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, 2001

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
incorporation or organization) (I.R.S. Employer
Identification No.)

555 Long Wharf Drive, 11th Floor, New Haven, Connecticut	06511 (Zip Code)
(Address of principal executive offices)

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 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, 2002, was approximately $621,047,600.

The number of shares outstanding of the Registrant’s common stock as of February 28, 2002 was 48,820,699.

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, 2001. Portions of such proxy statement are incorporated by reference into Part III of this report.

CURAGEN CORPORATION

FORM 10-K

INDEX

		Page #
	PART I
ITEM 1.	BUSINESS	1
ITEM 2.	PROPERTIES	11
ITEM 3.	LEGAL PROCEEDINGS	11
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	11
	PART II
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS	12
ITEM 6.	SELECTED FINANCIAL DATA	13
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	13
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	20
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	20
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES	41
	PART III
ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT	41
ITEM 11.	EXECUTIVE COMPENSATION	41
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	41
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	41
	PART IV
ITEM 14.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K	41

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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 pharmaceutical development company. We apply our integrated functional genomic technologies and Internet-based bioinformatic systems to discover and develop pharmaceutical products to treat large unmet medical needs. Through the application of our proprietary technologies, we are gaining an understanding of how genes and proteins function in the context of disease, and are applying this knowledge to the development of protein, antibody, and small molecule therapeutics.

Our integrated functional genomic technologies are enabling our scientists to conduct research throughout each stage of the drug discovery, drug development and pharmacogenomics screening and evaluation process. We have established internal programs to develop products to treat metabolic diseases, cancer, inflammatory diseases, and central nervous system, or CNS, disorders.

Our efforts are focused on the development of pharmaceutical products that address unmet medical needs. At each stage of the drug development process, we plan to reevaluate the relative merits of continuing our progress solely through internal efforts or through strategic drug development alliances. We expect that by leveraging our knowledge of the human genome, we are able to gain a greater understanding of the molecular basis of disease. By combining this comprehensive understanding of disease mechanisms with our functional genomic technologies, Internet-based bioinformatic systems, and industrialized discovery and development processes, we believe that we can develop pharmaceutical products with greater efficacy and fewer side effects, and increase the probability that the most appropriate drugs will be administered to the proper patients.

Overview

The large-scale study of genes and genetic information is known as genomics. 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. Through the study of genomics, scientists seek to understand the genetic basis of disease and to develop more effective treatments than those that are currently available. To date, the pharmaceutical, animal health and agricultural industries have not broadly used genomic approaches to investigate the molecular basis of disease when developing new products primarily because:

Ÿ the entire sequence of the human genome has not been previously available;

Ÿ genomics technologies have been inadequate;

Ÿ discovery processes used by these industries have caused them to underestimate the influence of genetic and environmental factors upon disease;

Ÿ uniform information systems necessary to drive genomics technologies have been largely unavailable; and,

Ÿ information systems designed to manage, analyze, and ultimately understand genomic information were unavailable.

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At CuraGen, we believe that we have addressed these issues through the application of proprietary technologies to better understand the molecular basis of disease, and are actively applying this knowledge to discover and develop novel pharmaceutical products. We intend to apply our proprietary genomic technologies to uncover and understand the molecular basis of disease, and expect that we will be able to exploit a unique opportunity to develop the next generation of therapeutic products to treat important complex diseases.

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, inflammatory diseases and CNS disorders are examples of such complex diseases. As scientific advances improve our understanding of the genetic basis of many diseases, we believe that the methods used by the pharmaceutical industry to develop new drugs will undergo a fundamental transformation.

Developing treatments for complex diseases remains a major technological challenge and will require an integrated set of genomics technologies, processes and information systems to be done successfully. 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, and related processes and information systems to generate this information and enable this understanding, and are actively applying this knowledge to develop pharmaceutical products.

Our Drug Discovery, Drug Development, and Pharmacogenomic Programs

We are focusing our drug discovery, drug development and pharmacogenomic programs to develop pharmaceutical products to address unmet medical needs. The discovery programs focus on identifying and validating drug targets derived from the human genome. To accomplish this, we are applying our functional genomics technologies to proprietary disease-focused research programs to systematically analyze the molecular basis of metabolic diseases, cancer, inflammation, and CNS disorders, in order to determine their distinct mechanisms of action. This approach has enabled the rapid identification of a large number of commercially valuable disease-related genes and potential drug targets. As of December 31, 2001, we were evaluating 120 potential protein drugs, 191 antibody targets, and 246 small molecule targets. We are currently advancing 170 of these projects through discovery and pre-clinical development with our partners.

Our scientists analyze 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. We are using this knowledge to develop drugs that are potentially safer and more effective than previously made. 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.

We have expertise in pharmacogenomics, a process of: determining how drugs work and why they fail; understanding why certain drugs may be unsafe due to adverse side effects; and, determining which drugs are appropriate for specific patients. We are using pharmacogenomic studies to find additional drug targets, to understand how current drugs work, and to prioritize the development of our own drugs.

Drug Discovery Programs

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

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pathways involved in these diseases, which are known to involve errors in cellular communication mechanisms and the regulation of metabolic pathways. To date, we have used our functional genomic technologies to discover genes associated with these diseases and 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 cellular communication mechanisms and pathway regulation. We are applying our functional genomic technologies to identify the genes and pathways involved in the early development of cancer and its 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 that are highly active in cancerous tissue may be excellent targets for the development of monoclonal antibody drugs.

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 numerous human tissues, cell lines, animal models and existing drugs with specific action in the central nervous system and uncovered a number of novel genes, pathways and potential targets.

Drug Development Programs

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

Ÿ secreted proteins;

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

Ÿ small molecule therapeutics.

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 an 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 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 cells 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.

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Small Molecule Therapeutics.    We are also applying our expertise in genomics and knowledge of disease to develop small molecule therapeutics. Specifically, we are identifying and validating drug targets for use in small molecule drug development. We currently do not have expertise in combinatorial and medicinal chemistry, therefore, we are actively seeking alliances that will provide us access to this expertise, in exchange for sharing the profits on therapeutics that may be developed as a result of these alliances.

Pharmacogenomic Programs

Using our functional genomic technologies, the tissues targeted by a drug, as well as the organs that might exhibit side effects, including liver, heart 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. 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 how they work within the human body, the mechanism of action, or by severe side effects. Our goal is to continue to generate databases 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 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 thousands of human genetic variations (cSNPs). The discovery of cSNPs predicting efficacy or toxicity may be of tremendous value in personalizing medicine at the genetic level by allowing researchers or physicians to:

Ÿ expedite compounds through clinical trials;

Ÿ reduce toxicity by segmenting patient populations; and,

Ÿ give the right drug to the right patient.

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

Strategic Research and Development Alliances

As part of our business strategy, we seek to establish strategic research and development alliances with companies to gain access to expertise that is currently unavailable at our Company. These alliances with other pharmaceutical and biotechnology companies may provide us with access to unique technologies, access to capital, near term revenues, milestone and/or royalty payments, and potential profit sharing arrangements. In return, we provide access to unique technologies, expertise in genomics, and information on the molecular basis of disease, drug targets, and drug candidates. To date, we have entered into significant strategic alliances with Abgenix, Inc. (“Abgenix”), Alexion Pharmaceuticals, Inc. (“Alexion”), Bayer AG (“Bayer”), and Sequenom, Inc. (“Sequenom”), formerly known as Gemini Genomics plc, in addition to numerous smaller agreements to facilitate these efforts. In these strategic alliances, either party can terminate the agreement at any time the alliance permits them to or if either party materially breaches the contract. We may not be able to maintain or expand existing alliances or establish any additional alliances.

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If any of our existing alliances were to breach, terminate or not renew their agreements with us or otherwise fail to conduct activities successfully and in a timely manner, the preclinical or clinical development or commercialization of product candidates or research programs may be delayed or terminated.

Abgenix

In December 1999, we entered into a strategic alliance with Abgenix to develop and commercialize genomics based antibody drugs using Abgenix’ XenoMouse^™ 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, were subject to a one-year lock-up restriction, which ended on November 27, 2001. After November 27, 2001, Abgenix has demand and piggyback registration rights on the shares.

Alexion

In March 2002, we entered into a multi-year drug target discovery and validation agreement with Alexion initially focused in oncology which may be expanded to include additional disease areas. The objective of the alliance is to discover and validate biologic and small molecule targets for use in developing pharmaceutical products. Throughout this agreement, we will apply our integrated functional genomic technologies to identify potential drug targets derived from research materials supplied by Alexion, and will immediately retain the rights to potential non-antibody protein therapeutics across all disease areas. We may receive near-term revenues, licensing fees for antibody and small molecule targets selected by Alexion, development milestone payments based upon Alexion’s ability to successfully advance products through the clinical development stages, and royalties from the sales of successfully commercialized drugs developed from research completed through this alliance. We also retain the rights to all antibody and small molecule drug targets that Alexion does not license from us. Under the termination provisions outlined in the agreement, either party can terminate after providing 30 days written notice of breach of contract at the conclusion of the first year of the agreement. In addition, either company can terminate on the contract’s anniversary date upon providing 90 days written notice.

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 in a private placement totaling $85,000,000.

The first agreement is a comprehensive alliance 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 anticipate bringing twelve candidates in obesity and

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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. Ultimately, we will jointly commercialize drugs resulting from this alliance with Bayer, and then share profits 56% to 44% between Bayer and us. 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 is a broad, five-year pharmacogenomic and toxicogenomic agreement 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, Bayer and we 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 toxicity screening services that will incorporate information from this database and pay Bayer royalties on the resulting revenues. During the later stages of this collaboration, Bayer 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.

Sequenom

In April 2000, we entered into a comprehensive, renewable two-year collaboration with Gemini Genomics (Gemini was purchased by Sequenom in September 2001) to link 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 proteomic technologies 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. In March 2002, the companies extended their relationship for a one-year period to conduct further research.

In addition to the above listed alliances, we have established relationships with more than 100 universities, academic institutions, and individual companies to gain access to disease tissue samples, disease models, and select technologies. Individually, we do not consider these relationships to be of a material nature, but as a group they form an important component of our business.

Service-Based Research Collaborations

Historically, we sought to enter into service-based research collaborations with pharmaceutical, biotechnology, and life science companies as a means of generating near-term revenues and validating our technology platform. As a natural part of our evolution into an integrated genomics based pharmaceutical development company, we are no longer seeking to enter into strict fee-for-service-only collaborations. In these collaborations, the collaborators typically had 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

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targets, small molecule drug targets, as well as markers for prioritizing drugs and markers for selecting patient populations. Collaborations typically included 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. Currently, we have two remaining service-based collaborations underway with Genentech, Inc. (“Genentech”) and Ono Pharmaceutials Co., Ltd. (“Ono”). In addition to the two remaining service-based collaborations, we have successfully conducted research with, and have the potential to receive future milestones and royalties from companies including Biogen, Inc., COR Therapeutics, Inc., DuPont/Pioneer Hi-Bred International, Inc., GlaxoSmithKline, Inc., Hoffmann-La Roche Inc. and its affiliate, Roche Vitamins, Inc., and Monsanto Company. Refer to Note 4 of our consolidated financial statements for revenue information on major customers.

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 through December 31, 2002 and paid us an undisclosed amount for discoveries through this date stemming from our collaboration.

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.

Integrated Functional Genomic Technologies

Our Internet-enabled functional genomic technologies, processes and information systems are fully integrated through a bioinformatics operating system that enables the rapid generation of comprehensive information about gene and protein function and about their interactions with drugs, the environment, and diverse patient populations. Our technologies and information systems are comprised of functional genomic technologies, automated processes, related databases and bioinformatics systems. In addition to accelerating the discovery of new drug candidates, we are also using our technologies 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 integrated our functional genomic technologies, processes and databases through a computer operating system that we refer to as the GeneScape bioinformatics platform, 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 the functionality and integrating additional technologies on our GeneScape operating platform.

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Our integrated functional 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.

Drug Target Identification, Qualification, and Validation

Our gene sequencing technology generates comprehensive sequence databases of expressed genes from any species and is used to identify cSNPs. Our gene expression 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 gene discovery and analysis technologies to:

Ÿ comprehensively measure the expression levels of 95% of the genes expressed in any species; and,

Ÿ 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.

We have developed our proprietary technologies to reduce the time and cost associated with the identification and functional understanding of targets for therapeutic intervention. Genes identified through the application of our technologies may potentially act as drug targets. Our protein pathway analysis technology is an automated, high-throughput process that identifies interactions between combinations of proteins and assembles these protein-protein interactions into our proteomics database. By identifying such protein-protein interactions and comparing them with known pathways within the proteomics database, we can determine the role of these proteins within a given biological pathway. We have designed our proteomic 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.

Once potential drug targets are identified, we apply technologies and processes to qualify and validate the discoveries as actual drug targets. To accomplish these, we have industrialized a series of “wet” biology approaches that include gene analysis across human disease tissue samples, cellular and biochemical assays, and in vitro and in vivo models of disease. Each of these processes further characterizes the drug targets, thus providing scientists with a greater insight into their role in drug development.

Pharmacogenomics and Pharmacogenetics

Our functional genomic 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 gene expression 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 gene sequence database to identify cSNPs in genes that respond to drugs, and can use these variations for identifying the most appropriate patients for a specific drug treatment.

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Technology Integration and Information Systems (Our GeneScape Bioinformatics Platform)

We have integrated our genomic technologies under a single bioinformatics operating system we refer to as our GeneScape bioinformatics platform. This system unifies all aspects of process management, data storage and analysis, and visualization programs used in our technologies.

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

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 with $40,000,000 from investors including ourselves, Soros Fund Management, L.L.C., Cooper Hill Partners, L.L.C, and members of our senior management team.

Competition

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

Ÿ pharmaceutical companies;

Ÿ biotechnology companies;

Ÿ diagnostic companies;

Ÿ academic and research institutions; and,

Ÿ 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:

Ÿ Human Genome Sciences, Inc.;

Ÿ Millennium Pharmaceuticals, Inc.;

Ÿ major pharmaceutical companies; and,

Ÿ universities and other research institutions (including those receiving funding from the federally funded Human Genome Project).

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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 depends on our ability to protect our genomic technologies, gene sequences, products, information systems and proprietary databases, software and other methods and technology. We continually file 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 had approximately 856 patent applications pending covering approximately 4,220 novel genes and gene transcripts, as well as our technology, discoveries and products with the United States Patent and Trademark Office (“USPTO”), and had filed numerous corresponding international and foreign patent applications. As of the date of this report, we had been issued 19 patents with respect to aspects of our technologies, discoveries and products with expiration dates from 2015 and thereafter.

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 initially to reject some of our pending new gene and protein patent applications. Although we believe that we will overcome such rejections to any of our new gene and protein cases, there is no guarantee that the USPTO will approve them. We strive especially to gain issued patents for our commercially important genes and proteins. The new guidelines are not expected to impact pending cases directed to technology platforms.

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:

Ÿ size of the patient population;

Ÿ proximity of patients to clinical sites;

Ÿ eligibility criteria for the study; and

Ÿ existence of competitive clinical trials.

We have not submitted an investigational new drug application for any product candidate, and no product candidate of ours 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 or us 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.

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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^®, GeneCalling^®, Niagara^®, QEA^®, OGI^®, SeqCalling^™, PathCalling^®, HitCalling^™, SNPCalling^™, GeneTools^™, Niagara^™, MicroNiagara^™, NanoNiagara^™, CuraGen^™, CuraMode^®, CuraTools^®, CuraMap^™, CuraSelect^™, CuraTox^® , GeneScape Portal^® , GENEANGLER^™ and SEQEXTENDER^™ 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, 2001, we and 454, our majority-owned subsidiary, had 506 full and part-time employees, 171 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 130,000 square feet at all locations. The leases are for terms of two to five years, and generally provide renewal options for terms of up to five years. In addition, we expect to construct a 62,000 square foot protein production facility on newly acquired land in Branford during the second half of 2002 and the first half of 2003. 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 currently a party to any material legal proceedings.

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, 2001.

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PART II

Item 5.    Market For Registrant’s Common Equity And Related Stockholder Matters

Market Information

Our common stock is traded on the Nasdaq National Market under the symbol “CRGN”. 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 common stock, as reported by the Nasdaq National Market:

	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

	2001
	Low		High
Quarter Ended March 31, 2001	$	18.9375	$	44.0625
Quarter Ended June 30, 2001		20.6250		41.1300
Quarter Ended September 30, 2001		16.0500		38.1300
Quarter Ended December 31, 2001		19.0800		24.8000

On February 28, 2002, the closing price of our common stock on the Nasdaq National Market was $16.63 per share.

Stockholders

As of February 28, 2002, there were approximately 200 shareholders of record of our common stock and, according to our estimates, 14,065 beneficial owners of our common stock. All of our nonvoting common stock, which was previously held by Genentech, Inc., was converted to voting common stock in November 2001.

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.

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Item 6.    Selected Financial Data

The selected consolidated financial data set forth below for each of the three years in the period ended December 31, 2001 are derived from our consolidated balance sheets as of December 31, 2000 and 2001 and the related consolidated statements of operations, of stockholders’ equity and of cash flows for each of the three years ended December 31, 1999, 2000 and 2001 and notes thereto as audited by Deloitte & Touche LLP, independent auditors, which are included elsewhere in this report. The balance sheet data as of December 31, 1997, 1998 and 1999 and the statement of operations data for each of the two years in the period ended December 31, 1998 have been derived from our related financial statements. The selected consolidated 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 consolidated financial statements.

	Year Ended December 31,
	2001			2000			1999			1998			1997
	(In thousands, except per share amounts)
Consolidated Statement of Operations Data:
Total revenue	$	23,475		$	20,838		$	15,104		$	9,257		$	5,897
Net loss attributable to common stockholders		(42,912	)		(26,978	)		(25,763	)		(18,936	)		(7,290	)
Net loss per share attributable to common stockholders		(0.89	)		(0.70	)		(0.89	)		(0.78	)		(0.46	)
Weighted average number of common shares outstanding attributable to common stockholders		48,208			38,748			28,802			24,402			15,777

	December 31,
	2001			2000			1999			1998			1997
	(In thousands)
Consolidated Balance Sheet Data:
Cash, cash equivalents and short-term investments	$	508,349		$	477,031		$	76,374		$	43,294		$	17,417
Working capital		496,131			462,543			67,890			33,066			14,739
Total assets		538,701			499,163			93,894			60,804			26,519
Total long-term liabilities		152,297			154,907			8,410			6,984			4,375
Accumulated deficit		(124,592	)		(81,680	)		(54,702	)		(28,939	)		(10,511	)
Stockholders’ equity		355,945			311,610			74,998			42,475			13,682
Cash dividends declared per common share		None			None			None			None			None

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are a genomics based pharmaceutical development company. We apply proprietary functional genomic technologies, bioinformatic systems, and disease expertise to discover genes and proteins, and to determine how these genes and proteins function in the context of disease. We use this information to develop protein, antibody, and small molecule therapeutics to treat metabolic diseases, cancer, inflammatory diseases, and central nervous system disorders. We are developing protein drugs on our own behalf. We have established an alliance with Abgenix, Inc. (“Abgenix”) to develop antibody drugs across all diseases areas, and have established an alliance with Bayer AG (“Bayer”) to develop small molecule drugs to treat obesity and diabetes. We are currently pursuing 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

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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.

Our ability to earn revenues and become profitable is dependent primarily on our ability to successfully develop and commercialize pharmaceutical products based upon our expertise in genomics, our technologies, and our drug discovery and development programs. Accomplishing this goal also depends in part on our ability to maintain our existing strategic alliances with Bayer and Abgenix, and on our ability to establish new alliances to aid us in developing and commercializing small molecule therapeutics. We cannot guarantee that any such strategic alliances, either new or existing, will be successful. We have also established a majority-owned subsidiary, 454 Corporation (“454”), to develop novel technologies for rapidly and comprehensively analyzing entire genomes. 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 pharmaceutical products over the next several years 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 and respective expertise are not expected for several years, if at all.

The 1999 and 2000 consolidated financial statements have been reclassified to conform to the classifications used in 2001. All dollar amounts are shown in thousands, except per share data.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses and as such, actual results may differ from these estimates under different assumptions or conditions.

Our critical accounting policies, which are more fully described in Note 1 to our consolidated financial statements, include the following:

Revenue Recognition.    We have entered into certain collaborative research agreements that provide for the partial or complete funding of specified projects in exchange for access to, and certain rights in, the data discovered under the related projects. Revenue is recognized based upon work performed or upon the attainment of certain benchmarks or milestones specified in the related agreements. We have also entered into a collaborative research exchange agreement in which services and technology access are exchanged between the collaborative partners. Revenues and expenses under this exchange agreement are based upon the fair value of the work performed by each collaborative partner. Deferred revenue arising from payments received from collaborative agreements is recognized as income when earned.

Cash, Cash Equivalents and Short-Term Investments.    We consider investments readily convertible into cash, with an original maturity of three months or less, to be cash equivalents. Investments with an original maturity greater than three months but less than one year are considered short-term investments. The carrying amount of the investments approximates fair value due to their short maturity.

Property and Equipment.    Property and equipment are recorded at cost. 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. Under accounting principles generally accepted in the United States of America, land is not required to be depreciated.

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

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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.

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 us 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. We will continue to apply APB No. 25 to our stock-based compensation awards to employees.

Results of Operations

Years Ended December 31, 2001 and 2000

Revenue.    Collaboration revenue for the year ended December 31, 2001 was $23,475, an increase of $2,637, or 13%, as compared to $20,838 for the corresponding period in 2000. Revenues recorded in the twelve month period ended December 31, 2001 were primarily related to our collaborative arrangements with Abgenix, Bayer, COR Therapeutics, Inc. (“COR”), and GlaxoSmithKline, Inc. (“GSK”) while the same period in 2000 primarily included revenue from our collaborative arrangements with Abgenix, COR, Genentech, Inc. (“Genentech”) and GSK. Revenue from each of Abgenix, Bayer, and GSK accounted for 10% or more of our total revenue in fiscal 2001. Abgenix, COR, DuPont/Pioneer Hi-Bred International, Inc. (“DuPont/Pioneer Hi-Bred”), Genentech, GSK, Hoffmann-La Roche Inc. and its affiliate, Roche Vitamins, Inc. (“Roche”) each accounted for 10% or more of our total revenue in 2000.

The revenue we recognize under our collaborative agreements is generally based upon work performed or the attainment of certain benchmarks and milestones specified in the related agreements. Future revenue growth will be dependent upon our ability to enter into additional collaborations and strategic alliances, maintain and expand current collaborations, receive royalties and milestone payments from products currently under development by our current and former collaborators and successfully develop and market products that may arise from our own internal product pipeline. We expect 2002 collaborative revenues to decrease slightly from 2001 levels, unless we enter into new agreements, or receive royalties and milestone payments from products currently under development by our current and former collaborative partners.

Operating Expenses.    Collaborative research and development expenses for the year ended December 31, 2001 were $65,849 compared to $40,951 for the same period in 2000. The increase of $24,898, or 61%, was primarily attributable to increased 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 continue to increase as our research and development facilities are expanded to accommodate our drug discovery and development efforts, as we continue advancing our products towards clinical development, and as the operations of 454 continue to grow.

General and administrative expenses for the year ended December 31, 2001 increased $4,587, or 32%, to $18,831 as compared to $14,244 for the same period in 2000. The increase was primarily attributable to higher recruiting, personnel, payroll and marketing costs, expenses in connection with upgrades and expansion of our facilities and related increased rent expenses, as well as legal expenses in support of the development of our intellectual property portfolio. We anticipate that general and administrative expenses will continue to increase in support of the advancement of our drug discovery and development efforts.

Interest Income, Net.    Net interest income for the year ended December 31, 2001 of $13,237 increased $7,586, or 134%, as compared to $5,651 for the same period in 2000. Gross interest income for the year ended December 31, 2001 of $23,790 increased $8,073, or 51%, as compared to $15,717 for the same period in 2000.

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The increase in gross interest income was primarily due to higher cash, cash equivalent and short-term investment balances as a result of funds we received from the proceeds of our public offering in November 2000 and from the combined net proceeds from our private placements with Abgenix in November 2000 and Bayer in January 2001, offset by recent declines in interest rates. We anticipate that gross interest income will begin to decrease as cash, cash equivalent and short-term investment balances are utilized in the normal course of operations. Gross interest expense for the year ended December 31, 2001 of $10,553 represented an increase of $487, or 5%, as compared to $10,066 for the year ended December 31, 2000. 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 expect gross interest expense to remain relatively constant in 2002.

Income Taxes.    For the year ended December 31, 2001, we have recorded a Connecticut research and development income tax benefit of $3,550. We recorded this income tax benefit as a result of Connecticut legislation, which allows companies to obtain cash refunds from the State of Connecticut at a rate of 65% of their annual research and development expense credit, in exchange for foregoing carryforward of their research and development credit. During 2002, we anticipate that the income tax benefit will be approximately $1,200, as we incur additional qualifying collaborative research and development costs. Realization of deferred tax assets is dependent on future earnings, if any, the timing and amount of which are uncertain. Accordingly, valuation allowances in amounts equal to the deferred income tax assets have been established to reflect these uncertainties in all periods presented.

Net Loss.    For the twelve months ended December 31, 2001, we reported a net loss of $42,912, or $0.89 per share as compared to $26,978, or $0.70 per share, for the same period in 2000. Since inception, we have incurred operating losses, and as of December 31, 2001, we had an accumulated deficit of $124,592. We have not paid any federal income taxes.

Minority Interest in Subsidiary Loss.    Minority interest in subsidiary loss for the year ended December 31, 2001, which is the portion of 454’s loss attributable to stockholders of 454 other than us, was $1,506 as compared to $328 for the same period in 2000. The increase of $1,178, or 359%, was primarily due to 454’s increased purchases of laboratory supplies, increased equipment depreciation and facilities expenses, as well as additional personnel costs, all of which were incurred during a full twelve month period in 2001, as compared to seven months during 2000, since 454 was formed in June 2000. As the expected future level of 454’s loss increases, we anticipate recording an increased minority interest in subsidiary loss based upon the minority shareholders’ ownership percentage.

Years Ended December 31, 2000 and 1999

Revenue.    Collaboration revenue for the year ended December 31, 2000 was $20,838, an increase of $6,371, or 44%, as compared to $14,467 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, Genentech and GSK. The increase was offset by a decrease in grant revenue due to the completion of all of our federal grants during 1999. Revenue from each of Abgenix, COR, DuPont/Pioneer Hi-Bred, Genentech, GSK, Roche accounted for 10% or more of our total revenue in fiscal 2000. Biogen, Inc., DuPont/Pioneer Hi-Bred, GSK, Roche each accounted for 10% or more of our total revenue in 1999.

Operating Expenses.    Collaborative research and development expenses for the year ended December 31, 2000 were $40,951 compared to $29,518 for the same period in 1999. The increase of $11,433, 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. The decrease in grant research expenses was attributable to the completion of our federal grants during 1999.

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General and administrative expenses for the year ended December 31, 2000 increased $4,883, or 52%, to $14,244 as compared to $9,361 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 portfolio.

Interest Income, Net.    Net interest income for the year ended December 31, 2000 of $5,651 increased $4,564, or 420%, compared to $1,087 for 1999. Gross interest income for the year ended December 31, 2000 of $15,717 increased $13,438, or 590%, as compared to $2,279 for the same period in 1999. The increase in gross interest income was primarily due to higher cash, cash equivalent and short-term investment 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 subsidiary 454 in June 2000 and from the proceeds of our public offering in November 2000. Gross interest expense for the year ended December 31, 2000 of $10,066 increased $8,874, or 745%, compared to $1,192 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.

Income Taxes.    For the year ended December 31, 2000, we recorded a Connecticut research and development income tax benefit of $1,400. This income tax benefit was 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.

Net Loss.    For the year ended December 31, 2000, we reported a net loss of $26,978, or $0.70 per share, as compared to a net loss of $25,763, or $0.89 per share, in 1999.

Minority Interest in Subsidiary Loss.    For the year ended December 31, 2000, minority interest in subsidiary loss of $328 was recorded for the portion of 454’s loss attributable to stockholders of 454 other than us.

Liquidity and Capital Resources

As of December 31, 2001, we had $508,349 in cash, cash equivalents and short-term investments, compared to $477,031 as of December 31, 2000. This increase was primarily a result of our receipt of $85,000 from our private placement with Bayer in January 2001, partially offset by operating losses in support of our research and development activities and interest paid to the holders of our convertible subordinated debt issued in February 2000. We have financed our operations since inception primarily through public offerings, our convertible subordinated debt offering, revenues received under our collaborative research agreements, private placements of equity securities, government grants, and capital leases. As of December 31, 2001, we had recognized $80,854 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, 2001, our gross investment in lab and office equipment, computers, land and leasehold improvements since inception was $36,952. At December 31, 2001, equipment with a gross book value of $10,301 secures our equipment financing facilities. We anticipate that we will use net proceeds of up to $15,000 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 $1,700 in material commitments for capital expenditures at December 31, 2001.

In accordance with our investment policy, we are utilizing the following investment objectives for cash, cash equivalents and short-term investments: (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.

17

Cash Flows For The Year Ended December 31, 2001

Operating Activities.    Net cash used in operating activities was $38,075 for the year ended December 31, 2001 and was primarily due to the $35,881 net cash loss from operations and increases in prepaid expenses, accrued payroll and related items and other current liabilities of $2,128, $556 and $782, respectively, offset by decreases in income taxes receivable and deferred revenue of $544 and $1,827, respectively.

Investing Activities.    Net cash used in investing activities was $138,997 for the year ended December 31, 2001 and was primarily due to net outflows from purchases and maturities of short-term investments of $125,195, acquisitions of property and equipment of $11,382 and payments of $2,583 for intangible assets, substantially consisting of deferred real estate costs.

Financing Activities.    Net cash provided by financing activities was $83,195 for the year ended December 31, 2001 and primarily included proceeds of $85,000 from the private placement of common stock to Bayer, proceeds from the sale-leaseback of equipment and exercises of stock options in the amount of $901 and $888, respectively, offset by payments on capital lease obligations of $3,518.

Future Liquidity

Sources of Liquidity.    During 2002, we expect to fund our operations through a combination of the following sources: cash, cash equivalents and short-term investment balances; collaboration revenue; gross interest income; available lease lines; draw-downs on our collaborator loan facility; tax benefits from the State of Connecticut; stock option exercises; and, potential public securities offerings and/or private strategic-driven common stock offerings.

Uses of Liquidity.    Throughout 2002, we plan to continue making substantial investments in our emerging preclinical and clinical drug pipeline. In that regard, we foresee the following as significant uses: research and development expenses; general and administrative expenses; gross interest expense; and, facilities and equipment costs. In order to advance our therapeutic pipeline in a cost effective and efficient manner, we will invest approximately $40,000 to build a protein production facility that will enable scientists to maintain the control necessary to expedite production of these therapeutics. We expect to incur approximately 50% of the costs associated with this capital investment in the second half of 2002 and the remainder during the first half of 2003. In addition, we anticipate that we will also incur additional capital expenditures in 2002, primarily for the purchase of equipment and tenant improvements at our existing research facilities and administrative offices.

In addition to the above mentioned operating uses of liquidity, the following table represents our future contractual obligations as of December 31, 2001:

	Payments Due Year Ended December 31,
	Total		2002		2003		2004		2005		2006
Capital leases	$	5,568	$	3,529	$	1,770	$	269	$	—	$	—
Operating leases		2,219		1,406		225		235		243		110
Interest on convertible subordinated debt		45,000		9,000		9,000		9,000		9,000		9,000
Total	$	52,787	$	13,935	$	10,995	$	9,504	$	9,243	$	9,110

We believe that our existing cash, cash equivalent and short-term investment balances and other sources of liquidity will be sufficient to meet our requirements through the end of 2002. Our expenditures are considered to be crucial to our future success and by continuing to make strategic investments in research and development, we are building substantial value for our shareholders. While we will continue to explore alternate sources for financing our business activities, including the possibility of public and/or private offerings of our securities, we cannot assure that in the future these sources of liquidity will be available when needed or that our actual cash requirements will not be greater than anticipated. In appropriate strategic situations, we may seek financial assistance from other sources, including contribution by others to joint ventures and other collaborative or licensing arrangements for the development and testing of products under development.

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Income Taxes

At December 31, 2001, we had federal and Connecticut net operating loss carryforwards for income tax purposes of $182,874 and $173,015, respectively. Federal net operating loss carryforwards expire beginning in 2008, and Connecticut net operating loss carryforwards began expiring in 1998. We also had federal and Connecticut research and development tax credit carryforwards for income tax purposes of $7,209 and $6,202, respectively, at December 31, 2001.

At December 31, 2001, 454 had federal and Connecticut net operating loss carryforwards for income tax purposes of $4,289 and $4,037, respectively. Federal net operating loss carryforwards expire beginning in 2016, and Connecticut net operating loss carryforwards begin expiring in 2021. 454 also had federal and Connecticut research and development tax credit carryforwards for income tax purposes of $196 and $0, respectively, at December 31, 2001.

Minority Interest in Subsidiary

As of December 31, 2001, minority interest in subsidiary was $13,899. Minority interest in subsidiary is related to the establishment of 454, a majority-owned subsidiary, during 2000 and reflects the initial minority shareholders’ capitalization less a gain recognition of $3,929 as a result of our contribution of technology to 454, less the minority shareholders’ portion of various expenses incurred to date. The loss attributed to the minority ownership in 454 is expected to increase during 2002 as 454 ramps up expenditures associated with technology development.

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”) which 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”, became effective for fiscal years beginning after June 15, 2000. We have determined that the adoption of SFAS 133 will have no impact on our consolidated financial statements. We have not entered into derivatives contracts either to hedge existing risks or for speculative purposes.

In July 2001, the FASB issued Statement of Financial Accounting Standards No. 141, “Business Combinations (“SFAS 141”)”, Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets (“SFAS 142”)”, and Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations (“SFAS 143”)”. SFAS 141 requires that the purchase method of accounting be used for all business combinations completed after June 30, 2001 and clarifies the criteria for recognition of intangible assets separately from goodwill. We have determined that the adoption of SFAS 141 will have no impact on our consolidated financial statements.

SFAS 142 requires that ratable amortization of goodwill be replaced with periodic tests of the goodwill’s impairment and that intangible assets, other than goodwill, which have determinable useful lives be amortized over that period. SFAS 142 is effective for fiscal years beginning after December 15, 2001. We have determined that the adoption of SFAS 142 will have no impact on our consolidated financial statements.

SFAS 143 provides accounting requirements for retirement obligations associated with tangible long-lived assets. SFAS 143 is effective for fiscal years beginning after June 15, 2002. We do not expect the adoption of this standard to affect our consolidated financial statements.

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In October 2001, the FASB issued Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets” (“SFAS 144”), which addresses accounting and reporting for the impairment or disposal of long-lived assets, including discontinued operations. It establishes a single accounting model for long-lived assets to be disposed of by sale. SFAS 144 became effective January 1, 2002. We do not expect adoption of the new standard to affect 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 ability to apply proprietary genomic technologies to understand the molecular basis of disease and develop the next generation of therapeutic products for important diseases, (ii) the expected transformation of the pharmaceutical industry and our opportunities with respect thereto, (iii) our ability to advance promising therapeutics into the clinic and to leverage the entire human genome in order to accomplish that goal, (iv) our ability to establish our fully integrated technologies and GeneScape operating system as the preferred platform for genomics, drug discovery, drug development and pharmacogenomics, (v) the likely success of our technologies, (vi) the expected benefits, effects, efficiency and performance of our services and products, (vii) our ability to enter into additional collaborations and strategic alliances, maintain and expand current collaborations, receive royalties and milestone payments from products currently under development by current and former collaborators and successfully develop and market products from our internal product pipeline, (viii) the suitability of Company-discovered genes and proteins involved in diabetes, hypertension and obesity as targets for small molecule drug development, (ix) the capacity of our products to predict the efficiency and safety of drugs already on the market and in development pipelines, (x) the ability of our subsidiary, 454, to commercialize products upon their development and create a future source of revenues for us, (xi) the expected future levels of losses, operating expenses and material commitments. 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 stage of development as a genomics based pharmaceutical company, uncertainties of clinical trials, government regulation and healthcare reform, technological uncertainty and product development risks, product liability exposure, uncertainty of additional funding, our history of incurring losses and the uncertainty of achieving profitability, reliance on research collaborations and strategic alliances, competition, and our ability to protect our patents and proprietary rights, and uncertainties relating to commercialization rights.

For further information, refer to the more specific risks and uncertainties discussed throughout this discussion and analysis.

Item 7a.    Quantitative and Qualitative Disclosures About Market Risk

Currently, we maintain approximately half of our cash, cash equivalents and short-term investments in financial instruments with original maturity dates of three months or less, and the remainder in financial instruments with original maturity dates of greater than three months but less than one year. These financial instruments are subject to interest rate risk and will decline in value if interest rates increase. Due to the short duration of these financial instruments, a change of 100 basis points in interest rates would not have a material effect on our financial condition.

Our outstanding long-term liabilities as of December 31, 2001 bear interest at fixed rates, therefore, our results of operations would not be affected by interest rate changes. Although future borrowings would be affected by interest rate changes, at this point we do not anticipate any significant future borrowings, and therefore do not believe that a change of 100 basis points in interest rates would have a material effect on our financial condition.

Item 8.    Financial Statements and Supplementary Data

20

CURAGEN CORPORATION AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(in thousands, except par value and share data)

	December 31,
	2000			2001
ASSETS
Current assets:
Cash and cash equivalents	$	329,495		$	235,618
Short-term investments		147,536			272,731
Income taxes receivable		1,400			856
Other current assets		671			676
Prepaid expenses		682			2,810
Total current assets		479,784			512,691
Property and equipment, net		14,188			19,376
Notes receivable—related parties		328			190
Other assets		316			131
Intangible assets, net		4,547			6,313
Total assets	$	499,163		$	538,701
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,587		$	3,476
Accrued expenses		1,764			1,744
Accrued payroll and related items		1,368			1,924
Interest payable, short-term		3,750			3,750
Deferred revenue		3,852			2,025
Deferred rent		59			59
Current portion of obligations under capital leases		2,861			2,800
Other current liabilities		—			782
Total current liabilities		17,241			16,560
Long-term liabilities:
Deferred rent, net of current portion		59			—
Convertible subordinated debt		150,000			150,000
Obligations under capital leases, net of current portion		4,848			2,297
Total long-term liabilities		154,907			152,297
Commitments and contingencies
Minority interest in subsidiary		15,405			13,899
Stockholders’ equity:
Common Stock—Voting; $.01 par value, issued and outstanding 44,050,017 shares at December 31, 2000, and 48,729,319 shares at December 31, 2001		441			487
Common Stock—Non-Voting; $.01 par value, issued and outstanding 1,270,272 shares at December 31, 2000, and none at December 31, 2001		13			—
Additional paid-in capital		392,867			480,050
Accumulated deficit		(81,680	)		(124,592	)
Unamortized stock-based compensation		(31	)		—
Total stockholders’ equity		311,610			355,945
Total liabilities and stockholders’ equity	$	499,163		$	538,701

See accompanying notes to consolidated financial statements

21

CURAGEN CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	Year Ended December 31,
	1999			2000			2001
Revenue:
Grant revenue	$	637		$	—		$	—
Collaboration revenue		14,467			20,838			23,475
Total revenue		15,104			20,838			23,475
Operating expenses:
Grant research		418			—			—
Collaborative research and development		29,518			40,951			65,849
Asset impairment expense		2,657			—			—
General and administrative		9,361			14,244			18,831
Total operating expenses		41,954			55,195			84,680
Loss from operations		(26,850	)		(34,357	)		(61,205	)
Interest income, net		1,087			5,651			13,237
Net loss before income taxes and minority interest in subsidiary loss		(25,763	)		(28,706	)		(47,968	)
Income tax benefit		—			1,400			3,550
Minority interest in subsidiary loss		—			328			1,506
Net loss	$	(25,763	)	$	(26,978	)	$	(42,912	)
Basic and diluted net loss per share	$	(0.89	)	$	(0.70	)	$	(0.89	)
Weighted average number of shares used in computing basic and diluted net loss per share		28,802			38,748			48,208

See accompanying notes to consolidated financial statements

22

CURAGEN CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Year Ended December 31, 1999, 2000 and 2001

(in thousands, except number of shares)

	Number of Shares	Voting Common Stock ($.01 par value)		Number of Shares		Non-Voting Common Stock ($.01 par value)			Additional Paid-in Capital			Accumulated Deficit			Unamortized Stock-Based Compensation			Total
January 1, 1999	26,633,514	$	267	—			—		$	71,917		$	(28,939	)	$	(769	)	$	42,476
Issuance of common stock	5,060,034		50	1,955,272		$	20			55,930			—			—			56,000
Stock issuance costs	—		—	—			—			(118	)		—			—			(118	)
Amortization and write-off of stock-based compensation	—		—	—			—			(193	)		—			454			261
Amortization of warrants—capital lease obligations	—		—	—			—			(16	)		—			—			(16	)
Exercise of employee stock options	184,838		2	—			—			661			—			—			663
Exercise of non-employee stock options	912,000		9	—			—			992			—			—			1,001
Issuance of options to non-employees	—		—	—			—			104			—			—			104
Stock-based 401(k) employer plan match	52,690		1	—			—			306			—			—			307
Other	—		—	—			—			84			—			—			84
Net loss	—		—	—			—			—			(25,763	)		—			(25,763	)
December 31, 1999	32,843,076		329	1,955,272			20			129,667			(54,702	)		(315	)		74,999
Issuance of common stock	6,241,442		62	—			—			246,738			—			—			246,800
Issuance of warrants	—		—	—			—			12,500			—			—			12,500
Stock issuance costs	—		—	—			—			(10,949	)		—			—			(10,949	)
Amortization and write-off of stock-based compensation	—		—	—			—			(131	)		—			284			153
Amortization of warrants—capital lease obligations	—		—	—			—			(17	)		—			—			(17	)
Exercise of employee stock options	775,782		8	—			—			2,672			—			—			2,680
Exercise of non-employee stock options	356,224		4	—			—			900			—			—			904
Exercise of non-employee warrants	3,137,732		31	—			—			6,433			—			—			6,464
Issuance of options to non-employees	—		—	—			—			591			—			—			591
Stock-based 401(k) employer plan match	10,761		—	—			—			534			—			—			534
Conversion of non-voting common stock	685,000		7	(685,000	)		(7	)		—			—			—			—
Gain on sale of technology to subsidiary	—		—	—			—			3,929			—			—			3,929
Net loss	—		—	—			—			—			(26,978	)		—			(26,978	)
December 31, 2000	44,050,017		441	1,270,272			13			392,867			(81,680	)		(31	)		311,610
Issuance of common stock	3,112,482		31	—			—			84,969			—			—			85,000
Stock issuance costs	—		—	—			—			(125	)		—			—			(125	)
Amortization and write-off of stock-based compensation	—		—	—			—			—			—			31			31
Amortization of warrants—capital lease obligations	—		—	—			—			(5	)		—			—			(5	)
Exercise of employee stock options	200,546		2	—			—			788			—			—			790
Exercise of non-employee stock options	32,848		—	—			—			98			—			—			98
Exercise of non-employee warrrants	30,000		—	—			—			61			—			—			61
Issuance of options to non-employees	—		—	—			—			656			—			—			656
Stock-based 401(k) employer plan match	33,154		—	—			—			741			—			—			741
Conversion of non-voting common stock	1,270,272		13	(1,270,272	)		(13	)		—			—			—			—
Net loss	—		—	—			—			—			(42,912	)		—			(42,912	)
December 31, 2001	48,729,319	$	487	—			—		$	480,050		$	(124,592	)		—		$	355,945

See accompanying notes to consolidated financial statements

23

CURAGEN CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Year Ended December 31,
	1999			2000			2001
Cash flows from operating activities:
Net loss	$	(25,763	)	$	(26,978	)	$	(42,912	)
Adjustments to reconcile net loss to net cash used in operating activities:
Asset impairment expense		2,657			—			—
Depreciation and amortization		5,552			6,090			7,109
Non-monetary compensation		365			744			687
Stock-based 401(k) employer plan match		307			534			741
Minority interest		—			(328	)		(1,506	)
Changes in assets and liabilities:
Income taxes receivable		—			(1,400	)		544
Other current assets		(242	)		196			(5	)
Prepaid expenses		(642	)		454			(2,128	)
Other assets		127			(70	)		74
Accounts payable		(934	)		1,744			(111	)
Accrued expenses		534			750			(20	)
Accrued payroll and related items		(331	)		534			556
Interest payable		—			3,729			—
Deferred revenue		(892	)		(131	)		(1,827	)
Deferred rent		(112	)		(69	)		(59	)
Other current liabilities		—			—			782
Net cash used in operating activities		(19,374	)		(14,201	)		(38,075	)
Cash flows from investing activities:
Acquisitions of property and equipment		(8,626	)		(4,273	)		(11,382	)
Payments for intangible assets		(96	)		(463	)		(2,583	)
(Loans to) Repayments from related parties		(4	)		(232	)		138
Proceeds from sale of fixed assets		1			165			25
Net outflows from purchases and maturities of short-term investments		(29,733	)		(117,804	)		(125,195	)
Net cash used in investing activities		(38,458	)		(122,607	)		(138,997	)
Cash flows from financing activities:
Payments on capital lease obligations		(3,020	)		(3,318	)		(3,518	)
Proceeds from issuance of Common Stock		56,000			246,800			85,000
Proceeds from issuance of 454 Corporation Preferred Stock		—			20,000			—
Proceeds from issuance of warrants		—			12,500			—
Proceeds from sale-leaseback of equipment		6,654			—			901
Proceeds from issuance of convertible subordinated debt		—			150,000			—
Payments of stock issuance costs		(118	)		(11,288	)		(125	)
Payments of financing costs		—			(5,080	)		(12	)
Proceeds from exercise of stock options		1,664			3,583			888
Proceeds from exercise of warrants		—			6,464			61
Net cash provided by financing activities		61,180			419,661			83,195
Net increase (decrease) in cash and cash equivalents		3,348			282,853			(93,877	)
Cash and cash equivalents, beginning of year		43,294			46,642			329,495
Cash and cash equivalents, end of year	$	46,642		$	329,495		$	235,618
Supplemental cash flow information:
Interest paid	$	1,041		$	5,652		$	9,767
Noncash financing transactions:
Obligations under capital leases	$	8,382			—		$	901

See accompanying notes to consolidated financial statements

24

CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Organization and Summary of Significant Accounting Policies

Organization—CuraGen Corporation (the “Company” or “CuraGen”) is a genomics based pharmaceutical development company that applies integrated functional genomic technologies and Internet-based bioinformatic systems to discover and develop pharmaceutical products to treat large unmet medical needs. Through the application of their proprietary technologies, the Company is gaining an understanding of how genes and proteins function in the context of disease, and are applying this knowledge to the development of protein, antibody, and small molecule therapeutics. 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 1999 and 2000 consolidated financial statements have been reclassified to conform to the classification used in 2001. All dollar amounts are shown in thousands, except per share data.

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 that provide for the partial or complete funding of specified projects in exchange for access to, and certain rights in, the data discovered under the related projects. Revenue is recognized based upon work performed or upon the attainment of certain benchmarks or milestones specified in the related agreements. The Company has also entered into a collaborative research exchange agreement in which services and technology access are exchanged between the collaborative partners. Revenues and expenses under this exchange arrangement are based upon the fair value of the work performed by each collaborative partner. Revenues were $167, $2,371 and $5,384 and expenses were $292, $3,871 and $6,884 under the collaborative research exchange agreement for the years ended December 31, 1999, 2000 and 2001, respectively. Deferred revenue arising from payments received from collaborative agreements is recognized as income when earned. 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).

Cash, Cash Equivalents and Short-Term Investments—The Company considers investments readily convertible into cash with an original maturity of three months or less to be cash equivalents. Investments with an original maturity greater than three months but less than one year are considered short-term investments. The carrying amount of the investments approximates fair value due to their short maturity.

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. Under accounting principles generally accepted in the United States of America, land is not required to be depreciated. 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

25

CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 original 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 $33, $45 and $57, respectively, as of December 31, 1999, 2000 and 2001. Related amortization expense was $12 for each of the years ended December 31, 1999, 2000 and 2001. Additionally, deferred real estate costs were paid during 2001 in connection with the proposed company construction of a new facility in Branford, Connecticut. These costs, which are currently included in Intangible assets, net, will be capitalized and depreciated over the estimated useful life of the building as of the date of occupancy, currently anticipated to be during 2003.

