiable Losses."  Purchaser shall reimburse the
Company Indemnitees for any legal or other expenses incurred by such Company
Indemnitees in connection with investigating or defending any such Company
Indemnifiable Losses as such expenses are incurred.

     Section 8.2  Indemnification Procedures. In case any proceeding or written
                  --------------------------
assertion of claim (including any governmental investigation) shall be
instituted involving any person in respect of which indemnity may be sought
pursuant to Section 8.1 above (the "Indemnitee"), promptly after receipt such
Indemnitee shall, if a claim in respect thereof is to be made against the
Company or the Purchaser, as the case may be (the "Indemnifying Person"), notify
the Indemnifying Person in writing of the commencement or the written assertion
thereof.  Failure by a Indemnitee to so notify the Indemnifying Person shall
relieve the Indemnifying Person from the obligation to indemnify such Indemnitee
only to the extent that the Indemnifying Person suffers actual and material
prejudice as a result of such failure but in no event shall such failure to
notify the Indemnifying Person (i) constitute prejudice suffered by the
Indemnifying Person if it has otherwise received notice of the actions giving
rise to such obligation to indemnify or (ii) relieve it from any liability or
obligation that it may otherwise have to such Indemnitee.  In case any such
action or claim shall be brought or asserted against any Indemnitee and it shall
notify the Indemnifying Person of the commencement or assertion thereof, the
Indemnifying Person shall be entitled to participate in or assume the defense of
such action or claim at any time, provided, however, that (a) if the
                                  --------  -------
Indemnifying Person does not assume the defense, it shall not, in connection
with any one such action or proceeding or separate but substantially similar
actions or proceedings arising out of the same general allegations, be liable
for the fees and expenses of more than one separate firm of attorneys at any
time for all Indemnitees, except to the extent that local counsel, in addition
to regular counsel, is required in order to effectively defend against such
action or proceeding and (b) if the Indemnifying Person assumes the defense, it
must select an attorney that is satisfactory to the Indemnitee, after which it
will not be liable for the attorney's fees of the Indemnitee.  Indemnitee shall
not enter into any settlement of any such

                                       20


claim without the prior consent of the Indemnifying Person, such consent not to
be unreasonably withheld or delayed.

     In no event shall the Indemnifying Person be liable under this Article 8,
and the Indemnifying Person's obligation to defend, indemnify and hold harmless
the Indemnitee shall not apply to: (a) any special, incidental or consequential
damages resulting from or based upon any breach by the Indemnifying Person of
any representation, warranty, covenant or obligation of such Indemnifying Person
hereunder, (b) any Indemnifiable Losses until the aggregate amount of such
Losses exceeds $5,000,000, and (c) any Indemnifiable Losses in excess of
$50,000,000.  The remedies set forth in this Article 8 are cumulative and shall
not be construed to restrict or otherwise affect any other remedies that may be
available to a Indemnitee or a Party under any other agreement, pursuant to
statutory or common law or equity.  Notwithstanding anything to the contrary in
this Agreement, any claim for indemnification under this Article 8 must be
brought prior to the second anniversary of the Closing Date, except for claims
relating to the representations and warranties in Sections 2.1(k) and 2.1 (m)
which can be brought any time prior to the expiration of the applicable statute
of limitations.

     Section 8.3  Survival of Representations and Warranties.  The
                  ------------------------------------------
representations and warranties of the Company and Purchaser contained in this
Agreement shall expire for all purposes on the second anniversary of the Closing
Date, except for the representations and warranties contained in Sections 2.1(k)
and 2.1(m) which shall expire for all purposes upon expiration of the applicable
statute of limitations.

                    ARTICLE 9.  INTERPRETATION; DEFINITIONS

     Section 9.1  Interpretation.  As used in this Agreement, unless the context
                  --------------
otherwise requires:

          (a)  any reference to the Company and its Subsidiary means the Company
and its Subsidiary;

          (b)  words of any gender include all genders;

          (c)  words using the singular or plural number also include the plural
or singular number, respectively; and

          (d)  the terms "hereof" "herein", and "hereby" and derivative or
similar words refer to this entire Agreement.

     Section 9.2  Definitions.  For purposes of this Agreement, the following
                  -----------
terms shall have the following meanings:

          (a)  "13D Group" is defined in Section 3.1(e).
                ---------

          (b)  "Affiliate" shall have the meaning set forth in Rule 12b-2 under
                ---------
the Exchange Act (as in effect on the date of this Agreement).

          (c)  "Agreement" is defined in the recitals to this agreement.
                ---------

                                       21


          (d)  "Beneficially Owned," "Beneficial Ownership" or any like
                ------------------    --------------------
expression with respect to any securities means having "beneficial ownership" of
such securities (as determined pursuant to Rule 13d-3 under the Exchange Act),
including pursuant to any agreement, arrangement or understanding, whether or
not in writing.

          (e)  "Business Day" means any day on which banking institutions are
                ------------
open in the City of Boston.

          (f)  "Closing" is defined in Section 1.2.
                -------

          (g)  "Closing Date" is defined in Section 1.2.
                ------------

          (h)  "Code" means the Internal Revenue Code of 1986, as amended,
                ----
and the regulations promulgated thereunder, as amended.

          (i)  "Collaboration Agreements" is defined in the recitals to this
                ------------------------
Agreement.

          (j)  "Common Stock" means the Voting Common Stock, $.01 par value
                ------------
per share, of the Company.

          (k)  "Company" is defined in the recitals to this Agreement.
                -------

          (l)  "Company Intellectual Property" is defined in Section 2.1(p).
                -----------------------------

          (m)  "Company SEC Documents" is defined in Section 2.1(f).
                ---------------------

          (n)  "Contract" is defined in Section 2.1(c).
                --------

          (o)  "Convertible Securities" means equity, debt or other securities
                ----------------------
of Purchaser or an Affiliate of Purchaser that are exercisable or exchangeable
for Shares.

          (p)  "Employee" means any employee or former employee of the Company
                --------
or its Subsidiary or any beneficiary or dependent of any such employee or former
employee.

          (q)  "Employee Benefit Plans" means all defined contribution, defined
                ----------------------
benefit, welfare benefit, bonus, incentive compensation, stock option, stock
purchase, stock appreciation right, stock bonus, incentive, deferred
compensation, insurance, medical, dental, vision, life, death benefit, fringe
benefit or other employee benefit plans, programs, policies or arrangements,
including without limitation, any employment, consulting, offer, secondment,
severance or other termination agreement, whether or not an employee benefit
plan within the meaning of section 3(3) of ERISA, maintained by the Company or
its Subsidiary.

          (r)  "Environmental Laws" is defined in Section 2.1(m).
                ------------------

          (s)  "Environmental Permits" is defined in Section 2.1(m).
                ---------------------

          (t)  "ERISA" means the Employee Retirement Income Security Act of
                -----
1974, as amended.

                                       22


          (u)  "Exchange Act" means the Securities Exchange Act of 1934, as
                ------------
amended, or any successor federal statute and the rules and regulations of the
SEC promulgated thereunder, all as the same shall be in effect from time to
time.

          (v)  "GAAP" means United States generally accepted accounting
                ----
principles.

          (w)  "Governmental Entity" is defined in Section 2.1(c).
                -------------------

          (x)  "Hazardous Substance" is defined in Section 2.1(m).
                -------------------

          (y)  "HSR Act" is defined in Section 2.1(c).
                -------

          (z)  "Indemnifying Person" is defined in Section 8.2.
                -------------------

          (aa) "Intellectual Property" means trademarks, trade names, trade
                ---------------------
dress, service marks, copyrights, domain names, and similar rights (including
registrations and applications to register or renew the registration of any of
the foregoing), patents and patent applications, trade secrets, ideas,
inventions, improvements, practices, processes, formulas, designs, know-how,
confidential business and technical information, computer software, firmware,
data and documentation, licenses of or agreements relating to any of the
foregoing, rights of privacy and publicity, moral rights, and any other similar
intellectual property rights and tangible embodiments of any of the foregoing
(in any medium including electronic media.)

          (bb) "Intellectual Property License" means any license, permit,
                -----------------------------
authorization, approval, Contract or consent granted, issued by or with any
Person relating to the use of Intellectual Property.

          (cc) "IRS" means the Internal Revenue Service.
                ---

          (dd) "Knowledge of the Company," "Knowledge of the Company or its
                ------------------------    -------------------------------
Subsidiary" or any like expression means to the actual knowledge of Jonathan
- -----------
M. Rothberg, Chief Executive Officer, President and Chairman of the Board;
David. M. Wurzer, Executive Vice-President, Treasurer and Chief Financial
Officer; Christopher K. McLeod, Executive Vice-President; Hovan Asdourian,
Senior Vice-President, Business Development; and Michael McKenna, Ph.D., Vice-
President, Operations.

          (ee) "Lien" is defined in Section 2.1(c).
                ----

          (ff) "Losses" is defined in Section 8.1.
                ------

          (gg) "Material Adverse Effect" on or with respect to an entity (or
                -----------------------
group of entities taken as a whole) means any state of facts, event, change or
effect that has had, or would reasonably be expected to have, a material adverse
effect on (a) the business, results of operations or financial condition of such
entity (or, if with respect thereto, of such group of entities taken as a
whole), other than any state of facts, event, change or effect attributable to
changes (x) in general economic or market conditions or (y) generally affecting
the biotechnology or pharmaceutical industries, or (b) the ability of such
entity (or group of entities)

                                       23


to consummate the transactions contemplated under this Agreement or the
Registration Rights Agreement.

          (hh) "Material Contract" is defined in Section 2.1(j).
                -----------------

          (ii) "Nonvoting Common Stock" means the Nonvoting Common Stock, $.01
                ----------------------
par value per share, of the Company.

          (jj) "Permit" is defined in Section 2.1(c).
                ------

          (kk) "Permitted Liens" means those Liens (A) securing debt that is
                ---------------
reflected on the balance sheets or the notes thereto contained in the Company
SEC Documents filed with the SEC and publicly available prior to the date
hereof, (B) for Taxes not yet due or payable or being contested in good faith
and for which adequate reserves have been established in accordance with GAAP,
(C) that constitute mechanics', carriers', workmens' or like liens, liens
arising under original purchase price conditional sales contracts and equipment
leases with third parties entered into in the ordinary course, (D) Liens
incurred or deposits made in the ordinary course of business consistent with
past practice in connection with workers' compensation, unemployment insurance
and social security, retirement and other legislation and (E) easements,
covenants, declarations, rights or way, encumbrances, or similar restrictions in
connection with real property owned by the Company of its Subsidiary that do not
materially impair the use of such real property by the Company and its
Subsidiary, and in the case of Liens described in clauses (B), (C), (D) or (E)
that, individually or in the aggregate, would not have a material Adverse Effect
on the Company and its Subsidiary, taken as a whole.

          (ll) "Person" means any individual, partnership, joint venture,
                ------
corporation, limited liability company, trust, unincorporated organization,
government or department or agency of a government or other entity.

          (mm) "Plans" is defined in Section 2.1(l).
                -----

          (nn) "Purchase Price" is defined in Section 1.1.
                --------------

          (oo) "Purchaser" is defined in the recitals to this Agreement.
                ---------

          (pp) "Purchaser Indemnifiable Losses" is defined in Section 8.1.
                ------------------------------

          (qq) "Purchaser Indemnitees" is defined in Section 8.1.
                ---------------------

          (rr) "Registration Rights Agreement" is defined in the recitals to
                -----------------------------
this Agreement.

          (ss) "Representative" means an agent or employee of Purchaser, or of
                --------------
an independent public accounting firm, law firm, or other consulting company or
advisor of Purchaser.

          (tt) "SEC" means the Securities and Exchange Commission.
                ---

                                       24


          (uu)   "Securities Act" means the Securities Act of 1933, as amended,
                  --------------
or any successor federal statute, and the rules and regulations of the SEC
promulgated thereunder, all as the same shall be in effect from time to time.

          (vv)   "Shares" is defined in Section 1.1.
                  ------

          (ww)   "Subsidiary" means, as to any Person, any corporation if at
                  ----------
least a majority of the shares of stock of which having general voting power
under ordinary circumstances to elect a majority of the Board of Directors of
such corporation (irrespective of whether or not at the time stock of any other
class or classes shall have or might have voting power by reason of the
happening of any contingency) is, at the time as of which the determination is
being made, owned by such Person, or its Subsidiary or by such Person and its
Subsidiary and includes 454 Corporation.

          (xx)   "Taxes" is defined in Section 2.1(k).
                  -----

          (yy)   "Tax Returns" is defined in Section 2.1(k).
                  -----------

          (zz)   "Total Voting Power" means at any time the total combined
                  ------------------
voting power in the general election of directors of all the Voting Securities
then outstanding.

          (aaa)  "Voting Securities" means at any time, shares of any class of
                  -----------------
capital stock of the Company which are then entitled to vote generally in the
election of directors.

                          ARTICLE 10.  MISCELLANEOUS

     Section 10.1  Severability.  If any term, provision, covenant or
                   ------------
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants, and restrictions without
including any of such which may be hereafter declared invalid, void or
unenforceable.

     Section 10.2  Specific Enforcement.  Purchaser, on the one hand, and the
                   --------------------
Company, on the other, acknowledge and agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached.  It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions hereof in any court of the
United States or any state thereof  having jurisdiction, this being in addition
to any other remedy to which they may be entitled at law or equity.

     Section 10.3  Entire Agreement.  This Agreement (including the documents
                   ----------------
set forth in the Exhibits and Schedules hereto) and the Collaboration Agreement
contain the entire understanding of the parties with respect to the transactions
contemplated hereby.

     Section 10.4  Counterparts.  This Agreement may be executed in one or more
                   ------------
counterparts, all of which shall be considered one and the same agreement, and
shall become

                                       25


effective when one or more of the counterparts have been signed by each party
and delivered to the other parties, it being understood that all parties need
not sign the same counterpart.

     Section 10.5  Notices.  All notices and other communications required or
                   -------
permitted under this Agreement shall be effective upon receipt and shall be in
writing and may be delivered in person, by telecopy, overnight delivery service
or registered or certified United States mail, addressed to the Company or the
Purchaser, as the case may be, at their respective addresses set forth below:

If to the Company:                              If to Purchaser:

CuraGen Corporation                             BAYER AG
555 Long Wharf Drive                            D 51368
11th Floor                                      Leverkeusen
New Haven, Connecticut 06511                    Federal Republic of Germany
Attn: Chief Executive Officer                   Attn: General Counsel
Telephone  (203) 401-3330                       Telephone:  011 49 214 30 81803
Facsimile: (203) 401-3333                       Facsimile:  011 49 214 30 50848

With copies to:                                 With copies to:

CuraGen Corporation                             Bayer Corporation, Inc.
555 Long Wharf Drive                            400 Morgan Lane
11th Floor                                      West Haven, CT
New Haven, Connecticut 06511                    Attn: Legal Department
Attn: Legal Department                          Telephone: (203) 812-2401
Telephone  (203) 401-3330                       Facsimile: (203) 812-2795
Facsimile: (203) 401-3333

and to:                                         and to:

Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C.,                                    Wilmer, Cutler & Pickering
One Financial Center                            2445 M Street
Boston, Massachusetts 02111                     Washington, D.C. 20037
Attn: Michael L. Fantozzi                       Attn: Richard W. Cass
Telephone  (617) 542-6000                       Telephone  (202) 663-6503
Facsimile: (617) 542-2241                       Facsimile: (202) 663-6363


All notices and other communications shall be effective upon the earlier of
actual receipt thereof by the person to whom notice is directed or (a) in the
case of notices and communications sent by personal delivery or telecopy, one
business day after such notice or communication arrives at the applicable
address or was successfully sent to the applicable telecopy number, (b) in the
case of notices and communications sent by overnight delivery service, at noon
(local time) on the second business day following the day such notice or
communications was delivered to such delivery service, and (c) in the case of
notices and communications sent by United States mail,

                                       26


seven days after such notice or communication shall have been deposited in the
United States mail. Any notice delivered to a party hereunder shall be sent
simultaneously, by the same means, to such party's counsel as set forth above.

     Section 10.6  Amendments.  This Agreement may be amended as to Purchaser
                   ----------
their successors and assigns (determined as provided in Section 10.8), and the
Company may take any action herein prohibited, or omit to perform any act
required to be performed by it, if the Company shall obtain the written consent
of Purchaser. This Agreement may not be waived, changed, modified, or discharged
orally, but only by an agreement in writing signed by the party or parties
against whom enforcement of any waiver, change, modification or discharge is
sought or by parties with the right to consent to such waiver, change,
modification or discharge on behalf of such party.

     Section 10.7  Cooperation.  Purchaser and the Company agree to take, or
                   -----------
cause to be taken, all such further or other actions as shall reasonably be
necessary to make effective and consummate the transactions contemplated by this
Agreement, including, without limitation, making all required filings under the
HSR Act, if any.

     Section 10.8  Successors and Assigns.  All covenants and agreements
                   ----------------------
contained herein shall bind and inure to the benefit of the parties hereto and
their respective successors and assigns; provided, however, that Purchaser may
                                         --------  -------
assign its rights hereunder (including its right to purchase the Shares) to an
Affiliate of Purchaser, provided that such Affiliate agrees in writing to be
bound by the terms and conditions set forth herein, and the Company may not
assign any of its rights under this Agreement without the written consent of
Purchaser, which consent shall not be unreasonably withheld.

     Section 10.9  Expenses and Remedies.  Whether or not the Closing takes
                   ---------------------
place, all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be borne by the party incurring such
expense; provided, however, that the Parties shall share equally the cost of any
         --------  -------
filing fees under the HSR Act.

     Section 10.10  Transfer of Shares.  Purchaser understands and agrees that
                    ------------------
the Shares have not been registered under the Securities Act or the securities
laws of any state and that they may be sold or otherwise disposed of only in one
or more transactions registered under the Securities Act and, where applicable,
such laws or as to which an exemption from the registration requirements of the
Securities Act and, where applicable, such laws is available. Purchaser
acknowledges that except as provided in the Registration Rights Agreement,
Purchaser has no right to require the Company to register the Shares and
understands and agrees that each certificate representing the Shares (other
than, with respect to the first legend, Shares that are no longer subject to the
provisions of Article 4 and other than, with respect to the second legend,
Shares which have been transferred in a transaction registered under the
Securities Act or exempt from the registration requirements of the Securities
Act pursuant to Rule 144 thereunder or any similar rule or regulation) shall
bear the following legends:

"THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS RESTRICTED BY
AN AGREEMENT ON FILE AT THE OFFICE OF THE CORPORATION.

                                       27


"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE
EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS."

and Purchaser agrees to transfer the Shares only in accordance with the
provisions of such legends.

     Section 10.11  Governing Law.  This Agreement shall be governed by and
                    -------------
construed and enforced in accordance with the laws of the State of Delaware
without regard to conflicts of law principles.

     Section 10.12  Publicity.  The Company and Purchaser will consult and
                    ---------
cooperate with each other before issuing, and provide each other the opportunity
to review and comment upon, any press release or otherwise making any public
statement with respect to the transactions contemplated by this Agreement.

     Section 10.13  No Third Party Beneficiaries.  Nothing contained in this
                    ----------------------------
Agreement is intended to confer upon any Person other than the parties hereto
and their respective successors and permitted assigns, any benefit, right or
remedies under or by reason of this Agreement; provided, however, that the
                                               --------  -------
parties hereto hereby acknowledge and agree that the Purchaser Indemnities
(other than Purchaser) are third party beneficiaries of Article 8 of this
Agreement.

     Section 10.14  Consent to Jurisdiction.  Each of the Company and Purchaser
                    -----------------------
irrevocably submits to the personal exclusive jurisdiction of the United States
District Court for the District of Delaware for the purposes of any suit, action
or other proceeding arising out of this Agreement or any transaction
contemplated hereby (and, to the extent permitted under applicable rules of
procedure, agrees not to commence any action, suit or proceeding relating hereto
except in such court).  Each of the Company and Purchaser further agrees that
service of any process, summons, notice or document hand delivered or sent by
registered mail to such party's respective address set forth in Section 10.5
will be effective service of process for any action, suit or proceeding in
Delaware with respect to any matters to which it has submitted to jurisdiction
as set forth in the immediately preceding sentence.  Each of the Company and
Purchaser irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby in the United States District court for the
District of Delaware, and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in such court that any such action, suit or
proceeding brought in such court has been brought in an inconvenient forum.

                            Signature Page Follows

                                       28


IN WITNESS WHEREOF, PURCHASER and the COMPANY have caused this Agreement to be
executed as of the day and year first above written.


                              BAYER AG


                              By: /s/ W. Hartwig
                                  --------------------------------------
                                  Name: W. Hartwig
                                  Title: EVP


                              By: /s/ A. Buchmeier
                                  --------------------------------------
                                  Name: A. Buchmeier
                                  Title: Senior Counsel


                              CURAGEN CORPORATION


                              By: /s/ Christopher K. McLeod
                                  --------------------------------------
                                  Name: Christopher K. McLeod
                                  Title: Executive Vice President

                                       29


                                                                 SCHEDULE 2.1(e)

Capitalization of 454 Corporation
- ---------------------------------

Preferred Stock Series: 15,000,000 shares authorized, $.01 par value

Series A -  6,000,000 shares issued and outstanding
            Series A issued to CuraGen Corporation for $20,000,000 cash and
            $177,827 of fixed assets

Series B -  4,000,000 shares issued and outstanding
            5,000,000 shares undesignated

Common Stock: 20,000,000 shares authorized

       No shares of Common Stock are issued or outstanding

2000 Employee, Director and Consultant Stock Plan:  2,500,000 shares of common
stock authorized

       907,206 option outstanding



                                                          Preferred         Cash          Contributed
                                Shares          Par        at Par         Issuance           Fixed              Total
                                Issued         Value        Value         Proceeds           Assets            Proceeds
                                                                                            
Series A
Preferred Stock
Issued to
CuraGen Corporation         6,000,000        $  0.01       60,000        20,000,000         177,827           20,177,827

Series B
Preferred Stock
Issued to
Various Investors
at $5.00 per share          4,000,000        $  0.01       40,000        20,000,000               0           20,000,000

Summary
Total Preferred
Shares Outstanding         10,000,000                     100,000        40,000,000         177,827           40,177,827
Par value of stock                                                                                              (100,000)
Equity
Offering Expenses                                                                                               (844,532)
                       -------------------------------------------------------------------------------------------------
Total                                                     100,000        40,000,000         177,827           39,233,295


                                       30


                                                                 SCHEDULE 2.1(j)

Contracts prohibiting or materially restricting the ability of the Company or
- -----------------------------------------------------------------------------
its Subsidiary to conduct its business, to engage in any business or operate in
- -------------------------------------------------------------------------------
any geographical area or compete with any person:
- -------------------------------------------------

The Technology Transfer and License Agreement by and between CuraGen Corporation
and 454 Corporation dated June 6, 2000 sets forth the following limitations.
Defined terms have the same meaning as the Technology Transfer and License
Agreement.

Section 2.1.7. The Subsidiary agrees that (i) prior to the closing of a
Qualified Public Offering, the Subsidiary will not engage independently or with
any Third Party in any business, venture or activity outside the 454 Field, and
(ii) after the closing of a Qualified Public Offering, 454 shall not engage
independently or with any Third Party in any business, venture or activity
within the CuraGen Field.

                                       31


                                   EXHIBIT A

                              CURAGEN CORPORATION

                         REGISTRATION RIGHTS AGREEMENT

     This Registration Rights Agreement (this "Agreement") is made as of January
12, 2001 by and between CuraGen Corporation, a Delaware corporation (the
"Company"), and Bayer AG, a corporation organized under the laws of the Federal
Republic of Germany ("Purchaser").

     WHEREAS, the Company and Purchaser have entered into a Stock Purchase
Agreement, dated as of January 12, 2001 (the "Stock Purchase Agreement"),
pursuant to which the Purchaser has agreed to purchase 3,112,482 Shares of
Voting Common Stock, par value $.01 per share, of the Company, upon the terms
and conditions set forth therein; and

     WHEREAS, in order to induce the Purchaser to enter into the Stock Purchase
Agreement, the Company has agreed to provide the registration rights set forth
in this Agreement for the benefit of Purchaser and its direct and indirect
transferees upon the terms and conditions set forth herein; and

     WHEREAS, the execution and delivery of this Agreement is a condition to the
Purchaser's obligations pursuant to the Stock Purchase Agreement.

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
set forth herein, the Company and Purchaser agree as follows:

                            ARTICLE 1.  DEFINITIONS

Capitalized terms used herein without definition shall have the meanings
assigned to such terms in the Stock Purchase Agreement.  For the purposes of
this Agreement:

          (a) "Commission" means the U.S.  Securities and Exchange Commission or
any other governmental authority from time to time administering the Securities
Act.

          (b) "Common Stock" means the Voting Common Stock, par value $.01 per
share, of the Company.

          (c) "DTC" means the Depository Trust Company.

          (d) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute and the rules and the regulations of
the Commission promulgated thereunder, all as the same shall be in effect from
time to time.

          (e) "Holder" means any Person owning or having the right to acquire
Registrable Securities, including an Affiliate or any successor, assignee or
transferee of Purchaser or a Holder that has received Registrable Securities in
accordance with Article 13 hereof.


          (f) "NASD" means the National Association of Securities Dealers, Inc.

          (g) "Person" means any natural person, firm, partnership, association,
corporation, company, joint venture, unincorporated association, trust, business
trust, government or department or agency of a government, limited liability
company or other entity.

          (h) "Prospectus" means the prospectus included in any Registration
Statement (including without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering or any portion
of the Registrable Securities covered by such Registration Statement and all
other amendments and supplements to the prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.

          (i) "Registrable Securities" means (a) the Shares of Common Stock
received by the Purchaser pursuant to the Stock Purchase Agreement and (b) any
capital stock or other securities of the Company issued or issuable with respect
to the Shares, (i) upon any conversion or exchange thereof, (ii) by way of stock
dividend or other distribution, stock split or reverse stock split, or (iii) in
connection with a combination of shares, recapitalization, merger,
consolidation, exchange offer or other reorganization.  As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (A) a Registration Statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such Registration
Statement, (B) such securities become eligible to be distributed to the public
in reliance upon Rule 144 (or any successor provision) under the Securities Act,
provided that at the time such securities are proposed to be disposed of, they
may be sold under Rule 144 without any limitation on the amount of such
securities which may be sold or (C) they shall have ceased to be outstanding.

