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, 2003

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 (Address of principal executive offices)	06511 (Zip Code)

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

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

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

Common Stock, $0.01 par value

Preferred Stock Purchase Rights

(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.  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).  Yes  x No  ¨

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) computed by reference to the average bid and asked price of the common stock, as of the last business day of the registrant’s most recently completed second fiscal quarter, was $235,673,966.

The number of shares outstanding of the registrant’s common stock as of March 1, 2004 was 49,951,600.

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, 2003. 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	12
ITEM 3.	LEGAL PROCEEDINGS	12
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	12
	PART II
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS	13
ITEM 6.	SELECTED FINANCIAL DATA	14
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	15
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	36
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	37
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	62
ITEM 9A.	CONTROLS AND PROCEDURES	62
	PART III
ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT	62
ITEM 11.	EXECUTIVE COMPENSATION	62
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	62
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	62
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	62
	PART IV
ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K	63

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 also “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Factors”.

BUSINESS

Overview

We are a genomics-based pharmaceutical development company dedicated to improving the lives of patients by developing novel protein, antibody and small molecule therapeutics in the areas of oncology, inflammatory diseases, obesity and diabetes, and central nervous system disorders. Our pipeline of therapeutics is based on internally discovered targets from the human genome that we believe play a role in important mechanisms underlying disease. We have focused our research efforts on three types of targets: targets that encode protein therapeutics, targets amenable to antibody therapeutic development and targets amenable to small molecule therapeutic development. We use internal resources to develop our protein therapeutics and have established development alliances with Abgenix, Inc. (“Abgenix”) to support our antibody projects and Bayer AG (“Bayer”) to support small molecule projects. Currently, we have one protein therapeutic in clinical development for cancer support and a preclinical pipeline of over 15 protein, antibody and small molecule projects.

Strategy

We hope to generate value for our shareholders by focusing our resources on developing genomics-based therapeutics to improve the lives of patients. We are striving to become profitable by commercializing a subset of therapeutics stemming from our development pipeline, and establishing partnerships with pharmaceutical and biotechnology companies for the development and commercialization of other therapeutics from our development pipeline.

Drug Development Approach

We have taken a systematic approach to identifying and validating the therapeutic targets we believe to be the most promising from the human genome that are both applicable and amenable to drug development. By leveraging our technology and informatics foundation, we have identified 8,000 genes, both novel and known, with the potential to be targets for therapeutic drug development. Based on disease associations in cellular and animal models, we have qualified 500 of these targets as possibly playing a role in disease. By evaluating the relative medical need, biology, speed of path to patients, and strength of intellectual property position of each of these targets, we have selected our priority projects for development. We have over 15 priority projects in animal validation or later stages of development across three therapeutic areas: protein therapeutics, antibody therapeutics, and small molecule therapeutics.

Protein Therapeutics

Proteins are molecules composed of amino acids found in the human body. There are many types of proteins, all carrying out a number of different biological functions. Protein therapeutics can treat conditions in which a person is either missing an important protein or would benefit from additional amounts of a given protein. We are applying our genomics expertise and knowledge of disease to develop protein therapeutics in four disease areas: oncology, inflammatory diseases, obesity and diabetes, and central nervous system disorders.

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We have identified genes whose protein products may make suitable therapeutics, have disease associations and are potentially protected by our intellectual property position. We have implemented protocols for the production, purification and testing of our proteins, and have established cell-based assays for characterizing the therapeutic potential of these proteins. Using animal models, we currently are evaluating the activity of a number of secreted proteins as potential human therapeutics. Proteins with activity and favorable toxicity profiles are then selected for clinical development. Our first product to enter into clinical trials was CG53135 (also known as FGF-20), a protein therapeutic we discovered, which is being investigated for the treatment of oral mucositis, a side effect of patients undertaking radiation or chemotherapy for cancer treatment.

Human Monoclonal Antibody Therapeutics

Antibody therapeutics are very powerful and highly specific molecules that mimic the activity of a family of specialized naturally occurring proteins used by the body’s immune system to combat many diseases. In contrast with protein therapeutics, which supply additional protein molecules, antibody therapeutics may be used to neutralize the activity of a protein that may contribute to the onset or progression of a disease. We are applying our genomics expertise and knowledge of disease to develop antibody therapeutics primarily in oncology and inflammatory diseases. We have identified genes that make suitable targets for antibody therapeutics, have disease associations and may be protected by intellectual property rights. We are developing antibody therapeutics with our partner Abgenix, a biopharmaceutical company focused on the discovery, development and manufacturing of human therapeutic monoclonal antibodies. We believe human monoclonal antibodies are superior to other antibody therapeutics because their close resemblance to naturally occurring antibodies decreases the risk of potentially eliciting an immune response that may neutralize their effect or cause an adverse reaction. We and Abgenix are evaluating many antibody development programs and each plan on advancing the most promising into clinical development. We anticipate initiating clinical trials of our second product, CR002, which is a fully-human monoclonal antibody being investigated for the treatment of kidney inflammation.

Small Molecule Therapeutics

Small molecules are low molecular weight molecules designed to interact with specific proteins known to be involved in a given disease condition. The biggest advantage of small molecule therapeutics is that in contrast to protein therapeutics and antibody therapeutics, which are primarily administered as injectibles, they can be administered as an orally available pill. We have applied our genomics expertise and knowledge of disease to identify small molecule therapeutic targets in four disease areas: oncology, inflammatory diseases, obesity and diabetes, and central nervous system disorders. Our strategy is to partner our small molecule targets with leading companies whose small molecule expertise complements our discovery capabilities. Our obesity and diabetes disease program is partnered with Bayer. In this alliance, we intend to co-develop small molecule therapeutics to treat obesity and Type II (adult onset) diabetes and will co-commercialize resulting products. Our oncology, inflammatory diseases and central nervous system small molecule targets are available for partnering.

Disease Focus

We are focusing our discovery and development efforts on four disease areas that have large growing markets and have large unmet medical needs.

Oncology

Nearly 10 million people throughout the world are diagnosed with cancer each year. The direct and indirect medical costs to treat cancer total more than $180 billion each year, and in the United States alone, cancer takes the lives of 1,500 people on average each day. Most of our protein and antibody therapeutics are being developed to help cancer patients. Our first indication for our clinical product, CG53135, is for oral mucositis, a side effect experienced by patients undergoing cancer therapy. In addition, we are developing several preclinical protein and antibody therapeutics as cancer treatments.

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Inflammatory Diseases

More than 80 million Americans suffer from major inflammatory diseases. Arthritis, various forms of respiratory inflammation and debilitating inflammatory bowel disease are a daily reality in the lives of millions of individuals. For some sufferers, surgery is an undesirable last resort. However, surgery cannot restore diseased tissue to their previously healthy state. By focusing on the underlying causes of diseases, we are making progress in developing therapeutics to treat, and in some cases, restore the damage caused by inflammatory disorders. CR002, which we anticipate to be our first antibody therapeutic to enter clinical trials, has the potential to be a promising alternative to many patients with kidney inflammation that may develop kidney failure and require kidney transplantation. In addition, we have multiple protein and antibody therapeutics in preclinical development to treat inflammatory conditions.

Obesity and Diabetes

Approximately 127 million Americans are overweight or obese and 13 million have been diagnosed with diabetes. In the United States alone, the direct and indirect costs of overweight and obesity is over $120 billion and of diabetes is over $130 billion. These conditions are reaching epidemic proportions and lead to a tremendous drain on the healthcare system. Our collaboration with Bayer for the development of small molecules for the treatment of diabetes and obesity accounts for the majority of our work in this area. The collaboration on diabetes treatment focuses on insulin secretion and insulin sensitivity. The focus of the collaboration for obesity is on satiety and peripheral metabolism. In addition to our small molecule collaboration with Bayer, we also have protein and antibody therapeutics in our pipeline for obesity.

Central Nervous System Disorders

It is estimated that up to 1.5 billion people throughout the world suffer with some form of central nervous system disorder, such as depression, schizophrenia, Alzheimer’s disease or Parkinson’s disease. Alzheimer’s disease alone leads to over a $100 billion drain to the US healthcare system. Our scientists have been examining the genetic pathways associated with both psychiatric and neurological disorders and have identified potential targets in this area. We have promising programs in central nervous system disorders in early stages of development.

Leading Products

CG53135 for oncology support

In 2003, we became one of the first genomics companies to discover, validate, and successfully advance a novel therapeutic candidate from the human genome into Phase I clinical trials when we received U.S. Food and Drug Administration (“FDA”) clearance to begin testing CG53135 in patients.

CG53135, also known as Fibroblast Growth Factor 20 (FGF-20), is a novel investigational protein therapeutic for the treatment of radiation or chemotherapy induced oral mucositis and inflammatory bowel disease. Oral mucositis is a side effect of patients undertaking radiation or chemotherapy for cancer treatment. The disease is characterized by inflammation and ulceration of the tissue lining the mouth and throat leading to bleeding, pain, and difficulty eating and drinking. In addition to leading to debilitating symptoms, oral mucositis may result in the interruption of radiation or chemotherapeutic protocols in oncology patients. Currently, there is no FDA approved therapy to treat oral mucositis. A therapeutic that could treat oral mucositis successfully would not only prevent debilitating symptoms, but also would enable cancer patients to receive the optimum dosage of radiation therapy or chemotherapy needed to fight their cancer.

CG53135 promotes proliferation of two critical layers of cells (epithelial and mesenchymal) present in the mucosa lining the mouth and the remainder of a patient’s gastrointestinal tract. The molecule has demonstrated activity in two animal models of oral mucositis and the data for these studies was published in the journal Clinical Cancer Research in 2003. In addition, the molecule is also active in multiple animal models of inflammatory bowel disease and data for these studies was published in the journal Gastroenterology in 2002.

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CG53135 is in a Phase I trial in patients with oral mucositis. Studies in other clinical indications are planned.

CR002 for kidney inflammation

CR002 is a novel fully-human monoclonal antibody with the potential to treat a potentially common form of kidney inflammation. CR002 is designed to block the activity of platelet-derived growth factor D, or PDGF-D, a target shown to play a role in kidney inflammation. CR002 is the most advanced fully-human monoclonal antibody stemming from our collaboration with Abgenix. The project is currently in preclinical development and we anticipate filing an investigational new drug application (“IND”) and initiating clinical trials of CR002. This molecule will be one of the first therapeutics aimed at treating a root cause of kidney inflammation.

Kidney inflammation typically is characterized by a loss of architecture and diminishing function that may eventually lead to kidney failure, necessitating dialysis or kidney transplantation. Kidney inflammation is usually managed clinically by the use of non-specific immunosuppressants, which have variable efficacy and debilitating side effects.

A study conducted in an animal model of kidney nephritis, published in the Journal of the American Society of Nephrology in 2003, earned us and our colleagues from Abgenix a Congress Award at the 2003 World Congress of Nephrology Meeting.

Pipeline

We have over 15 potential protein, antibody and small molecule therapeutics currently being evaluated in animal studies or being prepared for animal studies. Many of the INDs that we anticipate filing in the future will be identified from these programs. Each of these programs has been developed to target a mechanism believed to be causative or supportive of disease such as inflammation, proliferation and angiogenesis. The majority of our advanced antibody and protein therapeutics are in the areas of cancer and inflammation, and our small molecules are in the area of obesity and diabetes.

Collaborations

Our technology and expertise have been used in our partnerships with more than a dozen leading biotechnology and pharmaceutical companies including Biogen, Inc. (“Biogen”), Genentech, Inc. (“Genentech”), GlaxoSmithKline, Inc. (“GSK”), Hoffmann-La Roche Inc. (“Roche”) and Pfizer Inc.

In addition, we have established a pipeline of potential therapeutics by leveraging the capabilities of industry leaders to more efficiently advance our programs, reduce risk, and conserve resources. We have developed three classes of therapeutics: protein therapeutics which are developed in-house, fully-human monoclonal antibody therapeutics which are developed in collaboration with Abgenix and small molecule therapeutics for diabetes and obesity which are developed through a collaboration with Bayer.

Abgenix

In December 1999, we entered into a strategic alliance with Abgenix to develop and commercialize genomic-based antibody therapeutics using Abgenix’ XenoMouse^™ technology. This six-year alliance was established initially to identify fully-human antibody therapeutic candidates primarily in oncology. Antibodies determined to have commercial product potential will be allocated between the parties for further development. Under the terms of the agreement, the developing party will pay milestone and royalty payments to the other party 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 $15.0 million through a private placement.