Licensing Fees—Licensing fees for various research and development purposes were paid during 1999, 2000 and 2001. 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 and 2001. Accumulated amortization aggregated $128, $102 and $87, respectively, as of December 31, 1999, 2000 and 2001. Related amortization expense was $97, $429 and $94, respectively, for the years ended December 31, 1999, 2000 and 2001.

Financing Costs—Financing costs related to the convertible subordinated debt (see Note 8) were paid during 2000 and 2001. These costs, which are included in Intangible assets, net, are amortized over the remaining life of the debt. Accumulated amortization aggregated $655 and $1,384, respectively, as of December 31, 2000 and 2001. Related amortization expense was $655 and $729, respectively, for the years ended December 31, 2000 and 2001.

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 1999, 2000 and 2001, 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. For options issued to non-employees, the Company records the transactions based upon the

26

CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

difference between the option strike price and the estimated fair market value as of the date each option vests. The Company recorded stock-based compensation expense attributable to non-employees totaling $104, $591 and $656 for the years ended December 31, 1999, 2000 and 2001, respectively. For options issued to employees, the Company records the transactions based upon the difference between the option strike price and the Company’s closing stock price on the Nasdaq National Market as of the date of issuance. Stock-based compensation associated with options granted to employees during 1997 amounted to $1,673 and is being expensed by the Company over the vesting period of the underlying options. During 1999, 2000 and 2001, no stock-based compensation in connection with options granted to employees was recorded as all options granted were issued at the Company’s closing stock price on the Nasdaq National Market as of the date of issuance. The Company recorded amortization, net of write-offs, of stock-based compensation expense for options issued to employees during 1997 of $261, $154 and $31 for the years ended December 31, 1999, 2000 and 2001, respectively. During 1999, 2000 and 2001, no stock-based compensation in connection with options granted to employees was recorded as all options granted were issued at the Company’s closing stock price on the Nasdaq National Market as of the date of issuance.

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 of the “temporary differences” between the tax basis of assets and liabilities and their financial reporting amounts.

Loss Per Share—Basic loss per share (“LPS”) is computed by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted LPS 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 LPS calculations. Under the assumption that warrants, convertible subordinated debt and options were not antidilutive, the denominator for diluted loss per share would be 30,789,412, 42,638,848 and 50,680,170 at December 31, 1999, 2000 and 2001, respectively.

Fair Value of Financial Instruments—Statement of Financial Accounting Standards No. 107, “Disclosures about Fair Value of Financial Instruments” 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, cash equivalents and short-term investments, receivables, accounts payable, accrued 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 materially from those estimates.

Segments—The FASB issued Statement of Financial Accounting Standards No. 131, “Disclosures About Segments of an Enterprise and Related Information” (“SFAS 131”) which establishes standards for reporting information on operating segments in interim and annual financial statements, and became effective for fiscal years beginning after December 15, 1997. The Company’s chief operating decision makers review the profit and loss of the Company on an aggregate basis and manage the operations of the Company as a single operating segment. Accordingly, the Company had one reportable segment as of December 31, 2001.

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”) which

27

CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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”, became effective for fiscal years beginning after June 15, 2000. The Company has determined that the adoption of SFAS 133 will have no impact on its consolidated financial statements. The Company has not entered into derivatives contracts either to hedge existing risks or for speculative purposes.

In July 2001, the FASB issued Statement of Financial Accounting Standards No. 141, “Business Combinations” (“SFAS 141”), Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), and Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations” (“SFAS 143”). SFAS 141 requires that the purchase method of accounting be used for all business combinations completed after June 30, 2001 and clarifies the criteria for recognition of intangible assets separately from goodwill. The Company has determined that the adoption of SFAS 141 will have no impact on its consolidated financial statements.

SFAS 142 requires that ratable amortization of goodwill be replaced with periodic tests of the goodwill’s impairment and that intangible assets, other than goodwill, which have determinable useful lives be amortized over that period. SFAS 142 is effective for fiscal years beginning after December 15, 2001. The Company has determined that the adoption of SFAS 142 will have no impact on its consolidated financial statements.

SFAS 143 provides accounting requirements for retirement obligations associated with tangible long-lived assets. SFAS 143 is effective for fiscal years beginning after June 15, 2002. The Company does not expect the adoption of this standard to affect its consolidated financial statements.

In October 2001, the FASB issued Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets” (“SFAS 144”), which addresses accounting and reporting for the impairment or disposal of long-lived assets, including discontinued operations. It establishes a single accounting model for long-lived assets to be disposed of by sale. SFAS 144 became effective January 1, 2002. The Company does not expect adoption of this standard to affect its consolidated financial statements.

2.    Property and Equipment

Property and equipment consisted of the following:

	December 31,
	2000		2001
Laboratory equipment	$	8,193	$	11,088
Leased equipment		11,371		10,301
Leasehold improvements		1,582		4,434
Office equipment		4,516		9,427
Land		—		1,702
Total property and equipment		25,662		36,952
Less accumulated depreciation and amortization		11,474		17,576
Total property and equipment, net	$	14,188	$	19,376

Depreciation and amortization expense was $5,441, $4,878 and $6,166 for the years ended December 31, 1999, 2000 and 2001, respectively. During the second half of 2001, the Company spent $1,702 in the initiation of

28

CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

a purchase of land for the development of a protein production facility in Branford, Connecticut, and completed the purchase of this land in early 2002 for an additional amount of approximately $2,300.

3.    Leases

Capital Leases

In April 1997, the Company signed a lease-financing commitment to receive $4,000 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 Company’s Common Stock (“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. 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 $60. All of these warrants were exercised in March 2000.

In June 1998, the Company signed a lease-financing commitment to receive $10,000 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 in the amount of $2,400. The agreement provides for payment terms of twelve quarterly installments.

Since inception, the Company has also entered into other capital lease agreements to finance the purchase of equipment.

Leased equipment under all capital lease agreements consisted of the following:

	December 31,
	2000		2001
Leased equipment	$	11,371	$	10,301
Less accumulated amortization		5,474		6,347
Total leased equipment, net	$	5,897	$	3,954

The Company financed leased assets with costs of $8,382, $0 and $901 for the years ended December 31, 1999 2000 and 2001, respectively. These arrangements have terms of three to five years with interest rates ranging from approximately 9% to 19%. However, of the remaining outstanding leases, the majority of the arrangements have interest rates ranging from approximately 9% to 14%. 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, 2001 were as follows:

Year Ended December 31,
2002	$	3,529
2003		1,770
2004		269
Total minimum lease payments		5,568
Less amounts representing interest		471
Present value of future minimum lease payments		5,097
Less current portion of obligations		2,800
Obligations under capital leases, net of current portion	$	2,297

29

CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 June 2001, the Company amended that lease to increase its leased space by 8,000 square feet to a total of 48,000 square feet. 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.

In May 2001, the Company entered into a five-year lease agreement for a 20,000 square foot additional research facility in Branford, Connecticut. The Company has the option to renew this lease for one additional term of five years.

In November 2001, 454 entered into a non-renewable five-year lease agreement for its 16,000 square foot research facility in Branford, Connecticut.

Total rent expense under all operating leases for 1999, 2000 and 2001 was approximately $1,335, $1,476 and $1,757, respectively.

The future minimum rental payments for all operating leases are as follows as of December 31, 2001:

Year Ended December 31,
2002	$	1,406
2003		225
2004		235
2005		243
2006		110
Total	$	2,219

4.    Major Collaborators

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. Revenues from collaborative research agreements representing 10% or more of the Company’s total revenues are as follows:

	Year Ended December 31,
	1999				2000				2001
	Dollars		Percentages		Dollars		Percentages		Dollars		Percentages
Company A		*	*		$	2,371	11	%	$	5,384	23	%
Company B		*	*			*	*			8,332	35	%
Company C	$	2,100	14	%		*	*			*	*
Company D		*	*			2,363	11	%		*	*
Company E		5,000	33	%		4,706	23	%		*	*
Company F		*	*			2,732	13	%		*	*
Company G		2,408	16	%		4,102	20	%		4,252	18	%
Company H		3,736	25	%		3,511	17	%		*	*

* less than 10%

30

CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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. At December 31, 2001, the Company had reserved 937,500 shares of Common Stock for issuance pursuant to outstanding warrants, 528,480 shares of Common Stock for issuance pursuant to the 1993 Stock Plan and 6,279,748 shares of Common Stock for issuance pursuant to the 1997 Stock Plan.

454’s authorized capital stock consists of 40,000,000 shares of Common Stock, par value of $.01 per share (“454 Common Stock”) and 30,000,000 shares of Preferred Stock, par value of $.01 per share (“454 Preferred Stock”), of which 12,000,000 shares are designated as Series A Convertible Preferred Stock and 8,000,000 shares are designated as Series B Convertible Preferred Stock. At December 31, 2001, 454 had reserved 5,000,000 shares of Common Stock for issuance pursuant to the 454 2000 Stock Plan.

Common Stock and Warrants to Purchase Common Stock

In March 2000, the Company effected 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 June 2000, in conjunction with its formation of 454, 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.

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.

Also 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 to Abgenix, Inc.

In January 2001, the Company completed a private placement of 3,112,482 shares of Common Stock for an aggregate purchase price of $85,000 to Bayer AG.

In March 2001, 454 effected a two-for-one split on both its 454 Common Stock and 454 Preferred 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 November 2001, all of the Company’s Non-Voting Common Stock, which was held by Genentech, Inc., was converted to Voting Common Stock.

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 provided for the issuance of stock options and stock awards to officers, directors, advisors, employees, and affiliates of the Company. Of the 3,000,000 shares of Common Stock which were originally reserved for issuance under the 1993 Stock Plan, options to purchase 528,480 shares were granted and outstanding as of December 31, 2001. As of December 31, 2001, 1,142,488 stock options have been exercised and the Company does not intend to grant any additional options or awards under the 1993 Stock Plan.

31

CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

A summary of all stock option activity under the 1993 Stock Plan during the years ended December 31, 1999, 2000 and 2001 is as follows:

	Number of Shares		Weighted Average Exercise Price
Outstanding January 1, 1999	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
Granted	—			—
Exercised	(97,306	)		2.91
Canceled or lapsed	—			—
Outstanding December 31, 2001	528,480			2.34
Exercisable December 31, 1999	898,922			2.06
Exercisable December 31, 2000	471,599			2.13
Exercisable December 31, 2001	493,946			2.21

The following table summarizes information about stock options under the 1993 Stock Plan at December 31, 2001:

Range of Exercise Prices	Number of Options Outstanding	Weighted Average Contractual Life	Weighted Average Exercise Price
$0.76-1.50	235,650	3.8	$	1.21
2.05-5.00	292,830	5.4		3.25
	528,480

Range of Exercise Prices	Number of Options Exercisable	Weighted Average Exercise Price of Options Exercisable
$0.76-1.50	235,650	$	1.21
2.05-5.00	258,296		3.12
	493,946

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, 2001, there were no options outstanding that 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.

32

CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

A summary of all non-plan stock option activity during the years ended December 31, 1999, 2000 and 2001 is as follows:

	Number of Shares		Weighted Average Exercise Price
Outstanding January 1, 1999	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	—			—
Granted	—			—
Exercised	—			—
Canceled or lapsed	—			—
Outstanding December 31, 2001	—			—
Exercisable December 31, 1999	16,500			.50
Exercisable December 31, 2000	—			—
Exercisable December 31, 2001	—			—

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 were originally 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, 2001, the Company had 4,277,891 options outstanding under the 1997 Stock Plan and an additional 2,001,857 available for grant. In addition, 720,252 stock options had been exercised under the 1997 Stock Plan as of December 31, 2001.

33

CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

A summary of all stock option activity under the 1997 Stock Plan during the years ended December 31, 1999, 2000 and 2001 is as follows:

	Number of Shares		Weighted Average Exercise Price
Outstanding January 1, 1999	2,540,200		$	4.34
Granted	1,199,000			4.83
Exercised	(100,038	)		4.57
Canceled or lapsed	(643,464	)		4.48
Outstanding December 31, 1999	2,995,698			4.50
Granted	1,182,520			49.31
Exercised	(484,126	)		4.44
Canceled or lapsed	(230,497	)		20.03
Outstanding December 31, 2000	3,463,595			18.77
Granted	1,147,000			25.83
Exercised	(136,088	)		4.45
Canceled or lapsed	(196,616	)		22.30
Outstanding December 31, 2001	4,277,891			20.96
Exercisable December 31, 1999	594,401			4.28
Exercisable December 31, 2000	791,172			6.16
Exercisable December 31, 2001	1,523,954			13.27

The following table summarizes information about stock options under the 1997 Stock Plan at December 31, 2001:

Range of Exercise Prices	Number of Options Outstanding	Weighted Average Contractual Life	Weighted Average Exercise Price
$  2.5650-3.0650	257,700	6.7	$	3.01
3.3750-3.7130	563,660	5.6		3.44
3.8750-5.3150	662,847	7.2		4.11
5.7500-8.4060	663,530	6.4		6.40
16.7500-24.9375	290,770	9.3		21.12
26.5625-31.6600	885,034	8.9		27.34
41.1250-58.3340	954,350	8.0		52.01
	4,277,891

34

CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Range of Exercise Prices	Number of Options Exercisable	Weighted Average Exercise Price of Options Exercisable
$  2.5650-3.0650	226,900	$	3.03
3.3750-3.7130	341,060		3.44
3.8750-5.3150	252,767		4.12
5.7500-8.4060	363,530		6.31
16.7500-24.9375	60,876		24.26
26.5625-31.6600	39,034		30.48
41.1250-58.3340	239,787		51.54
	1,523,954

454’s 2000 Employee, Director and Consultant Stock Plan (“454 2000 Stock Plan”) was approved by its Board of Directors and stockholders in September 2000. The 454 2000 Stock Plan provides for the issuance of stock options and stock grants (‘‘Stock Rights’’) to employees, directors and consultants of 454. A total of 5,000,000 shares of Common Stock are reserved for issuance under the 454 2000 Stock Plan. The 454 2000 Stock Plan is administered by the Compensation Committee of the Board of Directors of 454. The Compensation Committee has the authority to administer the provisions of the 454 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, 2001, 454 had 1,927,250 options outstanding, an additional 3,072,750 available for grant, and no stock options have been exercised under the 454 2000 Stock Plan.

A summary of all stock option activity under the 454 2000 Stock Plan during the years ended December 31, 2000 and 2001 is as follows:

	Number of Shares		Weighted Average Exercise Price
Outstanding January 1, 2000.	—			—
Granted.	1,570,000		$	2.50
Exercised	—			—
Canceled or lapsed.	—			—
Outstanding December 31, 2000.	1,570,000			2.50
Granted.	1,657,250			2.45
Exercised	—
Canceled or lapsed.	(1,300,000	)		2.50
Outstanding December 31, 2001.	1,927,250			2.46
Exercisable December 31, 2000	—			—
Exercisable December 31, 2001.	395,370			2.52

35

CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes information about stock options under the 454 2000 Stock Plan at December 31, 2001:

Range of Exercise Prices	Number of Options Outstanding	Weighted Average Contractual Life	Weighted Average Exercise Price
$1.25-1.25	81,000	9.0	$	1.25
2.50-2.75	1,846,250	8.9		2.51
	1,927,250

Range of Exercise Prices	Number of Options Exercisable	Weighted Average Exercise Price of Options Exercisable
$1.25-1.25	—		—
2.50-2.75	395,370	$	2.52
	395,370

Had compensation cost for the Company’s stock option plans been determined in accordance with SFAS 123, the Company’s net loss and net loss per share would have approximated the pro forma amounts shown below for each of the years ended December 31, 1999, 2000 and 2001.

	December 31,
	1999						2000						2001
	As Reported			Pro Forma			As Reported			Pro Forma			As Reported			Pro Forma
Net loss	$	(25,763	)	$	(28,452	)	$	(26,978	)	$	(47,975	)	$	(42,912	)	$	(62,490	)
Net loss per share	$	(0.89	)	$	(0.99	)	$	(0.70	)	$	(1.24	)	$	(0.89	)	$	(1.30	)

The assumptions utilized by the Company in deriving the pro forma amounts for the years ended December 31, 1999, 2000 and 2001 are as follows:

	December 31,
	1999	2000	2001
Expected dividend yield	0%	0%	0%
Expected stock price volatility	102%	60%	60%
Risk-free interest rate (approximate)	5.25%	6.00%	5.75%
Expected option term in years	Between 5.2 and 8.7	Between 4.1 and 8.7	Between 3.9 and 9.1

The weighted average grant date fair value of options granted during the years ended December 31, 1999, 2000, and 2001 was approximately $3.23, $35.17 and $18.50 per share, respectively.

36

CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Preferred Stock

During 1996 and 1997, the Company received aggregate consideration of $1,750 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, $50 and $100, 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. 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 $1,968, including accrued dividends and dividends in arrears in the amount of $218. In addition, upon issuance, 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. Such warrants were valued at $376. The value of such warrants was accreted over the warrant period and such accretion was classified as preferred dividends. All of these warrants were exercised during 2000.

In June 2000, the Company launched 454, which sold 8,000,000 shares of 454 Series B Convertible Preferred Stock to Soros Fund Management, L.L.C. and Cooper Hill Partners, L.L.C. and members of the Company’s senior management team and related parties for an aggregate purchase price of $20,000. In order to complete the funding of 454 and in exchange for 12,000,000 shares of 454 Series A Convertible Preferred Stock, the Company contributed $20,000 in cash and certain technologies for conducting genomic analyses.

6.    Income Taxes

The net deferred income tax assets consisted of the following:

	December 31,
	2000			2001
Total deferred income tax assets	$	66,150		$	88,339
Valuation allowance		(66,150	)		(88,339	)
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 increase in the valuation allowance was $14,800, $35,950 and $22,189 for the years ended December 31, 1999, 2000 and 2001, respectively.

At December 31, 2001, CuraGen had federal and Connecticut net operating loss carryforwards for income tax purposes of $182,874 and $173,015, respectively. Federal net operating loss carryforwards expire beginning in 2008, and Connecticut net operating loss carryforwards began expiring in 1998. The Company also had federal and Connecticut research and development tax credit carryforwards for income tax purposes of $7,209 and $6,202, respectively, at December 31, 2001.

At December 31, 2001, 454 had federal and Connecticut net operating loss carryforwards for income tax purposes of $4,289 and $4,037, respectively. Federal net operating loss carryforwards expire beginning in 2016, and Connecticut net operating loss carryforwards begin expiring in 2021. 454 also had federal and Connecticut research and development tax credit carryforwards for income tax purposes of $196 and $0, respectively, at December 31, 2001.

37

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the year ended December 31, 2001, an income tax benefit of $3,550 was recorded as a result of 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.

For income tax purposes, the Company and 454 do not file consolidated income tax returns.

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 and $238. The term of the $450 grant is January 4, 1995 to December 31, 2004, and the term of the $238 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 of 6% convertible subordinated debentures due 2007 and received net proceeds of approximately $121,250. In addition, also in February 2000, the initial purchasers exercised their option to purchase an additional $25,000 of 6% convertible subordinated debentures due 2007, providing the Company with additional net proceeds of approximately $24,308. Related interest expense for the years ended December 31, 2000 and 2001 was $8,192 and $9,000, respectively.

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 the Company’s 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, was estimated at $114,000 on December 31, 2001.

9.    Minority Interest in Subsidiary

In June 2000, the Company launched 454, a 60% owned subsidiary established to develop novel technologies for rapidly and comprehensively analyzing entire genomes. 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. Simultaneously, 454 sold 8,000,000 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.

In order to complete the funding of 454 and in exchange for 12,000,000 shares of Series A Preferred Stock, the Company contributed $20,000 in cash and certain technologies for conducting genomic analyses. As a result

38

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

of this contribution of technology to 454, the Company recognized a gain of $3,929 recorded in additional paid-in-capital.

10.    Subsequent Event

On March 27, 2002, the Board of Directors of the Company adopted a stockholder rights plan and declared a dividend distribution of one preferred share purchase right for each outstanding share of the Company’s common stock. Each right will entitle registered holders of the Company’s common stock to purchase one one-hundredth of a share of a new series of junior participating preferred stock, designated as “Series A Junior Participating Preferred Stock”. The rights generally will be exercisable only if a person (which term includes an entity or group) (i) acquires 20 percent or more of the Company’s common stock or (ii) announces a tender offer, the consummation of which would result in ownership by that person, entity or group of 20 percent or more of the common stock. Once exercisable, the stockholder rights plan allows the Company’s stockholders (other than the acquiror) to purchase common stock of the Company or of the acquiror at a substantial discount.

11.    Summary Selected Quarterly Financial Data (Unaudited)

	Quarter Ended
	March 31			June 30			Sept. 30			Dec. 31
2001:
Total revenues	$	5,662		$	6,240		$	6,084		$	5,489
Total operating expenses		16,658			20,975			22,218			24,829
Net loss		(5,355	)		(10,279	)		(11,116	)		(16,162	)
Net loss per share		(0.11	)		(0.21	)		(0.23	)		(0.34	)
2000:
Total revenues	$	5,640		$	4,940		$	5,040		$	5,218
Total operating expenses		11,150			12,411			13,716			17,918
Net loss		(5,040	)		(6,281	)		(7,051	)		(8,606	)
Net loss per share		(0.14	)		(0.16	)		(0.18	)		(0.22	)

39

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, 2000 and 2001, 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, 2001. 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, 2000 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America.

/s/ DELOITTE & TOUCHE LLP

Hartford, Connecticut

January 30, 2002

(except as to footnote 10, as to which the date is March 27, 2002)

40

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 2002 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 2002 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 2002 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 2002 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, 2000 and 2001

Consolidated Statements of Operations for the Years Ended December 31, 1999, 2000 and 2001

Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 1999, 2000 and 2001

Consolidated Statements of Cash Flows for the Years Ended December 31, 1999, 2000 and 2001

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.

Item 14 (a)(3)    Exhibits

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

41

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)
*4.4	Stockholder Rights Agreement, dated March 27, 2002, by and between the Registrant and American Stock Transfer and Trust Company
%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	Option and Exclusive License Agreement, dated October 4, 1996, between the Registrant and Wisconsin Alumni Research Foundation (Filed as Exhibit 10.11)
+@10.9	Standard Non-Exclusive License Agreement—Brumley, dated July 1, 1996, between the Registrant and Wisconsin Alumni Research Foundation (Filed as Exhibit 10.12)
+@10.10	Collaborative Research and License Agreement, dated May 16, 1997, between the Registrant and Pioneer Hi-Bred International, Inc. (Filed as Exhibit 10.13)
+@10.11	Research and Option Agreement, dated October 1, 1997, between the Registrant and Biogen, Inc. (Filed as Exhibit 10.14)
+@10.12	Research and Option Agreement, dated November 20, 1997, between the Registrant and Genentech, Inc. (Filed as Exhibit 10.15)
+@10.13	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)
@10.14	ATP Agreement for Integrated Microfabricated DNA Analysis Device for Diagnosis of Complex Genetic Disorders, dated February 1995 (Filed as Exhibit 10.17)
@10.15	ATP Agreement for Molecular Recognition Technology for Precise Design of Protein-Specific Drugs, dated March 2, 1995 (Filed as Exhibit 10.18)
@10.16	ATP Agreement for Programmable Nanoscale Engines for Molecular Separation, dated May 6, 1997 (Filed as Exhibit 10.19)
@10.17	Material Transfer and Screening Agreement, dated January 15, 1998, between the Registrant and ArQule, Inc. (Filed as Exhibit 10.20)
+%10.18	Pharmacogenomics Research and License Agreement, dated November 18, 1998, by and between Glaxo Wellcome, Inc. and the Registrant (Filed as Exhibit 10.21)
+&10.19	Agreement between COR Therapeutics, Inc. and the Registrant dated May 1, 1999 (Filed as Exhibit 10.1)
÷10.20	Letter Agreement with Pequot Partners Fund, L.P. and Pequot International Fund, Inc. (Filed as Exhibit 10.1)
-10.21	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)

42

Exhibit No.	Description
+~10.22	Collaboration Agreement, dated as of December 8, 1999, between Abgenix, Inc. and the Registrant (Filed as Exhibit 10.1)
+^10.23	Metabolic Disorder Collaboration Agreement, dated January 12, 2001, by and between Bayer Corporation and the Registrant (Filed as Exhibit 10.24)
+^10.24	Pharmacogenomics Agreement, dated January 12, 2001, by and between the Registrant and Bayer AG (Filed as Exhibit 10.25)
^10.25	Stock Purchase Agreement, dated January 12, 2001, by and between Bayer AG and the Registrant (Filed as Exhibit 10.26)
+^10.26	Restated Collaboration Agreement, dated November 27, 2000, between Abgenix, Inc. and the Registrant (Filed as Exhibit 10.27)
*10.27	Lease, dated May 24, 2001, (Branford) by and between 16 Commercial Street Associates, LLC and the Registrant
*10.28	Lease, dated November 29, 2001, (Branford) by and between 20 Commercial Street Associates, LLC and 454 Corporation
*10.29	Assignment of Purchase Agreement, dated April 10, 2001, by and between the Registrant and Richard E. Beauvais
*10.30	Employment Agreement, dated April 1, 2002, between the Registrant and Jonathan M. Rothberg
*10.31	Employment Agreement, dated April 1, 2002, between the Registrant and Christopher K. McLeod
*10.32	Employment Agreement, dated April 1, 2002, between the Registrant and David M. Wurzer
*10.33	Employment Agreement, dated April 1, 2002, between the Registrant and Thomas F. McCaffery
*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 ended 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-Q, File No. 000-23223, for the period 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 ended 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 ended 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 ended June 30, 2000.

+ Confidential Treatment has been granted by the Commission as to certain portions.

^ 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, 2001.

43

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, 2001:

November 5, 2001—Item 5, Other Events—October 23, 2001 press release announcement of presentation of late-stage preclinical data on a novel growth factor, CG53135, which is being investigated for the treatment of ulcerative colitis, a component of inflammatory bowel disease; October 25, 2001 press release announcement of financial results for third quarter ended September 30, 2001, and description of certain recent accomplishments.

44

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.

CU RAGEN CORPORATION

/s/ DAVID M. WURZER

By :                                              

Dated: April 1, 2002

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 April 1, 2002.

Signature	Title
/s/ JONATHAN M. ROTHBERG Jonathan M. Rothberg	Chief Executive Officer, Chairman of the Board of Directors and President (principal executive officer)
/s/ DAVID M. WURZER David M. Wurzer	Executive Vice-President, Treasurer and Chief Financial Officer (principal financial and accounting officer)
/s/ RONALD M. CRESSWELL Ronald M. Cresswell	Director
/s/ VINCENT T. DEVITA, JR. Vincent T. DeVita, Jr	Director
David R. Ebsworth	Director
/s/ JOHN H. FORSGREN John H. Forsgren	Director
/s/ ROBERT E. PATRICELLI Robert E. Patricelli	Director

45

EXHIBIT INDEX

Exhibit Number	Description
4.4	Stockholder Rights Agreement, dated March 27, 2002, by and between the Registrant and American Stock Transfer and Trust Company.
10.27	Lease, dated May 24, 2001, (Branford) by and between 16 Commercial Street Associates, LLC and the Registrant
10.28	Lease, dated November 29, 2001, (Branford) by and between 20 Commercial Street Associates, LLC and 454 Corporation
10.29	Assignment of Purchase Agreement, dated April 10, 2001, by and between the Registrant and Richard E. Beauvais
10.30	Employment Agreement, dated April 1, 2002, between the Registrant and Jonathan M. Rothberg
10.31	Employment Agreement, dated April 1, 2002, between the Registrant and Christopher K. McLeod
10.32	Employment Agreement, dated April 1, 2002, between the Registrant and David M. Wurzer
10.33	Employment Agreement, dated April 1, 2002, between the Registrant and Thomas F. McCaffery
21.1	Subsidiaries of the Registrant
23.1	Consent of Deloitte & Touche LLP

EX-4.4

                                                                     EXHIBIT 4.4

- --------------------------------------------------------------------------------

                               CURAGEN CORPORATION

                                       and

                     AMERICAN STOCK TRANSFER & TRUST COMPANY

                                 as Rights Agent

                                    ---------

                          STOCKHOLDER RIGHTS AGREEMENT

                           Dated as of March 27, 2002

- --------------------------------------------------------------------------------




                                Table of Contents
                                -----------------

Section                                                                     Page

Section 1. Certain Definitions.................................................1
Section 2. Appointment of Rights Agent.........................................6
Section 3. Issue of Rights Certificates........................................6
Section 4. Form of Rights Certificates.........................................8
Section 5. Countersignature and Registration...................................8
Section 6. Transfer, Split Up, Combination and Exchange of Rights
        Certificates; Mutilated, Destroyed, Lost or Stolen Rights
        Certificates...........................................................9
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.......9
Section 8. Cancellation and Destruction of Rights Certificates................11
Section 9. Reservation and Availability of Capital Stock......................11
Section 10. Preferred Stock Record Date.......................................12
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
        Number of Rights......................................................13
Section 12. Certificate of Adjusted Purchase Price or Number of Shares........20
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
        Earning Power.........................................................21
Section 14. Fractional Rights and Fractional Shares...........................22
Section 15. Rights of Action..................................................24
Section 16. Agreement of Rights Holders.......................................24
Section 17. Rights Certificate Holder Not Deemed a Stockholder................25
Section 18. Concerning the Rights Agent.......................................25
Section 19. Merger or Consolidation or Change of Name of Rights Agent.........26
Section 20. Duties of Rights Agent............................................26
Section 21. Change of Rights Agent............................................28
Section 22. Issuance of New Rights Certificates...............................29
Section 23. Redemption and Termination........................................29
Section 24. Exchange..........................................................30
Section 25. Notice of Certain Events..........................................31
Section 26. Notices...........................................................32
Section 27. Supplements and Amendments........................................33
Section 28. Successors........................................................33
Section 29. Determinations and Actions by the Board of Directors, etc.........33
Section 30. Benefits of this Agreement........................................33
Section 31. Severability......................................................34
Section 32. Governing Law.....................................................34
Section 33. Counterparts......................................................34
Section 34. Descriptive Headings..............................................34

Exhibit A -- Form of Certificate of Designation
Exhibit B -- Form of Rights Certificate
Exhibit C -- Form of Summary of Rights



                          STOCKHOLDER RIGHTS AGREEMENT
                          ----------------------------

      STOCKHOLDER RIGHTS AGREEMENT, dated as of March 27, 2002 (the
"Agreement"), between CURAGEN CORPORATION, a Delaware corporation (the
 ---------
"Company"), and American Stock Transfer & Trust Company , as Rights Agent (the
 -------
"Rights Agent").
 ------------

                                   WITNESSETH

      WHEREAS, on March 27, 2002 (the "Rights Dividend Declaration Date"), the
                                       --------------------------------
Board of Directors of the Company (the "Board") authorized and declared a
                                        -----
dividend distribution of one Right (a "Right") for each share of Common Stock
                                       -----
(as hereinafter defined) of the Company outstanding at the close of business on
April 10, 2002 (the "Record Date"), and has authorized the issuance of one Right
                     -----------
(as such number may hereinafter be adjusted pursuant to the provisions hereof)
for each share of Common Stock of the Company issued (whether originally issued
or delivered from the Company's treasury) between the Record Date and the
Distribution Date, each Right initially representing the right to purchase one
one-hundredth of a share of Series A Junior Participating Preferred Stock upon
the terms and conditions hereinafter set forth (the "Rights");
                                                     ------

      NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:

      Section 1. Certain Definitions. For purposes of this Agreement, the
                 -------------------
following terms have the meanings indicated:

            (a) "Acquiring Person" shall mean any Person who or which, together
                 ----------------
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
of 20% or more of the shares of Common Stock then outstanding, but shall not
include the Company, any Subsidiary of the Company, any employee benefit plan of
the Company or of any Subsidiary of the Company, or any Person or entity
organized, appointed or established by the Company for or pursuant to the terms
of any such plan; provided, however, that (i) if the Board of Directors of the
                  --------  -------
Company determines in good faith that a Person who would otherwise be an
"Acquiring Person" became the Beneficial Owner of a number of shares of Common
Stock such that the Person would otherwise qualify as an "Acquiring Person"
inadvertently (including, without limitation, because (A) such Person was
unaware that it beneficially owned a percentage of Common Stock that would
otherwise cause such Person to be an "Acquiring Person" or (B) such Person was
aware of the extent of its Beneficial Ownership of Common Stock but had no
actual knowledge of the consequences of such Beneficial Ownership under this
Agreement) and without any intention of changing or influencing control of the
Company, then such Person shall not be deemed to be or to have become an
"Acquiring Person" for any purposes of this Agreement unless and until such
Person shall have failed to divest itself, as soon as practicable (as
determined, in good faith, by the Board of Directors of the Company), of
Beneficial Ownership of a sufficient number of shares of Common Stock so that
such Person would no longer otherwise qualify as an "Acquiring Person"; (ii) if,
as of the date hereof or prior to the first public announcement of the adoption
of this Agreement, any Person is or becomes the Beneficial Owner of 20% or more
of



the shares of Common Stock outstanding, such Person shall not be deemed to be or
to become an "Acquiring Person" unless and until such time as such Person shall,
after the first public announcement of the adoption of this Agreement, become
the Beneficial Owner of an additional 1% or more of the shares of Common Stock
outstanding (other than pursuant to a dividend or distribution paid or made by
the Company on the outstanding Common Stock or pursuant to a split or
subdivision of the outstanding Common Stock), unless, upon becoming the
Beneficial Owner of such additional shares of Common Stock, such Person is not
then the Beneficial Owner of 20% or more of the shares of Common Stock then
outstanding; and (iii) no Person shall become an "Acquiring Person" as the
result of an acquisition of shares of Common Stock by the Company which, by
reducing the number of shares outstanding, increases the proportionate number of
shares of Common Stock beneficially owned by such Person to 20% or more of the
shares of Common Stock then outstanding; provided, however, that if a Person
                                         --------  -------
shall become the Beneficial Owner of 20% or more of the shares of Common Stock
then outstanding by reason of such share acquisitions by the Company and shall
thereafter become the Beneficial Owner of an additional 1% or more of the shares
of Common Stock outstanding (other than pursuant to a dividend or distribution
paid or made by the Company on the outstanding Common Stock or pursuant to a
split or subdivision of the outstanding Common Stock), then such Person shall be
deemed to be an "Acquiring Person" unless upon becoming the Beneficial Owner of
such additional shares of Common Stock such Person does not beneficially own 20%
or more of the shares of Common Stock then outstanding. For all purposes of this
Agreement, any calculation of the number of shares of Common Stock outstanding
at any particular time, including for purposes of determining the particular
percentage of such outstanding shares of Common Stock of which any Person is the
Beneficial Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act (as
such term is hereinafter defined).

            (b) "Act" shall mean the Securities Act of 1933, as amended.
                 ---

            (c) "Affiliate" and "Associate" shall have the respective meanings
                 ---------       ---------
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended and in effect on the date of
this Agreement (the "Exchange Act"); provided, in the case of any executive
                     ------------
officer of the Corporation, the definitions of "Affiliate" and "Associate" shall
not include any relative of such executive officer other than his or her spouse,
children or grandchildren.

            (d) "Agreement" shall mean this Stockholder Rights Agreement as
                 ---------
originally executed or as it may from time to time be supplemented or amended
pursuant to the applicable provisions hereof.

            (e) A Person shall be deemed the "Beneficial Owner" and shall be
                                              ----------------
deemed to "beneficially own", any securities:

                  (i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such right
is exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding, whether or not in writing, or upon the
exercise of conversion rights, exchange rights, other rights, warrants or
options, or otherwise; provided, however, that a Person shall not
                       --------  -------


                                      I-2



be deemed the "Beneficial Owner" of, or to "beneficially own", (A) securities
tendered pursuant to a tender offer or exchange offer made by such Person or any
of such Person's Affiliates or Associates until such tendered securities are
accepted for purchase or exchange, or (B) securities issuable upon exercise of
Rights at any time prior to the occurrence of a Triggering Event, or (C)
securities issuable upon exercise of Rights from and after the occurrence of a
Triggering Event which Rights were acquired by such Person or any of such
Person's Affiliates or Associates prior to the Distribution Date or pursuant to
Section 3(a) or Section 22 hereof (the "Original Rights") or pursuant to Section
                                        ---------------
11(a)(i) hereof in connection with an adjustment made with respect to any
Original Rights;

                  (ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or has
"beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General
Rules and Regulations under the Exchange Act, or any comparable or successor
rule), including pursuant to any agreement, arrangement or understanding,
whether or not in writing; provided, however, that a Person shall not be deemed
                           --------  -------
the "Beneficial Owner" of, or to "beneficially own", any security under this
subparagraph (ii) as a result of an agreement, arrangement or understanding to
vote such security if such agreement, arrangement or understanding: (A) arises
solely from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable provisions
of the General Rules and Regulations under the Exchange Act, and (B) is not also
then reportable by such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report); or

                  (iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) and with respect to
which such Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding, whether or not in writing, for the
purpose of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to subparagraph (ii) of this paragraph (h)) or
disposing of such securities of the Company (a joint filing of a Schedule 13D
under the Exchange Act or any comparable or successor report being deemed to be
conclusive evidence of such an agreement, arrangement or understanding);
provided, however, that nothing in this paragraph (h) shall cause a Person
- --------  -------
engaged in business as an underwriter of securities to be the "Beneficial Owner"
of, or to "beneficially own", any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty (40) days after the date of such acquisition.

            Notwithstanding anything in this definition of Beneficial Ownership
to the contrary, the phrase "then outstanding," when used with reference to a
Person's Beneficial Ownership of securities of the Company, shall mean the
number of such securities then issued and outstanding together with the number
of such securities not then actually issued and outstanding which such Person
would be deemed to own beneficially hereunder.

            (f) "Board" means the Board of Directors of the Company.
                 -----

            (g) "Business Day" shall mean any day other than a Saturday, Sunday
                 ------------
or a day on which banking institutions in New York, New York, are authorized or
obligated by law or executive order to close.


                                      I-3



            (h) "Close of Business" on any given date shall mean 5:00 P.M.,
                 -----------------
Connecticut local time, on such date; provided, however, that if such date is
                                      --------  -------
not a Business Day it shall mean 5:00 P.M., Connecticut local time, on the next
succeeding Business Day.

            (i) "Common Stock" shall mean the voting common stock, $0.01 par
                 ------------
value per share, of the Company, except that "Common Stock" when used with
reference to any Person other than the Company shall mean the capital stock of
such Person with the greatest voting power, or the equity securities or other
equity interest having power to control or direct the management, of such
Person.

            (j) "Common Stock Equivalents" shall have the meaning set forth in
                 ------------------------
Section 11(a)(iii) hereof.

            (k) "Company" shall mean the Person named as the "Company" in the
                --------
first paragraph of this Agreement until a successor corporation shall have
become such or until a Principal Party shall assume, and thereafter be liable
for, all obligations and duties of the Company hereunder, pursuant to the
applicable provisions of this Agreement, and thereafter "Company" shall mean
such successor corporation or Principal Party.

            (l) "Current Market Price" shall have the meaning set forth in
                 --------------------
Section 11(d)(i) hereof.

            (m) "Current Value" shall have the meaning set forth in Section
                 -------------
11(a)(iii) hereof.

            (n) "Distribution Date" shall have the meaning set forth in Section
                 -----------------
3(a) hereof.

            (o) "Equivalent Preferred Stock" shall have the meaning set forth in
                 --------------------------
Section 11(b) hereof.

            (p) "Exchange Act" shall have the meaning set forth in Section 1(c)
                 ------------
hereof.

            (q) "Expiration Date" shall have the meaning set forth in Section
                 ---------------
7(a) hereof.

            (r) "Final Expiration Date" shall mean the close of business on
                 ---------------------
March 27, 2012.

            (s) "Initial Exercise Price" shall be $150.
                 ----------------------

            (t) "Nasdaq" shall mean the National Association of Securities
                 ------
Dealers, Inc. Automated Quotation System.

            (u) "Original Rights" shall have the meaning set forth in Section
                 ---------------
1(f)(i) hereof.

            (v) "Person" shall mean any natural person, firm, association,
                 ------
corporation, limited liability company, partnership, trust or other entity or
organization.


                                      I-4



            (w) "Preferred Stock" shall mean the Series A Junior Participating
                 ---------------
Preferred Stock, $0.01 par value per share, of the Company having the terms set
forth in the form of certificate of designation attached hereto as Exhibit A.
                                                                   ---------

            (x) "Principal Party" shall have the meaning set forth in Section
                 ---------------
13(b) hereof.

            (y) "Purchase Price" shall have the meaning set forth in Section
                 --------------
4(a) hereof.

            (z) "Record Date" shall have the meaning set forth in the preamble
                 -----------
of the Agreement.

            (aa) "Redemption Price" shall have the meaning set forth in Section
                  ----------------
23(a) hereof.

            (bb) "Rights" shall have the meaning set forth in the preamble of
                  ------
the Agreement.

            (cc) "Rights Agent" shall mean the Person named as the "Rights
                  ------------
Agent" in the first paragraph of this Agreement until a successor Rights Agent
shall have become such pursuant to the applicable provisions hereof, and
thereafter "Rights Agent" shall mean such successor Rights Agent. If at any time
there is more than one Person appointed by the Company as Rights Agent pursuant
to the applicable provisions of this Agreement, "Rights Agent" shall mean and
include each such Person.

            (dd) "Rights Certificates" shall have the meaning set forth in
                  -------------------
Section 3(a) hereof.

            (ee) "Rights Dividend Declaration Date" shall have the meaning set
                  --------------------------------
forth in the preamble of this Agreement.

            (ff) "Section 11(a)(ii) Event" shall mean the event described in
                  -----------------------
Section 11(a)(ii) hereof.

            (gg) "Section 11(a)(ii) Trigger Date" shall have the meaning set
                  ------------------------------
forth in Section 11(a)(iii) hereof.

            (hh) "Section 13 Event" shall mean any event described in clauses
                  ----------------
(x), (y) or (z) of Section 13(a) hereof.

            (ii) "Spread" shall have the meaning set forth in Section 11(a)(iii)
                  ------
hereof.

            (jj) "Stock Acquisition Date" shall mean the first date of a public
                  ----------------------
announcement or disclosure (which, for purposes of this definition, shall
include, without limitation, a report filed pursuant to Section 13(d) under the
Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has
become such.

            (kk) "Subsidiary" shall mean, with reference to any Person,
                  ----------
including the Company, any corporation of which an amount of voting securities
sufficient to elect at least a


                                      I-5



majority of the directors of such corporation is Beneficially Owned, directly or
indirectly, by such Person, or which is otherwise controlled by such Person.

            (ll) "Substitute Consideration" shall have the meaning set forth in
                  ------------------------
Section 11(a)(iii) hereof.

            (mm) "Substitution Period" shall have the meaning set forth in
                  -------------------
Section 11(a)(iii) hereof.

            (nn) "Trading Day" shall have the meaning set forth in Section 11(d)
                  -----------
hereof.

            (oo) "Triggering Event" shall mean a Section 11(a)(ii) Event or any
                  ----------------
Section 13 Event.

      Section 2. Appointment of Rights Agent. The Company hereby appoints the
                 ---------------------------
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable. Notwithstanding the foregoing, the Rights Agent shall
have no duty to supervise, and in no event shall be liable for, the acts or
omissions of any such Co-Rights Agent.

      Section 3. Issue of Rights Certificates.
                 ----------------------------

            (a) Until the earlier of (i) the Close of Business on the tenth day
after the Stock Acquisition Date (or, if the tenth day after the Stock
Acquisition Date occurs before the Record Date, the Close of Business on the
Record Date) or (ii) the Close of Business on the tenth Business Day (or, if
such tenth Business Day occurs before the Record Date, the Close of Business on
the Record Date), or such later date as may be determined by action of the Board
of Directors prior to such time as any Person becomes an Acquiring Person, after
the date that a tender offer or exchange offer, or an intention to make a tender
offer or exchange offer, by any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of any Subsidiary of
the Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan) is first published or
sent or given within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act, if upon consummation thereof for the maximum
number of shares that may be purchased thereunder, such Person would be the
Beneficial Owner of 20% or more of the shares of Common Stock then outstanding
(the earlier of (i) or (ii) being herein referred to as the "Distribution
                                                             ------------
Date"), (x) the Rights will be evidenced (subject to the provisions of paragraph
- ----
(b) of this Section 3) by the certificates for the Common Stock registered in
the names of the holders of the Common Stock (which certificates for Common
Stock shall be deemed also to be certificates for Rights) and not by separate
certificates, and (y) the Rights will be transferable only in connection with
the transfer of the underlying shares of Common Stock (including a transfer to
the Company). As soon as practicable after the Distribution Date and upon
receipt of all necessary information, the Rights Agent will send by first-class,
insured, postage prepaid mail, to each record holder of the Common Stock as of
the Close of Business on the Distribution Date (other than to any Acquiring
Person or any Associate or Affiliate of an Acquiring Person) at the address of
such holder shown on the records of the Company, one or more rights
certificates,


                                      I-6



in the form specified in Section 4 hereof (the "Rights Certificates"),
                                                -------------------
evidencing one Right for each share of Common Stock so held, subject to
adjustment as provided herein. In the event that an adjustment in the number of
Rights per share of Common Stock has been made pursuant to this Agreement, at
the time of distribution of the Rights Certificates, the Company shall make the
necessary and appropriate rounding adjustments (in accordance with Section 14(a)
hereof) so that Rights Certificates representing only whole numbers of Rights
are distributed and cash is paid in lieu of any fractional rights. As of and
after the Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.

            (b) As promptly as practicable following the Record Date, the
Company will send a copy of a Summary of Rights, in substantially the form
attached hereto as Exhibit C, by first-class, postage prepaid mail, to each
                   ---------
record holder of the Common Stock as of the Close of Business on the Record Date
(other than to any Acquiring Person or any Associate or Affiliate of an
Acquiring Person) at the address of such holder shown on the records of the
Company. With respect to certificates for the Common Stock outstanding as of the
Record Date, until the Distribution Date, the Rights will be evidenced by such
certificates for the Common Stock together with the Summary of Rights and the
registered holders of the Common Stock shall also be the registered holders of
the associated Rights. Until the earlier of the Distribution Date or the
Expiration Date (as such term is defined in Section 7 hereof), the transfer of
any certificates representing shares of Common Stock, with or without a copy of
the Summary of Rights, shall also constitute the transfer of the Rights
associated with the shares of Common Stock represented by such certificates.

            (c) Rights shall be issued in respect of all shares of Common Stock
that are issued (whether originally issued or from the Company's treasury) after
the Record Date but prior to the earlier of the Distribution Date or the
Expiration Date. Rights shall also be issued to the extent provided in Section
22 in respect of all shares of Common Stock which are issued (whether originally
issued or from the Company's treasury) after the Distribution Date and prior to
the Expiration Date. Certificates representing such shares of Common Stock in
respect of which Rights are issued pursuant to the first sentence of this
Section 3(c) shall also be deemed to be certificates for Rights, and commencing
as soon as reasonably practicable following the date hereof shall bear the
following legend:

            This certificate also evidences and entitles the holder hereof to
            certain Rights as set forth in the Stockholder Rights Agreement
            between CuraGen Corporation (the "Company") and American Stock
            Transfer & Trust Company (the "Rights Agent") dated as of March 27,
            2002 (the "Rights Agreement"), the terms of which are hereby
            incorporated herein by reference and a copy of which is on file at
            the principal offices of the Company. Under certain circumstances,
            as set forth in the Rights Agreement, such Rights will be evidenced
            by separate certificates and will no longer be evidenced by this
            certificate. The Company will mail to the holder of this certificate
            a copy of the Rights Agreement, as in effect on the date of mailing,
            without charge promptly after receipt of a written request therefor.
            Under certain circumstances set forth in the Rights Agreement,
            Rights issued to, or held by, any Person who is, was or becomes an
            Acquiring Person or any Affiliate or Associate of an Acquiring
            Person (as such terms are defined in the Rights


                                      I-7



            Agreement), whether currently held by or on behalf of such Person or
            by any subsequent holder, will become null and void.

With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.
Notwithstanding the foregoing, the omission of a legend shall not affect the
enforceability of any part of this Agreement or the rights of any holder of the
Rights.

      Section 4. Form of Rights Certificates.
                 ---------------------------

            (a) The Rights Certificates (and the forms of election to purchase
and of assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit B hereto and may have such marks
                                       ---------
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate (but which do not affect the
rights, duties or responsibilities of the Rights Agent) and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or trading market
on which the Rights may from time to time be listed, or to conform to usage.
Subject to the provisions hereof, the Rights Certificates, whenever distributed,
shall be dated as of the Record Date and on their face shall entitle the holders
thereof to purchase such number of one one-hundredths of a share of Preferred
Stock as shall be set forth therein at the price per share set forth therein
(such exercise price per one one-hundredth of a share hereinafter referred to as
the "Purchase Price"), but the amount and type of securities purchasable upon
     --------------
the exercise of each Right and the Purchase Price thereof shall be subject to
adjustment as provided herein.