          (j) "Registration Expenses" means all fees and expenses incident to
the performance of or compliance with the provisions of this Agreement, whether
or not any Registration Statement is filed or becomes effective, including,
without limitation, all (a) registration and filing fees (including, without
limitation, (i) fees with respect to filings required to be made and other
expenses associated with the NASD and any other applicable exchange in
connection with an underwritten offering), and (ii) fees and expenses of
compliance with state securities or blue sky laws (including, without
limitation, fees and distributions of counsel for the underwriter or
underwriters in connection with blue sky qualifications of the Registrable
Securities and determination of eligibility of the Registrable Securities for
investment under the laws of such jurisdictions as are provided in Section
5(e)), (b) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities in a form eligible for deposit
with DTC and of printing prospectuses), (c) fees and disbursements of all
independent certified public accountants referred to in Article 5 (including,
without limitation, the reasonable expenses of any special audit and "cold
comfort" letters required by or incident to such performance), (d) the fees and
expenses of any "qualified independent underwriter" or other independent
appraiser participating in an offering pursuant to the NASD Rules of Conduct and
the corresponding rules of any other applicable exchange, (e) liability
insurance under the

                                       2


Securities Act or any other securities laws, if the Company desires such
insurance, (f) fees and expenses of all attorneys, advisers, appraisers and
other persons retained by the Company or any Subsidiary of the Company, (g)
internal expenses of the Company and its Subsidiaries (including, without
limitation, all salaries and expenses of officers and employees of the Company
and its Subsidiaries, other general overhead expenses of the Company and its
Subsidiaries, and other expenses for the performance of legal or accounting
duties), (h) the expense of any annual audit and the preparation of historical
and pro forma financial statements or other data normally prepared by the
Company in the ordinary course of business, (i) the expenses relating to
printing, word processing and distributing all Registration Statements,
underwriting agreements, securities sales agreements, and any other documents
necessary in order to comply with this Agreement, (j) any fees and disbursements
of any other underwriters and broker-dealers customarily paid by issuers or
sellers of securities, and (k) the fees and disbursements of not more than one
(1) counsel (together with appropriate local counsel) chosen by the Holders of a
majority of the Registrable Securities to be included in such Registration
Statement; provided, however, that in all cases in which the Company is required
to pay Registration Expenses hereunder, Registration Expenses shall exclude any
underwriting discounts, selling commissions or any transfer taxes payable in
respect of the sale of the Registrable Securities by the Holders thereof.

          (k) "Registration Statement" means any registration statement of the
Company that covers any of the Registrable Securities pursuant to the provisions
of this Agreement, and all amendments and supplements to any such registration
statement, including post-effective amendments, in each case including the
Prospectus, all exhibits and all material incorporated by reference or deemed to
be incorporated by reference in such registration statement.

          (l) "Rule 144" means Rule 144 (or any successor provision) under the
Securities Act.

          (m) "Securities Act" means the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.

          (n) "Special Registration" means the registration of share of equity
securities and/or options or other rights in respect thereof to be offered
solely to directors, members of management, employees, consultants or sales
agents, distributors or similar representatives of the Company or its direct or
indirect Subsidiaries, solely on Form S-8 or any successor form, a registration
on Form S-4 with respect to any merger, consolidation or acquisition, or a
registration on another form not available for registering Registrable
Securities for sale to the public.

          (o) "underwritten registration" or "underwritten offering" means a
registration in which securities of the Company (including Registrable
Securities) are sold to an underwriter for reoffering to the public.

                                       3


                        ARTICLE 2.  DEMAND REGISTRATION

          (a) Request for Registration.  Subject to the provisions of Section
2(d) and Article 8, at any time or from time to time on or after June 30, 2002,
Holders of Registrable Securities shall have the right to make a written request
(the "Initiating Holders") that the Company effect a registration under the
Securities Act of all or part of its Registrable Securities of the Holders
making such request; provided, however, that Purchaser or a Purchaser Affiliate
may demand registration beginning six months after the date hereof for
Registrable Securities that may be acquired upon the exercise of Convertible
Securities, so long as any exercise or exchanges of Convertible Securities for
Registrable Securities pursuant to the terms and conditions of the Convertible
Securities shall not occur until a sale, transfer or disposition of the
Registrable Securities would be permitted under Section 4.1 of the Stock
Purchase Agreement.  A request for registration pursuant to this Article 2 (a
"Demand Registration") shall specify the approximate number of Registrable
Securities requested to be registered, the anticipated per share price range for
such offering and the intended method or disposition thereof by such Initiating
Holders.

          (b) Obligation to Effect Registration.  Within five (5) days after
receipt by the Company of any request for Demand Registration, the Company shall
promptly give written notice of such requested registration to all Holders.
Such Holders shall have the right, by giving written notice to the Company
within twenty (20) days after the Company provides its notice, to elect to have
included in such registration such of their Registrable Securities as such
Holders may request in such notice of election.  Thereupon, the Company shall,
as expeditiously as possible, use reasonable best efforts to effect the
registration under the Securities Act of all Registrable Securities that the
Company has been requested to so register; provided, that if the underwriter (if
any) managing the offering determines that, because of marketing factors, all of
the Registrable Securities requested to be registered by all Holders may not be
included in the offering, then all Holders who have requested registration shall
participate in the offering in accordance with Section 2(h).

          (c) Registration Statement Form.  Registrations under this Article 2
shall be on such appropriate form of Registration Statement of the Commission as
shall be selected by the Company and available to it under the Securities Act.
The Company agrees to include in any such Registration Statement all information
which, in the opinion of counsel to the Company, is required to be included
therein under the Securities Act.

          (d) Limitations on Registration.  The Company shall not be required to
effect more than two (2) Demand Registrations pursuant to this Article 2.  In
addition, the Company shall not be required to effect any such registration
(other than on Form S-3 or any other successor form relating to secondary
offerings) during the period starting with the date sixty (60) days prior to the
Company's estimated date of filing of, and ending on the date ninety (90) days
immediately following the effective date of, any registration statement (other
than a Special Registration) pertaining to the securities of the Company,
provided that the Company is actively employing in good faith all reasonable
efforts to cause such registration statement to become effective.  The Company
shall not be required to effect the Demand Registration if the Holders propose
to sell Registrable Securities that have a market value at the time of such
demand of less than $3,000,000.

                                       4


          (e) Inclusion of Other Securities.  The Registration Statement filed
pursuant to the request of the Holders may, subject to the provisions of Section
2(h), include other securities of the Company with respect to which registration
rights have been granted, and may include securities of the Company being sold
for the account of the Company.  If the Company shall request inclusion in any
registration, securities being sold for its own account, or if other persons
shall request inclusion in any registration pursuant to Section 2.(h), the
Holders shall offer to include such securities in the underwriting.

          (f) Effective Registration Statement.  A Demand Registration shall not
be deemed to have been effected unless a Registration Statement covering all of
the Registrable Securities requested to be included in such registration by the
Holders thereof and as reduced, if necessary, in accordance with Section 2(g)
hereto has been declared effective by the Commission and remains continually
effective for the period specified in Section 5(b).

          (g) Suspension.  In addition to the limitations in Section 2(d), if
the Board of Directors of the Company, in its good faith judgment, determines
that any registration under the Securities Act of Registrable Securities should
not be made or continued because it would materially interfere with any material
financing, acquisition, corporation reorganization, merger, or other transaction
involving the Company or any of its subsidiaries (a "Valid Business Reason"),
(i) the Company may postpone filing a Registration Statement relating to a
Demand Registration until such Valid Business Reason no longer exists, but in no
event for more than one hundred twenty (120) days, and (ii) in case a
Registration Statement has been filed relating to a Demand Registration, the
Company may cause such Registration Statement to be withdrawn and its
effectiveness terminated or may postpone amending or supplementing such
Registration Statement until such Valid Business Reason no longer exists, but in
no event for more than one hundred twenty (120) days (the "Postponement
Period"); provided, however, that in no event shall the Company be permitted to
postpone or withdraw a Registration Statement within 120 days after the
expiration of any Postponement Period.

          (h) Allocation.  If any Demand Registration involves an underwritten
offering and the managing underwriter of such offering shall advise the Company
that, in its view, the number of Registrable Securities and other shares of
common stock of the Company with registration rights (the "Section 2 Other
Shares") requested to be included in such registration exceeds the largest
number that can be sold in an orderly manner in such offering within a price
range acceptable to the Holders of Registrable Securities requesting the
registration, the Company shall include in such registration:

              (i) first, to each Initiating Holder, pro rata on the basis of the
number of shares of Registrable Securities held by such Initiating Holders that
such Initiating Holders had requested to be included in the registration,
provided, however, if any Initiating Holder does not request inclusion of the
maximum number of shares of Registrable Securities allocated to him pursuant to
the above-described procedure, the remaining portion of his allocation shall be
reallocated among the remaining Initiating Holders whose allocations did not
satisfy their requests pro rata on the basis of the number of shares of
Registrable Securities held by such remaining Initiating Holders that such
Holders had requested to be included in the registration, and this procedure
shall be repeated until all of the shares of Registrable Securities which may be
included in the registration on behalf of the Initiating Holders have been so
allocated,

                                       5


               (ii) thereafter, to the selling holders of the non-requesting
Registrable Securities and Section 2 Other Shares, pro rata on the basis of the
number of shares of Registrable Securities and Section 2 Other Shares held by
such Holders and other selling stockholders that such Holders and other selling
stockholders had requested to be included in the registration; provided,
however, that if any Holder or other selling stockholder does not request
inclusion of the maximum number of shares of Registrable Securities and Section
2 Other Shares allocated to him pursuant to the above-described procedure, the
remaining portion of his allocation shall be reallocated among those requesting
Holders and other selling stockholders whose allocations did not satisfy their
requests pro rata on the basis of the number of shares of Registrable Securities
and Section 2 Other Shares held by such Holders and other selling stockholders
that such Holders and other selling stockholders had requested to be included in
the registration, and this procedure shall be repeated until all of the shares
of Registrable Securities and Section 2 Other Shares which may be included in
the registration on behalf of the Holders and other selling stockholders have
been so allocated, and

               (iii) thereafter to the Company. The Company shall not limit the
number of Registrable Securities to be included in a registration pursuant to
this Section 2(h) in order to include shares held by stockholders with no
registration rights or to include founder's stock or any other shares of stock
issued to employees, officers, directors, or consultants pursuant to the
Company's employee stock option plans in order to include in such registration
securities registered for the Company's own account.

                      ARTICLE 3.  PIGGYBACK REGISTRATION

          (a) Inclusion in Piggyback Registration.  If the Company at any time
on or after June 30, 2002 proposes to register any of its securities under the
Securities Act (other than pursuant to Article 2 or a Special Registration),
whether or not for sale for its own account, (a "Company Registration"), it
shall each such time, prior to such filing, give prompt written notice to all
Holders of Registrable Securities of its intention to do so and, upon the
written request of any Holder of Registrable Securities given to the Company
within twenty (20) days after the Company has provided such notice (which
request shall state the intended method of disposition of such Registrable
Securities), the Company shall use reasonable best efforts to cause all
Registrable Securities that the Company has been requested by the Holders
thereof to register to be so registered under the Securities Act to the extent
necessary to permit their disposition in accordance with the intended methods of
distribution specified in the request of such Holder or Holders; provided, that
if at any time after giving written notice of its intention to register any
securities and prior to the effective date of the Registration Statement filed
in connection with such registration, the Company shall determine for any reason
not to register such securities, the Company may, at its election, give written
notice of such determination to each Holder that was previously notified of such
registration, and, thereupon, shall not register any Registrable Securities in
connection with such registration (but shall nevertheless pay the Registration
Expenses in connection therewith), without prejudice, however, to the rights of
any Holders to request that a registration be effect under Article 2 and
provided further, that no registration effected under this Article 3 shall
relieve the Company from its obligations to effect Registration upon request
under Article 2.

                                       6


          (b) Terms of Underwriting.  In connection with any offering under this
Article 3 involving an underwritten offering, the Company shall not be required
to include any Registrable Securities in such offering unless the Holder thereof
accepts the terms and enters into an underwriting agreement, if any, of the
underwriting as agreed upon between the Company and the underwriters selected by
it provided that such terms must be reasonably satisfactory in substance and
form to the Holder and consistent with this Agreement, and then only in such
quantity as will not, in the opinion of the managing underwriter, jeopardize the
success of the offering by the Company.

          (c) Allocation.  If any Company Registration involves an underwritten
offering and the managing underwriter of such offering shall advise the Company
that, in its view, the number of securities requested to be included in such
registration exceeds the largest number that can be sold in an orderly manner in
such offering within a price range acceptable to the Company, the Company shall
include in such registration:

               (i) in the event of a Company initiated registration, first to
the Company for securities being sold for its own account, or

               (ii) in the event of a demand registration by holders of other
shares of common stock of the Company with registration rights ("Section 3 Other
Shares"), first to the demanding holders of such Section 3 Other Shares.
Thereafter the number of shares to be included in the registration shall be
allocated as set forth in Section 3(c)(iii). If any person does not agree to the
terms of any such underwriting, such person shall be excluded therefrom by
written notice from the Company or the underwriter. Any Registrable Securities
or other securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration. If shares are so withdrawn from the
registration or if the number of shares of Registrable Securities to be included
in such registration was previously reduced as a result of marketing factors,
the Company shall then offer to all persons who have retained the right to
include securities in the registration the right to include additional
securities in the registration in an aggregate amount equal to the number of
shares so withdrawn, with such shares to be allocated among the persons
requesting additional inclusion in accordance with Section 3(c).

               (iii) For purposes of this Section 3, in any circumstance in
which all of the Registrable Securities and non-demanding Section 3 Other Shares
requested to be included in a registration on behalf of the Holders or non-
demanding selling stockholders cannot be so included as a result of limitations
of the aggregate number of shares of Registrable Securities and Section 3 Other
Shares that may be so included, the number of shares of Registrable Securities
and non-demanding Section 3 Other Shares that may be so included shall be
allocated among the Holders and non-demanding selling stockholders requesting
inclusion of shares such that the selling holders of the Registrable Securities
and non-demanding Section 3 Other Shares shall have their shares included pro
rata on the basis of the number of shares of Registrable Securities and Section
3 Other Shares held by such Holders and non-demanding selling stockholders that
such Holders and non-demanding selling stockholders had requested to be included
in the registration; provided, however, that such allocation shall not operate
to reduce the aggregate number of Registrable Securities and Section 3 Other
Shares to be included in such registration. If any Holder or non-demanding
selling stockholder does not request inclusion of the maximum number of shares
of Registrable Securities and Section 3 Other Shares allocated to such person

                                       7


pursuant to the above-described procedure, the remaining portion of such
person's allocation shall be reallocated among those requesting Holders and
other non-demanding selling stockholders whose allocations did not satisfy their
requests pro rata on the basis of the number of shares of Registrable Securities
and Section 3 Other Shares held by such Holders and other non-demanding selling
stockholders that such Holders and other non-demanding selling stockholders had
requested to be included in the registration, and this procedure shall be
repeated until all of the shares of Registrable Securities and Section 3 Other
Shares which may be included in the registration on behalf of the Holders and
other non-demanding selling stockholders have been so allocated. The Company
shall not limit the number of Registrable Securities to be included in a
registration pursuant to this Agreement in order to include shares held by
stockholders with no registration rights or to include founder's stock or any
other shares of stock issued to employees, officers, directors, or consultants
pursuant to the Company's employee stock option plans.

                       ARTICLE 4.  ALLOCATION OF EXPENSES

The Company will pay all Registration Expenses of all registrations under this
Agreement.

                     ARTICLE 5.  OBLIGATIONS OF THE COMPANY

If and whenever the Company is required to use best efforts to effect the
registration under the
Securities Act of any Registrable Securities pursuant to Articles 2 and 3 of
this Agreement, the
Company shall:

     (a) file with the Commission, as soon as practicable, a Registration
Statement with respect to such Registrable Securities, make all required filings
with the NASD and any other applicable exchange, and use best efforts to cause
such Registration Statement to become effective at the earliest possible date
and remain effective;

     (b) prepare and file with the Commission such amendments and supplements to
the Registration Statement and the Prospectus used in connection therewith and
such other documents as may be necessary to keep the Registration Statement
effective until the earlier of (i) one hundred twenty (120) days after the
effective date of such Registration Statement or (ii) the consummation of the
disposition by the Holders of all the Registrable Securities covered by such
Registration Statement and otherwise comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
Registration Statement;

     (c) furnish to counsel (if any) selected by the Holders of a majority of
the Registrable Securities covered by such Registration Statement and to counsel
for the underwriters in any underwritten offering copies of all documents
proposed to be filed with the Commission in connection with such registration a
reasonable time prior to the proposed filing thereof and give reasonable
consideration in good faith to any comments of such Holders, counsel and
underwriters.

     (d) furnish to each seller of such securities, without charge, such number
of conformed copies of such Registration Statement and of each such amendment
and supplement thereto (in each case, including all exhibits (including all
exhibits incorporated by reference), financial statements, schedules, and all
documents incorporated therein, deemed to be

                                       8


incorporated therein by reference or filed therewith, except that the Company
shall not be obligated to furnish any seller of securities with more than two
copies of such exhibits and documents), such numbers of copies of the Prospectus
included in such Registration Statement (including each preliminary prospectus)
in conformity with the requirements of the Securities Act, and such other
documents, as such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such seller;

     (e) use its reasonable best efforts to register or qualify and cooperate
with the Holders of Registrable Securities, the underwriters and their
respective counsels in connection with the registration or qualification (or
exemption from such registration or qualification) of the securities covered by
such Registration Statement under such other securities or blue sky laws of such
jurisdictions as each seller shall request; provided, however, that where
Registrable Securities are offered other than through an underwritten offering,
the Company agrees to cause its counsel to perform blue sky investigations and
file registrations and qualification required to be filed pursuant to this
Section 5(e); keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration Statement is required
to be effective hereunder and do any and all other acts and things which may be
necessary or advisable to enable such seller to consummate the disposition in
such jurisdictions of the securities owned by such seller, except that the
Company shall not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it is not so
qualified, subject itself to taxation in any jurisdiction wherein it is not so
subject, or take any action which would subject it to general service of process
in any jurisdiction wherein it is not so subject;

     (f) in connection with an underwritten public offering only, furnish to
each seller in a signed counterpart, addressed to the sellers, of

          (i) an opinion of counsel for the Company experienced in securities
law matters, dated the effective date of the Registration Statement, and

          (ii) a "cold comfort" letter signed by the independent public
accountants who have issued an audit report on the Company's financial
statements included in the Registration Statement, subject to such seller having
executed and delivered to the independent public accountants such certificates
and documents as such accountants shall reasonably request, covering
substantially the same matters with respect to the Registration Statement (and
the Prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to the underwriters in underwritten public offerings of
securities;

     (g)

          (i) notify each Holder of Registrable Securities subject to such
Registration Statement if such Registration Statement, at the time it or any
amendment thereto became effective, (x) contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading upon discovery by the
Company of such material misstatement or omission or (y) upon discovery by the
Company of the happening of any event as a result of which the Company believes
there

                                       9


would be such a material misstatement or omission, and, as promptly as
practicable, prepare and file with the Commission a post-effective amendment to
such Registration Statement and use reasonable best efforts to cause such post-
effective amendment to become effective such that such Registration Statement,
as so amended, shall not contain an untrue statement or a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and

          (ii) notify each Holder of Registrable Securities subject to such
Registration Statement, at any time when a Prospectus related therefor is
required to be delivered under the Securities Act, if the Prospectus included in
such Registration Statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading upon discovery by the Company of such
material misstatement or omission or upon the discovery by the Company of the
happening of any event as a result of which the Company believes that there
would be a material misstatement or omission, and, as promptly as is
practicable, prepare and furnish to such Holder a reasonable number of copies of
a supplement to or an amendment of such Prospectus as may be necessary so that,
as thereafter delivered to the purchasers of such securities, such Prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading;

     (h) otherwise use its reasonable best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement of the Company
complying with the provisions of Section 11(a) of the Securities Act and Rule
158 under the Securities Act (or any similar rule promulgated under the
Securities Act) no later than 45 days after the end of any 12-month period (or
90 days after the end of any 12-month period if such period is a fiscal year)
(i) commencing at the end of any fiscal quarter in which Registrable Securities
are sold to an underwriter or to underwriters in a firm commitment or best
efforts underwritten offering, and (ii) if not sold to an underwriter or to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Company after the effective date of the relevant
Registration Statement, which statements shall cover said 12-month periods;

     (i) promptly notify each Holder of Registrable Securities covered by such
Registration Statement, their counsel and the underwriters (i) when such
Registration Statement, or any post-effective amendment to such Registration
Statement, shall have become effective, or any amendment of or supplement to the
Prospectus used in connection therewith shall be filed, (ii) of any request by
the Commission to amend such Registration Statement or to amend or supplement
such Prospectus or for additional information, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of such Registration
Statement or of any order preventing or suspending the use of any preliminary
prospectus or the initiation or threatening of any proceedings for any of such
purposes, (iv) of the suspension of the qualification of such securities for
offering or sale in any jurisdiction, or of the institution of any proceedings
for any of such purposes and (v) if at any time when a Prospectus is to be
required by the Securities Act to be delivered in connection with the sale of
the Registrable Securities, the representations and warranties of the Company
contained in any agreement (including the

                                      10


underwriting agreement contemplated in Section 6(b) below), to the knowledge of
the Company, cease to be true and correct in any material respect;

     (j) use its reasonable best efforts to prevent the issuance of any order
suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Registrable Securities covered
thereby for sale in any jurisdiction, and, if any such order is issued, to use
its reasonable best efforts obtain the withdrawal of any such order at the
earliest possible moment;

     (k) if requested by the managing underwriter, if any, (i) promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter, if any, reasonably requests to be
included therein to comply with applicable law, and (ii) make all required
filings of such prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to be
incorporated in such prospectus supplement or post-effective amendment;

     (l) cooperate with the Holders and the managing underwriter, if any, to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates shall not bear any
restrictive legends whatsoever and shall be in a form eligible for deposit with
DTC, and enable such Registrable Securities to be in such denominations and
registered in such names as the underwriters, if any, or Holders may reasonably
request at least two (2) business days prior to any sale of Registrable
Securities in a firm commitment underwritten public offering;

     (m) use its reasonable best efforts to cause the Registrable Securities
covered by a Registration Statement to be registered with, and to obtain the
consent or approval of, each governmental agency or authority, whether federal,
state, local or foreign, which may be required to effect such registration or
the offering or sale in connection therewith or to enable the sellers to offer,
or to consummate the disposition of, the Registrable Securities subject to such
Registration Statement, except as may be required solely as a consequence of the
nature of such seller's business, in which case the Company will cooperate with
all reasonable respects with the filing of the Registration Statement and the
granting of such approvals;

     (n) prior to the effective date of the Registration Statement, (i) provide
the registrar for the Common Stock or such other Registrable Securities with
printed certificates for such securities in a form eligible for deposit with DTC
and (ii) provide a CUSIP number for such securities.

     (o) The Company agrees not to file or make any amendment to any
Registration Statement with respect to any Registrable Securities, or any
amendment of or supplement to the Prospectus used in connection therewith, which
refers to any seller of any securities covered thereby by name, or otherwise
identifies such seller as the holder of any securities of the Company, without
the consent of such seller, such consent not to be unreasonably withheld, except
that no such consent shall be required for any disclosure that is required by
law.

                                      11


                      ARTICLE 6.  UNDERWRITTEN OFFERINGS

The provisions of this Article 6 do not establish additional registration rights
but instead set forth procedures applicable, in addition to those set forth in
Articles 2, 3 and 5, to any registration that is an underwritten offering.

          (a) Underwritten Offerings Exclusive.  Whenever a request for Demand
Registration is for an underwritten offering, only securities that are to be
distributed by the underwriters may be included in the Registration.

          (b) Underwriting Agreement.  If requested by the underwriters for any
underwritten offering by Holders pursuant to a request for Demand Registration,
the Company shall enter into an underwriting agreement with such underwriters
for such offering, such agreement to be reasonably satisfactory in substance and
form to the Company and Holders of a majority of the Registrable Securities to
be covered by such registration and to the underwriters and to contain such
representations and warranties by the Company and such other terms and
provisions as are customarily contained in agreements of this type, including,
but not limited to, indemnities to the effect and to the extent provided in
Article 10, provisions for the delivery of customary officers' certificates,
opinions of counsel and accountants' "cold comfort" letters, and hold-back
arrangements.  The Holders of Registrable Securities to be distributed by such
underwriters shall be parties to such underwriting agreement and may, at their
option, require that any or all the representations and warranties by, and the
agreements on the part of, the Company to and for the benefit of such
underwriters be made to and for the benefit of such Holders and that any or all
of the conditions precedent to the obligations of such underwriters under such
underwriting agreements shall also be conditions precedent to the obligations of
such Holders.

     Each Holder of Registrable Securities shall furnish to the Company such
information regarding such Holder and the distribution proposed by such Holder
as the Company may reasonably request and as shall be reasonably required in
connection with any registration, qualification, or compliance referred to in
this Agreement, except to the extent that the furnishing of such information
would violate any law or any contractual arrangement.  The Company shall not be
obligated to register the Registrable Securities of any Holder who fails
promptly to provide to the Company such information as the Company may
reasonably request at the time to enable the Company to comply with applicable
laws or regulations or to facilitate preparation of the registration statement,
including any information that the Holder fails to provide on the basis that
such information would violate any law or any contractual arrangement.

          (c) Selection of Underwriters.  The Company shall have the right to
select any underwriters to administer the any underwritten offerings hereunder,
subject to the consent of the Holders of a majority of the Registrable
Securities to be registered pursuant to such offering, which shall not be
unreasonably withheld.  At least one of the underwriters chosen by the Company
shall be an underwriter of nationally-recognized standing.

          (d) Hold Back Agreements.  If and whenever the Company proposes to
register any of its securities under the Securities Act, whether or not for its
own account (other than pursuant to a Special Registration), or is required to
use its best efforts to effect the

                                      12


registration of any Registrable Securities under the Securities Act pursuant to
Articles 2 or 3, each Holder, if requested by the managing underwriter in an
underwritten offering, agrees by acquisition of such Registrable Securities not
to effect (other than pursuant to such registration) any public sale or
distribution, including, without limitation, any sale pursuant to Rule 144, of
any Registrable Securities, any other equity securities of the Company or any
securities convertible into or exchangeable or exercisable for any equity
securities of the Company during the twenty (20) days prior to, and for ninety
(90) days after the effective date of such registration (it being understood
that in the case of an offering under a shelf registration statement under Rule
415, that the effective date shall be the date of the pricing of such offering),
and the Company agrees to cause each director and executive officer of the
Company to enter into a similar agreement with the Company.