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In November 2000, we expanded our alliance with Abgenix to include the potential for generating fully-human monoclonal antibodies against a larger number of targets and for treating a broader range of complex diseases including autoimmune disorders. As part of this expanded alliance, Abgenix purchased an additional 1,441,442 shares of our common stock at a price of $34.69 per share for $50.0 million through a private placement.

Our collaboration with Abgenix has been very productive. Fully-human monoclonal antibodies have been raised against over 20 targets and many of these programs are being evaluated for advancement into cellular and animal validation. We anticipate that we will be initiating clinical development in the near future of CR002, our leading antibody therapeutic stemming from our collaboration with Abgenix and together we have eight additional antibody programs in animal studies. Our Abgenix collaboration has enabled us to leverage the resources and expertise of one of the world’s leaders in generating fully-human monoclonal antibodies and has fueled our pipeline with a total of 5 proprietary fully-human monoclonal antibodies whose development we control. Either party can terminate the agreement upon an uncured material breach of contract by the other party upon 30 days written notice. In addition, either party may terminate the agreement upon a breach of certain payment or diligence obligations by the other party if such breach continues, in the case of certain payment obligations, for 10 days and, in the case of certain diligence obligations, for 30 days, after written notice of such breach was provided by the non-breaching party.

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 $27.31 per share in a private placement totaling $85.0 million.

The first agreement is a comprehensive alliance to discover, develop, and jointly commercialize small molecule therapeutics to treat metabolic disorders, primarily obesity and adult onset diabetes. We are to provide therapeutic targets to Bayer and grant Bayer access to our comprehensive suite of functional genomic technologies, bioinformatics and pharmacogenomic expertise to select and prioritize the resulting therapeutics. Bayer will utilize its development expertise to develop small molecule therapeutics against the targets supplied by us. Bayer is responsible under the agreement for funding all high-throughput screening, combinatorial chemistry, medicinal chemistry and pharmacology activities until a designated preclinical stage. We share expenses with Bayer related to later stage preclinical and clinical compound development. Both parties jointly fund the relevant research, development and commercialization activities. If we jointly commercialize any therapeutics resulting from this alliance with Bayer, Bayer will receive 56% of the profits associated with that therapeutic and we will receive 44%. Either party can terminate the agreement upon an uncured material breach of contract by the other party, upon 90 days written notice (30 day notice for payment breach). Bayer may terminate the agreement if there is a change in control involving us, upon providing 90 days written notice to us within 90 days. We may terminate the screening term upon a change in control of Bayer, upon providing written notice to Bayer within 90 days.

The second agreement is a broad, five-year pharmacogenomic and toxicogenomic collaboration. We are applying our functional genomic technologies and pharmacogenomics expertise to evaluate Bayer’s developmental and preclinical pipeline of pharmaceutical compounds across all disease areas. Through the efforts of this collaboration, we and Bayer expect to reduce drug development costs, reduce the time to market, and create safer and more efficacious therapeutics. Either party can terminate upon an uncured material breach of contract by the other party, upon 90 days written notice. In certain circumstances Bayer may terminate the agreement if there is a change in control involving us, upon providing written notice to us within 90 days.

Other

In addition to the above-listed alliances, we have smaller, ongoing collaborative relationships with various pharmaceutical and biotech companies. We have established relationships with more than 100 universities,

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academic institutions, and individual companies to gain access to disease tissue samples, disease models, and select technologies. We have successfully conducted research with, and have the potential to receive future milestones and royalties from companies including Alexion Pharmaceuticals, Inc., Biogen, DuPont/Pioneer Hi-Bred International, Inc., GSK, Genentech, Roche and its affiliate, Roche Vitamins, Inc. and Millennium Pharmaceuticals, Inc. (formerly COR Therapeutics, Inc.). At present, we do not consider these relationships either collectively or individually to be of a material nature.

Company History

We began operations in 1993, when the massive undertaking to sequence the human genome was just beginning. Our strategy was based on discovering novel ways to combat disease through an understanding of how genes and their resulting proteins function within the human genome. We developed an integrated genomics, proteomics and bioinformatics technology platform that has been used to analyze the human genome, disease models, marketed therapeutics and therapeutic candidates. This approach has led to our discovery of hundreds of disease-related genes, therapeutic targets and potential novel therapeutics. Our platform has been utilized by over a dozen biotechnology and pharmaceutical companies. These collaborations helped validate our technology and have assisted us in developing our own proprietary pipeline of potential therapeutics. We have focused our research efforts on three types of targets: targets that encode protein therapeutics, targets amenable to antibody therapeutic development, and targets amenable to small molecule therapeutic development. As our portfolio has grown, we have started developing protein therapeutics on our own, and transitioned our service-based collaborations towards more strategic research and development alliances that would enable us to leverage the expertise and resources of industry leaders to turn our antibody and small molecule targets into therapeutics. To that end, we established a strategic alliance with Abgenix for the development of fully-human monoclonal antibodies against our proprietary targets and a strategic alliance with Bayer around the development of small molecules directed against our targets in diabetes and obesity. As our pipeline has matured over the past few years, we have decreased our early-stage target discovery efforts and increased resources for the advancement of our pipeline of protein, antibody and small molecule therapeutics into clinical development. Today, we remain one of the leading genomics-based pharmaceutical companies in the industry with a Phase I product for cancer support and a deep pipeline of protein, antibody and small molecule therapeutics.

Technology

We have assembled a comprehensive, proprietary, and large-scale platform to understand the human genome and have laid the groundwork to better understand the biology behind disease. Using this foundation, we prioritized promising programs from what we believe to be the remaining intervention points appropriate for the development of novel therapeutics. We identify pharmaceutically relevant genes and proteins and associate them with specific diseases through biological methods that include hypothesis-driven disease models, drug response models, gene and pathway mining approaches, and human genetics. We are developing a pipeline of protein, antibody, and small molecule therapeutics in the areas of oncology, inflammatory diseases, obesity and diabetes and central nervous system disorders.

We have used our proprietary technology to identify the Pharmaceutically Tractable Genome (“PTG”). The PTG is the subset of human genes that we believe will make suitable therapeutic targets either because they are proteins that are shed in the blood and can be targeted by protein and antibody therapeutics, sit on cell surfaces and make suitable antibody and small molecule therapeutics, or belong to intracellular classes of proteins that can be modulated by small molecules. We have identified the roughly 8,000 genes that make up the PTG and have used this foundation to systematically determine which are the most promising ones to develop as therapeutic candidates.

We have established disease programs for the identification of novel, pharmaceutically relevant targets and the association of these targets with specific diseases through process-driven and hypothesis-driven scientific strategies. Once associated with diseases, potential therapeutic target candidates are validated through cellular

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assays and animal model systems. Information resulting from these efforts is comprehensively managed through our bioinformatics system which is composed of tools and databases that have been designed specifically to manage, organize, and analyze this complementary biological information.

We are a leader in the emerging field of systems biology. We have used our technologies to complete the world’s first comprehensive protein interaction map for a multicellular organism, Drosophila melanogaster. That achievement was featured on the cover of and published in the December 5, 2003 edition of Science. We also were the first to complete a proteomics map of a eukaryotic organism, yeast (Saccharomyces cerevisiae). That achievement was featured on the cover of and published in the February 10, 2000 edition of Nature. In addition, we have a proprietary set of human protein-protein interaction data. Insight into the highly complex pathways of model organisms’ protein-protein interactions, combined with our proprietary knowledge of human protein-protein interactions, enhances our ability to select promising novel targets for drug development and continues to support our preclinical and clinical development efforts through the identification of biomarkers.

Competition

Currently we face, and will continue to face, intense competition from:

• biotechnology companies;

• pharmaceutical companies;

• academic and research institutions; and

• government agencies.

We also are subject to significant competition from organizations that are pursuing strategies, approaches, technologies and products that are the same as or similar to our own. 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 is highly competitive. Our competitors in the genomics area include:

• Human Genome Sciences, Inc.;

• Genentech, Inc.;

• ZymoGenetics, Inc.;

• Amgen, Inc.;

• Incyte Pharmaceuticals, Inc.;

• major biotechnology and pharmaceutical companies; and

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

A number of our competitors are attempting to rapidly identify and patent genes and gene fragments sequenced at random, typically without specific knowledge of the function of such genes or gene fragments. If our competitors discover or characterize important genes or gene fragments before we do, it could adversely affect any of our related disease research programs. In addition, a number of competitors are producing proteins from genes and claiming both the proteins as potential therapeutics as well as claiming antibodies against these proteins. In many cases generic antibody claims are being issued by the United States Patent and Trademark Office (“USPTO”) even though competitors have not actually made antibodies against the protein of interest, or do not have cellular, animal, or human data to support the use of these antibodies as therapeutics. These claims on proteins as therapeutics and such claims covering all antibodies against the proteins and methods of use in broad human indications are being filed at a rapid rate, and some number of these claims have issued and may continue to issue. 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.

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Intellectual Property

Our business and competitive position depend on our ability to protect our genomic technologies, gene sequences, the proteins they encode, antibodies raised against them, other 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, discovery of biological pathways and drug screening and development. As of the date of this report, we had approximately 790 patent applications pending covering genes and gene transcripts, the proteins they encode, antibodies raised against them, methods of use of therapeutic proteins or antibodies and the use of gene targets for small molecular screening, as well as for our products, processes and technologies with the USPTO, as well as numerous corresponding international and foreign patent applications. As of the date of this report, we had been issued approximately 50 patents with respect to aspects of our gene portfolio, products, processes and technologies.

In 2001, the USPTO issued new guidelines for patent applications reflecting its 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.

CuraGen^® and other trademarks of CuraGen Corporation mentioned in this report are the property of CuraGen Corporation. Trademarks of 454 Life Sciences Corporation mentioned in this report are the property of 454 Life Sciences Corporation. All other trademarks or trade names referred to herein are the property of their respective owners.

454 Life Sciences Corporation

In June 2000, we announced the formation of 454 Life Sciences Corporation (“454”). This majority-owned subsidiary was initially funded with $40.0 million primarily from investors including us, Soros Fund Management, L.L.C., Cooper Hill Partners, L.L.C., and members of our senior management team. In September 2003, 454 secured an additional $20.0 million in equity financing from us and several existing shareholders, including Cooper Hill Partners L.L.C., to initiate commercialization of 454’s product offering. This second round of financing increased our ownership from 60% to 66%.

454 is developing novel nanoscale instrumentation and technologies for rapidly and comprehensively determining the nucleotide sequence—“whole genome sequencing”—of entire genomes. 454’s proprietary technology is expected to have widespread applications in industrial processes, agriculture, animal health, biodefense, human health care, including drug discovery and development, and disease diagnosis.

In August 2003, 454, utilizing its proprietary platform, submitted the whole genome sequence of an adenovirus to GenBank^®, the National Institutes of Health genetic sequence database. The submission marked the first time that a new method has been used to sequence a whole genome since Walter Gilbert and Frederick Sanger won the Nobel Prize in 1980 for the invention of DNA sequencing in 1977.

454’s technology platform is based on the application of massively parallel approaches to every step of the sequencing process: sample preparation, DNA sequencing, basecalling, sequence assembly and bioinformatic analysis. This approach, combined with the use of advanced nanotechnology, reduces cost and throughput roadblocks to efficient whole genome analysis. It is our goal to allow entire genomes to be analyzed without the cost and time restrictions normally associated with scaling up current methods of DNA sequencing in large facilities.

Scientists, using the 454 technology platform, will be able to generate whole genome sequences for a wide variety of viral and bacterial organisms. Instead of looking for biologically meaningful regions in one bacterial genome, researchers will have at their disposal multiple strains of an organism for comparison. This will provide

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information about new pathogens, drug resistant strains and variations in host-pathogen interactions as mutation of pathogens occurs. Currently, 454 is focusing on the analysis of viruses and bacteria. 454 anticipates that it will begin scaling its technology to analyze bacteria, fungi, larger model organisms, human DNA, and other genomic applications during 2004. 454 plans to sell both genomic analysis services and complete genomic analysis systems including instrumentation, reagents and software to end-users.

The operations of 454 are run by a separate management team and governed by a Board of Directors made up of members of our management team and Board of Directors. 454 has also established a Scientific Advisory Board that is comprised of an elite group of scientists in the fields of whole genome sequencing, infectious disease, human genetics, chemical engineering and bioinformatics. As this new technology is commercialized and its applications across the life sciences industry become accepted, we anticipate that 454 will contribute revenue to the consolidated entity. See Note 12 to our consolidated financial statements for segment reporting.