      Section 5. Countersignature and Registration.
                 ---------------------------------

            (a) The Rights Certificates shall be executed on behalf of the
Company by its Chief Executive Officer and President, Chief Financial Officer or
any Vice President, either manually or by facsimile signature, and shall have
affixed thereto the Company's seal or a facsimile thereof which shall be
attested by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. The Rights Certificates shall be manually
countersigned by the Rights Agent and shall not be valid for any purpose unless
so countersigned. In case any officer of the Company who shall have signed any
of the Rights Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Rights Certificates had not ceased to be such officer
of the Company; and any Rights Certificates may be signed on behalf of the
Company by any person who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Agreement any such
person was not such an officer.


                                      I-8



            (b) Following the Distribution Date and receipt by the Rights Agent
of all necessary information, the Rights Agent will keep or cause to be kept, at
its office designated as the appropriate place for surrender of Rights
Certificates upon exercise or transfer, books for registration and transfer of
the Rights Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Rights Certificates, the number of
Rights evidenced on its face by each of the Rights Certificates, the Rights
Certificate number and the date of each of the Rights Certificates.

            Section 6. Transfer, Split Up, Combination and Exchange of Rights
                       ------------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
- ----------------------------------------------------------------------

            (a) Subject to the provisions of Section 14 hereof, at any time
after the Close of Business on the Distribution Date, and at or prior to the
Close of Business on the Expiration Date, any Rights Certificate or Certificates
may be transferred, split up, combined or exchanged for another Rights
Certificate or Certificates, entitling the registered holder to purchase a like
number of one one-hundredths of a share of Preferred Stock (or, following a
Triggering Event, Common Stock, other securities, cash or other assets, as the
case may be) as the Rights Certificate or Certificates surrendered then entitled
such holder (or former holder in the case of a transfer) to purchase. Any
registered holder desiring to transfer, split up, combine or exchange any Rights
Certificate or Certificates shall make such request in writing delivered to the
Rights Agent, and shall surrender the Rights Certificate or Certificates to be
transferred, split up, combined or exchanged at the office of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the transfer of any such
surrendered Rights Certificate or Certificates until the registered holder shall
have properly completed and signed the certificate contained in the form of
assignment set forth on the reverse side of each such Rights Certificate and
shall have provided such additional evidence of the identity of the Beneficial
Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the
Company or the Rights Agent shall reasonably request. Thereupon the Rights Agent
shall, subject to Section 14 hereof, countersign and deliver to the Person
entitled thereto a Rights Certificate or Certificates, as the case may be, as so
requested. The Company may require payment of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of Rights Certificates. The Rights Agent shall
have no duty or obligation to take any action under any Section of this
Agreement which requires the payment by a Rights holder of applicable taxes and
governmental charges unless and until the Rights Agent is satisfied that all
such taxes and/or charges have been paid.

            (b) Upon receipt by the Company and the Rights Agent of evidence
satisfactory to them of the loss, theft, destruction or mutilation of a Rights
Certificate, and, in case of loss, theft or destruction, of indemnity or
security satisfactory to them, and, at the Company's or the Right Agent's
request, reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Rights Certificate if mutilated, the Company will execute
and deliver a new Rights Certificate of like tenor to the Rights Agent for
countersignature and delivery to the registered owner in lieu of the Rights
Certificate so lost, stolen, destroyed or mutilated.

      Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
                 -------------------------------------------------------------


                                      I-9



            (a) Except as otherwise provided herein, the registered holder of
any Rights Certificate may exercise the Rights evidenced thereby in whole or in
part at any time after the Distribution Date upon surrender of the Rights
Certificate, with the form of election to purchase set forth on the reverse side
thereof and the certificate contained therein completed and duly executed, to
the Rights Agent at the office of the Rights Agent designated for such purpose,
together with payment of the aggregate Purchase Price with respect to the total
number of one one-hundredths of a share of Preferred Stock (or other securities,
cash or other assets, as the case may be) as to which such surrendered Rights
are then exercisable, at or prior to the earlier of (i) the Final Expiration
Date, (ii) the time at which the Rights are redeemed as provided in Section 23
hereof (the "Redemption Date"), or (iii) the time at which such Rights are
             ---------------
exchanged as provided in Section 24 hereof (the earliest of (i), (ii) or (iii)
being herein referred to as the "Expiration Date").
                                 ---------------

            (b) The Purchase Price for each one one-hundredth of a share of
Preferred Stock pursuant to the exercise of a Right shall initially be the
Initial Exercise Price, and shall be subject to adjustment from time to time as
provided in Sections 11 and 13(a) hereof and shall be payable in accordance with
paragraph (c) below.

            (c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase set forth on the reverse side
thereof and the certificate contained therein completed and duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per one one-hundredth of a share of Preferred Stock (or other securities,
cash or other assets, as the case may be) to be purchased as set forth below and
an amount equal to any applicable tax or charge, the Rights Agent shall, subject
to Section 20(k) hereof, promptly (i) requisition from any transfer agent of the
shares of Preferred Stock (or make available, if the Rights Agent is the
transfer agent for such shares) certificates for the total number of one
one-hundredths of a share of Preferred Stock to be purchased and the Company
hereby irrevocably authorizes its transfer agent to comply with all such
requests, (ii) requisition from the Company the amount of cash, if any, to be
paid in lieu of fractional shares in accordance with Section 14 hereof, (iii)
after receipt of such certificates, cause the same to be delivered to or upon
the order of the registered holder of such Rights Certificate, registered in
such name or names as may be designated by such holder, and (iv) after receipt
thereof, deliver such cash, if any, to or upon the order of the registered
holder of such Rights Certificate. The payment of the Purchase Price (as such
amount may be reduced pursuant to Section 11(a)(iii) hereof) shall be made in
cash or by certified check, cashier's check or bank draft payable to the order
of the Company. In the event that the Company is obligated to issue other
securities (including Common Stock) of the Company, pay cash or distribute other
property pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such other securities, cash or other property are
available for distribution by the Rights Agent, if and when necessary to comply
with this Agreement. The Company reserves the right to require prior to the
occurrence of a Triggering Event that, upon any exercise of Rights, such number
of Rights be exercised so that only whole shares of Preferred Stock would be
issued.

            (d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing the Rights equivalent to the Rights remaining unexercised shall be
issued by the Rights Agent and delivered to, or


                                      I-10



upon the order of, the registered holder of such Rights Certificate, registered
in such name or names as may be designated by such holder, subject to the
provisions of Section 14 hereof.

            (e) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) duly and properly completed and signed the certificate contained in the form
of election to purchase set forth on the reverse side of the Rights Certificate
surrendered for such exercise, and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company or the Rights Agent shall reasonably request.

      Section 8. Cancellation and Destruction of Rights Certificates. All
                 ---------------------------------------------------
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Rights Certificates to the Company, or shall, at the written request
of the Company, destroy such cancelled Rights Certificates, and in such case
shall deliver a certificate of destruction thereof to the Company.

      Section 9. Reservation and Availability of Capital Stock.
                 ---------------------------------------------

            (a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock (and, following the occurrence of a Triggering Event, out of its
authorized and unissued shares of Common Stock or other securities or out of its
authorized and issued shares held in its treasury), the number of shares of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock or other securities) that, as provided in this Agreement including Section
11(a)(iii) hereof, will be sufficient to permit the exercise in full of all
outstanding Rights.

            (b) So long as the shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock or other securities) issuable and
deliverable upon the exercise of the Rights may be listed on any national
securities exchange, the Company shall use its best efforts to cause all shares
reserved for such issuance to be listed on such exchange upon official notice of
issuance upon such exercise.

            (c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a
Triggering Event in which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with this Agreement, a
registration statement under the Act, with respect to the Common Stock or other
securities purchasable upon exercise of the Rights on an appropriate form, (ii)
cause such registration statement to become effective as soon as practicable
after such filing, and (iii) cause such registration statement to remain
effective (with a prospectus at all


                                      I-11



times meeting the requirements of the Act) until the earlier of (A) the date as
of which the Rights are no longer exercisable for such securities, and (B) the
Expiration Date. The Company will also take such action as may be appropriate
under, or to ensure compliance with, the securities or "blue sky" laws of the
various states in connection with the exercisability of the Rights. The Company
may temporarily suspend, for a period of time not to exceed ninety (90) days
after the date set forth in clause (i) of the first sentence of this Section
9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. In addition, if the
Company shall determine that a registration statement is required following the
Distribution Date, the Company may temporarily suspend the exercisability of the
Rights until such time as a registration statement has been declared effective.
Upon any suspension of the exercisability of the Rights referred to in this
Section 9(c), the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. The Company
shall promptly provide the Rights Agent with copies of such announcements.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable and shall be void so long as held by a holder in any
jurisdiction where the requisite qualification to the issuance to such holder,
or the exercise by such holder, of the Rights in such jurisdiction shall not
have been obtained or be obtainable, the exercise thereof shall not be permitted
under applicable law or a registration statement shall not have been declared
effective.

            (d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all one one-hundredths of a share of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock or other securities) delivered upon exercise of Rights shall, at the time
of delivery of the certificates for such shares (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
nonassessable.

            (e) The Company further covenants and agrees that it will pay when
due and payable any and all taxes and governmental charges that may be payable
in respect of the issuance or delivery of the Rights Certificates and of any
certificates for a number of one one-hundredths of a share of Preferred Stock
(or Common Stock or other securities, as the case may be) upon the exercise of
Rights. The Company shall not, however, be required to pay any tax or charge
that may be payable in respect of any transfer or delivery of Rights
Certificates to a Person other than, or the issuance or delivery of a number of
one one-hundredths of a share of Preferred Stock (or Common Stock or other
securities, as the case may be) in respect of a name other than that of, the
registered holder of the Rights Certificates evidencing Rights surrendered for
exercise or to issue or deliver any certificates for a number of one
one-hundredths of a share of Preferred Stock (or Common Stock or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax or charge shall have been
paid (any such tax or charge being payable by the holder of such Rights
Certificates at the time of surrender) or until it has been established to the
Company's satisfaction that no such tax or charge is due.

      Section 10. Preferred Stock Record Date. Each Person in whose name any
                  ---------------------------
certificate for a number of one one-hundredths of a share of Preferred Stock (or
Common Stock or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such Preferred Stock (or Common Stock or other securities, as the case
may be) represented thereby on, and such certificate shall be dated, the


                                      I-12



date upon which the Rights Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and all applicable taxes or
charges) was made; provided, however, that if the date of such surrender and
                   --------  -------
payment is a date upon which the Preferred Stock (or Common Stock or other
securities, as the case may be) transfer books of the Company are closed, such
Person shall be deemed to have become the record holder of such shares on, and
such certificate shall be dated, the next succeeding Business Day on which the
Preferred Stock (or Common Stock or other securities, as the case may be)
transfer books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Rights Certificate shall not be entitled to
any rights of a stockholder of the Company with respect to shares for which the
Rights shall be exercisable, including, without limitation, the right to vote,
to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceedings of
the Company, except as provided herein.

      Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
                  ----------------------------------------------------------
Number of Rights. The Purchase Price, the number and kind of shares covered by
- ----------------
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.

            (a)(i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Stock payable in shares
of Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C) combine
the outstanding Preferred Stock into a smaller number of shares, or (D) issue
any shares of its capital stock in a reclassification of the Preferred Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11(a) hereof, the Purchase Price in effect
at the time of the record date for such dividend or of the effective date of
such subdivision, combination or reclassification, and the number and kind of
shares of Preferred Stock or capital stock, as the case may be, issuable on such
date, shall be proportionately adjusted so that if a holder of Rights after such
time were to exercise that number of Rights (or fraction thereof) which would
result in the aggregate amount of the Purchase Price payable upon such exercise
(at the Purchase Price then in effect) being equal to the amount of the Purchase
Price payable prior to such time upon exercise of a Right, he would be entitled
to receive the aggregate number and kind of shares of Preferred Stock or other
capital stock, as the case may be, which, if a Right had been exercised
immediately prior to such time and at a time when the Preferred Stock transfer
books (or other capital stock transfer books, as the case may be) of the Company
were open, he would have owned upon such exercise and been entitled to receive
by virtue of such dividend, subdivision, combination or reclassification. If an
event occurs that would require an adjustment under both this Section 11(a)(i)
and Section 11(a)(ii) hereof, the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii) hereof.

            (ii) Subject to Section 24 of this Agreement, in the event any
Person becomes an Acquiring Person (the first occurrence of such event being
referred to hereinafter as the "Section 11(a)(ii) Event"), then (A) the Purchase
Price shall be adjusted to be the Purchase Price in effect immediately prior to
the Section 11(a)(ii) Event multiplied by the number of one one-hundredths of a
share of Preferred Stock for which a Right was exercisable immediately prior to
such Section 11(a)(ii) Event, whether or not such Right was then exercisable,
and (B) each holder of a Right, except as otherwise provided in this Section


                                      I-13



11(a)(ii) and Section 11(a)(iii) hereof, shall thereafter have the right to
receive, upon exercise thereof at a price equal to the Purchase Price (as so
adjusted), in accordance with the terms of this Agreement and in lieu of shares
of Preferred Stock, such number of shares of Common Stock as shall equal the
result obtained by dividing the Purchase Price (as so adjusted) by 50% of the
Current Market Price per share of the Common Stock (determined pursuant to
Section 11(d) hereof) on the date of such Section 11(a)(ii) Event; provided,
                                                                   --------
however, that the Purchase Price (as so adjusted) and the number of shares of
- -------
Common Stock so receivable upon exercise of a Right shall, following the Section
11(a)(ii) Event, be subject to further adjustment as appropriate in accordance
with Section 11(f) hereof. Notwithstanding anything in this Agreement to the
contrary, however, from and after the Section 11(a)(ii) Event, any Rights that
are beneficially owned by (x) any Acquiring Person (or any Affiliate or
Associate of any Acquiring Person), (y) a transferee of any Acquiring Person (or
any such Affiliate or Associate) who becomes a transferee after the Section
11(a)(ii) Event or (z) a transferee of any Acquiring Person (or any such
Affiliate or Associate) who became a transferee prior to or concurrently with
the Section 11(a)(ii) Event pursuant to either (I) a transfer from the Acquiring
Person to holders of its equity securities or to any Person with whom it has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (II) a transfer which the Board of Directors has determined is part of
a plan, arrangement or understanding which has the purpose or effect of avoiding
the provisions of this paragraph, and subsequent transferees of such Persons,
shall be void without any further action and any holder of such Rights shall
thereafter have no rights whatsoever with respect to such Rights under any
provision of this Agreement. The Company shall use all reasonable efforts to
ensure that the provisions of this Section 11(a)(ii) are complied with, but
shall have no liability to any holder of Right Certificates or other Person as a
result of its failure to make any determinations with respect to an Acquiring
Person or its Affiliates, Associates or transferees hereunder. From and after
the Section 11(a)(ii) Event, no Right Certificate shall be issued pursuant to
Section 3 or Section 6 hereof that represents Rights that are or have become
void pursuant to the provisions of this paragraph, and any Right Certificate
delivered to the Rights Agent that represents Rights that are or have become
void pursuant to the provisions of this paragraph shall be canceled. From and
after the occurrence of an event specified in Section 13(a) hereof, any Rights
that theretofore have not been exercised pursuant to this Section 11(a)(ii)
shall thereafter be exercisable only in accordance with Section 13 and not
pursuant to this Section 11(a)(ii).

            (iii) In the event that the number of shares of Common Stock which
are authorized by the Company's Certificate of Incorporation, as amended, but
not outstanding or reserved for issuance for purposes other than upon exercise
of the Rights are not sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii) of this Section 11(a), the
Company shall (A) determine the value of the shares of Common Stock issuable
upon the exercise of a Right (the "Current Value"), and (B) with respect to each
                                   -------------
Right, (subject to Section 11(a)(ii)) make adequate provision to substitute,
upon the exercise of a Right and payment of the applicable Purchase Price, (1)
cash, (2), a reduction in the Purchase Price, (3) Common Stock or other equity
securities of the Company (including, without limitation, shares, or units of
shares, of preferred stock which the Board has deemed to have the same value as
shares of Common Stock (such shares of preferred stock being referred to herein
as "Common Stock Equivalents")), (4) debt securities of the Company, (5) other
    ------------------------
assets, or (6) any combination


                                      I-14



of the foregoing, having an aggregate value equal to the Current Value, as
adjusted (less the amount of any reduction in the Purchase Price), where such
aggregate value has been determined by the Board based upon the advice of a
nationally recognized investment banking firm selected by the Board; provided,
                                                                     --------
however, if the Company shall not have made adequate provision to deliver value
- -------
pursuant to clause (B) above within thirty (30) days following the first
occurrence of a Section 11(a)(ii) Event (the "Section 11(a)(ii) Trigger Date"),
                                              ------------------------------
then the Company shall be obligated to deliver, upon the surrender for exercise
of a Right and without requiring payment of the Purchase Price, shares of Common
Stock (to the extent available) and then, if necessary, cash, which shares or
cash have an aggregate value equal to the Spread. For purposes of the preceding
sentence, the term "Spread" shall mean the excess of (i) the Current Value over
                    ------
(ii) the Purchase Price. If the number of shares of Common Stock that are
authorized by the Company's Restated Certificate of Incorporation, as amended,
but not outstanding or reserved for issuance for purposes other than upon
exercise of the Rights are not sufficient to permit the exercise in full of any
Rights and the Board determines in good faith that it is likely that sufficient
additional shares of Common Stock could be authorized for issuance upon exercise
in full of the Rights, the thirty (30) day period set forth above may be
extended to the extent necessary, but not more than ninety (90) days after the
Section 11(a)(ii) Trigger Date, in order that the Company may seek stockholder
approval for the authorization of such additional shares (such thirty (30) day
period, as it may be extended, shall be referred to as the "Substitution
                                                            ------------
Period"). To the extent that the Company determines that some action need be
- ------
taken pursuant to the preceding provisions of this Section 11(a)(iii), the
Company (x) shall provide, subject to Section 11(a)(ii) hereof, that such action
shall apply uniformly to all outstanding Rights, and (y) may suspend the
exercisability of the Rights until the expiration of the Substitution Period in
order to seek any authorization of additional shares or to decide the
appropriate form of distribution to be made pursuant to such provisions and to
determine the value thereof. In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability of the Rights
has been temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect and the Company shall promptly provide the
Rights Agent copies of such announcements. For purposes of this Section
11(a)(iii), the value of each share of Common Stock shall be the Current Market
Price per share of the Common Stock (as determined pursuant to Section 11(d)
hereof) on the Section 11(a)(ii) Trigger Date and the per share or per unit
value of any Common Stock Equivalent shall be deemed to equal the Current Market
Price per share of the Common Stock on such date.

            (b) In case the Company shall fix a record date for the issuance of
rights (other than the Rights), options or warrants to all holders of Preferred
Stock entitling them to subscribe for or purchase (for a period expiring within
forty-five (45) calendar days after such record date) Preferred Stock, shares
having the same rights, privileges and preferences as the shares of Preferred
Stock ("Equivalent Preferred Stock") or securities convertible into Preferred
        --------------------------
Stock or Equivalent Preferred Stock at a price per share of Preferred Stock or
per share of Equivalent Preferred Stock (or having a conversion price per share,
if a security convertible into Preferred Stock or Equivalent Preferred Stock)
less than the Current Market Price per share of Preferred Stock (as determined
pursuant to Section 11(d) hereof) on such record date, the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Preferred Stock outstanding
on such record date, plus the number of shares of Preferred Stock which the
aggregate offering price of the total number of


                                      I-15



shares of Preferred Stock or Equivalent Preferred Stock (or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such Current Market Price, and the denominator of which shall be the
number of shares of Preferred Stock outstanding on such record date, plus the
number of additional shares of Preferred Stock or Equivalent Preferred Stock to
be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible). In case such
subscription price may be paid by delivery of consideration part or all of which
may be in a form other than cash, the value of such noncash consideration shall
be as determined in good faith by the Board, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on the
Rights Agent and the holders of the Rights. Shares of Preferred Stock owned by
or held for the account of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustment shall be made successively
whenever such a record date is fixed, and in the event that such rights, options
or warrants are not so issued, the Purchase Price shall be adjusted to be the
Purchase Price which would then be in effect if such record date had not been
fixed.

            (c) In case the Company shall fix a record date for a distribution
to all holders of Preferred Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation) of evidences of indebtedness, cash (other than a
regular quarterly or other periodic cash dividend out of the earnings or
retained earnings of the Company), assets (other than a dividend payable in
Preferred Stock, but including any dividend payable in stock other than
Preferred Stock) or subscription rights or warrants (excluding those referred to
in Section 11(b) hereof), the Purchase Price to be in effect after such record
date shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
Current Market Price per share of Preferred Stock (as determined pursuant to
Section 11(d) hereof) on such record date, less the fair market value (as
determined in good faith by the Board whose determination shall be described in
a statement filed with the Rights Agent and shall be binding on the Rights Agent
and the holders of the Rights) of the portion of the cash, assets or evidences
of indebtedness so to be distributed or of such subscription rights or warrants
applicable to a share of Preferred Stock and the denominator of which shall be
such Current Market Price per share of Preferred Stock (as determined pursuant
to Section 11(d) hereof). Such adjustments shall be made successively whenever
such a record date is fixed, and in the event that such distribution is not so
made, the Purchase Price shall be adjusted to be the Purchase Price which would
have been in effect if such record date had not been fixed.

            (d) (i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the Current Market
Price per share of Common Stock on any date shall be deemed to be the average of
the daily closing prices per share of such Common Stock for the thirty (30)
consecutive Trading Days immediately prior to but not including such date, and
for the purposes of computations made pursuant to Section 11(a)(iii) hereof, the
Current Market Price per share of Common Stock on any date shall be deemed to be
the average of the daily closing prices per share of such Common Stock for the
ten (10) consecutive Trading Days immediately following but not including such
date; provided, however, that in the event that the Current Market Price per
      --------  -------
share of the Common Stock is determined during a period following the
announcement by the issuer of such Common Stock of (A) any dividend or
distribution on such Common Stock payable in shares of such Common Stock or
securities convertible into shares of such Common Stock (other than Rights), or
(B) any


                                      I-16



subdivision, combination or reclassification of such Common Stock, and prior to
the expiration of the requisite thirty (30) Trading Day or ten (10) Trading Day
period, as set forth above, after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the Current Market Price shall be
properly adjusted to take into account ex-dividend trading. The closing price
for each day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed on, the principal
national securities exchange on which the shares of Common Stock are listed or
admitted to trading or, if the shares of Common Stock are not listed or admitted
to trading on any national securities exchange, the last quoted price or, if not
so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by Nasdaq or such other system then in use,
or, if on any such date the shares of Common Stock are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock selected by the
Board. If on any such date no market maker is making a market in the Common
Stock, the fair value of such shares on such date as determined in good faith by
the Board shall be used. The term "Trading Day" shall mean a day on which the
                                   -----------
principal national securities exchange on which the shares of Common Stock are
listed or admitted to trading is open for the transaction of business or, if the
shares of Common Stock are not listed or admitted to trading on any national
securities exchange, a Business Day. If the Common Stock is not publicly held or
not so listed or traded, Current Market Price per share shall mean the fair
value per share as determined in good faith by the Board whose determination
shall be described in a statement filed with the Rights Agent and shall be
conclusive for all purposes.

                  (ii) For the purpose of any computation hereunder, the Current
Market Price per share of Preferred Stock shall be determined in the same manner
as set forth above for the Common Stock in clause (i) of this Section 11(d)
(other than the last sentence thereof). If the Current Market Price per share of
Preferred Stock cannot be determined in the manner provided above or if the
Preferred Stock is not publicly held or listed or traded in a manner described
in clause (i) of this Section 11(d), the Current Market Price per share of
Preferred Stock shall be conclusively deemed to be an amount equal to 100 (as
such number may be appropriately adjusted for such events as stock splits, stock
dividends and recapitalizations with respect to the Common Stock occurring after
the date of this Agreement) multiplied by the Current Market Price per share of
the Common Stock. If neither the Common Stock nor the Preferred Stock is
publicly held or so listed or traded, Current Market Price per share of the
Preferred Stock shall mean the fair value per share as determined in good faith
by the Board, whose determination shall be described in a statement filed with
the Rights Agent and shall be conclusive for all purposes. For all purposes of
this Agreement, the Current Market Price of one one-hundredth of a share of
Preferred Stock shall be equal to the Current Market Price of one share of
Preferred Stock divided by 100.

                  (iii) For the purpose of any computation hereunder, the value
of any securities or assets other than Common Stock or Preferred Stock shall be
the fair value as determined in good faith by the Board or by a nationally
recognized investment banking firm selected by the Board, which determination
shall be described in a statement filed with the Rights Agent and shall be
conclusive for all purposes.


                                      I-17



            (e) Anything herein to the contrary notwithstanding, no adjustment
in the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the Purchase Price;
provided, however, that any adjustments which by reason of this Section 11(e)
- --------  -------
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest ten-thousandth of a share of Common Stock
or other share or one-millionth of a share of Preferred Stock, as the case may
be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
(3) years from the date of the transaction which mandates such adjustment, or
(ii) the Expiration Date.

            (f) If as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock other than
Preferred Stock, thereafter the number of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Stock contained in
Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m) hereof, and the
provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred
Stock shall apply on like terms to any such other shares.

            (g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.

            (h) Unless the Company shall have exercised its election as provided
in Section 11(i) hereof, upon each adjustment of the Purchase Price as a result
of the calculations made in Sections 11(b) and (c) hereof, each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-hundredths of a share of Preferred Stock obtained by (i) multiplying (x)
the number of one one-hundredths of a share covered by a Right immediately prior
to this adjustment, by (y) the Purchase Price in effect immediately prior to
such adjustment of the Purchase Price, and (ii) dividing the product so obtained
by the Purchase Price in effect immediately after such adjustment of the
Purchase Price.

            (i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in lieu of any adjustment in
the number of shares of Preferred Stock purchasable upon the exercise of a
Right. Each of the Rights outstanding after the adjustment in the number of
Rights shall be exercisable for the number of one one-hundredths of a share of
Preferred Stock for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest
one-ten-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The Company shall
make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be


                                      I-18



made, and shall promptly give the Rights Agent a copy of such announcement. The
record date may be the date on which the Purchase Price is adjusted or any day
thereafter, but, if the Rights Certificates have been issued, shall be at least
ten (10) days later than the date of the public announcement. If Rights
Certificates have been issued, upon each adjustment of the number of Rights
pursuant to this Section 11(i), the Company shall, as promptly as practicable,
cause to be distributed to holders of record of Rights Certificates on such
record date Rights Certificates evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be distributed to
such holders of record in substitution and replacement for the Rights
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the option
of the Company, the adjusted Purchase Price) and shall be registered in the
names of the holders of record of Rights Certificates on the record date
specified in the public announcement.

            (j) Irrespective of any adjustment or change in the Purchase Price
or the number of one one-hundredths of a share of Preferred Stock issuable upon
the exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per share and the number of
shares which were expressed in the initial Rights Certificates issued hereunder.

            (k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value of the shares of Common Stock
issuable upon exercise of the Rights, the Company shall take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue, fully paid and nonassessable, such number
of one one-hundredths of a share of Preferred Stock at such adjusted Purchase
Price.

            (l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer (and shall give prompt written
notice of such election to the Rights Agent) until the occurrence of such event
the issuance to the holder of any Right exercised after such record date the
number of one one-hundredths of a share of Preferred Stock and other capital
stock or securities of the Company, if any, issuable upon such exercise over and
above the number of one one-hundredths of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
                                                                       --------
however, that the Company shall deliver to such holder a due bill or other
- -------
appropriate instrument evidencing such holder's right to receive such additional
shares or securities upon the occurrence of the event requiring such adjustment.

            (m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board shall determine to be
advisable in order that any (i) consolidation or subdivision of the Preferred
Stock, (ii) issuance wholly for cash of any shares of Preferred Stock at less
than the Current Market Price, (iii) issuance wholly for cash of any shares of
Preferred Stock or securities


                                      I-19



which by their terms are convertible into or exchangeable for shares of
Preferred Stock, (iv) stock dividends, or (v) issuance of rights, options or
warrants referred to in this Section 11, hereafter made by the Company to
holders of its Preferred Stock shall not be taxable to such stockholders.

            (n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person, (ii) merge
with or into any other Person, or (iii) sell or transfer (or permit any
Subsidiary to sell or transfer), in one transaction, or a series of related
transactions, assets or earning power aggregating more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company or any of its Subsidiaries in
one or more transactions each of which complies with Section 11(o) hereof), if
(x) at the time of or immediately after such consolidation, merger or sale there
are any rights, warrants or other instruments or securities outstanding or
agreements in effect that would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights or (y) prior to,
simultaneously with or immediately after such consolidation, merger or sale, the
stockholders of the Person who constitutes, or would constitute, the "Principal
Party" for purposes of Section 13(a) hereof shall have received a distribution
- -----
of Rights previously owned by such Person or any of its Affiliates and
Associates.

            (o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or Section 27 hereof, take
(or permit any Subsidiary to take) any action if at the time such action is
taken it is reasonably foreseeable that such action will diminish substantially
or otherwise eliminate the benefits intended to be afforded by the Rights.

            (p) Anything in this Agreement to the contrary notwithstanding, in
the event that the Company shall at any time after the Rights Dividend
Declaration Date and prior to the Distribution Date (i) declare a dividend on
the outstanding shares of Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding shares of Common Stock, or (iii) combine the
outstanding shares of Common Stock into a smaller number of shares, the number
of Rights associated with each share of Common Stock then outstanding, or issued
or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction the numerator of
which shall be the total number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
following the occurrence of such event.

      Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
                  ----------------------------------------------------------
Whenever an adjustment is made as provided in Section 11 or Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the computations and facts accounting for
such adjustment, (b) promptly file with the Rights Agent, and with each transfer
agent for the Preferred Stock and the Common Stock, a copy of such certificate,
and (c) mail a brief summary thereof to each holder of a Rights Certificate (or,
if prior to the Distribution Date, to each holder of a certificate representing
shares of Common Stock) in accordance with Section 26 hereof. The Rights Agent
shall be fully protected in relying on any


                                      I-20



such certificate and on any adjustment therein contained and shall have no duty
with respect to and shall not be deemed to have knowledge of any such adjustment
unless and until it shall have received such certificate.

      Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
                  --------------------------------------------------------------
Power.
- -----

            (a) In the event, directly or indirectly, at any time after a
Section 11(a)(ii) Event (i) the Company shall consolidate with or shall merge
into any other Person, (ii) any Person shall merge with and into the Company and
the Company shall be the continuing or surviving corporation of such merger and,
in connection with such merger, all or part of the Common Stock shall be changed
into or exchanged for stock or other securities of any other Person (or of the
Company) or cash or any other property, or (iii) the Company shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer), in one or more transactions, assets or earning power aggregating 50%
or more of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person (other than the Company or one or more
wholly-owned Subsidiaries of the Company), then upon the first occurrence of
such event, proper provision shall be made so that: (A) each holder of a Right
(other than Rights which have become void pursuant to Section 11(a)(ii) hereof)
shall thereafter have the right to receive, upon the exercise thereof at the
Purchase Price (as theretofore adjusted in accordance with Section 11(a)(ii)
hereof), in accordance with the terms of this Agreement and in lieu of shares of
Preferred Stock or Common Stock of the Company, such number of validly
authorized and issued, fully paid, non-assessable and freely tradeable shares of
Common Stock of the Principal Party (as such term is hereinafter defined), not
subject to any liens, encumbrances, rights of first refusal or other adverse
claims, as shall equal the result obtained by dividing the Purchase Price (as
theretofore adjusted in accordance with Section 11(a)(ii) hereof) by 50% of the
current per share market price of the Common Stock of such Principal Party
(determined pursuant to Section 11(d) hereof) on the date of consummation of
such consolidation, merger, sale or transfer; provided, however, that the
                                              --------  -------
Purchase Price (as theretofore adjusted in accordance with Section 11(a)(ii)
hereof) and the number of shares of Common Stock of such Principal Party so
receivable upon exercise of a Right shall be subject to further adjustment as
appropriate in accordance with Section 11(f) hereof to reflect any events
occurring in respect of the Common Stock of such Principal Party after the
occurrence of such consolidation, merger, sale or transfer; (ii) such Principal
Party shall thereafter be liable for, and shall assume, by virtue of such
Section 13 Event, all the obligations and duties of the Company pursuant to this
Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such
                           -------
Principal Party, it being specifically intended that the provisions of Section
11 hereof shall apply only to such Principal Party following the first
occurrence of a Section 13 Event; (iv) such Principal Party shall take such
steps (including, but not limited to, the reservation of a sufficient number of
shares of its common stock) in connection with the consummation of any such
transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
shares of common stock thereafter deliverable upon the exercise of the Rights;
and (v) the provisions of Section 11(a)(ii) hereof shall be of no effect
following the first occurrence of any Section 13 Event.

            (b) "Principal Party" shall mean
                 ---------------


                                      I-21



                  (i)   in the case of any transaction described in clause (x)
                        or (y) of the first sentence of Section 13(a) hereof,
                        the Person that is the issuer of any securities into
                        which shares of Common Stock of the Company are
                        converted in such merger or consolidation, and if no
                        securities are so issued, the Person that is the other
                        party to such merger or consolidation; and

                  (ii)  in the case of any transaction described in clause (z)
                        of the first sentence of Section 13(a) hereof, the
                        Person that is the party receiving the greatest portion
                        of the assets or earning power transferred pursuant to
                        such transaction or transactions;

provided, however, that in any such case, (1) if the common stock of such Person
- --------  -------
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the common stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the common stock of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the common stock having the greatest aggregate market value.

            (c) The Company shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party shall have a sufficient number of
authorized shares of its common stock which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this Section 13
and further providing that, as soon as practicable after the date of any Section
13 Event, the Principal Party will:

                  (i) prepare and file a registration statement under the Act,
with respect to the Rights and the securities purchasable upon exercise of the
Rights on an appropriate form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after such
filing and (B) remain effective (with a prospectus at all times meeting the
requirements of the Act) until the Expiration Date; and

                  (ii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates that comply in all
respects with the requirements for registration on Form 10 under the Exchange
Act.

The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a) hereof.

      Section 14. Fractional Rights and Fractional Shares.
                  ---------------------------------------


                                      I-22



            (a) The Company shall not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(p) hereof, or to
distribute Rights Certificates that evidence fractional Rights. If the Company
determines not to issue fractional Rights, there shall be paid in lieu thereof
to the registered holders of the Rights Certificates with regard to which such
fractional Rights would otherwise be issuable, an amount in cash equal to the
same fraction of the current market value of a whole Right. For purposes of this
Section 14(a), the current market value of a whole Right shall be the closing
price of the Rights for the Trading Day immediately prior to the date on which
such fractional Rights would have been otherwise issuable. The closing price of
the Rights for any day shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Rights are listed or admitted to
trading, or if the Rights are not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported by
Nasdaq or such other system then in use or, if on any such date the Rights are
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the Rights
selected by the Board. If on any such date no such market maker is making a
market in the Rights the fair value of the Rights on such date as determined in
good faith by the Board shall be used.

            (b) The Company shall not be required to issue fractions of shares
of Preferred Stock (other than fractions which are integral multiples of one
one-hundredth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates that evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-hundredth of a
share of Preferred Stock). In lieu of fractional shares of Preferred Stock that
are not integral multiples of one one-hundredth of a share of Preferred Stock,
the Company may pay to the registered holders of Rights Certificates, with
regard to which such fractional shares of Preferred Stock would otherwise be
issuable, at the time such Rights are exercised as herein provided, an amount in
cash equal to the same fraction of the current market value of one one-hundredth
of a share of Preferred Stock. For purposes of this Section 14(b), the current
market value of one one-hundredth of a share of Preferred Stock shall be one
one-hundredth of the closing price per share of Common Stock (determined
pursuant to Section 11(d)(ii) hereof) on the Trading Day immediately prior to
the date of such exercise.

            (c) Following the occurrence of a Triggering Event, the Company
shall not be required to issue fractions of shares of Common Stock upon exercise
of the Rights or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of fractional shares of Common Stock, the Company may pay
to the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one share of Common Stock. For purposes of this Section
14(c), the current market value of one share of Common Stock shall be the
closing price of one share of Common Stock (as determined pursuant to Section
11(d)(i) hereof) for the Trading Day immediately prior to the date of such
exercise.


                                      I-23



            (d) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.

            (e) Whenever a payment for fractional Rights or fractional shares is
to be made by the Rights Agent, the Company shall (i) promptly prepare and
deliver to the Rights Agent a certificate setting forth in reasonable detail the
facts related to such payment and the prices and/or formulas utilized in
calculating such payments, and (ii) provide sufficient monies to the Rights
Agent in the form of fully collected funds to make such payments. The Rights
Agent shall be fully protected in relying upon such a certificate and shall have
no duty with respect to, and shall not be deemed to have knowledge of, any
payment for fractional Rights or fractional shares under any Section of this
Agreement relating to the payment of fractional Rights or fractional shares
unless and until the Rights Agent shall have received such a certificate and
sufficient monies.

            Section 15. Rights of Action. All rights of action in respect of
                        ----------------
this Agreement, other than rights of action vested in the Rights Agent in
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.

      Section 16. Agreement of Rights Holders. Every holder of a Right, by
                  ---------------------------
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:

            (a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;

            (b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms of assignment and certificates duly completed and
fully executed;

            (c) subject to Section 6(a) and Section 7(f) hereof, the Company and
the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common Stock
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or


                                      I-24



writing on the Rights Certificates or the associated Common Stock certificate
made by anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent, subject to the last
sentence of Section 11(a)(ii) hereof, shall be required to be affected by any
notice to the contrary; and

            (d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
                                --------  -------
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.

      Section 17. Rights Certificate Holder Not Deemed a Stockholder. No holder,
                  --------------------------------------------------
as such, of any Rights Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the number of one one-hundredths of a
share of Preferred Stock or any other securities of the Company which may at any
time be issuable on the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Rights Certificate be construed to confer
upon the holder of any Rights Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in Section 25 hereof),
or to receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.

      Section 18. Concerning the Rights Agent.
                  ---------------------------

            (a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the preparation, execution,
delivery, amendment and administration of this Agreement and the exercise and
performance of its duties hereunder. The Company also agrees to indemnify the
Rights Agent for, and to hold it harmless against, any loss, liability, damage,
judgment, fine, penalty, claim, demand, settlement, cost or expense, incurred
without gross negligence, bad faith or willful misconduct on the part of the
Rights Agent (each as determined by a final, non-appealable order, judgment,
decree or ruling of a court of competent jurisdiction) for any action taken,
suffered or omitted by the Rights Agent in connection with the acceptance and
administration of this Agreement, including, without limitation, the costs and
expenses of defending against any claim of liability in the premises. The costs
and expenses incurred in enforcing this right of indemnification shall be paid
by the Company. The provisions of this Section 18 and Section 20 below shall
survive the termination of this Agreement, the exercise or expiration of the
Rights and the resignation or removal of the Rights Agent.


                                      I-25



            (b) The Rights Agent shall be authorized and protected and shall
incur no liability for or in respect of any action taken, suffered or omitted by
it in connection with its acceptance and administration of this Agreement in
reliance upon any Rights Certificate or certificate for Common Stock or for
other securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper Person or Persons. The Rights Agent shall not be deemed to have
knowledge of any event of which it was supposed to receive notice thereof
hereunder, and the Rights Agent shall be fully protected and shall incur no
liability for failing to take any action in connection therewith unless and
until it has received such notice in writing.

      Section 19. Merger or Consolidation or Change of Name of Rights Agent.
                  ---------------------------------------------------------

            (a) Any Person into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any Person
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any Person succeeding to the
business of the Rights Agent or any successor Rights Agent, shall be the
successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto;
provided, however, that such Person would be eligible for appointment as a
- --------  -------
successor Rights Agent under the provisions of Section 21 hereof. In case at the
time such successor Rights Agent shall succeed to the agency created by this
Agreement, any of the Rights Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the counter-signature of a
predecessor Rights Agent and deliver such Rights Certificates so countersigned;
and in case at that time any of the Rights Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Rights
Certificates either in the name of the predecessor or the name of the successor
Rights Agent; and in all such cases such Rights Certificates shall have the full
force provided in the Rights Certificates and in this Agreement.

            (b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.

      Section 20. Duties of Rights Agent. The Rights Agent undertakes only the
                  ----------------------
duties and obligations imposed by this Agreement (and no implied duties and
obligations) upon the following terms and conditions, by all of which the
Company and the holders of Rights Certificates, by their acceptance thereof,
shall be bound:

            (a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the advice or opinion of such counsel shall
be full and complete authorization and protection to the Rights Agent, and the
Rights Agent shall incur no liability for


                                      I-26



or in respect of, any action taken, suffered or omitted by it in accordance with
such advice or opinion.

            (b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of Current Market Price) be proved or established by the Company
prior to taking, suffering or omitting to take any action hereunder, such fact
or matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by the Chief Executive Officer and President, the Chief
Financial Officer, any Vice President, the Treasurer, any Assistant Treasurer,
the Secretary or any Assistant Secretary of the Company and delivered to the
Rights Agent; and such certificate shall be full authorization and protection to
the Rights Agent and the Rights Agent shall incur no liability for or in respect
of, any action taken, suffered or omitted to be taken by it under the provisions
of this Agreement in reliance upon such certificate.

            (c) The Rights Agent shall be liable hereunder only for its own
gross negligence, bad faith or willful misconduct (each as determined by a
final, non-appealable order, judgment, decree or ruling of a court of competent
jurisdiction). Anything to the contrary notwithstanding, in no event shall the
Rights Agent be liable for special, punitive, indirect, consequential or
incidental loss or damage of any kind whatsoever (including but not limited to
lost profits), even if the Rights Agent has been advised of the likelihood of
such loss or damage. Any liability of the Rights Agent under this Agreement will
be limited to the amount of fees paid by the Company to the Rights Agent.

            (d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.

            (e) The Rights Agent shall not be under any responsibility or have
any liability in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any adjustment required
under the provisions of Section 11 or Section 13 hereof or responsible for the
manner, method or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except with respect
to the exercise of Rights evidenced by Rights Certificates after receipt of a
certificate describing any such adjustment furnished in accordance with Section
12); nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock to
be issued pursuant to this Agreement or any Rights Certificate or as to whether
any shares of Common Stock will, when so issued, be validly authorized and
issued, fully paid and nonassessable.

            (f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and


                                      I-27



other acts, instruments and assurances as may reasonably be required by the
Rights Agent for the carrying out or performing by the Rights Agent of the
provisions of this Agreement.

            (g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chief Executive Officer and President, the Chief Financial Officer, any Vice
President, the Secretary, any Assistant Secretary, the Treasurer or any
Assistant Treasurer of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and such instructions shall be full
authorization and protection to the Rights Agent and the Rights Agent shall
incur no liability for or in respect of any action taken, suffered or omitted to
be taken by it in accordance with instructions of any such officer.

            (h) The Rights Agent and any stockholder, affiliate, director,
officer or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
the Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other Person.

            (i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct absent gross negligence, bad faith or willful misconduct
(each as determined by a final, non-appealable order, judgment, decree or ruling
of a court of competent jurisdiction) in the selection and continued employment
thereof.

            (j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
it believes that repayment of such funds or adequate indemnification against
such risk or liability is not assured to it.

            (k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate contained in the form of
assignment or the form of election to purchase set forth on the reverse thereof,
as the case may be, has either not been completed or indicates an affirmative
response to clause 1 or 2 thereof, the Rights Agent shall not take any further
action with respect to such requested exercise or transfer without first
consulting with the Company.

      Section 21. Change of Rights Agent. The Rights Agent or any successor
                  ----------------------
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (30) days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Common Stock
and Preferred Stock, by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. If the


                                      I-28



Rights Agent shall resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Rights Agent. If the
Company shall fail to make such appointment within a period of thirty (30) days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by any registered holder of a Rights Certificate (who shall, with such notice,
submit his Rights Certificate for inspection by the Company), then any
registered holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be (a) a
Person organized and doing business under the laws of the United States or any
state thereof in good standing, which is authorized under such laws to exercise
stock transfer powers and is subject to supervision or examination by federal or
state authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50,000,000 or (b) an affiliate of a
Person described in clause (a) of this sentence. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Stock and Preferred Stock, and mail a
notice thereof in writing to the registered holders of the Rights Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.

      Section 22. Issuance of New Rights Certificates. Notwithstanding any of
                  -----------------------------------
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by the Board to reflect any adjustment or change in the
Purchase Price and the number or kind or class of shares or other securities or
property purchasable under the Rights Certificates made in accordance with the
provisions of this Agreement. In addition, in connection with the issuance or
sale of shares of Common Stock following the Distribution Date (other than upon
exercise of a Right) and prior to the redemption or expiration of the Rights,
the Company (a) shall, with respect to shares of Common Stock so issued or sold
pursuant to the exercise of stock options or under any employee plan or
arrangement, or upon the exercise, conversion or exchange of securities, notes,
warrants or debentures issued by the Company, and (b) may, in any other case, if
deemed necessary or appropriate by the Board, issue Rights Certificates
representing the appropriate number of Rights in connection with such issuance
or sale; provided, however, that (i) no such Rights Certificate shall be issued
         --------  -------
if, and to the extent that, the Company shall be advised by counsel that such
issuance would create a significant risk of material adverse tax consequences to
the Company or the Person to whom such Rights Certificate would be issued, and
(ii) no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.

      Section 23. Redemption and Termination.
                  --------------------------


                                      I-29



            (a) The Board may, at its option, at any time prior to a Section
11(a)(ii) Event, redeem all but not less than all of the then outstanding Rights
at a redemption price of $0.01 per Right, as such amount may be appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the "Redemption Price"). The redemption of the Rights may be
                    ----------------
made effective at such time, on such basis and with such conditions as the Board
of Directors in its sole discretion may establish.

            (b) The Company may, at its option, pay the Redemption Price in
cash, shares of Common Stock (based on the Current Market Price as defined in
Section 11(d) hereof, of the Common Stock at the time of redemption) or any
other form of consideration deemed appropriate by the Board.

            (c) Immediately upon the action of the Board ordering the redemption
of the Rights, and without any further action and without any notice, the right
to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price for each Right so
held. Promptly after the action of the Board ordering the redemption of the
Rights, the Company shall give notice of such redemption to the Rights Agent in
writing and the holders of the then outstanding Rights by mailing such notice to
all such holders at each holder's last address as it appears upon the registry
books of the Rights Agent or, prior to the Distribution Date, on the registry
books of the Transfer Agent for the Common Stock. Any notice which is mailed in
the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of the redemption will state the method by
which the payment of the Redemption Price will be made.

      Section 24. Exchange. (a) At any time after a Section 11(a)(ii) Event, the
                  --------
Board may, at its option, exchange all or part of the then outstanding and
exercisable Rights (which (i) shall not include Rights that have become null and
void pursuant to Section 11(a)(ii) hereof and (ii) shall include, without
limitation, any Rights issued after the Distribution Date in connection with the
exercise of options pursuant to any employee benefit plan of the Company or any
Subsidiary of the Company) for shares of Common Stock at an exchange ratio of
one share of Common Stock per Right, appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(such exchange ratio being hereinafter referred to as the "Exchange Ratio").
                                                           --------------
Notwithstanding the foregoing, the Board of Directors shall not be empowered to
effect such exchange at any time after any Person (other than the Company, any
of its Subsidiaries, any employee benefit plan of the Company or any of its
Subsidiaries or any Person organized, appointed or established by the Company or
any of its Subsidiaries for or pursuant to the terms of any such plan), together
with all Affiliates and Associates of such Person, becomes the Beneficial Owner
of 50% or more of the shares of Common Stock then outstanding. From and after
the occurrence of a Section 13 Event, any Rights that theretofore have not been
exchanged pursuant to this Section 24(a) shall thereafter be exercised only in
accordance with Section 13 and may not be exchanged pursuant to this Section
24(a).