               ARTICLE 7.  PREPARATION, REASONABLE INVESTIGATION

In connection with the preparation and filing of each Registration Statement
registering Registrable Securities under the Securities Act, the Company shall
give the Holders of Registrable Securities to be so registered and their
underwriters, if any, and their respective counsel and accountants, the
opportunity to participate in the preparation of such Registration Statement,
each Prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and shall give each of them such access
to all pertinent financial, corporate, and other documents and properties of the
Company and its Subsidiaries, and such opportunities to discuss the business of
the Company with its officers, directors, employees and the independent public
accountants who have issued audit reports on its financial statements as shall
be necessary, in the opinion of such Holders' and such underwriters' respective
counsel, to conduct a reasonable investigation within the meaning of the
Securities Act.

                        ARTICLE 8.  OTHER REGISTRATIONS

If and whenever the Company is required to use its best efforts to effect the
registration under the Securities Act of any Registrable Securities pursuant to
Articles 2 or 3, and if such registration shall not have been withdrawn or
abandoned, the Company shall not be obligated to and shall not file any
Registration Statement with respect to any of its securities (including
Registrable Securities) under the Securities Act (other than a Special
Registration), whether of its own accord or at the request or demand of any
holder or holders of such securities, until a period of 180 days shall have
elapsed from the effective date of such previous registration, provided that the
Company shall not be excused from filing a Registration Statement by virtue of
this Article 8 more than once in a 360 day period.

                   ARTICLE 9.  CERTAIN OBLIGATIONS OF HOLDERS

          (a) The Company may require each Holder of any Registrable Securities
as to which any registration is being effected to furnish to the Company such
information regarding such Holder and the intended method of disposition of such
securities as the Company may from time to time reasonably request and as shall
be required to effect the registration of such Holder's Registrable Securities.
Each such Holder agrees to furnish promptly to the Company all information
required to be disclosed in order to make the information previously furnished
to the Company by such Holder not materially misleading.

                                      13


          (b) Each Holder of Registrable Securities covered by a Registration
Statement agrees that, upon receipt of any notice from the Company pursuant to
Section 5(g), such Holder will promptly discontinue the disposition of
Registrable Securities pursuant to such Registration Statement until such Holder
shall have received, in the case of clause (i) of Section 5(g), notice from the
Company that such Registration Statement has been amended, as contemplated by
Section 5(g), and, in the case of clause (ii) of Section 5(g), copies of the
supplemented or amended Prospectus contemplated by Section 5(g).  If so directed
by the Company, each Holder will deliver to the Company (at the Company's
expense) all copies, other than permanent file copies, in such Holder's
possession of the Prospectus covering such Registrable Securities at the time of
receipt of such notice.  In the event that the Company shall give any such
notice, the period mentioned in Section 5(b) shall be extended by the number of
days during the period from and including the date of the giving of such notice
to and including the date when each seller of any Registrable Securities covered
by such Registration Statement shall have received copies of the supplemented or
amended Prospectus covering such Registrable Securities contemplated by Section
5(g).

                 ARTICLE 10.  INDEMNIFICATION AND CONTRIBUTION

          (a) In the event of any registration of any of the Registrable
Securities under the Securities Act pursuant to this Agreement, the Company will
indemnify and hold harmless the seller of such securities, its directors,
officers, and employees, each other Person who participates as an underwriter,
broker or dealer in the offering or sale of such securities, and each other
person, if any, who controls such seller, underwriter, broker, dealer or any
such participating Person within the meaning of the Securities Act or the
Exchange Act, against any losses, claims, damages, or liabilities, joint or
several, to which such seller or any such director, officer, employee,
underwriter, broker, dealer, participating Person, or controlling Person may
become subject under the Securities Act, the Exchange Act, state securities or
blue sky laws, or otherwise, insofar as such losses, claims, damages, or
liabilities (or actions or proceedings in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in any Registration Statement under which such Registrable Securities
were registered under the Securities Act, any preliminary prospectus, or
Prospectus contained in the Registration Statement, or any amendment or
supplement to such Registration Statement, or arise out of or are based upon the
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and the
Company shall reimburse such seller and each such director, officer, employee,
underwriter, broker, dealer, participating Person, and controlling Person in
connection with investigating or defending any such loss, claim, damage,
liability, action or proceeding as such expenses are incurred; provided,
however, that the Company will not be liable in any such case to the extent that
any such loss, claim, damage, liability or expense arises out of or is based
upon any untrue statement or omission made in such Registration Statement,
preliminary prospectus, or Prospectus, or any such amendment or supplement, in
reliance upon and in conformity with information furnished to the Company, in
writing, by or on behalf of such seller, underwriter, participating Person or
controlling Person specifically for use in the preparation thereof.  The
indemnity agreement contained in this Article 10(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld).

                                      14


          (b) In the event of any registration of any of the Registrable
Securities under the Securities Act pursuant to this Agreement, each seller of
such securities, severally and not jointly, will indemnify and hold harmless the
Company, each of its directors and officers and each underwriter (if any) and
each person, if any, who controls the Company or any such underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages, or liabilities, joint or several, to which the Company, such directors
and officers, underwriters, or controlling Persons may become subject under the
Securities Act, Exchange Act, state securities or blue sky laws, or otherwise,
insofar as such losses, claims, damages, or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement under which such securities were registered under the
Securities Act, any preliminary prospectus or Prospectus contained in the
Registration Statement, or any amendment or supplement to the Registration
Statement, or arise out of or are based upon any omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, if the statement or omission was made in
reliance upon and in conformity with information relating to such seller
furnished in writing to the Company by or on behalf of such seller expressly for
use in connection with the preparation of such Registration Statement,
preliminary prospectus, Prospectus, amendment, or supplement; provided, however,
that the liability of each such seller hereunder shall be in proportion to and
limited to the gross amount received by such seller from the sale of Registrable
Securities sold in connection with such registration.

          (c) Each party entitled to indemnification under this Article 10 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld); and, provided, further, that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Article 10, except to the extent that the Indemnifying
Party is adversely affected by such failure.  The Indemnified Party may
participate in such defense at such party's expense; provided, however, that the
Indemnifying Party shall pay such expense if representation of such Indemnified
Party by the counsel retained by the Indemnifying Party would be inappropriate
due to actual or potential differing interests or conflicts between the
Indemnified Party and any other party represented by such counsel in such
proceeding.  No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation, and no Indemnified Party shall consent to entry of any judgment or
settle such claim or litigation without the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld.

          (d) If for any reason the foregoing indemnity is unavailable, or is
insufficient to hold harmless an Indemnified Party, other than by reason of the
exceptions provided in this Article 10, then the Indemnifying Party shall, in
lieu of indemnifying such Indemnified Party,

                                      15


contribute to the amount paid or payable by the Indemnifying Party as a result
of such losses, claims, damages liabilities or expenses in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on the one
hand and the Indemnified Party on the other in connection with the statements or
omissions which resulted in such losses, claims, damages, or liabilities, as
well as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the Holders of
Registrable Securities covered by the Registration Statement in question and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.

          (e) The Company and the Holders agree that it would not be just and
equitable if contribution pursuant to this Article 10 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in Section 10(d).  The amount paid
or payable by an Indemnified Party as a result of the losses, claims, damages
and liabilities referred to in Section 10(d) shall be deemed to include, subject
to the limitations set forth above, any legal or other expenses reasonably
incurred by such Indemnified Party in connection with investigating or defending
any such claim or litigation.  Notwithstanding anything to the contrary in this
Article 10, (A) no such Holder will be required to contribute any amount in
excess of the proceeds it received from the sale of its Registrable Securities
pursuant to such Registration Statement, (B) 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 and (C) no party shall be liable for contribution
under this Article 10 except to the extent and under such circumstances as such
party would have been liable to indemnify under this Article 10 if such
indemnification were enforceable under applicable law.  Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect to which a claim for
contribution may be made against another party or parties under this Article,
notify such party or parties from whom contribution may be sought, but the
omission so to notify such party or parties from whom contribution may be sought
shall not relieve such party from any other obligation it or they may have
thereunder or otherwise under this Article.  No party shall be liable for
contribution with respect to any action, suit, proceeding or claim settled
without its prior written consent, which consent shall not be unreasonably
withheld.

       ARTICLE 11.  INDEMNIFICATION WITH RESPECT TO UNDERWRITTEN OFFERING

In the event that Registrable Securities are sold pursuant to a Registration
Statement in an underwritten offering, the Company agrees to enter into an
underwriting agreement containing customary representations and warranties with
respect to the business and operations of an issuer of the securities being
registered and customary covenants and agreements to be performed by such
issuer, including without limitation customary provisions with respect to
indemnification by the Company of the underwriters of such offering.

                                      16


           ARTICLE 12.  REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934

With a view to making available to the Holders the benefits of Rule 144
promulgated under the Securities Act and any other rule or regulation of the
Commission that may at any time permit a Holder to sell Registrable Securities
of the Company to the public without Registration, the Company agrees to use its
reasonable best efforts to:

          (a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;

          (b) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and

          (c) furnish to any Holder, so long as such Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144 under the Securities
Act, any other such applicable reporting requirements under the Securities Act
and all applicable reporting requirements under the Exchange Act, (ii) a copy of
the most recent animal or quarterly report of the Company and such other reports
and documents so filed by the Company, and (iii) such other information as may
be reasonably requested in availing any Holder of any rule or regulation of the
Commission which permits the selling of any such securities without Registration
or pursuant to such form.

                ARTICLE 13.  SUCCESSORS, ASSIGNS AND TRANSFEREES

This Agreement shall be binding upon and shall inure to the benefit of each
party hereto, and their respective successors, assigns and transferees.  The
Purchaser or any other Holder under this Agreement may assign its rights under
this Agreement only to any Affiliate or to other successors, assigns and
transferees of the Purchaser or any such Holder of not less than 250,000 shares
of Registrable Securities (subject to adjustment for stock splits, stock
dividends and the like); provided, however, that the Company is given written
notice from the Purchaser or any such Holder at the time of such transfer
stating the name and address of the transferee or assign and identifying the
securities with respect to which the rights hereunder are being transferred.  As
a condition to the effectiveness of any transfer permitted hereunder (i) the
transferee or assign shall agree, in writing, to be bound by the provisions of
this Agreement, and (ii) the Company shall be given written notice at the time
of or within a reasonable time after said transfer or assignment, stating the
name and address of said transferee or assign and identifying the securities
with respect to which such registration rights are being assigned.  Provided
that the Purchaser or any Holder and any transferee or assignee has complied
with the foregoing conditions, this Agreement shall survive any transfer of
Registrable Securities to and shall inure to the benefit of an Affiliate or such
other successors, assigns and transferees of the Purchase or any such Holder.
In addition, and whether or not any express transfer or assignment shall have
been made, the provisions of this Agreement which are for the benefits of the
parties hereto other than the Company shall also be for the benefit of and
enforceable by any subsequent Holder of Registrable Securities.

                                      17


                           ARTICLE 14.  MISCELLANEOUS

          (a) No Inconsistent Agreements.  The Company will not hereafter enter
into any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the Holders in this Agreement.

          (b) Specific Performance; Other Rights.  The parties recognize that
various of the rights of the Purchaser and any other Holder under this Agreement
are unique and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached.  Accordingly, the parties agree that
each of the Purchaser and any such Holder shall, in addition to such other
remedies as may be available to it at law or in equity, have the right to
enforce its rights hereunder by actions for injunctive relief and specific
performance in any court of the United States or any state thereof having
jurisdiction, to the extent permitted by law.  The Company hereby waives any
requirement for security or the posting of any bond in connection with any
temporary or permanent award of injunctive, mandatory or other equitable relief

          (c) Severability.  If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.  It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants, and restrictions without including any
of such which may be hereafter declared invalid, void or unenforceable.

          (d) Notices.  All notices and other communications required or
permitted under this Agreement shall be effective upon receipt and shall be in
writing and may be delivered in person, by telecopy, overnight delivery service
or registered or certified United States mail, addressed to the Company or the
Purchaser (or to any other Holder not a party hereto on the date hereof, to the
address of such Holder in the stock record books of the Company), as the case
may be, at their respective addresses set forth below:

If to the Company:                         If to Purchaser
CuraGen Corporation                        BAYER AG
555 Long Wharf Drive                       D 51368
11th Floor                                 Leverkusen
New Haven, Connecticut  06511              Federal Republic of Germany
Attn:  Chief Executive Officer             Attn:  General Counsel
Telephone  (203) 401-3330                  Telephone:  011 49 214 30 81803
Facsimile:  (203) 401-3333                 Facsimile:  011 49 214 30 50848

                                      18


With copies to:                            With copies to:

CuraGen Corporation                        Bayer Corporation, Inc.
555 Long Wharf Drive                       400 Morgan Lane
11th Floor                                 West Haven, CT
New Haven, Connecticut  06511              Attn:  Legal Department
Attn:  Legal Department                    Telephone:  (203) 812-2401
Telephone  (203) 401-3330                  Facsimile:  (203) 812-2795
Facsimile:  (203) 401-3333

and to:                                    and to:

Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C.,                               Wilmer, Cutler & Pickering
One Financial Center                       2445 M Street
Boston, Massachusetts  02111               Washington, D.C.  20037
Attn:  Michael Fantozzi                    Attn:  Richard W. Cass
Telephone (617) 542-6000                   Telephone:  (202) 663-6503
Facsimile:  (617) 542-2241                 Facsimile:  (202) 663-6363

All notices and other communications shall be effective upon the earlier of
actual receipt thereof by the person to whom notice is directed or (a) in the
case of notices and communications sent by personal delivery or telecopy, one
business day after such notice or communication arrives at the applicable
address or was successfully sent to the applicable telecopy number, (b) in the
case of notices and communications sent by overnight delivery service, at noon
(local time) on the second business day following the day such notice or
communications was delivered to such delivery service, and (c) in the case of
notices and communications sent by United States mail, seven days after such
notice or communication shall have been deposited in the United States mail.
Any notice delivered to a party hereunder shall be sent simultaneously, by the
same means, to such party's counsel as set forth above.

          (e) Entire Agreement.  This Agreement contain the entire understanding
of the parties with respect to the matters covered hereby.

          (f) Amendments and Waivers.  This Agreement may be amended as to the
Holders and their successors and assigns (determined as provided in Article 13),
and the Company may take any action herein prohibited, or omit to perform any
act required to be performed by it, only if the Company shall obtain the written
consent of the Holders of 75% of the Registrable Securities.  This Agreement may
not be waived, changed, modified, or discharged orally, but only by an agreement
in writing signed by the party or parties against whom enforcement of any
waiver, change, modification or discharge is sought or by parties with the right
to consent to such waiver, change, modification or discharge on behalf of such
party; provided, however, that any consent required by the Holders shall require
the consent in writing of no less than the Holders of 75% of the Registrable
Securities.

          (g) Headings; Counterparts.  Headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof.  This Agreement may

                                      19


be executed in any number of counterparts, each of which shall be an original,
but all of which together shall constitute one and the same instrument, and
shall become effective when one or more of the counterparts have been signed by
each party and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.

          (h) Gender.  Whenever used herein the singular number shall include
the plural, the plural shall include the singular, and the use of any gender
shall include all genders.

          (i) Further Assurances.  Each of the parties hereto agrees to execute
and deliver those writings and documents reasonably required to more fully carry
out the purposes of this Agreement and the transactions contemplated hereby.

          (j) Governing Law.  This Agreement shall be construed in accordance
with and governed by the laws of the State of Delaware without regard to
conflicts of law principles.

          (k) No Third Party Beneficiaries.  Except as provided by Articles 10
and 13, nothing contained in this Agreement is intended to confer upon any
Person other than the parties hereto and their respective successors and
permitted assigns and transferees, any benefit, right or remedies under or by
reason of this Agreement.

          (l) Consent to Jurisdiction.  Each of the parties hereto irrevocably
submits to the personal exclusive jurisdiction of the United States District
Court for the District of Delaware for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated hereby
(and, to the extent permitted under applicable rules of procedure, agrees not to
commence any action, suit or proceeding relating hereto except in such court).
Each of the parties hereto further agrees that service of any process, summons,
notice or document hand delivered or sent by registered mail to such party's
respective address set forth in Section 14(e) will be effective service of
process for any action, suit or proceeding in Delaware with respect to any
matters to which it has submitted to jurisdiction as set forth in the
immediately preceding sentence.  Each of the parties hereto irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby in the United States District court for the District of Delaware, and
hereby further irrevocably and unconditionally waives and agrees not to plead or
claim in such court that any such action, suit or proceeding brought in such
court has been brought in an inconvenient forum.

                             Signature Page Follows

                                      20


IN WITNESS WHEREOF, PURCHASER and the COMPANY have caused this Agreement to be
executed as of the day and year first above written.

                                    BAYER AG


                                    By: ________________________________
                                        Name:
                                        Title:

                                    By: ________________________________
                                        Name:
                                        Title:



                                    CURAGEN CORPORATION


                                    By: /s/ Christopher K. McLeod
                                        -------------------------------
                                        Name: Christopher K. McLeod
                                        Title: Executive Vice President

                                      21

EX-10.27

                                                                  EXHIBIT 10.27

                       RESTATED COLLABORATION AGREEMENT

     THIS RESTATED COLLABORATION AGREEMENT (this "Agreement"), dated as of
November 27, 2000, is made between ABGENIX, INC., a Delaware corporation
("ABX"), having a place of business at 7601 Dumbarton Circle, Fremont,
California 94555, and CURAGEN CORPORATION, a Delaware corporation ("CuraGen"),
having a place of business at 555 Long Wharf Drive, New Haven, Connecticut
06511, with respect to the following facts:

                                    RECITALS

     A.  The parties entered into the Collaboration Agreement effective as of
December 8, 1999 (the "Original Agreement").

     B.  The parties desire to amend the Original Agreement in certain respects,
and for convenience to restate the Original Agreement, on the terms and
conditions set forth below.

     NOW THEREFORE, in consideration of the foregoing premises and the mutual
covenants set forth below, the parties amend the Original Agreement and agree as
follows:

     1.  DEFINITIONS
     For purposes of this Agreement, the terms set forth in this Article 1 shall
have the respective meanings set forth below:

         1.1 "ABX In-License" shall mean a license, sublicense or other
agreement under which ABX acquired rights to the ABX Patent Rights or ABX Know-
How.

         1.2 "ABX Know-How" shall mean, collectively, all inventions,
discoveries, data, information, methods, techniques, technology and other
results, whether or not patentable but which are not generally known, regarding
ABX Technology and Information. All ABX Know-How shall be Confidential
Information of ABX.

         1.3 "ABX Licensed Antigens" shall mean all ABX Optioned Antigens for
which ABX has exercised an option to obtain a commercial license pursuant to
Article 7 below, and "ABX Licensed Antigen" shall mean any one of the ABX
Licensed Antigens.

         1.4 "ABX Optioned Antigens" shall mean all antigens which are selected
from the Eligible Antigens by ABX pursuant to Article 5 below, for which CuraGen
has the right to grant ABX the commercial license under Article 7 below, and
which are not Licensed Antigens, and "ABX Optioned Antigen" shall mean any one
of the ABX Optioned Antigens.

         1.5 "ABX Patent Rights" shall mean, collectively, (a) all patents and
patent applications listed on Exhibit A and any foreign counterparts claiming
priority thereof; (b) all patent applications heretofore or hereafter filed in
any country which claim (and only to the extent they claim) ABX Technology and
Information or the use thereof; (c) all patents that have issued or in the

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.



future issue from any of the foregoing patent applications, including without
limitation utility models, design patents and certificates of invention; and (d)
all divisionals, continuations, continuations-in-part, reissues, renewals,
supplemental protection certificates, extensions or additions to any such
patents and patent applications.

         1.6 "ABX Product" shall mean, with respect to any ABX Licensed Antigen,
any product comprising (a) an Antibody which binds to such ABX Licensed Antigen;
or (b) Genetic Material that encodes such an Antibody wherein, in respect of
each ABX Product, said Genetic Material does not encode multiple antibodies.

         1.7  "ABX Technology and Information" shall mean, collectively,
[_____________________________].

         1.8 "Affiliate" shall mean, with respect to any person or entity, any
other person or entity which controls, is controlled by or is under common
control with such person or entity. A person or entity shall be regarded as in
control of another entity if it owns or controls at least fifty percent (50%) of
the equity securities of the subject entity entitled to vote in the election of
directors (or, in the case of an entity that is not a corporation, for the
election of the corresponding managing authority).

         1.9 "Antibody" shall mean a composition comprising (a) a whole
antibody, or any fragment thereof, derived from the XenoMouse Animals hereunder;
or (b) a whole antibody, or any fragment thereof, which is derived from a whole
antibody or any fragment thereof, which itself is derived from the XenoMouse
Animals hereunder or which is derived from the Genetic Material encoding or
derived from, or the amino acid sequences of or derived from, a whole antibody
or any fragment thereof, which itself is derived from the XenoMouse Animals
hereunder.

         1.10 "Antibody Cells" shall mean all cells that contain, express, or
secrete antibodies or Genetic Materials that encode antibodies.

         1.11 "Antibody Equivalent" shall mean [______________________].

         1.12 "Antigen Specific Materials and Information" shall mean with
respect to an Antigen, collectively, [_________________________].

         1.13 "Antigens" shall mean, collectively, the Research Antigens,
Eligible Antigens, Optioned Antigens and Licensed Antigens, and "Antigen" shall
mean any one of the Antigens.

         1.14 "BLA" shall mean a Biologics License Application, Product License
Application, New Drug Application, or similar application for marketing approval
of a product for use in the Therapeutic Field submitted to the FDA, or its
foreign equivalent.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       2


         1.15 "Commercial Field" shall mean, collectively, the Therapeutic Field
and the Diagnostic Field.

         1.16 "Confidential Information" shall mean, with respect to a party,
all information of any kind whatsoever, and all tangible and intangible
embodiments thereof of any kind whatsoever, which is disclosed by such party to
the other party pursuant to this Agreement, and (if disclosed in writing or
other tangible medium) is marked or identified in writing as confidential at the
time of disclosure to the receiving party or (if otherwise disclosed or if not
so marked or identified in writing) is identified as confidential at the time of
disclosure to the receiving party and is summarized and identified as
confidential in writing or by electronic means within thirty (30) days after
such disclosure. Notwithstanding the foregoing, Confidential Information of a
party shall not include information which, and only to the extent, the receiving
party can establish by written documentation or electronic records (a) has been
publicly known prior to disclosure of such information by the disclosing party
to the receiving party; (b) has become publicly known without fault on the part
of the receiving party, subsequent to disclosure of such information by the
disclosing party to the receiving party; (c) has been received by the receiving
party at any time from a source, other than the disclosing party, rightfully
having possession of and the right to disclose such information free of
confidentiality obligations; (d) has been otherwise known by the receiving party
free of confidentiality obligations prior to disclosure of such information by
the disclosing party to the receiving party; or (e) has been independently
developed (as demonstrated by contemporaneous written or electronic evidence
maintained in the ordinary course of business of the receiving party) by
employees or agents of the receiving party without access to or use of such
information disclosed by the disclosing party to the receiving party.

         1.17 "CuraGen Databases" shall mean, collectively, all data,
information and materials (other than Research Program Technology and
Information) related to human Genetic Materials and the expression products
thereof which as of the Effective Date are contained in CuraGen's SeqCalling
Database or which at any time during the term of this Agreement are added
thereto. For purposes hereof, the CuraGen SeqCalling Database shall include
without limitation the following data, information, and materials possessed,
acquired or developed by CuraGen as of the Effective Date or at any time during
the term of this Agreement, the acquisition or development of which has not been
sponsored or directed by a commercial Third Party to whom rights in such data,
information, and materials have been granted in advance: (i) sequence data with
respect to human Genetic Materials (including expressed sequences) and
expression products thereof; (ii) the tissue or cellular distribution relating
to such Genetic Materials, their expression and expression products; (iii)
literature publications and patent status (i.e., information related to CuraGen
filing dates, priority of claim(s) and any related patents and patent
applications, and any information known by CuraGen regarding Third Party patents
and patent applications) related to such Genetic Materials and expression
products; (iv) the biological function of such Genetic Materials and expression
products; (v) clones, expression products, proteins, cell lines and vectors
related to such Genetic Materials and expression products, and (vi) all of the
data, information, and materials described in the foregoing clauses (i) to (v)
with respect to any homologs of such Genetic Materials and expression products.
As of the Effective Date, the CuraGen SeqCalling Database includes
[_______________________________].

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       3


         1.18 "CuraGen Exclusive Antigen" shall mean an antigen (other than a
Research Antigen) or Research Antigen that is designated by CuraGen as a CuraGen
Exclusive Antigen in accordance with Section 4.8.

         1.19 "CuraGen Know-How" shall mean, collectively, all inventions,
discoveries, data, information, methods, techniques, technology and other
results, whether or not patentable but which are not generally known, regarding
CuraGen Technology and Information. All CuraGen Know-How shall be Confidential
Information of CuraGen.

         1.20 "CuraGen Licensed Antigen" shall mean all CuraGen Optioned
Antigens for which CuraGen has exercised an option to obtain a commercial
license pursuant to Article 7 below, and "CuraGen Licensed Antigen" shall mean
any one of the CuraGen Licensed Antigens.

         1.21 "CuraGen Optioned Antigens" shall mean all antigens which are
selected from the Eligible Antigens by CuraGen pursuant to Article 5 below, for
which ABX has the right to grant CuraGen the commercial license under Article 7
below, and which are not Licensed Antigens, and "CuraGen Optioned Antigen" shall
mean any one of the CuraGen Optioned Antigens.

         1.22 "CuraGen Patent Rights" shall mean, collectively, (a) all patent
applications heretofore or hereafter filed in any country which claim (and only
to the extent they claim) CuraGen Technology and Information or the use thereof;
(b) all patents that have issued or in the future issue from any of the
foregoing patent applications, including without limitation utility models,
design patents and certificates of invention; and (c) all divisionals,
continuations, continuations-in-part, reissues, renewals, supplemental
protection certificates, extensions or additions to any such patents and patent
applications.

         1.23 "CuraGen Product" shall mean, with respect to any CuraGen Licensed
Antigen, any product comprising (a) an Antibody which binds to such CuraGen
Licensed Antigen, or (b) Genetic Material that encodes such an Antibody wherein,
in respect of each CuraGen Product, said Genetic Material does not encode
multiple antibodies.