Government Regulation

Prior to the marketing of any new therapeutic developed by us, or by our collaborators, that new therapeutic must undergo an extensive regulatory approval process in the United States and other countries. This regulatory process, which includes preclinical and clinical studies 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 process for new drug approval has many steps, including:

Investigational new drug application (“IND”).    During the pre-clinical testing, an IND is filed with the FDA to begin human testing of the drug. The IND becomes effective if not rejected by the FDA within 30 days. All clinical trials must be conducted in accordance with good clinical practices, (“GCPs”). In addition, an Institutional Review Board, (“IRB”), comprised of physicians at the hospital or clinic where the proposed studies will be conducted, must review and approve the study. The IRB also continues to monitor the study for any safety issues. Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA. In addition, the FDA may, at any time during the 30-day period or at any time thereafter, impose a clinical hold on proposed or ongoing clinical trials. If the FDA imposes a clinical hold, clinical trials cannot commence or recommence without FDA authorization and then only under terms authorized by the FDA. In some instances, the IND application process can result in substantial delay and expense. The IND must contain the following:

• the results of pre-clinical experiments;

• how, where and by whom the new clinical studies will be conducted;

• the chemical structure of the compound, or the sequence of a protein or antibody therapeutic;

• the mechanism by which it is believed to work in the human body;

• any toxic effects of the compound found in the animal studies; and

• how the compound, protein therapeutic or antibody therapeutic is manufactured.

Clinical trials.    Clinical trials are typically conducted in three sequential phases, which could possibly overlap. The FDA monitors the progress of each phase and may require the modification, suspension, or termination of a trial if it is determined to present excessive risks to patients. The clinical trial process may also be accompanied by substantial delay and expense and there can be no assurance that the data generated in these studies will ultimately be sufficient for marketing approval by the FDA.

New drug application (“NDA”).    After the completion of the clinical trial phases, and with considerable interaction with the FDA, a company prepares an NDA for submission to the FDA. The NDA must contain all of the information on the drug gathered to that date, including data from the clinical trials.

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The FDA does a preliminary review of all NDAs submitted before it accepts them for filing and may request additional information rather than accepting an NDA for filing. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA. Under the Federal Food, Drug and Cosmetic Act, the FDA has specified time frames in which to review the NDA and respond to the applicant. The review process is often significantly extended by FDA requests for additional information or clarification regarding information already provided in the submission. The FDA may refer the application to an appropriate advisory committee, typically a panel of clinicians, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee. If FDA evaluations of the NDA and the manufacturing facilities are favorable, the FDA may issue either an approval letter or an approvable letter, which usually contains a number of conditions that must be met in order to secure final approval of the NDA. When and if those conditions have been met to the FDA’s satisfaction, the FDA will issue an approval letter, authorizing commercial marketing of the drug for certain indications. If the FDA’s evaluation of the NDA submission or manufacturing facilities is not favorable, the FDA may refuse to approve the NDA or issue a not approvable letter.

Marketing approval.    If the FDA approves the NDA, the drug becomes available for physicians to prescribe. Periodic reports must be submitted to the FDA, including descriptions of any adverse reactions reported. The FDA may request additional studies (Phase IV) to evaluate long-term effects.

Phase IV clinical trials and post marketing studies.    In addition to studies requested by the FDA after approval, additional studies are conducted to explore new indications. The purpose of these trials and related publications is to broaden the application and use of the drug and its acceptance in the medical community.

Approvals in European Union (“EU”).    In 1993, the EU established a system for the registration of medicinal products in the EU and under that system, marketing authorization may be submitted at either a centralized or decentralized level. The centralized procedure is administered by the European Agency for the Evaluation of Medicinal Products. This procedure is mandatory for the approval of biotechnology products and is available at the applicant’s option for other innovative products. The centralized procedure provides, for the first time in the EU, for the granting of a single marketing authorization that is valid in all EU member states. A mutual recognition procedure is available at the request of the applicant for all medicinal products that are not subject to the mandatory centralized procedure, under a decentralized procedure. The decentralized procedure creates a new system for mutual recognition of national approvals and establishes procedures for coordinated EU action on product suspensions and withdrawals. Under this procedure, the holder of a national marketing authorization for which mutual recognition is sought may submit an application to one or more member states, certifying that identical dossiers are being submitted to all member states for which recognition is sought. Within 90 days of receiving the application and assessment report, each member state must decide whether or not to recognize the approval. The procedure encourages member states to work with applicants and other regulatory authorities to resolve disputes concerning mutual recognition. If such disputes cannot be resolved within the 90-day period provided for review, the application will be subject to a binding arbitration procedure at the request of the applicant. Alternatively, the application may be withdrawn.

Approvals outside of the United States and EU.    Steps similar to those in the United States must be undertaken in virtually every other country comprising the market for our products before any such product can be commercialized in those countries. The approval procedure and the time required for approval vary from country to country and may involve additional testing. There can be no assurance that approvals will be granted on a timely basis or at all. In addition, regulatory approval of prices is required in most countries other than the United States. There can be no assurance that the resulting prices would be sufficient to generate an acceptable return to us.

We have received FDA clearance to conduct clinical trials for CG53135, a potential protein therapeutic for the treatment of oral mucositis in cancer patients that are undergoing chemotherapy and radiotherapy. None of our product candidates have been approved for commercialization in the United States or elsewhere. We, or any

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of our collaborators, may not be able to conduct clinical testing or obtain the necessary approvals from the FDA or other regulatory authorities for some products. Failure by us, or our collaborators, to obtain required governmental approvals will delay or preclude our collaborators or us from marketing therapeutics 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.

In February 2004, the FDA granted us orphan drug designation on CG53135, for the treatment of radiation induced oral mucositis. The Orphan Drug Act of 1983 is intended to encourage companies to develop therapies for the treatment of diseases that affect fewer than 200,000 individuals in the United States at the time of application. Further criteria include the ability of the product to address an unmet medical need where no approved treatment option exists or provide significant benefit over available treatments. Orphan drug designation, granted by the FDA’s Office of Orphan Products Development, provides us with a number of potential benefits for CG53135. Orphan drug designation may result in seven years of market exclusivity in the United States upon FDA product approval, provided that the sponsor company continues to meet certain conditions established by the FDA. Upon marketing authorization and during the period of market exclusivity, the FDA does not accept or approve other applications to market the same medicinal product for the same therapeutic indication. Other incentives provided by orphan designation include protocol assistance and eligibility for research and development support. Protocol assistance includes regulatory assistance and reduced filing fees, as well as advice on the conduct of clinical trials.

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

Available Information

We were incorporated in Delaware in November 1991. Our principal executive office is 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. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports, are available free of charge through the Investor Relations section of our website as soon as reasonably practicable after such materials have been electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). These documents are also available in the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330, and in addition, the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC (http://www.sec.gov).

Employees

As of December 31, 2003, we and 454 had 327 full and part-time employees, 149 of whom hold Ph.D., M.D. or J.D. degrees. Our employees include 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.

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Item 2.    Properties

We maintain our administrative offices along with research facilities at locations in both Branford and New Haven, Connecticut. At December 31, 2003, we leased a total of approximately 166,000 square feet at all locations. Our leases are for original terms of two to six years, and generally provided for renewal options for terms of up to five years. Currently, we are attempting to sub-lease approximately 20,000 square feet of unoccupied office space at our New Haven facility. This space is unoccupied as a result of our corporate restructurings in late 2002 and mid 2003, and is not suitable to be built-out as laboratory space. In January 2004, we entered into a five-year lease agreement for an additional 20,000 square foot research facility in Branford to allow us to further our pipeline efforts.

We believe that our facilities are adequate for our current operations or that suitable additional leased space will be available as needed. Our plans to construct a new corporate headquarters and protein production facility in Branford have been deferred indefinitely, pending improvements in the external financing environment which would afford us the ability to finance the future construction costs.

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, 2003.

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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”. The following table sets forth, for the periods indicated, the low and high sales prices per share for our common stock, as reported by the Nasdaq National Market:

	2003
	Low		High
Quarter Ended March 31, 2003	$	3.02	$	5.25
Quarter Ended June 30, 2003		4.01		7.04
Quarter Ended September 30, 2003		3.81		6.37
Quarter Ended December 31, 2003		5.00		7.86
	2002
	Low		High
Quarter Ended March 31, 2002	$	13.87	$	22.20
Quarter Ended June 30, 2002		4.56		16.09
Quarter Ended September 30, 2002		3.82		7.20
Quarter Ended December 31, 2002		3.40		5.58

On March 1, 2004, the closing price of our common stock on the Nasdaq National Market was $6.88 per share.

Stockholders

As of March 1, 2004, there were approximately 220 stockholders of record of our common stock and, according to our estimates, 10,385 beneficial owners of our common stock.

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, 2003 are derived from our consolidated balance sheets as of December 31, 2003 and 2002 and the related audited consolidated statements of operations, of stockholders’ equity and of cash flows for each of the three years ended December 31, 2003, 2002 and 2001 and notes thereto, which are included elsewhere in this report. The consolidated balance sheet data as of December 31, 2001, 2000 and 1999 and the consolidated statements of operations data for each of the two years in the periods ended December 31, 2000 and 1999 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,
	2003			2002			2001			2000			1999
	(In thousands, except per share amounts)
Consolidated Statement of Operations Data:
Total revenue	$	6,918		$	18,246		$	23,475		$	20,838		$	15,104
Total operating expenses		86,597			115,591			84,680			55,195			41,954
Loss from operations		(79,679	)		(97,345	)		(61,205	)		(34,357	)		(26,850	)
Net loss		(74,497	)		(90,403	)		(42,912	)		(26,978	)		(25,763	)
Net loss per share		(1.51	)		(1.85	)		(0.89	)		(0.70	)		(0.89	)
Weighted average number of common shares outstanding		49,335			48,942			48,208			38,748			28,802
	December 31,
	2003			2002			2001			2000			1999
	(In thousands)
Consolidated Balance Sheet Data:
Cash and investments	$	343,641		$	414,809		$	508,349		$	477,031		$	76,375
Working capital		326,310			404,211			496,131			462,543			67,890
Total assets		376,957			448,529			538,701			499,163			93,894
Total long-term liabilities		151,500			150,263			152,297			154,907			8,410
Accumulated deficit		289,492			214,995			124,592			81,680			54,702
Stockholders’ equity		197,681			271,504			355,945			311,610			74,998
Cash dividends declared per common share		None			None			None			None			None

Deficiency of Earnings Available to Cover Fixed Charges:

The following table sets forth our consolidated deficiency of earnings available to cover fixed charges for each of our five most recent fiscal years.

	Year Ended December 31,
	2003			2002			2001			2000			1999
	(In thousands)
Deficiency of earnings available to cover fixed charges (1) (2)	$	(80,634	)	$	(95,793	)	$	(47,968	)	$	(28,706	)	$	(25,763	)

(1) Earnings were inadequate to cover fixed charges. We needed additional earnings, as indicated by the deficiency of earnings available to cover fixed charges for each of the periods presented above, to achieve a ratio of earnings to fixed charges of 1.0x.

(2) The deficiency of earnings available to cover fixed charges is computed by subtracting fixed charges from earnings before income taxes and minority interest plus fixed charges. Fixed charges consist of interest expense plus that portion of net rental expense deemed representative of interest.

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

Overview

We are a genomics-based pharmaceutical development company dedicated to improving the lives of patients by developing novel protein, antibody and small molecule therapeutics in the areas of oncology, inflammatory diseases, obesity and diabetes, and central nervous system disorders. Our pipeline of therapeutics is based on targets from the human genome that we believe play a role in important mechanisms underlying disease.

We have taken a systematic approach to identifying and validating the most promising therapeutic targets from the human genome that are both applicable and amenable to drug development. We use internal resources to develop our protein therapeutics and have established development alliances with Abgenix, Inc. (“Abgenix”) to support our antibody projects and Bayer AG (“Bayer”) to support small molecule projects.