            (b) Immediately upon the action of the Board electing to exchange
any Rights pursuant to Section 24(a) and without any further action and without
any notice, the right to exercise such Rights will terminate and thereafter the
only right of the holders of such Rights shall be to receive that number of
shares of Common Stock equal to the number of such Rights


                                      I-30



held by such holder multiplied by the Exchange Ratio. The Company shall promptly
thereafter give written notice of such exchange to the Rights Agent and the
holders of the Rights to be exchanged in the manner set forth in Section 26;
provided, however, that the failure to give, or any defect in, such notice shall
- --------  -------
not affect the validity of such exchange. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder receives
the notice. Each such notice of exchange will state the method by which the
exchange of the shares of Common Stock for Rights will be effected and, in the
event of any partial exchange, the number of Rights which will be exchanged. Any
partial exchange shall be effected pro rata based on the number of Rights (other
than Rights which have become void pursuant to Section 11(a)(ii)) held by each
holder of Rights.

            (c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute Common Stock Equivalents (as defined in Section
11(a)(iii)) for shares of Common Stock exchangeable for Rights, at the initial
rate of one Common Stock Equivalent for each share of Common Stock, as
appropriately adjusted to reflect adjustments in dividend, liquidation and
voting rights of Common Stock Equivalents pursuant to the terms thereof, so that
each Common Stock Equivalent delivered in lieu of each share of Common Stock
shall have essentially the same dividend, liquidation and voting rights as one
share of Common Stock.

            (d) In the event that the number of shares of Common Stock which are
authorized by the Company's certificate of incorporation but not outstanding or
reserved for issuance are not sufficient to permit an exchange of Rights as
contemplated by this Section 24, the Company shall take all such action as may
be necessary to authorize additional shares of Common Stock for issuance upon
exchange of the Rights.

            (e) The Company shall not be required to issue fractions of shares
of Common Stock or to distribute certificates that evidence fractional shares of
Common Stock. In lieu of fractional shares of Common Stock, the Company may pay
to the registered holders of Rights Certificates with regard to which such
fractional shares of Common Stock would otherwise be issuable, an amount in cash
equal to the same fraction of the current market value of a whole share of
Common Stock. For purposes of this Section 24(e), the current market value of a
whole share of Common Stock shall be the closing price per share of Common Stock
(determined pursuant to Section 11(d)(ii) hereof) on the Trading Day immediately
prior to the date of exchange pursuant to this Section 24.

      Section 25. Notice of Certain Events.
                  ------------------------

            (a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with any other Person (other than a Subsidiary of the Company in
a transaction which complies with Section 11(o) hereof), or to effect any sale
or other transfer (or to permit


                                      I-31



one or more of its Subsidiaries to effect any sale or other transfer), in one
transaction or a series of related transactions, of more than 50% of the assets
or earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company or any of its Subsidiaries in
one or more transactions each of which complies with Section 11(o) hereof), or
(v) to effect the liquidation, dissolution or winding up of the Company, then,
in each such case, the Company shall give to each holder of a Rights
Certificate, to the extent feasible, in accordance with Section 26 hereof, a
notice of such proposed action, which shall specify the record date for the
purposes of such stock dividend or distribution of rights or warrants, or the
date on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the shares of Preferred Stock, if any
such date is to be fixed, and such notice shall be so given in the case of any
action covered by clause (i) or (ii) above at least twenty (20) days prior to
the record date for determining holders of the shares of Preferred Stock for
purposes of such action, and in the case of any such other action, at least
twenty (20) days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the shares of Preferred Stock,
whichever shall be the earlier.

            (b) In case any Section 11(a)(ii) Event or Section 13 Event shall
occur, then, in any such case, (i) the Company shall as soon as practicable
thereafter give to each holder of a Rights Certificate and to the Rights Agent,
and in accordance with Section 26 hereof, a notice of the occurrence of such
event, which shall specify the event and the consequences of the event to
holders of Rights under Section 11(a)(ii) or Section 13 hereof and (ii) all
references in the preceding paragraph to Common Stock shall, to the extent
appropriate, also be deemed thereafter to refer to other securities.

      Section 26. Notices. Notices or demands authorized by this Agreement to be
                  -------
given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) or by facsimile transmission as follows:

            CuraGen Corporation
            555 Long Wharf Drive
            11th Floor
            New Haven, CT 06511
            Attention: Chief Executive Officer, President and Chairman of the
                       Board

Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) or by facsimile transmission as follows:

            American Stock Transfer & Trust Company
            59 Maiden Lane
            New York, NY 10038


                                      I-32



Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.

      Section 27. Supplements and Amendments. Except as provided in the
                  --------------------------
penultimate sentence of this Section 27, for so long as the Rights are then
redeemable, the Company may in its sole and absolute discretion, and the Rights
Agent shall if the Company so directs, supplement or amend any provision of this
Agreement in any respect without the approval of any holders of the Rights. At
any time when the Rights are no longer redeemable, except as provided in the
penultimate sentence of this Section 27, the Company may, and the Rights Agent
shall, if the Company so directs, supplement or amend this Agreement without the
approval of any holders of Rights, provided that no such supplement or amendment
                                   --------
may (a) adversely affect the interests of the holders of Rights as such (other
than an Acquiring Person or an Affiliate or Associate of an Acquiring Person),
(b) cause this Agreement again to become amendable other than in accordance with
this sentence or (c) cause the Rights again to become redeemable.
Notwithstanding anything contained in this Agreement to the contrary, no
supplement or amendment shall be made which changes the Redemption Price. Upon
the delivery of a certificate from an appropriate officer of the Company which
states that the supplement or amendment is in compliance with the terms of this
Section 27, the Rights Agent shall execute such supplement or amendment,
provided that any supplement or amendment that does not amend Sections 18, 19,
- --------
20 or 21 hereof in a manner adverse to the Rights Agent shall become effective
immediately upon execution by the Company, whether or not also executed by the
Rights Agent.

      Section 28. Successors. All the covenants and provisions of this Agreement
                  ----------
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.

      Section 29. Determinations and Actions by the Board of Directors, etc. For
                  ---------------------------------------------------------
all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the provisions of the last sentence of Rule 13d-3(d)(l)(i) of the General Rules
and Regulations under the Exchange Act. The Board shall have the exclusive power
and authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board or to the Company, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations which are done or made by the Board in good
faith, shall be final, conclusive and binding on the Company, the Rights Agent,
the holders of the Rights and all other Persons.

      Section 30. Benefits of this Agreement. Nothing in this Agreement shall be
                  --------------------------
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the


                                      I-33



Rights Certificates (and, prior to the Distribution Date, registered holders of
the Common Stock) any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the registered holders of the Rights Certificates
(and, prior to the Distribution Date, registered holders of the Common Stock).

      Section 31. Severability. If any term, provision, covenant or restriction
                  ------------
of this Agreement is held by a court of competent jurisdiction or other
authority 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.

      Section 32. Governing Law. This Agreement, each Right and each Rights
                  -------------
Certificate issued hereunder shall be deemed to be a contract made under the
internal laws of the State of Delaware and for all purposes shall be governed by
and construed in accordance with the laws of such State applicable to contracts
made and to be performed entirely within such State; provided, however, that all
                                                     --------  -------
provisions regarding the rights, duties and obligations of the Rights Agent
shall be governed by and construed in accordance with the laws of the State of
New York applicable to contracts made and to be performed entirely within such
State.

      Section 33. Counterparts. This Agreement may be executed in any number of
                  ------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.

      Section 34. Descriptive Headings. Descriptive headings of the several
                  --------------------
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.

              [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]


                                      I-34



      IN WITNESS WHEREOF, the parties hereto have caused this Stockholder Rights
Agreement to be duly executed and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.

Attest:                                 CURAGEN CORPORATION

    /s/ Elizabeth A. Whayland               /s/ Jonathan M. Rothberg
   ----------------------------------      -------------------------------------
    Elizabeth A. Whayland                   Jonathan M. Rothberg, Ph.D.
    Director of Financial                   Chief Executive Officer, President
    Management and Secretary                and Chairman of the Board


Attest:                                 AMERICAN STOCK TRANSFER
                                        & TRUST COMPANY

    /s/ Susan Silber                        /s/ Herbert J. Lemmer
   ----------------------------------      -------------------------------------
    Susan Silber                            Herbert J. Lemmer
    Assistant Secretary                     Vice President


                                      I-35



                                                                       EXHIBIT A

                           CERTIFICATE OF DESIGNATION

                  SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

                           ---------------------------

                                ($.01 Par Value)
                                       of
                               CURAGEN CORPORATION

                         Pursuant to Section 151 of the
                General Corporation Law of the State of Delaware

                           ---------------------------

      CuraGen Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), in
accordance with the provisions of Section 103 thereof, DOES HEREBY CERTIFY:

      FIRST: That pursuant to the authority conferred upon the Board of
Directors by the Restated Certificate of Incorporation of the Corporation filed
on March 23, 1998 and as amended on May 25, 2000, the Board of Directors of the
Corporation at a meeting of the Board of Directors on March 27, 2002, adopted
the following resolutions creating a series of 1,000,000 shares of Preferred
Stock, $.01 par value per share, designated as Series A Junior Participating
Preferred Stock:

      RESOLVED:   That pursuant to the authority vested in the Board of
                  Directors of this Corporation in accordance with the
                  provisions of Article FOURTH, Section B of its Restated
                  Certificate of Incorporation, as amended, a series of
                  Preferred Stock of the Corporation (the "Series A Junior
                  Participating Preferred Stock") be, and it hereby is, created,
                  and that the designation and amount thereof and the voting
                  powers, preferences and relative, participating, optional and
                  other special rights of the shares of the Series A Junior
                  Participating Preferred Stock, and the qualifications,
                  limitations or restrictions thereof, shall be as follows:

      Section 1. Designation and Amount. The shares of such series shall be
                 ----------------------
designated as "Series A Junior Participating Preferred Stock" and the number of
shares constituting such series shall be 1,000,000. Such number of shares may be
increased or decreased by resolution of the Board of Directors; provided,
                                                                --------
however, that no decrease shall reduce the number of shares of Series A Junior
- -------
Participating Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon the exercise of
outstanding options, rights or warrants or upon the conversion of any
outstanding securities issued by the Corporation convertible into Series A
Junior Participating Preferred Stock.


                                      A-1



      Section 2. Dividends and Distributions.
                 ---------------------------

            (A) Subject to the rights of the holders of any shares of any series
of Preferred Stock ranking prior and superior to the shares of Series A Junior
Participating Preferred Stock with respect to dividends, the holders of shares
of Series A Junior Participating Preferred Stock, in preference to the holders
of Common Stock, $.01 par value per share (the "Common Stock"), of the
Corporation, and of any other junior stock, shall be entitled to receive, when,
as and if declared by the Board of Directors, out of funds of the Corporation
legally available for the payment of dividends, quarterly dividends payable in
cash on March 31, June 30, September 30 and December 31 in each year (each such
date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of Series A Junior Participating Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the greater
of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set
forth, 100 times the aggregate per share amount of all cash dividends, and 100
times the aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions, other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a
share of Series A Junior Participating Preferred Stock. In the event the
Corporation shall at any time declare or pay any dividend on Common Stock
payable in shares of Common Stock or effect a subdivision, combination or
consolidation of the outstanding Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the amount to
which holders of shares of Series A Junior Participating Preferred Stock were
entitled immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

            (B) The Corporation shall declare a dividend or distribution on the
Series A Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock) and the Corporation
shall pay such dividend or distribution on the Series A Junior Participating
Preferred Stock before the dividend or distribution declared on the Common Stock
is paid or set apart; provided, however, that, in the event no dividend or
                      --------  -------
distribution shall have been declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $1.00 per share on the Series A Junior
Participating Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.

            (C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Junior Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of Series
A Junior Participating Preferred Stock, unless the date of issue of such shares
is prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of


                                      A-2



issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Series A Junior Participating Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in either of
which events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Junior Participating
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more
than 60 days prior to the date fixed for the payment thereof.

      Section 3. Voting Rights. The holders of shares of Series A Junior
                 -------------
Participating Preferred Stock shall have the following voting rights:

            (A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Junior Participating Preferred Stock shall entitle the
holder thereof to 100 votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at any time
declare or pay any dividend on Common Stock payable in shares of Common Stock or
effect a subdivision, combination of consolidation of the outstanding Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the number of votes per share to which holders of shares of
Series A Junior Participating Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

            (B) Except as otherwise provided herein, by law, or in any other
Certificate of Designation creating a series of Preferred Stock or any similar
stock, the holders of shares of Series A Junior Participating Preferred Stock,
the holders of shares of Common Stock and any other capital stock of the
Corporation having general voting rights shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation.

            (C) (i) If at any time dividends on any Series A Junior
Participating Preferred Stock shall be in arrears in an amount equal to six (6)
quarterly dividends thereon, the occurrence of such contingency shall mark the
beginning of a period (herein called a "default period") which shall extend
until such time when all accrued and unpaid dividends for all previous quarterly
dividend periods and for the current quarterly dividend period on all shares of
Series A Junior Participating Preferred Stock then outstanding shall have been
declared and paid or set apart for payment. During each default period, all
holders of Preferred Stock (including holders of the Series A Junior
Participating Preferred Stock) with dividends in arrears in an amount equal to
six (6) quarterly dividends thereon, voting as a class, irrespective of series,
shall have the right to elect two (2) Directors.


                                      A-3



                  (ii) During any default period, such voting right of the
holders of Series A Junior Participating Preferred Stock may be exercised
initially at a special meeting called pursuant to subparagraph (iii) of this
Section 3(C) or at any annual meeting of stockholders, and thereafter at annual
meetings of stockholders, provided that neither such voting right nor the right
of the holders of any other series of Preferred Stock, if any, to increase, in
certain cases, the authorized number of Directors shall be exercised unless the
holders of ten percent (10%) in number of shares of Preferred Stock outstanding
shall be present in person or by proxy. The absence of a quorum of the holders
of Common Stock shall not affect the exercise by the holders of Preferred Stock
of such voting right. At any meeting at which the holders of Preferred Stock
shall exercise such voting right initially during an existing default period,
they shall have the right, voting as a class, to elect Directors to fill such
vacancies, if any, in the Board of Directors as may then exist up to two (2)
Directors or, if such right is exercised at an annual meeting, to elect two (2)
Directors. If the number which may be so elected at any special meeting does not
amount to the required number, the holders of the Preferred Stock shall have the
right to make such increase in the number of Directors as shall be necessary to
permit the election by them of the required number. After the holders of the
Preferred Stock shall have exercised their right to elect Directors in any
default period and during the continuance of such period, the number of
Directors shall not be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or pari passu with the Series A Junior
Participating Preferred Stock.

                  (iii) Unless the holders of Preferred Stock shall, during an
existing default period, have previously exercised their right to elect
Directors, the Board of Directors may order the calling of a special meeting of
the holders of Preferred Stock, which meeting shall thereupon be called by the
Chairman of the Board or the President of the Corporation. Notice of such
meeting and of any annual meeting at which holders of Preferred Stock are
entitled to vote pursuant to this paragraph (C)(iii) shall be given to each
holder of record of Preferred Stock by mailing a copy of such notice to him at
his last address as the same appears on the books of the Corporation. Such
meeting shall be called for a time not earlier than 10 days and not later than
60 days after such order or request. Notwithstanding the provisions of this
paragraph (C)(iii), no such special meeting shall be called during the period
within 60 days immediately preceding the date fixed for the next annual meeting
of the stockholders.

                  (iv) In any default period, the holders of Common Stock, and
other classes of stock of the Corporation if applicable, shall continue to be
entitled to elect the whole number of Directors until the holders of Preferred
Stock shall have exercised their right to elect two (2) Directors voting as a
class, after the exercise of which right (x) the Directors so elected by the
holders of Preferred Stock shall continue in office until their successors shall
have been elected by such holders or until the expiration of the default period,
and (y) any vacancy in the Board of Directors may (except as provided in
paragraph (C)(ii) of this Section 3) be filled by vote of a majority of the
remaining Directors theretofore elected by the holders of the class of stock
which elected the Director whose office shall have become vacant. References in
this paragraph (C) to Directors elected by the holders of a particular class of
stock shall include Directors elected by such Directors to fill vacancies as
provided in clause (y) of the foregoing sentence.


                                      A-4



                  (v) Immediately upon the expiration of a default period, (x)
the right of the holders of Preferred Stock as a class to elect Directors shall
cease, (y) the term of any Directors elected by the holders of Preferred Stock
as a class shall terminate, and (z) the number of Directors shall be such number
as may be provided for in the certificate of incorporation or by-laws
irrespective of any increase made pursuant to the provisions of paragraph
(C)(ii) of this Section 3 (such number being subject, however, to change
thereafter in any manner provided by law or in the certificate of incorporation
or bylaws). Any vacancies in the Board of Directors effected by the provisions
of clauses (y) and (z) in the preceding sentence may be filled by a majority of
the remaining Directors.

            (D) Except as set forth herein, or as otherwise provided by law,
holders of Series A Junior Participating Preferred Stock shall have no special
voting rights and their consent shall not be required (except to the extent they
are entitled to vote with holders of Common Stock as set forth herein) for
taking any corporate action.

      Section 4. Certain Restrictions.
                 --------------------

            (A) Whenever quarterly dividends or other dividends on distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:

                  (i) declare or pay dividends on or make any other
distributions on any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Junior
Participating Preferred Stock;

                  (ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Stock, except dividends paid ratably on the Series A
Junior Participating Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;

                  (iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to dividends or upon
liquidation/dissolution or winding up) to the Series A Junior Participating
Preferred Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Junior Participating
Preferred Stock;

                  (iv) purchase or otherwise acquire for consideration any
shares of Series A Junior Participating Preferred Stock, or any shares of stock
ranking on a parity with the Series A Junior Participating Preferred Stock,
except in accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the respective
series and classes, shall


                                      A-5



determine in good faith will result in fair and equitable treatment among the
respective series or classes.

            (B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.

      Section 5. Reacquired Shares. Any shares of Series A Junior Participating
                 -----------------
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.

      Section 6. Liquidation, Dissolution on Winding Up. (A) Upon any
                 --------------------------------------
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating Preferred Stock
shall have received $150 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment (the "Series A Liquidation Preference"). Following the payment of
the full amount of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series A Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (i) the Series A Liquidation
Preference by (ii) 100 (as appropriately adjusted as set forth in subparagraph C
below to reflect such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock) (such number in clause (ii),
the "Adjustment Number"). Following the payment of the full amount of the Series
A Liquidation Preference and the Common Adjustment in respect of all outstanding
shares of Series A Junior Participating Preferred Stock and Common Stock,
respectively, holders of Series A Junior Participating Preferred Stock and
holders of shares of Common Stock shall receive their ratable and proportionate
share of the remaining assets to be distributed in the ratio of the Adjustment
Number to 1 with respect to such Preferred Stock and Common Stock, on a per
share basis, respectively.

            (B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of Preferred Stock, if any,
which rank on a parity with the Series A Junior Participating Preferred Stock,
then such remaining assets shall be distributed ratably to the holders of such
parity shares in proportion to their respective liquidation preferences. In the
event, however, that there are not sufficient assets available to permit payment
in full of the Common Adjustment, then such remaining assets shall be
distributed ratably to the holders of Common Stock.


                                      A-6



            (C) In the event the Corporation shall at any time declare or pay
any dividend on Common Stock payable in shares of Common Stock, or effect a
subdivision, combination or consolidation of the outstanding Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the Adjustment Number in effect immediately prior to such event shall
be adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.

            (D) Neither the consolidation, merger or other business combination
of the Corporation with or into any other corporation the sale, lease, exchange
or conveyance of all or any part of the property, assets or business of the
Corporation shall be deemed to be a liquidation, dissolution or winding up of
the Corporation for purposes of this Section 6.

      Section 7. Consolidation, Merger, etc. In case the Corporation shall enter
                 --------------------------
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 100 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time declare or pay any
dividend on Common Stock payable in shares of Common Stock, or effect a
subdivision, combination or consolidation of the outstanding Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Junior Participating Preferred Stock
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denomination of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.

      Section 8. No Redemption. The shares of Series A Junior Participating
                 -------------
Preferred Stock shall not be redeemable.

      Section 9. Ranking. The Series A Junior Participating Preferred Stock
                 -------
shall rank junior to all other series of the Corporation's Preferred Stock as to
the payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.

      Section 10. Amendment. The Restated Certificate of Incorporation of the
                  ---------
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least seventy-five percent of the
outstanding shares of Series A Junior Participating Preferred Stock, voting
together as a single class.


                                      A-7



      Section 11. Fractional Shares. Series A Junior Participating Preferred
                  -----------------
Stock may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Junior Participating Preferred Stock.

              [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]


                                      A-8



      IN WITNESS WHEREOF, said CuraGen Corporation has caused this Certificate
of Designation to be signed by its duly authorized officer this ____ day of
______, 2002.

                                        CURAGEN CORPORATION


                                        By _____________________________________
                                           Jonathan M. Rothberg,
                                           Chief Executive Officer, President
                                           and Chairman of the Board


                                      A-9



                                                                       EXHIBIT B
                                                                       ---------

                          [FORM OF RIGHTS CERTIFICATE]

Certificate No. R-                                              _________ Rights

      NOT EXERCISABLE AFTER MARCH 27, 2012 OR EARLIER IF REDEEMED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT
$0.01 PER RIGHT, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE
OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS WILL BECOME NULL AND VOID.

                               Rights Certificate

                               CURAGEN CORPORATION

      This Rights Certificate certifies that ____________________, or registered
assigns, is the registered holder of the number of Rights set forth above, each
of which entitles the holder thereof, subject to the terms, provisions and
conditions of the Stockholder Rights Agreement, dated as of March 27, 2002 (the
"Rights Agreement"), between CuraGen Corporation, a Delaware corporation (the
"Company"), and American Stock Transfer & Trust Company (the "Rights Agent"), to
purchase from the Company after the Distribution Date (as such term is defined
in the Rights Agreement) and at any time prior to the Expiration Date (as such
term is defined in the Rights Agreement) at the office or offices of the Rights
Agent designated for such purpose, or its successors as Rights Agent, one
one-hundredth of a fully paid, non-assessable share of Series A Junior
Participating Preferred Stock (the "Preferred Stock") of the Company, at a
purchase price of $150 per one one-hundredth of a share (the "Purchase Price"),
upon presentation and surrender of this Rights Certificate with the Form of
Election to Purchase and related Certificate duly executed. The number of Rights
evidenced by this Rights Certificate (and the number of shares which may be
purchased upon exercise thereof) set forth above, and the Purchase Price per
share set forth above, are the number and Purchase Price as of ______________,
based on the Preferred Stock as constituted at such date. The Company reserves
the right to require prior to the occurrence of a Triggering Event (as such term
is defined in the Rights Agreement) that a number of Rights be exercised so that
only whole shares of Preferred Stock will be issued.

      Capitalized terms used herein and not otherwise defined herein shall have
the meanings assigned to such terms in the Rights Agreement.

      Upon the occurrence of a Section 11(a)(ii) Event, if the Rights evidenced
by this Rights Certificate are beneficially owned by (i) an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (ii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate of an Acquiring Person),
or (iii) under certain circumstances specified in the Rights Agreement, a
transferee of a person who, after such transfer, became an Acquiring Person (or
an Associate or Affiliate of an Acquiring Person), such Rights shall become null
and void and no holder hereof


                                      B-1



shall have any right with respect to such Rights from and after the occurrence
of such Section 11(a)(ii) Event.

      As provided in the Rights Agreement, the Purchase Price and the number and
kind of shares of Preferred Stock or other securities which may be purchased
upon the exercise of the Rights evidenced by this Rights Certificate are subject
to modification and adjustment upon the happening of certain events, including
Triggering Events.

      This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the office of the Company and are
also available upon written request to the Company.

      This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office or offices of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-hundredths of a share of Preferred
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.

      Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Company at the option of the Board at a
redemption price of $0.01 per Right at any time prior to a Section 11(a)(ii)
Event.

      No fractional shares of Preferred Stock will be issued upon the exercise
of any Right or Rights evidenced hereby (other than fractions which are
integral-multiples of one one-hundredth of a share of Preferred Stock), but in
lieu thereof a cash payment will be made, as provided in the Rights Agreement.

      No holder of this Rights Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of shares of Preferred Stock
or of any other securities of the Company which may at any time be issuable on
the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting stockholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by this Rights Certificate shall have been
exercised as provided in the Rights Agreement.


                                      B-2



      This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent

      IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal by its authorized officers.

Dated:

ATTEST:                                 CURAGEN CORPORATION

__________________________________      By: ____________________________________
Name:                                       Jonathan M. Rothberg,
Title:                                      Chairman of the Board, Chief
                                            Executive Officer and President


Countersigned:

AMERICAN STOCK TRANSFER &
TRUST COMPANY

By: ______________________________
    Authorized Signature


                                      B-3



                  [Form of Reverse Side of Rights Certificate]

                               FORM OF ASSIGNMENT
                               ------------------

                (To be executed by the registered holder if such
              holder desires to transfer the Rights Certificate.)

FOR VALUE RECEIVED _____________________________________________________________

hereby sells, assigns and transfers unto _______________________________________

________________________________________________________________________________
                  (Please print name and address of transferee)

this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________ Attorney, to
transfer the within Rights Certificate on the books of the within-named Company,
with full power of substitution.

Dated:


                                        ________________________________________
                                        Signature

Signature Guaranteed:


                                      B-4



                                   Certificate
                                   -----------

      The undersigned hereby certifies by checking the appropriate boxes that:

      (1) this Rights Certificate [_] is [_] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of an Acquiring Person (as such terms are defined in the
Rights Agreement); and

      (2) after due inquiry and to the best knowledge of the undersigned, it [_]
did [_] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.

Dated:


                                        ________________________________________
                                        Signature

Signature Guaranteed:

                                     NOTICE
                                     ------

      The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.


                                      B-5



                          FORM OF ELECTION TO PURCHASE
                          ----------------------------

                      (To be executed if holder desires to
                       exercise Rights represented by the
                              Rights Certificate.)

To:   CURAGEN CORPORATION:

      The undersigned hereby irrevocably elects to exercise ______ Rights
represented by this Rights Certificate to purchase the shares or portion thereof
of Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be issued
in the name of and delivered to:

Please insert social security
or other identifying number

________________________________________________________________________________

________________________________________________________________________________
                         (Please print name and address)

      If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:

Please insert social security
or other identifying number

________________________________________________________________________________

________________________________________________________________________________
                         (Please print name and address)

Dated:


                                        ________________________________________
                                        Signature Guaranteed:


                                      B-6



                                   Certificate
                                   -----------

      The undersigned hereby certifies by checking the appropriate boxes that:

      (1) the Rights evidenced by this Rights Certificate [_] are [_] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are defined in
the Rights Agreement); and

      (2) after due inquiry and to the best knowledge of the undersigned, it [_]
did [_] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.

Dated:


                                        ________________________________________
                                        Signature

Signature Guaranteed:

                                     NOTICE
                                     ------

      The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.


                                      B-7



                                                                       EXHIBIT C
                                                                       ---------

                  SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK

      On March 27, 2002 the Board of Directors of CuraGen Corporation (the
"Company") declared a dividend of one preferred stock purchase right (a "Right")
for each outstanding share of the Company's voting common stock, $.01 par value
(the "Common Stock") to stockholders of record at the close of business on April
10, 2002 (the "Record Date"). Each Right entitles the registered holder to
purchase from the Company one one-hundredth of a share of Series A Junior
Participating Preferred Stock, $.01 par value per share (the "Preferred Stock"),
at a purchase price of $150 in cash (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in a
Stockholder Rights Agreement (the "Rights Agreement") between the Company and
American Stock Transfer & Trust Company, as Rights Agent.

      Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate certificates for Rights
will be distributed. The Rights will separate from the Common Stock and a
"Distribution Date" will occur upon the earlier of (i) 10 days following a
public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired, or obtained the right to acquire,
beneficial ownership of more than 20% or more of the outstanding shares of the
Company's Common Stock (the "Stock Acquisition Date") or (ii) 10 business days
following the commencement of a tender offer or exchange offer that may result
in a person or group beneficially owning 20% or more of the outstanding shares
of the Company's Common Stock.

      Until the Distribution Date (or earlier redemption or expiration of the
Rights), (i) the Rights will be evidenced by the Common Stock certificates and
will be transferred with and only with such Common Stock certificates, (ii) new
Common Stock certificates issued after the Record Date will contain a notation
incorporating the Rights Agreement by reference and (iii) the surrender for
transfer of any certificates for Common Stock outstanding, even without such
notation, will also constitute the transfer of the Rights associated with the
Common Stock represented by such certificate.

      The Rights are not exercisable until the Distribution Date and will expire
at the close of business on March 27, 2012, unless earlier redeemed or exchanged
by the Company as described below.

      As soon as practicable after the Distribution Date, separate certificates
evidencing the Rights ("Rights Certificates") will be mailed to holders of
record of the Common Stock as of the close of business on the Distribution Date
(other than to any Acquiring Person or any associate or affiliate of an
Acquiring Person) and, thereafter, such separate Rights Certificates alone will
represent the Rights. Except as otherwise determined by the Board and except in
connection with shares of Common Stock issued upon the exercise of employee
stock options, issuances under other employee stock benefit plans or upon the
conversion of convertible securities issued after the Distribution Date, only
shares of Common Stock issued prior to the Distribution Date will be issued with
Rights.

      In the event any Person becomes an Acquiring Person, also known as a
"Section 11(a)(ii) Event", each holder of a Right will thereafter have the right
to receive, upon exercise, that


                                      C-1



number of shares of Common Stock (or, in certain circumstances, cash, property
or other securities of the Company) which equals the exercise price of the Right
divided by one-half of the current market price (as defined in the Rights
Agreement) of the Common Stock at the date of the occurrence of the event.
Notwithstanding any of the foregoing, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by an
Acquiring Person will be null and void.

      In the event that, at any time following a Section 11(a)(ii) Event, (i)
the Company is acquired in a merger or other business combination transaction or
(ii) more than 50% of the Company's assets or earning power is sold or
transferred, each holder of a Right (except Rights which previously have been
voided as set forth above) shall thereafter have the right to receive, upon
exercise, that number of shares of common stock of the acquiring company which
equals the exercise price of the Right divided by one-half of the current market
price (as defined in the Rights Agreement) of such common stock at the date of
the occurrence of the event. The events set forth in this paragraph and in the
preceding paragraph are referred to as the "Triggering Events."

      At any time after the occurrence of a Section 11(a)(ii) Event, the Board
may exchange the Rights (other than Rights owned by an Acquiring Person which
have become void), in whole or in part, at an exchange ratio of one share of
Common Stock, or one Common Stock Equivalent (as defined in the Rights
Agreement), per Right (subject to adjustment).

      The Purchase Price payable, and the number of units of Preferred Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Stock, (ii) if holders of the Preferred Stock are granted certain rights or
warrants to subscribe for Preferred Stock or convertible securities at less than
the current market price of the Preferred Stock, or (iii) upon the distribution
to holders of the Preferred Stock of evidences of indebtedness or assets
(excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).

      With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional shares of Preferred Stock (other than fractions which are
integral multiples of one one-hundredth of a share of Preferred Stock) will be
issued and, in lieu thereof, an adjustment in cash will be made based on the
market price of the Preferred Stock on the last trading date prior to the date
of exercise.

      In general, the Company may redeem the Rights in whole, but not in part,
at any time before a Section 11(a)(ii) Event, at a price of $.01 per Right
(payable in cash, Common Stock or other consideration deemed appropriate by the
Board). Immediately upon the action of the Board ordering redemption of the
Rights, the Rights will terminate and the only right of the holders of Rights
will be to receive the $.01 per Right redemption price. The redemption price is
payable in cash, stock or other consideration deemed appropriate by the Board.

      Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While


                                      C-2



the distribution of the Rights will not be taxable to stockholders or to the
Company, stockholders may, depending upon the circumstances, recognize taxable
income in the event that the Rights become exercisable for Common Stock (or
other consideration) of the Company or for common stock of the acquiring company
as set forth above.

      Subject to certain exceptions, any of the provisions of the Rights
Agreement may be amended by the Board of Directors of the Company prior to such
time as the Rights are no longer redeemable.

      A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an exhibit to the Company's Annual Report on Form 10-K.
A copy of the Rights Agreement is available free of charge from the Company.
This summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.


                                      C-3

EX-10.27

                                                                   EXHIBIT 10.27

                                 LEASE AGREEMENT

                                   - Between -

                          CURAGEN CORPORATION (Tenant)

                                     - And -

                 16 COMMERCIAL STREET ASSOCIATES, LLC (Landlord)






                               TABLE OF CONTENTS

                                                                       PAGE NO.

PREMISES......................................................................1
TERM AND USE..................................................................1
RENT..........................................................................1
TENANT'S REPAIRS..............................................................2
LANDLORD'S REPAIRS............................................................2
INSURANCE.....................................................................3
ALTERATIONS AND IMPROVEMENTS..................................................4
ENVIRONMENTAL COMPLIANCE AND INDEMNIFICATIONS.................................4
TENANT'S PROPERTY.............................................................5
UTILITIES AND FUEL............................................................5
ASSIGNMENT AND SUBLETTING.....................................................5
DAMAGE OR DESTRUCTION.........................................................5
CONDEMNATION..................................................................6
DEFAULT.......................................................................6
OPTION TO RENEW...............................................................7
HOLDING OVER..................................................................7
SUBORDINATION.................................................................7
NOTICES.......................................................................7
SECURITY DEPOSIT..............................................................8
LANDLORD'S RULES AND REGULATIONS..............................................8
LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS................................8
LIENS.........................................................................9
WASTE.........................................................................9
INSPECTION BY LANDLORD........................................................9
SURRENDER OF PREMISES.........................................................9
WAIVER OF NOTICE..............................................................9
ESTOPPEL CERTIFICATE..........................................................9
LIMITATION OF LIABILITY......................................................10
RIGHTS OF LANDLORD; NON-WAIVER...............................................10
BROKER.......................................................................10
ENTIRE AGREEMENT; AMENDMENT..................................................10
NOTICE OF LEASE..............................................................10


EXHIBIT A - LEGAL DESCRIPTION
EXHIBIT B - TENANT IMPROVEMENT ALLOWANCE
EXHIBIT C - TENANT IMPROVEMENTS (Floor Plan, Detail by ________)






                                 LEASE AGREEMENT

LEASE AGREEMENT made and entered into as of May 24, 2001, between 16 Commercial
Street Associates, LLC (hereinafter known as "Landlord"), whose principal place
of business is 431 Orange Street, New Haven, Connecticut 06511, and CuraGen
Corporation (hereinafter known as "Tenant") whose principal place of business is
555 Long Wharf Drive, 11th Floor, New Haven, Connecticut 06511.

                                    PREMISES

The Landlord, in consideration of the covenants, conditions, agreements and
stipulations of the Tenant expressed, does hereby lease the following Premises,
the improvements, buildings and land known as 16 Commercial Street, Branford,
Connecticut 06405. The Premises is also described in Exhibit A of the Lease.

                                  TERM AND USE

The Term of the Lease and the estate hereby granted (collectively the "Term of
the Lease") shall commence June 1, 2001 (hereinafter known as the "Commencement
Date") and shall end on May 31, 2006 (hereinafter known as "End of Term"). The
Tenant shall have the option to terminate this Lease on June 1, 2004. The Tenant
must give written Notice to the Landlord of its option to terminate by December
1, 2003, time being of the essence. If the Tenant elects to terminate this
Lease, the Term of the Lease shall continue month-to-month after June 1, 2004,
until the Landlord has signed a lease for the Premises with a new tenant. The
Landlord shall use diligent efforts to secure a new tenant. Rent shall continue
as scheduled herein until the Landlord has signed a lease with a new tenant.

The Premises shall be used by the Tenant for office and lab use. Landlord is its
reasonable discretion reserves the right to limit uses that would constitute and
environmental concern, disturb the quiet enjoyment of other tenants of the
Landlord, or overtax the capacity of the Premises.

                                      RENT

The Rent under this Lease for the Term hereof shall begin on the Commencement
Date and stop at the End of Term. Rent shall include the Base Rent and Common
Area Charges.

1. Base Rent shall starting on the Commencement Date shall be paid as follows:

     From June 1, 2001 to May 31, 2004, the Base Rent is $125,000 per year,
payable in equal installments of $10,416.67 per month. From June 1, 2004 to May
30, 2006, Base Rent is $135,000 per year, payable in equal installments of
$11,250 per month.

2. In addition to Base Rent, the Tenant shall pay the Landlord for all expenses
with respect to the operation, management, and maintenance of the interior and
exterior of the building, the




                                       1



grounds, and all areas incidental to the Premises, hereinafter referred to as
"Common Area Charges." The costs shall include such items as, but not limited
to, real estate taxes, all property insurance, sewer taxes or usage fees, water
usage fees, landscape maintenance, snow removal, security, administrative costs,
management fees, roof repairs that result from the Tenant's improvements,
general maintenance and repairs (other than those for which Tenant is
responsible, referred to as "Tenant's Repairs"), and contractor fees. Common
Area Charges shall exclude depreciation, interest and amortization payments on
any mortgage or other indebtedness of Landlord, capital expenditures, leasing
commissions, structural repairs, and expenses reimbursed to the Landlord by
property insurance.

During the first lease year, the Tenant shall pay $2,500 per month in addition
to Base Rent (hereinafter referred to as "CAC Contribution") towards the Common
Area Charges. The Landlord will reconcile the difference between the CAC
Contribution and the Common Area Charges twice during each Lease year. Also, the
monthly CAC Contribution will be adjusted at the end of each Lease year by the
Landlord to reflect the projected costs for the upcoming year. The Landlord will
provide notice of the new CAC Contribution for the upcoming lease year.

3. The Rent shall be paid to the Landlord at the address specified herein, or at
such other place as the Landlord may designate, in lawful money of the United
States of America, as and when the same shall become due and payable and without
abatement of offset and without notice or demand therefor.

4. If any installment of Rent as provided for in this Lease is not received at
the Landlord's address within (10) ten days after the same is due and payable,
the Tenant shall pay an additional amount equal to (5%) five percent of the
monthly Rent so due.

5. As used herein, "Lease Year" shall mean the period commencing on the
Commencement Date and ending on the End of Term, including twelve consecutive
calendar months.

                                TENANT'S REPAIRS

Tenant agrees to provide and pay for all ordinary and necessary maintenance and
repairs of the interior and exterior of the Premises including, but not limited
to, lighting tubes, ballasts, lavatory fixtures and accessories, all glass, all
doors, exit signage, janitorial service, refuse and trash removal, heating and
air conditioning, electrical, plumbing, and all systems in a professional
manner.

The Landlord will contract, on behalf of the Tenant, for snow plowing,
shoveling, sanding, salting of sidewalks, entrances, stairs and stoops, as well
as to be certain that the parking areas are safe for use by the Tenant's
employees, visitors and invitees. These costs shall be reimbursed by the Tenant
to the Landlord through the Common Area Charges.

                               LANDLORD'S REPAIRS

The Landlord shall contract for landscaping and snow removal service. These
costs shall be reimbursed by the Tenant to the Landlord through the Common Area
Charges. So long as no Default shall have occurred and be continuing hereunder,
the Landlord, at its own expense, shall


                                       2



provide all structural repairs and replacements. Unless such repairs or
replacements shall be required by reason of the Tenant Improvements or
equipment, the default by Tenant in any of its obligations, or the negligence or
willful misconduct of the Tenant, its officers, employees, contractors, agents,
or invitees, in which the Tenant shall reimburse the Landlord for all such costs
and expenses within (10) days of written demand therefor.

                                    INSURANCE

1. At all times during the term of this lease, the Landlord shall insure the
Premises against loss or damage by fire, flood, and such other casualties, rent
loss, in such amount as the Landlord shall deem appropriate. The Tenant shall
reimburse the Landlord for this expense as part of the Common Area Charges.

2. The Tenant shall not commit or permit any violation of the policies carried
by the Landlord, or do or permit anything to be done, or keep or permit anything
to be kept, on or in the Premises, which in case of any of the foregoing, could
result in the termination of such insurance policies, could adversely affect the
Landlord's right of recovery under any such policies, or would result in the
refusal by insurance companies to insure the Premises in the amounts
satisfactory to the Landlord. If any such action by the Tenant shall result in
an increase in the rate of insurance premiums, the Tenant shall pay the increase
to the Landlord upon demand.

3. At all times during this Lease, the Tenant shall insure the Tenant's
Improvements, and the Tenant's Property against loss or damage by fire, flood,
and such other casualties equal to the full replacement value. The tenant will
keep in full force and effect a policy of public liability and property damage
insurance in which the limits shall initially be less than two million dollars
($2,000,000) combined single limit, three million dollars general aggregate
($3,000,000), such limits to be increased as reasonably specified by the
Landlord. The Tenant shall also carry plate glass window insurance and otherwise
be responsible for the same when damaged during the term of this Lease. During
any time when Tenant shall be making alterations or improvements to the
Premises, the Tenant shall keep in full force and effect a policy of completed
value builder's risk insurance (on an "installations floater"), including
building materials, covering loss from damage from fire, lightening, extended
coverage perils, vandalism and malicious mischief, and perils in an amount not
less than the final cost of such alterations or improvements.

4. All insurance policies provided by the Tenant shall be effected under valid
and enforceable policies in form and substance then standard in the State of
Connecticut, issues by insurers having an "AM Best" rating of A- or better.
Within (30) thirty days of the Commencement Date, the Tenant shall provide
certificates to the Landlord of the insurance. All such insurance policies shall
contain an agreement by the insurers that such policies shall not be canceled,
amended, or otherwise modified without (30) thirty days written notice to the
Landlord, and the Landlord's rights and interests under such policies shall not
be subject to cancellation by reason of any act or omission of the Tenant. All
insurance policies provided by the Tenant shall name the Landlord and Landlord's
mortgage lenders as additional insured as their interests may appear.

5. Tenant shall indemnify and hold the Landlord harmless against any liability
or expense, including reasonable attorney's fees, on account of any accident or
injury to the Tenant, the Tenant's employees, servants, agents, customers,
invitees, licensees, contractors, or visitors, who


                                       3



may be injured by the Tenant or on the Premises. The foregoing shall not extend
to the gross negligence of the Landlord.


                          ALTERATIONS AND IMPROVEMENTS

1. The Tenant shall not make or have made alterations, improvements,
decorations, installations and substitutions (collectively called "Tenant's
Improvements") in, of or to the Premises without the prior written consent of
the Landlord. Approval by Landlord shall not be unreasonably withheld. Unless
otherwise specified, any improvements or alterations in the Premises made by
Tenant (including without limitation permanent partitions, wall paneling and
lighting fixtures, but excepting the Tenant's Property, shall be and remain upon
and be surrendered with the Premises at the End of Term. If the Landlord
requests the removal of any of the Tenant's Improvements, including telephone
and computer cabling, the Tenant shall in good workmanlike manner remove said
improvements at the End of Term.

2. The Tenant shall obtain all necessary permits and certificates for the
commencement and prosecution of the Tenant's Improvements. The Tenant's
Improvements shall not constitute the basis for a claim against the Landlord,
nor a lien or charge upon or against the Premises. If at any time any such claim
or charge shall be filed against the Premises, the Tenant shall cause such
claim, lien or charge to be properly released of record. The Tenant shall pay
for all materials constituting Tenant's Improvements, and the Tenant agrees that
none of such materials shall be at any time subject to any lien, security
interest, charge, installment sales contract, by any other person, firm or
corporation whether created voluntarily or involuntarily.

                 ENVIRONMENTAL COMPLIANCE AND INDEMNIFICATIOINS

1. "Environmental Laws" shall mean any and all statutory, regulatory, or
decisional law pertaining to the protection of the environment or to any
Polluting Substance, including Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (CERCLA), the Resource Conservation and
Recovery Act of 1976 (RCRA), and Title 22a "Environmental Protection" of the
Connecticut General Statutes, including Sections 22a-448 through 22a-457, state
and Federal laws concerning underground storage tanks, the Federal Clean Air
Act, 42 USAA Section 7401 et. seq. state law concerning air pollution, Conn.
Gen. Statutes Section 22a-174 et. Seq.; the Federal Clean Water Act, 33 USC
Section 1251 et. seq. And state and Water Pollution Control Act, Conn. Gen.
Stat. Chapter 446k, and any as amended from time to time. The term "Polluting
Substance" shall mean any toxic, polluting waste or substance, determined by any
agency with jurisdiction to pose a present or potential hazard to human health
or the environment.

2. The Tenant shall not cause or permit any Polluting Substance to be generated,
recycled, refined, transported, treated, stored, disposed, handled, processed,
produced or released on the Premises, except in compliance with all applicable
laws and regulations, including the Environmental Laws. The Tenant covenants and
agrees to be responsible for all costs and penalties arising from non-compliance
with the Environmental Laws, permits, or orders of any agency with jurisdiction
that may impair the Premises or third parties. If the event of a release of a
Polluting Substance caused by Tenant's activities, the Tenant shall notify the
Landlord and the appropriate governmental agency within (24) hours of the
release. The Tenant covenants and


                                       4



agrees to forever indemnify and hold the Landlord harmless from all costs or
liabilities, including legal and consulting expenses, arising from a violation
of the foregoing. The Environmental Compliance shall survive the expiration or
termination of this Lease, and be governed and construed under the laws of the
State of Connecticut.

                                TENANT'S PROPERTY

Any trade fixtures, equipment and other personal property installed in or
attached to the Premises by the Tenant, shall remain the property of the Tenant
and may be removed by the Tenant at any time during this lease. The Tenant shall
pay for the cost or repairing any damages to the Premises resulting from such
installation or removal. The Landlord shall not be liable to the Tenant or any
person or company for damage or theft to the Tenant's Property.

                               UTILITIES AND FUEL

The Tenant agrees to pay all charges made by any utility company for services
furnished to the Premises during the term of this Lease, including, but not
limited to, electricity, gas, water, sewer, telephone, and cable television.

                            ASSIGNMENT AND SUBLETTING

The Tenant agrees not to assign or in any way encumber this Lease, nor sublet
the Premises, or any part hereof, without obtaining prior written consent of the
Landlord, which shall not be unreasonably withheld. In the event the Landlord
consents to an assignment, by reason of a sale of the Tenant, or for any other
purpose, the Tenant will remain liable for full performance of the lease. In the
event of an assignment, or sale of the Tenant, all rights and guarantees
provided to the Landlord will survive the assignment.

                              DAMAGE OR DESTRUCTION

1. In the event that the Premises, other than Tenant's Improvements or Tenant's
Property, is damaged by fire or other insured casualty, but the Tenant shall
continue to have reasonably convenient access, and no portion shall be rendered
unfit for use and occupancy, the Landlord shall repair such damage with
diligence. During the repair period, the Rent shall not be abated or suspended.

2. In the event that the Premises, other than Tenant's Improvements or Tenant's
Property, are damaged or destroyed by fire or other insured casualty, and the
Tenant shall not have reasonably convenient access, or rendered unfit for use
and occupancy, and if in the sole judgment of the Landlord the damage may be
repaired within one hundred and eighty days (180) after the occurrence, then the
Landlord shall notify the Tenant within thirty (30) days after the occurrence,
and shall repair such damage with diligence. If the Premises does not have
reasonably convenient access or some portion of the Premises, or the whole of
the Premises is rendered unfit, the Rent shall be appropriately abated during
the period until tenant regains occupancy. The Tenant shall have the right to
terminate the Lease, within ten (10) days notice, if


                                       5



the Landlord cannot repair the damage and receive appropriate authority for Use
and occupancy after the one hundred and eighty (180) day period, except for
delays caused by acts of god, strikes, or government regulation. No damages,
compensation or claim shall by payable to the Landlord or the Tenant, or any
other person, by reason of inconvenience, loss of business, or annoyance arising
from any damage, or repair thereof.

                                  CONDEMNATION

If the building, or so much of the building as is necessary for the Tenant's Use
and occupancy for the purpose set forth herein, shall be taken by condemnation
or in any other manner, then the term of this lease shall terminate as of the
date title vests in the taking authority, and the Rent shall be apportioned as
of such date. The Tenant shall have the right in any condemnation proceeding to
any award payable for the Tenant's moving expenses and the value of the Tenant's
Property. The Tenant shall have no other right to any award for taking of the
land, the contract value of this Lease, and rights to all such rewards shall be
retained by the Landlord.

                                     DEFAULT

1. Any of the following shall constitute "Default" under this Lease: whenever
the Tenant fails to pay Rent or Common Area Charges, or any other charge payable
by Tenant to the Landlord, under this Lease within fifteen (15) days of it being
due. Or, whenever the Tenant fails to obtain or maintain the required insurance
under this Lease, or if the Tenant does, or fails to do, any other action
provided for by this Lease, and does not remedy the same within thirty (30)
days.