         1.24 "CuraGen Technology and Information" shall mean, collectively,
[______________________________].

         1.25  "Derived" or "derived" shall mean obtained, developed, created,
synthesized, designed, derived or resulting from, based upon or otherwise
generated (whether directly or indirectly, or in whole or in part).

         1.26 "Diagnostic Field" shall mean the use of Products for the
following human medical purposes: the detection, diagnosis and monitoring of any
disease, predisposition, state or condition in humans or the selection of a
particular patient(s) to receive a particular therapeutic treatment(s).

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       4


         1.27  "Effective Date" shall mean December 8, 1999.

         1.28 "Eligible Antigen" shall mean a Research Antigen which satisfies
the criteria of Exhibit B as determined by the JMC pursuant to Section 3.2 below
or the arbitrator pursuant to Section 3.5 below, and which is not an Optioned
Antigen.

         1.29  "Excluded ABX Technology" shall mean, collectively,
[____________________________].

         1.30  "Excluded CuraGen Technology" shall mean, collectively,
[____________________________].

         1.31 "FDA" shall mean the United States Food and Drug Administration or
its successor agency.

         1.32 "First Commercial Sale" shall mean, with respect to each Product
in each country, the date of first commercial sale (other than for purposes of
obtaining regulatory approval) of such Product by a party hereto, its
Sublicensee or their respective Affiliates to an unaffiliated Third Party in
such country.

         1.33 "Gene Therapy" shall mean the treatment or prevention of a disease
by means of Ex Vivo or In Vivo delivery (via viral or nonviral gene transfer
systems) of compositions comprising either (a) Genetic Material that encodes an
Antibody, wherein such Antibody serves a material function in the treatment or
prevention of such disease; (b) Genetic Material that encodes a moiety other
than an Antibody, wherein the moiety serves a material function in the treatment
or prevention of such disease and wherein such composition incorporates an
Antibody (or Genetic Material that encodes such Antibody), which Antibody is
used as a targeting vehicle for the composition; or (c) Genetic Material that
encodes an Antibody that serves a material function in the treatment or
prevention of such disease, wherein such composition also incorporates an
Antibody (or Genetic Material that encodes such Antibody) which Antibody is used
as a targeting vehicle for the composition. "Ex Vivo" delivery shall mean the
introduction, outside of the body of a human, of such compositions into a cell,
tissue, organoid, or organ, followed by the administration of the cell, tissue,
organoid, or organ which contains such introduced compositions into the body of
the same (autologous) or different (allogeneic) human, without limitation as to
the formulation, anatomic site, or route of administration or the use of
encapsulation or other devices for such administration. "In Vivo" delivery shall
mean the introduction of such compositions into an individual, without
limitation as to the formulation, anatomic site, or route of administration or
the use of encapsulation or other devices for such administration.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       5


         1.34 "Genetic Material" shall mean a nucleic acid, including DNA, RNA,
and nucleic acid complementary and reverse complementary to such nucleotide
sequences or nucleic acid, whether coding or noncoding and whether intact or a
fragment.

        1.35 "GenPharm Cross License Agreement" shall mean that certain Cross
License Agreement entered into by and between ABX, JTI, XT, Cell Genesys, Inc.,
and GenPharm International, Inc., effective as of March 26, 1997, as the same
may be amended from time to time.

         1.36  "Human Antibody Equivalent" shall mean [_______________________].

         1.37 "IND" shall mean an Investigational New Drug application filed
with the FDA, or any similar filing with any foreign regulatory authority, to
commence human clinical testing of any Product in any country.

         1.38 "JMC" shall mean the joint management committee comprising
representatives of ABX and CuraGen described in Section 3.1 below.

         1.39  "JTI" shall mean Japan Tobacco Inc., a Japanese corporation.

         1.40 Licensed Antigens" shall mean, collectively, the ABX Licensed
Antigens and CuraGen Licensed Antigens, and "Licensed Antigen" shall mean any
one of the Licensed Antigens.

         1.41 "Licensed ABX Intellectual Property" shall mean ABX's rights in
the ABX Patent Rights, ABX Know-How, Research Program Patent Rights and Research
Program Know-How; provided, however, that the Licensed ABX Intellectual Property
(a) is all to the extent and only to the extent that ABX has the right to grant
(sub)licenses thereunder (including without limitation to the extent permitted
under the applicable ABX In-Licenses); (b) is expressly subject to the ABX In-
Licenses; and (c) shall exclude the Excluded ABX Technology.

         1.42 "Licensed CuraGen Intellectual Property" shall mean CuraGen's
rights in the CuraGen Patent Rights, CuraGen Know-How, Research Program Patent
Rights and Research Program Know-How; provided, however, that the Licensed
CuraGen Intellectual Property (a) is all to the extent and only to the extent
that CuraGen has the right to grant (sub)licenses thereunder; and (b) shall
exclude the Excluded CuraGen Technology.

         1.43 "Licensed Intellectual Property" shall mean, collectively, the
Licensed ABX Intellectual Property and the Licensed CuraGen Intellectual
Property.

         1.44 "Net Sales" shall mean, with respect to a Product, the gross sales
price charged by a party, its Sublicensees and their respective Affiliates for
sales of such Product to non-Affiliate customers, less
[_____________________________].

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       6


         1.45 "Non-Mining Antigen" shall mean an antigen first developed,
identified or acquired by CuraGen, (other than through research efforts in
connection with the CuraGen Databases), whether from hypothesis driven research
or otherwise, that (i) CuraGen reasonably believes is not the subject of any
Third Party intellectual property rights (or the parties mutually believe, as
evidenced by written agreement, that a license to all applicable Third Party
intellectual property rights can be reasonably obtained), (ii) CuraGen
reasonably believes could be subject (or the parties mutually believe, as
evidenced by written agreement, that the antibodies to which could be subject)
to a proprietary position of CuraGen, (iii) CuraGen reasonably believes would be
available hereunder as a Research Antigen, and (iv) CuraGen reasonably believes
is reasonably likely to have potential as a target for antibody-based
therapeutics.

         1.46 "Non-Mining Research Antigen" shall mean a Research Antigen that
is a Non-Mining Antigen.

         1.47 "Optioned Antigens" shall mean, collectively, the ABX Optioned
Antigens and CuraGen Optioned Antigens, and "Optioned Antigen" shall mean any
one of the Optioned Antigens.

         1.48 "Patent Claim" shall mean a claim of a pending patent application
or issued and unexpired patent included within the Licensed Intellectual
Property which has not been held unenforceable or invalid by a court or other
governmental agency of competent jurisdiction, unappealable or unappealed within
the time allowed for appeal and which has not been admitted to be invalid or
unenforceable through reissue, disclaimer or otherwise.

         1.49 "Person" shall mean an individual, corporation, partnership,
limited liability company, trust, business trust, association, joint stock
company, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization, governmental authority or any other form of entity not
specifically listed herein.

         1.50 "Phase I Clinical Trial" shall mean a human clinical trial in any
country that is intended to initially evaluate the safety and/or pharmacological
effect of a Product in subjects, or that would otherwise satisfy requirements of
21 CFR 312.21(a), or its foreign equivalent.

         1.51 "Phase II Clinical Trial" shall mean a human clinical trial in any
country that is intended to initially evaluate the effectiveness of a Product
for a particular indication or indications in patients with the disease or
indication under study, or that would otherwise satisfy requirements of 21 CFR
312.21(b) , or its foreign equivalent.

         1.52 "Phase III Clinical Trial" shall mean a pivotal human clinical
trial in any country the results of which could be used to establish safety and
efficacy of a Product as a basis for a marketing approval application submitted
to the FDA, or that would otherwise satisfy requirements of 21 CFR 312.21(c), or
its foreign equivalent.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       7


         1.53 "PMA" shall mean a Pre-Market Approval Application, 510(k) notice
or similar application for marketing approval of a product for use in the
Diagnostic Field submitted to the FDA, or its foreign equivalent.

         1.54 "Products" shall mean, collectively, the ABX Products and the
CuraGen Products, and "Product" shall mean any one of the Products.

         1.55 "Program Year" shall mean any period commencing on the Effective
Date or any anniversary thereof, and continuing through the first anniversary
thereof, during the term of the Research Program.

         1.56 "Research Antigens" shall mean, collectively, the antigens which
are selected by the JMC, ABX or CuraGen pursuant to Section 4.3 below for use in
the Research Program, for which ABX and CuraGen have the right to grant the
other party the commercial license under Article 7 below, and which are not
Optioned Antigens or Licensed Antigens, and "Research Antigen" shall mean any
one of the Research Antigens.

         1.57 "Research Field" shall mean the use of materials derived from
XenoMouse Animals that are immunized with Research Antigens solely for the
creation, identification, analysis, research, characterization and preclinical
development of potential Products for use in the Commercial Field.

         1.58 "Research Program" shall mean the collaborative research program
described in Section 4.4 below

         1.59 "Research Program Know-How" shall mean, collectively, all
inventions, discoveries, data, information, methods, techniques, technology and
other results, whether or not patentable but which are not generally known,
regarding Research Program Technology and Information or the use thereof.

         1.60 "Research Program Technology and Information" shall mean, with
respect to an Antigen, collectively, [_____________________________].

         1.61 "Research Program Patent Rights" shall mean, collectively, (a) all
patent applications hereafter filed in any country which claim Research Program
Technology and Information or the use thereof; (b) all patents that have issued
or in the future issue from any of the foregoing patent applications, including
without limitation utility models, design patents and certificates of invention;
and (c) all divisionals, continuations, continuations-in-part, reissues,
renewals, supplemental protection certificates, extensions or additions to any
such patents and patent applications.

         1.62 "Royalty Commencement Date" shall mean, with respect to each
Product in each country, the date of the First Commercial Sale of such Product
in such country.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       8


         1.63 "Sublicense" shall mean, with respect to a Product, an agreement
or arrangement pursuant to which a (sub)license or distribution right regarding
such Product has been granted to a Sublicensee.

         1.64 "Sublicense Income" shall mean, with respect to a Product, the
aggregate cash consideration, and the fair market value of the non-cash
consideration, received by a party or its Affiliate in connection with the
Sublicense of such Product, excluding consideration received (a) in
reimbursement of such party's or its Affiliate's cost to perform research,
development or similar services conducted for such Product after the grant of
such Sublicense, (b) in reimbursement of patent or other out-of-pocket expenses
on such Product, or (c) in consideration for the purchase of any securities of
such party or its Affiliates at a price equal to no more than 120% of the then
fair market value of such securities).

         1.65 "Sublicensee" shall mean a Third Party that is granted (a) a
(sub)license under the Licensed Intellectual Property to develop, make, use,
offer for sale, sell or import a Product in the Commercial Field; or (b) a right
to distribute a Product in the Commercial Field, provided that such Third Party
is responsible for marketing and promotion of such Product within the applicable
territory.

         1.66 "Technology and Information" shall mean, collectively, the ABX
Technology and Information, CuraGen Technology and Information and Research
Program Technology and Information.

         1.67 "Therapeutic Field" shall mean the use of Products for the
following human medical purposes: the prevention or treatment of any disease,
state or condition in humans.

         1.68 "Third Party" shall mean any Person other than ABX, CuraGen and
their respective Affiliates.

         1.69 "XenoMouse Animals" shall mean the transgenic mice capable of
producing human antibodies when immunized by ABX with an antigen.

         1.70  "XT" shall mean Xenotech, L.P., a California limited partnership.

         1.71 "XT Master Research License and Option Agreement" shall mean that
certain Master Research License and Option Agreement entered into by and among
XT, JTI and Cell Genesys, Inc. effective as of June 28, 1996, and subsequently
assigned to ABX by Cell Genesys, Inc., as the same may be amended from time to
time.

         1.72 "XT/ABX Product License Agreement" shall mean a license agreement
between XT and ABX entered into pursuant to the XT Master Research and License
Agreement granting to ABX a license (with the right to grant sublicenses) to
commercialize Products in one or more territories.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       9


     2.  REPRESENTATIONS AND WARRANTIES

     Each party hereby represents and warrants to the other party as follows:

         2.1 Existence. Such party is duly organized, validly existing and in
             ---------
good standing under the laws of the state in which it is organized.

         2.2 Authorization and Enforcement of Obligations. Such party: (a) has
             --------------------------------------------
the requisite power and authority and the legal right to enter into this
Agreement and to perform its obligations hereunder; and (b) has taken all
requisite action on its part to authorize the execution and delivery of this
Agreement and the performance of its obligations hereunder. This Agreement has
been duly executed and delivered on behalf of such party, and constitutes a
legal, valid, binding obligation enforceable against such party in accordance
with its terms except as enforcement may be limited by equitable remedies or
defenses and applicable bankruptcy laws.

         2.3 No Consents. All necessary consents, approvals and authorizations
             -----------
of all governmental authorities and other persons required to be obtained by
such party in connection with this Agreement have been obtained.

         2.4 No Conflict. The execution and delivery of this Agreement and the
             -----------
performance of such party's obligations hereunder (a) do not conflict with or
violate any requirement of applicable laws or regulations; and (b) do not
conflict with, or constitute a default under, any contractual obligation of it.

         2.5 ABX In-Licenses. ABX has made available to counsel to CuraGen
             ---------------
correct copies of ABX In-Licenses, as in effect on the Effective Date.

         2.6 Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS
             ----------
AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES OF
ANY KIND REGARDING TECHNOLOGY AND INFORMATION, PRODUCTS OR LICENSED INTELLECTUAL
PROPERTY EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT OR VALIDITY.
ALL TECHNOLOGY AND INFORMATION IS PROVIDED "AS IS."

     3.  JOINT MANAGEMENT COMMITTEE

         3.1 Composition. The JMC shall comprise three (3) named representatives
             -----------
of CuraGen and three (3) named representatives of ABX. Each party shall notify
the other party in writing of its initial representatives to the JMC within ten
(10) days after the Effective Date, and may substitute one or more
representatives from time to time effective upon written notice to the other
party.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       10


         3.2 Responsibilities. The JMC shall be responsible for (a) selecting
antigens from the CuraGen Databases as Research Antigens; (b) monitoring and
reporting the progress of the Research Program; (c) recommending to the parties
any modifications to the Research Program with respect to any or all of the
Research Antigens; (d) facilitating open and frequent exchange of information
between the parties regarding the Research Program; (e) reviewing the data and
information regarding Research Antigens and determining whether a Research
Antigen satisfies the criteria set forth in Exhibit B; and (f) making selections
of Eligible Antigens under Article 5 below; and (g) discussing and making
recommendations regarding the application of CuraGen's capacity and resources to
generate potential antibody targets other than from the CuraGen Databases.

         3.3 Meetings. The JMC shall meet in person (unless otherwise agreed on
             --------
a meeting-by-meeting basis) not less than once each calendar quarter during the
term of the Research Program, on such dates and at such times and places as
agreed to by CuraGen and ABX, alternating between Fremont, California and New
Haven, Connecticut, or such other locations as the parties mutually agree. For
all other meetings, the JMC may meet by telephonic or video conference or in
person, as the parties mutually agree. Each party shall have the right to have
one (or such greater number as the parties mutually agree) employee or agent who
is not a member of the JMC attend each meeting of the JMC as a non-voting
observer. Each party shall be responsible for all its own personnel, travel and
related expenses relating to JMC meetings. The first meeting of the JMC shall
take place at the offices of Abgenix as soon as practicable after the Effective
Date, but in no event later than thirty (30) days after the Effective Date.

              3.3.1 Within thirty (30) days following each JMC meeting, the
party hosting the meeting (or entitled to host the meeting, if held by
telephonic or video conference or at a location other than Fremont, California
or New Haven, Connecticut) shall prepare and provide to the other party mutually
acceptable, reasonably detailed written minutes describing (a) all matters
reviewed or considered by the JMC; (b) all discussions regarding potential and
actual Antigens; and (c) all determinations and actions of the JMC and the
reasons therefor. Such minutes shall be the Confidential Information of both ABX
and CuraGen; provided, however, that to the extent that such minutes relate to
the Optioned Antigens and Licensed Antigens of a party they shall be the
Confidential Information solely of such party.

              3.3.2 Not less than ten (10) days prior to each regularly
scheduled quarterly meeting of the JMC, each party shall provide the other party
with all data and information, not previously disclosed to the other party,
regarding the activities of such party to identify potential Research Antigens
and all other activities of such party under the Research Program.

              3.3.3 Not less than ten (10) days prior to each regularly
scheduled meeting of the JMC, CuraGen shall provide ABX with (a) a reasonably
detailed written report describing the activities under all of CuraGen's
internal research programs for the generation of, or that actually generate,
potential antibody targets (other than from the CuraGen Databases) and the
results thereof, together with CuraGen's capacity and resources (and its
projected capacity and resources) to conduct such research activities and the

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       11


utilization thereof, and (b) copies of all data and information available to
CuraGen, that was not previously provided to ABX, regarding each Non-Mining
Antigen (other than CuraGen Exclusive Antigens, Optioned Antigens and Licensed
Antigens) that previously has been disclosed to ABX and antibodies thereto.

              3.3.4 Not less than five (5) days prior to each regularly
scheduled meeting of the JMC, each party shall provide the other party with a
list of the potential antigens of interest, identified from those antigens
proposed by the parties under Section 4.2, that such party desires to discuss at
such JMC meeting for potential use in the Research Program.

         3.4 Actions. ABX and CuraGen each shall be entitled to cast one vote on
             -------
matters before the JMC. Decisions of the JMC shall be made by unanimous
approval.

         3.5 Disagreements. All disagreements within the JMC shall be resolved
             -------------
in the following manner:

              3.5.1 Promptly upon receipt of written notice (a "Dispute Notice")
from one party to the other of a disagreement to be resolved under this
Paragraph 3.5, the JMC representatives of each party promptly shall present the
disagreement to the chief executive officer of such party.

              3.5.2 The chief executive officers of each party thereafter shall
meet to discuss each party's view and to explain the basis for their respective
positions of such disagreement, and in good faith shall attempt to resolve such
disagreement among themselves.

              3.5.3 If, within thirty (30) days after receipt of a Dispute
Notice as to whether a Research Antigen satisfies the criteria of Exhibit B, the
chief executive officers of each party cannot resolve such disagreement, then
upon written notice from one party to the other party, such disagreement shall
be settled as follows. Within forty five (45) days after receipt of such Dispute
Notice, the parties shall attempt to mutually agree upon a single independent
Third Party arbitrator, who shall be a scientific professional in the antibody
field, to resolve such disagreement. If the parties are unable to mutually agree
upon one such person, then each party shall appoint one independent Third Party
scientific professional in the antibody field prior to the expiration of such
forty five (45) day period, and within sixty (60) days after receipt of such
Dispute Notice, such person(s) shall select a single independent Third Party
arbitrator, who shall be a scientific professional in the antibody field, to
resolve such disagreement. Each party shall present all information presented to
the JMC and all other information as such party reasonably desires regarding
such disagreement. Within ninety (90) days after receipt of such Dispute Notice,
such arbitrator shall determine whether such Research Antigen satisfies the
criteria of Exhibit B and provide written notice to the parties regarding such
determination.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       12


               4.  RESEARCH ANTIGEN IDENTIFICATION AND RESEARCH

         4.1 Maintenance and Enhancement of CuraGen Databases; Disclosure of
             ---------------------------------------------------------------
Non-Mining Antigens. CuraGen shall continue to seek appropriate samples of human
- -------------------
tissues and to analyze Genetic Material therefrom using CuraGen's proprietary
methods and techniques, as well as publicly available methods and techniques, to
identify human sequences and gene assemblies, and expression products thereof,
that are not found in publicly available databases. CuraGen shall engage in the
foregoing efforts for as long as, and to the extent that, CuraGen reasonably
believes that, in its prudent business judgment, such efforts are yielding an
appropriate return of expressed sequences that are not found in publicly
available databases. CuraGen shall update the CuraGen Databases at least once
every month to incorporate (i) the data, information and materials generated by
the foregoing efforts that have not been sponsored or directed by a commercial
Third Party to whom rights in such data, information, and materials have been
granted prior to November 27, 2000, and (ii) those publicly available ESTs that
CuraGen determines in its prudent judgment have sufficient reliability. Promptly
upon physically cloning or acquiring a full-length gene encoding a potential
Non-Mining Antigen, CuraGen shall give to ABX written notice of such gene and
antigen including the applicable DNA sequence, the Clone ID number (if any is
known), the name(s) by which such antigen is known and any other information
available to CuraGen regarding such gene, antigen or their function or use.

         4.2 Searches for Research Antigens. During the term of the Research
             ------------------------------
Program, CuraGen shall have primary responsibility for the screening of the
CuraGen Databases and shall conduct searches thereof to identify and recommend
to the JMC potential antigens of interest hereunder. CuraGen shall recommend to
the JMC [___] antigens of interest (whether or not the genes encoding such
antigens are contained in the CuraGen Databases) that, based on the data and
information in the CuraGen Databases and such other data and information as
CuraGen may have acquired or developed, (i) CuraGen reasonably believes is not
the subject of any Third Party intellectual property rights (or the parties
mutually believe, as evidenced by written agreement, that a license to all
applicable Third Party intellectual property rights can be reasonably obtained),
(ii) CuraGen reasonably believes could be subject (or the parties mutually
believe, as evidenced by written agreement, that the antibodies to which could
be subject) to a proprietary position of CuraGen, (iii) CuraGen reasonably
believes would be available hereunder as Research Antigen, and (iv) CuraGen
reasonably believes is reasonably likely to have potential as a target for
antibody-based therapeutics. CuraGen will use its best efforts to recommend to
the JMC at least [_______________] such antigens of interest from the CuraGen
Databases. ABX shall have the right, but not the obligation, to recommend to the
JMC antigens of interest from the CuraGen Databases and the Non-Mining Antigens
that ABX reasonably believes, are not the subject of any Third Party
intellectual property rights, would be available hereunder as Research Antigens
and are reasonably likely to have potential as targets for antibody-based
therapeutics.

              4.2.1 During the six (6) month period after the Effective Date,
CuraGen may restrict its screening of the CuraGen Databases to searches for
potential antigens of interest that are useful in the field of
[____________________________________________________].

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       13


              4.2.2 From and after the date six (6) months after the Effective
Date and during the term of the Research Program, CuraGen shall provide ABX,
upon its request, with access to and use of the CuraGen Databases solely (i) to
conduct research to identify potential Research Antigens, (ii) to research and
develop Antibodies to Research Antigens and (iii) to research, develop, make,
have made, use, import, offer to sell and sell ABX Products in accordance this
Agreement. Such access shall be both remote access at ABX's facilities and
direct access at CuraGen's facilities. CuraGen hereby grants ABX the
nonexclusive license (or sublicense, as the case may be) under CuraGen's patent
rights, copyrights and other intellectual property rights in the CuraGen
Databases and all methods and techniques utilized by CuraGen to produce,
maintain, access and search the CuraGen Databases solely to use the CuraGen
Databases for such purposes.

              4.2.3 CuraGen shall provide ABX with all the most current
software, documentation and information available to CuraGen as reasonably
necessary or useful to enable ABX to fully utilize the CuraGen Databases and
formulate and conduct searches thereof as provided in Sections 4.2.3, 4.2.5 and
4.2.6. CuraGen shall provide not less than three (3) ABX employees with all
training and technical assistance as reasonably necessary or useful to enable
ABX to fully utilize the CuraGen Databases and formulate and conduct searches
thereof as provided in Sections 4.2.3, 4.2.5 and 4.2.6.

              4.2.4 At the reasonable request of ABX at any time after the date
six (6) months after the Effective Date and during the term of the Research
Program, CuraGen additionally shall permit up to three (3) ABX employees to
participate in the formulation and conduct of searches, and other use, of the
CuraGen Databases by CuraGen employees directed toward the collaborative search
for and identification of potential Research Antigens.

              4.2.5 CuraGen shall permit up to three (3) ABX employees access to
CuraGen's facilities and equipment at all times during normal business hours at
any time after the date six (6) months after the Effective Date and during the
term of the Research Program to conduct searches of and use the CuraGen
Databases on behalf of ABX.

              4.2.6 During each visit by ABX employees to utilize the CuraGen
Databases, at the request of ABX, CuraGen shall provide such ABX employees in
person access to one or more CuraGen employees skilled in the formulation of
searches and search criteria and in the use of the CuraGen Databases to provide
prompt on site technical assistance to enable such ABX employees to fully
utilize the CuraGen Databases and formulate and conduct searches thereof.

              4.2.7 ABX shall not permit any ABX employee who has direct access
to a non-public database of a Third Party to have direct access to the CuraGen
Databases. For purposes hereof, "direct access" to a database shall mean first-
person access to the data contained in such database and the proprietary search
methods, tools, algorithms, and software associated with it; provided, however,
that access to the results of searches run by another person or access to the
data in a database, without the means to search such data by the proprietary
search methods, tools, algorithms, and software associated with such database,
shall not constitute "direct access" to a database.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       14


              4.2.8 At the reasonable request of ABX at any time during the term
of the Research Program, CuraGen shall conduct searches of the CuraGen Databases
based on criteria selected by ABX and shall provide the results thereof to ABX.

              4.2.9 During the Research Program, CuraGen shall operate and
maintain research programs (that are not directed to the CuraGen Databases),
with reasonable capacity and resources dedicated thereto, for the identification
of potential antibody targets in the [________________] that will be available
for use in the Research Program. During the Research Program, CuraGen shall use
its best efforts to identify and recommend to the JMC [________________] Non-
Mining Antigens per Program Year until such time as the JMC has selected
[_________________] Non-Mining Research Antigens (other than antigens selected
as Research Antigens under Section 4.3.2 and (CuraGen Exclusive Antigens) in the
aggregate.

         4.3  Research Antigen Selection.
              --------------------------

              4.3.1 During the term of the Research Program, based upon the data
and information provided by the parties regarding potential antigens of
interest, the JMC shall select at any JMC meeting, from those antigens proposed
by the parties under Section 4.2, potential antigens of interest for use in the
Research Program. With respect to each potential antigen which is selected, by
the action of the JMC, for use under the Research Program, within thirty (30)
days after the date of such JMC meeting, each party shall notify the other party
in writing if such party does not have the right to grant the other party a
commercial license under Article 7 below for such antigen. Subject to Section
4.3.6, unless a party timely notifies the other party in writing that it does
not have the right to grant the other party a commercial license under Article 7
below for such antigen, such antigen thereafter shall be a Research Antigen.