As our pipeline has matured over the past few years, we have decreased our early-stage target discovery efforts and focused our resources on the advancement of our pipeline of protein, antibody and small molecule therapeutics into clinical development. In 2003, we received U.S. Food and Drug Administration (“FDA”) clearance to conduct Phase I clinical trials for CG53135, a potential protein therapeutic for the treatment of oral mucositis in cancer patients that are undergoing chemotherapy and radiotherapy. CR002, which is the most advanced fully-human monoclonal antibody stemming from our collaboration with Abgenix, is currently in preclinical development and we anticipate filing an investigational new drug application (“IND”) for, and initiating clinical trials of, CR002 in the near future. CR002 is a novel fully-human monoclonal antibody with the potential to treat a form of kidney inflammation that if left untreated could progress to kidney failure. In addition to CG53135 and CR002, we have over 15 potential protein, antibody and small molecule therapeutics currently being evaluated in animal studies or being prepared for animal studies. Many of the INDs that we anticipate filing in the future will be identified from these programs.

To enable us to focus on our pipeline, we announced the formation of 454 Life Sciences Corporation (“454”) in June 2000. This majority-owned subsidiary is developing novel nanoscale instrumentation and technologies for rapidly and comprehensively determining the nucleotide sequence—“whole genome sequencing”—of entire genomes. 454’s proprietary technology is expected to have widespread applications in industrial processes, agriculture, animal health, biodefense, human health care, including drug discovery and development, and disease diagnosis. Currently, 454 is focusing on the analysis of viruses and bacteria and anticipates that it will begin scaling its technology to analyze bacteria, fungi, larger model organisms, human DNA, and other genomic applications during 2004. 454 plans to sell both genomic analysis services and complete genomic analysis systems, including instrumentation, reagents and software to end-users.

We expect to generate value for our shareholders by focusing our resources on developing genomics-based therapeutics to improve the lives of patients. We expect to become profitable by commercializing a subset of therapeutics stemming from our development pipeline, and establishing partnerships with pharmaceutical and biotechnology companies for the co-development and co-commercialization of other therapeutics from our development pipeline. Our failure to successfully develop pharmaceutical products that we can commercialize would materially adversely affect our business, financial condition and results of operations. Royalties or other revenue generated from commercial sales of products developed through the application of our technologies and expertise are not expected for several years, if at all. We expect that our revenue or income sources for at least the next several years may be limited to: interest income; payments under various collaboration agreements to the extent milestones are met; royalty payments from collaborators under existing or future arrangements (to the extent that we enter into any future arrangements); and 454 service and product revenue (which is expected in 2004, as 454’s technology is commercialized and its applications across the life sciences industry become accepted).

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We expect to continue to incur substantial expenses relating to our research and development efforts, as we focus on preclinical and clinical trials required for the development of therapeutic protein, antibody and small molecule product candidates, and as 454 focuses on the continued development and commercialization of its technology for whole genome analysis. Conducting clinical trials is a lengthy, time-consuming and expensive process. Before obtaining regulatory approvals for the commercial sale of any product, we must demonstrate through various studies that a product is both effective and safe for use in humans. We will incur substantial expenses for, and devote a significant amount of time to, these studies. As a result, we expect to incur continued and increasing losses over the next several years, unless we are able to realize additional revenues under existing or new collaboration agreements or through 454’s sales of genomic analysis services and/or complete genomic analysis systems. The timing and amounts of such revenues, if any, cannot be predicted with certainty and may fluctuate. Results of operations for any period may be unrelated to the results of operations for any other period. In addition, historical results should not be viewed as indicative of future operating results.

The 2002 and 2001 consolidated financial statements have been reclassified to conform to the classifications used in 2003. All dollar amounts in tabular presentations are shown in thousands, unless otherwise noted.

Critical Accounting Policies and Use of Estimates

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 consolidated 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 our estimates under different assumptions or conditions.

While our significant accounting policies are more fully described in Note 1 to our consolidated financial statements, we believe the following to be our critical accounting policies and uses of estimates:

Research and development expenses.    Research and development costs have been our most significant costs to date and primarily include personnel costs, supplies and reagents, clinical trial related costs such as contractual services and manufacturing costs, depreciation of lab equipment and allocated facility costs. Such costs are charged to research and development expenses as incurred unless recoverable under contract. Our research and development expenses also include accruals for clinical trial related costs such as contractual services and current manufacturing costs. At each period end, we estimate the costs incurred to date but not yet invoiced, and we analyze the progress of these services based upon information received from the supplier when evaluating the adequacy of the accrued liabilities. Significant judgments and estimates must be used in determining the related accruals in any accounting period. Actual results could differ significantly from our estimates under different assumptions.

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. Collaboration revenue is recognized based upon defined metrics of completion that include percentage of completion milestones, and project specific initiatives as defined in each of the respective research plans. The defined metrics are reviewed internally each month to determine the work performed, whether deliverables have been accepted by the collaborator and the appropriate revenue to be recognized. We have also entered into a collaborative research exchange agreement in which services and technology access are exchanged between the collaborative partner and us. Collaboration revenues and expenses under this exchange agreement include the fair value of the work performed by each collaborative partner. Deferred revenue arising from payments received from collaborative research agreements is recognized as income when earned.

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Results of Operations

The following table sets forth a comparison of the components of our net loss for the years ended December 31, 2003 and 2002 (in millions):

	2003		2002		$ Change			% Change
Collaboration revenue	$	6.9	$	18.2	$	(11.3	)	(62	)%
Research and development expenses		64.5		81.6		(17.1	)	(21	)%
General and administrative expenses		19.2		22.9		(3.7	)	(17	)%
Restructuring and related charges		2.9		11.0		(8.1	)	(74	)%
Interest income		8.9		11.7		(2.8	)	(24	)%
Interest expense		9.8		10.2		(0.4	)	(4	)%
Income tax benefit		0.4		1.5		(1.1	)	(73	)%
Minority interest in subsidiary loss		5.7		3.9		1.8		47	%
Net loss		74.5		90.4		(15.9	)	(18	)%

Collaboration revenue.    The decrease in collaboration revenue for the year ended December 31, 2003 was primarily a result of a decline in revenue recognized from the Abgenix strategic alliance. Also reflected in the decrease was the on-going change in our business strategy, which is to establish strategic research and development alliances with companies for the co-development and co-commercialization of therapeutics from our development pipeline, rather than focusing on short-term revenue generating service-based collaborations. In addition, during 2002 the setup phase of the Bayer alliance was completed and we received a related milestone payment, resulting in a transition to the production phase of that alliance. We expect that 2004 collaboration revenue will remain fairly constant as compared to 2003, reflecting continued progress of the Bayer alliance and various other collaborations, as well as the inclusion of nominal revenues expected from the commercialization of 454’s new technology.

Research and development expenses.    The decrease in research and development expenses for the year ended December 31, 2003 was primarily due to implementation of corporate restructuring plans in late 2002 and mid 2003, intended to reduce overall costs and focus resources on prioritizing, selecting and advancing our most promising drug candidates. We anticipate that research and development expenses, particularly with respect to our preclinical and clinical trials, will increase in 2004 as we continue to advance our pipeline of protein, antibody, and small molecule therapeutics and as expenses increase in preparation for, and in connection with, the expected commercialization of 454’s technology.

General and administrative expenses.    General and administrative expenses for the year ended December 31, 2003 decreased primarily due to the implementation of corporate restructuring plans. Additionally, lower intellectual property expenses are indicative of the shift in our focus from early-stage discovery efforts to the advancement of our therapeutic development efforts. General and administrative expenses are expected to increase slightly in 2004.

Restructuring and related charges.    Restructuring and related charges of approximately $2.9 million were incurred in the second quarter of 2003 as a part of our June 2003 corporate restructuring plan which was intended to focus resources on continuing to advance our pipeline of therapeutics into preclinical and clinical development. In connection with the 2003 restructuring plan, we incurred $1.8 million related to employee separation costs, $1.0 million of operating lease obligations and $0.1 million of asset impairment costs. The employee separation costs were recorded under Statement of Financial Accounting Standards No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS 146”) and included amounts to be paid for severance and related benefits, the services for which had been performed in full as of the end of 2003. The cash requirements under the June 2003 restructuring plan were $2.7 million, of which $1.4 million were paid prior to December 31, 2003. The remaining cash requirements of $1.3 million will be paid through the end of 2008. The components of our 2002 restructuring charges are set forth on page 19.

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Interest income.    Interest income for the year ended December 31, 2003 decreased primarily due to lower yields in our investment portfolio and a decrease in cash and investment balances during 2003. We earned an average yield of 2.3% in 2003 as compared to 2.7% in 2002. During 2004, we anticipate that interest income will increase as compared to 2003, as a result of the receipt of net proceeds of approximately $97.0 million from our 4% convertible subordinated notes due 2011, which we issued on February 17, 2004, offset by the utilization of cash and investment balances in the normal course of operations. In 2004 we expect the yields in our investment portfolio to be consistent with 2003. However, in the event that in 2004 we use a portion of the net proceeds of the debt offering due 2011 to repay our existing debt due 2007, our anticipation of an increase in interest income for 2004 will differ accordingly.

Interest expense.    We expect a significant increase in interest expense during 2004, attributable to interest to be paid semi-annually to the holders of our $100.0 million of 4% convertible subordinated notes due 2011, which we issued on February 17, 2004.

Income tax benefit.    For the year ended December 31, 2003, the income tax benefit decrease was a result of the decline in various expenses which qualified for the annual research and development credit as a result of the corporate restructuring plan, primarily personnel costs, supplies and reagents, and intellectual property expenses. We recorded the income tax benefit as a result of Connecticut legislation, which allowed 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 forgoing the credit carryforward. In addition, due to 454’s focus on revenues to be realized in the short term, 454 elected not to request a cash refund for 2003, but instead elected to continue to carry forward the credit.

Minority interest in subsidiary loss.    Minority interest in subsidiary loss for the year ended December 31, 2003 (which is the portion of 454’s loss attributable to shareholders of 454 other than us) increased primarily due to 454’s additional efforts to advance its technology. During 2004, losses attributed to the minority ownership in 454 are expected to remain fairly constant as compared to 2003, as 454 continues to make progress towards commercializing and developing new technologies.

The following table sets forth a comparison of the components of our net loss for the years ended December 31, 2002 and 2001 (in millions):

	2002		2001		$ Change			% Change
Collaboration revenue	$	18.2	$	23.5	$	(5.3	)	(23	)%
Research and development expenses		81.6		65.9		15.7		24	%
General and administrative expenses		22.9		18.8		4.1		22	%
Restructuring and related charges		11.0		—		11.0		N/A
Interest income		11.7		23.8		(12.1	)	(51	)%
Interest expense		10.2		10.6		(0.4	)	(4	)%
Income tax benefit		1.5		3.6		(2.1	)	(58	)%
Minority interest in subsidiary loss		3.9		1.5		2.4		160	%
Net loss		90.4		42.9		47.5		110	%

Collaboration revenue.    The decrease in collaboration revenue for the year ended December 31, 2002 reflected a change in our business strategy which is to establish strategic research and development alliances with companies for the co-development and co-commercialization of therapeutics from our development pipeline, rather than focusing on short-term revenue generating service-based collaborations. The decline in collaboration revenue can also be attributed to the completion in 2001 of various short-term service-based collaborations including GlaxoSmithKline, Inc. and Millennium Pharmaceuticals, Inc. (formerly COR Therapeutics, Inc.). The decrease in collaboration revenue was also a result of the progression of the Bayer alliance during 2002 from the set-up phase to the production phase, offset by additional revenue recognized from the Abgenix strategic alliance.

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Research and development expenses.    The increase in research and development expenses for the year ended December 31, 2002 was primarily attributable to increased internal research efforts and our obligations to fulfill research requirements under existing collaborations and strategic alliances, which included payments for contractual services, increased equipment depreciation expense and additional personnel costs.

General and administrative expenses.    General and administrative expenses for the year ended December 31, 2002 increased primarily due to legal expenses in support of the development of our intellectual property portfolio and additional personnel costs.

Restructuring and related charges.    Restructuring and related charges of approximately $11.0 million were incurred in 2002 as a part of our restructuring plan which was intended to reduce costs and focus resources on prioritizing, selecting and rapidly advancing our most promising drug candidates. In connection with this restructuring plan, we incurred $1.8 million related to employee separation costs and $1.1 million of asset impairment costs related to equipment no longer in service. The employee separation costs were recorded under SFAS 146 and included amounts to be paid for severance and related benefits, the services for which had been performed in full as of the end of 2002. The cash requirements under the restructuring plan were $1.9 million, of which $1.2 million were paid prior to December 31, 2002, and the remaining cash requirements of $0.7 million were paid by the end of 2003.

Also included in restructuring and related charges was an asset impairment of $8.1 million, consisting of costs previously incurred in conjunction with the planned construction of a campus facility, including a new corporate headquarters and protein production facility in Branford, Connecticut. Plans to construct these facilities have been deferred indefinitely, pending improvements in the external financing environment, which would afford us the ability to finance the future construction costs.