2. In the event of Default, the Landlord shall have the immediate right, at its
election, to terminate the term of the Lease by giving the Tenant ten (10) days
notice of the Landlord's election to terminate. The Landlord may elect to take
possession and remove the property and possessions of the Tenant, and the same
may be stored in a public warehouse, at the cost for the account of the Tenant,
and without notice or resort to legal process. The Landlord shall not be guilty
of trespass, or be liable for loss or damage occasioned thereby.

3. If the Landlord elects to take possession, the Landlord shall be under no
obligation to re-lease the whole or part of the Premises on behalf of the
Tenant, for period equal to, greater or less than, the remainder of the term of
this Lease, and at such rent and upon such terms as the Landlord shall deem
reasonable. The Landlord shall be entitled to the rent upon such re-leasing,
whether or not such rent is in excess of the Rent.

4. If the Landlord elects to re-enter and take possession of the Premises, and
whether or not the Landlord has terminated this lease, or re-leased the
Premises, the Tenant shall pay to the landlord as liquidated damages, within ten
(10) days of written demand, all unpaid Rent for the Term of the Lease,
including Common Area Charges, all expenses of maintaining the Premises while
vacant, all expenses, including reasonable attorney's fees, incurred by Landlord
in recovering possession, re-leasing the same, and collecting Rent, all costs of
repairs and decorations to re-lease the Premises, and all brokerage commissions
in re-leasing the Premises. Notwithstanding the foregoing, the Landlord shall
reimburse the Tenant that portion of the unpaid rent that is recovered by
Landlord's releasing of the Premises.


                                       6



                                 OPTION TO RENEW

The Tenant shall have one option to extend the Term of this lease by five years,
beginning June 1, 2006, and continuing through May 31, 2011. Such renewal shall
be upon the same terms and conditions as are applicable to the first term,
except for Base Rent. The annual Base Rent during the Option will be equal to
the Fair Market Value for similar property in the area. The Tenant's right to
exercise the Option shall be contingent upon this Lease being in full force
without Default, the Tenant's giving notice to the Landlord of its intent by
September 1, 2005, and the mutual agreement by the Landlord and Tenant to Fair
Market Rent by December 1, 2005.

                                  HOLDING OVER

The Tenant shall pay to the Landlord Rent equal to one hundred and twenty-five
(125%) percent of the Rent payable at the End of Term. The hold-over rent shall
be paid in equal monthly installments. The provisions of this article shall not
constitute a waiver or limit any other rights and remedies of the Landlord
provided herein or at law.

                                  SUBORDINATION

This Lease and all rights of the Tenant hereunder are subject to and subordinate
to any mortgage or ground lease made by the Landlord, which affect the Premises.
It is the intention of the Landlord and Tenant that this provision be
self-operative, and no further instrument shall be required to effect a
subordination of this Lease. Upon demand, however, the Tenant shall at any time
execute, acknowledge and deliver to the Landlord any subordination agreement to
any future mortgagee or ground lessor. If in the mortgaging of the Premises by
the Landlord, any mortgagee requests modifications to the Lease, and such
modification does not materially increase the obligations of the Tenant, the
Tenant shall not withhold or delay consent to such modification.

                                     NOTICES

Whenever notice is required by conditions of this lease, such notice shall be
given or served in person, or sent by a nationally recognized overnight carrier,
or by registered or certified mail, return receipt requested, and addressed as
follows:

To Landlord at
- --------------
Richard Michaud
16 Commercial Street Associates, LLC
C/o Michaud Company
431 Orange Street
New Haven, Connecticut  06511


                                       7



To Tenant at:
- -------------
Terrie B. Atkinson, Director, Financial Planning
CuraGen Corporation
555 Long Wharf Drive, 11th floor
New Haven, Connecticut  06511

Or to such other person or address as either party shall have specified for
itself by notice to the other party in the manner set forth previously.

                                SECURITY DEPOSIT

Contemporaneously with the execution of this Lease, the Tenant has deposited
with the Landlord the sum of ten thousand four hundred and sixteen dollars
($10,416.67). The security deposit will be held by the Landlord, without
liability for interest except as required by law, as security for the
performance by the Tenant of all terms of this Lease. The Security Deposit shall
not be used to pay Rent at the End of Term. The Security Deposit shall be
returned to the Tenant within thirty (30) days after vacating the Premises with
a final accounting of offsets, if any.

                        LANDLORD'S RULES AND REGULATIONS

No unregistered cars, trucks or trailers may be present upon the Premises
without prior written permission of the Landlord. Outside storage shall be
limited to incidental materials used in the operation of the Tenant's business.
The Tenant shall limit the outside storing of cars, trucks, vans, truck bodies,
storage sheds, boats, trailers, or storage containers. Any and all materials
handling equipment shall not mark or damage the floors and paving. No animals of
any kind shall be housed on the Premises, except seeing eye dogs or similar
animals. While the Landlord will contract for snow removal, the Tenant is
responsible for shoveling and sanding sidewalks, stoops, entranceways, and to be
certain all areas are safe. The Tenant agrees to notify or call the Landlord
within eight (8) hours of an emergency, such as fire, explosion, criminal
activity, environmental hazard, storm damage, and similar events.

                 LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS

The Landlord may make any payment or fulfill any obligation on behalf of the
Tenant regarding the repair and maintenance of the Premises. The Landlord shall
not be obligated to perform any of Tenant's covenants. The Tenant is not
released of its obligations thereto if the Landlord performs any of the Tenant's
obligations. If the Landlord makes any payment in performance of the Tenant's
obligations, the payment shall become Rent as used in this lease, together with
interest of eighteen percent (18%) per year or the maximum rate allowable by
law.


                                       8



                                      LIENS

The Tenant shall not suffer or permit any mechanics liens, materialman's liens
or other liens, including, but not limited to, real estate broker liens, to be
filed against the Premises. If any such lien shall be filed, the Tenant shall
cause the same to be discharged of record within thirty (30) days of the receipt
of notice by the Tenant of the filing of the same.

                                      WASTE

The Tenant covenants and agrees not to do or suffer any waste, damage,
disfigurement or injury to the Premises of any part hereof.

                             INSPECTION BY LANDLORD

Upon reasonable notice, the Tenant agrees to permit the Landlord, and its
representatives, to enter the Premises. The Landlord shall have the right to
exhibit the same for the purpose of sale. And during the last year of the Lease,
the Landlord shall have the right to exhibit the Premises for the purpose of
leasing or for a sale.

                              SURRENDER OF PREMISES

On the last day of this Lease, or upon any earlier termination, the Tenant shall
quit and surrender the Premises to the Landlord, in good order, condition and
repair. The Tenant shall remove all Tenant's Property, and shall remove those
portions of the Tenant's Improvements designated by the Landlord, and repair any
damage incidental thereto such removal.

                                WAIVER OF NOTICE

Intentionally omitted.


                              ESTOPPEL CERTIFICATE

The Tenant agrees to deliver to the Landlord's written request, within ten (10)
days of receipt, a written certificate, in recordable form, ratifying this
Lease, including all terms and conditions requested by such certificate.


                                       9



                             LIMITATION OF LIABILITY

Anything within this Lease to the contrary notwithstanding, the Tenant agrees
that it shall look solely to the estate and property of the Landlord in the
Premises for the collection of any judgment, or other judicial process,
requiring the payment of money by the Landlord, and for no other assets of the
Landlord or of any partner in the Landlord.

                         RIGHTS OF LANDLORD; NON-WAIVER

No right or remedy conferred upon the Landlord is intended to be exclusive of
any other right or remedy, and every right and remedy shall be cumulative. The
failure of Landlord to insist upon strict performance of any provision of this
Lease shall not be construed as a waiver or relinquishment thereof for the
future. Receipt by the Landlord of Rent, with knowledge of a breach of any
provision shall not be deemed a waiver of such breach.

                                     BROKER

The Tenant represents that no broker or agent participated with Tenant in this
transaction. The Tenant agrees to indemnify and hold Landlord harmless from and
against any claim of any other broker or agent.

                           ENTIRE AGREEMENT; AMENDMENT

This Lease and all Exhibits attached constitute the entire agreement between the
Tenant and the Landlord. This lease may not be modified except in writing,
signed by both parties. The Tenant by entering into actual possession of the
Premises shall be conclusively deemed to have agreed that the Landlord has
provided its obligations.

                                 NOTICE OF LEASE

This lease shall not be recorded on the Branford land records. Upon written
request by either party, the other party shall execute a Notice of Lease, in
recordable form, satisfying the requirements of Section 47-19 of the Connecticut
General Statues, as amended.


                                       10



IN WITNESS WHEREOF, the Landlord and the Tenant have caused this Lease to be
duly executed the day and year written on the first page.

Landlord:                                           Signed, sealed and delivered
                                                    in the presence of:
                                                    ----------------------------

20 Commercial Street Associates, LLC
- ---------------------                               -------------------------
Richard Michaud
Member
- -------------------------                           -------------------------
Frederick Petrella
Member

Tenant:

CuraGen Corporation
- -------------------------                           -------------------------
David Wurzer

Executive Vice President and Chief Financial Officer
- -----------------------                             -------------------------
Terrie B. Atkinson
Director of Financial Planning


                                       11



                                    EXHIBIT A

                        - Legal Description of Premises -





                                    EXHIBIT B

                        - Tenant Improvement Allowance -

The Landlord shall provide to the Tenant a cash allowance of $26,000. The
allowance will be paid during the first three months of the lease term. The
allowance shall be used by the Tenant to offset the cost of the Tenant
Improvements the Tenant will install, at its expense, to the Premises. The
Tenant will renovate the Premises for office and/or lab space at its expense,
including exterior windows. The improvements tenant will install are detailed by
Exhibit C.

At its expense, the Landlord will repaint/repair the exterior of the building
and make repairs to the exterior landscaping. The Tenant will be responsible for
providing all interior painting and repairs.





                                    EXHIBIT C

                               Tenant Improvements

                                   Floor Plan

                       Construction Detail By ____________

EX-10.28

                                                                   EXHIBIT 10.28

                                 LEASE AGREEMENT

                                   - Between -

                         454 CORPORATION, INC. (Tenant)

                                     - And -

                 20 COMMERCIAL STREET ASSOCIATES, LLC (Landlord)



                                TABLE OF CONTENTS

                                                                                           

                                                                                                  PAGE NO.

PREMISES ............................................................................................... 1
TERM AND USE ........................................................................................... 1
RENT ................................................................................................... 1
TENANT'S REPAIRS ....................................................................................... 2
LANDLORD'S REPAIRS ..................................................................................... 3
INSURANCE .............................................................................................. 3
ALTERATIONS AND IMPROVEMENTS ........................................................................... 4
ENVIRONMENTAL COMPLIANCE AND INDEMNIFICATIONS .......................................................... 4
TENANT'S PROPERTY ...................................................................................... 5
UTILITIES AND FUEL ..................................................................................... 5
ASSIGNMENT AND SUBLETTING .............................................................................. 5
DAMAGE OR DESTRUCTION .................................................................................. 5
CONDEMNATION ........................................................................................... 6
DEFAULT ................................................................................................ 6
HOLDING OVER ........................................................................................... 7
SUBORDINATION .......................................................................................... 7
NOTICES ................................................................................................ 7
SECURITY DEPOSIT ....................................................................................... 8
LANDLORD'S RULES AND REGULATIONS ....................................................................... 8
LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS ......................................................... 8
LIENS .................................................................................................. 9
WASTE .................................................................................................. 9
INSPECTION BY LANDLORD ................................................................................. 9
SURRENDER OF PREMISES .................................................................................. 9
WAIVER OF NOTICE ....................................................................................... 9
ESTOPPEL CERTIFICATE ................................................................................... 9
LIMITATION OF LIABILITY ............................................................................... 10
RIGHTS OF LANDLORD; NON-WAIVER ........................................................................ 10
BROKER ................................................................................................ 10
ENTIRE AGREEMENT; AMENDMENT ........................................................................... 10
NOTICE OF LEASE ....................................................................................... 10
16 COMMERCIAL STREET .................................................................................. 10




EXHIBIT A - LEGAL DESCRIPTION
EXHIBIT B - GUARANTEE
EXHIBIT C - TENANT IMPROVEMENT ALLOWANCE
EXHIBIT D - TENANT IMPROVEMENTS (Svigals Floor Plan, Detail by OR&L)







                                 LEASE AGREEMENT

LEASE AGREEMENT made and entered into as of May _____, 2001, between 20
Commercial Street Associates, LLC (hereinafter known as "Landlord"), whose
principal place of business is 431 Orange Street, New Haven, Connecticut 06511,
and 454 Corporation, Inc. (hereinafter known as "Tenant") whose place of
business is 322 East Main Street, Branford, Connecticut 06405.

                                    PREMISES

The Landlord, in consideration of the covenants, conditions, agreements and
stipulations of the Tenant expressed, does hereby lease the following Premises,
the improvements, buildings and land known as 20 and 24 Commercial Street,
Branford, Connecticut 06405. The Premises is also described in Exhibit A of the
Lease.

                                  TERM AND USE

The Term of the Lease and the estate hereby granted (collectively the "Term of
the Lease") shall commence June 8, 2001 (hereinafter known as the "Commencement
Date") and shall end on June 30, 2006 (hereinafter known as "End of Term"). The
End of Term will be adjusted to provide for a full sixty months following the
date the Landlord provides the Tenant with the Tenant Improvement Allowance.

The Premises shall be used by the Tenant for the specific use as an
biotechnology engineering and research facility, and the like for doing all
things incidental and necessary to the foregoing uses, as office space for
corporate office activities. Landlord is its reasonable discretion reserves the
right to limit uses that would constitute and environmental concern, disturb the
quiet enjoyment of other tenants of the Landlord located at the same premises,
or overtax the capacity of the Premises.

                                      RENT

The Rent under this Lease for the Term hereof shall begin on the Commencement
Date and stop at the End of Term. Rent shall include the Base Rent and Common
Area Charges.

     1. Base Rent shall starting on the Commencement Date shall be paid as
follows:

     From June 8, 2001 to June 30, 2001, the Base Rent shall be $6,249.75. Base
Rent payments of $8,333.33 per month will continue after June 30, 2001, until
the Landlord provides the Tenant with the Tenant Improvement Allowance. This
rental period that occurs before the Landlord has provided the Tenant
Improvement Allowance shall be referred to as the Initial Rental Period.

     From July 1, 2001 to June 30, 2004, the Base Rent shall be $160,000 per
year, payable in equal installments of $13,333.33 per month. Notwithstanding
anything to the contrary herein,


                                       1



Base Rent payments of $160,000 per year will continue for thirty-six months
after the Initial Rental Period.

     From July 1, 2004 to June 30, 2006, the Base Rent shall be $168,000 per
year, payable in equal installments of $14,000.00 per month. Notwithstanding
anything to the contrary herein, Base Rent payments of $168,000 per year will
continue for twenty-four months, starting thirty-six months after the Initial
Rental Period.

2. In addition to Base Rent, the Tenant shall pay the Landlord for all expenses
with respect to the operation, management, and maintenance of the interior and
exterior of the building, the grounds, and all areas incidental to the Premises,
hereinafter referred to as "Common Area Charges." The costs shall include such
items as, but not limited to, real estate taxes, all property insurance, sewer
taxes or usage fees, water usage fees, landscape maintenance, snow removal,
security, administrative costs, management fees, roof repairs, general
maintenance and repairs (other than those for which Tenant is responsible,
referred to as "Tenant's Repairs"), and contractor fees. Common Area Charges
shall exclude depreciation, interest and amortization payments on any mortgage
or other indebtedness of Landlord, capital expenditures, leasing commissions,
structural repairs, and expenses reimbursed to the Landlord by property
insurance.

During the first lease year, the Tenant shall pay $2,500 per month in addition
to Base Rent (hereinafter referred to as "CAC Contribution") towards the Common
Area Charges. The Landlord will reconcile the difference between the CAC
Contribution and the Common Area Charges twice during each Lease year. Also, the
monthly CAC Contribution will be adjusted at the end of each Lease year by the
Landlord to reflect the projected costs for the upcoming year. The Landlord will
provide notice of the new CAC Contribution for the upcoming lease year.

3. The Rent shall be paid to the Landlord at the address specified herein, or at
such other place as the Landlord may designate, in lawful money of the United
States of America, as and when the same shall become due and payable and without
abatement of offset and without notice or demand therefor.

4. If any installment of Rent as provided for in this Lease is not received at
the Landlord's address within (15) fifteen days after the same is due and
payable, the Tenant shall pay an additional amount equal to (5%) five percent of
the monthly Rent so due.

5. As used herein, "Lease Year" shall mean the period commencing on the
Commencement Date and ending on the End of Term, including twelve consecutive
calendar months.

                                TENANT'S REPAIRS

Tenant agrees to provide and pay for all ordinary and necessary maintenance and
repairs of the interior and exterior of the Premises including, but not limited
to, lighting tubes, ballasts, lavatory fixtures and accessories, all glass, all
doors, exit signage, janitorial service, refuse and trash removal, heating and
air conditioning, electrical, plumbing, and all systems in a professional
manner.


                                       2



While the Landlord may contract, on behalf of the Tenant, for snow plowing, the
Tenant is responsible for shoveling, sanding, salting of sidewalks, entrances,
stairs and stoops, as well as to be certain that the parking areas are safe for
use by the Tenant's employees, visitors and invitees.

                               LANDLORD'S REPAIRS

The Landlord shall contract for landscaping and snow removal service. These
costs shall be reimbursed by the Tenant to the Landlord through the Common Area
Charges. The Tenant shall contract for all other services. So long as no Default
shall have occurred and be continuing hereunder, the Landlord, at its own
expense, shall provide all structural repairs and replacements. Unless such
repairs or replacements shall be required by reason of the Tenant Improvements
or equipment, the default by Tenant in any of its obligations, or the negligence
or willful misconduct of the Tenant, its officers, employees, contractors,
agents, or invitees, in which the Tenant shall reimburse the Landlord for all
such costs and expenses within (10) days of written demand therefor.

                                    INSURANCE

1. At all times during the term of this lease, the Landlord shall insure the
Premises against loss or damage by fire, flood, and such other casualties, rent
loss, in such amount as the Landlord shall deem appropriate. The Tenant shall
reimburse the Landlord for this expense as part of the Common Area Charges.

2. The Tenant shall not commit or permit any violation of the policies carried
by the Landlord, or do or permit anything to be done, or keep or permit anything
to be kept, on or in the Premises, which in case of any of the foregoing, could
result in the termination of such insurance policies, could adversely affect the
Landlord's right of recovery under any such policies, or would result in the
refusal by insurance companies to insure the Premises in the amounts
satisfactory to the Landlord. If any such action by the Tenant shall result in
an increase in the rate of insurance premiums, the Tenant shall pay the increase
to the Landlord upon demand.

3. At all times during this Lease, the Tenant shall insure the Tenant's
Improvements, and the Tenant's Property against loss or damage by fire, flood,
and such other casualties equal to the full replacement value. The tenant will
keep in full force and effect a policy of public liability and property damage
insurance in which the limits shall initially be less than two million dollars
($2,000,000) combined single limit, three million dollars general aggregate
($3,000,000), such limits to be increased as reasonably specified by the
Landlord. The Tenant shall also carry plate glass window insurance and otherwise
be responsible for the same when damaged during the term of this Lease. During
any time when Tenant shall be making alterations or improvements to the
Premises, the Tenant shall keep in full force and effect a policy of completed
value builder's risk insurance (on an "installations floater"), including
building materials, covering loss from damage from fire, lightening, extended
coverage perils, vandalism and malicious mischief, and perils in an amount not
less than the final cost of such alterations or improvements.

4. All insurance policies provided by the Tenant shall be effected under valid
and enforceable policies in form and substance then standard in the State of
Connecticut, issues by insurers having an "AM Best" rating of A- or better.
Within (30) thirty days of the


                                       3



Commencement Date, the Tenant shall provide certificates to the Landlord of the
insurance. All such insurance policies shall contain an agreement by the
insurers that such policies shall not be canceled, amended, or otherwise
modified without (30) thirty days written notice to the Landlord, and the
Landlord's rights and interests under such policies shall not be subject to
cancellation by reason of any act or omission of the Tenant. All insurance
policies provided by the Tenant shall name the Landlord and Landlord's mortgage
lenders as additional insured as their interests may appear.

5. Tenant shall indemnify and hold the Landlord harmless against any liability
or expense, including reasonable attorney's fees, on account of any accident or
injury to the Tenant, the Tenant's employees, servants, agents, customers,
invitees, licensees, contractors, or visitors, who may be injured by the Tenant
or on the Premises. The foregoing shall not extend to the gross negligence of
the Landlord.

                          ALTERATIONS AND IMPROVEMENTS

1. The Tenant shall not make or have made alterations, improvements,
decorations, installations and substitutions (collectively called "Tenant's
Improvements") in, of or to the Premises without the prior written consent of
the Landlord. Approval by Landlord shall not be unreasonably withheld. Unless
otherwise specified, any improvements or alterations in the Premises made by
Tenant (including without limitation permanent partitions, wall paneling and
lighting fixtures, but excepting the Tenant's Property, shall be and remain upon
and be surrendered with the Premises at the End of Term. If the Landlord
requests the removal of any of the Tenant's Improvements, including telephone
and computer cabling, the Tenant shall in good workmanlike manner remove said
improvements at the End of Term.

2. The Tenant shall obtain all necessary permits and certificates for the
commencement and prosecution of the Tenant's Improvements. The Tenant's
Improvements shall not constitute the basis for a claim against the Landlord,
nor a lien or charge upon or against the Premises. If at any time any such claim
or charge shall be filed against the Premises, the Tenant shall cause such
claim, lien or charge to be properly released of record. The Tenant shall pay
for all materials constituting Tenant's Improvements, and the Tenant agrees that
none of such materials shall be at any time subject to any lien, security
interest, charge, installment sales contract, by any other person, firm or
corporation whether created voluntarily or involuntarily.

                 ENVIRONMENTAL COMPLIANCE AND INDEMNIFICATIOINS

1. "Environmental Laws" shall mean any and all statutory, regulatory, or
decisional law pertaining to the protection of the environment or to any
Polluting Substance, including Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (CERCLA), the Resource Conservation and
Recovery Act of 1976 (RCRA), and Title 22a "Environmental Protection" of the
Connecticut General Statutes, including Sections 22a-448 through 22a-457, state
and Federal laws concerning underground storage tanks, the Federal Clean Air
Act, 42 USAA Section 7401 et. seq. state law concerning air pollution, Conn.
Gen. Statutes Section 22a-174 et. Seq.; the Federal Clean Water Act, 33 USC
Section 1251 et. seq. And state and Water Pollution Control Act, Conn. Gen.
Stat. Chapter 446k, and any as amended from time to time. The term "Polluting
Substance" shall mean any toxic, polluting waste or substance, determined



                                       4



by any agency with jurisdiction to pose a present or potential hazard to human
health or the environment.

2. The Tenant shall not cause or permit any Polluting Substance to be generated,
recycled, refined, transported, treated, stored, disposed, handled, processed,
produced or released on the Premises, except in compliance with all applicable
laws and regulations, including the Environmental Laws. The Tenant covenants and
agrees to be responsible for all costs and penalties arising from non-compliance
with the Environmental Laws, permits, or orders of any agency with jurisdiction
that may impair the Premises or third parties. If the event of a release of a
Polluting Substance caused by Tenant's activities, the Tenant shall notify the
Landlord and the appropriate governmental agency within (24) hours of the
release. The Tenant covenants and agrees to forever indemnify and hold the
Landlord harmless from all costs or liabilities, including legal and consulting
expenses, arising from a violation of the foregoing. The Environmental
Compliance shall survive the expiration or termination of this Lease, and be
governed and construed under the laws of the State of Connecticut.

                                TENANT'S PROPERTY

Any trade fixtures, equipment and other personal property installed in or
attached to the Premises by the Tenant, shall remain the property of the Tenant
and may be removed by the Tenant at any time during this lease. The Tenant shall
pay for the cost or repairing any damages to the Premises resulting from such
installation or removal. The Landlord shall not be liable to the Tenant or any
person or company for damage or theft to the Tenant's Property.

                               UTILITIES AND FUEL

The Tenant agrees to pay all charges made by any utility company for services
furnished to the Premises during the term of this Lease, including, but not
limited to, electricity, gas, water, sewer, telephone, and cable television.

                            ASSIGNMENT AND SUBLETTING

The Tenant agrees not to assign or in any way encumber this Lease, nor sublet
the Premises, or any part hereof, without obtaining prior written consent of the
Landlord, which shall not be unreasonably withheld. In the event the Landlord
consents to an assignment, by reason of a sale of the Tenant, or for any other
purpose, the Tenant will remain liable for full performance of the lease. In the
event of an assignment, or sale of the Tenant, all rights and guarantees
provided to the Landlord by the Guarantee (Exhibit B) will survive the
assignment.

                              DAMAGE OR DESTRUCTION

1. In the event that the Premises, other than Tenant's Improvements or Tenant's
Property, is damaged by fire or other insured casualty, but the Tenant shall
continue to have reasonably convenient access, and no portion shall be rendered
unfit for use and occupancy, the Landlord


                                       5



shall repair such damage with diligence. During the repair period, the Rent
shall not be abated or suspended.

2. In the event that the Premises, other than Tenant's Improvements or Tenant's
Property, are damaged or destroyed by fire or other insured casualty, and the
Tenant shall not have reasonably convenient access, or rendered unfit for use
and occupancy, and if in the sole judgment of the Landlord the damage may be
repaired within one hundred and eighty days (180) after the occurrence, then the
Landlord shall notify the Tenant within thirty (30) days after the occurrence,
and shall repair such damage with diligence. If the Premises does not have
reasonably convenient access, or some portion of the Premises, or the whole of
the Premises is rendered unfit, the Rent shall be appropriately abated during
the period until tenant regains full occupancy. The Tenant shall have the right
to terminate the Lease, within ten (10) days notice, if the Landlord cannot
repair the damage and receive appropriate authority for Use and occupancy after
the one hundred and eighty (180) day period, except for delays caused by acts of
god, strikes, or government regulation. No damages, compensation or claim shall
by payable to the Landlord or the Tenant, or any other person, by reason of
inconvenience, loss of business, or annoyance arising from any damage, or repair
thereof.

                                  CONDEMNATION

If the building, or so much of the building as is necessary for the Tenant's Use
and occupancy for the purpose set forth herein, shall be taken by condemnation
or in any other manner, then the term of this lease shall terminate as of the
date title vests in the taking authority, and the Rent shall be apportioned as
of such date. The Tenant shall have the right in any condemnation proceeding to
any award payable for the Tenant's moving expenses and the value of the Tenant's
Property. The Tenant shall have no other right to any award for taking of the
land, the contract value of this Lease, and rights to all such rewards shall be
retained by the Landlord.

                                     DEFAULT

1. Any of the following shall constitute "Default" under this Lease: whenever
the Tenant fails to pay Rent or Common Area Charges, or any other charge payable
by Tenant to the Landlord, under this Lease within fifteen (15) days of it being
due. Or, whenever the Tenant fails to obtain or maintain the required insurance
under this Lease, or if the Tenant does, or fails to do, any other action
provided for by this Lease, and does not remedy the same within thirty (30)
days.

2. In the event of Default, the Landlord shall have the immediate right, at its
election, to terminate the term of the Lease by giving the Tenant ten (10) days
notice of the Landlord's election to terminate. The Landlord may elect to take
possession and remove the property and possessions of the Tenant, and the same
may be stored in a public warehouse, at the cost for the account of the Tenant,
and without notice or resort to legal process. The Landlord shall not be guilty
of trespass, or be liable for loss or damage occasioned thereby.


                                       6



3. If the Landlord elects to take possession, subsequent and as a result of a
default the Landlord shall be under no obligation to re-lease the whole or part
of the Premises on behalf of the Tenant, for period equal to, greater or less
than, the remainder of the term of this Lease, and at such rent and upon such
terms as the Landlord shall deem reasonable. The Landlord shall be entitled to
the rent upon such re-leasing, to the extent that such rent is equal to or less
than the Rent.

4. If the Landlord elects to re-enter and take possession of the Premises, and
whether or not the Landlord has terminated this lease, or re-leased the
Premises, the Tenant shall pay to the landlord as liquidated damages, within ten
(10) days of written demand, all unpaid Rent for the Term of the Lease,
including Common Area Charges, all expenses of maintaining the Premises while
vacant, all expenses, including reasonable attorney's fees, incurred by Landlord
in recovering possession, re-leasing the same, and collecting Rent, all costs of
repairs and decorations to re-lease the Premises, and all brokerage commissions
in re-leasing the Premises. Notwithstanding the foregoing, the Landlord shall
reimburse to Tenant that portion of the unpaid Rent that is recovered by
Landlord's re-leasing the Premises.

                                  HOLDING OVER

The Tenant shall pay to the Landlord Rent equal to one hundred and twenty-five
(125%) percent of the Rent payable at the End of Term. The hold-over rent shall
be paid in equal monthly installments. The provisions of this article shall not
constitute a waiver or limit any other rights and remedies of the Landlord
provided herein or at law.

                                  SUBORDINATION

This lease and all rights of the Tenant hereunder are subject to and subordinate
to any mortgage or ground lease made by the Landlord, which affect the Premises.
It is the intention of the Landlord and Tenant that this provision be
self-operative, and no further instrument shall be required to effect a
subordination of this Lease. Upon demand, however, the Tenant shall at any time
execute, acknowledge and deliver to the Landlord any subordination agreement to
any future mortgagee or ground lessor. If in the mortgaging of the Premises by
the Landlord, any mortgagee requests modifications to the Lease, and such
modification does not materially increase the obligations of the Tenant, the
Tenant shall not withhold or delay consent to such modification.

                                     NOTICES

Whenever notice is required by conditions of this lease, such notice shall be
given or served in person, or sent by a nationally recognized overnight carrier,
or by registered or certified mail, return receipt requested, and addressed as
follows:


                                       7



To Landlord at:
- ---------------

Richard Michaud
20 Commercial Street Associates, LLC
C/o Michaud Company
431 Orange Street
New Haven, Connecticut  06511

To Tenant at:
- -------------
454 Corporation, Inc.
20 Commercial Street
Branford, Connecticut  06405

Or to such other person or address as either party shall have specified for
itself by notice to the other party in the manner set forth previously.

                                SECURITY DEPOSIT

Contemporaneously with the execution of this Lease, the Tenant has deposited
with the Landlord the sum of thirteen thousand three hundred and thirty-three
dollars ($13,333.33). The security deposit will be held by the Landlord, without
liability for interest except as required by law, as security for the
performance by the Tenant of all terms of this Lease. The Security Deposit shall
not be used to pay Rent at the End of Term. The Security Deposit shall be
returned to the Tenant within thirty (30) days after vacating the Premises with
a final accounting of offsets, if any.

                        LANDLORD'S RULES AND REGULATIONS

No unregistered cars, trucks or trailers may be present upon the Premises
without prior written permission of the Landlord. Outside storage shall be
limited to incidental materials used in the operation of the Tenant's business.
The Tenant shall limit the outside storing of cars, trucks, vans, truck bodies,
storage sheds, boats, trailers, or storage containers. Any and all materials
handling equipment shall not mark or damage the floors and paving. No animals of
any kind shall be housed on the Premises, except seeing eye dogs or similar
animals. While the Landlord will contract for snow removal, the Tenant is
responsible for shoveling and sanding sidewalks, stoops, entranceways, and to be
certain all areas are safe. The Tenant agrees to notify or call the Landlord
within eight (8) hours of an emergency, such as fire, explosion, criminal
activity, environmental hazard, storm damage, and similar events.

                 LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS

The Landlord may make any payment or fulfill any obligation on behalf of the
Tenant regarding the repair and maintenance of the Premises. The Landlord shall
not be obligated to perform any of Tenant's covenants. The Tenant is not
released of its obligations thereto if the Landlord performs any of the Tenant's
obligations. If the Landlord makes any payment in performance of


                                       8



the Tenant's obligations, the payment shall become Rent as used in this lease,
together with interest of eighteen percent (18%) per year or the maximum rate
allowable by law.

                                      LIENS

The Tenant shall not suffer or permit any mechanics liens, materialman's liens
or other liens, including, but not limited to, real estate broker liens, to be
filed against the Premises. If any such lien shall be filed, the Tenant shall
cause the same to be discharged of record within thirty (30) days of the receipt
of notice by the Tenant of the filing of the same.

                                      WASTE

The Tenant covenants and agrees not to do or suffer any waste, damage,
disfigurement or injury to the Premises of any part hereof.

                             INSPECTION BY LANDLORD

Upon reasonable notice, the Tenant agrees to permit the Landlord, and its
representatives, to enter the Premises. The Landlord shall have the right to
exhibit the same for the purpose of sale. And during the last year of the Lease,
the Landlord shall have the right to exhibit the Premises for the purpose of
leasing or for a sale.

                              SURRENDER OF PREMISES

On the last day of this Lease, or upon any earlier termination, the Tenant shall
quit and surrender the Premises to the Landlord, in good order, condition and
repair. The Tenant shall remove all Tenant's Property, and shall remove those
portions of the Tenant's Improvements designated by the Landlord, and repair any
damage incidental thereto such removal.

                                WAIVER OF NOTICE

Intentionally omitted.


                              ESTOPPEL CERTIFICATE

The Tenant agrees to deliver to the Landlord's written request, within ten (10)
days of receipt, a written certificate, in recordable form, ratifying this
Lease, including all terms and conditions requested by such certificate.


                                       9



                             LIMITATION OF LIABILITY

Anything within this Lease to the contrary notwithstanding, the Tenant agrees
that it shall look solely to the estate and property of the Landlord in the
Premises for the collection of any judgment, or other judicial process,
requiring the payment of money by the Landlord, and for no other assets of the
Landlord or of any partner in the Landlord.

                         RIGHTS OF LANDLORD; NON-WAIVER

No right or remedy conferred upon the Landlord is intended to be exclusive of
any other right or remedy, and every right and remedy shall be cumulative. The
failure of Landlord to insist upon strict performance of any provision of this
Lease shall not be construed as a waiver or relinquishment thereof for the
future. Receipt by the Landlord of Rent, with knowledge of a breach of any
provision shall not be deemed a waiver of such breach.

                                     BROKER

The Tenant represents that no broker or agent participated with Tenant in this
transaction. The Tenant agrees to indemnify and hold Landlord harmless from and
against any claim of any other broker or agent.

                           ENTIRE AGREEMENT; AMENDMENT

This Lease and all Exhibits attached constitute the entire agreement between the
Tenant and the Landlord. This lease may not be modified except in writing,
signed by both parties. The Tenant by entering into actual possession of the
Premises shall be conclusively deemed to have agreed that the Landlord has
provided its obligations.

                                 NOTICE OF LEASE

This lease shall not be recorded on the Branford land records. Upon written
request by either party, the other party shall execute a Notice of Lease, in
recordable form, satisfying the requirements of Section 47-19 of the Connecticut
General Statues, as amended.

                              16 COMMERCIAL STREET

At the time of signing this lease, the principals of the Landlord also own 16
Commercial Street, Branford, Connecticut. At any time during this ownership, the
Landlord agrees to inform the Tenant of upcoming vacancies at 16 Commercial
Street, so that the Tenant may plan for future expansion.


                                       10


IN WITNESS WHEREOF, the Landlord and the Tenant have caused this Lease to be
duly executed the day and year written on the first page.


Landlord:                       Signed, sealed and delivered in the presence of:
- ---------                       ------------------------------------------------

20 Commercial Street Associates, LLC



- -----------------------                              -----------------------
Richard Michaud
Member



- -----------------------                              -----------------------
Frederick Petrella
Member



Tenant:
- -------

454 Corporation, Inc.




- -----------------------                              -----------------------
Peter J. Dacey, CPA
Vice President of Finance and Administration




- -----------------------                              -----------------------
XXXXXXXXXX
xxxxxxx


                                       11




                                    EXHIBIT A
                        - Legal Description of Premises -




                                    EXHIBIT B

                                  - Guarantee -

WHEREAS, 454 Corporation, Inc, ("Tenant"), is desirous of entering into a lease
of even date herewith (the "Lease") for certain space at 20 Commercial Street,
Branford, Connecticut 06405 (the "Premises"); and

WHEREAS, 20 Commercial Street Associates, LLC, as landlord ("Landlord"), has
required Curagen Corporation, 555 Long Wharf Drive, 11th floor, New Haven,
Connecticut, 06511, ("Guarantor") to execute this Guaranty of the Lease
("Guaranty") as set forth herein below; and

WHEREAS, in order to induce Landlord to enter into the Lease, which is being
executed simultaneously herewith, the undersigned Guarantor has agreed to
execute this Guaranty.

NOW, THEREFORE, in consideration of the foregoing together with other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned Guarantor hereby agrees as follows:

AGREEMENT
- ---------

FIRST: Guarantor hereby (jointly and severally if more than one) absolutely and
unconditionally guarantees to Landlord the full and prompt payment of all base
rent and additional rent and any and all other sums and charges payable by
Tenant under the Lease including without limitation, "holdover rent" or "use and
occupancy payments" (collectively "Rent") hereby further guarantees the full and
timely performance and observance of all of the covenants, terms conditions and
agreements therein provided to be performed and observed by Tenant. In the event
of a default under the Lease, Guarantor hereby covenants and agrees with
Landlord: (i) to make the due and full punctual payment of all Rent, monies and
other charges payable by Tenant under the Lease; (ii) to effect prompt and
complete performance of all and each of the terms, covenants, conditions and
provisions contained in the Lease on the part of Tenant to be kept, observed and
performed; and (iii) to indemnify and save harmless Landlord from any loss,
costs or damages arising out of any failure to pay the aforesaid rent, monies
and charges or the failure to perform any of the terms, covenants, conditions
and provisions. The Guarantor waives notice of any breach or default by Tenant.

SECOND: In the event of a default under the Lease, Guarantor waives any right to
require Landlord to: (I) first proceed against Tenant or pursue any rights or
remedies with respect to the Lease; (ii) proceed against or exhaust any security
that Landlord holds from Tenant; or (iii) pursue any other remedy whatsoever in
Landlord's power. Landlord shall have the right to enforce this Guaranty
regardless of the acceptance of additional security from Tenant and regardless
of the release or discharge of Tenant by Landlord or by others, or by operation
of law.

THIRD: Guarantor hereby expressly waives any right of setoff, counterclaim,
deduction or compensation against amount due under this Guaranty and waives
notice of the acceptance of this Guaranty.

FOURTH: Without limiting the generality of the foregoing, the liability of
Guarantor under this Guaranty shall not be deemed to have been waived, released,
discharged, impaired or affected by reason of any waiver or failure to enforce
any of the obligations of the Tenant under the Lease, or the granting of any
indulgence or extension of time to Tenant, or assignment of the Lease, or the
subletting of the Premises by Tenant, or by the expiration of the term, or if
Tenant holds over beyond the term of the Lease, or the release or discharge of
Tenant in any voluntary or involuntary receivership, bankruptcy, winding-up or
other creditors' proceedings, or the rejection, disaffirmance or disclaimer of
the Lease by any party in any action or proceeding, or the release of any other
Guarantor and shall continue with respect to the periods prior thereto and
thereafter. The liability of the Guarantor shall not be affected by any
repossession of the Premises by Landlord; provided, however, that the net
payments received by Landlord after deducting all costs and expenses of
repossession and/or reletting the same (including, without limitation, any
attorney fees and any reasonable costs or expenses incurred in redecorating,
remodeling, or altering Premises for re-letting), shall be credited from time to
time by Landlord to the account of Tenant and Guarantor and Guarantor shall pay
any balance owing to Landlord from time to time, immediately upon being given
written notice of demand by Landlord in the manner for providing notice set
forth in the Lease.





FIFTH: The obligations of Guarantor shall not be released by any modification of
the Lease (including any extension or renewal of the term of the Lease), and in
the case any such modification the liability of Guarantor shall be modified in
accordance with the term of any such modification of the Lease. Guarantor waives
any notice of the modification of the Lease.

SIXTH: Guarantor shall pay Landlord reasonable attorney's fees and all costs and
other expenses incurred in any collection or attempted collection of the
Guaranty or in any negotiations relative to the obligations hereby guaranteed.

SEVENTH: Until all the covenants and conditions in the Lease on Tenant's part to
be performed and observed are fully performed and observed, Guarantor: (i) shall
have no right subrogation against Tenant by reason of any payments or acts of
performance by the Guarantor in compliance with the obligations of the Guarantor
hereunder; (ii) waives any right to enforce any remedy which Guarantor now or
hereafter shall have against Tenant by reason of any one or more payments or
acts of performance in compliance with the obligations of Guarantor hereunder;
and (iii) subordinates any liability or indebtedness of Tenant now or hereafter
held by Guarantor to the obligations of Tenant to the Landlord under the Lease.

EIGHTH: This instrument may not be changed, modified, discharged or
terminated orally or in any manner other than by an agreement in writing
signed by Guarantor and the Landlord.

NINTH: All of the terms, agreements and conditions of the Guaranty shall extend
to and be binding upon Guarantor, and the heirs, executors, and personal
administrator of Guarantor and shall inure to the benefit of and may be enforced
by Landlord, its successors and assigns, and the holder of any mortgage to which
the leased premises may be subject at any time or from time to time.

TENTH: The use of the singular herein shall include the plural. All property of
the undersigned, whether sole and separate of community, shall be available to
satisfy the obligations created by the Guaranty. This Guaranty shall be governed
by the laws of the State of Connecticut.

ELEVENTH: As further inducement to Landlord to make and enter into the Lease,
Guarantor hereby knowingly and voluntarily waives the right to trial by jury in
any action or proceeding that may hereafter in instituted by Landlord against
Guarantor with respect to this Guaranty. Guarantor further acknowledges that his
Guaranty constitutes a commercial transaction as such term is defined in Section
52-278(a) of the Connecticut General Statutes. Guarantor hereby expressly waives
any and all rights to any notice or hearing under Section 52-278(a) to 52-278(g)
prior to the issuance of a prejudgement remedy and specifically authorize the
attorney for Landlord to issue a writ for a prejudgement remedy without first
securing a court order.

DATED: ________________________, 2001



       ------------------------------



       ------------------------------










                                    EXHIBIT C

                        - Tenant Improvement Allowance -

The Landlord shall provide to the Tenant a cash allowance of $275,000. The
allowance will be paid during the first three months of the lease term. The
allowance shall be used by the Tenant to offset the cost of improvements the
Tenant will install, at its expense, to the Premises. The improvements tenant
will install are detailed by the floor plan on the following page. Upon payment
by the Landlord of the Tenant Improvement Allowance, the Term of the Lease shall
continue for sixty months.






                                    EXHIBIT D

                               Tenant Improvements
                          Svigals Associates Floor Plan
                           Construction Detail By OR&L





- --------------------------------------------------------------------------------
                          AMENDMENT OF LEASE AGREEMENT
- --------------------------------------------------------------------------------

     This Amendment of Lease Agreement is made and entered into as of the 29th
day of November, 2001, by and between 20 Commercial Street Associates, LLC (the
"Landlord") and 454 Corporation, Inc. (the "Tenant").

                               W I T N E S S E T H

     WHEREAS, Landlord and Tenant entered into a certain Lease Agreement dated
as of May ___, 2001 (the "Lease"); and

     WHEREAS, pursuant to the Lease, Landlord and Tenant agreed that Landlord
would advance certain funds to Tenant or on behalf of Tenant as a Tenant
Improvement Allowance, which would be repaid to Landlord by increased Rent
during a portion of the Term; and

     WHEREAS, Tenant subsequently agreed to forego and waive any right to any
such Tenant Improvement Allowance; and

     WHEREAS, Landlord and Tenant desire to amend the Lease to correctly set
forth the Rent due, absent any such Tenant Improvement Allowance.

     NOW THEREFORE, in consideration of the premises set forth above and the
mutual promises set forth herein, and other valuable consideration, the parties
hereto agree as follows:

     1. Except as otherwise defined herein, any and all defined terms used
herein shall have the meanings set forth in the Lease.

     2. Section of the Lease entitle "RENT" is hereby deleted and the following
is set forth in lieu and substitution therefor:

                                      "RENT

          The term Rent shall include the Base Rent, as defined in paragraph 1
     below, and the Common Area Charges, as defined in paragraph 2 below
     (collectively the "Rent").

     1.   Base Rent in the total amount of $205,916.38 (the "Base Rent") shall
          be payable in monthly installments, in advance, on the first day of
          each month during the Term of the Lease as follows, except for the
          Initial Period, hereinafter defined, for which Base Rent shall be
          payable on June 8, 2001:

          A.   From June 8, 2001 through June 30, 2001, (the "Initial Period")
               the monthly Base Rent shall be $6,249.75;

          B.   From July 1, 2001 through June 30, 2004, the monthly Base Rent
               shall be $8,333.33;

          C.   From July 1, 2004 through June 30, 2006, the monthly Base Rent
               shall be $9,000.00.








     2.   In addition to the Base Rent, the Tenant shall pay the Landlord for
          all expenses with respect to the operation, management, and
          maintenance of the interior and exterior of the building, the grounds,
          and all areas incidental to the Premises, hereinafter referred to as
          "Common Area Charges." The costs shall include such items as, but not
          limited to, real estate taxes, all property insurance, sewer taxes or
          usage fees, water usage fees, landscape maintenance, snow removal,
          security, administrative costs, management fees, roof repairs that
          result from the Tenant improvements, general maintenance and repairs
          (other than those for which tenant is responsible, referred to as
          "Tenant's Repairs"), and contractor fees. Common Area Charges shall
          exclude depreciation, interest and amortization payments on any
          mortgage or other indebtedness of Landlord, capital expenditures,
          leasing commissions, structural repairs, and expenses reimbursed to
          the Landlord by property insurance.

          During the first lease year, the Tenant shall pay $2,500.00 per month
          in addition to Base Rent (hereinafter referred to as "CAC
          Contribution") towards the Common Area Charges. The Landlord will
          reconcile the difference between the CAC Contribution and the Common
          Area Charges twice during each Lease year. Also, the monthly CAC
          Contribution will be adjusted at the end of each Lease year by the
          Landlord to reflect the projected costs for the upcoming year. The
          Landlord will provide notice of the new CAC Contribution for the
          upcoming lease year.

     3.   The Rent shall be paid to the Landlord at the address specified
          herein, or at such other place as the Landlord may designate, in
          lawful money of the united States of America, as and when the same
          shall become due and payable and without abatement of offset and
          without notice or demand therefor.

     4.   If any installment of Rent as provided for in this Lease is not
          received at the Landlord's address within fifteen (15) days after the
          same is due and payable, the Tenant shall pay an additional amount
          equal to five (5%) percent of the monthly Rent so due.

     5.   As used herein, "Lease Year" shall mean the period commencing on the
          Commencement Date and ending on the End of Term, including twelve
          consecutive calendar months."



     3. Except as specifically set forth herein, each and every term and
condition of the Lease shall remain in full force and effect.

     4. The Landlord has tendered with this Amendment $35,000 to the Tenant as
full compensation for improvements the Tenant made to the Premises.

     5. In addition to the Landlord's rights of inspection, the Landlord shall
have the right to place a sign upon the premises to advertise it for sale or for
lease during the last year of the lease.

IN WITNESS WHEREOF, the Landlord and the Tenant have caused this Amendment of
Lease Agreement to be duly executed on the day and year first above written.


Landlord:                       Signed, sealed and delivered in the presence of:
- --------                         -----------------------------------------------

20 Commercial Street Associates, LLC



- -------------------------------     -------------------------------
Richard Michaud
Member



- -------------------------------     -------------------------------
Frederick Petrella
Member

Tenant:
- ------

454 Corporation, Inc.



- -------------------------------     -------------------------------
Peter J. Dacey, CPA
Vice President of Finance
and Administration

EX-10.29

                                                                   EXHIBIT 10.29


                               AGREEMENT REGARDING

                        ASSIGNMENT OF PURCHASE AGREEMENT

     This AGREEMENT is made between Richard E. Beauvais ("Beauvais") and CuraGen
Corporation ("CuraGen") as of April 10th, 2001.

     WHEREAS, Beauvais has entered into a Purchase Agreement with Marc L. Nevas,
Trustee for Bittersweet Associates ("Bittersweet"), a copy of which is attached
hereto as Exhibit A ("Purchase Agreement"), pursuant to which Bittersweet is to
convey to Beauvais certain land in Branford, Connecticut more particularly
described in Exhibit A of the Purchase Agreement (the "Property") subject to the
terms and conditions of the Purchase Agreement.