              4.3.2 During the term of the Research Program, CuraGen shall have
the right to select at any JMC meeting, from those antigens proposed by the
parties under Section 4.2, potential antigens of interest for use in the
Research Program. CuraGen shall not select any antigen (other than antigens
designated as CuraGen Exclusive Antigens at the time of selection) for which it
does not have the right to grant ABX a commercial license under Article 7 below
for such antigen. With respect to each potential antigen which is selected, by
CuraGen but not by the action of the JMC, for use under the Research Program,
within thirty (30) days after the date of such JMC meeting, ABX shall notify
CuraGen in writing if ABX does not have the right to grant CuraGen a commercial
license under Article 7 below for such antigen. Subject to Section 4.3.6, unless
ABX timely notifies CuraGen in writing that it does not have the right to grant
CuraGen a commercial license under Article 7 below for such antigen, such
antigen thereafter shall be a Research Antigen.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       15


              4.3.3 During the term of the Research Program, ABX shall have the
right to select at any JMC meeting, from those antigens proposed by the parties
under Section 4.2, potential antigens of interest for use in the Research
Program. ABX shall not select any antigen for which it does not have the right
to grant CuraGen a commercial license under Article 7 below for such antigen.
With respect to each potential antigen which is selected, by ABX but not by the
action of the JMC, for use under the Research Program, within thirty (30) days
after the date of such JMC meeting, CuraGen shall notify ABX in writing if
CuraGen does not have the right to grant ABX a commercial license under Article
7 below for such antigen. Subject to Section 4.3.6, unless CuraGen timely
notifies ABX in writing that it does not have the right to grant ABX a
commercial license under Article 7 below for such antigen, such antigen
thereafter shall be a Research Antigen.

              4.3.4 In addition to the rights of the parties to select antigens
under Sections 4.3.1, 4.3.2 and 4.3.3 above, during the term of the Research
Program, ABX shall have the right to select at any JMC meeting additional
potential antigens of interest, from those proposed by the parties under Section
4.2, for use in the Research Program. ABX shall not select any antigen for which
it does not have the right to grant CuraGen a commercial license under Article 7
below for such antigen. With respect to each potential antigen which is
selected, by ABX but not by the action of the JMC, for use under the Research
Program, within thirty (30) days after the date of such JMC meeting, CuraGen
shall notify ABX in writing if CuraGen does not have the right to grant ABX a
commercial license under Article 7 below for such antigen. Subject to Section
4.3.6, unless CuraGen timely notifies ABX in writing that it does not have the
right to grant ABX a commercial license under Article 7 below for such antigen,
such antigen thereafter shall be a Research Antigen.

              4.3.5 If fewer than [___________] antigens (other than Non-Mining
Antigens) in the aggregate have become Research Antigens pursuant to Sections
4.3.1, 4.3.2, and 4.3.3 by the fifth anniversary of the Effective Date other
than as a result of a lack of diligence by CuraGen, CuraGen shall have the right
to select at any JMC meeting thereafter additional potential antigens of
interest, from those antigens proposed by the parties under Section 4.2 (other
than Non-Mining Antigens), for use in the Research Program; provided, however,
that the total number of antigens for which CuraGen may exercise its rights
pursuant to this Section 4.3.5 shall equal (i) [___________] minus (ii) the
aggregate number of antigens (other than Non-Mining Antigens) that have become
Research Antigens pursuant to Sections 4.3.1, 4.3.2, and 4.3.3 on or prior to
the fifth anniversary of the Effective Date. CuraGen shall act in a reasonable
and prudent manner in the exercise of the foregoing right. In addition, CuraGen
shall not select any antigen for which it does not have the right to grant ABX a
commercial license under Article 7 below for such antigen (other than in the
case of antigens that are designated as CuraGen Exclusive Antigens at the time
of selection). With respect to each potential antigen which is selected, by
CuraGen but not by the action of the JMC, for use under the Research Program,
within thirty (30) days after the date of such JMC meeting, ABX shall notify
CuraGen in writing if ABX does not have the right to grant CuraGen a commercial
license under Article 7 below for such antigen. Unless ABX timely notifies
CuraGen in writing that it does not have the right to grant CuraGen a commercial
license under Article 7 below for such antigen, such antigen thereafter shall be
a Research Antigen.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       16


              4.3.6 Notwithstanding anything to the contrary in this Agreement,
(a) not more than two hundred fifty (250) antigens in the aggregate may become
Research Antigens under Sections 4.3.1, 4.3.2, 4.3.3 and 4.3.5 above; (b) not
more than [___________] antigens may become Research Antigens under Section
4.3.2 above in the aggregate, of which not more than [___________] may be
Non-Mining Antigens; (c) not more than [___________] antigens may become
Research Antigens under Section 4.3.2 above in any one Program Year; (d) not
more than [___________] antigens may become Research Antigens under Section
4.3.3 above in the aggregate, of which not more than [__________] may be
Non-Mining Antigens; and (e) not more than [___________] antigens may become
Research Antigens under Section 4.3.3 above in any one Program Year. No
antigen for use in the prevention, treatment, detection, diagnosis or monitoring
of any disease or condition other than [________] in humans may become a
Research Antigen prior to the date six (6) months after the Effective Date,
without CuraGen's approval.

              4.3.7 Notwithstanding anything to the contrary in this Agreement,
if a party gives written notice to the other party at any time stating that such
party does not have the right to grant the other party a commercial license
under Article 7 below for a Research Antigen, then effective thirty (30) days
after the receipt by the other party of such notice, such antigen shall cease to
be a Research Antigen and both parties shall destroy all Antigen Specific
Materials and Information pertaining to such antigen. A party shall give such
written notice to the other party promptly upon the occurrence of the event
giving rise to such party's not having the right to grant the other party a
commercial license under Article 7, to the extent such party has the right to do
so.

         4.4  Research Program.
              ----------------

              4.4.1 Research Plan. During the term of the Research Program, each
party shall use its commercially reasonable efforts to perform its obligations
set forth in Exhibit C within the time schedules contemplated therein. The JMC
may recommend changes to the allocation of responsibilities set forth in Exhibit
C, from time to time; provided, however, that such changes shall only be
effective if in a written amendment duly executed by both parties. Other than
the activities specified in Exhibit C as being the responsibility of one party
or another, the JMC shall allocate the responsibility for each such activity
between the parties, taking into account the skills of each party, in an effort
to divide the resources and internal costs reasonably required to be dedicated
by each party to the conduct of such activities [_______________]. In the event
that any activities with respect to Research Antigens (other than CuraGen
Exclusive Antigens), other than those specified in Exhibit C as being the
responsibility of one party or another, require any payments to a Third Party
for goods or services (e.g., specific animal models), such payments shall be
shared [_______________], provided that all such goods and services and payments

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       17


therefor are approved by the JMC prior to incurring any such expense.
Notwithstanding anything to the contrary in this Agreement, all activities with
respect to Research Antigens that are CuraGen Exclusive Antigens, other than the
generation and biochemical characterization of Antibodies as described and
allocated to ABX in Exhibit C, shall be the sole and exclusive responsibility of
CuraGen, at its sole cost and expense. With respect to each Research Antigen,
during the term of the Research Program, each party may conduct, in its sole
discretion, such additional preclinical research in the Research Field as such
party reasonably desires to evaluate its interest in such Research Antigen,
provided that, the preceding right shall not apply to ABX in the case of
Research Antigens that are CuraGen Exclusive Antigens, and provided further that
prior to commencing such additional preclinical research with respect to
Research Antigens that are not CuraGen Exclusive Antigens, such party shall give
prior written notice to the other party of the nature and scope of such
additional preclinical research regarding such Research Antigen and shall
provide the other party with all results of such research, which research shall
be deemed to have been part of the Research Program. Each party shall provide
the personnel, materials, equipment and other resources required to conduct its
obligations hereunder; provided, however, that CuraGen shall transfer to ABX all
information and materials available to CuraGen that are useful in the conduct of
all assays conducted by or on behalf of CuraGen in connection with the Research
Program. ABX shall reimburse CuraGen for all reasonable out-of-pocket expenses
incurred in effecting such transfer. CuraGen grants to ABX the nonexclusive,
worldwide license (without the right to grant sublicenses) to practice and use
all such assays both (a) for use in the Research Program, and (b) for research
purposes (unrelated to the Research Program or CuraGen) related to the research
and development of antigens and/or antibodies. ABX shall make the antibody
generation/isolation technologies of Immgenics, Inc. available for use by ABX in
the performance of its obligations under Exhibit C. Each party shall perform its
obligations hereunder in accordance with high scientific and professional
standards, and in compliance in all material respects with the requirements of
applicable laws and regulations. Each party shall provide reasonable assistance
required by the other party in connection with the performance of the Research
Program. Each party shall have the right, at reasonable times during normal
business hours and upon reasonable notice, to visit the facilities of the other
party where the other party is conducting its obligations under the Research
Program to observe such activities.

              4.4.2 Access. Without limiting the generality of Section 4.4.1,
                    ------
each party shall permit up to three (3) employees of the other party access to
such party's facilities, upon reasonable advance notice, at all times during
normal business hours during the term of the Research Program Term to work with
the employees of such party in the development and use of assays pursuant to the
Research Program. Each party shall provide such employees of the other party in
person access to one or more employees of such party skilled in the development
and use of such assays to enable such employees of such other party to utilize
such assays and develop similar assays for use in the Research Program and, in
the case of ABX, as contemplated under Section 4.4.1; provided, however, except
as otherwise provided in Section 4.4.1, that no license (or sublicense, as the
case may be) to any intellectual property relating to such assays is granted
hereby, whether expressly or by implication.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       18


              4.4.3 Term of the Research Program. Unless this Agreement is
                    ----------------------------
earlier terminated, the term of the Research Program shall commence on the
Effective Date and shall continue through the sixth anniversary of the Effective
Date.

         4.5  Research Records and Reports.
              ----------------------------

              4.5.1 Research Records. Each party shall maintain records, in
                    ----------------
sufficient detail and in good scientific manner appropriate for patent purposes,
which shall be complete and accurate and shall fully and properly reflect all
work done and results achieved in the performance of the activities under the
Research Program. Each party shall have the right, during normal business hours
and upon reasonable notice, to inspect and copy all such records of the other
party to the extent reasonably required for the performance of its obligations
under this Agreement. Each party shall maintain such records and the information
of the other party contained therein in confidence in accordance with Article 11
below.

              4.5.2 Research Reports and Information. Each party shall keep the
                    --------------------------------
other informed of the progress of its own activities under the Research Program.
At a minimum, within thirty (30) days following the last day of each calendar
quarter during the term of the Research Program, each party shall prepare, and
provide to the other party, a reasonably detailed written summary report which
shall describe the work performed by such party to date under the Research
Program.

         4.6  Exclusivity.
              -----------

              4.6.1 Except as otherwise expressly permitted under this
Agreement, during the term of the Research Program, CuraGen shall not,
[_________________________].

              4.6.2 For a period commencing on November 27, 2000, and ending on
the earlier of (i) the [_______________] anniversary of the Effective Date, and
(ii) the effective date of a termination of the Research Program and the
options, licenses and rights of ABX under this Agreement by CuraGen pursuant to
Section 14.2.3 upon an uncured material breach of a material obligation by ABX,
CuraGen shall not [____________________________________]

              (a) [_____________________________________________].

              (b) [_____________________________________________].

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       19


              (c) [__________________________________________________].

              (d) [__________________________________________________].

              (e) [__________________________________________________].

              4.6.3 Except as otherwise expressly permitted under this
Agreement, for a period ending on the earlier of(a) the [_________] anniversary
of the Effective Date, and (b) the effective date of a termination of the
Research Program and the options, licenses and rights of ABX under this
Agreement by CuraGen pursuant to Section 14.2.3 upon an uncured material breach
of a material obligation by ABX, CuraGen shall not, and shall not grant any
license (or sublicense, as the case may be), immunity or other right to any
Person to, research, develop, make, have made, use, import, offer to sell or
sell any Antibody Equivalent to an Antigen (or any mutein or fragment thereof)
for use in the Commercial Field from and after the date on which a XenoMouse
Animal was first immunized with such Antigen; provided, however, that the
foregoing limitation shall not apply to antigens as to which ABX has notified
CuraGen that it does not have the right to grant CuraGen a commercial license
under Article 7 unless ABX has agreed to pay CuraGen the amounts provided
hereunder upon the development and commercialization of an antibody product
targeting such antigen as if it were an ABX Product hereunder in return for the
licenses from CuraGen for such product as if it were an ABX Product hereunder.
For the avoidance of doubt, nothing in this Agreement shall preclude CuraGen
from granting any license (or sublicense, as the case may be), immunity or other
right to any Person to research, develop, make, have made, use, import, offer to
sell or sell any Antibody Equivalent to an antigen contained in the CuraGen
Databases (or any mutein or fragment thereof) for any purpose other than for use
in the prevention, treatment, detection, diagnosis or monitoring of, or the
determination of a predisposition for, or the selection of a particular

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       20


patient(s) to receive a particular therapeutic treatment(s) for,
[_______________], unless and until a XenoMouse Animal has been immunized with
such antigen under this Agreement.

              4.6.4 Except as otherwise expressly permitted under this
Agreement, during the term of this Agreement, ABX shall not, and shall not grant
any license (or sublicense, as the case may be), immunity or other right to any
Person to, research, develop, make, have made, use, import, offer to sell or
sell any Antibody Equivalent to a CuraGen Optioned Antigen (or any mutein or
fragment thereof), for so long as such antigen remains a CuraGen Optioned
Antigen, or a CuraGen Licensed Antigen (or any mutein or fragment thereof) for
use in the Commercial Field.

              4.6.5 Except as otherwise expressly permitted under this
Agreement, during the term of this Agreement, CuraGen shall not, and shall not
grant any license (or sublicense, as the case may be), immunity or other right
to any Person to, research, develop, make, have made, use, import, offer to sell
or sell any Antibody Equivalent to an ABX Optioned Antigen (or any mutein or
fragment thereof), for so long as such antigen remains an ABX Optioned Antigen,
or an ABX Licensed Antigen (or any mutein or fragment thereof) for use in the
Commercial Field.

              4.6.6 For a period commencing on November 27, 2000, and ending on
December 27, 2000, CuraGen shall not enter into any agreement with any other
Person under which [___________________________________________________]

         4.7  Research Program Licenses.
              -------------------------

              4.7.1 Subject to the terms and conditions of this Agreement, ABX
hereby grants to CuraGen a nonexclusive license (or sublicense, as the case may
be) under the Licensed ABX Intellectual Property, without right to grant
Sublicenses, in the Research Field solely to conduct its obligations under the
Research Program and to conduct additional preclinical research as permitted
under Section 4.4.1. Except as expressly set forth in this Agreement or
otherwise expressly agreed in writing by the parties, CuraGen shall not use the
Licensed ABX Intellectual Property or any ABX Technology and Information or any
Research Program Technology and Information for any use other than those uses
expressly licensed under this Section 4.7.1.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       21


              4.7.2 Subject to the terms and conditions of this Agreement,
CuraGen hereby grants to ABX a nonexclusive license (or sublicense, as the case
may be) under the Licensed CuraGen Intellectual Property, without right to grant
Sublicenses, in the Research Field solely to conduct its obligations under the
Research Program and to conduct additional preclinical research as permitted
under Section 4.4.1. Except as expressly set forth in this Agreement or
otherwise expressly agreed in writing by the parties, ABX shall not use the
Licensed CuraGen Intellectual Property or any CuraGen Technology and Information
or any Research Program Technology and Information for any use other than those
uses expressly licensed under this Section 4.7.2.

         4.8  CuraGen Exclusive Antigens.
              --------------------------

              4.8.1  Right to Designate.
                     ------------------
              (a) CuraGen shall earn the right (a "Designation Right") to
designate one (1) Non-Mining Antigen as a CuraGen Exclusive Antigen, in
accordance with the process described in Section 4.8.2, after [______________]
Non-Mining Antigens (other than CuraGen Exclusive Antigens) have been selected
as Research Antigens under Section 4.3. Thereafter, CuraGen shall earn another
Designation Right for a Non-Mining Antigen (i) after [_______________________]
Non-Mining Antigens (other than CuraGen Exclusive Antigens) have been selected
as Research Antigens under Section 4.3, and (ii) after [_____________________]
Non-Mining Antigens (other than CuraGen Exclusive Antigens) have been selected
as Research Antigens under Section 4.3. For the avoidance of doubt, it is
acknowledged [_______________________________________________________________].

              (b) CuraGen shall earn the right (a "Designation Right") to
designate one (1) antigen (other than a Non-Mining Antigen) as a CuraGen
Exclusive Antigen, in accordance with the process described in Section 4.8.2,
after [________________________] antigens (other than Non-Mining Antigens and
CuraGen Exclusive Antigens) have been selected as Research Antigens under
Section 4.3. For the avoidance of doubt, it is acknowledged [________________].


              4.8.2  Designation Process.
                     -------------------

              (a) CuraGen shall have the right to designate any antigen that has
been included on a list furnished under Section 3.3.4 as a CuraGen Exclusive
Antigen as the first order of business at a JMC meeting, provided that such

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       22


designation is made prior to the discussion or any action by the JMC relating to
such antigen. CuraGen shall not have the right to designate under Section
4.8.1(b) more than [________] antigens (that are not Non-Mining Antigens) in the
aggregate as CuraGen Exclusive Antigens, or to designate under Section 4.8.1(a)
more than [____________________] Non-Mining Antigens in the aggregate as CuraGen
Exclusive Antigens. Any antigen (whether or not a Non-Mining Antigen) designated
as a CuraGen Exclusive Antigen under this Section 4.8 shall be counted against
the number of antigens that CuraGen is entitled to select under Section 4.3.2.
In addition, (i) CuraGen may not designate more than [_____] Non-Mining Antigens
as CuraGen Exclusive Antigens in any Program Year based on Designation Rights
earned under Section 4.8.1(a) on the basis of Non-Mining Antigens designated as
Research Antigens by CuraGen pursuant to Section 4.3.2; and (ii) CuraGen may not
designate more than [_______] antigens other than Non-Mining Antigens as CuraGen
Exclusive Antigens in any Program Year based on Designation Rights earned under
Section 4.8.1(b) on the basis of antigens other than Non-Mining Antigens
designated as Research Antigens by CuraGen pursuant to Section 4.3.2.

              (b) The parties acknowledge that [______________________________].

              (c) If CuraGen fails (or, by operation of the limitation of
Section 4.8.1(a), is unable) to exercise its right to designate a Non-Mining
Antigen as a CuraGen Exclusive Antigen in the same Program Year in which the
Designation Right was earned under Section 4.8.1(a), CuraGen may carry forward
such unused Designation Right to subsequent Program Years; provided, however,
that CuraGen may not exercise the unused Designation Right to designate more
than [_______] Non-Mining Antigens as CuraGen Exclusive Antigens in any one (1)
subsequent Program Year (other than the [______] Program Year).

              (d) If CuraGen fails (or, by operation. of the limitation of
Section 4.8.1(b), is unable) to exercise its right to designate an antigen
(other than a Non-Mining Antigen) as a CuraGen Exclusive Antigen in the same
Program Year in which the right was earned under Section 4.8.1(b), CuraGen may
carry forward such unused Designation Right to the subsequent Program Years;
provided, however, that CuraGen may not exercise the unused Designation Right to
designate more than [_________] antigen (other than a Non-Mining Antigen) as a
CuraGen Exclusive Antigen in any [____] subsequent Program Year (other than the
[____] Program Year).

              (e) Once an antigen is designated as a CuraGen Exclusive Antigen
and, provided that within thirty (30) days after the date of the JMC meeting in
which such CuraGen Exclusive Antigen is designated by CuraGen, ABX does not
notify CuraGen in writing that ABX does not have the right to grant CuraGen a
commercial license under Article 7 below for such antigen, (i) such antigen
shall be a Research Antigen, but shall not be part of the Pool (as defined in
Section 5.2); (ii) CuraGen shall have the exclusive right to select such
Research Antigen as an Optioned Antigen or Licensed Antigen regardless of
whether such Research Antigen is an Eligible Antigen; and (iii) ABX shall have
no right to select such Research Antigen as an Optioned Antigen or Licensed
Antigen.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       23


              4.8.3 Selection of CuraGen Exclusive Antigens as Optioned
Antigens. CuraGen shall have the right to select any Research Antigen that is a
CuraGen Exclusive Antigen as an Optioned Antigen regardless of whether such
CuraGen Exclusive Antigen is an Eligible Antigen. CuraGen shall make any such
selection by giving express written notice to ABX at any time during the first
[____] years after the Effective Date. CuraGen's right to make such
selections under this Section 4.8.3 shall be outside, and in addition to, the
selection process for Optioned Antigens under Section 5.2.

              4.8.4 If ABX notifies CuraGen in writing that ABX does not have
the right to grant CuraGen a commercial license under Article 7 below for an
antigen that CuraGen designates as a CuraGen Exclusive Antigen, then such
antigen shall not count against the quantity limitations on CuraGen Exclusive
Antigens set forth in this Section 4.8.

              4.8.5 Co-Development Rights in CuraGen Exclusive Antigens.
[_____________________________________________________________________________].

     5.  SELECTION OF OPTIONED ANTIGENS

         5.1 Eligible Antigens. Not less than ten (10) days prior to each
             -----------------
regularly scheduled meeting of the JMC, each party shall provide the other party
with a dossier for each Research Antigen that it proposes to be considered as a

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       24


potential Eligible Antigen. Such dossier shall contain all information
reasonably available to such party demonstrating whether such Research Antigen
satisfies the criteria set forth in Exhibit B. At such regularly scheduled
meeting of the JMC, the JMC shall consider whether such Research Antigen
satisfies the criteria set forth in Exhibit B. A Research Antigen shall be an
Eligible Antigen at such time as it is determined to satisfy the criteria set
forth in Exhibit B, as determined by the JMC under Section 3.2 above or the
arbitrator under Section 3.5 above. Notwithstanding anything to the contrary in
this Agreement, if a party gives written notice to the other party at any time
stating that such party does not have the right to grant the other party a
commercial license under Article 7 below for an Eligible Antigen, then effective
thirty (30) days after the receipt by the other party of such notice, such
antigen shall cease to be an Eligible Antigen and both parties shall destroy all
Antigen Specific Materials and Information pertaining to such Eligible Antigen.

         5.2 Selection of Optioned Antigens. During the first eight (8) years
             ------------------------------
after the Effective Date, each party shall have the right, in its sole
discretion, to select Optioned Antigens from the list of Eligible Antigens at
the time in question (the "Pool") as follows:

              5.2.1  [______________________________].
              5.2.2  [______________________________].
              5.2.3  [______________________________].
              5.2.4  [______________________________].
              5.2.5  [______________________________].
              5.2.6  [______________________________].
              5.2.7  [______________________________].
              5.2.8  [______________________________].

              5.2.9 With respect to each Eligible Antigen which is selected by
CuraGen as a CuraGen Optioned Antigen pursuant to this Section 5.2, ABX shall
notify CuraGen in writing, within thirty (30) days of receipt of the notice of
selection from CuraGen, if ABX does not have the right to grant CuraGen a
commercial license under Article 7 below for such Eligible Antigen. Unless ABX
timely notifies CuraGen in writing that ABX does not have the right to grant
CuraGen a commercial license under Article 7 below for such antigen, ABX shall
use its good faith efforts to nominate such Eligible Antigen under the XTIABX
Master Research and License Agreement and to obtain the right thereunder to
obtain an XT/ABX Product License Agreement with respect to CuraGen Products to
such Eligible Antigen. If ABX is successful in nominating such Eligible Antigen
and in obtaining the right to obtain an XT/ABX Product License Agreement for
CuraGen Products to such Eligible Antigen, the ABX shall give prompt written
notice to CuraGen. Effective upon such notice, such Eligible Antigen shall be a
CuraGen Optioned Antigen.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       25


              5.2.10 With respect to each Eligible Antigen which is selected by
ABX as an ABX Optioned Antigen pursuant to this Section 5.2, CuraGen shall
notify ABX in writing, within thirty (30) days of receipt of the notice of
selection from ABX, if CuraGen does not have the right to grant ABX a commercial
license under Article 7 below for such Eligible Antigen. Unless CuraGen timely
notifies ABX in writing that CuraGen does not have the right to grant ABX a
commercial license under Article 7 below for such antigen, such Eligible Antigen
thereafter shall be an ABX Optioned Antigen upon the expiration of such thirty
(30) day period.

              5.2.11 At such time as an Eligible Antigen becomes an Optioned
Antigen of one of the parties (the "Optioning Party"), the other party shall
deliver to the Optioning Party all Antigen Specific Materials and Information in
its possession pertaining to such Optioned Antigen and all related Confidential
Information of such other party, and such Antigen Specific Materials and
Information and Confidential Information shall thereafter be the Confidential
Information of the Optioning Party.

     6.  RESEARCH FIELD LICENSES FOR OPTIONED ANTIBODIES

         6.1  Research Field Licenses.
              -----------------------

              6.1.1 Subject to the terms and conditions of this Agreement, ABX
hereby grants to CuraGen a nonexclusive license (or sublicense, as the case may
be) under the Licensed ABX Intellectual Property, without right to grant
Sublicenses, (a) to research, develop, make and use (but not to transfer, sell,
lease, offer to sell or lease, or otherwise transfer title to or an interest in)
Antibody Cells that contain, express or secrete Antibodies to the CuraGen
Optioned Antigens solely for use in the Research Field, and (b) to research,
develop, make and use (but not to transfer, sell, lease, offer to sell or lease,
or otherwise transfer title to or an interest in) Antibodies that bind to the
CuraGen Optioned Antigens and Genetic Material that encodes such Antibodies,
solely for use in the Research Field for the research and development of
potential CuraGen Products. Except as expressly agreed in this Agreement or
otherwise expressly agreed in writing by the parties, CuraGen shall not use the
Licensed ABX Intellectual Property, the ABX Technology and Information or the
Research Program Technology and Information for any use other than those uses
expressly licensed under this Section 6.1.1.