Interest income.    Interest income for the year ended December 31, 2002 decreased primarily due to lower yields in our investment portfolio and a decrease in cash and investment balances during 2002. We earned an average yield of 2.7% in 2002 as compared to 4.0% in 2001.

Minority interest in subsidiary loss.    Minority interest in subsidiary loss for the year ended December 31, 2002 (which is the portion of 454’s loss attributable to shareholders of 454 other than us) increased primarily due to 454’s additional personnel costs, increased purchases of laboratory supplies, increased equipment depreciation expense and payments for consulting and contractual services as a result of the continued development of their technology platform.

Liquidity and Capital Resources

Since our inception, we have financed our operations and met our capital expenditure requirements primarily through public equity offerings, private placements of equity securities, convertible subordinated debt offerings, revenues received under our collaborative research agreements and government grants, capital leases and exercises of stock options. As of December 31, 2003, we had recognized $106.0 million of cumulative sponsored research revenues from collaborative research agreements and government grants. At December 31, 2003, our gross investment in lab and office equipment, computers, land and leasehold improvements was $47.4 million, and equipment with a gross book value of $2.3 million secured our capital lease facilities. Since inception, we have not had any off-balance sheet arrangements. To date, inflation has not had a material effect on our business.

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Cash and investments.    The following table depicts the components of our operating, investing and financing activities for the year ended December 31, 2003, using the direct cash flow method (in millions):

Cash received from collaborators	$	7.3
Cash paid to suppliers and employees		(69.9	)
Restructuring and related charges paid		(2.1	)
Interest income received		8.9
Interest expense paid		(9.1	)
Income tax benefit received		2.7
Net cash and investments used in operating activities		(62.2	)
Cash paid to acquire property and equipment, net of sales proceeds		(6.9	)
Cash paid to acquire intangible assets		(3.6	)
Net cash and investments used in investing activities		(10.5	)
Cash paid for principal portion of capital leases		(1.6	)
Cash received from outside investors, net of stock issuance costs		3.5
Cash received from employee stock option exercises and restricted stock grants		1.4
Net cash and investments provided by financing activities		3.3
Unrealized loss on marketable securities		(1.8	)
Net decrease in cash and investments		(71.2	)
Cash and investments, beginning of period		414.8
Cash and investments, end of period	$	343.6

The decrease in cash and investments for 2003 was primarily a result of additional operating losses in support of our research and development activities and acquisitions of additional property and equipment and intangible assets, offset by proceeds received in 454’s equity financing from several existing minority shareholders.

In accordance with our investment policy, we are utilizing the following investment objectives for cash and 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.

Future Liquidity

Sources of Liquidity.    During 2004, we expect to continue to fund our operations through a combination of the following sources: cash and investment balances; interest income; collaboration revenue; and potential public securities offerings and/or private strategic-driven common stock offerings.

Uses of Liquidity.    Throughout 2004, 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 of liquidity: personnel costs; supplies and reagents; clinical trial related costs such as contractual services and manufacturing costs; interest expense related to payments made to the holders of our convertible subordinated debt issued in February 2000 and February 2004; and capital expenditures. These costs will be incurred primarily in connection with the following preclinical and clinical efforts: ongoing clinical trial costs and anticipated Phase II manufacturing costs on our protein therapeutic CG53135 in the area of oral mucositis; costs related to our manufacturing agreement with Abgenix for CR002; toxicology costs to support our planned submission of an IND for CR002; preclinical and clinical costs in connection with the use of our protein therapeutic CG53135 to

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treat alternative clinical indications; and legal expenses in support of the continued protection of our intellectual property portfolio. We anticipate that we will also incur significant capital expenditures in 2004, primarily for the expansion of our existing protein production laboratory facilities, in addition to the purchase of equipment and leasehold improvements at both our and 454’s research facilities and administrative offices.

Contractual Obligations

The following table represents our consolidated contractual obligations as of December 31, 2003:

	Payments Due Year Ended December 31,
	Total		2004		2005		2006		2007		2008		Thereafter
Long-term debt obligations (1) (5)	$	150,000	$	—	$	—	$	—	$	150,000	$	—	$	—
Interest on convertible subordinated debt (1) (5)		31,500		9,000		9,000		9,000		4,500		—		—
Capital leases (2)		208		208		—		—		—		—		—
Operating leases (2)		7,340		2,236		1,949		1,586		1,221		300		48
Purchase commitments (3)		3,581		3,581		—		—		—		—		—
Other long-term liabilities (4)		1,500		—		500		500		500		—		—
Total	$	194,129	$	15,025	$	11,449	$	11,086	$	156,221	$	300	$	48

(1) Refer to Note 7 and Note 13 to our consolidated financial statements for additional discussion.

(2) Refer to Note 3 to our consolidated financial statements for additional discussion.

(3) Includes commitments for capital expenditures and contractual services, but excludes amounts included on our balance sheet as liabilities and certain purchase obligations as discussed below.

(4) Refer to Note 11 to our consolidated financial statements for additional discussion.

(5) On February 17, 2004, we completed an offering of $100.0 million of 4% convertible subordinated notes due 2011 and received net proceeds of approximately $97.0 million. In February 2004, we also repurchased $20.0 million of our existing 6% convertible subordinated debentures due 2007. We will pay cash interest of $2.0 million on the notes on February 15 and August 15 of each year, beginning on August 15, 2004. Refer to Note 13 to our consolidated financial statements for additional discussion.

The expected timing of payment of the obligations discussed above is estimated based on current information. Timing of payments and actual amounts paid may be different depending on the time of receipt of goods or services or changes to agreed-upon amounts for some obligations.

Purchase obligations for supplies and reagents are not included in the table above, as our purchase orders typically represent authorizations to purchase rather than binding agreements. For the purposes of this table, contractual obligations for purchase of goods or services are defined as agreements that are enforceable and legally binding on us and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Our purchase orders are based on our current operating needs and are fulfilled by our vendors within short time periods. We do not have significant agreements for the purchase of supplies and reagents specifying minimum quantities or set prices. Additionally, we have entered into agreements for contractual services primarily relating to the manufacturing costs of our protein therapeutic CG53135, and our fully-human monoclonal antibody CR002, and have included these amounts in purchase commitments above.

On February 17, 2004, we completed an offering for $100.0 million of 4% convertible subordinated notes due February 15, 2011, and received net proceeds of approximately $97.0 million. Depending on market and other conditions, from time to time, we may repurchase a portion of the existing notes in open market purchases, in privately negotiated transactions, or otherwise. In addition, we also may use net proceeds for working capital,

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general corporate purposes and potentially for future acquisitions of complementary businesses or technologies. The amounts and timing of our actual expenditures will depend upon numerous factors, including the amount and extent of our acquisitions, our product development activities, our investments in technology and the amount of cash generated by our operations. Actual expenditures may vary substantially from our estimates. Our failure to use such funds effectively could have a material adverse effect on our business, results of operations and financial condition. In February 2004, we repurchased $20.0 million of our 6% convertible subordinated debentures due 2007, for total consideration of $20.0 million, plus accrued interest of $0.05 million to the date of repurchase.

We believe that our existing cash and investment balances and other sources of liquidity will be sufficient to meet our requirements for the next twenty-four months. Our operating and capital expenditures are considered to be crucial to our future success, and by continuing to make strategic investments in our preclinical and clinical drug pipeline, we believe that we are building substantial value for our shareholders. The adequacy of our available funds to meet our future operating and capital requirements, including the repayment of our remaining $130.0 million of 6% convertible subordinated debentures due February 2, 2007 and our $100.0 million of 4% convertible subordinated notes due February 15, 2011, will depend on many factors. These factors include: the number, breadth and progress of our research, product development and clinical programs; the costs and timing of obtaining regulatory approvals for any of our products; potential future acquisitions of complementary businesses or technologies; in-licensing of pharmaceutical products; and costs incurred in enforcing and defending our patent claims and other intellectual property rights.

While we will continue to explore alternative sources for financing our business activities, including the possibility of public securities offerings and/or private strategic-driven common stock offerings, we cannot be certain 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 contributions by others to joint ventures and other collaborative or licensing arrangements for the development and testing of products under development. However, should we be unable to obtain future financing either through the methods described above or through other means, we may be unable to meet the critical objective of our long-term business plan, which is to successfully develop and market pharmaceutical products.

We 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 to 1998, we also received two grants from Connecticut Innovations, Inc. (“CII”) in the amounts of $0.5 million and $0.2 million. The term of the $0.5 million grant is January 4, 1995 to December 31, 2004, and the term of the $0.2 million grant is February 1, 1995 to January 31, 2005. We could be required to repay 100% of these amounts if during the terms of the respective grants (i) we breach and fail to cure a material covenant, (ii) a we fail to cure any of our material representations or warranties that become untrue, (iii) we become bankrupt or insolvent or liquidate our assets, or (iv) we are required to repay the federal grants to which the CII grants relate. In addition, we could be required to repay up to 200% of the amounts of the CII grants if we cease to have a “Connecticut presence,” during the terms of the respective grants.

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Income Taxes

For income tax purposes, we do not file consolidated income tax returns with 454. We and 454 have tax net operating loss carryforwards available to reduce future federal and Connecticut taxable income and research and development tax credit carryforwards available to offset future federal and Connecticut income taxes as detailed below. Utilization of the net operating loss and tax credit carryforwards may be limited due to changes within each company’s ownership, as defined within Section 382 of the Internal Revenue Code.

Net Operating Loss Carryforwards	Federal		Expire In	Connecticut		Expire In
CuraGen	$	321,603	2007 to 2023	$	286,604	2004 to 2023
454	$	28,517	2020 to 2023	$	28,203	2020 to 2023
Research and Development Tax Credit Carryforwards	Federal		Expire In	Connecticut		Expire In
CuraGen	$	12,619	2008 to 2023	$	9,737	2013 to 2018
454	$	1,146	2020 to 2023	$	1,219	2016 to 2018

Minority Interest in Subsidiary

As of December 31, 2003, minority interest in subsidiary was $8.2 million. Minority interest in subsidiary is related to 454 and reflects the minority shareholders’ capitalization, less a gain recognition of $3.9 million as a result of our contribution of technology to 454 in 2000, and less the minority shareholders’ portion of losses incurred to date. The loss attributed to the minority ownership in 454 is expected to remain fairly constant during 2004, as 454 continues to make progress towards commercializing and developing new technologies.

Recently Enacted Pronouncements

In January 2003, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation (“FIN”) No. 46, “Consolidation of Variable Interest Entities—an Interpretation of Accounting Research Bulletin No. 51.” FIN No. 46 clarifies rules for consolidation of special purpose entities. The provisions of FIN No. 46 became effective for financial statements issued after January 31, 2003 and the adoption of FIN No. 46 did not have a material effect on our financial statements. In December 2003, the FASB issued FIN No. 46(R) which clarifies rules for consolidation of special purpose entities. We have evaluated the provisions of this interpretation, and we do not believe it will have an impact on our financial statements.

In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities”, (“SFAS 149”) which amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities.” The provisions of SFAS 149 are effective for financial statements issued after June 30, 2003, and the adoption of SFAS 149 did not have a material effect on our financial statements.

In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (“SFAS 150”) which requires that an issuer classify a financial instrument that is within its scope as a liability, or an asset in some circumstances, where those instruments were previously classified as equity. The provisions of SFAS 150 are effective for financial statements issued after May 15, 2003, and the adoption of SFAS 150 did not have a material effect on our financial statements.

In December 2003, the FASB issued Statement of Financial Accounting Standards No. 132R (“SFAS 132R”), “Employers’ Disclosures about Pensions and Other Post-retirement Benefits”. SFAS 132R amends the disclosure requirements of SFAS 132 to require additional disclosures about assets, obligations, cash flow and net periodic benefit cost. The statement was effective in 2003 and did not have an impact on our financial statements.

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RISK FACTORS

Risks Related to Our Business

Because our business strategy is still largely untested, we do not know whether we will be able to commercialize any of our products or to what extent we will generate revenue or become profitable.

We do not know whether we can implement our business strategy successfully because we are in the early stages of development. Initially, we set out to find as many genes and their related functions as possible and are now using that information to develop our own therapeutic products. This strategy is largely untested. Other companies first target particular diseases and try to find cures for them, have a limited number of genes and proteins of potential therapeutic interest, or rely on other more proven strategies. If our strategy does not result in the development of products that we can commercialize, we will be unable to generate revenue. We have not completed development of any product based on our genomics research. Although our first potential product has entered clinical trials, we cannot be certain that this or any future products will receive marketing approval. If we are unable to commercialize products, we may not be able to recover our investment in our product development efforts.