     WHEREAS, CuraGen has requested that Beauvais assign his interest in the
Purchase Agreement to CuraGen and Beauvais has agreed to do so in consideration
of a payment from CuraGen to Beauvais more particularly described below;

     WHEREAS, prior to the assignment, CuraGen has requested that Beauvais cause
Bittersweet to consent to such assignment as more particularly described below;

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Beauvais and CuraGen agree as
follows:

     1. Concurrently with the execution and delivery of this Agreement, Beauvais
and CuraGen will execute the Assignment and Assumption Agreement attached hereto
as Exhibit B ("Assignment and Assumption Agreement");

     2. No later than April 12, 2001, Beauvais will cause Bittersweet to consent
to the Assignment and Assumption Agreement by executing and delivering the same
to Beauvais and CuraGen. Upon the execution and delivery by Bittersweet the
Assignment and Assumption Agreement shall be considered effective and shall bear
the date of such execution and delivery.

     3. No later than April 12, 2001, Beauvais shall deliver to CuraGen(a) all
reports, test data, plans, drawings, diligence matters and related information
(in electronic as well as paper format, if available) which relate to the
Property and are in Beavais' possession or control and (b) if and to the extent
the Plans and Materials have been prepared by a third party, the acknowledgement
in writing of such third party that it consents to CuraGen's use thereof without
liability or cost to CuraGen and that such third party has been paid in full for
the preparation of such Plans and Materials.

     4. In consideration for the assignment of the Purchase Agreement and the
Plans and Materials, CuraGen shall pay to Beauvais the Assignment Payment
(hereinafter defined) upon the consummation of the purchase and sale pursuant to
the Purchase Agreement (the "Property Closing"). Concurrently with the execution
and delivery hereof, CuraGen shall


                                       1



reimburse Beauvais the Fifty Thousand Dollar ($50,000) security deposit Beauvais
has delivered to Bittersweet's attorney pursuant to the Purchase Agreement.

     5. As used herein, "Assignment Payment" shall mean Zero ($0.00), provided,
however, that in the event CuraGen and Beauvais or an entity owned or controlled
by Beauvais have failed to enter into a mutually satisfactory agreement on or
before the date of the Property Closing pursuant to which Beauvais or such an
entity is engaged by CuraGen on a fee basis to develop and build improvements on
the Property, "Assignment Payment" shall mean One Million Five Hundred Dollars
($1,500,000). The Assignment Payment shall be made by certified, cashiers or
bank treasurer's check, or by wire transfer.

     6. Beauvais represents and warrants that:

     (a) the copy of the Purchase Agreement attached hereto as Exhibit A is a
true, accurate and complete copy of the Purchase Agreement;

     (b) the Purchase Agreement reflects all of the agreements of Beauvais and
Bittersweet which relate in any way to the Property; Beauvais shall not assign
or otherwise transfer any interest in the Purchase Agreement or agree to do so
while this Agreement remains in effect;

     (c) the Purchase Agreement has not been amended or modified in any respect;

     (d) Beauvais is not in default of any of the terms and conditions of the
Purchase Agreement and, to the best of Beauvais' knowledge, Bittersweet is not
in default of any of the terms and conditions of the Purchase Agreement;

     (e) to the best of Beauvais' actual knowledge, there are no circumstances
or conditions relating to the Property which would prevent CuraGen from
developing the Property other than the need to obtain regulatory permits and
approvals;

     (f) Beauvais has not made, and, to Beauvais' actual knowledge, Bittersweet
has not made, any commitments to governmental authorities, adjoining or
surrounding property owners, civic associations, utility companies or other
persons or entities, which would in any manner be binding upon CuraGen or
materially limit CuraGen from utilizing or developing the Property;

     (g) to Beauvais' actual knowledge, there is no material violation of any
law, ordinance, rule, regulation or order affecting the Property;

     (h) Beauvais has no actual knowledge that any part of the Property is
assessed as farmland, agricultural land, or any other type of assessed property
that is entitled to rollback taxes or deferred taxes or is subject to a right of
first refusal or other pre-emptive right held by any governmental authority;




                                       2



     (i) to Beauvais' actual knowledge, there are no actions, suits or
condemnation proceedings pending affecting any portion of the Property, at law
or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
whether domestic of foreign;

     (j) to Beauvais' actual knowledge, there are no attachments, executions,
assignments for the benefit of creditors or voluntary or involuntary proceedings
in bankruptcy pending against Beauvais or Bittersweet; and

     (k) Beauvais has no actual knowledge of any pending improvements, liens or
special assessments to be made against the Property by any governmental
authority.

The provisions of this Section 6 shall survive the termination of this Agreement
and the Property Closing.

     7. Beauvais agrees and covenants that:

     (a) Beauvais will not amend the Purchase Agreement and will not permit the
Purchase Agreement to be terminated or to expire; and

     (b) Beauvais shall not assign or otherwise transfer any interest in the
Purchase Agreement or agree to do so while this Agreement remains in effect.

     (c) Beauvais will forward to CuraGen copies of all correspondence and
notices between Beauvais and Bittersweet contemporaneously with the receipt or
transmission of such correspondence or notices, and will give CuraGen written
notice of any defaults by either party under the Purchase Agreement.

     8. Beauvais and CuraGen each hereby represent and warrant to the other that
it has not employed any broker, agent or finder in connection with the Property
or the transactions contemplated hereby. Each will protect, indemnify and hold
the other harmless from and against all loss, cost, damages, and exposure,
including reasonable attorney's fees, arising out of any breach of this
representation and warranty. The foregoing indemnity in this Section 8 will
survive the Property Closing or the earlier termination of this Agreement.

     9. Any notices, requests, demands or other communications hereunder will be
in writing and sent by certified mail, return receipt requested, or by
commercial overnight or other courier service providing a receipt upon delivery,
addressed as follows:

TO BEAUVAIS:

Richard E. Beauvais
61 Soundview Road
P.O. Box 855
Guilford, CT 06437






                                       3



COPY TO:



TO CURAGEN:       CuraGen Corporation
                  555 Long Wharf Drive, 11th Floor
                  New Haven, CT 06511
                  Attn: Terrie B. Atkinson

COPY TO:          Mintz, Levin, Cohn, Ferris, Glovsky
                    and Popeo, P .C.
                  One Financial Center
                  Boston, Massachusetts 02111
                  Attn: Joshua Davis, Esquire

All such notices will be deemed given when delivered to the addressee, as
evidenced by the return receipt provided to the sending party by the United
States Postal Service or when delivery is refused or confirmation of delivery or
refusal of delivery by the commercial overnight or other courier service, as the
case may be. Any changes to the above addressees and/or addresses will be
effective upon the giving of a notice of any and all such changes to the other
party in accordance with the terms of this subparagraph.

     10. Notwithstanding any other provision of this Agreement, or any
agreements, contracts or obligations which may derive herefrom, nothing herein
shall be construed to make the parties hereto partners or joint venturers, or to
render either party liable for any of the debts or obligations of the other
party, it being the intention of this Agreement to merely create the
relationship of assignor and assignee with regard to the Purchase Agreement.

     11. This Agreement constitutes the entire agreement between the parties
pertaining to the subject matter contained herein and supersedes all prior
agreements, representations and all understanding of the parties.

     12. No change or modification of this Agreement shall be valid unless the
same is in writing and executed by Beauvais and CuraGen. No purported or alleged
waiver of any of the provisions of this Agreement is binding or effective unless
in writing and signed by the party against whom it is sought to be enforced.

     13. CuraGen has the right to assign this Agreement without the consent of
Seller to any entity that is owned or controlled by or in common control with
CuraGen.




                                       4



     14. This Agreement shall be governed by and construed in accordance with
the laws of the State of Connecticut.

     15. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

     16. Time is of the essence in this Agreement.

     WITNESS the execution hereof as of the day and year above written.


                                        ---------------------------------
                                        Richard E. Beauvais

                                        CuraGen Corporation

                                        By: -----------------------------
                                            Jonathan Rothberg
                                            Founder, Chairman and
                                            Chief Executive Officer




                                       5



                                    EXHIBIT A

                          [COPY OF PURCHASE AGREEMENT]











                                    EXHIBIT B

               ASSIGNMENT AND ASSUMPTION OF AGREEMENT WITH CONSENT

     The undersigned, Richard E. Beauvais ("Beauvais"), for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
hereby assigns all of his right, title and interest in and to that certain
Purchase Agreement dated as of April 12, 2001, between Marc L. Nevas, Trustee
for Bittersweet Associates, as seller, and Richard E. Beauvais, as buyer, to
CuraGen Corporation ("CuraGen") and CuraGen hereby agrees to assume the
obligations of the buyer thereunder, effective as of the date hereof, such
assignment being consented to by the seller as evidenced by its countersignature
below.

     IN WITNESS WHEREOF, this Assignment and Assumption Agreement has been
executed under seal as of this 12 day of April, 2001.
                              ---       -------



                                             -------------------------------
                                             Richard E. Beauvais

                                             CuraGen Corporation

                                             By: ---------------------------
                                                 Jonathan Rothberg
                                                 Founder, Chairman and
                                                 Chief Executive Officer

The undersigned hereby consents
to the foregoing assignment
and certifies that no default
exists under the Purchase Agreement:

- ------------------------------------
Marc L. Nevas, Trustee for
Bittersweet Associates, a
Connecticut joint venture






EXHIBIT "A"

                               PURCHASE AGREEMENT

     AGREEMENT made this 5th, day of April, 2001 by and between MARC L. NEVAS,
TRUSTEE FOR BITTERSWEET ASSOCIATES, a Connecticut Joint Venture having its
principal place of business in the Town of Westport, County of Fairfield and
State of Connecticut, (hereinafter referred to as "Seller") acting herein by
RICHARD E. BEAUVAIS, of 61 Soundview Road, P.O. Box 855, Guilford, Connecticut
06437, (hereinafter referred to as "Purchaser").

1. Purchase and Sale.
   -------------------

     Seller agrees to sell and convey to Purchaser, and Purchaser agrees to
purchase from Seller, all that certain piece or parcel of land with all
improvements thereon and all appurtenances thereto, as more particularly
described on Schedule A attached hereto and made a part hereof, which is located
at 771-779 East Main Street in the Town of Branford, County New Haven State of
Connecticut. (The aforesaid land and improvements are hereinafter collectively
referred to as the "Property".)

2. Personal Property.
   -------------------

     The parties agree that all personal property owned by Seller and presently
located on and used in connection with the Property is included in the sale,
including screens, storm windows, venetian blinds, curtain rods and fixtures,
wall to wall carpeting, awnings, shades, automatic hot water heaters (except
rented water heaters), heating fixtures (except portable heaters) and lighting
fixtures (except rented or tenant owned lamps and lighting fixtures) and plants
and shrubbery.

3. Purchase Price.
   ----------------

     The consideration for the sale and transfer of the Property is the sum of
TWO MILLION TWO HUNDRED SIXTY-TWO THOUSAND FIVE HUNDRED and 00/100
($2,262,500.00) DOLLARS payable as follows:

     (a) Before or upon the signing of this Agreement,
     receipt of which is hereby acknowledged, subject
     to collection;                                             $    50,000.00

     (b) Upon the delivery of the deed, by certified
     check or official bank check drawn on a bank which
     is a member of the New York Clearing House, or the
     proceeds of which are immediately available to
     Seller at a local bank;                                    $ 2,212,500.00
                                                                --------------
              TOTAL                                             $ 2,262,500.00
                                                                ==============


                                       -1-



Any down payment made hereunder shall be paid to the Seller's attorney who shall
hold the same in escrow subject to the terms and conditions hereof and release
same to Seller upon the satisfaction of all contingencies stated herein or
default by Purchaser, whichever shall first occur. Any other deposits held by
other parties shall immediately be forwarded to Seller's attorney to be held in
escrow under the same conditions. If there is a dispute as to the deposit the
escrow agent may commence an interpleader action and pay the deposit into court
whereupon the escrow agent shall be relieved of all further obligation.

Mortgage company checks or similar holding company checks, unless certified, DO
NOT represent immediate funds and will not be accepted at the time of closing.
Trustee checks are NOT satisfactory funds for any payment required by this
Agreement at the time of closing. In the event SELLER or his attorney accepts
PURCHASER's attorney's trustee check in lieu of other funds, PURCHASER and
PURCHASER's attorney agree that no stop payment order will be issued with
respect to such check(s)

4. Additional Down Payment/Contingencies.
   ----------------------------------------

     Upon execution of this Agreement or within ten (10) days thereafter, the
Seller will deliver to the Buyer such of the following documents as are in his
possession:

     (a) Survey of the property;
     (b) Wetland map or data in his possession;
     (c) A List of all Leases and the terms thereof;
     (d) Copies of all Leases

     The Purchaser shall expedituously perform all due diligence with respect to
the premises. Having done so, if within thirty (30) days of the date of the
contract the Purchaser determines to cancel and terminate this contract, he
shall then receive a refund of the aforesaid deposit upon delivery to Nevas,
Nevas, Capasse & Gerard, 246 Post Road East, P.O. Box 791, Westport, Connecticut
06881- 0791 notice of said cancellation in writing by delivery notice of such
cancellation within said 30 days.

     In the event the Purchaser does not cancel said contract as herein set
forth, then it shall forthwith pay to the Seller an additional sum of ONE
HUNDRED FIFTY-TWO THOUSAND FIVE HUNDRED and 00/100 ($152,500.00) DOLLARS. On the
expiration of said thirty (30) days after the decision of the Purchaser not to
terminate all sums paid hereunder shall be non-refundable.

     The Purchaser shall have one hundred eighty (180) days to obtain necessary
Branford Planning and Zoning Permits and Branford Wetlands Commission Permits
providing, however, that the Purchaser shall have diligently pursued such
applications and has filed said applications within sixty (60) days of the
execution of the contract.

     If the Purchaser diligently pursues such applications but there has not
been favorable action by the Planning and Zoning Commission and the Wetlands
Commission within said nine (9) month period, the Purchaser may, at his option,
extend the time for obtaining such permits for an additional



                                       -2-



period of thirty (30) days upon payment of TWENTY-FIVE THOUSAND and 00/100
($25,000.00) DOLLARS. If, within the said thirty (30) days, the Purchaser
desires to extend the closing date for an additional thirty (30) days because of
the failure to obtain said permits, the Seller agrees that upon the payment of
an additional sum of TWENTY -FIVE THOUSAND and 00/100 ($25,000.00) DOLLARS the
closing date shall be extended for an additional thirty (30) days. The said
payments of FIFTY THOUSAND and 00/100 ($50,000.00) DOLLARS shall not be
refundable and shall not be credited on account of the purchase price.

5. Bond/Security Deposit.
   -----------------------

     The Seller has deposited with the Town of Branford a security deposit in
the amount of FIFTY EIGHT THOUSAND and 00/100 ($58,000.00) DOLLARS, which sum
shall be reimbursed by the Purchaser to the Seller at the time of closing. The
Seller shall assign to the Purchaser all rights and claims to the said bond.
Seller shall provide the Buyer with a copy of the bond and all supporting
documentation within ten (10) days of the date of the contract.

6. Adjustments, Prepaid Rents, Tax Reduction Proceedings.
   -------------------------------------------------------

     (a). The following items shall be adjusted between Seller and Purchaser as
of 12:01 a.m. of the Closing Date:

          (i). Real Estate, Personal Property and Other Municipally or State
               --------------------------------------------------------------
               Imposed Taxes.
               --------------
          Current real estate, personal property and other taxes, if any, which
are, or may become liens on the Property for the year of the closing shall be
assumed by Purchaser. Such taxes shall be adjusted pursuant to the custom
adopted by the Assessor of the Town of Branford and Guilford. If the assessment
or the tax rate shall not have been set as of the Closing Date, taxes shall be
assumed on the basis of the most recently ascertainable tax bill. When such
assessment or tax rate for the period covered by the assumption shall become
available, the Purchaser agrees to assume the increase in taxes associated
therewith, if any.

          (ii). Rents. The total rent potential for the calendar month during
which the closing shall take place, as set forth on the Leases delivered to
Purchaser at the closing whether or not all of such rents shall have been
received by Seller as of the Closing Date. All rental income attributable to a
period of time prior to the closing shall be payable to Seller and all rents
earned and attributable to any period after the closing shall be paid to
Purchaser. Seller specifically reserves the right to retain and/or proceed with
any and all claims for rentals attributable to its period of ownership. Any
payments received by Purchaser after closing, less any expenses of collection
incurred by Purchaser including reasonable attorney's fees, shall first be
applied to current rents due and the balance paid to Seller on account of any
rental arrearage shown on the Schedule of Leases attached hereto. Purchaser
shall not be obligated to bring suit to collect such arrearages. Rents prepaid
by tenants for any month subsequent to the month during which the closing shall
occur shall be credited to Purchaser by the Seller at the closing, or, if
received by Seller after the closing, shall be promptly remitted to Purchaser.



                                       -3-



         (iii). Service and Other Contracts. Amounts, if any, prepaid or
                ----------------------------
accrued by Seller with respect to any service or other contracts assigned or
transferred to Purchaser at the closing, shall be credited to the Seller at the
time of the closing.

         (iv). Utilities. If any utility bills are presently in the name
               ----------
of the Seller, Seller shall use its best efforts to have utility meters read as
of the Closing Date and to cause utility companies to render final bills to
Seller, which bills Seller shall pay promptly. If a final bill shall not have
been rendered as of the Closing Date, the prepaid or unbilled, as the case may
be, amount of such utility shall be prorated on the basis of the most recently
ascertainable bill for such utility, and such utility shall be adjusted, if
necessary, when the actual bill therefore for the period covered by the
proration shall become available, and the appropriate credit or payment shall be
made between Seller and Purchaser upon demand of either party. For the purposes
of this paragraph "utilities" shall include but shall not be limited to
electricity, natural gas and fuel oil.

          (v). Water Hydrant and Sewer Use Charge. Purchaser shall assume
               ----------------------------------
all water, hydrant and sewer use charges at the time of closing with an
adjustment made between the Purchaser and Seller as to the prepaid or unbilled,
as the case may be. If the water, hydrant and sewer assessment or use charge
rate shall not have been set as of the Closing Date, said water, hydrant and
sewer use charges shall be assumed on the basis of the most recently
ascertainable bill for such water, hydrant and sewer use. Such water, hydrant
and sewer use charge shall be adjusted, if necessary, when the actual water,
hydrant and sewer use charge bills for the period shall become available, and
the appropriate credit or payment shall be made between Seller and Purchaser
upon demand of either party.

          (vi). Tenant Deposits. All amounts held by Seller as refundable
                ---------------
tenant deposits, and all interest thereon as, required by law under the leases
and tenancies shall be credited and assigned to Purchaser at the time of the
closing, which deposits may include, without limitation, security deposits, key
deposits or pet deposits. Purchaser herein agrees to assume all responsibility
from and after the Closing Date for such refundable tenant deposits and the
interest thereon upon receipt by Purchaser of an Assignment of Leases and
receipt or credit for the security deposits.

7. Final Inspection.
   ------------------

     The Purchaser shall have the right to make a final inspection of the
Property during the week preceding the closing and agrees to notify Seller of
the time and date of said final inspection at least twenty-four (24) hours prior
to the time and date of said final inspection.

8. Leases.
   --------

     Seller agrees to deliver to Purchaser copies of all leases, lease
extensions and lease modifications affecting the Property within ten (10) days
after receipt of a fully executed contract with the deposit required herein. In
the event any portion of the Property is subject to an oral or month to month
lease the Seller shall inform the Purchaser .of the circumstances of said oral
or month to month lease and agrees to set forth in writing the terms of such
occupancy and to deliver same to the Purchaser within said ten (10) days.



                                       -4-



9. Title.
   ------

     (a). Purchaser, at its sole cost and expense shall promptly examine the
title to the Property and obtain current searches (a "UCC Search") of all
uniform Commercial Code financing statements filed with the Secretary of the
State of Connecticut against Seller and the Property, or either or them relating
to the Property. If Purchaser's examination of title to the Property discloses
any objection to title affecting marketability, or if Purchaser's UCC Search
reveals any claim or lien against Seller or the Property, Purchaser shall notify
Seller of any such objection within ten (10) days of receipt of its search. If
Seller, after making reasonable efforts to do so (including, without limitation,
the payment of money to obtain the release or discharge of liens or other
encumbrances securing the payment of money), shall be unable to remove or
correct any such title objection within ten (10) days prior to closing, Seller
shall so notify Purchaser, and Purchaser, at its option, may either (a) accept
such title as Seller can then convey without reduction of the Purchase Price or
any credit against the same or (b) terminate this Agreement, in which event
neither party shall have any further rights or obligations under this Agreement.

     (b). It is understood and agreed that the title herein required to be
conveyed by the Seller shall be marketable and the marketability thereof shall
be determined in accordance with the Standards of Title of the Connecticut Bar
Association now in force. It is also agreed that any and all defects in or
encumbrances against the title, which come within the scope of said Title
Standards, shall not constitute a valid objection on the part of the Purchaser,
if such Standards do not so provide; provided the Seller furnishes any
affidavits or other instruments which may be required by the applicable
Standards. If, at the time of closing, the Seller shall be unable to convey
marketable title to said Property to the Purchaser, then the Purchaser may elect
to accept such title as Seller can convey, upon payment of the Purchase Price,
or may reject the deed conveying such unmarketable title. Upon such rejection,
all sums paid as a Deposit shall be repaid to Purchaser without interest. Upon
such rejection, this Agreement shall terminate and become null and void and the
parties hereto shall be released and discharged of all further claims and
obligations to each other.

10. Closing; Closing Documents; Closing Costs.
    -------------------------------------------

     (a). The closing of title under this Agreement shall be held at the offices
of Snow, Atticks & Hollo, 69 Wall St. Madison, Connecticut. (The date on which
such closing of title shall take place is herein sometimes referred to as the
"Closing Date."). The terms "closing", "closing of title", "title closing",
"delivery of deed" and words of similar import are used interchangeably in this
Agreement, as the context may require, to mean the event of consummation of the
purchase and sale. The closing of title shall occur on the first of any of the
following days to occur:

          (i). Two hundred ten (210) days from the date of execution of this
Agreement;

          (ii). Thirty (30) days after obtaining permits from the Branford
Planning and Zoning Commission and the Branford Wetlands Commission;

          (iii). In the event the extensions as above set forth in paragraph 4
of this Agreement have been granted, then on the expiration of said extended
periods.

     (b). At the closing, Seller, at its sole cost and expense, shall, in
addition to any other documents required under this Agreement, deliver to
Purchaser, in form and content reasonably acceptable to counsel for Purchaser:

          (i). A Warranty Deed together with all conveyance taxes due in
connection with this transaction, conveying good and marketable fee simple title
to the Property, subject only to:




                                       -5-



               (i) Any and all zoning and/or building restrictions, limitations,
regulations, ordinances, and/or laws; any and all building lines; and all other
restrictions, limitations, regulations, ordinances and/or laws imposed by any
governmental authority and any and all other provisions of any governmental
restrictions, limitations, regulations, ordinances and/or public and/or private
laws, provided same are not in violation at the time of closing.

               (ii) Real Property Taxes on the Current Grand List and any and
all existing tax payments, liens, and assessments, coming due on or after the
date of closing; the Purchaser shall by acceptance of the deed assume and agree
to pay, any and all tax payments, liens and assessments which may on or after
the date hereofbe assessed, levied against or become a lien on the Property.

               (iii) Any state of facts which a survey and/or physical
inspection of the Property might reveal, provided same do not render title
unmarketable (such exception shall not be included in the Warranty Deed, unless
it was in the legal description in the deed which Seller received upon
purchasing the property).

               (iv) Common law and/or other rights, if any, of upper and lower
riparian owners in and to any natural watercourse flowing through or adjoining
the Property, and all statutory and other rights of others in and to any such
watercourse.

               (v) Unless otherwise specifically agreed between the parties in
writing, any municipal assessment other than taxes such as sewers and the like
shall be paid on a current basis by the Seller and the balance assumed by the
Purchaser at closing.

               (vi) Such encumbrances as shown on Schedules A and B, if any.

          (ii). A Bill of Sale conveying the Personal Property of the Seller
located on the Property is in its "as is - where is" condition to Purchaser.

          (iii). An Affidavit of Seller dated as of the date of the closing (a)
verifying the non-existence of mechanic's and materialmen's lien rights (b)
verifying the non-existence of any tenants' rights, other than as set forth
herein, (c) verifying the non-existence of any security interests in persona
property and fixtures being sold with the property (d) affirming that Seller is
not a "foreign person" pursuant to Internal Revenue Code Section 1445; together
with any other affidavit reasonalby requested by the Purchasers' lender or title
company as to facts within Sellers' knowledge.

          (iv). A copy and a written assignment of each contract or service
contract pursuant to which any party shall be rendering services in connections
with the care, maintenance, upkeep or management of the Property. Purchaser
shall, at the closing, assume in writing, the obligations of Seller under all
such service contracts arising after the Closing Date unless such contracts are
terminable by Seller and Purchaser has elected not to assume said contracts.

          (v). All written leases, lease modifications and lease extensions and
a written assignment to Purchaser of all Seller's rights, title and interest in
and to all leases and tenancies, and in all and to all rentals thereafter
becoming due thereunder. Purchaser shall, at the closing, assume in writing the
obligations of Seller under all such leases and tenancies arising after the
Closing Date.




                                       -6-



          (vi). All plans, surveys, (including site plans) and building
specifications pertaining to the Property which Seller possesses, or to which
Seller has reasonable access, shall be delivered within ten (10) days of this
Agreement, provided that Seller shall not be obligated to incur any cost or
expense in connection with providing same to the Purchaser.

          (vii). An assignment of all permits, licenses, contractual rights and
warranties affecting the Property.

          (viii). A copy of the Tenant Roll updated to the date of the closing
and certified by Seller as substantially complete and accurate.

     (c) At or prior to the closing, purchaser, at its sole cost and expense,
and, in addition to any other documents required under this Agreement, shall
deliver to Seller, in form and content reasonably acceptable to counsel for
Seller:

          (i). An Assumption Agreement of Seller's obligations under all leases,
lease modifications and lease extensions in effect at the time of the closing.

          (ii). An Assumption of Sellers' obligations under all service
contracts in effect at the time of the closing.

          (iii) Evidence of Purchaser's authority to enter into this Agreement,
to perform all of the obligations of the Purchaser as required by this
Agreement, to accept delivery of the deed to the Property and to execute such
other Agreements and instruments as shall be required pursuant to this
Agreement.

11. Occupancy and Possession: Grounds.
    -----------------------------------

     Purchaser shall have exclusive occupancy and possession of the Property on
the date of the closing subject to the rights of the tenants then in possession.
Seller agrees to deliver all keys in Seller's possession to the Purchaser on the
date of the closing. Seller agrees to maintain or have the grounds maintained in
reasonably the same condition as they exist on the date of execution of this
Agreement until the date of the closing.

12. Representations: Condition of Property
    ---------------------------------------

     Purchaser hereby acknowledges and represents that neither Seller nor any
person or party on behalf of Seller has made any representation of any nature
whatsoever upon which Purchaser has relied in entering into the Agreement or,
upon which Purchaser shall rely in consummating the transactions described in or
contemplated by this Agreement and that Purchaser shall accept delivery of title
to the Property in such condition as the Property shall be as of the date of
this Agreement. Purchaser further acknowledges and represents that it is
entering into this Agreement and shall perform all of its obligations hereunder
and consummate the transactions described in or contemplated by this Agreement
solely as a result of Purchaser's own inspections and investigations. The
Purchaser represents that the Purchaser has examined the Property and is
satisfied with the physical condition thereof and that neither Seller nor any
representative of Seller has made any representation or promise other than those
expressly stated herein upon which Purchaser has relied in making this
Agreement. Notwithstanding the foregoing, however, Seller hereby represents and
warrants to Purchaser as to the following matters, each of which is so warranted
to be true and correct as of the date hereof and only to the date hereof which
truth and correctness shall be a condition precedent to Purchaser's obligation
to close title and Seller agrees that it will not take any




                                       -7-



action between the date hereof and the closing date which would result in any of
the foregoing representations becoming untrue in any material respect:

     (a). Seller is the owner of and has a good and marketable title to the
Property.

     (b). Seller has not entered into any other contract to sell or granted any
option or right of first refusal to purchase the Property, or any portion
thereof except to Purchaser.

     (c). The Property shall not be in violation of any ordinance, municipal
regulation, public or private law or restrictions at the time of the closing.

     (d). See Schedule B attached hereto.
              ----------

13. Risk of Loss.
    --------------

     The risk of loss or further damage to the Property by fire or any other
casualty or cause beyond the Seller's control in an amount independently
appraised at less than $2,000.00 or the taking of all or a portion of the
Property by Condemnation, eminent domain or other governmental acquisition
proceedings, in advance of the Closing Date shall be borne by Seller. In the
event of any damage, Seller shall have a reasonable time within which to repair
or replace such Damage. In the event of Seller's default of such repair or
replacement within a reasonable time, or in the event that any loss or further
damage to the Property exceeds the amount of $2,000.00 or that any such taking
by condemnation, eminent domain or other governmental acquisition proceeding, in
Purchaser's judgment, shall in any manner impair the Purchaser's intentions as
contemplated by this Agreement or the feasibility thereof as contemplated
herein, Purchaser shall have the right:

     (a). to terminate this Agreement and receive back all amounts paid as a
Deposit on the Purchase Price, plus interest thereon, in which event neither of
the parties hereto shall have any further rights or obligations hereunder; or

     (b). to accept the Property as provided in this Agreement without any
reduction of the Purchase Price, in which event Purchaser shall be entitled to
an assignment from Seller of all insurance proceeds or condemnation or other
award due or payable on account of such loss or damage or taking less any amount
actually expended by Seller in connection with the repair (including temporary
repair) or replacement of such damage plus the amount of any deductible, not to
exceed the amount of the loss.

14. Brokerage.
    -----------

     The parties hereto mutually warrant and represent that DOW REALTY CO. is
the sole broker who negotiated the sale of the Property and a commission or fee
shall be due as a result of this Agreement or the purchase contemplated hereby,
which commission shall be paid by the Seller. Seller covenants and agrees to
indemnify and hold Purchaser harmless of, from and against all claims, costs,
damages and expenses, including, without limitation, reasonable attorney's fees
and court costs, which Purchaser may suffer or incur as a result of claims made
or suits brought by any other broker, agent or for a commission based on
dealings or alleged dealings with Seller with respect to the purchase of the
Property. Purchaser agrees to indemnify and hold Seller harmless of, from and
against all claims, costs, damages and expenses, including, without limitation,
reasonable attorney's fees and court costs, which Seller may suffer or incur as
a result of claims made or suits brought by any broker, agent or finder except
as named herein for a commission based on dealings with Purchaser with respect
to the purchase of the Property.




                                       -8-



15. Default: Liquidated Damages.
    -----------------------------

     In the event that the sale of the Property fails to close as a result of
any material act or omission on the part of the Purchaser and the Seller is not
in default, the Deposit shall be immediately paid over to the Seller by the
Seller's attorney on the date of the scheduled closing. Seller shall be entitled
to retain said Deposit as liquidated damages. The Seller and Purchaser hereby
agree that the exact extent of damages which the Seller would suffer as a result
of Purchaser's failure to close or as a result of Purchaser's act or omission or
default is incapable of being computed and therefore both the Seller and
Purchaser agree that the sum of the Deposit is the best available computation of
liquidated damages to which the Seller would be entitled. Upon the payment of
the Deposit to the Seller, both the Seller and Purchaser shall be relieved of
further liability under this Agreement.

16. Release of Mortgages:
    ----------------------

     Notwithstanding anything to the contrary contained in this Agreement or any
riders attached hereto, in the event the Seller after due diligence cannot
obtain a release for any existing mortgage on the Property at the time of the
closing of title from the lending institution holding said mortgage, or any
assignee thereof, either because said lending institution will not release the
mortgage without first receiving payment or because the lending institution has
delayed in sending the attorney for the Seller the release of mortgage, then
Purchaser agrees to close title notwithstanding the absence of the release of
mortgage, provided the attorney for the Seller furnishes the attorney for the
Purchaser, at the closing, with the payoff amount and a copy of the payoff check
evidencing that payment of the unreleased mortgage is to be made in full at the
time of the closing, and with an undertaking to make said payment, and further
provided the Purchaser's Title Insurance Company will issue a fee policy at no
additional premium which takes no exception for said mortgage or mortgages.
Seller shall exercise due diligence to obtain any such release or releases and
will upon receipt thereof immediately record the same and forward a copy or
copies thereof to Purchaser's attorney with recording information. If Seller has
not obtained such release within sixty (60) days after closing, he shall give to
Purchaser's attorney the affidavit provided for in Connecticut General Statutes
Section 49-8(a), as amended, together with the necessary recording fee. This
provision shall survive the closing.

17. Acceptance of Deed.
    --------------------

     The delivery and acceptance of the deed described herein shall be deemed to
constitute full compliance with all the tenDs, conditions, covenants and
representations contained herein, or made in connection with this transaction,
except as may herein be expressly provided and except for the warranties of
title.

18. Assignment
    -----------

     Purchaser may assign its rights under this Agreement without the written
consent of the other party.

19. Binding Effect.
    ----------------

This Agreement shall inure to the benefit of and bind the parties hereto and
their respective legal representatives, heirs, administrators, executors,
successors and assigns.




                                       -9-


20. Merger: Amendment.
    ------------------

     This Agreement, and any Addendum annexed hereto, embodies the entire
contract between the parties hereto with respect to the Property and the subject
matter hereof and supersedes any and all prior negotiations agreements and
understanding, written or oral, formal or informal, all of which are deemed to
be merged herein. No modification or amendment to this Agreement of any kind
whatsoever shall be made or claimed by Seller or Purchaser, and no notice of any
extension, change, modification or amendment made or claimed by Seller or
Purchaser (except with respect to permitted unilateral waivers) shall have any
force or effect whatsoever unless the same is in writing and signed by both the
Seller and Purchaser.

21. Pronouns; Joint and Several Liability.
    ---------------------------------------

     All pronouns and nouns and any variations hereof shall be deemed to refer
to the masculine, feminine or neuter, singular or plural, as the identity of the
parties or the context may require. If Purchaser or Seller consists of two or
more parties, the liability of such parties shall be joint and several.

22. Invalidity.
    ------------

     If any term or provision of this Agreement shall to any extent or for any
reason be held invalid, illegal or unenforceable, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, but the
remainder of this Agreement and each term and provision of this Agreement shall
be valid and enforceable to the fullest extent permitted by law, subject to such
modification hereof as may be necessitated by such invalidity.

23. Application Law; Construction.
    -------------------------------

     (a). This Agreement and all questions of interpretation hereof and all
controversies hereunder, shall be construed in accordance with and governed by
the applicable procedural, statutory and common law of the State of Connecticut.

     (b). Neither this Agreement nor any term or provision of this Agreement
shall be construed against either party hereto by reason of such party's having
drafted, or caused to be drafted, either this Agreement or such term or
provision, as the case may be.

24. Notice.
    --------

     Any notice, demand, request or other communication made, given or required
pursuant to this Agreement shall be in writing and shall be sufficient if it is
(a) in writing, (b) delivered personally, deposited for delivery with a
commercial overnight courier or express service or mailed by certified or
registered first class mail, return receipt requested, postage prepaid, and (c)
addressed to the party for whom intended as follows:

     if to Sel1er:           Marc L. Nevas, Trustee for Bittersweet Associates
                             250 Post Road East
                             Westport, CT  06880

     copy to:                Leo Nevas, Esquire
                             Nevas, Nevas, Capasse & Gerard
                             246 Post Road East
                             Westport, CT 06880




                                      -10-



     if to Purchaser:        Richard E. Beauvais
                             61 Soundview Road
                             P.O. Box 855
                             Guilford, CT 06437

     copy to:                Donald F. Snow, Jr., Esq.
                             Snow, Atticks & Hollo, LLC
                             69 Wall Street
                             Madison, CT 06443

     Either party may designate by notice given to the other a new address to
which notices or other communications intended for such party shall thereafter
be given. Unless otherwise stated in this Agreement, a notice or other
communication shall be deemed given on the earliest of when (a) actually
received, (b) personally delivered, (c) one day after being deposited with a
commercial overnight courier or express service or (d) two days after being
deposited in the United States mail in the manner aforesaid.

25. Calculation of Time.
    ---------------------

     Whenever in this Agreement a period of time is stated as a number of days,
it shall be construed to mean calendar days; provided, however, that when any
period of time so stated would end upon a Saturday, Sunday or legal holiday,
such period shall be deemed to end upon the next day following which is not a
Saturday, Sunday or legal holiday.

26. Expenses.
    ----------

     Whether or not the transactions contemplated under this Agreement are
consummated, Seller and Purchaser agree to pay their own expenses incident to
the preparation and performance of this Agreement, including, without
limitation, attorney's fees and costs.

27. Waivers: Extensions.
    ---------------------

     No waiver of any breach of any agreement or provision herein contained
shall be deemed a waiver of any preceding or succeeding breach thereof or of any
other agreement or provision herein contained. No extension of time for the
performance of any obligation or act shall be deemed an extension of the time
for the performance of any other obligation or act.

28. Survival.
    ----------

     This Agreement, and all of the covenants, conditions, representations,
warranties and other terms and provisions hereof shall merge into the deed to
the Property delivered to Purchaser at the closing.

29. Incorporation by Reference.
    ----------------------------

     All documents, instruments, schedules and other matters attached to this
Agreement as Exhibits are specifically made a part thereof and incorporated
herein by the reference thereto in the body of this Agreement.




                                      -11-



30. Counterparts., Captions.
    -------------------------

     This Agreement may be executed in counterparts, each of which shall be
deemed to be an original. The captions are for convenience of reference only and
shall not affect the construction to be given any of the provisions hereof.

31. Recordation.
    -------------

     If this Agreement is recorded on the Branford and/or Guilford Land Records,
it shall automatically terminate within ten (10) days thereafter. Purchaser
agrees to execute and deliver a document in recordable form and acceptable to
Seller in form and substance sufficient to terminate the effect of this
Agreement and to release the encumbrance of the Agreement as a result of the
recordation of this Agreement. If Purchaser fails to do so, Purchaser shall be
liable to Seller for any damages from such failure as well as any and all costs
and expenses, including attorney's fees, incurred by Seller in obtaining such
termination or a judicial determination of such termination and the actual
release thereof.

     IN WITNESS WHEREOF, the parties have hereunto set their hands and seals.

                                     SELLER:

- -----------------------------------  ------------------------------------------
Social Security Number               MARC L. NEVAS, TRUSTEE
                                     FOR BITTERSWEET ASSOCIATES





                                     PURCHASER:

- -----------------------------------  ------------------------------------------
Social Security Number               RICHARD E. BEAUVAIS
                                                                        -




                                      -12-




                                   SCHEDULE A
                                   ----------

     ALL THAT certain piece or parcel of land, together with the buildings
thereon, situated in the Towns of Branford and Guilford, County of New Haven and
State of Connecticut, bounded and described as follows:

NORTHWEST AND NORTH:      by the Boston Post Road, 501.17 feet, more or less;

EAST:                     by land now or formerly of Michael Harrison, et ux,
                          200 feet;

NORTH AGAIN:              by land now or formerly of Michael Harrison, et ux,
                          125 feet;

EAST AGAIN:               by land now or formerly of Norbert Kneuer Jr.,
                          243 feet, more or less;

NORTHEAST:                by land now or formerly of Norbert Kneuer, Jr.,
                          365 feet, more or less;

NORTHWEST AGAIN:          by land now or formerly of Norbert Kneuer, Jr.,
                          25 feet, more or less;

NORTHEAST AGAIN:          by land now or formerly of Kenneth R. Mattern et ux,
                          657.52 feet;

NORTHWEST AGAIN;          by land now or formerly of Kenneth R. Mattern et ux,
                          500 feet;

NORTHEAST AGAIN AND
EAST AGAIN:               by Orchard Road, formerly known as Goldsmith Road,
                          1450 feet, more or less;

SOUTH:                    by land now or formerly of Henry G. Goldsmith,
                          375 feet, more or less;

EAST AGAIN:               by land now or formerly of Henry G. Goldsmith,
                          550 feet, more or less;

SOUTH AGAIN:              by land now or formerly of Henry G. Cooke and now or
                          formerly of the Estate of Charles W. Cooke, 1960 feet,
                          more or less;

NORTHWEST AGAIN:          by land now or formerly of John P. Riesman et ux,
                          208.37 feet;

WEST:                     by land now or formerly of John P. Riesman et ux,
                          39.72 feet;






                              SCHEDULE A CONTINUED
                              --------------------

NORTHWEST AGAIN:          by land now or formerly of John P. Riesman et ux,
                          120.48 feet;

SOUTHWEST:                by land now or formerly of John P. Riesman et ux,
                          225 feet;

WEST AGAIN:               by land formerly of Sidney Harris and Kalman Liske,
                          more lately now or formerly of Matteo H. Leona, Jr.
                          and Carl C. Leona 1426.80 feet, more or less, by a
                          broken line;

NORTH AGAIN:              by land now or formerly of Frederick A. Dudley et ux,
                          136.61 feet;

WEST AGAIN:               by land now or formerly of Frederick A. Dudley et ux,
                          300 feet.

     SAID premises are shown on a map entitled "Property of Robert and Jane W.
Wallace Boston Post Road, Branford and Guilford Connecticut May 1956 - Scale 1"
= 100'" certified substantially correct by Robert H. Decker, registered engineer
and land surveyor, which map is on file in the Branford Town Clerk's Office.

     EXCEPTING THEREFROM, HOWEVER, THE FOLLOWING DESCRIBED PARCELS:

     1) .23 acre, more or less, situated on the southeasterly side of the Boston
Post Road, as conveyed by Robert Wallace and Jane W. Wallace to the State of
Connecticut by deed dated May 14, 1956 and recorded in Volume 154, Page 39 of
the Branford Land Records;

     2) lots situated on the westerly side of Orchard Road, formerly known as
Goldsmith Road, as conveyed by Robert Wallace and Jane W. Wallace by four deeds
recorded in the Guilford Land Records as follows:

                  a) deed dated January 31, 1977 - Volume 229, Page 686;
                  b) deed dated February 1, 1977 - Volume 229, Page 840;
                  c) deed dated April 26, 1977 - Volume 231, Page 142;
and
                  d) deed dated May 31, 1977 - Volume 231, Page 994.



                                   SCHEDULE B

1. Any and all provisions of any zoning, planning or other ordinance, municipal
regulation or public law.

2. The Purchaser assumes and agrees to pay all taxes and assessments payable
after the closing of title and the Buyer shall reimburse the Seller for all
prepaid taxes or assessments.

3. Any riparian, drainage or littoral rights of others in and to any water or
body of water adjoining or passing through the above premises.

4. Any and all assessments which may on or after the date hereof be assessed,
levied or imposed against or become a lien upon the premises or any part
thereof.

5. Any state of facts which a physical inspection or accurate survey of the
premises might disclose, provided that such survey does not disclose a violation
of the applicable zoning regulations or render the title otherwise unmarketable.

6. An easement to the Connecticut Light and Power Compay dated November 29, 1972
and recorded in Volume 249 at Page 711 of the Branford Land Records.

7. An Assessor's Certificate filed under Public Act 490, from Robert Wallace to
the Town of Branford for Farm Acreage, recorded April 9, 1974 in Volume 260 at
Page 449 of said Land Records.

8. An Assessor's Certificate filed under Public Act 490, from Robert and Jane W.
Wallace to the Town of Guilford dated November 24, 1975 and recorded in Volume
219 at Page 587 of the Guilford Land Records.

9. Notices from the Planning and Zoning Commission and the Zoning Board of
Appeals of the Town of Branford, as recorded in Volume 285 at Page 125, Volume
289 at Page 609, Volume 290 at Page 784 and Volume 294 at Page 691 of the
Branford Land Records.

10. Rights of tenants in possession.

EX-10.30

                                                                   EXHIBIT 10.30

     THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
March 4, 2002 between CuraGen Corporation, a corporation organized under the
laws of the State of Delaware, with its principal place of business at 555 Long
Wharf Drive, New Haven, Connecticut (the "Company"), and Jonathan M. Rothberg
("Executive").

     WHEREAS, the Executive desires to be employed by the Company, subject to
the terms and conditions of this Agreement; and the Company desires to retain
the Executive's services, subject to the terms and conditions of this Agreement.

     THEREFORE, the Company and the Executive, intending to be legally bound,
hereby agree as follows:

1. Employment; Duties and Responsibilities
   ---------------------------------------

     A) The Company shall employ the Executive, and the Executive shall serve
the Company, as Chairman, President and Chief Executive Officer, with such
duties and responsibilities as may be assigned to the Executive by the Board of
Directors ("BOD") of the Company and are typically associated with a position of
that nature.

     B) The Executive shall devote his best efforts and all of his business time
to the performance of his duties under this Agreement and shall perform them
faithfully, diligently and competently in a manner consistent with the policies
and goals of the Company as determined from time to time by the BOD.

     C) The Executive shall report to the BOD of the Company.

     D) The Executive shall not engage in any activities outside the scope of
his employment that would detract from, or interfere with, the fulfillment of
his responsibilities or duties under this Agreement.



                                       1




     E) The Executive shall not serve as a director (or the equivalent position)
of any company or entity and shall not render services of a business,
professional or commercial nature to any other person or firm without prior
written consent of the BOD. Such consent shall not be unreasonably withheld.

     F) The Executive shall not receive fees or other remuneration for work
performed either within or outside the scope of his employment except for
not-for-profit entities without prior written consent of the BOD. Such consent
shall not be unreasonably withheld.

2. Term of Employment
   ------------------

     A) The Executive's employment by the Company under this Agreement shall
commence on the date of this Agreement and, subject to the earlier termination
pursuant to section 10 shall terminate on December 31, 2002; provided, however,
that commencing on January 1, 2003 and each January 1 thereafter the term of
this Agreement shall be extended for one (1) additional year unless, not later
than October 31 of the preceding year, the Company or the Executive shall have
given written notice that the Company or the Executive does not wish to extend
this Agreement.




                                       2




3. Compensation
   ------------

     As full compensation for all services rendered by the Executive to the
Company under this Agreement, the Company shall pay the Executive the
compensation set forth in Schedule A attached and incorporated into this
Agreement. This schedule may be amended from time to time in writing by the
Company and the Executive.

4. Fringe Benefits
   ---------------

     A) The Executive shall be entitled to participate in all health and welfare
benefit plans provided by the Company to its employees.

     B) The Executive shall be entitled to participate in all pension plans
provided by the Company to its employees.

     C) The Company may, at its sole option, devise a benefit plan for its
executives or senior managers. The Executive shall be entitled to participate in
benefit plans provided by the Company to its executives or senior managers.

     D) The Executive shall be entitled to a minimum of four (4) weeks paid
vacation time annually, to be taken at times selected by him.

5. Expenses
   --------

     The Company shall reimburse the Executive for all reasonable
and necessary expenses incurred by him in connection with the performance of his
services for the Company in accordance with the Company's policies, upon
submission of appropriate expense reports and documentation in accordance with
the Company's policies and procedures.



                                       3




6. Disability or Death
   -------------------

     A) If, as the result of any physical or mental disability, the Executive
shall have failed or is unable to perform his duties for a period of ninety (90)
consecutive days, the Company may, by notice to the Executive, terminate his
employment under this Agreement as of the date of the notice without any further
payment or the furnishing of any benefit by the Company under this Agreement
(other than accrued and unpaid base salary and expenses and benefits which have
accrued pursuant to any plan or by law).

     B) The term of the Executive's employment under this Agreement shall
terminate upon his death without any further payment or the furnishing of any
benefit by the Company under this Agreement (other than accrued and unpaid base
salary and commission and expenses and benefits which have accrued pursuant to
any plan or by law). This provision shall not be read to change the terms of any
other agreement between the Executive and the Company, including any stock
option plans, which shall be governed by its terms. Unless expressly provided
for in such agreements, the death of the Executive shall not terminate such
agreements.

7. Patents, Copyrights and Intellectual Property
   ---------------------------------------------

     A) The Executive shall promptly disclose to the Company all Inventions.
Inventions shall mean, for purposes of this paragraph, inventions, discoveries,
developments, methods and processes (whether or not patenable or copyrightable
or constituting trade secrets) conceived, made or discovered by the Executive
(whether alone or with others) while employed by the Company that relate,
directly or indirectly, to the past, present, or future business activities,
research, product design or development, personnel, and business opportunities
of the Company, or result from tasks assigned to the Executive by the Company or
done by the Executive for or on behalf of the Company. The Executive hereby
assigns and agrees to assign to the Company



                                       4




(or as otherwise directed by the Company) his full right, title and interest in
and to all Inventions. The Executive agrees to execute any and all applications
for domestic and foreign patents, copyrights or other proprietary rights and to
do such other acts (including, among others, the execution and delivery of
instruments of further assurance or confirmation) requested by the Company to
assign the Inventions to the Company and to permit the Company to file, obtain
and enforce any patents, copyrights or other proprietary rights in the
Inventions. The Executive agrees to make and maintain adequate and current
records of all Inventions, in the form of notes, sketches, drawings, or reports
relating thereto, which records shall be and remain the property of and
available to the Company at all times.