              6.1.2 Subject to the terms and conditions of this Agreement,
CuraGen hereby grants to ABX a nonexclusive license (or sublicense, as the case
may be) under the Licensed CuraGen Intellectual Property, without right to grant
Sublicenses, (a) to research, develop, make and use (but not to transfer, sell,
lease, offer to sell or lease, or otherwise transfer title to or an interest in)
Antibody Cells that contain, express or secrete Antibodies to the ABX Optioned
Antigens solely for use in the Research Field, and (b) to research, develop,
make and use (but not to transfer, sell, lease, offer to sell or lease, or
otherwise transfer title to or an interest in) Antibodies that bind to the ABX
Optioned Antigens and Genetic Material that encodes such Antibodies, solely for
use in the Research Field for the research and development of potential ABX
Products. Except as expressly agreed in this Agreement or otherwise expressly
agreed in writing by the parties, ABX shall not use the Licensed CuraGen

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       26


Intellectual Property, the CuraGen Technology and Information or the Research
Program Technology and Information for any use other than those uses expressly
licensed under this Section 6.1.2.

              6.1.3 The licenses (or sublicenses, as the case may be) granted
under this Section 6.1 shall terminate with respect to each Optioned Antigen on
the first anniversary of the date on which such antigen became an Optioned
Antigen; provided, however, if a party has timely exercised its option under
Article 7 below to obtain a license (or sublicense, as the case may be) for
Products to such Optioned Antigen, such license (or sublicense, as the case may
be) shall remain in effect for Products to such Optioned Antigen for the term of
the applicable license (or sublicense, as the case may be) under Article 7
below. If a party does not timely exercise its option under Article 7 below to
obtain a license (or sublicense, as the case may be) for Products to an Optioned
Antigen and the other party does not timely exercise its standby option under
Section 7.1.2 or 7.2.2, as the case may be, for Products to such Optioned
Antigen, such Antigen shall cease to be an Optioned Antigen but shall be
restored as an Eligible Antigen.

         6.2  Research and Preclinical Development.
              ------------------------------------

              6.2.1 As between ABX and CuraGen, ABX shall have the sole right
and responsibility, at its sole expense, to conduct research and preclinical
development of Antibodies that bind to the ABX Optioned Antigens and Genetic
Material that encodes such Antibodies for use in the research and development of
potential ABX Products in the Research Field.

              6.2.2 As between ABX and CuraGen, CuraGen shall have the sole
right and responsibility, at its sole expense, to conduct research and
preclinical development of Antibodies that bind to the CuraGen Optioned Antigens
and Genetic Material that encodes such Antibodies for use in the research and
development of potential CuraGen Products in the Research Field.

              6.2.3 Each party shall conduct such research and preclinical
development in accordance with high scientific and professional standards, and
in compliance in all material respects with the requirements of applicable laws
and regulations.

     7.  COMMERCIAL FIELD LICENSES FOR LICENSED ANTIGENS

         7.1  CuraGen Products.
              ----------------

              7.1.1 Options for CuraGen Optioned Antigens. Subject to the terms
and conditions of this Agreement, ABX hereby grants to CuraGen exclusive, non-
transferable options to obtain a license (or sublicense, as the case may be)
under Section 7.1.3 below for CuraGen Products to each CuraGen Optioned Antigen,
with each such option being exercisable in accordance with the provisions of
this Section 7.1.1 until the earliest of(a) the first anniversary of the date on

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       27


which such antigen became a CuraGen Optioned Antigen; (b) such time as ABX no
longer would be obligated to grant a license (or sublicense, as the case may be)
under Section 7.1.3 below for such CuraGen Products, and (c) the eighth
anniversary of the Effective Date.

              (a) If CuraGen desires to exercise its option for CuraGen Products
to such CuraGen Optioned Antigen, CuraGen shall so notify ABX in writing.

              (b) As soon as reasonably practicable after receipt of such
notice, ABX shall exercise its option under the XT/ABX Master Research and
License Agreement to obtain the XT/ABX Product License Agreement for CuraGen
Products to such CuraGen Optioned Antigen. ABX shall notify CuraGen at such time
as ABX has obtained the XT/ABX Product License Agreement for CuraGen Products to
such CuraGen Optioned Antigen. Effective upon such notice, such CuraGen Optioned
Antigen shall be a CuraGen Licensed Antigen, and the exclusive license (or
sublicense, as the case may be) grant under Section 7.1.3 below for CuraGen
Products to such CuraGen Licensed Antigen shall then be effective.

          (c) CuraGen's option for CuraGen Products to any CuraGen Optioned
Antigen is subject to ABX successfully obtaining an XT/ABX Product License
Agreement for CuraGen Products to such CuraGen Optioned Antigen.

              7.1.2 Standby Options for ABX Optioned Antigens. If ABX fails to
timely exercise its option under Section 7.2.1 below for any ABX Optioned
Antigen, within ten (10) days after the written request by CuraGen, ABX shall
provide CuraGen with copies of, or access to, all data and information of ABX
regarding such ABX Optioned Antigen and Antibodies thereto. Except as otherwise
expressly provided in this Agreement or the parties otherwise expressly agree in
writing, CuraGen shall have the right to use such data and information for the
sole purpose of evaluating its interest in exercising its option under this
Section 7.1.2 for such ABX Optioned Antigen. Subject to the terms and conditions
of this Agreement, ABX hereby grants to CuraGen exclusive, non-transferable
options to obtain a license (or sublicense, as the case may be) under Section
7.1.3 below for CuraGen Products to each ABX Optioned Antigen for which ABX
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fails to timely exercise its option under Section 7.2.1 below, with each such
option being exercisable in accordance with the provisions of this Section 7.1.2
commencing on the expiration of ABX's option under Section 7.2.1 below until the
earliest of(a) the date six (6) months thereafter, (b) such time as ABX no
longer would be obligated to grant a license (or sublicense, as the case may be)
under Section 7.1.3 below for such CuraGen Products, and (c) the eighth
anniversary of the Effective Date.

              (a) If CuraGen desires to exercise its option for (2ura(Jen
products to such ABX Optioned Antigen, CuraGen shall so notify ABX in writing.

              (b) Within thirty (30) days after receipt of such notice, ABX
shall notify CuraGen in writing if ABX does not have the right to grant CuraGen
the license (or sublicense, as the case may be) under Section 7.1.3 below for
CuraGen products to such ABX Optioned Antigen. If ABX does not have such a
right, ABX shall have no obligation to grant CuraGen the license (or sublicense,
as the case may be) under Section 7.1.3 below for CuraGen Products to such ABX
Optioned Antigen.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       28


              (c) Unless ABX timely notifies CuraGen in writing that it does not
have such a right, ABX shall use its good faith efforts to nominate such ABX
Optioned Antigen under the XT/ABX Master Research and License Agreement and
obtain the right thereunder to obtain an XT/ABX Product License Agreement with
respect to CuraGen Products to such ABX Optioned Antigen.

              (d) If ABX is successful in nominating such ABX Optioned Antigen
and in obtaining the right to obtain an XT/ABX Product License Agreement for
CuraGen Products to such ABX Optioned Antigen, then ABX shall give prompt
written notice to CuraGen and as soon as reasonably practicable thereafter shall
exercise its option under the XT/ABX Master Research and License Agreement to
obtain the XT/ABX Product License Agreement for CuraGen Products to such ABX
Optioned Antigen. ABX shall notify CuraGen at such time as ABX has obtained the
XT/ABX Product License Agreement for CuraGen Products to such ABX Optioned
Antigen. Effective upon such notice, such antigen shall be a CuraGen Licensed
Antigen, and the exclusive license (or sublicense, as the case may be) grant
under Section 7.1.3 below for CuraGen Products to such CuraGen Licensed Antigen.

              (e) CuraGen's option for CuraGen Products to any ABX Optioned
Antigen is subject to ABX successfully obtaining the right under the XT/ABX
Master Research and License Agreement to obtain an XT/ABX Product License
Agreement for CuraGen Products to such ABX Optioned Antigen.

              7.1.3 Commercial Field License. Subject to the terms and
                    ------------------------
conditions of this Agreement, ABX hereby grants to CuraGen an exclusive
worldwide license (or sublicense, as the case may be) (with the right to grant
Sublicenses) under Licensed ABX Intellectual Property to research, develop,
make, have made, use, import, offer to sell and sell CuraGen Products in the
Commercial Field. CuraGen shall provide ABX with a copy of each Sublicense
promptly after executing the same; provided, however, that CuraGen shall have
the right to redact any confidential financial terms or confidential research,
development or commercialization plans from the copy provided to ABX. Any
Sublicense shall be subject and subordinate to the terms and conditions of this
Agreement, and CuraGen shall remain responsible for all payments due to ABX
hereunder.

         7.2  ABX Products.
              ------------

              7.2.1 Options for ABX Optioned Antigens. Subject to the terms and
conditions of this Agreement, CuraGen hereby grants to ABX exclusive, non-
transferable options to obtain a license (or sublicense, as the case may be)
under Section 7.2.3 below for ABX Products to each ABX Optioned Antigen, with
each such option being exercisable in accordance with the provisions of this
Section until the earliest of (a) the first anniversary of the date on which
such antigen became a ABX Optioned Antigen, (b) such time as CuraGen no longer
would be obligated to grant a license (or sublicense, as the case may be) under
Section 7.2.3 below for such ABX Products, and (c) the eighth anniversary of the
Effective Date.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       29


              (a) If ABX desires to exercise its option for ABX Products to such
ABX Optioned Antigen, ABX shall so notify CuraGen in writing.

              (b) Effective upon such notice, such antigen shall be an ABX
Licensed Antigen, and the exclusive license (or sublicense, as the case may be)
grant under Section 7.2.3 below for ABX Products to such ABX Licensed Antigen
shall be effective.

              7.2.2 Standby Options for CuraGen Optioned Antigens. If CuraGen
                    ---------------------------------------------
fails to timely exercise its option under Section 7.1.1 above for any CuraGen
Optioned Antigen, within ten (10) days after the written request by ABX, CuraGen
shall provide ABX with copies of, or access to, all data and information of
CuraGen regarding such CuraGen Optioned Antigen and Antibodies thereto. Except
as otherwise expressly provided in this Agreement or the parties otherwise
expressly agree in writing, ABX shall have the right to use such data and
information for the sole purpose of evaluating its interest in exercising its
option under this Section 7.2.2 for such CuraGen Optioned Antigen. Subject to
the terms and conditions of this Agreement, CuraGen hereby grants to ABX non-
exclusive, non-transferable options to obtain a license (or sublicense, as the
case may be) under Section 7.2.3 below for ABX Products to each CuraGen Optioned
Antigen for which CuraGen fails to timely exercise its option under Section
7.1.1 above, with each such option being exercisable in accordance with the
provisions of this Section 7.2.2 commencing on the expiration of CuraGen's
option under Section 7.1 .1 above until the earliest of (a) the date six (6)
months thereafter, (b) such time as CuraGen no longer would be obligated to
grant a license (or sublicense, as the case may be) under Section 7.2.3 below
for such ABX Products, and (c) the eighth anniversary of the Effective Date.

              (a) If ABX desires to exercise its option for ABX products to such
CuraGen Optioned Antigen, ABX shall so notify CuraGen in writing.

              (b) Within thirty (30) days after receipt of such notice, CuraGen
shall notify ABX in writing if CuraGen does not have the right to grant ABX the
license (or sublicense, as the case may be) under Section 7.2.3 below for ABX
products to such CuraGen Optioned Antigen. If CuraGen does not have such a
right, CuraGen shall have no obligation to grant ABX the license (or sublicense,
as the case may be) under Section 7.2.3 below for ABX Products to such CuraGen
Optioned Antigen.

              (c) Unless CuraGen timely notifies ABX in writing that it does not
have such a right, effective upon the expiration of such thirty (30) day period,
such antigen shall be an ABX Licensed Antigen, and the exclusive license (or
sublicense, as the case may be) grant under Section 7.2.3 below for ABX Products
to such ABX Licensed Antigen shall be effective upon the expiration of such
thirty (30) day period.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       30


              7.2.3 Commercial Field License. Subject to the terms and
                    ------------------------
conditions of this Agreement, CuraGen hereby grants to ABX an exclusive
worldwide license (or sublicense, as the case may be) (with the right to grant
Sublicenses) under Licensed CuraGen Intellectual Property to research, develop,
make, have made, use, import, offer to sell and sell ABX Products in the
Commercial Field. ABX shall provide CuraGen with a copy of each Sublicense
promptly after executing the same; provided, however, that ABX shall have the
right to redact any confidential financial terms or confidential research,
development or commercialization plans from the copy provided to CuraGen. Any
Sublicense shall be subject and subordinate to the terms and conditions of this
Agreement, and ABX shall remain responsible for all payments due to CuraGen
hereunder.

         7.3  No Other Rights. No rights other than those expressly set forth in
              ---------------
this Agreement are granted to either party hereunder, and no additional rights
shall be granted to either party by implication, estoppel or otherwise.

         7.4  Further Restrictions.
              --------------------

              7.4.1 Notwithstanding anything to the contrary in this Agreement,
neither a party, nor its Sublicensees hereunder nor their respective Affiliates
shall submit an IND for, or otherwise commence human clinical testing of, any
Product to any Antigen unless and until such party has obtained a commercial
license under this Article 7 for Products to such Antigen.

              7.4.2 For purposes of this Agreement, if(a) JT or ABX has
nominated an antigen pursuant to the XT Master Research and License Agreement,
(b) XT has granted a license pursuant to the XT Master Research and License
Agreement with respect to an antigen, (c) ABX has an obligation to so nominate
an antigen or XT or ABX has an obligation to so grant a license (or sublicense,
as the case may be), (d) ABX has otherwise granted exclusive rights to
antibodies to an antigen to a Third Party without breach of the exclusivity
provisions of Section 4.6, or (e) ABX has an active research and development
program ongoing for antibodies to an antigen (that was not provided by CuraGen
hereunder) that is independent of its efforts hereunder and does not and did not
involve access to, or otherwise make use of, the CuraGen Databases, then ABX
shall not have the right to grant CuraGen a license (or sublicense, as the case
may be) hereunder to use such antigen in the Research Field or a license (or
sublicense, as the case may be) regarding the related CuraGen Products in the
Commercial Field.

              7.4.3 For purposes of this Agreement, if CuraGen has granted
exclusive rights to antibodies to an antigen to a Third Party without breach of
the exclusivity provisions of Section 4.6, then CuraGen shall not have the right
to grant ABX a license (or sublicense, as the case may be) hereunder to use such
antigen in the Research Field or a license (or sublicense, as the case may be)
regarding the related ABX Products in the Commercial Field.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       31


     8.  PAYMENTS
         --------

         8.1 Research Funding. CuraGen shall pay to ABX aggregate research
             ----------------
funding of [______________________________]. Such research funding shall be
payable in twenty (20) equal quarterly installments of
[______________________________] each, due on or before each of January 3, 2000,
and each March 8, June 8, September 8 and December 8 thereafter, until the last
such payment on September 8, 2004.

         8.2  Certain Fees.
              ------------

              8.2.1 Each party shall pay to the other party a non-refundable,
non-creditable technology access fee of [______________________________] for
each Eligible Antigen it selects under Article 5 above that becomes an Optioned
Antigen within ten (10) days after such Eligible Antigen becomes an Optioned
Antigen.

              8.2.2 Each party shall pay to the other party a non-refundable,
non-creditable exercise fee of [______________________________] for each
Optioned Antigen for which it exercised an option to obtain a commercial license
under Article 7 above within ten (10) days after such Optioned Antigen becomes a
Licensed Antigen.

              8.2.3 With respect to each Licensed Antigen for which a party
exercised an option to obtain a commercial license under Article 7 above, but
for which it was not required to pay an option fee under Section 8.2.1 above
because it was not selected as an Optioned Antigen by such party under Article 5
above, such party shall pay to the other party, in lieu of the amounts set forth
in Sections 8.2.1 and 8.2.2, a non-refundable, non-creditable exercise fee of
[______________________________] for such Licensed Antigen within ten (10) days
after such antigen becomes a Licensed Antigen.

         8.3  Milestone Payments.
              ------------------

              8.3.1 In the Therapeutic Field. Subject, in the case of
Sublicenses, to Section 8.4.3(c) below, within thirty (30) days following the
achievement of each of the following milestones with respect to each CuraGen
Product for use in the Therapeutic Field, on a CuraGen Product-by-CuraGen
Product basis, CuraGen shall give written notice to ABX thereof and shall pay to
ABX the corresponding milestone payments described below. Subject, in the case
of Sublicenses, to Section 8.4.3(a) below, within thirty (30) days following the
achievement of each of the following milestones with respect to each ABX Product
for use in the Therapeutic Field, on an ABX Product-by-ABX Product basis, ABX
shall give written notice to CuraGen thereof and shall pay to CuraGen the
corresponding milestone payments described below.

     [_______]  [______________________________]

     [_______]  [______________________________]

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       32


     [_______]  [______________________________]

     [_______]  [______________________________]

     [_______]  [______________________________]


     If, at the time when any milestone payment listed in this Section 8.3.1,
with respect to a Product for use in the Therapeutic Field, is due from a party,
such party has not paid all other milestone payments (if any) previously listed
in this Section 8.3.1 with respect to such Product, then at such time such party
shall pay all such unpaid milestone payments (if any) previously listed in this
Section 8.3.1 with respect to such Product. If, at the time of the First
Commercial Sale by a party, its Affiliate or their respective Sublicensee of a
Product for use in the Therapeutic Field, such party has not paid all milestone
payments (if any) listed in this Section 8.3.1 with respect to such Product,
then at such time such party shall pay all such unpaid milestone payments (if
any) listed in this Section 8.3.1 with respect to such Product. If at any time a
party abandons the development of a Product after the payment to the other party
of one or more milestone payments under this Section 8.3.1 and subsequently
commences or continues the development of another Product directed to the same
Licensed Antigen as the abandoned Product, then such party shall have no
obligation to pay to the other party a milestone payment upon the occurrence of
a milestone event for the subsequent Product for which such party previously has
paid to the other party a milestone payment under this Section 8.3.1 for the
abandoned Product.

              8.3.2 In the Diagnostic Field. Subject, in the case of
                    -----------------------
Sublicenses, to Section 8.4.3(d) below, within thirty (30) days following the
achievement of each of the following milestones with respect to each CuraGen
Product for use in the Diagnostic Field, on a CuraGen Product-by-CuraGen Product
basis, CuraGen shall give written notice to ABX thereof and shall pay to ABX the
corresponding milestone payments described below. Subject, in the case of
Sublicenses, to Section 8.4.3(b) below, within thirty (30) days following the
achievement of each of the following milestones with respect to each ABX Product
for use in the Diagnostic Field, on an ABX Product-by-ABX Product basis, ABX
shall give written notice to CuraGen thereof and shall pay to CuraGen the
corresponding milestone payments described below.

     [_______]  [______________________________]

     [_______]  [______________________________]

     [_______]  [______________________________]


     If, at the time when any milestone payment listed in this Section 8.3.2,
with respect to a Product for use in the Diagnostic Field, is due from a party,
such party has not paid all other milestone payments (if any) previously listed

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       33


in this Section 8.3.2 with respect to such Product, then at such time such party
shall pay all such unpaid milestone payments (if any) previously listed in this
Section 8.3.2 with respect to such Product. If, at the time of the First
Commercial Sale by a party, its Affiliate or permitted (sub)licensee of a
Product for use in the Diagnostic Field, such party has not paid all milestone
payments (if any) listed in this Section 8.3.2 with respect to such Product,
then at such time such party shall pay all such unpaid milestone payments (if
any) listed in this Section 8.3.2 with respect to such Product. If at any time a
party abandons the development of a Product after the payment to the other party
of one or more milestone payments under this Section 8.3.2 and subsequently
commences or continues the development of another Product directed to the same
Licensed Antigen as the abandoned Product, then such party shall have no
obligation to pay to the other party a milestone payment upon the occurrence of
a milestone event for the subsequent Product for which such party previously has
paid to the other party a milestone payment under this Section 8.3.2 for the
abandoned Product.

         8.4  Royalties.
              ---------

              8.4.1 Notice of Royalty Commencement Date. Within thirty (30) days
                    -----------------------------------
following the Royalty Commencement Date for each CuraGen Product in each
country, CuraGen shall give written notice to ABX thereof. Within thirty (30)
days following the Royalty Commencement Date for each ABX Product in each
country, ABX shall give written notice to CuraGen thereof.

              8.4.2  Royalties on Net Sales.

              (a) Subject, in the case of Sublicenses, to Sections 8.4.3(a) and
(b) below, ABX shall pay to CuraGen royalties equal to
[_______________________________].

              (b) Subject, in the case of Sublicenses, to Sections 8.4.3(c) and
(d) below, CuraGen shall pay to ABX royalties equal to
[_______________________________].

              8.4.3  Royalties on Sublicense Income.

              (a) In the event that ABX grants a Sublicense with respect to any
ABX Product for use in the Therapeutic Field, ABX shall notify CuraGen in
writing, within fifteen (15) days of the grant of such Sublicense, whether ABX
elects to pay to CuraGen (i) the milestone payments set forth in Section 8.3.1
upon the occurrence with respect to such ABX Product of the milestone events set
forth therein and the royalties set forth in Section 8.4.2 based on Net Sales of
such ABX Product or (ii) the following payments and royalties equal to the
following percentage of Sublicense Income received by ABX and its Affiliates in
connection with such Sublicense for each ABX Product for use in the Therapeutic
Field:

     [_________]  [________________________________]

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       34


     [_________]  [________________________________]

     [_________]  [________________________________]

     Notwithstanding the foregoing, the royalties owing by ABX under this
Section 8.4.3(a) in any calendar quarter, with respect to Net Sales by such
Sublicensee and its Affiliates of any ABX Product for use in the Therapeutic
Field, shall not be less than [____________________] of Net Sales by such
Sublicensee and its Affiliates of such ABX Product in such calendar quarter.
Once made, the election of the basis of payment hereunder may not be changed,
and ABX shall pay the amounts determined in accordance with its election.

              (b) In the event that ABX grants a Sublicense with respect to any
ABX Product for use in the Diagnostic Field, ABX shall notify CuraGen in
writing, within fifteen (15) days of the grant of such Sublicense, whether ABX
elects to pay to CuraGen (i) the milestone payments set forth in Section 8.3.2
upon the occurrence with respect to such ABX Product of the milestone events set
forth therein and the royalties set forth in Section 8.4.2 based on Net Sales of
such ABX Product or (ii) the following payments and royalties equal to the
following percentage of Sublicense Income received by ABX and its Affiliates in
connection with such Sublicense for each ABX Product for use in the Diagnostic
Field:

     [_________]  [________________________________]

     [_________]  [________________________________]

     [_________]  [________________________________]

     Notwithstanding the foregoing, the royalties owing by ABX under this
Section 8.4.3(b) in any calendar quarter, with respect to Net Sales by such
Sublicensee and its Affiliates of any ABXProduct for use in the Diagnostic
Field, shall not be less than [______________________] of Net Sales by such
Sublicensee and its Affiliates of such ABX Product in such calendar quarter.
Once made, the election of the basis of payment hereunder may not be changed,
and ABX shall pay the amounts determined in accordance with its election.

              (c) In the event that CuraGen grants a Sublicense with respect to
any CuraGen Product for use in the Therapeutic Field, CuraGen shall notify ABX
in writing, within fifteen (15) days of the grant of such Sublicense, whether
CuraGen elects to pay to ABX (i) the milestone payments set forth in Section
8.3.1 upon the occurrence with respect to such CuraGen Product of the milestone
events set forth therein and the royalties set forth in Section 8.4.2 based on
Net Sales of such CuraGen Product or (ii) the following payments and royalties
equal to the following percentage of Sublicense Income received by CuraGen and
its Affiliates in connection with the Sublicense for each CuraGen Product for
use in the Therapeutic Field:

     [_________]  [________________________________]

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       35


     [_________]  [________________________________]

     [_________]  [________________________________]

     Notwithstanding the foregoing, the royalties owing by CuraGen under this
Section 8.4.3(c) in any calendar quarter, with respect to Net Sales by such
Sublicensee and its Affiliates of any CuraGen Product for use in the Therapeutic
Field, shall not be less than the [________________] of Net Sales by such
Sublicensee and its Affiliates of such CuraGen Product in such calendar quarter,
[________________________________________].  Once made, the election of the
basis of payment hereunder may not be changed, and CuraGen shall pay the amounts
determined in accordance with its election.

              (d) In the event that CuraGen grants a Sublicense with respect to
any CuraGen Product for use in the Diagnostic Field, CuraGen shall notify ABX in
writing, within fifteen (15) days of the grant of such Sublicense, whether
CuraGen elects to pay to ABX (i) the milestone payments set forth in Section
8.3.2 upon the occurrence with respect to such CuraGen Product of the milestone
events set forth therein and the royalties set forth in Section 8.4.2 based on
Net Sales of such CuraGen Product or (ii) the following payments and royalties
equal to the following percentage of Sublicense Income received by CuraGen and
its Affiliates in connection with the Sublicense for such CuraGen Product for
use in the Diagnostic Field:

     [_________]  [________________________________]

     [_________]  [________________________________]

     [_________]  [________________________________]

     Notwithstanding the foregoing, the royalties owing by CuraGen under this
Section 8.4.3(d) in any calendar quarter, with respect to Net Sales by such
Sublicensee and its Affiliates of any CuraGen Product for use in the Diagnostic
Field, shall not be less than the [_____________] of Net Sales by such
Sublicensee and its Affiliates of such CuraGen Product in such calendar quarter,
[________________________________________________]. Once made, the election of
the basis of payment hereunder may not be changed, and CuraGen shall pay the
amounts determined in accordance with its election.

              (e) Length of Royalty Obligations. Each party's obligations to pay
royalties (including without limitation percentages of Sublicense Income) with
respect to each Product in each country shall commence on the Royalty
Commencement Date for such Product in such country, and shall continue for such
Product in such country until  [________________].

              8.4.4 Discounting. If a party, its Sublicensees or their
                    -----------
respective Affiliates sells a Product to a Third Party who also purchases other
products or services from such party, its Sublicensees or their respective

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       36


Affiliates, and such party, its Sublicensees or their respective Affiliates
discounts the purchase price of such Product to a greater degree than it
generally discounts the price of its other products or services to such
customer, then in such case the Net Sales for the sale of such Product to such
Third Party shall equal the arm's length pnce that Third Parties would generally
pay for the Product alone when not purchasing any other product or service from
such party, its Sublicensee or their respective Affiliates. For purposes of this
provision "discounting" includes establishing the list price at a lower-than-
normal level.

     9.  ACCOUNTING AND RECORDS

         9.1 Royalty Reports and Payments. Commencing with the first calendar
             ----------------------------
quarter in which the Royalty Commencement Date for a Product occurs, CuraGen in
the case of CuraGen Products, and ABX in the case of ABX Products (the "Payor")
shall make written reports to the other party (the "Payee") within sixty (60)
days after the end of each calendar quarter, stating in each such report the
number, description, and aggregate Net Sales of such Product sold during the
calendar quarter, and the calculation of the royalties and other amounts payable
under Article 8 above. Concurrently with the making of such reports, the Payor
shall pay to the Payee all royalties payable under Article 8 above.