Because clinical trials for our products will be expensive and protracted and their outcome is uncertain, we must invest substantial amounts of time and money that may not yield viable products.

Conducting clinical trials is a lengthy, time-consuming and expensive process. Before obtaining regulatory approvals for the commercial sale of any product, we must demonstrate through laboratory, animal and human studies that such product is both effective and safe for use in humans. We will incur substantial expense for, and devote a significant amount of time to, these studies.

Completion of clinical trials may take many years. The length of time required varies substantially according to the type, complexity, novelty and intended use of the product candidate. The FDA monitors the progress of each phase of testing, and may require the modification, suspension, or termination of a trial if it is determined to present excessive risks to patients. Our rate of commencement and completion of clinical trials may be delayed by many factors, including:

• our inability to manufacture sufficient quantities of materials for use in clinical trials;

• variability in the number and types of patients available for each study, as well as the difficulty in enrolling patients in each study;

• difficulty in maintaining contact with patients after treatment, resulting in incomplete data;

• unforeseen safety issues or side effects;

• poor or unanticipated effectiveness of products during the clinical trials;

• institutional review board delays at institutions assisting us with our clinical trials; and

• government or regulatory delays.

Studies that we conduct, or studies which third parties conduct on our behalf, may not demonstrate sufficient effectiveness and safety to obtain the requisite regulatory approvals for these or any other potential products. Regulatory authorities may not permit us to undertake any additional clinical trials. The clinical trial process may be accompanied by substantial delay and expense and there can be no assurance that the data generated in these studies ultimately will be sufficient for marketing approval by the FDA.

We have only one product in clinical development and our other products are in preclinical development. None of these products may demonstrate sufficient effectiveness or safety to obtain the requisite regulatory approvals required for initiation or continuation of clinical studies or obtaining marketing approval.

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Because we have limited experience in developing, commercializing and marketing products, we may be unsuccessful in our efforts to do so.

Currently, we are developing several potential pharmaceutical products, and such products will require significant research and development and preclinical testing, and will require extensive clinical testing prior to our submitting any regulatory application for their commercial use. Although we are conducting human studies with respect to one product, we have limited experience with these activities and may not be successful in developing or commercializing these or other products. These activities, if undertaken without the collaboration of others, will require the expenditure of significant funds. Such potential pharmaceutical products will be subject to the risks of failure inherent in the development of pharmaceutical products based on new technologies. Before we can commercialize a product, we must rigorously test the product in the laboratory and complete extensive human studies. Even if we complete such studies, our ability to develop and commercialize products will depend on our ability to:

• complete laboratory testing and human studies;

• obtain and maintain necessary intellectual property rights to our products;

• obtain and maintain necessary regulatory approvals related to the efficacy and safety of our products;

• enter into arrangements with third parties to manufacture our products on our behalf; and

• deploy sales and marketing resources effectively or enter into arrangements with third parties to provide these functions.

As a result of these possibilities, we may not be able to develop through our research and development activities any commercially viable products. We cannot be certain that expenses for testing and study will yield profitable products or even products approved for marketing by the FDA. If we are not successful in identifying products that we can develop commercially, we may be unable to recover the large investment we have made in research, development and manufacturing. In addition, should we choose to develop pharmaceutical products internally, we will have to make significant investments in pharmaceutical product development, marketing, sales and regulatory compliance resources, and we will have to establish or contract for the manufacture of products under the current good manufacturing practices (“cGMPs”) of the FDA. Any potential products developed by our licensees will be subject to the same risks.

We do not have any marketed products. If we develop products that can be marketed, we intend to market the products either independently or together with collaborators or strategic partners. If we decide to market any products independently, we will incur significant additional expenditures and commit significant additional management resources to establish a sales force. For any products that we market together with partners, we will rely, in whole or in part, on the marketing capabilities of those parties. We may also contract with third parties to market certain of our products. Ultimately, we and our partners may not be successful in marketing our products.

We depend on a limited number of suppliers and depend on them to manufacture and supply critical components of our development and clinical programs.

Currently, we contract with third-party manufacturers or develop products with partners and use the partners’ manufacturing capabilities. As we use others to manufacture our products, we depend on those parties to comply with cGMPs, and other regulatory requirements and to deliver materials on a timely basis. These parties may not perform adequately. Any failures by these third parties may delay our development of products or the submission of these products for regulatory approval.

We depend on third-party research organizations to design and conduct our laboratory testing and human studies. If we are unable to obtain any necessary testing services on acceptable terms, we may not complete our product development efforts in a timely manner. As we rely on third parties for laboratory testing and human studies, we may lose some control over these activities and become too dependent upon these parties. These third parties may not complete testing activities on schedule or when we request.

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Because neither we nor any of our collaborative partners have received marketing approval for any product resulting from our research and development efforts, and may never be able to obtain any such approval, we may not be able to generate any product revenue.

All the products being developed by our collaborative partners also will require additional research and development, extensive preclinical studies and clinical trials and regulatory approval prior to any commercial sales. In some cases, the length of time that it takes for our collaborative partners to achieve various regulatory approval milestones may affect the payments that we are eligible to receive under our collaboration agreements. We and our collaborative partners may need to address a number of technical challenges successfully in order to complete development of our products. Moreover, these products may not be effective in treating any disease or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining regulatory approval or prevent or limit commercial use.

We may be unable to manufacture or obtain sufficient quantities of our products and ensure their proper performance and quality.

Biopharmaceuticals must be produced under the cGMPs of the FDA. We do not have facilities capable of manufacturing drug products under cGMPs and must outsource any such production. We are devoting resources to establishing our own manufacturing capabilities to support development and preclinical activities and are contracting with third-party vendors for the manufacture of materials for use in humans. We may be unable to contract successfully for cGMPs manufacture of any products and may be unable to obtain required quantities of our products economically. We may not be able to obtain capacity to produce a sufficient amount of commercial product to meet our commercial and clinical development needs. Failure to meet the demand for product may adversely affect our ability to continue to market the product.

Compliance with government regulation is critical to our business and failure to satisfy regulatory requirements could impair our business.

Prior to the marketing of any new drug developed by us, or by our collaborators, that new drug must undergo an extensive regulatory review 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. Even if the FDA approves our products, we will still need to obtain institutional review board approval, which may involve additional delays. The rate of completion of clinical trials depends upon, among other factors, the enrollment of patients. Patient enrollment is a function of many factors, including:

• timing and restriction of institutional review board approval;

• the size of the patient population;

• proximity of patients to clinical sites;

• eligibility criteria for the study;

• time commitment of a patient to the study; and

• existence of competitive clinical trials.

We have not had any of our product candidates receive approval for commercialization in the United States or elsewhere. Neither we nor our collaborators may 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

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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. Even where a product is exempted from FDA clearance or approval, the FDA may impose restrictions as to the types of customers to which we can market and sell our products. Such restrictions may materially and adversely affect our business, financial condition and results of operations.

In addition, the FDA may condition marketing approval on the conduct of specific post-marketing studies to further evaluate safety and efficacy. Rigorous and extensive FDA regulation of pharmaceutical products continues after approval, particularly with respect to compliance with cGMPs reporting of adverse effects, advertising, promotion and marketing. Discovery of previously unknown problems or failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the product from the market as well as possible civil or criminal sanctions, any of which could materially adversely affect our business.

We must obtain regulatory approval by governmental agencies in other countries prior to commercialization of our products in those countries. Foreign regulatory systems may be just as rigorous, costly and uncertain as in the United States.

We rely significantly on our collaborative partners, and our business could be harmed if we are unable to maintain strategic alliances.

As part of our business strategy, we have strategic research and development alliances with companies to gain access to specific technologies. 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 and Bayer, 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. If any of our existing collaborators 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.

We depend on attracting and retaining key employees.

We are highly dependent on the principal members of our management and scientific staff, including Jonathan M. Rothberg, Ph.D., our Chief Executive Officer, President and Chairman of the Board; David M. Wurzer, Executive Vice President and Chief Financial Officer; Christopher K. McLeod, Executive Vice President; Timothy M. Shannon, M.D., Executive Vice President and Chief Medical Officer; and Richard F. Begley, Ph.D., President and Chief Executive Officer of 454. The loss of services of any of these personnel could materially adversely affect our business, financial condition and results of operations. We entered into employment agreements with all of the principal members of our management and scientific staff that bind them to a specific term of employment. We maintain key person life insurance on the life of Dr. Rothberg in the amount of $2.0 million. Our future success also will depend in part on the continued services of our key scientific and management personnel and our ability to attract, hire and retain additional personnel. There is intense competition for such qualified personnel and there can be no assurance that we will be able to continue to attract and retain such personnel. Failure to attract and retain key personnel could materially, adversely affect our business, financial condition and results of operations.

We depend on academic collaborators, consultants and scientific advisors.

We have relationships with collaborators and consultants at academic and other institutions who conduct research at our request. These collaborators and consultants are not our employees. Substantially all of our

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collaborators and consultants are employed by employers other than us and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us. As a result, we have limited control over their activities and, except as otherwise required by our collaboration and consulting agreements, can expect only limited amounts of their time to be dedicated to our activities. Our ability to discover genes and biological pathways involved in human disease and commercialize products based on those discoveries may depend in part on continued collaborations with researchers at academic and other institutions. We may not be able to negotiate additional acceptable collaborations with collaborators or consultants at academic and other institutions.

Our academic collaborators, consultants and scientific advisors may have relationships with other commercial entities, some of which could compete with us. Our academic collaborators, consultants and scientific advisors sign agreements which provide for confidentiality of our proprietary information and of the results of studies. We may not be able to maintain the confidentiality of our technology and other confidential information in connection with every academic collaboration or advisory arrangement, and any unauthorized dissemination of our confidential information could materially adversely affect our business, financial condition and results of operations. Further, any such collaborator, consultant or advisor may enter into an employment agreement or consulting arrangement with one of our competitors.

Competition in our field is intense and likely to increase.

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

• biotechnology companies;

• pharmaceutical companies;

• academic and research institutions; and

• government agencies.

We also are subject to significant competition from organizations that are pursuing approaches, 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, protein therapeutics, and fully-human antibodies generally is highly competitive. Our competitors include:

• Human Genome Sciences, Inc.;

• Genentech, Inc.;

• ZymoGenetics, Inc.;

• Amgen, Inc.;

• Incyte Pharmaceuticals, Inc.;

• major biotechnology and pharmaceutical companies; and

• universities and other non-profit research organizations.

A number of organizations 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 our ability to commercialize our products. We expect that competition in genomics research, protein therapeutics, and therapeutic antibodies will intensify as technical advances are made and become more widely known. In addition, a number of competitors are producing proteins from genes and claiming both the proteins as potential therapeutics as well as claiming antibodies against these proteins. In many cases generic antibody claims are being issued by the United States Patent and Trademark Office (“USPTO”) even though competitors

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have not actually made antibodies against the protein of interest, or do not have cellular, animal, or human data to support the use of these antibodies as therapeutics. These claims on proteins as therapeutics and these claims covering all antibodies against the proteins and methods of use in broad human indications are being filed at a rapid rate, and some number of these claims have issued and may continue to issue. In addition, purified proteins, therapeutic data, and antibodies, including polyclonal antibodies, mouse monoclonal antibodies and, in some cases, fully-human monoclonal antibodies, are being generated against a large number of targets within the human genome. All of these activities may make it difficult to commercialize products, or, if licenses are made available, may make the royalty burden on these products so high as to prevent commercial success.

We may engage in acquisitions that are unsuccessful.

In the future, we may engage in acquisitions in order to exploit technology or market opportunities. We are not experienced in acquiring and integrating new businesses. If we acquire another company, we may not be able to integrate the acquired business successfully into our existing business in a timely and non-disruptive manner or at all. Furthermore, an acquisition may not produce the revenues, earnings or business synergies that we anticipate. If we fail to integrate the acquired business effectively or if key employees of that business leave, the anticipated benefits of the acquisition would be jeopardized. The time, capital management and other resources spent on an acquisition that fails to meet our expectations could cause our business and financial condition to be materially and adversely affected. In addition, acquisitions can involve material non-recurring charges and amortization of significant amounts of non-cash acquisition costs that could adversely affect our results of operations.