                                       5




8. Proprietary and Trade Secret Information
   ----------------------------------------

     A) The Executive agrees that he will keep confidential and will not make
any unauthorized use or disclosure, or use for his own benefit or the benefit of
others, during or subsequent to his employment of any research, development,
engineering and manufacturing data, plans, designs, formulae, processes,
specifications, techniques, trade secrets, financial information, customer or
supplier lists or other information that becomes known to him as a result of his
employment with the Company which is the property of the Company or any of its
clients, customers, consultants, licensors, licensees, or affiliates, provided
nothing herein shall be construed to prevent the Executive from using his
general knowledge and skill after termination of his employment whether acquired
prior to or during his employment by the Company.

     B) Proprietary information subject to paragraph 8(A) does not include
information that: (i) is or later becomes available to the public through no
breach of this Agreement by the Employee; (ii) is obtained by the Executive from
a third party who had the legal right to disclose the information to the
Executive; or (iii) is required to be disclosed by law, government regulation,
or court order.





                                       6




     C) Upon leaving the employment of the Company, the Executive will not
remove from the Company premises, either directly or indirectly, any drawings,
writings, prints, any documents or anything containing, embodying, or disclosing
any confidential or proprietary information or any of the Company's trade
secrets unless express written permission is given by the Board of Directors.
Upon termination of his employment, the Executive shall return to the Company
any and all documents and materials that are the property of the Company or its
customers, licensees, licensors or affiliates or which contain information that
is the property of the Company.

9. Covenant Not to Compete
   -----------------------

     A) While in the employ of the Company and for a period of one year or the
maximum period permitted by applicable law (whichever is shorter) following
termination of his employment with the Company, the Executive shall not, without
the approval of the Company, alone or as a partner, officer, director,
consultant, employee, stockholder or otherwise, engage in any employment,
consulting or business activity or occupation that is or is intended to be
directly competitive with the business of the Company, as being considered,
researched, developed, marketed and/or sold at the time of termination;
provided, however, that the holding by the Executive of any investment in any
security shall not be deemed to be a violation of this section if such
investment does not constitute over one percent (1%) of the outstanding issue of
such security. The restriction shall run for a period of one year after said
termination, and if there shall be any violation hereof during said period, then
for a period of one year after cessation of such violation.

     B) While in the employ of the Company, the Executive shall promptly notify
the Company, if the Executive, alone or as a partner, officer, director,
consultant, employee,



                                       7




stockholder or otherwise, engages in any employment, consulting or business
activity or occupation outside his employment by the Company.

     C) The Executive shall not, directly or indirectly, either during the term
of the Executive's employment under this Agreement or for a period of one (1)
year thereafter, solicit, directly or indirectly, the services of any person who
was a full-time employee of the Company, its subsidiaries, divisions or
affiliates, or solicit the business of any person who was a client or customer
of the Company, its subsidiaries, divisions or affiliates, in each case at any
time during the last year of the term of the Executive's employment under this
Agreement. The Executive shall not, directly or indirectly, either during the
term of the Executive's employment under this Agreement or for a period of one
(1) year thereafter, employ, directly or indirectly, the services of any person
who was a full-time employee of the Company, its subsidiaries, divisions or
affiliates, or solicit the business of any person who was a client or customer
of the Company, its subsidiaries, divisions or affiliates, in each case at any
time during the last year of the term of the Executive's employment under this
Agreement. For purposes of this Agreement, the term "person" shall include
natural persons, corporations, business trusts, associations, sole
proprietorships, unincorporated organizations, partnerships, joint ventures and
governments or any agencies, instrumentalities or political subdivisions
thereof.

     D) The Executive acknowledges and agrees that the covenants in this section
are necessary for the protection of the legitimate business interests of the
Company and that the covenants are reasonable in all respects. The Executive
further acknowledges and agrees that, if his employment by the Company is
terminated, his experience and capabilities are such that he is both qualified
and willing to seek and obtain employment involving business activities which



                                       8




will not violate any covenant on his part to be observed hereunder and that a
court decree enjoining any such violation will not prevent him from earning a
reasonable livelihood.

     E) Just compensation for the duties under this paragraph is included in the
salary and benefits provided herein.

     F) If the Executive is terminated as a result of a Change of Control, as
defined in this Agreement, this Section, titled "Covenant Not to Compete," shall
not be applicable.

10. Termination
    -----------

     A) The Company shall have the right to terminate this Agreement and the
Executive's employment with the Company for performance reasons or cause. For
purposes of this Agreement, the term "performance reasons" shall mean
termination of the Executive's employment upon the assessment of the Board of
Directors, or a Committee of the Board of Directors, that the Executive has
failed to satisfactorily perform the essential functions of the Executive's
position. Such a determination shall be made using acceptable business practices
and sound management principles and shall not be made in bad faith or
arbitrarily.

     B) For purposes of this Agreement, the term "for cause" shall mean the
Executive's willfully engaging in conduct demonstrably and materially injurious
to the Company, monetarily or otherwise, provided that the Executive receives a
copy of a resolution duly adopted by the unanimous affirmative vote of the
entire membership of the Board of Directors of the Company at a meeting of the
Board of the Company called and held for such purpose after the Executive has
been given reasonable notice of such meeting and has been given an opportunity,
together with his counsel, to be heard by the Board of the Company, finding that
in the good faith opinion of the Board of the Company the Executive was guilty
of the conduct set forth and specifying the particulars thereof in detail.



                                       9




     C) The Executive's act, or failure to act, shall be deemed "willful" if the
Executive was not acting in good faith or acting without reasonable belief that
the Executive's action or omission was in the best interests of the Company. Any
act or failure to act based on authority given pursuant to a resolution duly
adopted by the Board of the Company, or based upon the advice of counsel for the
Company shall be conclusively presumed to have been done by the Executive in
good faith and in the best interests of the Company.

     D) If the Executive is terminated for cause, the Company shall not be
obligated to make any further payment to the Executive (other than accrued and
unpaid base salary and expenses to the date of termination), or continue to
provide any benefit (other than benefits which have accrued pursuant to any plan
or by law) to the Executive under this Agreement.

         E) If the Executive is terminated for performance reasons, the
Executive shall be entitled to certain benefits. The benefits shall consist of
(i) salary continuation at the salary the Executive was receiving at the time of
termination and (ii) the Executive's continued participation in any employee
health and welfare benefit plan to which the Executive was a participant prior
to his termination on the same basis as the Executive had participated as an
employee. The salary continuation and continued participation in any health and
welfare benefit plan shall be for twelve (12) months.

11. Change of Control
    -----------------

     A) "Change in Control" of CuraGen Corporation means the occurrence of any
        -------------------
one of the following events:

          (i) individuals who, on January 1, 2002, constituted the Board (the
     "Incumbent Directors") cease for any reason to constitute at least a
     majority of the Board, provided that any person becoming a director
     subsequent to January 1, 2002,



                                       10




     whose election or nomination for election was approved by a vote of at
     least two-thirds of the Incumbent Directors then on the Board (either by a
     specific vote or by approval of the proxy statement of the Company in which
     such person is named as a nominee for director, without objection to such
     nomination) shall be an Incumbent Director; provided, however, that no
     individual elected or nominated as a director of the Company initially as a
     result of an actual or threatened election contest with respect to
     directors or any other actual or threatened solicitation of proxies (or
     consents) by or on behalf of any person other than the Board shall be
     deemed an Incumbent Director;

          (ii) any "person" (as such term is defined in Section 3(a)(9) of the
     Securities Exchange Act of 1934 [the "Exchange Act"] and as used in Section
     13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial
     owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
     indirectly, of securities of the Company representing 25% or more of the
     combined voting power of the Company's then outstanding securities eligible
     to vote for the election of the Board (the "Company Voting Securities");
     provided, however, that the event described in this paragraph (ii) shall
     not be deemed to be a Change in Control by virtue of any of the following
     acquisitions: (A) by the Company or any Subsidiary; (B) by any employee
     benefit plan sponsored or maintained by the Company or Subsidiary; or (C)
     by any underwriter temporarily holding securities pursuant to an offering
     of such securities;



                                       11



          (iii) the consummation of a merger, consolidation, statutory share
     exchange or similar form of corporate transaction involving the Company or
     any of its Subsidiaries that requires the approval of the Company's
     stockholders, whether for such transaction or the issuance of securities in
     the transaction (a "Business Combination"), unless immediately following
     such Business Combination: (A) more than 50% of the total voting power of
     (x) the corporation resulting from such Business Combination (the
     "Surviving Corporation"), or (y) if applicable, the ultimate parent
     corporation that directly or indirectly has beneficial ownership of 100% of
     the voting securities eligible to elect directors of the Surviving
     Corporation (the "Parent Corporation"), is represented by Company Voting
     Securities that were outstanding immediately prior to such Business
     Combination (or, if applicable, shares into which such Company Voting
     Securities were converted pursuant to such Business Combination), and such
     voting power among the holders thereof is in substantially the same
     proportion as the voting power of such Company Voting Securities among the
     holders thereof immediately prior to the Business Combination; (B) no
     person (other than any employee benefit plan sponsored or maintained by the
     Surviving Corporation or the Parent Corporation), is or becomes the
     beneficial owner, directly or indirectly, of 20% or more of the total
     voting power of the outstanding voting securities eligible to elect
     directors of the Parent Corporation (or, if there is no Parent Corporation,
     the Surviving Corporation); (C); at least a majority of the members of the
     board of directors of the Parent Corporation (or, if there is no Parent
     Corporation, the Surviving Corporation) were incumbent Directors at the
     time of the Board's approval of the execution of the initial agreement
     providing for such Business Combination (any Business Combination which
     satisfies all of the criteria specified in (A), (B) and (C) above shall be
     deemed to be a "Non-Qualifying Transaction"); or

          (iv) the stockholders of the Company approve a plan of complete
     liquidation or dissolution of the Company or a sale or disposition of all
     or substantially all of the Company's assets.

     B) Notwithstanding the foregoing, a Change in Control of the Company shall
not be deemed to occur solely because any person acquires beneficial ownership
of more than 25% of the Company Voting Securities as a result of the acquisition
of Company Voting Securities by the Company which reduces the number of Company
Voting Securities outstanding.

12. Benefits Upon Termination

    -------------------------

     A) If the Executive is terminated by the Company for any reason other than
for cause, performance reasons, retirement, total disability or death, or if
this Agreement is not renewed by the Company, pursuant to Section 2.A., the
Executive shall be entitled certain benefits. The benefits shall consist of (i)
salary continuation at the salary the Executive was receiving at the time of
termination and (ii) the Executive's continued participation in any employee
health and welfare benefit plan to which the Executive was a participant prior
to his termination on the same basis as the Executive had participated as an
employee. The salary

                                       12




continuation and continued participation in any health and welfare benefit plan
shall be for twelve (12) months.

     B) However, if the Executive is terminated by the Company within twelve
(12) months of a Change of Control as defined in this Agreement, the Executive
shall be entitled to an additional twelve (12) months of salary continuation and
continued participation in any health and welfare benefit plan for a total of
twenty-four (24) months salary continuation and participation in the health and
welfare benefit plan.

     C) If the Executive terminates his employment for a "good reason," the
Executive shall be entitled to the same benefits as provided in paragraph B of
this section. Termination by the Executive of his employment for "good reason"
shall mean termination based on:

          (i) subsequent to a Change in Control of the Company, and without the
     Executive's express written consent, any reduction in Executive's duties or
     responsibilities compared to those prior to a Change in Control, or a
     change in the Executive's reporting responsibilities, titles or offices as
     in effect immediately prior to a Change in Control, or any removal of the
     Executive from, or any failure to re-elect the Executive, to any of his
     previously held positions with the Company; except in connection with the
     termination of the Executive's employment for Cause, Disability or
     Retirement or as a result of the Executive's death or by the Executive
     other than for good reason;

          (ii) subsequent to a Change in Control of the Company, a reduction by
     the Company in the Executive's base salary as in effect on the date hereof
     or as the same may be increased from time to time;

          (iii) subsequent to a Change in Control of the Company, a failure by
     the Company to continue any bonus plans in which the Executive is presently
     entitled



                                       13




     to participate (the "Bonus Plans") as the same may be modified from time to
     time but substantially in the form currently in effect, or a failure by the
     Company to continue the Executive as a participant in the Bonus Plans on at
     least the same basis as the Executive presently participates in accordance
     with the Bonus Plans;

          (iv) subsequent to a Change in Control of the Company and without the
     Executive's express written consent, the Company's requiring the Executive
     to be based anywhere other than within fifty (50) miles of the Executive's
     present office location, except for required travel on the Company's
     business to an extent substantially consistent with the Executive's present
     business travel obligations;

          (v) subsequent to a Change in Control of the Company, the failure by
     the Company to continue in effect any benefit or compensation plan, stock
     ownership plan, stock purchase plan, stock option plan, life insurance
     plan, health-and-accident plan or disability plan in which the Executive is
     participating at the time of a Change in Control of the Company (or plans
     providing the Executive with substantially similar benefits), the taking of
     any action by the Company which would adversely affect the Executive's
     participation in or materially reduce the Executive's benefits under any of
     such plans or deprive the Executive of any material fringe benefit enjoyed
     by the Executive at the time of the Change in Control, or the failure by
     the Company to provide the Executive with the number of paid vacation days
     to which the Executive is then entitled in accordance with the Company's
     normal vacation policy in effect on the date hereof; or



                                       14





          (vi) subsequent to a Change in Control of the Company, any purported
     termination of the Executive's employment which is not effected pursuant to
     the terms of this Agreement. No such purported termination shall be
     effective.

     D) Upon a Change of Control, notwithstanding any other agreement, all
stock, restricted stock, stock options or restricted stock options of the
Executive shall become fully vested to 100%.

13. Arbitration
    -----------

     A) Any dispute under this Agreement, including any dispute as to cause or
good reason for termination, shall be submitted to binding arbitration subject
to the rules of the American Arbitration Association. EACH OF THE PARTIES
IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY SUCH
ACTIONS, SUIT OR PROCEEDING. The Company shall bear all costs associated with
the Arbitration, including filing fees and any stipend for the arbitrator. The
Company and the Executive shall each bear its own attorneys' fees. However, if
the Executive prevails in a challenge to the Company's determination for cause,
the Executive shall be entitled to be reimbursed for all attorney fees.

     B) Nothing in this section shall be read to preclude the Company seeking
injunctive relief for the Executive's breach of Section 8, Proprietary and Trade
Secret Information or Section 9, Covenant Not to Compete.



                                       15




14. Injunctive Relief
    -----------------

     A) The Executive acknowledges that the services rendered by him under this
Agreement are of a special, unique and extraordinary character and, in
connection with such services, he will have access to confidential information
concerning the Company's business. By reason of this access to confidential
information, the Executive consents and agrees that if he violates any of the
provisions of this Agreement with respect to Proprietary and Trade Secret
Information or the Covenant Not to Compete, the Company would sustain
irreparable harm and, therefore, in addition to any other remedies which the
Company may have under this Agreement or otherwise, the Company shall be
entitled to an injunction to be issued by any court of competent jurisdiction
restraining the Executive from committing or continuing to commit any such
violation of this Agreement.

15. Miscellaneous
    -------------

     A) This Agreement shall be governed by and construed in accordance with the
laws of the State of Connecticut, applicable to agreements made and to be
performed in Connecticut, and shall be construed without regard to any
presumption or other rule requiring construction against the party causing the
Agreement to be drafted.

     B) This Agreement contains a complete statement of all the arrangements
between the Company and the Executive with respect to its subject matter,
supersedes all previous agreements, written or oral, among them relating to its
subject matter and cannot be modified, amended or terminated orally. Amendments
may be made to this Agreement at any time if mutually agreed upon in writing.

     C) Any amendment, notice or other communication under this Agreement shall
be in writing and shall be considered given when received and shall be delivered
personally or mailed



                                       16




by Certified Mail, Return Receipt Requested, to the parties at their respective
addresses set forth in this Agreement, or at such other address as a party may
specify by written notice to the other.

     D) The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to that term or
any other term of this Agreement. Any waiver must be in writing.

     E) Each of the parties irrevocably submits to the exclusive jurisdiction of
any court of the State of Connecticut or the Federal District Court of
Connecticut over any action, suit or proceeding relating to or arising out of
this Agreement and the transactions contemplated hereby. Each party hereby
irrevocably waives any objections, including, without limitation, any objection
to the laying of venue or based on the grounds of forum non conveniens which
such party may now or hereafter have to the bringing of any such actions, suit
or proceeding in any such court and irrevocably agrees that process in any such
actions, suit or proceeding may be served upon that party personally or by
Certified or Registered Mail, Return Receipt Requested.

     F) The invalidity or unenforceability of any term or provision of this
Agreement shall not affect the validity or enforceability of the remaining terms
or provisions of this Agreement which shall remain in full force and effect and
any such invalid or unenforceable term or provision shall be given full effect
as is legally permissible. If any term or provision of this Agreement is invalid
or unenforceable in one jurisdiction, it shall not affect the validity or
enforceability of that term or provision in any other jurisdiction.

     G) This Agreement is not assignable by either party except that it shall
inure to the benefit of and be binding upon any successor to the Company by
merger or consolidation or the acquisition of all or substantially all of the
Company's assets, provided such successor assumes



                                       17




all of the obligations of the Company, and shall inure to the benefit of the
heirs and legal representatives of the Executive.



By: /s/ Robert E. Patricelli                    4-1-02
    ----------------------------------          ------
    Robert E. Patricelli                         Date
    Chairman, Compensation Committee
    Board of Directors
    CuraGen Corporation
    555 Long Wharf Drive 11th Floor
    New Haven, CT 06511

By: /s/ Jonathan M. Rothberg                    4-1-02
    -------------------------------             ------
    Jonathan M. Rothberg                         Date
    Chief Executive Officer
    CuraGen Corporation
    555 Long Wharf Drive 11th Floor
    New Haven, CT 06511
    ("the Executive")




                                       18




                                   SCHEDULE A

     Compensation

     The Executive shall receive the following compensation for services during
the initial term of employment:

                   1) The Executive's base salary shall be $363,700 per year,
                      payable in bi-weekly installments, subject to increases by
                      the Board of Directors, which shall review the salary
                      periodically.

                   2) The Executive, if otherwise eligible, shall participate in
                      any incentive compensation plan, pension, profit sharing,
                      stock purchase or stock option plan, annuity, or group
                      insurance plan, medical plan and other benefits,
                      maintained by the Company for its employees.

                   3) The Executive shall be eligible to receive performance-
                      based bonuses on the attainment of certain goals set by
                      the Compensation Committee of the Board of Directors.

                                       19

EX-10.31

                                                                   EXHIBIT 10.31

     THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
March 4, 2002 between CuraGen Corporation, a corporation organized under the
laws of the State of Delaware, with its principal place of business at 555 Long
Wharf Drive, New Haven, Connecticut (the "Company"), and Christopher K. McLeod
("Executive").

     WHEREAS, the Executive desires to be employed by the Company, subject to
the terms and conditions of this Agreement; and the Company desires to retain
the Executive's services, subject to the terms and conditions of this Agreement.

     THEREFORE, the Company and the Executive, intending to be legally bound,
hereby agree as follows:

1. Employment; Duties and Responsiblities
   --------------------------------------

     A) The Company shall employ the Executive, and the Executive shall serve
the Company, as Executive Vice President, with such duties and responsibilities
as may be assigned to the Executive by the Chief Executive Officer ("CEO") of
the Company and are typically associated with a position of that nature.

     B) The Executive shall devote his best efforts and all of his business time
to the performance of his duties under this Agreement and shall perform them
faithfully, diligently and competently in a manner consistent with the policies
and goals of the Company as determined from time to time by the CEO or an
officer of the Company.

     C) The Executive shall report to the CEO of the Company, or identified
member of the Executive Committee.

     D) The Executive shall not engage in any activities outside the scope of
his employment that would detract from, or interfere with, the fulfillment of
his responsibilities or duties under this Agreement.


                                       1



     E) The Executive shall not serve as a director (or the equivalent position)
of any company or entity and shall not render services of a business,
professional or commercial nature to any other person or firm without prior
written consent of the CEO. Such consent shall not be unreasonably withheld.

     F) The Executive shall not receive fees or other remuneration for work
performed either within or outside the scope of his employment except for
not-for-profit entities without prior written consent of the CEO. Such consent
shall not be unreasonably withheld.

2. Term of Employment
   ------------------

     A) The Executive's employment by the Company under this Agreement shall
commence on the date of this Agreement and, subject to the earlier termination
pursuant to section 10 shall terminate on December 31, 2002; provided, however,
that commencing on January 1, 2003 and each January 1 thereafter the term of
this Agreement shall be extended for one (1) additional year unless, not later
than October 31 of the preceding year, the Company or the Executive shall have
given written notice that the Company or the Executive does not wish to extend
this Agreement.

     B) Notwithstanding any such notice by the Company, if a Change of Control
occurs during the original, or extended term of this Agreement, or after this
Agreement has been terminated, but within twelve (12) months after such notice
to terminate the Agreement was given by the Company, the termination shall be
deemed ineffective and the Agreement shall continue in effect. In any event, the
term of this Agreement shall expire on the second (2nd) anniversary of the date
of the Change of Control.


                                       2



3. Compensation
   ------------

     As full compensation for all services rendered by the Executive to the
Company under this Agreement, the Company shall pay the Executive the
compensation set forth in Schedule A attached and incorporated into this
Agreement. This schedule may be amended from time to time in writing by the
Company and the Executive.

4. Fringe Benefits
   ---------------

     A) The Executive shall be entitled to participate in all health and welfare
benefit plans provided by the Company to its employees.

     B) The Executive shall be entitled to participate in all pension plans
provided by the Company to its employees.

     C) The Company may, at its sole option, devise a benefit plan for its
executives or senior managers. The Executive shall be entitled to participate in
benefit plans provided by the Company to its executives or senior managers.

     D) The Executive shall be entitled to a minimum of four (4) weeks paid
vacation time annually, to be taken at times selected by him, with the prior
approval of the person to whom the Executive is to report.

5. Expenses
   --------

     The Company shall reimburse the Executive for all reasonable and necessary
expenses incurred by him in connection with the performance of his services for
the Company in accordance with the Company's policies, upon submission of
appropriate expense reports and documentation in accordance with the Company's
policies and procedures.


                                       3



6. Disability or Death
   -------------------

     A) If, as the result of any physical or mental disability, the Executive
shall have failed or is unable to perform his duties for a period of ninety (90)
consecutive days, the Company may, by notice to the Executive, terminate his
employment under this Agreement as of the date of the notice without any further
payment or the furnishing of any benefit by the Company under this Agreement
(other than accrued and unpaid base salary and expenses and benefits which have
accrued pursuant to any plan or by law).

     B) The term of the Executive's employment under this Agreement shall
terminate upon his death without any further payment or the furnishing of any
benefit by the Company under this Agreement (other than accrued and unpaid base
salary and commission and expenses and benefits which have accrued pursuant to
any plan or by law). This provision shall not be read to change the terms of any
other agreement between the Executive and the Company, including any stock
option plans, which shall be governed by its terms. Unless expressly provided
for in such agreements, the death of the Executive shall not terminate such
agreements.

7. Patents, Copyrights and Intellectual Property
   ---------------------------------------------

     A) The Executive shall promptly disclose to the Company all Inventions.
Inventions shall mean, for purposes of this paragraph, inventions, discoveries,
developments, methods and processes (whether or not patenable or copyrightable
or constituting trade secrets) conceived, made or discovered by the Executive
(whether alone or with others) while employed by the Company that relate,
directly or indirectly, to the past, present, or future business activities,
research, product design or development, personnel, and business opportunities
of the Company, or result from tasks assigned to the Executive by the Company or
done by the Executive for or on behalf of the Company. The Executive hereby
assigns and agrees to assign to the Company


                                       4



(or as otherwise directed by the Company) his full right, title and interest in
and to all Inventions. The Executive agrees to execute any and all applications
for domestic and foreign patents, copyrights or other proprietary rights and to
do such other acts (including, among others, the execution and delivery of
instruments of further assurance or confirmation) requested by the Company to
assign the Inventions to the Company and to permit the Company to file, obtain
and enforce any patents, copyrights or other proprietary rights in the
Inventions. The Executive agrees to make and maintain adequate and current
records of all Inventions, in the form of notes, sketches, drawings, or reports
relating thereto, which records shall be and remain the property of and
available to the Company at all times.

     B) All designs, ideas, inventions, improvements, and other creations made
or owned by the Executive before becoming an employee of the Company and which
the Executive desires to exempt from this Agreement are listed on Attachment A
hereof and authorized for exclusion by the signature of an Officer of the
Company. (If the Executive does not have any such designs, ideas, inventions,
improvements, or other creations write "none" on this line: NONE.)

     C) The Executive agrees to notify the Company in writing before the
Executive makes any disclosure or performs or causes to be performed any work
for or on behalf of the Company, which appears to threaten or conflict with (a)
rights the Executive claims in any invention or idea conceived by the Executive
or others (i) prior to the Executive's employment, or (ii) otherwise outside the
scope of this Agreement; or (b) rights of others arising out of obligations
incurred by the Executive (i) prior to this Agreement, or (ii) otherwise outside
the scope of this Agreement. In the event of the Executive's failure to give
notice under the circumstances specified, the Company may assume that no such
conflicting invention or idea exists and the Executive agrees that the Executive
will make no claim against the Company with


                                       5



respect to the use of any such invention or idea in any work which the Executive
performs or causes to be performed for or on behalf of the Company.

8. Proprietary and Trade Secret Information
   ----------------------------------------

     A) The Executive agrees that he will keep confidential and will not make
any unauthorized use or disclosure, or use for his own benefit or the benefit of
others, during or subsequent to his employment of any research, development,
engineering and manufacturing data, plans, designs, formulae, processes,
specifications, techniques, trade secrets, financial information, customer or
supplier lists or other information that becomes known to him as a result of his
employment with the Company which is the property of the Company or any of its
clients, customers, consultants, licensors, licensees, or affiliates, provided
nothing herein shall be construed to prevent the Executive from using his
general knowledge and skill after termination of his employment whether acquired
prior to or during his employment by the Company.

     B) Proprietary information subject to paragraph 8(A) does not include
information that: (i) is or later becomes available to the public through no
breach of this Agreement by the Employee; (ii) is obtained by the Executive from
a third party who had the legal right to disclose the information to the
Executive; or (iii) is required to be disclosed by law, government regulation,
or court order.

     C) During the course of his employment with the Company, the Executive will
not accept information from sources outside of the Company, which is designated
as "Confidential," or "Proprietary," or "Trade Secret" without prior written
permission from the Company or its attorneys. The Executive is not expected to
and is expressly forbidden by the Company policy from disclosing to the Company
a "Trade Secret" or "Confidential" or "Proprietary" information from a former
employer.


                                       6



     D) During his employment, or upon leaving the employment of the Company,
the Executive will not remove from the Company premises, either directly or
indirectly, any drawings, writings, prints, any documents or anything
containing, embodying, or disclosing any confidential or proprietary information
or any of the Company's trade secrets unless express written permission is given
by the Company management. Upon termination of his employment, the Executive
shall return to the Company any and all documents and materials that are the
property of the Company or its customers, licensees, licensors or affiliates or
which contain information that is the property of the Company.

9. Covenant Not to Compete
   -----------------------

     A) While in the employ of the Company and for a period of one year or the
maximum period permitted by applicable law (whichever is shorter) following
termination of his employment with the Company, the Executive shall not, without
the approval of the Company, alone or as a partner, officer, director,
consultant, employee, stockholder or otherwise, engage in any employment,
consulting or business activity or occupation that is or is intended to be
directly competitive with the business of the Company, as being considered,
researched, developed, marketed and/or sold at the time of termination;
provided, however, that the holding by the Executive of any investment in any
security shall not be deemed to be a violation of this section if such
investment does not constitute over one percent (1%) of the outstanding issue of
such security. The restriction shall run for a period of one year after said
termination, and if there shall be any violation hereof during said period, then
for a period of one year after cessation of such violation.

     B) While in the employ of the Company, the Executive shall promptly notify
the Company, if the Executive, alone or as a partner, officer, director,
consultant, employee,


                                       7



stockholder or otherwise, engages in any employment, consulting or business
activity or occupation outside his employment by the Company.

     C) The Executive shall not, directly or indirectly, either during the term
of the Executive's employment under this Agreement or for a period of one (1)
year thereafter, solicit, directly or indirectly, the services of any person who
was a full-time employee of the Company, its subsidiaries, divisions or
affiliates, or solicit the business of any person who was a client or customer
of the Company, its subsidiaries, divisions or affiliates, in each case at any
time during the last year of the term of the Executive's employment under this
Agreement. The Executive shall not, directly or indirectly, either during the
term of the Executive's employment under this Agreement or for a period of one
(1) year thereafter, employ, directly or indirectly, the services of any person
who was a full-time employee of the Company, its subsidiaries, divisions or
affiliates, or solicit the business of any person who was a client or customer
of the Company, its subsidiaries, divisions or affiliates, in each case at any
time during the last year of the term of the Executive's employment under this
Agreement. For purposes of this Agreement, the term "person" shall include
natural persons, corporations, business trusts, associations, sole
proprietorships, unincorporated organizations, partnerships, joint ventures and
governments or any agencies, instrumentalities or political subdivisions
thereof.

     D) The Executive acknowledges and agrees that the covenants in this section
are necessary for the protection of the legitimate business interests of the
Company and that the covenants are reasonable in all respects. The Executive
further acknowledges and agrees that, if his employment by the Company is
terminated, his experience and capabilities are such that he is both qualified
and willing to seek and obtain employment involving business activities which


                                       8



will not violate any covenant on his part to be observed hereunder and that a
court decree enjoining any such violation will not prevent him from earning a
reasonable livelihood.

     E) Just compensation for the duties under this paragraph is included in the
salary and benefits provided herein.

     F) If the Executive is terminated as a result of a Change of Control, as
defined in this Agreement, this Section, titled "Covenant Not to Compete," shall
not be applicable.

10. Termination
    -----------

     A) The Company shall have the right to terminate this Agreement and the
Executive's employment with the Company for performance reasons or cause. For
purposes of this Agreement, the term "performance reasons" shall mean
termination of the Executive's employment upon the assessment of the Chief
Executive Officer, or the Board of Directors, or a Committee of the Board of
Directors that the Executive has failed to satisfactorily perform the essential
functions of the Executive's position. Such a determination shall be made using
acceptable business practices and sound management principles and shall not be
made in bad faith or arbitrarily.

     B) For purposes of this Agreement, the term "for cause" shall mean the
Executive's willfully engaging in conduct demonstrably and materially injurious
to the Company, monetarily or otherwise, provided that the Executive receives a
copy of a resolution duly adopted by the unanimous affirmative vote of the
entire membership of the Board of Directors of the Company at a meeting of the
Board of the Company called and held for such purpose after the Executive has
been given reasonable notice of such meeting and has been given an opportunity,
together with his counsel, to be heard by the Board of the Company, finding that
in the good faith opinion of the Board of the Company the Executive was guilty
of the conduct set forth and specifying the particulars thereof in detail.


                                       9



     C) The Executive's act, or failure to act, shall be deemed "willful" if the
Executive was not acting in good faith or acting without reasonable belief that
the Executive's action or omission was in the best interests of the Company. Any
act or failure to act based on authority given pursuant to a resolution duly
adopted by the Board of the Company, or based upon the advice of counsel for the
Company shall be conclusively presumed to have been done by the Executive in
good faith and in the best interests of the Company.

     D) If the Executive is terminated for cause, the Company shall not be
obligated to make any further payment to the Executive (other than accrued and
unpaid base salary and expenses to the date of termination), or continue to
provide any benefit (other than benefits which have accrued pursuant to any plan
or by law) to the Executive under this Agreement.

     E) If the Executive is terminated for performance reasons, the Executive
shall be entitled to certain benefits. The benefits shall consist of (i) salary
continuation at the salary the Executive was receiving at the time of
termination and (ii) the Executive's continued participation in any employee
health and welfare benefit plan to which the Executive was a participant prior
to his termination on the same basis as the Executive had participated as an
employee. The salary continuation and continued participation in any health and
welfare benefit plan shall be for twelve (12) months.

11. Change of Control
    -----------------

     A) "Change in Control" of CuraGen Corporation means the occurrence of any
one of the following events:

          (i) individuals who, on January 1, 2002, constituted the Board (the
     "Incumbent Directors") cease for any reason to constitute at least a
     majority of the Board, provided that any person becoming a director
     subsequent to January 1, 2002,


                                       10



     whose election or nomination for election was approved by a vote of at
     least two-thirds of the Incumbent Directors then on the Board (either by a
     specific vote or by approval of the proxy statement of the Company in which
     such person is named as a nominee for director, without objection to such
     nomination) shall be an Incumbent Director; provided, however, that no
     individual elected or nominated as a director of the Company initially as a
     result of an actual or threatened election contest with respect to
     directors or any other actual or threatened solicitation of proxies (or
     consents) by or on behalf of any person other than the Board shall be
     deemed an Incumbent Director;

          (ii) any "person" (as such term is defined in Section 3(a)(9) of the
     Securities Exchange Act of 1934 [the "Exchange Act"] and as used in Section
     13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial
     owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
     indirectly, of securities of the Company representing 25% or more of the
     combined voting power of the Company's then outstanding securities eligible
     to vote for the election of the Board (the "Company Voting Securities");
     provided, however, that the event described in this paragraph (ii) shall
     not be deemed to be a Change in Control by virtue of any of the following
     acquisitions: (A) by the Company or any Subsidiary; (B) by any employee
     benefit plan sponsored or maintained by the Company or Subsidiary; or (C)
     by any underwriter temporarily holding securities pursuant to an offering
     of such securities;


                                       11



          (iii) the consummation of a merger, consolidation, statutory share
     exchange or similar form of corporate transaction involving the Company or
     any of its Subsidiaries that requires the approval of the Company's
     stockholders, whether for such transaction or the issuance of securities in
     the transaction (a "Business Combination"), unless immediately following
     such Business Combination: (A) more than 50% of the total voting power of
     (x) the corporation resulting from such Business Combination (the
     "Surviving Corporation"), or (y) if applicable, the ultimate parent
     corporation that directly or indirectly has beneficial ownership of 100% of
     the voting securities eligible to elect directors of the Surviving
     Corporation (the "Parent Corporation"), is represented by Company Voting
     Securities that were outstanding immediately prior to such Business
     Combination (or, if applicable, shares into which such Company Voting
     Securities were converted pursuant to such Business Combination), and such
     voting power among the holders thereof is in substantially the same
     proportion as the voting power of such Company Voting Securities among the
     holders thereof immediately prior to the Business Combination; (B) no
     person (other than any employee benefit plan sponsored or maintained by the
     Surviving Corporation or the Parent Corporation), is or becomes the
     beneficial owner, directly or indirectly, of 20% or more of the total
     voting power of the outstanding voting securities eligible to elect
     directors of the Parent Corporation (or, if there is no Parent Corporation,
     the Surviving Corporation); (C); at least a majority of the members of the
     board of directors of the Parent Corporation (or, if there is no Parent
     Corporation, the Surviving Corporation) were incumbent Directors at the
     time of the Board's approval of the execution of the initial agreement
     providing for such Business Combination (any Business Combination which
     satisfies all of the criteria specified in (A), (B) and (C) above shall be
     deemed to be a "Non-Qualifying Transaction"); or

          (iv) the stockholders of the Company approve a plan of complete
     liquidation or dissolution of the Company or a sale or disposition of all
     or substantially all of the Company's assets.

     B) Notwithstanding the foregoing, a Change in Control of the Company shall
not be deemed to occur solely because any person acquires beneficial ownership
of more than 25% of the Company Voting Securities as a result of the acquisition
of Company Voting Securities by the Company which reduces the number of Company
Voting Securities outstanding; provided, that if after such acquisition by the
Company such person becomes the beneficial owner of additional Company Voting
Securities that increases the percentage of outstanding Company Voting
Securities beneficially owned by such person, a Change in Control of the Company
shall then occur.

12. Benefits Upon Termination
    -------------------------

     A) If the Executive is terminated by the Company for any reason other than
for cause, performance reasons, retirement, total disability or death, or if
this Agreement is not renewed by the Company, pursuant to Section 2.A., the
Executive shall be entitled certain benefits. The benefits shall consist of (i)
salary continuation at the salary the Executive was receiving at the time of
termination and (ii) the Executive's continued participation in any employee
health and welfare benefit plan to which the Executive was a participant prior
to his termination on the same basis as the Executive had participated as an
employee. The salary


                                       12



continuation and continued participation in any health and welfare benefit plan
shall be for twelve (12) months.

     B) However, if the Executive is terminated by the Company within twelve
(12) months of a Change of Control as defined in this Agreement, the Executive
shall be entitled to an additional twelve (12) months of salary continuation and
continued participation in any health and welfare benefit plan for a total of
twenty-four (24) months salary continuation and participation in the health and
welfare benefit plan.

     C) Termination by the Executive of his employment for "good reason" shall
mean termination based on:

          (i) subsequent to a Change in Control of the Company, and without the
     Executive's express written consent, the assignment to Executive of any
     duties inconsistent with those duties prior to a Change in Control, or a
     change in the Executive's reporting responsibilities, titles or offices as
     in effect immediately prior to a Change in Control, or any removal of the
     Executive from, or any failure to re-elect the Executive, to any of such
     positions, except in connection with the termination of the Executive's
     employment for Cause, Disability or Retirement or as a result of the
     Executive's death or by the Executive other than for good reason;

          (ii) subsequent to a Change in Control of the Company, a reduction by
     the Company in the Executive's base salary as in effect on the date hereof
     or as the same may be increased from time to time;

          (iii) subsequent to a Change in Control of the Company, a failure by
     the Company to continue any bonus plans in which the Executive is presently
     entitled


                                       13



     to participate (the "Bonus Plans") as the same may be modified from time to
     time but substantially in the form currently in effect, or a failure by the
     Company to continue the Executive as a participant in the Bonus Plans on at
     least the same basis as the Executive presently participates in accordance
     with the Bonus Plans;

          (iv) subsequent to a Change in Control of the Company and without the
     Executive's express written consent, the Company's requiring the Executive
     to be based anywhere other than within fifty (50) miles of the Executive's
     present office location, except for required travel on the Company's
     business to an extent substantially consistent with the Executive's present
     business travel obligations;

          (v) subsequent to a Change in Control of the Company, the failure by
     the Company to continue in effect any benefit or compensation plan, stock
     ownership plan, stock purchase plan, stock option plan, life insurance
     plan, health-and-accident plan or disability plan in which the Executive is
     participating at the time of a Change in Control of the Company (or plans
     providing the Executive with substantially similar benefits), the taking of
     any action by the Company which would adversely affect the Executive's
     participation in or materially reduce the Executive's benefits under any of
     such plans or deprive the Executive of any material fringe benefit enjoyed
     by the Executive at the time of the Change in Control, or the failure by
     the Company to provide the Executive with the number of paid vacation days
     to which the Executive is then entitled in accordance with the Company's
     normal vacation policy in effect on the date hereof;


                                       14



          (vi) subsequent to a Change in Control of the Company, the failure by
     the Company to obtain the assumption of this Agreement by any successor; or

          (vii) subsequent to a Change in Control of the Company, any purported
     termination of the Executive's employment which is not effected pursuant to
     the terms of this Agreement. No such purported termination shall be
     effective.

     D) If the Executive terminates his employment for a "good reason," the
Executive shall be entitled to the same benefits as provided in paragraph B of
this section.

     E) Upon a Change of Control, notwithstanding any other agreement, all
stock, restricted stock, stock options or restricted stock options of the
Executive shall become fully vested to 100%.

13. Arbitration
    -----------

     A) Any dispute under this Agreement, including any dispute as to cause or
good reason for termination, shall be submitted to binding arbitration subject
to the rules of the American Arbitration Association. EACH OF THE PARTIES
IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY SUCH
ACTIONS, SUIT OR PROCEEDING. The Company shall bear all costs associated with
the Arbitration, including filing fees and any stipend for the arbitrator. The
Company and the Executive shall each bear its own attorneys' fees. However, if
the Executive prevails in a challenge to the Company's determination for cause,
the Executive shall be entitled to be reimbursed for all attorney fees.

     B) Nothing in this section shall be read to preclude the Company seeking
injunctive relief for the Executive's breach of Section 8, Proprietary and Trade
Secret Information or Section 9, Covenant Not to Compete.


                                       15



14. Injunctive Relief
    -----------------

     A) The Executive acknowledges that the services rendered by him under this
Agreement are of a special, unique and extraordinary character and, in
connection with such services, he will have access to confidential information
concerning the Company's business. By reason of this access to confidential
information, the Executive consents and agrees that if he violates any of the
provisions of this Agreement with respect to Proprietary and Trade Secret
Information or the Covenant Not to Compete, the Company would sustain
irreparable harm and, therefore, in addition to any other remedies which the
Company may have under this Agreement or otherwise, the Company shall be
entitled to an injunction to be issued by any court of competent jurisdiction
restraining the Executive from committing or continuing to commit any such
violation of this Agreement.

15. Miscellaneous
    -------------

     A) This Agreement shall be governed by and construed in accordance with the
laws of the State of Connecticut, applicable to agreements made and to be
performed in Connecticut, and shall be construed without regard to any
presumption or other rule requiring construction against the party causing the
Agreement to be drafted.

     B) This Agreement contains a complete statement of all the arrangements
between the Company and the Executive with respect to its subject matter,
supersedes all previous agreements, written or oral, among them relating to its
subject matter and cannot be modified, amended or terminated orally. Amendments
may be made to this Agreement at any time if mutually agreed upon in writing.

     C) Any amendment, notice or other communication under this Agreement shall
be in writing and shall be considered given when received and shall be delivered
personally or mailed


                                       16



by Certified Mail, Return Receipt Requested, to the parties at their respective
addresses set forth in this Agreement, or at such other address as a party may
specify by written notice to the other.

     D) The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to that term or
any other term of this Agreement. Any waiver must be in writing.

     E) Each of the parties irrevocably submits to the exclusive jurisdiction of
any court of the State of Connecticut or the Federal District Court of
Connecticut over any action, suit or proceeding relating to or arising out of
this Agreement and the transactions contemplated hereby. Each party hereby
irrevocably waives any objections, including, without limitation, any objection
to the laying of venue or based on the grounds of forum non conveniens which
such party may now or hereafter have to the bringing of any such actions, suit
or proceeding in any such court and irrevocably agrees that process in any such
actions, suit or proceeding may be served upon that party personally or by
Certified or Registered Mail, Return Receipt Requested.

     F) The invalidity or unenforceability of any term or provision of this
Agreement shall not affect the validity or enforceability of the remaining terms
or provisions of this Agreement which shall remain in full force and effect and
any such invalid or unenforceable term or provision shall be given full effect
as is legally permissible. If any term or provision of this Agreement is invalid
or unenforceable in one jurisdiction, it shall not affect the validity or
enforceability of that term or provision in any other jurisdiction.

     G) This Agreement is not assignable by either party except that it shall
inure to the benefit of and be binding upon any successor to the Company by
merger or consolidation or the acquisition of all or substantially all of the
Company's assets, provided such successor assumes


                                       17



all of the obligations of the Company, and shall inure to the benefit of the
heirs and legal representatives of the Executive.



By: /s/ Jonathan M. Rothberg                    4-1-02
    -------------------------------             ------
    Chief Executive Officer                      Date
    CuraGen Corporation
    555 Long Wharf Drive 11th Floor
    New Haven, CT 06511
    ("the Company")


By: /s/ Christopher K. McLeod                   4-1-02
    -------------------------------             ------
    Christopher K. McLeod                        Date
    Executive Vice President
    CuraGen Corporation
    555 Long Wharf Drive 11th Floor
    New Haven, CT 06511
    ("the Executive")



                                       18



                                   SCHEDULE A

     Compensation
     ------------

     The Executive shall receive the following compensation for services during
the initial term of employment:

               1) The Executive's base salary shall be $255,500 per year,
                  payable in bi-weekly installments, subject to increases by the
                  Board of Directors, which shall review the salary
                  periodically.

               2) The Executive, if otherwise eligible, shall participate in any
                  incentive compensation plan, pension, profit sharing, stock
                  purchase or stock option plan, annuity, or group insurance
                  plan, medical plan and other benefits, maintained by the
                  Company for its employees.

               3) The Executive shall be eligible to receive performance-based
                  bonuses on the attainment of certain goals set by the CEO.

                                       19

EX-10.32

                                                                   EXHIBIT 10.32

     THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
March 4, 2002 between CuraGen Corporation, a corporation organized under the
laws of the State of Delaware, with its principal place of business at 555 Long
Wharf Drive, New Haven, Connecticut (the "Company"), and David M. Wurzer
("Executive").

     WHEREAS, the Executive desires to be employed by the Company, subject to
the terms and conditions of this Agreement; and the Company desires to retain
the Executive's services, subject to the terms and conditions of this Agreement.

     THEREFORE, the Company and the Executive, intending to be legally bound,
hereby agree as follows:

1. Employment; Duties and Responsibilities
   ---------------------------------------

     A) The Company shall employ the Executive, and the Executive shall serve
the Company, as Executive Vice President and Chief Financial Officer, with such
duties and responsibilities as may be assigned to the Executive by the Chief
Executive Officer ("CEO") of the Company and are typically associated with a
position of that nature.

     B) The Executive shall devote his best efforts and all of his business time
to the performance of his duties under this Agreement and shall perform them
faithfully, diligently and competently in a manner consistent with the policies
and goals of the Company as determined from time to time by the CEO or an
officer of the Company.

     C) The Executive shall report to the CEO of the Company, or identified
member of the Executive Committee.

     D) The Executive shall not engage in any activities outside the scope of
his employment that would detract from, or interfere with, the fulfillment of
his responsibilities or duties under this Agreement.



                                       1




     E) The Executive shall not serve as a director (or the equivalent position)
of any company or entity and shall not render services of a business,
professional or commercial nature to any other person or firm without prior
written consent of the CEO. Such consent shall not be unreasonably withheld.

     F) The Executive shall not receive fees or other remuneration for work
performed either within or outside the scope of his employment except for
not-for-profit entities without prior written consent of the CEO. Such consent
shall not be unreasonably withheld.

2. Term of Employment
   ------------------

     A) The Executive's employment by the Company under this Agreement shall
commence on the date of this Agreement and, subject to the earlier termination
pursuant to section 10 shall terminate on December 31, 2002; provided, however,
that commencing on January 1, 2003 and each January 1 thereafter the term of
this Agreement shall be extended for one (1) additional year unless, not later
than October 31 of the preceding year, the Company or the Executive shall have
given written notice that the Company or the Executive does not wish to extend
this Agreement.

         B) Notwithstanding any such notice by the Company, if a Change of
Control occurs during the original, or extended term of this Agreement, or after
this Agreement has been terminated, but within twelve (12) months after such
notice to terminate the Agreement was given by the Company, the termination
shall be deemed ineffective and the Agreement shall continue in effect. In any
event, the term of this Agreement shall expire on the second (2nd) anniversary
of the date of the Change of Control.



                                       2




3. Compensation
   ------------

     As full compensation for all services rendered by the Executive to the
Company under this Agreement, the Company shall pay the Executive the
compensation set forth in Schedule A attached and incorporated into this
Agreement. This schedule may be amended from time to time in writing by the
Company and the Executive.

4. Fringe Benefits
   ---------------

     A) The Executive shall be entitled to participate in all health and welfare
benefit plans provided by the Company to its employees.

     B) The Executive shall be entitled to participate in all pension plans
provided by the Company to its employees.

     C) The Company may, at its sole option, devise a benefit plan for its
executives or senior managers. The Executive shall be entitled to participate in
benefit plans provided by the Company to its executives or senior managers.

     D) The Executive shall be entitled to a minimum of four (4) weeks paid
vacation time annually, to be taken at times selected by him, with the prior
approval of the person to whom the Executive is to report.

5. Expenses
   --------

     The Company shall reimburse the Executive for all reasonable and necessary
expenses incurred by him in connection with the performance of his services for
the Company in accordance with the Company's policies, upon submission of
appropriate expense reports and documentation in accordance with the Company's
policies and procedures.