         9.2 Records; Inspection. The Payor shall keep (and cause its
             -------------------
Affiliates, Sublicensees and Sublicensees' Affiliates to keep) complete, true
and a00ccurate books of account and records for the purpose of determining the
royalties payable to the Payee under this Agreement. Such books and records
shall be kept at the principal place of business of the Payor, its Sublicensee
or their respective Affiliates, as the case may be, for at least three years
following the end of the calendar quarter to which they pertain. Such records of
the Payor and its Affiliates shall be open for inspection during such three-year
period by independent accountants chosen by the Payee, and subject to the
approval of the Payor, which approval shall not be unreasonably withheld or
delayed, (which accountants, in the case of ABX, may also represent XI) for the
purpose of verifying the royalty statements. The Payor shall require each of its
Sublicensees to maintain similar books and records and to open such records for
inspection during the same three-year period by a representative of the Payor
reasonably satisfactory to the Payee on behalf of, and as required by, the Payee
for the purpose of verifying the royalty statements. All such inspections may be
made no more than once each calendar year at reasonable times mutually agreed by
the Payor and the Payee. The independent accountants chosen by the Payee will be
obliged to execute a reasonable confidentiality agreement prior to commencing
any such inspection. Inspections conducted under this Section 9.2 shall be at
the expense of the Payee, unless a variation or error producing an increase
exceeding five percent (5%) of the amount stated for any period is established
in the course of any such inspection, whereupon all costs relating to the audit
of such period will be paid by the Payor.

        9.3 Payment Method. All payments by the Payor to the Payee hereunder
            --------------
shall be in United States Dollars in immediately available funds and shall be
made by wire transfer from a United States bank located in the United States to
such bank account as designated by the Payee to the Payor.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       37


         9.4  Currency Conversion. If any currency conversion shall be required
              -------------------
in connection with the calculation of royalties hereunder, such conversion shall
be made using the selling exchange rate for conversion of the foreign currency
into United States Dollars, quoted for current transactions reported under the
heading "Currency Trading -- Exchange Rates" in The Wall Street Journal in the
United States for the last business day of the calendar quarter to which such
payment pertains. If The Wall Street Journal ceases to be published, then the
rate of exchange to be used shall be that reported in such other business
publication of national circulation in the United States as the parties
reasonably agree.

         9.5 Late Payments. Any payments due from the Payor that are not paid on
             -------------
the date such payments are due under this Agreement shall bear interest at the
lesser of(i) the Prime Rate as reported under the heading "Money Rates" in The
Wall Street Journal in the United States on the date such payment is due, plus
an additional two percent (2%), or (ii) the maximum rate permitted by applicable
law, in each case calculated on the number of days such payment is delinquent.
This Section 9.5 shall in no way limit any other remedies available to any
party. If The Wall Street Journal ceases to be published, then the prime rate to
be used shall be that reported in such other business publication of national
circulation in the United States as the parties reasonably agree.

         9.6 Withholding Taxes. Each party shall be entitled to deduct from the
             -----------------
royalties owing to the other party hereunder the amount of any withholding
taxes, value-added taxes or other taxes, levies or charges with respect to such
amounts, other than United States taxes, payable by such party, or any taxes
required to be withheld by such party, to the extent such party pays to the
appropriate governmental authority on behalf of the other party such taxes,
levies or charges. The withholding party shall use reasonable efforts to
minimize any such taxes, levies or charges required to be withheld on behalf of
the other party by such party. The withholding party promptly shall deliver to
the other party proof of payment of all such taxes, levies and other charges,
together with copies of all communications from or with such governmental
authority with respect thereto, and shall reasonably assist the other party in
obtaining a refund thereof (to the extent permitted under applicable law) or to
obtain a foreign tax credit therefor.

     10. DILIGENCE

         10.1  Diligence Obligation of CuraGen.
               -------------------------------

               10.1.1 CuraGen shall use commercially reasonable efforts to
actively research, develop and obtain regulatory approvals as expeditiously as
reasonably practicable to market in major markets throughout the world at least
one CuraGen Product to each CuraGen Licensed Antigen, and following such
approval to maximize N~t Sales of such CuraGen Product.

               10.1.2 Without limiting Section 10.1.1, CuraGen, its Sublicensees
or their respective Affiliates shall file an JIND with the FDA for at least one
CuraGen Product to each CuraGen Licensed Antigen within three (3) years after

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       38


the effective date of the applicable XT/ABX Product License Agreement. After the
filing of an IND for at least one CuraGen Product to a CuraGen Licensed Antigen,
CuraGen, its Sublicensees or their respective Affiliates, shall have an active
IND and actively and diligently conduct clinical trials in pursuit of regulatory
approval for at least one such CuraGen Product in the United States until at
least one such CuraGen Product may be sold commercially in the United States.

               10.1.3 During the term of this Agreement and for a period of five
(5) years thereafter, CuraGen shall keep complete and accurate records of its
activities conducted under this Agreement regarding the commercialization of
CuraGen Products and the results thereof. Within thirty (30) days after the end
of each semi-annual period during the term of this Agreement, CuraGen shall
prepare and provide ABX with a reasonably detailed written report of such
activities and results, through such date.

         10.2  Diligence Obligation of ABX.
               ---------------------------

               10.2.1 ABX shall use commercially reasonable efforts to actively
research, develop and obtain regulatory approvals as expeditiously as reasonably
practicable to market in major markets throughout the world at least one ABX
Product to each ABX Licensed Antigen, and following such approval to maximize
Net Sales of such ABX Product.

               10.2.2 Without limiting Section 10.2.1, ABX, its Sublicensees or
their respective Affiliates shall file an IND with the FDA for at least one ABX
Product to each ABX Licensed Antigen within three (3) years after the effective
date of the applicable XT/ABX Product License Agreement. After the filing of an
IND for at least one ABX Product to a ABX Licensed Antigen, ABX, its
Sublicensees or their respective Affiliates, shall have an active IND and
actively and diligently conduct clinical trials in pursuit of regulatory
approval for at least one such ABX Product in the United States until at least
one such ABX Product may be sold commercially in the United States.

               10.2.3 During the term of this Agreement and for a period of five
(5) years thereafter, ABX shall keep complete and accurate records of its
activities conducted under this Agreement regarding the commercialization of ABX
Products and the results thereof. Within thirty (30) days after the end of each
semi-annual period during the term of this Agreement, ABX shall prepare and
provide CuraGen with a reasonably detailed written report of such activities and
results, through such date.

         10.3 Standards of Performance. The development and commercialization of
              ------------------------
a Product hereunder by a party, its Sublicensees and their respective Affiliates
shall be performed in accordance with high scientific and professional
standards, and in compliance in all material respects with the requirements of
applicable laws and regulations. ABX, its Sublicensees and their respective
Affiliates shall be solely responsible for providing the personnel, materials,
equipment, and other resources for the development and commercialization of ABX
Products hereunder. CuraGen, its Sublicensees and their respective Affiliates
shall be solely responsible for providing the personnel, materials, equipment,
and other resources for the development and commercialization of CuraGen
Products hereunder.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       39


         10.4 Gene Therapy Applications. Each party's intention as of the
              -------------------------
Effective Date is to commercialize a Product hereunder for an application other
than Gene Therapy before commercializing a Product hereunder for a Gene Therapy
application. It is understood, however, that either party may or may not also
intend to develop and sell Products for use in Gene Therapy, and that such Gene
Therapy application may ultimately be commercialized before a Product is
commercialized hereunder for a non-Gene Therapy application.

     11. CONFIDENTIALITY

         11.1 Confidential Information. During the term of this Agreement and
              ------------------------
for a period of five (5) years following the expiration or earlier termination
hereof, each party shall maintain in confidence the Confidential Information of
the other party, and shall not disclose, use or grant the use of the
Confidential Information of the other party except on a need-to-know basis to
such party's directors, officers employees, consultants and collaborators, and
to the Third Party licensors of the Licensed Intellectual Property, to the
extent such disclosure is reasonably necessary or required in connection with
such party's activities as expressly authorized by this Agreement. To the extent
that disclosure by a party to any Person is authorized by this Agreement, prior
to disclosure, a party shall obtain written agreement of such Person to hold in
confidence and not disclose, use or grant the use of the Confidential
Information of the other party except as expressly permitted under this
Agreement. Each party shall notify the other promptly upon discovery of any
unauthorized use or disclosure of the other party's Confidential Information.
Upon the expiration or earlier termination of this Agreement, each party shall
return to the other party all tangible items regarding the Confidential
Information of the other party and all copies thereof, except for Confidential
Information pertaining to any Licensed Antigen and related Products for which,
and for so long as, such party retains a license (or sublicense, as the case may
be) hereunder; provided, however, that each party shall have the right to retain
one (1) copy for its legal files for the sole purpose of determining its
obligations hereunder.

         11.2 Terms of Agreement. Neither party shall disclose any terms or
              ------------------
conditions of this Agreement to any Third Party without the prior consent of the
other party; provided, however, that either party may disclose the terms or
conditions of this Agreement, (a) on a need-to-know basis to its legal and
financial advisors to the extent such disclosure is reasonably necessary in
connection with such party's activities as expressly permitted by this Agreement
or for the conduct of its business; (b) to the Third Party licensors of the
Licensed Intellectual Property; (c) to a Third Party in connection with (i) an
equity investment or other form of financing in such party by a Third Party;
(ii) a merger, consolidation or similar transaction entered into by such party;
or (iii) the sale of all or substantially all of the assets of such party; and
(d) as may, in the reasonable opinion of such party's counsel, be required by
applicable law, regulation or court order, including without limitation, a
disclosure in connection with such party's filing of a registration statement or
other filing with the United States Securities and Exchange Commission (in which
event such party will first consult with the other party, to the extent

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       40


reasonably practicable, with respect to such disclosure). Notwithstanding the
foregoing, (i) the parties will jointly issue a press release in mutually agreed
form promptly after execution hereof and (ii) prior to execution of this
Agreement CuraGen and ABX shall agree upon the substance of information that can
be used to describe the terms of this transaction, and CuraGen and ABX may
disclose such information, as modified by mutual agreement from time to time,
without the other party's consent.

     12. TECHNOLOGY, INFORMATION AND INTELLECTUAL PROPERTY
         -------------------------------------------------

         12.1  Ownership.
               ---------

               12.1.1 ABX shall solely own all right, title and interest in the
ABX Technology and Information and in all patent rights and other intellectual
property rights therein. CuraGen shall not (and shall not attempt or purport to)
file or prosecute any patent application in any country which claims or purports
to claim the ABX Technology and Information, unless the parties otherwise
expressly agree in writing. ABX shall solely own all right, title and interest
in the Excluded ABX Technology and in all patent rights and other intellectual
property rights therein. CuraGen shall not (and shall not attempt or purport to)
file or prosecute any patent application in any country which claims or purports
to claim the Excluded ABX Technology.

               12.1.2 CuraGen shall solely own all right, title and interest in
the CuraGen Technology and Information and in all patent rights and other
intellectual property rights therein. ABX shall not (and shall not attempt or
purport to) file or prosecute any patent application in any country which claims
or purports to claim the CuraGen Technology and Information, unless the parties
otherwise expressly agree in writing. CuraGen shall solely own all right, title
and interest in the Excluded CuraGen Technology and in all patent rights and
other intellectual property rights therein. ABX shall not (and shall not attempt
or purport to) file or prosecute any patent application in any country which
claims or purports to claim the Excluded CuraGen Technology.

               12.1.3 ABX shall solely own all right, title and interest in
Research Program Technology and Information conceived, reduced to practice or
otherwise derived solely by Persons on behalf of ABX, together with all patent
rights and other intellectual property rights therein and, subject to the
provisions of this Agreement, shall have the right to freely exploit, transfer,
license, or encumber its rights thereto. CuraGen shall solely own all right,
title and interest in Research Program Technology and Information conceived,
reduced to practice or otherwise derived solely by Persons on behalf of CuraGen,
together with all patent rights and other intellectual property rights therein
and, subject to the provisions of this Agreement, shall have the right to freely
exploit, transfer, license, or encumber its rights thereto. The parties jointly
shall own all right, title and interest in Research Program Technology and
Information conceived, reduced to practice or otherwise derived jointly by
Persons on behalf of ABX and by Persons on behalf of CuraGen, together with all
patent rights and other intellectual property rights therein. Each party shall
have the right, subject to the provisions of this Agreement, to freely exploit,
transfer, license or encumber its rights in any jointly-owned Research Program

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       41


Technology and Information (and all patent rights and other intellectual
property rights therein) without the consent of, or payment or accounting to,
the other party.

               12.1.4 The transfer of physical possession of any Technology and
Information owned by, and the physical possession and use of any Technology and
Information by, CuraGen or ABX, as the case may be, shall not be (nor be
construed as) a sale, lease, offer to sell or lease, or other transfer of title
of such Technology and Information to CuraGen or ABX, as the case may be.

               12.1.5 During the term of this Agreement, neither party shall
(and neither party shall attempt or purport to) assign, sell, have sold, lease,
offer to sell or lease, otherwise transfer title to, or otherwise distribute or
license, sublicense or otherwise commercialize or exploit, any Research Program
Technology and Information, except as otherwise set forth-herein or the parties
otherwise expressly agree in writing.

         12.2  Assignment and Disclosure. Each party shall cause all employees
               -------------------------
and others conducting work on its behalf under this Agreement to promptly
disclose to the other party all Technology and Information in which the other
party has an ownership interest, and to assign any and all right, title and
interest in all Technology and Information and all patent rights and other
intellectual property rights therein in accordance with this Agreement. Each
party shall maintain records in sufficient detail and in good scientific manner
appropriate for patent purposes to properly reflect all work done and results
achieved in conducting its work hereunder, and shall respond to reasonable
requests of the other party for information regarding Technology and Information
in which the other party has an ownership interest.

         12.3  Research Program Patent Rights.
               ------------------------------

               12.3.1  Prosecution and Maintenance.
                       ---------------------------

               (a) Subject to the provisions of Section 12.3.1(d) below, ABX
shall have the right (but not the obligation), at its sole expense, to prepare,
file, prosecute and maintain the ABX Patent Rights.

               (b) CuraGen shall have the right (but not the obligation), at its
sole expense, to prepare, file, prosecute and maintain the CuraGen Patent
Rights.

               (c) Subject to the provisions of Section 12.3.1(d) and (e) below,
(i) ABX shall have the right (but not the obligation), at its sole expense, to
prepare, file, prosecute and maintain the Research Program Patent Rights owned
solely by ABX; (ii) CuraGen shall have the right (but not the obligation), at
its sole expense, to prepare, file, prosecute and maintain the Research Program
Patent Rights owned solely by CuraGen; and (iii) CuraGen shall have the right
(but not the obligation) to prepare, file, prosecute and maintain the Research
Program Patent Rights owned jointly by the parties, and ABX shall reimburse
CuraGen on demand for one-half the reasonable expenses thereof.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       42


               (d) Upon the effective date of a commercial license under Article
7 for CuraGen Products to a CuraGen Licensed Antigen, and for so long as such
license remains in effect, (i) CuraGen shall have the right (but not the
obligation) to assume control of the preparation, filing, prosecution and
maintenance of the Research Program Patent Rights that specifically and solely
claim such CuraGen Licensed Antigen or the use thereof (ii) CuraGen shall have
the right (but not the obligation) to assume control of the preparation, filing,
prosecution and maintenance of the ABX Patent Rights that specifically and
solely claim the use of such CuraGen Antigen or Antibodies to such CuraGen
Licensed Antigen or the use thereof; (iii) CuraGen shall reimburse ABX on demand
for all previously unreimbursed expenses of the preparation, filing, prosecution
and maintenance of such ABX Patent Rights and Research Program Patent Rights;
and (iv) CuraGen shall be solely responsible for the expenses of the
preparation, filing, prosecution and maintenance of such ABX Patent Rights and
Research Program Patent Rights thereafter. in the event there are any Research
Program Patent Rights or ABX Patent Rights with such claims and other claims,
ABX shall file such divisional or other applications, to the extent legally
permitted, as may be necessary to separate such claims into a separate
application, which CuraGen shall then have the right to control as aforesaid. If
the claims cannot be so separated ABX will take no action with respect to any
such claim that would materially narrow the scope thereof without CuraGen's
express written consent, which consent shall not be unreasonably withheld or
delayed.

               (e) Upon the effective date of a commercial license under Article
7 for ABX Products to an ABX Licensed Antigen, and for so long as such license
remains in effect, (i) ABX shall have the right (but not the obligation) to
assume control of the preparation, filing, prosecution and maintenance of the
Research Program Patent Rights that specifically and solely claim such ABX
Licensed Antigen or the use thereof; (ii) ABX shall have the right (but not the
obligation) to assume control of the preparation, filing, prosecution and
maintenance of the CuraGen Patent Rights that specifically and solely claim
antibodies to such ABX Licensed Antigen or the use thereof; (iii) ABX shall
reimburse CuraGen on demand for all previously unreimbursed expenses of the
preparation, filing, prosecution and maintenance of such Research Program Patent
Rights and CuraGen Patent Rights; and (iv) ABX shall be solely responsible for
the expenses of the preparation, filing, prosecution and maintenance of such
Research Program Patent Rights and CuraGen Patent Rights thereafter. In the
event there are any Research Program Patent Rights or CuraGen Patent Rights with
such claims and other claims, CuraGen shall file such divisional or other
applications, to the extent legally permitted, as may be necessary to separate
such claims into a separate application, which ABX shall then have the right to
control as aforesaid. If the claims cannot be so separated CuraGen will take no
action with respect to any such claim that would materially narrow the scope
thereof without ABX's express written consent, which consent shall not be
unreasonably withheld or delayed.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       43


               (f) With respect to each patent application and patent within the
Licensed Intellectual Property Rights or Research Program Patent Rights that
specifically and solely claims a Licensed Antigen, an Antibody to a Licensed
Antigen or the use thereof and with respect to each other patent and patent
application within the Research, Program Patent Rights owned jointly by the
parties, the controlling party shall (i) provide the non-controlling party with
any patent application filed by the controlling party prior to filing in order
to provide the non-controlling party with an opportunity to comment thereon, and
consider in good faith reasonable comments by the non-controlling party thereon;
(ii) provide the non-controlling party with any patent application filed by the
controlling party promptly after such filing; and (iii) provide the non-
controlling party promptly with copies of all substantive communications
received from or filed in patent office(s) with respect to such filings and
consider in good faith reasonable comments by the non-controlling party thereon.

               (g) The non-controlling party shall assist the controlling party,
upon the controlling party's request, and to the extent commercially reasonable,
in preparing, filing or maintaining the patent applications and patents within
the Research Program Patent Rights and Licensed Intellectual Property Rights.

               12.3.2  Enforcement.
                       -----------

               (a) Subject to the provisions of Section 12.3.2(e) below, ABX
shall have the right (but not the obligation), at its sole expense, to control
the enforcement of the ABX Patent Rights; provided, however, that CuraGen shall
have the right (but not the obligation), at its sole expense, to control the
enforcement of those ABX Patent Rights (if any) for which CuraGen assumes
control of the preparation, filing, prosecution and maintenance under Section
12.3.1(d) above.

               (b) Subject to the provisions of Section 12.3.2(e) below, CuraGen
shall have the right (but not the obligation), at its sole expense, to control
the enforcement of the CuraGen Patent Rights; provided, however, that ABX shall
have the right (but not the obligation), at its sole expense, to control the
enforcement of those CuraGen Patent Rights (if any) for which ABX assumes
control of the preparation, filing, prosecution and maintenance under Section
12.3.1(e) above.

               (c) Subject to the provisions of Section 12.3.2(e) below, the
controlling party identified under Section 12.3.1 above shall have the first
right (but not the obligation), at its sole expense, to enforce the Research
Program Patent Rights.

               (d) With respect to each patent within the Licensed Intellectual
Property Rights or Research Program Patent Rights that specifically and solely
claims a Licensed Antigen, an Antibody to a Licensed Antigen or the use thereof,
the controlling party shall keep the non-controlling party informed and consider
in good faith the reasonable comments of the non-controlling party, both prior
to and during any such enforcement. The non-controlling party shall assist the
controlling party, upon request and at the controlling party's sole expense, and
to the extent commercially reasonable, in taking any action to enforce such
Licensed Intellectual Property Rights or Research Program Patent Rights to the
extent the non-controlling party has the right to do so.


Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       44


               (e) If the controlling party fails to abate an infringement of
any patent within the Licensed Intellectual Property Rights or Research Program
Patent Rights that specifically and solely claims a Licensed Antigen, an
Antibody to a Licensed Antigen or the use thereof, or to file an action to abate
such infringement, within ninety (90) days after a written request from the non-
controlling party to do so, or if the controlling party discontinues the
prosecution of any such action after filing patent, the non-controlling party at
its expense may, in its discretion, undertake such action as it determines
appropriate to enforce the Research Program Patent Rights. In such case, the
controlling party shall assist the non-controlling party, upon request and at
the non-controlling party's sole expense, and to the extent commercially
reasonable, in taking any action to enforce such patent within the Licensed
Intellectual Property Rights or Research Program Patent Rights to the extent the
controlling party has the right to do so.

               (f) All monies recovered upon the final judgment or settlement of
any such action regarding the Licensed Intellectual Property Rights or Research
Program Patent Rights that specifically and solely claims a Licensed Antigen, an
Antibody to a Licensed Antigen or the use thereof shall be used (i) first, to
reimburse the costs and expenses (including reasonable attorneys' fees and
costs) of the controlling party and the non-controlling party, and (ii) the
remainder, [____________________________________].

         12.4  Patent Marking. Each party shall mark, and shall cause its
               --------------
Sublicensees and their respective Affiliates to mark all Products, sold pursuant
to this Agreement by such party, its Sublicensees and their respective
Affiliates in accordance with the requirements of applicable laws and
regulations in the country or countries of manufacture and sale thereof.

         12.5 Limitation. Notwithstanding any other provision in this Article
              ----------
12, (a) ABX shall not be obligated to prepare, file, prosecute, and maintain
patents and patent applications, or to bring or pursue enforcement proceedings
or defend declaratory judgment actions regarding the Licensed ABX Intellectual
Property if, and to the extent that, ABX is not entitled to do so under one or
more ABX In-Licenses, and (b) any rights conveyed under this Article 12
permitting CuraGen to prepare, file, prosecute and maintain certain patents and
patent applications, or to bring and pursue enforcement proceedings, or defend
declaratory judgment actions, regarding the Licensed ABX Intellectual Property,
shall be subject to all applicable ABX In-Licenses, and are conveyed only to the
extent permitted under such agreements.

         12.6 Use and Transfer Restrictions. Each party shall use the Technology
              -----------------------------
and Information owned by the other party solely for purposes of conducting its
obligations or exercising its rights under this Agreement, at its facilities,
under commercially and scientifically reasonable containment conditions, and not
for any other commercial, business or other use or purpose, without the prior

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       45


express written consent of the other party. Except as otherwise provided in this
Agreement, (a) a party shall not transfer or provide access to the Technology
and Information owned by the other party to any Affiliate or Third Party; (b) a
party shall not transfer or transport the Technology and Information owned by
the other party from its facilities to any other location; (c) a party shall
limit access to the Technology and Information owned by the other party to those
of its employees working on its premises, to the extent such access is
reasonably necessary to conduct its obligations or exercise its rights under
this Agreement; and (d) a party shall not (and shall not attempt or purport to)
assign, sell, have sold, lease, offer to sell or lease, otherwise transfer title
to, or otherwise distribute or license, sublicense or otherwise commercialize or
exploit, any Technology and Information owned by the other party or any interest
therein.

         12.7  Grant Backs.
               -----------

               12.7.1 It is the intent of the parties that this Agreement shall
not restrict ABX's freedom to practice and commercialize the Licensed ABX
Intellectual Property, the XenoMouse Animals and the ABX Technology and
Information, except as expressly set forth herein. CuraGen hereby grants to ABX
a royalty-free, perpetual, irrevocable, exclusive, worldwide license (with the
right to grant sublicenses) under CuraGen's rights in the Research Program
Patent Rights and Research Program Know-How to research, develop, make, have
made, use, offer for sale, sell and import Human Antibody Equivalents and
products comprising Human Antibody Equivalents (other than CuraGen Products) for
all uses. CuraGen hereby grants to ABX a royalty-free, perpetual, irrevocable,
nonexclusive worldwide license (with the right to grant sublicenses) under
CuraGen's rights in the Research Program Patent Rights and Research Program
Know-How to research, develop, make and use Antibody Equivalents (other than
Human Antibody Equivalents) solely in connection with the research, development,
making, having made, using, offering for sale, selling and importing of Human
Antibody Equivalents and products comprising Human Antibody Equivalents (other
than CuraGen Products) for all uses. CuraGen hereby grants to ABX a royalty-
free, perpetual, irrevocable, nonexclusive, worldwide license (with the right to
grant sublicenses) under those certain one or more CuraGen Patent Rights, which
have a common claim of priority and relate to the same antigen and in which the
claims within such CuraGen Patent Rights are supported by information or data
derived from the use of the ABX Technology and Information and/or Research
Program Technology and Information, solely in connection with the research,
development, making, having made, using, offering for sale, selling and
importing of Human Antibody Equivalents and products comprising Human Antibody
Equivalents (other than CuraGen Products) for all uses.

               12.7.2 It is the intent of the parties that this Agreement shall
not restrict CuraGen's freedom to practice and commercialize the Licensed
CuraGen Intellectual Property, the CuraGen Databases, and the CuraGen Technology
and Information, except as expressly set forth herein. ABX hereby grants to
CuraGen a royalty-free, perpetual, irrevocable, exclusive, worldwide license
(with the right to grant sublicenses) under ABX's rights in the Research Program
Patent Rights and Research Program Know-How to research, develop, make, have
made, use, offer for sale, sell and import Antibody Equivalents (other than

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       46


Human Antibody Equivalents) and compositions other than Antibody Equivalents,
and products (other than ABX Products) comprising Antibody Equivalents (other
than Human Antibody Equivalents) and compositions other than Antibody
Equivalents, for all uses; provided, however, that ABX reserves, for itself and
its sublicensees, the right under ABX's rights in the Research Program Patent
Rights and Research Program Know-How to exercise its license rights granted
under Section 12.7.1 above. ABX hereby grants to CuraGen a royalty-free,
perpetual, irrevocable, nonexclusive, worldwide license (with the right to grant
sublicenses) under those certain one or more ABX Patent Rights, which have a
common claim of priority and relate to the same antigen and in which the claims
within such ABX Patent Rights are supported by information or data derived from
the use of the CuraGen Technology and Information and/or Research Program
Technology and Information, solely in connection with the research, development,
making, having made, using, offering for sale, selling and importing of Antibody
Equivalents (other than Human Antibody Equivalents) and compositions other than
Antibody Equivalents, and products (other than ABX Products) comprising Antibody
Equivalents (other than Human Antibody Equivalents) and compositions other than
Antibody Equivalents, for all uses.