If our patent applications do not result in issued patents, then our competitors may obtain rights to commercialize our discoveries.

Our business and competitive position depends on our ability to protect our products, processes and technologies. We continually file patent applications for our proprietary methods, novel uses of genes, and our development products. As of the date of this report, we had approximately 790 patent applications pending covering novel genes and gene transcripts, as well as our products, processes and technologies with the USPTO, and had filed numerous corresponding international and foreign patent applications. As of the date of this report, we had been issued approximately 50 patents with respect to aspects of our gene portfolio, products, processes and technologies.

Our commercial success also depends in part on obtaining patent protection on genes and proteins for which we or our collaborators discover utility and on products, methods and services based on such discoveries. We have applied for patent protection on novel genes and proteins, novel mutants of known genes and their uses, partial sequences of novel proteins and their gene sequences and uses, and novel uses for previously identified genes discovered by third parties. We have applied for patents on antibodies against the proteins we have discovered, as well as seek or have our partners seek patent protection on the antibodies we produce against these proteins. We have sought and intend to continue to seek patent protection for novel uses for genes and proteins and therapeutic antibodies that may have been patented by third parties. In such cases, we would need a license from the holder of the patent with respect to such gene or protein in order to make, use or sell such gene or protein for such use. We may not be able to acquire such licenses on commercially reasonable terms, if at all. Our patent application filings that result from the identification of genes associated with the cause or effect of a particular disease generally seek to protect the genes and the proteins encoded by such genes as well as antibodies raised against these gene products. We also seek patent protection for our therapeutic, diagnostic and drug screening methods and products.

In 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. There is no guarantee that the USPTO will approve them. We strive especially to gain issued patents for our commercially important genes and proteins.

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The patent positions of pharmaceutical, biopharmaceutical and biotechnology companies, including us, are generally uncertain and involve complex legal and factual questions. Our patent applications may not protect our products, processes and technologies because of the following reasons:

• there is no guarantee that any of our pending patent applications will result in additional issued patents;

• we may develop additional proprietary technologies that are not patentable;

• there is no guarantee that any patents issued to us or our collaborative customers will provide a basis for commercially viable products;

• there is no guarantee that any patents issued to us or our collaborative customers will provide us with any competitive advantages;

• there is no guarantee that any patents issued to us or our collaborative customers will not be challenged or circumvented or invalidated by third parties; and

• there is no guarantee that any patents issued to others will not have an adverse effect on our ability to do business.

In addition, patent law relating to the scope of claims in the technology fields in which we operate is still evolving. The degree of future protection for our proprietary rights is uncertain. Furthermore, there can be no assurance that others will not independently develop similar or alternative technologies, duplicate any of our technologies, or, if patents are issued to us, design around the patented technologies developed by us. In addition, we could incur substantial costs in litigation if we are required to defend ourselves in patent suits brought by third parties or if we initiate such suits.

The issuance of patents may not provide us with sufficient protection.

We may not be able to obtain further patents for our products, processes and technologies, or, if we are able to obtain further patents, these patents may not provide us with substantial protection or be commercially beneficial. The issuance of a patent is not conclusive as to its validity or enforceability, nor does it provide the patent holder with freedom to operate without infringing the patent rights of others. A patent could be challenged by litigation and, if the outcome of such litigation were adverse to the patent holder, competitors could be free to use the subject matter covered by the patent, or the patent holder may license the technology to others in settlement of such litigation. The invalidation of key patents owned by or licensed to us or non-approval of pending patent applications could increase competition, and materially adversely affect our business, financial condition and results of operations. In addition, any application or exploitation of our technology could infringe patents or proprietary rights of others and any licenses that we might need as a result of such infringement might not be available to us on commercially reasonable terms, if at all. Third parties have indicated to us that they believe we may be required to obtain a license in order to perform certain processes that we use in the conduct of our business or in order to market potential drugs we have in development.

We cannot predict whether our or our competitors’ pending patent applications will result in the issuance of valid patents. Litigation, which could result in substantial cost to us, also may be necessary to enforce our patent and proprietary rights and/or to determine the scope and validity of others’ proprietary rights. We may participate in interference proceedings that may in the future be declared by the USPTO to determine priority of invention, which could result in substantial cost to us. The outcome of any such litigation or interference proceeding might not be favorable to us, and we might not be able to obtain licenses to technology that we require or that, if obtainable, we could license such technology at a reasonable cost.

The public availability of genomic sequence information or other sequence information prior to the time we apply for patent protection on a corresponding full-length or partial gene could adversely affect our ability to obtain patent protection with respect to such gene or gene sequences. In addition, certain other groups are attempting to rapidly identify and characterize genes through the use of gene expression analysis and other technologies. To the extent any patents issue to other parties on such partial or full-length genes or uses for such

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genes, the risk increases that the sale of potential products, including therapeutics, or processes developed by us or our collaborators may give rise to claims of patent infringement. Others may have filed and in the future are likely to file patent applications covering genes or gene products or antibodies against the gene products that are similar or identical to our products. Any such patent application may have priority over our patent applications. Any legal action against us or our collaborators claiming damages and seeking to enjoin commercial activities relating to the affected products and processes could, in addition to subjecting us to potential liability for damages, require us or our collaborators to obtain a license in order to continue to manufacture or market the affected products and processes or could enjoin us from continuing to manufacture or market the affected products and processes. There can be no assurance that we or our collaborators would prevail in any such action or that any license required under any such patent would be made available on commercially acceptable terms, if at all. We believe that there may be significant litigation in the industry regarding patent and other intellectual property rights. If we become involved in such litigation, it could consume a substantial portion of our managerial and financial resources.

There is substantial uncertainty concerning the extent to which supportive data will be required for issuance of patents for human therapeutics. If data additional to that available to us is required, our ability to obtain patent protection could be delayed or otherwise adversely affected. Although the USPTO issued new utility guidelines in July 1995 that address the requirements for demonstrating utility for biotechnology inventions, particularly for inventions relating to human therapeutics, there can be no assurance that the USPTO examiners will follow such guidelines or that the USPTO’s position will not change with respect to what is required to establish utility for gene sequences and products and methods based on such sequences.

We cannot be certain that our security measures will protect our proprietary technologies.

We also rely upon trade secret protection for some of our confidential and proprietary information that is not subject matter for which patent protection is being sought. We have developed a database of proprietary gene expression patterns and biological pathways which we update on an ongoing basis and which can be accessed over the Internet. We have taken security measures to protect our proprietary technologies, processes, information systems and data and continue to explore ways to enhance such security. Such measures, however, may not provide adequate protection for our trade secrets or other proprietary information. While we require employees, academic collaborators and consultants to enter into confidentiality and/or non-disclosure agreements where appropriate, any of the following could still occur:

• proprietary information could be disclosed;

• others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose such technology; or

• we may not be able to meaningfully protect our trade secrets.

We depend upon our ability to license technologies.

We may have to acquire or license certain components of our technologies or products from third parties. We may not be able to acquire from third parties or develop new technologies, either alone or with others. Failure to license or otherwise acquire necessary technologies could materially adversely affect our business, financial condition and results of operations.

The 454 Life Sciences technology platform is in development and the early stages of commercialization.

The technology platform of 454, our majority-owned subsidiary (see “Business—454 Life Sciences Corporation”), is still in development and 454 has not had significant sales of its services or products. 454 may not be able to continue to successfully develop or commercialize the 454 technology platform. The success of commercialization of the 454 technology platform depends on many factors, including:

• the acceptance of 454’s technology in the market place;

• technical performance of 454’s platform in relation to existing technologies;

31

• 454’s ability to obtain key components for the manufacture of the 454 instrument and reagents from suppliers; and

• 454’s ability to obtain licenses to resell reagents for use in the 454 instrument, if required.

454 is subject to competition from organizations that have developed or are developing technologies and products to service 454’s potential customers.

Many of the organizations competing with 454 potentially have greater capital resources, research and development staffs and facilities and marketing capabilities. 454’s potential competitors include:

• Applied Biosystems;

• Amersham Biosciences;

• Affymetrix;

• Perlegen; and

• other companies recently formed or soon to be funded to develop whole genome sequencing technologies.

We believe that the future success of 454 will depend in large part on our ability to maintain a competitive position in instruments for the high throughput nucleic acid sequencing field. Before we recover development expenses for our products or technologies, such products or technologies may become obsolete as a result of technological developments by us or others. Our products could also be made obsolete by new technologies which are less expensive or more effective. We may not be able to make the enhancements to our technology necessary to compete successfully with newly emerging technologies. A market for the high throughput nucleic acid sequencing field may not be sufficient to generate revenues significant enough for 454 to achieve profitability.

We could be liable for any failure to comply with hazardous product regulations.

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. Although we believe that our safety procedures for handling and disposing of such materials comply with the standards prescribed by federal, state and local laws and regulations, the risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, we could be held liable for any damages that result and any liability could exceed our resources.

Risks Related to Our Financial Results

We have a history of operating losses and expect to incur losses in the future.

We have incurred losses since inception, principally as a result of research and development and general and administrative expenses in support of our operations. We anticipate incurring additional losses over the next several years as we focus our resources on prioritizing, selecting and advancing our most promising drug candidates. We may never be profitable or achieve significant revenues. For example, we experienced net losses of $74.5 million in 2003, $90.4 million in 2002 and $42.9 million in 2001, and as of December 31, 2003 had an accumulated deficit of $289.5 million.

Our quarterly operating results have fluctuated greatly and may continue to do so.

Our operating results have fluctuated on a quarterly basis. We expect that losses will continue to fluctuate from quarter to quarter and that these fluctuations may be substantial. Our results of operations are difficult to

32

predict and may fluctuate significantly from period to period, which may cause our stock price to decline and result in losses to investors. Some of the factors that could cause our operating results to fluctuate include:

• changes in the demand for our services;

• the nature, pricing and timing of products and services provided to our collaborators;

• our ability to compete effectively in our therapeutic discovery and development efforts against competitors that have greater financial or other resources or drug candidates that are in further stages of development;

• acquisition, licensing and other costs related to the expansion of our operations;

• losses and expenses related to our investments;

• regulatory developments or changes in public perceptions relating to the use of genetic information and the diagnosis and treatment of disease based on genetic information;

• regulatory actions and changes related to the development of drugs;

• changes in intellectual property laws that affect our patent rights;

• payments of milestones, license fees or research payments under the terms of our external alliances and collaborations and our ability to monitor and enforce such payments; and

• the timing of intellectual property licenses that we may enter.

We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of future performance. In addition, fluctuations in quarterly results could affect the market price of our common stock in a manner unrelated to our long-term operating performance.

The market price of our common stock is highly volatile.

The market price of our common stock has fluctuated widely and may continue to do so. For example, during fiscal year 2003, the closing sale price of our stock ranged from a high of $7.70 per share to a low of $3.17 per share. Many factors could cause the market price of our common stock to rise and fall. These factors include:

• variations in our quarterly operating results;

• announcements of technological innovations, clinical results, or new products by us or our competitors;

• introduction of new products or new pricing policies by us or our competitors;

• acquisitions or strategic alliances by us or others in our industry;

• announcement by the government or other agencies regarding the economic health of the United States and the rest of the world;

• the hiring or departure of key personnel;

• changes in market valuations of companies within the biotechnology industry; and

• changes in estimates of our performance or recommendations by financial analysts.

We have a large amount of debt and our debt service obligations may prevent us from taking actions that we would otherwise consider to be in our best interests.

As of March 1, 2004, we had total consolidated debt of $231.5 million; and for the year ended December 31, 2003, we had a deficiency of earnings available to cover fixed charges of $80.6 million. A variety of uncertainties and contingencies will affect our future performance, many of which are beyond our control. We

33

may not generate sufficient cash flow in the future to enable us to meet our anticipated fixed charges, including our debt service requirements with respect to our notes that we sold in February 2000 and February 2004. At March 1, 2004, $230.0 million of those notes remained outstanding. The following table shows, as of March 1, 2004, the remaining aggregate amount of our interest payments due in each of the years listed (in millions):

Year	Aggregate Interest
2004	$	5.9
2005		11.8
2006		11.8
2007		7.9
2008		4.0
Thereafter		10.0

Our substantial leverage could have significant negative consequences for our future operations, including:

• increasing our vulnerability to general adverse economic and industry conditions;

• limiting our ability to obtain additional financing;

• requiring the dedication of a substantial portion of our expected cash flow to service our indebtedness, thereby reducing the amount of our expected cash flow available for other purposes, including working capital and capital expenditures;

• limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; or

• placing us at a possible competitive disadvantage compared to less leveraged competitors and competitors that have better access to capital resources.