                                       3




6. Disability or Death
   -------------------

     A) If, as the result of any physical or mental disability, the Executive
shall have failed or is unable to perform his duties for a period of ninety (90)
consecutive days, the Company may, by notice to the Executive, terminate his
employment under this Agreement as of the date of the notice without any further
payment or the furnishing of any benefit by the Company under this Agreement
(other than accrued and unpaid base salary and expenses and benefits which have
accrued pursuant to any plan or by law).

     B) The term of the Executive's employment under this Agreement shall
terminate upon his death without any further payment or the furnishing of any
benefit by the Company under this Agreement (other than accrued and unpaid base
salary and commission and expenses and benefits which have accrued pursuant to
any plan or by law). This provision shall not be read to change the terms of any
other agreement between the Executive and the Company, including any stock
option plans, which shall be governed by its terms. Unless expressly provided
for in such agreements, the death of the Executive shall not terminate such
agreements.

7. Patents, Copyrights and Intellectual Property
   ---------------------------------------------

     A) The Executive shall promptly disclose to the Company all Inventions.
Inventions shall mean, for purposes of this paragraph, inventions, discoveries,
developments, methods and processes (whether or not patenable or copyrightable
or constituting trade secrets) conceived, made or discovered by the Executive
(whether alone or with others) while employed by the Company that relate,
directly or indirectly, to the past, present, or future business activities,
research, product design or development, personnel, and business opportunities
of the Company, or result from tasks assigned to the Executive by the Company or
done by the Executive for or on behalf of the Company. The Executive hereby
assigns and agrees to assign to the Company



                                       4




(or as otherwise directed by the Company) his full right, title and interest in
and to all Inventions. The Executive agrees to execute any and all applications
for domestic and foreign patents, copyrights or other proprietary rights and to
do such other acts (including, among others, the execution and delivery of
instruments of further assurance or confirmation) requested by the Company to
assign the Inventions to the Company and to permit the Company to file, obtain
and enforce any patents, copyrights or other proprietary rights in the
Inventions. The Executive agrees to make and maintain adequate and current
records of all Inventions, in the form of notes, sketches, drawings, or reports
relating thereto, which records shall be and remain the property of and
available to the Company at all times.

     B) All designs, ideas, inventions, improvements, and other creations made
or owned by the Executive before becoming an employee of the Company and which
the Executive desires to exempt from this Agreement are listed on Attachment A
hereof and authorized for exclusion by the signature of an Officer of the
Company. (If the Executive does not have any such designs, ideas, inventions,
improvements, or other creations write "none" on this line: NONE.)

     C) The Executive agrees to notify the Company in writing before the
Executive makes any disclosure or performs or causes to be performed any work
for or on behalf of the Company, which appears to threaten or conflict with (a)
rights the Executive claims in any invention or idea conceived by the Executive
or others (i) prior to the Executive's employment, or (ii) otherwise outside the
scope of this Agreement; or (b) rights of others arising out of obligations
incurred by the Executive (i) prior to this Agreement, or (ii) otherwise outside
the scope of this Agreement. In the event of the Executive's failure to give
notice under the circumstances specified, the Company may assume that no such
conflicting invention or idea exists and the Executive agrees that the Executive
will make no claim against the Company with



                                       5




respect to the use of any such invention or idea in any work which the Executive
performs or causes to be performed for or on behalf of the Company.

8. Proprietary and Trade Secret Information
   ----------------------------------------

     A) The Executive agrees that he will keep confidential and will not make
any unauthorized use or disclosure, or use for his own benefit or the benefit of
others, during or subsequent to his employment of any research, development,
engineering and manufacturing data, plans, designs, formulae, processes,
specifications, techniques, trade secrets, financial information, customer or
supplier lists or other information that becomes known to him as a result of his
employment with the Company which is the property of the Company or any of its
clients, customers, consultants, licensors, licensees, or affiliates, provided
nothing herein shall be construed to prevent the Executive from using his
general knowledge and skill after termination of his employment whether acquired
prior to or during his employment by the Company.

     B) Proprietary information subject to paragraph 8(A) does not include
information that: (i) is or later becomes available to the public through no
breach of this Agreement by the Employee; (ii) is obtained by the Executive from
a third party who had the legal right to disclose the information to the
Executive; or (iii) is required to be disclosed by law, government regulation,
or court order.

     C) During the course of his employment with the Company, the Executive will
not accept information from sources outside of the Company, which is designated
as "Confidential," or "Proprietary," or "Trade Secret" without prior written
permission from the Company or its attorneys. The Executive is not expected to
and is expressly forbidden by the Company policy from disclosing to the Company
a "Trade Secret" or "Confidential" or "Proprietary" information from a former
employer.



                                       6




     D) During his employment, or upon leaving the employment of the Company,
the Executive will not remove from the Company premises, either directly or
indirectly, any drawings, writings, prints, any documents or anything
containing, embodying, or disclosing any confidential or proprietary information
or any of the Company's trade secrets unless express written permission is given
by the Company management. Upon termination of his employment, the Executive
shall return to the Company any and all documents and materials that are the
property of the Company or its customers, licensees, licensors or affiliates or
which contain information that is the property of the Company.

9. Covenant Not to Compete
   -----------------------

         A) While in the employ of the Company and for a period of one year or
the maximum period permitted by applicable law (whichever is shorter) following
termination of his employment with the Company, the Executive shall not, without
the approval of the Company, alone or as a partner, officer, director,
consultant, employee, stockholder or otherwise, engage in any employment,
consulting or business activity or occupation that is or is intended to be
directly competitive with the business of the Company, as being considered,
researched, developed, marketed and/or sold at the time of termination;
provided, however, that the holding by the Executive of any investment in any
security shall not be deemed to be a violation of this section if such
investment does not constitute over one percent (1%) of the outstanding issue of
such security. The restriction shall run for a period of one year after said
termination, and if there shall be any violation hereof during said period, then
for a period of one year after cessation of such violation.

     B) While in the employ of the Company, the Executive shall promptly notify
the Company, if the Executive, alone or as a partner, officer, director,
consultant, employee,



                                       7



stockholder or otherwise, engages in any employment, consulting or business
activity or occupation outside his employment by the Company.

     C) The Executive shall not, directly or indirectly, either during the term
of the Executive's employment under this Agreement or for a period of one (1)
year thereafter, solicit, directly or indirectly, the services of any person who
was a full-time employee of the Company, its subsidiaries, divisions or
affiliates, or solicit the business of any person who was a client or customer
of the Company, its subsidiaries, divisions or affiliates, in each case at any
time during the last year of the term of the Executive's employment under this
Agreement. The Executive shall not, directly or indirectly, either during the
term of the Executive's employment under this Agreement or for a period of one
(1) year thereafter, employ, directly or indirectly, the services of any person
who was a full-time employee of the Company, its subsidiaries, divisions or
affiliates, or solicit the business of any person who was a client or customer
of the Company, its subsidiaries, divisions or affiliates, in each case at any
time during the last year of the term of the Executive's employment under this
Agreement. For purposes of this Agreement, the term "person" shall include
natural persons, corporations, business trusts, associations, sole
proprietorships, unincorporated organizations, partnerships, joint ventures and
governments or any agencies, instrumentalities or political subdivisions
thereof.

     D) The Executive acknowledges and agrees that the covenants in this section
are necessary for the protection of the legitimate business interests of the
Company and that the covenants are reasonable in all respects. The Executive
further acknowledges and agrees that, if his employment by the Company is
terminated, his experience and capabilities are such that he is both qualified
and willing to seek and obtain employment involving business activities which



                                       8



will not violate any covenant on his part to be observed hereunder and that a
court decree enjoining any such violation will not prevent him from earning a
reasonable livelihood.

     E) Just compensation for the duties under this paragraph is included in the
salary and benefits provided herein.

     F) If the Executive is terminated as a result of a Change of Control, as
defined in this Agreement, this Section, titled "Covenant Not to Compete," shall
not be applicable.

10. Termination
    -----------

     A) The Company shall have the right to terminate this Agreement and the
Executive's employment with the Company for performance reasons or cause. For
purposes of this Agreement, the term "performance reasons" shall mean
termination of the Executive's employment upon the assessment of the Chief
Executive Officer, or the Board of Directors, or a Committee of the Board of
Directors that the Executive has failed to satisfactorily perform the essential
functions of the Executive's position. Such a determination shall be made using
acceptable business practices and sound management principles and shall not be
made in bad faith or arbitrarily.

     B) For purposes of this Agreement, the term "for cause" shall mean the
Executive's willfully engaging in conduct demonstrably and materially injurious
to the Company, monetarily or otherwise, provided that the Executive receives a
copy of a resolution duly adopted by the unanimous affirmative vote of the
entire membership of the Board of Directors of the Company at a meeting of the
Board of the Company called and held for such purpose after the Executive has
been given reasonable notice of such meeting and has been given an opportunity,
together with his counsel, to be heard by the Board of the Company, finding that
in the good faith opinion



                                       9




of the Board of the Company the Executive was guilty of the conduct set forth
and specifying the particulars thereof in detail.

     C) The Executive's act, or failure to act, shall be deemed "willful" if the
Executive was not acting in good faith or acting without reasonable belief that
the Executive's action or omission was in the best interests of the Company. Any
act or failure to act based on authority given pursuant to a resolution duly
adopted by the Board of the Company, or based upon the advice of counsel for the
Company shall be conclusively presumed to have been done by the Executive in
good faith and in the best interests of the Company.

     D) If the Executive is terminated for cause, the Company shall not be
obligated to make any further payment to the Executive (other than accrued and
unpaid base salary and expenses to the date of termination), or continue to
provide any benefit (other than benefits which have accrued pursuant to any plan
or by law) to the Executive under this Agreement.

     E) If the Executive is terminated for performance reasons, the Executive
shall be entitled to certain benefits. The benefits shall consist of (i) salary
continuation at the salary the Executive was receiving at the time of
termination and (ii) the Executive's continued participation in any employee
health and welfare benefit plan to which the Executive was a participant prior
to his termination on the same basis as the Executive had participated as an
employee. The salary continuation and continued participation in any health and
welfare benefit plan shall be for twelve (12) months.

11. Change of Control
    -----------------

     A) "Change in Control" of CuraGen Corporation means the occurrence of any
one of the following events:



                                       10




          (i) individuals who, on January 1, 2002, constituted the Board (the
     "Incumbent Directors") cease for any reason to constitute at least a
     majority of the Board, provided that any person becoming a director
     subsequent to January 1, 2002, whose election or nomination for election
     was approved by a vote of at least two-thirds of the Incumbent Directors
     then on the Board (either by a specific vote or by approval of the proxy
     statement of the Company in which such person is named as a nominee for
     director, without objection to such nomination) shall be an Incumbent
     Director; provided, however, that no individual elected or nominated as a
     director of the Company initially as a result of an actual or threatened
     election contest with respect to directors or any other actual or
     threatened solicitation of proxies (or consents) by or on behalf of any
     person other than the Board shall be deemed an Incumbent Director;

          (ii) any "person" (as such term is defined in Section 3(a)(9) of the
     Securities Exchange Act of 1934 [the "Exchange Act"] and as used in Section
     13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial
     owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
     indirectly, of securities of the Company representing 25% or more of the
     combined voting power of the Company's then outstanding securities eligible
     to vote for the election of the Board (the "Company Voting Securities");
     provided, however, that the event described in this paragraph (ii) shall
     not be deemed to be a Change in Control by virtue of any of the following
     acquisitions: (A) by the Company or any Subsidiary; (B) by any employee
     benefit plan sponsored or maintained by the Company or Subsidiary; or (C)
     by any underwriter temporarily holding securities pursuant to an offering
     of such securities;



                                       11




          (iii) the consummation of a merger, consolidation, statutory share
     exchange or similar form of corporate transaction involving the Company or
     any of its Subsidiaries that requires the approval of the Company's
     stockholders, whether for such transaction or the issuance of securities in
     the transaction(a "Business Combination"), unless immediately following
     such Business Combination: (A) more than 50% of the total voting power of
     (x) the corporation resulting from such Business Combination (the
     "Surviving Corporation"), or (y) if applicable, the ultimate parent
     corporation that directly or indirectly has beneficial ownership of 100% of
     the voting securities eligible to elect directors of the Surviving
     Corporation (the "Parent Corporation"), is represented by Company Voting
     Securities that were outstanding immediately prior to such Business
     Combination (or, if applicable, shares into which such Company Voting
     Securities were converted pursuant to such Business Combination), and such
     voting power among the holders thereof is in substantially the same
     proportion as the voting power of such Company Voting Securities among the
     holders thereof immediately prior to the Business Combination; (B) no
     person (other than any employee benefit plan sponsored or maintained by the
     Surviving Corporation or the Parent Corporation), is or becomes the
     beneficial owner, directly or indirectly, of 20% or more of the total
     voting power of the outstanding voting securities eligible to elect
     directors of the Parent Corporation (or, if there is no Parent Corporation,
     the Surviving Corporation); (C); at least a majority of the members of the
     board of directors of the Parent Corporation (or, if there is no Parent
     Corporation, the Surviving Corporation) were incumbent Directors at the
     time of the Board's approval of the execution of the initial agreement
     providing for such Business Combination (any Business Combination which
     satisfies all of the criteria specified in (A), (B) and (C) above shall be
     deemed to be a "Non-Qualifying Transaction"); or

          (iv) the stockholders of the Company approve a plan of complete
     liquidation or dissolution of the Company or a sale or disposition of all
     or substantially all of the Company's assets.

     B) Notwithstanding the foregoing, a Change in Control of the Company shall
not be deemed to occur solely because any person acquires beneficial ownership
of more than 25% of the Company Voting Securities as a result of the acquisition
of Company Voting Securities by the Company which reduces the number of Company
Voting Securities outstanding; provided, that if after such acquisition by the
Company such person becomes the beneficial owner of additional Company Voting
Securities that increases the percentage of outstanding Company Voting
Securities beneficially owned by such person, a Change in Control of the Company
shall then occur.

12. Benefits Upon Termination
    -------------------------

     A) If the Executive is terminated by the Company for any reason other than
for cause, performance reasons, retirement, total disability or death, or if
this Agreement is not renewed by the Company, pursuant to Section 2.A., the
Executive shall be entitled certain benefits. The benefits shall consist of (i)
salary continuation at the salary the Executive was receiving at the time of
termination and (ii) the Executive's continued participation in any



                                       12




employee health and welfare benefit plan to which the Executive was a
participant prior to his termination on the same basis as the Executive had
participated as an employee. The salary continuation and continued participation
in any health and welfare benefit plan shall be for twelve (12) months.

     B) However, if the Executive is terminated by the Company within twelve
(12) months of a Change of Control as defined in this Agreement, the Executive
shall be entitled to an additional twelve (12) months of salary continuation and
continued participation in any health and welfare benefit plan for a total of
twenty-four (24) months salary continuation and participation in the health and
welfare benefit plan.

     C) Termination by the Executive of his employment for "good reason" shall
mean termination based on:

          (i) subsequent to a Change in Control of the Company, and without the
     Executive's express written consent, the assignment to Executive of any
     duties inconsistent with those duties prior to a Change in Control, or a
     change in the Executive's reporting responsibilities, titles or offices as
     in effect immediately prior to a Change in Control, or any removal of the
     Executive from, or any failure to re-elect the Executive, to any of such
     positions, except in connection with the termination of the Executive's
     employment for Cause, Disability or Retirement or as a result of the
     Executive's death or by the Executive other than for good reason;

          (ii) subsequent to a Change in Control of the Company, a reduction by
     the Company in the Executive's base salary as in effect on the date hereof
     or as the same may be increased from time to time;



                                       13




          (iii) subsequent to a Change in Control of the Company, a failure by
     the Company to continue any bonus plans in which the Executive is presently
     entitled to participate (the "Bonus Plans") as the same may be modified
     from time to time but substantially in the form currently in effect, or a
     failure by the Company to continue the Executive as a participant in the
     Bonus Plans on at least the same basis as the Executive presently
     participates in accordance with the Bonus Plans;

          (iv) subsequent to a Change in Control of the Company and without the
     Executive's express written consent, the Company's requiring the Executive
     to be based anywhere other than within fifty (50) miles of the Executive's
     present office location, except for required travel on the Company's
     business to an extent substantially consistent with the Executive's present
     business travel obligations;

          (v) subsequent to a Change in Control of the Company, the failure by
     the Company to continue in effect any benefit or compensation plan, stock
     ownership plan, stock purchase plan, stock option plan, life insurance
     plan, health-and-accident plan or disability plan in which the Executive is
     participating at the time of a Change in Control of the Company (or plans
     providing the Executive with substantially similar benefits), the taking of
     any action by the Company which would adversely affect the Executive's
     participation in or materially reduce the Executive's benefits under any of
     such plans or deprive the Executive of any material fringe benefit enjoyed
     by the Executive at the time of the Change in Control, or the failure by
     the Company to provide the Executive with the number of paid vacation days
     to which the Executive is then entitled in



                                       14




     accordance with the Company's normal vacation policy in effect on the date
     hereof;

          (vi) subsequent to a Change in Control of the Company, the failure by
     the Company to obtain the assumption of this Agreement by any successor; or

          (vii) subsequent to a Change in Control of the Company, any purported
     termination of the Executive's employment which is not effected pursuant to
     the terms of this Agreement. No such purported termination shall be
     effective.

     D) If the Executive terminates his employment for a "good reason," the
Executive shall be entitled to the same benefits as provided in paragraph B of
this section.

     E) Upon a Change of Control, notwithstanding any other agreement, all
stock, restricted stock, stock options or restricted stock options of the
Executive shall become fully vested to 100%.

13. Arbitration
    -----------

     A) Any dispute under this Agreement, including any dispute as to cause or
good reason for termination, shall be submitted to binding arbitration subject
to the rules of the American Arbitration Association. EACH OF THE PARTIES
IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY SUCH
ACTIONS, SUIT OR PROCEEDING. The Company shall bear all costs associated with
the Arbitration, including filing fees and any stipend for the arbitrator. The
Company and the Executive shall each bear its own attorneys' fees. However, if
the Executive prevails in a challenge to the Company's determination for cause,
the Executive shall be entitled to be reimbursed for all attorney fees.




                                       15




     B) Nothing in this section shall be read to preclude the Company seeking
injunctive relief for the Executive's breach of Section 8, Proprietary and Trade
Secret Information or Section 9, Covenant Not to Compete.

14. Injunctive Relief
    -----------------

     A) The Executive acknowledges that the services rendered by him under this
Agreement are of a special, unique and extraordinary character and, in
connection with such services, he will have access to confidential information
concerning the Company's business. By reason of this access to confidential
information, the Executive consents and agrees that if he violates any of the
provisions of this Agreement with respect to Proprietary and Trade Secret
Information or the Covenant Not to Compete, the Company would sustain
irreparable harm and, therefore, in addition to any other remedies which the
Company may have under this Agreement or otherwise, the Company shall be
entitled to an injunction to be issued by any court of competent jurisdiction
restraining the Executive from committing or continuing to commit any such
violation of this Agreement.

15. Miscellaneous
    -------------

     A) This Agreement shall be governed by and construed in accordance with the
laws of the State of Connecticut, applicable to agreements made and to be
performed in Connecticut, and shall be construed without regard to any
presumption or other rule requiring construction against the party causing the
Agreement to be drafted.

     B) This Agreement contains a complete statement of all the arrangements
between the Company and the Executive with respect to its subject matter,
supersedes all previous agreements, written or oral, among them relating to its
subject matter and cannot be modified,



                                       16




amended or terminated orally. Amendments may be made to this Agreement at any
time if mutually agreed upon in writing.

     C) Any amendment, notice or other communication under this Agreement shall
be in writing and shall be considered given when received and shall be delivered
personally or mailed by Certified Mail, Return Receipt Requested, to the parties
at their respective addresses set forth in this Agreement, or at such other
address as a party may specify by written notice to the other.

     D) The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to that term or
any other term of this Agreement. Any waiver must be in writing.

     E) Each of the parties irrevocably submits to the exclusive jurisdiction of
any court of the State of Connecticut or the Federal District Court of
Connecticut over any action, suit or proceeding relating to or arising out of
this Agreement and the transactions contemplated hereby. Each party hereby
irrevocably waives any objections, including, without limitation, any objection
to the laying of venue or based on the grounds of forum non conveniens which
such party may now or hereafter have to the bringing of any such actions, suit
or proceeding in any such court and irrevocably agrees that process in any such
actions, suit or proceeding may be served upon that party personally or by
Certified or Registered Mail, Return Receipt Requested.

     F) The invalidity or unenforceability of any term or provision of this
Agreement shall not affect the validity or enforceability of the remaining terms
or provisions of this Agreement which shall remain in full force and effect and
any such invalid or unenforceable term or provision shall be given full effect
as is legally permissible. If any term or provision of



                                       17




this Agreement is invalid or unenforceable in one jurisdiction, it shall not
affect the validity or enforceability of that term or provision in any other
jurisdiction.

     G) This Agreement is not assignable by either party except that it shall
inure to the benefit of and be binding upon any successor to the Company by
merger or consolidation or the acquisition of all or substantially all of the
Company's assets, provided such successor assumes all of the obligations of the
Company, and shall inure to the benefit of the heirs and legal representatives
of the Executive.

By: /s/ Jonathan M. Rothberg                       4-1-02
    -------------------------------                ------
    Chief Executive Officer                         Date
    CuraGen Corporation
    555 Long Wharf Drive 11th Floor
    New Haven, CT 06511
    ("the Company")


By: /s/ David M. Wurzer                            4-1-02
    -------------------------------                ------
    David M. Wurzer                                 Date
    Executive Vice President and
    Chief Financial Officer
    CuraGen Corporation
    555 Long Wharf Drive 11th Floor
    New Haven, CT 06511
    ("the Executive")




                                       18




                                   SCHEDULE A

     Compensation

     The Executive shall receive the following compensation for services during
the initial term of employment:

                   1) The Executive's base salary shall be $255,500 per year,
                      payable in bi-weekly installments, subject to increases by
                      the Board of Directors, which shall review the salary
                      periodically.

                   2) The Executive, if otherwise eligible, shall participate in
                      any incentive compensation plan, pension, profit sharing,
                      stock purchase or stock option plan, annuity, or group
                      insurance plan, medical plan and other benefits,
                      maintained by the Company for its employees.

                   3) The Executive shall be eligible to receive
                      performance-based bonuses on the attainment of certain
                      goals set by the CEO.


                                       19

EX-10.33

                                                                   EXHIBIT 10.33

         THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
March 4, 2002 between CuraGen Corporation, a corporation organized under the
laws of the State of Delaware, with its principal place of business at 555 Long
Wharf Drive, New Haven, Connecticut (the "Company"), and Thomas F. McCaffery
("Executive").

         WHEREAS, the Executive desires to be employed by the Company, subject
to the terms and conditions of this Agreement; and the Company desires to retain
the Executive's services, subject to the terms and conditions of this Agreement.

         THEREFORE, the Company and the Executive, intending to be legally
bound, hereby agree as follows:

1. Employment; Duties and Responsibilities
   ---------------------------------------

     A) The Company shall employ the Executive, and the Executive shall serve
the Company, as Vice President and General Counsel, with such duties and
responsibilities as may be assigned to the Executive by the Chief Executive
Officer ("CEO") of the Company and are typically associated with a position of
that nature.

     B) The Executive shall devote his best efforts and all of his business time
to the performance of his duties under this Agreement and shall perform them
faithfully, diligently and competently in a manner consistent with the policies
and goals of the Company as determined from time to time by the CEO or an
officer of the Company.

     C) The Executive shall report to the CEO of the Company, or identified
member of the Executive Committee.

     D) The Executive shall not engage in any activities outside the scope of
his employment that would detract from, or interfere with, the fulfillment of
his responsibilities or duties under this Agreement.



                                       1




     E) The Executive shall not serve as a director (or the equivalent position)
of any company or entity and shall not render services of a business,
professional or commercial nature to any other person or firm without prior
written consent of the CEO. Such consent shall not be unreasonably withheld.

     F) The Executive shall not receive fees or other remuneration for work
performed either within or outside the scope of his employment except for
not-for-profit entities without prior written consent of the CEO. Such consent
shall not be unreasonably withheld.

2. Term of Employment
   ------------------

          A) The Executive's employment by the Company under this Agreement
shall commence on the date of this Agreement and, subject to the earlier
termination pursuant to section 10 shall terminate on December 31, 2002;
provided, however, that commencing on January 1, 2003 and each January 1
thereafter the term of this Agreement shall be extended for one (1) additional
year unless, not later than October 31 of the preceding year, the Company or the
Executive shall have given written notice that the Company or the Executive does
not wish to extend this Agreement.

         B) Notwithstanding any such notice by the Company, if a Change of
Control occurs during the original, or extended term of this Agreement, or after
this Agreement has been terminated, but within twelve (12) months after such
notice to terminate the Agreement was given by the Company, the termination
shall be deemed ineffective and the Agreement shall continue in effect. In any
event, the term of this Agreement shall expire on the second (2nd) anniversary
of the date of the Change of Control.



                                       2




3. Compensation
   -------------

     As full compensation for all services rendered by the Executive to the
Company under this Agreement, the Company shall pay the Executive the
compensation set forth in Schedule A attached and incorporated into this
Agreement. This schedule may be amended from time to time in writing by the
Company and the Executive.

4. Fringe Benefits
   ---------------

     A) The Executive shall be entitled to participate in all health and welfare
benefit plans provided by the Company to its employees.

     B) The Executive shall be entitled to participate in all pension plans
provided by the Company to its employees.

     C) The Company may, at its sole option, devise a benefit plan for its
executives or senior managers. The Executive shall be entitled to participate in
benefit plans provided by the Company to its executives or senior managers.

     D) The Executive shall be entitled to a minimum of four (4) weeks paid
vacation time annually, to be taken at times selected by him, with the prior
approval of the person to whom the Executive is to report.

5. Expenses
   --------

     The Company shall reimburse the Executive for all reasonable and necessary
expenses incurred by him in connection with the performance of his services for
the Company in accordance with the Company's policies, upon submission of
appropriate expense reports and documentation in accordance with the Company's
policies and procedures.



                                       3




6. Disability or Death
   -------------------

     A) If, as the result of any physical or mental disability, the Executive
shall have failed or is unable to perform his duties for a period of ninety (90)
consecutive days, the Company may, by notice to the Executive, terminate his
employment under this Agreement as of the date of the notice without any further
payment or the furnishing of any benefit by the Company under this Agreement
(other than accrued and unpaid base salary and expenses and benefits which have
accrued pursuant to any plan or by law).

     B) The term of the Executive's employment under this Agreement shall
terminate upon his death without any further payment or the furnishing of any
benefit by the Company under this Agreement (other than accrued and unpaid base
salary and commission and expenses and benefits which have accrued pursuant to
any plan or by law). This provision shall not be read to change the terms of any
other agreement between the Executive and the Company, including any stock
option plans, which shall be governed by its terms. Unless expressly provided
for in such agreements, the death of the Executive shall not terminate such
agreements.

7. Patents, Copyrights and Intellectual Property
   ---------------------------------------------

     A) The Executive shall promptly disclose to the Company all Inventions.
Inventions shall mean, for purposes of this paragraph, inventions, discoveries,
developments, methods and processes (whether or not patenable or copyrightable
or constituting trade secrets) conceived, made or discovered by the Executive
(whether alone or with others) while employed by the Company that relate,
directly or indirectly, to the past, present, or future business activities,
research, product design or development, personnel, and business opportunities
of the Company, or result from tasks assigned to the Executive by the Company or
done by the Executive for or on behalf of the Company. The Executive hereby
assigns and agrees to assign to the Company



                                       4




(or as otherwise directed by the Company) his full right, title and interest in
and to all Inventions. The Executive agrees to execute any and all applications
for domestic and foreign patents, copyrights or other proprietary rights and to
do such other acts (including, among others, the execution and delivery of
instruments of further assurance or confirmation) requested by the Company to
assign the Inventions to the Company and to permit the Company to file, obtain
and enforce any patents, copyrights or other proprietary rights in the
Inventions. The Executive agrees to make and maintain adequate and current
records of all Inventions, in the form of notes, sketches, drawings, or reports
relating thereto, which records shall be and remain the property of and
available to the Company at all times.

     B) All designs, ideas, inventions, improvements, and other creations made
or owned by the Executive before becoming an employee of the Company and which
the Executive desires to exempt from this Agreement are listed on Attachment A
hereof and authorized for exclusion by the signature of an Officer of the
Company. (If the Executive does not have any such designs, ideas, inventions,
improvements, or other creations write "none" on this line: NONE.)

     C) The Executive agrees to notify the Company in writing before the
Executive makes any disclosure or performs or causes to be performed any work
for or on behalf of the Company, which appears to threaten or conflict with (a)
rights the Executive claims in any invention or idea conceived by the Executive
or others (i) prior to the Executive's employment, or (ii) otherwise outside the
scope of this Agreement; or (b) rights of others arising out of obligations
incurred by the Executive (i) prior to this Agreement, or (ii) otherwise outside
the scope of this Agreement. In the event of the Executive's failure to give
notice under the circumstances specified, the Company may assume that no such
conflicting invention or idea exists and the Executive agrees that the Executive
will make no claim against the Company with




                                       5




respect to the use of any such invention or idea in any work which the Executive
performs or causes to be performed for or on behalf of the Company.

8. Proprietary and Trade Secret Information
   ----------------------------------------

     A) The Executive agrees that he will keep confidential and will not make
any unauthorized use or disclosure, or use for his own benefit or the benefit of
others, during or subsequent to his employment of any research, development,
engineering and manufacturing data, plans, designs, formulae, processes,
specifications, techniques, trade secrets, financial information, customer or
supplier lists or other information that becomes known to him as a result of his
employment with the Company which is the property of the Company or any of its
clients, customers, consultants, licensors, licensees, or affiliates, provided
nothing herein shall be construed to prevent the Executive from using his
general knowledge and skill after termination of his employment whether acquired
prior to or during his employment by the Company.

     B) Proprietary information subject to paragraph 8(A) does not include
information that: (i) is or later becomes available to the public through no
breach of this Agreement by the Employee; (ii) is obtained by the Executive from
a third party who had the legal right to disclose the information to the
Executive; or (iii) is required to be disclosed by law, government regulation,
or court order.

     C) During the course of his employment with the Company, the Executive will
not accept information from sources outside of the Company, which is designated
as "Confidential," or "Proprietary," or "Trade Secret" without prior written
permission from the Company or its attorneys. The Executive is not expected to
and is expressly forbidden by the Company policy from disclosing to the Company
a "Trade Secret" or "Confidential" or "Proprietary" information from a former
employer.



                                       6




     D) During his employment, or upon leaving the employment of the Company,
the Executive will not remove from the Company premises, either directly or
indirectly, any drawings, writings, prints, any documents or anything
containing, embodying, or disclosing any confidential or proprietary information
or any of the Company's trade secrets unless express written permission is given
by the Company management. Upon termination of his employment, the Executive
shall return to the Company any and all documents and materials that are the
property of the Company or its customers, licensees, licensors or affiliates or
which contain information that is the property of the Company.

9. Covenant Not to Compete
   -----------------------

     A) While in the employ of the Company and for a period of one year or the
maximum period permitted by applicable law (whichever is shorter) following
termination of his employment with the Company, the Executive shall not, without
the approval of the Company, alone or as a partner, officer, director,
consultant, employee, stockholder or otherwise, engage in any employment,
consulting or business activity or occupation that is or is intended to be
directly competitive with the business of the Company, as being considered,
researched, developed, marketed and/or sold at the time of termination;
provided, however, that the holding by the Executive of any investment in any
security shall not be deemed to be a violation of this section if such
investment does not constitute over one percent (1%) of the outstanding issue of
such security. The restriction shall run for a period of one year after said
termination, and if there shall be any violation hereof during said period, then
for a period of one year after cessation of such violation.

     B) While in the employ of the Company, the Executive shall promptly notify
the Company, if the Executive, alone or as a partner, officer, director,
consultant, employee,



                                       7




stockholder or otherwise, engages in any employment, consulting or business
activity or occupation outside his employment by the Company.

     C) The Executive shall not, directly or indirectly, either during the term
of the Executive's employment under this Agreement or for a period of one (1)
year thereafter, solicit, directly or indirectly, the services of any person who
was a full-time employee of the Company, its subsidiaries, divisions or
affiliates, or solicit the business of any person who was a client or customer
of the Company, its subsidiaries, divisions or affiliates, in each case at any
time during the last year of the term of the Executive's employment under this
Agreement. The Executive shall not, directly or indirectly, either during the
term of the Executive's employment under this Agreement or for a period of one
(1) year thereafter, employ, directly or indirectly, the services of any person
who was a full-time employee of the Company, its subsidiaries, divisions or
affiliates, or solicit the business of any person who was a client or customer
of the Company, its subsidiaries, divisions or affiliates, in each case at any
time during the last year of the term of the Executive's employment under this
Agreement. For purposes of this Agreement, the term "person" shall include
natural persons, corporations, business trusts, associations, sole
proprietorships, unincorporated organizations, partnerships, joint ventures and
governments or any agencies, instrumentalities or political subdivisions
thereof.

     D) The Executive acknowledges and agrees that the covenants in this section
are necessary for the protection of the legitimate business interests of the
Company and that the covenants are reasonable in all respects. The Executive
further acknowledges and agrees that, if his employment by the Company is
terminated, his experience and capabilities are such that he is both qualified
and willing to seek and obtain employment involving business activities which




                                       8




will not violate any covenant on his part to be observed hereunder and that a
court decree enjoining any such violation will not prevent him from earning a
reasonable livelihood.

     E) Just compensation for the duties under this paragraph is included in the
salary and benefits provided herein.

     F) If the Executive is terminated as a result of a Change of Control, as
defined in this Agreement, this Section, titled "Covenant Not to Compete," shall
not be applicable.

10. Termination
    -----------

     A) The Company shall have the right to terminate this Agreement and the
Executive's employment with the Company for performance reasons or cause. For
purposes of this Agreement, the term "performance reasons" shall mean
termination of the Executive's employment upon the assessment of the Chief
Executive Officer, or the Board of Directors, or a Committee of the Board of
Directors that the Executive has failed to satisfactorily perform the essential
functions of the Executive's position. Such a determination shall be made using
acceptable business practices and sound management principles and shall not be
made in bad faith or arbitrarily.

     B) For purposes of this Agreement, the term "for cause" shall mean the
Executive's willfully engaging in conduct demonstrably and materially injurious
to the Company, monetarily or otherwise, provided that the Executive receives a
copy of a resolution duly adopted by the unanimous affirmative vote of the
entire membership of the Board of Directors of the Company at a meeting of the
Board of the Company called and held for such purpose after the Executive has
been given reasonable notice of such meeting and has been given an opportunity,
together with his counsel, to be heard by the Board of the Company, finding that
in the good faith opinion



                                       9




     of the Board of the Company the Executive was guilty of the conduct set
forth and specifying the particulars thereof in detail.

     C) The Executive's act, or failure to act, shall be deemed "willful" if the
Executive was not acting in good faith or acting without reasonable belief that
the Executive's action or omission was in the best interests of the Company. Any
act or failure to act based on authority given pursuant to a resolution duly
adopted by the Board of the Company, or based upon the advice of counsel for the
Company shall be conclusively presumed to have been done by the Executive in
good faith and in the best interests of the Company.

     D) If the Executive is terminated for cause, the Company shall not be
obligated to make any further payment to the Executive (other than accrued and
unpaid base salary and expenses to the date of termination), or continue to
provide any benefit (other than benefits which have accrued pursuant to any plan
or by law) to the Executive under this Agreement.

     E) If the Executive is terminated for performance reasons, the Executive
shall be entitled to certain benefits. The benefits shall consist of (i) salary
continuation at the salary the Executive was receiving at the time of
termination and (ii) the Executive's continued participation in any employee
health and welfare benefit plan to which the Executive was a participant prior
to his termination on the same basis as the Executive had participated as an
employee. The salary continuation and continued participation in any health and
welfare benefit plan shall be for twelve (12) months.

11. Change of Control
    -----------------

     A) "Change in Control" of CuraGen Corporation means the occurrence of any
one of the following events:



                                       10




          (i) individuals who, on January 1, 2002, constituted the Board (the
     "Incumbent Directors") cease for any reason to constitute at least a
     majority of the Board, provided that any person becoming a director
     subsequent to January 1, 2002, whose election or nomination for election
     was approved by a vote of at least two-thirds of the Incumbent Directors
     then on the Board (either by a specific vote or by approval of the proxy
     statement of the Company in which such person is named as a nominee for
     director, without objection to such nomination) shall be an Incumbent
     Director; provided, however, that no individual elected or nominated as a
     director of the Company initially as a result of an actual or threatened
     election contest with respect to directors or any other actual or
     threatened solicitation of proxies (or consents) by or on behalf of any
     person other than the Board shall be deemed an Incumbent Director;

          (ii) any "person" (as such term is defined in Section 3(a)(9) of the
     Securities Exchange Act of 1934 [the "Exchange Act"] and as used in Section
     13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial
     owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
     indirectly, of securities of the Company representing 25% or more of the
     combined voting power of the Company's then outstanding securities eligible
     to vote for the election of the Board (the "Company Voting Securities");
     provided, however, that the event described in this paragraph (ii) shall
     not be deemed to be a Change in Control by virtue of any of the following
     acquisitions: (A) by the Company or any Subsidiary; (B) by any employee
     benefit plan sponsored or maintained by the Company or Subsidiary; or (C)
     by any underwriter temporarily holding securities pursuant to an offering
     of such securities;





                                       11



          (iii) the consummation of a merger, consolidation, statutory share
     exchange or similar form of corporate transaction involving the Company or
     any of its Subsidiaries that requires the approval of the Company's
     stockholders, whether for such transaction or the issuance of securities in
     the transaction(a "Business Combination"), unless immediately following
     such Business Combination: (A) more than 50% of the total voting power of
     (x) the corporation resulting from such Business Combination (the
     "Surviving Corporation"), or (y) if applicable, the ultimate parent
     corporation that directly or indirectly has beneficial ownership of 100% of
     the voting securities eligible to elect directors of the Surviving
     Corporation (the "Parent Corporation"), is represented by Company Voting
     Securities that were outstanding immediately prior to such Business
     Combination (or, if applicable, shares into which such Company Voting
     Securities were converted pursuant to such Business Combination), and such
     voting power among the holders thereof is in substantially the same
     proportion as the voting power of such Company Voting Securities among the
     holders thereof immediately prior to the Business Combination; (B) no
     person (other than any employee benefit plan sponsored or maintained by the
     Surviving Corporation or the Parent Corporation), is or becomes the
     beneficial owner, directly or indirectly, of 20% or more of the total
     voting power of the outstanding voting securities eligible to elect
     directors of the Parent Corporation (or, if there is no Parent Corporation,
     the Surviving Corporation); (C); at least a majority of the members of the
     board of directors of the Parent Corporation (or, if there is no Parent
     Corporation, the Surviving Corporation) were incumbent Directors at the
     time of the Board's approval of the execution of the initial agreement
     providing for such Business Combination (any Business Combination which
     satisfies all of the criteria specified in (A), (B) and (C) above shall be
     deemed to be a "Non-Qualifying Transaction"); or

          (iv) the stockholders of the Company approve a plan of complete
     liquidation or dissolution of the Company or a sale or disposition of all
     or substantially all of the Company's assets.

     B) Notwithstanding the foregoing, a Change in Control of the Company shall
not be deemed to occur solely because any person acquires beneficial ownership
of more than 25% of the Company Voting Securities as a result of the acquisition
of Company Voting Securities by the Company which reduces the number of Company
Voting Securities outstanding; provided, that if after such acquisition by the
Company such person becomes the beneficial owner of additional Company Voting
Securities that increases the percentage of outstanding Company Voting
Securities beneficially owned by such person, a Change in Control of the Company
shall then occur.

12. Benefits Upon Termination
    -------------------------

     A) If the Executive is terminated by the Company for any reason other than
for cause, performance reasons, retirement, total disability or death, or if
this Agreement is not renewed by the Company, pursuant to Section 2.A., the
Executive shall be entitled certain benefits. The benefits shall consist of (i)
salary continuation at the salary the Executive was receiving at the time of
termination and (ii) the Executive's continued participation in any



                                       12




employee health and welfare benefit plan to which the Executive was a
participant prior to his termination on the same basis as the Executive had
participated as an employee. The salary continuation and continued participation
in any health and welfare benefit plan shall be for twelve (12) months.

     B) However, if the Executive is terminated by the Company within twelve
(12) months of a Change of Control as defined in this Agreement, the Executive
shall be entitled to an additional twelve (12) months of salary continuation and
continued participation in any health and welfare benefit plan for a total of
twenty-four (24) months salary continuation and participation in the health and
welfare benefit plan.

     C) Termination by the Executive of his employment for "good reason" shall
mean termination based on:

          (i) subsequent to a Change in Control of the Company, and without the
     Executive's express written consent, the assignment to Executive of any
     duties inconsistent with those duties prior to a Change in Control, or a
     change in the Executive's reporting responsibilities, titles or offices as
     in effect immediately prior to a Change in Control, or any removal of the
     Executive from, or any failure to re-elect the Executive, to any of such
     positions, except in connection with the termination of the Executive's
     employment for Cause, Disability or Retirement or as a result of the
     Executive's death or by the Executive other than for good reason;

          (ii) subsequent to a Change in Control of the Company, a reduction by
     the Company in the Executive's base salary as in effect on the date hereof
     or as the same may be increased from time to time;



                                       13




          (iii) subsequent to a Change in Control of the Company, a failure by
     the Company to continue any bonus plans in which the Executive is presently
     entitled to participate (the "Bonus Plans") as the same may be modified
     from time to time but substantially in the form currently in effect, or a
     failure by the Company to continue the Executive as a participant in the
     Bonus Plans on at least the same basis as the Executive presently
     participates in accordance with the Bonus Plans;

          (iv) subsequent to a Change in Control of the Company and without the
     Executive's express written consent, the Company's requiring the Executive
     to be based anywhere other than within fifty (50) miles of the Executive's
     present office location, except for required travel on the Company's
     business to an extent substantially consistent with the Executive's present
     business travel obligations;

          (v) subsequent to a Change in Control of the Company, the failure by
     the Company to continue in effect any benefit or compensation plan, stock
     ownership plan, stock purchase plan, stock option plan, life insurance
     plan, health-and-accident plan or disability plan in which the Executive is
     participating at the time of a Change in Control of the Company (or plans
     providing the Executive with substantially similar benefits), the taking of
     any action by the Company which would adversely affect the Executive's
     participation in or materially reduce the Executive's benefits under any of
     such plans or deprive the Executive of any material fringe benefit enjoyed
     by the Executive at the time of the Change in Control, or the failure by
     the Company to provide the Executive with the number of paid vacation days
     to which the Executive is then entitled in



                                       14




     accordance with the Company's normal vacation policy in effect on the date
     hereof;

          (vi) subsequent to a Change in Control of the Company, the failure by
     the Company to obtain the assumption of this Agreement by any successor; or

          (vii) subsequent to a Change in Control of the Company, any purported
     termination of the Executive's employment which is not effected pursuant to
     the terms of this Agreement. No such purported termination shall be
     effective.

     D) If the Executive terminates his employment for a "good reason," the
Executive shall be entitled to the same benefits as provided in paragraph B of
this section.

     E) Upon a Change of Control, notwithstanding any other agreement, all
stock, restricted stock, stock options or restricted stock options of the
Executive shall become fully vested to 100%.

13. Arbitration
    -----------

     A) Any dispute under this Agreement, including any dispute as to cause or
good reason for termination, shall be submitted to binding arbitration subject
to the rules of the American Arbitration Association. EACH OF THE PARTIES
IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY SUCH
ACTIONS, SUIT OR PROCEEDING. The Company shall bear all costs associated with
the Arbitration, including filing fees and any stipend for the arbitrator. The
Company and the Executive shall each bear its own attorneys' fees. However, if
the Executive prevails in a challenge to the Company's determination for cause,
the Executive shall be entitled to be reimbursed for all attorney fees.



                                       15




     B) Nothing in this section shall be read to preclude the Company seeking
injunctive relief for the Executive's breach of Section 8, Proprietary and Trade
Secret Information or Section 9, Covenant Not to Compete.

14. Injunctive Relief
    -----------------

     A) The Executive acknowledges that the services rendered by him under this
Agreement are of a special, unique and extraordinary character and, in
connection with such services, he will have access to confidential information
concerning the Company's business. By reason of this access to confidential
information, the Executive consents and agrees that if he violates any of the
provisions of this Agreement with respect to Proprietary and Trade Secret
Information or the Covenant Not to Compete, the Company would sustain
irreparable harm and, therefore, in addition to any other remedies which the
Company may have under this Agreement or otherwise, the Company shall be
entitled to an injunction to be issued by any court of competent jurisdiction
restraining the Executive from committing or continuing to commit any such
violation of this Agreement.

15. Miscellaneous
    -------------

     A) This Agreement shall be governed by and construed in accordance with the
laws of the State of Connecticut, applicable to agreements made and to be
performed in Connecticut, and shall be construed without regard to any
presumption or other rule requiring construction against the party causing the
Agreement to be drafted.

     B) This Agreement contains a complete statement of all the arrangements
between the Company and the Executive with respect to its subject matter,
supersedes all previous agreements, written or oral, among them relating to its
subject matter and cannot be modified,



                                       16




amended or terminated orally. Amendments may be made to this Agreement at any
time if mutually agreed upon in writing.

     C) Any amendment, notice or other communication under this Agreement shall
be in writing and shall be considered given when received and shall be delivered
personally or mailed by Certified Mail, Return Receipt Requested, to the parties
at their respective addresses set forth in this Agreement, or at such other
address as a party may specify by written notice to the other.

     D) The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to that term or
any other term of this Agreement. Any waiver must be in writing.

     E) Each of the parties irrevocably submits to the exclusive jurisdiction of
any court of the State of Connecticut or the Federal District Court of
Connecticut over any action, suit or proceeding relating to or arising out of
this Agreement and the transactions contemplated hereby. Each party hereby
irrevocably waives any objections, including, without limitation, any objection
to the laying of venue or based on the grounds of forum non conveniens which
such party may now or hereafter have to the bringing of any such actions, suit
or proceeding in any such court and irrevocably agrees that process in any such
actions, suit or proceeding may be served upon that party personally or by
Certified or Registered Mail, Return Receipt Requested.

     F) The invalidity or unenforceability of any term or provision of this
Agreement shall not affect the validity or enforceability of the remaining terms
or provisions of this Agreement which shall remain in full force and effect and
any such invalid or unenforceable term or provision shall be given full effect
as is legally permissible. If any term or provision of



                                       17




this Agreement is invalid or unenforceable in one jurisdiction, it shall not
affect the validity or enforceability of that term or provision in any other
jurisdiction.

     G) This Agreement is not assignable by either party except that it shall
inure to the benefit of and be binding upon any successor to the Company by
merger or consolidation or the acquisition of all or substantially all of the
Company's assets, provided such successor assumes all of the obligations of the
Company, and shall inure to the benefit of the heirs and legal representatives
of the Executive.

By: /s/ Johnathan M. Rothenberg                         4-1-02
    ----------------------------------                  ------
    Chief Executive Officer                              Date
    CuraGen Corporation
    555 Long Wharf Drive 11th Floor
    New Haven, CT 06511
    ("the Company")


By: /s/ Thomas F. McCaffery                             4-1-02
    ----------------------------------                  ------
    Thomas F. McCaffery                                  Date
    Vice President and General Counsel
    CuraGen Corporation
    555 Long Wharf Drive 11th Floor
    New Haven, CT 06511
    ("the Executive")



                                       18




                                   SCHEDULE A

     Compensation

     The Executive shall receive the following compensation for services during
the initial term of employment:

                   1) The Executive's base salary shall be $200,000 per year,
                      payable in bi-weekly installments, subject to increases by
                      the Board of Directors, which shall review the salary
                      periodically.

                   2) The Executive, if otherwise eligible, shall participate in
                      any incentive compensation plan, pension, profit sharing,
                      stock purchase or stock option plan, annuity, or group
                      insurance plan, medical plan and other benefits,
                      maintained by the Company for its employees.

                   3) The Executive shall be eligible to receive performance-
                      based bonuses on the attainment of certain goals set by
                      the CEO.


                                       19

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 30, 2002 (except as to Footnote 10 as to which the date is March 27, 2002) appearing in this Annual Report on Form 10-K of CuraGen Corporation for the year ended December 31, 2001.

/s/    DELOITTE & TOUCHE LLP

Hartford, Connecticut

March 28, 2002