     13. INDEMNIFICATION

         13.1 ABX. ABX shall indemnify and hold harmless CuraGen, and its
              ----
directors, officers, employees and agents, from and against all losses,
liabilities, damages and expenses, including reasonable attorneys' fees and
costs (collectively, "Liabilities"), resulting from any claims, demands, actions
or other proceedings by any Third Party arising from (a) the material breach of
any representation, warranty or covenant by ABX under this Agreement, (b) any
use, handling or storage by ABX, its Sublicensees (other than CuraGen) and their
respective Affiliates of the CuraGen Technology and Information or the Research
Program Technology and Information, (c) the manufacture, use, sale, handling or
storage by ABX, its Sublicensees (other than CuraGen) and their respective
Affiliates of ABX Products (without regard to culpable conduct), or (d) any use
by ABX, its Sublicensees (other than CuraGen) and their respective Affiliates of
the Confidential Information of CuraGen; provided, however, that ABX shall not
be obligated to indemnify or hold harmless CuraGen for such Liabilities to the
extent that such Liabilities arise from the gross negligence or willful
misconduct of CuraGen.

         13.2  CuraGen.  CuraGen shall indemnify and hold harmless ABX, and its
               -------
directors, officers, employees and agents, from and against all Liabilities
resulting from any claims, demands, actions or other proceedings by any Third
Party arising from (a) the material breach of any representation, warranty or
covenant by CuraGen under this Agreement, (b) any use, handling or storage by
CuraGen, its Sublicensees (other than ABX) and their respective Affiliates of
the ABX Technology and Information or the Research Program Technology and
Information, (c) the manufacture, use, sale, handling or storage by CuraGen, its
Sublicensees (otheE than ABX) and their respective Affiliates of CuraGen
Products (without regard to culpable conduct), or (d) any use by CuraGen, its
Sublicensees (other than ABX) and their respective Affiliates of the
Confidential Information of ABX; provided, however, that CuraGen shall not be
obligated to indemnify or hold harmless ABX for such Liabilities to the extent
that such Liabilities arise from the gross negligence or willful misconduct of
ABX.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       47


         13.3 Procedure. If a party (an "Indemnitee") intends to claim
              ---------
indemnification under this Article 13, it shall promptly notify the indemnifying
party (the "Indemnitor") in writing of any claim, demand, action or other
proceeding for which the Indemnitee intends to claim such indemnification, and
the Indemnitor shall have the right to participate in, and, to the extent the
Indemnitor so desires, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an Indemnitee shall have
the right to retain its own counsel, with the fees and expenses to be paid by
the Indemnitor, if representation of such Indemnitee by the counsel retained by
the Indemnitor would be inappropriate due to actual or potential differing
interests between such Indemnitee and any other party represented by such
counsel in such proceeding. The indemnity agreement in this Article 13 shall not
apply to amounts paid in settlement of any claim, demand, action or other
proceeding if such settlement is effected without the consent of the Indemnitor,
which consent shall not be withheld or delayed unreasonably. The failure to
deliver written notice to the Indemnitor within a reasonable time after the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such Indemnitor of any liability to the Indemnitee under
this Article 13, but the omission so to deliver written notice to the Indemnitor
shall not relieve it of any liability that it may have to any party claiming
indemnification otherwise than under this Article 13. The party claiming
indemnification under this Article 13, its employees and agents, shall
reasonably cooperate with the Indemnitor and its legal representatives in the
investigation of any claim, demand, action or other proceeding covered by this
indemnification.

         13.4 Insurance. Each party shall maintain insurance, including product
              ---------
liability insurance, with respect to the research, development, manufacture and
sale of Products hereunder by such party, its Sublicensees and their respective
Affiliates in such amount as such party customarily maintains with respect to
the research, development, manufacture and sale of its other products. Each
party shall maintain such insurance for so long as such party, its Sublicensees
and their respective Affiliates continues to research, develop, manufacture or
sell any Products hereunder, and thereafter for so long as such party
customarily maintains insurance covering the research, development, manufacture
and sale of its other products.

     14. TERM AND TERMINATION

         14.1  Term. The term of this Agreement shall commence on the Effective
               ----
Date and, unless earlier terminated, shall continue in full force and effect
until the expiration of the parties' respective royalty obligations pursuant to
this Agreement.

         14.2  Termination.
               -----------

               14.2.1 If CuraGen breaches its obligations under Section 8.2, 8.3
or 8.4 above, or materially breaches its obligations under Section 10.1 above,
with respect to any Antigen or to CuraGen Products to any CuraGen Licensed

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       48


Antigen, and such breach shall have continued for ten (10) days, in the case of
breaches under Section 8.2, 8.3, or 8.4, or for thirty (30) days, in the case of
material breaches under Section 10.1, after written notice of such breach was
provided to CuraGen by ABX, ABX shall have the right at its option to terminate
the licenses (or sublicenses, as the case may be) under this Agreement with
respect to such Antigen or to CuraGen Products to such CuraGen Licensed Antigen
(as applicable) effective at the end of such ten (10) day or thirty (30) day
period, as the case may be, without otherwise affecting the other licenses (or
sublicenses, as the case may be) granted under this Agreement or the other
remaining provisions of this Agreement. In the event of such termination by ABX,
the Antigen which was the subject of the termination shall be subject to ABX's
standby option under Section 7.2.2, CuraGen's obligation to provide data and
information under Section 7.2.2 shall apply to all data and information in
existence at the time of the termination, the six-month period in which to
exercise such option shall commence on the date of termination, and no payment
shall be due under Section 8.2.3 upon the exercise by ABX of such option.

               14.2.2 If ABX breaches its obligations under Section 8.2, 8.3 or
8.4 above, or materially breaches its obligations under Section 10.2 above, with
respect to any Antigen or to ABX Products to any ABX Licensed Antigen, and such
breach shall have continued for ten (10) days, in the case of breaches under
Section 8.2, 8.3, or 8.4, or for thirty (30) days, in the case of material
breaches under Section 10.2, after written notice of such breach was provided to
ABX by CuraGen, CuraGen shall have the right at its option to terminate the
licenses (or sublicenses, as the case may be) under this Agreement with respect
to such Antigen or to ABX Products to such ABX Licensed Antigen (as applicable)
effective at the end of such ten (10) day or thirty (30) day period, as the case
may be, without otherwise affecting the other licenses (or sublicenses, as the
case may be) granted under this Agreement or the other remaining provisions of
this Agreement. In the event of such termination by CuraGen, the Antigen which
was the subject of the termination shall be subject to CuraGen's standby option
under Section 7.1.2, ABX's obligation to provide data and information under
Section 7.1.2 shall apply to all data and information in existence at the time
of the termination, the six-month period in which to exercise such option shall
commence on the date of termination, and no payment shall be due under Section
8.2.3 upon the exercise by CuraGen of such option.

               14.2.3 If a party shall have materially breached any of its
material obligations hereunder (other than under Sections 8.2, 8.3, 8.4, 10.1
and 10.2 above), and such breach shall have continued for thirty (30) days after
written notice of such breach was provided to the breaching party by the
nonbreaching party, the nonbreaching party shall have the right (at its option),
effective at the end of such thirty (30) day period, to terminate the Research
Program and all options, licenses, and rights to obtain additional options and
licenses granted to the breaching party under this Agreement; provided, however,
that any commercial licenses previously granted to the breaching party under
Article 7 above (and any related continuing research licenses to the breaching
party under Section 6.1 above), all licenses granted to the breaching party
under Section 12.7 above, and all options, licenses, and rights to obtain
additional options and licenses granted to the nonbreaching party under this
Agreement shall survive any such termination by the nonbreaching party under
this Section 14.2.3.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       49


         14.3  Effect of Expiration or Termination.

               14.3.1 Expiration or termination of this Agreement shall be
without prejudice to any rights which shall have accrued to the benefit of a
party prior to such expiration or termination. Without limiting the foregoing,
the license rights granted under Section 4.4.1 and the provisions of Sections
4.6.3 and 8.1 and Articles 9, 11, 12, 13, 14 and 15 shall survive any expiration
or termination of this Agreement.

               14.3.2 In the event of termination of the Research Program and
the options, licenses and rights of ABX under this Agreement by CuraGen pursuant
to Section 14.2.3 upon an uncured material breach of a material obligation by
ABX, then the payments remaining to be paid to ABX under Section 8.1 shall be
reduced [______________________]. Such reduction shall be applied against the
payments remaining to be paid to ABX under Section 8.1 on a last-to-be-paid
first-reduced basis.

               14.3.3 In the event of expiration of this Agreement prior to the
fifth anniversary of the Effective Date, termination of this Agreement for any
reason, or termination of the Research Program and the options, licenses and
rights of CuraGen by ABX pursuant to Section 14.2.3 above, then all payments
remaining to be paid to ABX under Section 8.1 shall be immediately due and
payable on or before the date thirty (30) days following the effective date of
such expiration or termination.

               14.3.4 Following the expiration under Section 8.4.3(e) of
CuraGen's obligation to pay royalties to ABX hereunder with respect to a CuraGen
Product (provided that CuraGen's option, license or other rights with respect to
such CuraGen Product have not been previously terminated), CuraGen shall have a
fully-paid up, non-exclusive license (or sublicense, as the case may be) (with
the right to grant sublicenses) under the ABX Know-How and Research Program
Know-How solely to make, have made, use, offer for sale, sell and import such
CuraGen Product for use in the Commercial Field. Following the expiration under
Section 8.4.3(e) of ABX's obligation to pay royalties to CuraGen hereunder with
respect to an ABX Product (provided that ABX's option, license or other rights
with respect to such ABX Product have not been previously terminated), ABX shall
have a fully-paid up, non-exclusive license (or sublicense, as the case may be)
(with the right to grant sublicenses) under the CuraGen Know-How and Research
Program Know-How solely to make, have made, use, offer for sale, sell and import
such ABX Product for use in the Commercial Field.

               14.3.5 Upon termination of this Agreement, or upon termination of
the licenses (or sublicenses, as the case may be) hereunder for any CuraGen
Product, CuraGen, its Sublicensees and their respective Affiliates shall have
the right to sell or otherwise dispose (consistent with all applicable laws and
regulations and subject to Articles 8 and 9 above) of the stock of any CuraGen
Product then on hand. Upon termination of this Agreement, or upon termination of
the licenses (or sublicenses, as the case may be) hereunder for any ABX Product,
ABX, its Sublicensees and their respective Affiliates shall have the right to
sell or otherwise dispose (consistent with all applicable laws and regulations
and subject to Articles 8 and 9 above) of the stock of any ABX Product then on
hand.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       50


               14.3.6 Upon termination of this Agreement by ABX, or upon
termination by ABX of the licenses (or sublicenses, as the case may be)
hereunder for any CuraGen Product, any Sublicense granted by CuraGen hereunder
shall survive, provided that upon request by ABX, such Sublicensee promptly
agrees in writing that such Sublicensee shall be bound by the terms of such
Sublicense for the benefit of ABX and ABX shall have all of the rights of
CuraGen under such Sublicense, but ABX shall not be bound by any obligation of
CuraGen thereunder except to the extent it is already bound to an equivalent
obligation hereunder. Upon termination of this Agreement by CuraGen, or upon
termination by CuraGen of the licenses (or sublicenses, as the case may be)
hereunder for any ABX Product, any Sublicense granted by ABX hereunder shall
survive, provided that upon request by CuraGen, such Sublicensee promptly agrees
in writing that such Sublicensee shall be bound by the terms of such Sublicense
for the benefit of CuraGen and CuraGen shall have all of the rights of ABX under
such Sublicense, but CuraGen shall not be bound by any obligation of ABX
thereunder except to the extent it is already bound to an equivalent obligation
hereunder.

               14.3.7 Except as otherwise expressly agreed in writing by the
parties, promptly upon the expiration or earlier termination of the Research
Program, each party shall destroy all remaining Research Program Technology and
Information and Antigen Specific Materials and Information; in each case except
to the extent such party retains an option or license (or sublicense, as the
case may be) thereto hereunder; that survives such expiration or termination.

               14.3.8 Except as otherwise expressly agreed in writing by the
parties, promptly upon the expiration or earlier termination of this Agreement,
(a) CuraGen shall destroy or return to ABX (as ABX `shall direct) all remaining
ABX Technology and Information;

               (b) ABX shall destroy or return to CuraGen (as CuraGen shall
direct) all remaining CuraGen Technology and Information; and (c) each party
shall destroy all remaining Research Program Technology and Information and
Antigen Specific Materials and Information; in each case except to the extent
such party retains a license (or sublicense, as the case may be) thereto
hereunder; that survives such expiration or termination.

               14.3.9 Except as otherwise expressly agreed in writing by the
parties, promptly upon the termination of the license (or sublicense, as the
case may be)s granted to CuraGen hereunder regarding any Antigen, CuraGen shall
destroy or return to AB-X (as ABX shall direct) all remaining ABX Technology and
Information regarding such Antigen, Antibodies to such Antigens and Products to
such Antigen, and shall destroy all remaining Research Program Technology and
Information and Antigen Specific Materials and Information regarding such
Antigen, Antibodies to such Antigens and Products to such Antigen.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       51


               14.3.10 Except as otherwise expressly agreed in writing by the
parties, promptly upon the termination of the license (or sublicense, as the
case may be)s granted to ABX hereunder regarding any Antigen, ABX shall destroy
or return to CuraGen (as CuraGen shall direct) all remaining CuraGen Technology
and Information regarding such Antigen, Antibodies to such Antigens and Products
to such Antigen, and shall destroy all remaining Research Program Technology and
Information and Antigen Specific Materials and Information regarding such
Antigen, Antibodies to such Antigens and Products to such Antigen.

     15. MISCELLANEOUS

         15.1  Governing Laws. This Agreement shall be governed by, interpreted
               --------------
and construed in accordance with the laws of the State of Delaware, without
regard to conflicts of law principles.

         15.2  Waiver. No waiver by any party hereto of any breach or default of
               ------
any of the covenants or agreements herein set forth shall be deemed a waiver as
to any subsequent and/or similar breach or default.

         15.3  Assignments. Neither this Agreement nor any right or obligation
               -----------
hereunder may be assigned or delegated, in whole or part, by either party
without the prior express written consent of the other; provided, however, that
either party may, without the written consent of the other, assign this
Agreement and its rights and delegate its obligations hereunder in connection
with the transfer or sale of all or substantially all of its business, or in the
event of its merger, consolidation, change in control or similar transaction.
Any permitted assignee shall assume all obligations of its assignor under this
Agreement. Any purported assignment in violation of this Section 15.3 shall be
void.

         15.4  Independent Contractors. The relationship of the parties hereto
               -----------------------
is that of independent contractors. The parties hereto shall not be deemed to be
agents, partners or joint venturers of the others for any purpose as a result of
this Agreement or the transactions contemplated thereby.

         15.5  Further Actions. Each party agrees to execute, acknowledge and
               ---------------
deliver such further instruments and to do all such other acts as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.

         15.6  Notices. All requests and notices required or permitted to be
               -------
given to the parties hereto shall be given in writing, shall expressly reference
the section(s) of this Agreement to which they pertain, and shall be delivered
to the other party, effective on receipt, at the appropriate address as set
forth below or to such other addresses as may be designated in writing by the
parties from time to time during the term of this Agreement.

               If to ABX:

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       52


                    Abgenix, Inc.
                    7601 Dumbarton Circle
                    Fremont, California 94555
                    Attn:  President

               with a copy to:

                    Gray Cary Ware & Freidenrich LLP
                    4365 Executive Drive, Suite 1600
                    San Diego, California 92121-2189
                    Attn:  Mark R. Wicker

               If to CuraGen:

                    CuraGen Corporation
                    555 Long Wharf Drive
                    New Haven, Connecticut 06511
                    Attn:  President

               with a copy to:

                    Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C.
                    One Financial Center
                    Boston, Massachusetts 02111
                    Attn:  Jeffrey M. Wiesen

         15.7 No Implied Licenses. Only licenses (or sublicenses, as the case
              -------------------
may be) and rights granted expressly herein shall be of legal force and effect.
No license (or sublicense, as the case may be) or other right shall be created
hereunder by implication, estoppel or otherwise. By way of clarification and not
limitation, no license (or sublicense, as the case may be) is granted hereunder
to CuraGen to have in its possession any XenoMouse Animals or to conduct
immunizations thereof.

         15.8 Compliance with Laws. Each party shall use the Technology and
              --------------------
Information of the other party and the Research Program Technology and
Information in compliance in all material respects with all applicable laws,
guidelines and regulations which are applicable to such Technology and
Information or the use thereof, including without limitation any biosafety
procedures and all safety precautions accompanying such Technology and
Information. Except as otherwise expressly agreed in this Agreement or otherwise
expressly agreed in writing by the parties, neither party shall administer the
Technology and Information of the other party or the Research Program Technology
and Information to humans under any circumstances.


Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       53


         15.9 Export Laws. Notwithstanding anything to the contrary contained
              -----------
herein, all obligations of ABX and CuraGen are subject to prior compliance with
United States export regulations and such other United States laws and
regulations as may be applicable, and to obtaining all necessary approvals
required by the applicable agencies of the government of the United States. Each
party shall be responsible for obtaining such approvals as required of it, and
shall use efforts consistent with prudent business judgment to obtain such
approvals. Each party shall cooperate reasonably with the other party and
provide reasonable assistance to the other party as may be reasonably necessary
to obtain any required approvals.

         15.10 Force Majeure. Nonperformance of a party (other than for the
               -------------
payment of money) shall be excused to the extent that performance is rendered
impossible by strike, fire, earthquake, flood, governmental acts or orders or
restrictions, failure of suppliers, or any other reason where failure to
perform, is beyond the reasonable control and not caused by the negligence,
intentional conduct or misconduct of the nonperforming party.

         15.11 No Consequential Damages. IN NO EVENT SHALL A PARTY HERETO BE
               ------------------------
LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS
AGREEMENT OR THE EXERCISE OF ITS RIGHTS HEREUNDER, INCLUDING WITHOUT LIMITATION
LOST PROFITS ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT,
REGARDLESS OF ANY NOTICE OF SUCH DAMAGES. NOTHING IN THIS SECTION 15.11 IS
INTENDED TO LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF
EITHER PARTY.

         15.12 Third Party Rights. Notwithstanding anything to the contrary in
               ------------------
this Agreement, the grant of rights by ABX under this Agreement shall be subject
to and limited in all respects by the terms of the applicable ABX In-License(s)
pursuant to which ABX acquired any Licensed ABX Intellectual Property, and all
rights or sublicenses granted under this Agreement shall be limited to the
extent that ABX may grant such rights and sublicenses under such ABX In-
Licenses. Additionally, and without limiting the foregoing, the rights granted
to CuraGen hereunder, including without limitation any grant of "exclusive"
rights, shall be subject to the rights granted to or retained by GenPharm under
the GenPharm Cross License Agreement.

         15.13 Complete Agreement. This Agreement constitutes the entire
               ------------------
agreement between the parties regarding the subject matter hereof, and all prior
representations, understandings and agreements regarding the subject matter
hereof (including without limitation, the Original Agreement and the letter
dated July 5, 2000, from Christopher McLeod to Raymond Withy) either written or
oral, expressed or implied, are superseded and of no effect.

         15.14 Counterparts. This Agreement may be executed in counterparts,
               ------------
each of which shall be deemed to be an original and both together shall be
deemed to be one and the same agreement.

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       54


         15.15 Headings. The captions to the several Articles and Sections
               --------
hereof are not a part of this Agreement, but are included merely for convenience
of reference only and shall not affect its meaning or interpretation.




Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       55


     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective duly authorized officers as of the day and year first above
written.

                              ABGENIX, INC.


                              By: /s/ Raymond M. Withy
                                  ----------------------------------
                                  (Signature)

                                  Raymond M. Withy
                                  ----------------------------------
                                  (Printed Name)

                                  Chief Business Officer
                                  ----------------------------------
                                  (Title)

                              CURAGEN CORPORATION


                              By: /s/ Christopher K. McLeod
                                  ----------------------------------
                                  (Signature)

                                  Christopher K. McLeod
                                  ---------------------
                                  (Printed Name)

                                  Executive Vice President
                                  ------------------------
                                  (Title)


Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       56


                                   EXHIBIT A

                              [__________________]

1.  [__________________________]

     A.  [___________________________________________________]:



     [_____]            [________]             [_______]               [________]                  [________]
- -----------------------------------------------------------------------------------------------------------------------
                                                                              
[__________]       [____________]        [_____________]         [_______________]        [____________________]
- -----------------------------------------------------------------------------------------------------------------------
[__________]       [____________]        [_____________]         [_______________]        [____________________]
- -----------------------------------------------------------------------------------------------------------------------
[__________]       [____________]        [_____________]         [_______________]        [____________________]
- -----------------------------------------------------------------------------------------------------------------------
[__________]       [____________]        [_____________]         [_______________]        [____________________]
- -----------------------------------------------------------------------------------------------------------------------
[__________]       [____________]        [_____________]         [_______________]        [____________________]
- -----------------------------------------------------------------------------------------------------------------------
[__________]       [____________]        [_____________]         [_______________]        [____________________]
- -----------------------------------------------------------------------------------------------------------------------
[__________]       [____________]        [_____________]         [_______________]        [____________________]
- -----------------------------------------------------------------------------------------------------------------------
[__________]       [____________]        [_____________]         [_______________]        [____________________]
- -----------------------------------------------------------------------------------------------------------------------
[__________]       [____________]        [_____________]         [_______________]        [____________________]
- -----------------------------------------------------------------------------------------------------------------------
[__________]       [____________]        [_____________]         [_______________]        [____________________]
- -----------------------------------------------------------------------------------------------------------------------
[__________]       [____________]        [_____________]         [_______________]        [____________________]
- -----------------------------------------------------------------------------------------------------------------------
[__________]       [____________]        [_____________]         [_______________]        [____________________]
- -----------------------------------------------------------------------------------------------------------------------
[__________]       [____________]        [_____________]         [_______________]        [____________________]
- -----------------------------------------------------------------------------------------------------------------------
[__________]       [____________]        [_____________]         [_______________]        [____________________]
- -----------------------------------------------------------------------------------------------------------------------
[__________]       [____________]        [_____________]         [_______________]        [____________________]
- -----------------------------------------------------------------------------------------------------------------------
[__________]       [____________]        [_____________]         [_______________]        [____________________]
- -----------------------------------------------------------------------------------------------------------------------
[__________]       [____________]        [_____________]         [_______________]        [____________________]
- -----------------------------------------------------------------------------------------------------------------------
[__________]       [____________]        [_____________]         [_______________]        [____________________]
- -----------------------------------------------------------------------------------------------------------------------
[__________]       [____________]        [_____________]         [_______________]        [____________________]
- -----------------------------------------------------------------------------------------------------------------------


B.  [__________________________________________________________________]:
[______________________________________________________________________].
D.  [__________________________________________________________________]:
[______________________________________________________________________].
E.  [__________________________________________________________________]:
[______________________________________________________________________].


II.  [_______________________________]

A.  [______________________________________________________________________].

Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       57


B.  [______________________________________________________________________].

C.  [________________________________________________________________]:

[____________________________________________________________________].



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       58


                                   EXHIBIT B


                           ELIGIBLE ANTIGEN CRITERIA


A Research Antigen shall become an Eligible Antigen if it meets the following
criteria:

1.   [_______________________________________________________________].

2.   [_______________________________________________________________].



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       59


                                   EXHIBIT C


                                 RESEARCH PLAN


                         CURAGEN/ABGENIX RESEARCH PLAN


                                   [ATTACHED]



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       60


                                   EXHIBIT D


                             THIRD PARTY AGREEMENTS

Collaboration Agreements between CuraGen and

     [_________________________________]
     [_________________________________]
     [_________________________________]
     [_________________________________]
     [_________________________________]
     [_________________________________]

TRADOCS:1445129.1(%Z2H01!.DOC)



Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to the Company's application requesting
confidential Investment under Rule 406 of the Securities Act.

                                       61

EX-11.1

                                   EXHIBIT 11

                       CURAGEN CORPORATION AND SUBSIDIARY
                        COMPUTATION OF NET LOSS PER SHARE
                       ATTRIBUTABLE TO COMMON STOCKHOLDERS


                                                                                       YEAR ENDED DECEMBER 31,
                                                                            -----------------------------------------------
                                                                                1998              1999            2000
                                                                            -------------    -------------    ------------
                                                                                                     
Net loss before income tax benefit and minority interest                    $ (18,428,485)   $ (25,762,760)   $(28,706,377)

Income tax benefit                                                                   --               --         1,400,000
Minority interest                                                                    --               --           327,990
                                                                            -------------    -------------    ------------

Net loss before preferred dividends                                           (18,428,485)     (25,762,760)    (26,978,387)

Preferred dividends                                                              (508,435)            --              --
                                                                            -------------    -------------    ------------

Net loss attributable to common stockholders                                $ (18,936,920)   $ (25,762,760)   $(26,978,387)
                                                                            =============    =============    ============

Basic and diluted net loss per share attributable to common stockholders    $       (0.78)   $       (0.89)   $      (0.70)
                                                                            =============    =============    ============

Weighted average number of shares used in computing basic and diluted
   net loss per share attributable to common stockholders                      24,402,012       28,801,984      38,747,819
                                                                            =============    =============    ============

EX-21.1

EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT

GeneScape Corporation

454 Corporation

EX-23.1

EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Registration Statements No.
333-56829 and No. 333-89465 of CuraGen Corporation on Forms S-8, and
Registration Statements No. 333-32756, 333-47600, and 333-90321 of CuraGen
Corporation on Forms S-3 of our report dated January 23, 2001 in this Annual
Report on Form 10-K of CuraGen Corporation for the year ended December 31, 2000.



/s/ DELOITTE & TOUCHE LLP

Hartford, Connecticut
March 26, 2001