Our debt investments are impacted by the financial viability of the underlying companies.

We have a diversified portfolio of investments of which $196.6 million at December 31, 2003 were invested in US Treasuries and debt investments that are sponsored by the US Government. Our corporate fixed-rate debt investments comply with our policy of investing in only investment-grade debt instruments. The ability for the debt to be repaid upon maturity or to have a viable resale market is dependent, in part, on the financial success of the underlying company. Should the underlying company suffer significant financial difficulty, the debt instrument could either be downgraded or, in the worst case, our investment could be worthless. This would result in our losing the cash value of the investment and incurring a charge to our statement of operations.

We may need to raise additional funding, which may not be available on favorable terms, if at all.

We believe that we have sufficient capital to satisfy our capital needs for at least the next twenty-four months. However, our future funding requirements will depend on many factors and we anticipate that, at some future point, we will need to raise additional capital to fund our business plan and research and development efforts on a going-forward basis. To the extent that we need to obtain additional funding, the amount of additional capital we would need to raise would depend on many factors, including:

• the number, breadth and progress of our research, product development and clinical programs;

• our ability to establish and maintain additional collaborations;

• the progress of our collaborators;

• our costs incurred in enforcing and defending our patent claims and other intellectual property rights; and

• the costs and timing of obtaining regulatory approvals for any of our products.

34

We expect that we would raise any additional capital we require through public or private equity offerings, debt financings or additional collaborations and licensing arrangements. We cannot be certain 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 contributions by others to joint ventures and other collaborative or licensing arrangements for the development and testing of products under development. If we raise additional capital by issuing equity securities, the issuance of such securities would result in ownership dilution to our shareholders. If we raise additional funds through collaborations and licensing arrangements, we may be required to relinquish rights to certain of our technologies or product candidates, or to grant licenses on unfavorable terms. The relinquishing of rights or granting of licenses on unfavorable terms could materially adversely affect our business, financial condition and results of operations. If adequate funds are not available, our business, financial condition and results of operations would be materially adversely affected. However, should we be unable to obtain future financing either through the methods described above or through other means, we may be unable to meet the critical objective of our long-term business plan, which is to successfully develop and market pharmaceutical products. If we require additional capital at a time when investment in biotechnology companies such as ours, or in the marketplace in general, is limited due to the then prevailing market or other conditions, we may not be able to raise such funds at the time that we desire or any time thereafter.

Risks Related to Our Convertible Debt and Our Common Stock into which Our Debt is Convertible

We have significant leverage as a result of the sales of our debt in 2000 and 2004.

In February 2000, in connection with the sale of our 6% convertible subordinated debentures due in 2007, we incurred $150.0 million of indebtedness. In February 2004, we repurchased $20.0 million of these debentures, for total consideration of $20.0 million, plus accrued interest of $0.05 million to the date of repurchase. As a result of the remaining indebtedness of $130.0 million, our interest payment obligations amount to $7.8 million per year.

In February 2004, in connection with the sale of our 4% convertible subordinated notes due in 2011, we incurred an additional $100.0 million of indebtedness. As a result of this indebtedness, our interest payment obligations amount to $4.0 million per year. The degree to which we are leveraged could adversely affect our ability to obtain further financing for working capital, acquisitions or other purposes and could make us more vulnerable to industry downturns and competitive pressures. Our ability to meet our debt service obligations will depend upon our future performance, which may be subject to the financial, business and other factors affecting our operations, many of which are beyond our control.

These notes, due in 2007 and 2011, are effectively subordinated to all of our secured indebtedness and all indebtedness of our subsidiaries. These notes are our general unsecured obligations and are not guaranteed by any of our subsidiaries. Accordingly, these notes are effectively subordinated to all of our current and future secured indebtedness to the extent of the assets securing the indebtedness. Furthermore, our right to receive any distribution of assets of any subsidiary upon that subsidiary’s liquidation, reorganization or otherwise, is subject to the prior claims of creditors of that subsidiary, except to the extent we also are recognized as a creditor of that subsidiary. As a result, these notes are effectively subordinated to the claims of such creditors.

There are no restrictive covenants in our indentures relating to our ability to incur future indebtedness.

The indentures governing our notes due in 2007 and 2011 do not contain any financial or operating covenants or restrictions on the payment of dividends, the incurrence of indebtedness, transactions with affiliates, incurrence of liens or the issuance or repurchase of securities by us or any of our subsidiaries. We may therefore incur additional debt, including secured indebtedness senior to these notes. As part of our growth strategy, we

35

potentially may use proceeds from the 2004 offering to finance future acquisitions of complementary businesses or technologies, which may cause us or our subsidiaries to incur significant indebtedness to which these notes would be subordinate.

These notes are obligations exclusively of CuraGen Corporation. Our subsidiaries are separate and distinct legal entities. Our subsidiaries have no obligation to pay any amounts due on these notes or to provide us with funds for our payment obligations, whether by dividends, distributions, loans or other payments. In addition, any payment of dividends, distributions, loans or advances by our subsidiaries to us could be subject to statutory or contractual restrictions. Payments to us by our subsidiaries will also be contingent upon our subsidiaries’ earnings and business considerations.

Our debt service obligations may adversely affect our cash flow.

A higher level of indebtedness increases the risk that we may default on our debt obligations. We cannot be certain that we will be able to generate sufficient cash flow to pay the interest on our debt or that future working capital, borrowings or equity financing will be available to pay or refinance such debt. If we are unable to generate sufficient cash flow to pay the interest on our debt, we may have to delay or curtail our research and development programs.

The level of our indebtedness among other things, could:

• make it difficult for us to make payments on our notes;

• make it difficult for us to obtain any necessary financing in the future for working capital, capital expenditures, debt service requirements or other purposes;

• limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; and

• make us more vulnerable in the event of a downturn in our business.

Our ability to repurchase notes, if required, with cash upon a change in control or fundamental change may be limited.

In certain circumstances involving a change in control, we may be required to repurchase some or all of the notes due 2007. In certain circumstances involving a fundamental change, we may be required to repurchase some or all of the notes due 2011. We cannot be certain that we will have sufficient financial resources at such time or would be able to arrange financing to pay the repurchase price of the notes. Our ability to repurchase the notes in such event may be limited by law, by the indenture and by such indebtedness and agreements as may be entered into, replaced, supplemented or amended from time to time.

Securities we issue to fund our operations could cause dilution to our shareholders’ ownership.

The conversion of our notes into shares of common stock will dilute the ownership interest of our current shareholders. We may decide to raise additional funds through a public or private debt or equity financing to fund our operations. If we raise funds by issuing equity securities, the percentage ownership of current shareholders, including the ownership that holders of the notes would have upon conversion, will be reduced, and the new equity securities may have rights prior to those of the common stock issuance upon conversion of the notes. We may not obtain sufficient financing on terms that are favorable to existing shareholders and us.

Item 7a.    Quantitative and Qualitative Disclosures About Market Risk

Currently, we maintain approximately 12% of our cash and investments in financial instruments with original maturity dates of less than three months, 21% in financial instruments with original maturity dates of

36

greater than three months and less than one year, and the remaining 67% in financial instruments with original maturity dates of greater than one year and less than five years. These financial instruments are subject to interest rate risk and will decline in value if interest rates increase. We estimate that a change of 100 basis points in interest rates would result in a $3.0 million decrease or increase in the fair value of our cash and investments.

Our outstanding long-term liabilities as of December 31, 2003 consisted of our 6% convertible subordinated debentures due February 2, 2007 and an accrued long-term liability for the remaining future minimum payments under a license agreement (see Note 11 to our consolidated financial statements). As the debentures bear interest at a fixed rate, our results of operations would not be affected by interest rate changes. Although future borrowings may bear interest at a floating rate, and would therefore be affected by interest rate changes, at this point we do not anticipate any significant future borrowings (except for the issuance on February 17, 2004 of $100.0 million of 4% convertible subordinated notes due 2011, which is more fully described in Note 13 to our consolidated financial statements), and therefore do not believe that a change of 100 basis points in interest rates would have a material effect on our financial condition.

Accordingly, we do not believe that there is any material market risk exposure with respect to derivative or other financial instruments that would require disclosure under this item.

As of December 31, 2003, the market value of our $150.0 million 6% convertible subordinated debentures due 2007, based on quoted market prices, was estimated at $133.0 million.

Item 8.    Financial Statements and Supplementary Data

37

CURAGEN CORPORATION AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(in thousands, except par value and share data)

	December 31,
	2003			2002
ASSETS
Current assets:
Cash and cash equivalents	$	42,843		$	68,401
Short-term investments		72,402			198,301
Marketable securities		228,396			148,107
Cash and investments		343,641			414,809
Income taxes receivable		429			2,359
Other current assets		26			275
Prepaid expenses		1,757			3,405
Total current assets		345,853			420,848
Property and equipment, net		23,540			24,336
Intangible and other assets, net		7,564			3,345
Total assets	$	376,957		$	448,529
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,661		$	2,426
Accrued expenses		3,671			2,539
Accrued payroll and related items		1,864			2,300
Interest payable		3,750			3,750
Deferred revenue		3,010			2,610
Current portion of obligations under capital leases		204			1,511
Other current liabilities		2,383			1,501
Total current liabilities		19,543			16,637
Long-term liabilities:
Convertible subordinated debt		150,000			150,000
Obligations under capital leases, net of current portion		—			263
Accrued long-term liabilities		1,500			—
Total long-term liabilities		151,500			150,263
Commitments and contingencies
Minority interest in subsidiary		8,233			10,125
Stockholders’ equity:
Common Stock; $.01 par value, issued and outstanding 49,896,622 shares at December 31, 2003, and 49,362,463 shares at December 31, 2002		499			494
Treasury Stock, at cost; none at December 31, 2003, and 12,500 shares at December 31, 2002		—			(49	)
Additional paid-in capital		485,531			483,824
Accumulated other comprehensive income (loss)		1,524			3,357
Accumulated deficit		(289,492	)		(214,995	)
Unamortized stock-based compensation		(381	)		(1,127	)
Total stockholders’ equity		197,681			271,504
Total liabilities and stockholders’ equity	$	376,957		$	448,529

See accompanying notes to consolidated financial statements

38

CURAGEN CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	Year Ended December 31,
	2003			2002			2001
Revenue
Collaboration revenue	$	6,918		$	18,246		$	23,475
Total revenue		6,918			18,246			23,475
Operating expenses
Research and development		64,545			81,654			65,849
General and administrative		19,164			22,955			18,831
Restructuring and related charges		2,888			10,982			—
Total operating expenses		86,597			115,591			84,680
Loss from operations		(79,679	)		(97,345	)		(61,205	)
Interest income		8,890			11,728			23,790
Interest expense		(9,845	)		(10,176	)		(10,553	)
Loss before income tax benefit and minority interest in subsidiary loss		(80,634	)		(95,793	)		(47,968	)
Income tax benefit		429			1,503			3,550
Minority interest in subsidiary loss		5,708			3,887			1,506
Net loss	$	(74,497	)	$	(90,403	)	$	(42,912	)
Basic and diluted net loss per share	$	(1.51	)	$	(1.85	)	$	(0.89	)
Weighted average number of shares used in computing basic and diluted net loss per share		49,335			48,942			48,208

See accompanying notes to consolidated financial statements

39

CURAGEN CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(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)			Number of Shares		Treasury Stock			Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Unamortized Stock-Based Compensation			Total			Total Comprehensive Loss
January 1, 2001	44,050,017		$	441	1,270,272		$	13		—			—		$	392,867			—		$	(81,680	)	$	(31	)	$	311,610
Net loss	—			—	—			—		—			—			—			—			(42,912	)		—			(42,912	)
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	)
Employee stock option activity	200,546			2	—			—		—			—			788			—			—			—			790
Non-employee stock option activity	32,848			—	—			—		—			—			754			—			—			—			754
Exercise of non-employee warrrants	30,000			—	—			—		—			—			61			—			—			—			61
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	)	—			—			—			—			—			—			—
December 31, 2001	48,729,319			487	—			—								480,050			—			(124,592	)		—			355,945
Net loss	—			—	—			—		—			—			—			—			(90,403	)		—			(90,403	)	$	(90,403	)
Unrealized gains on marketable securities	—			—	—			—		—			—			—		$	3,357			—			—			3,357			3,357
Comprehensive loss	—			—	—			—		—			—			—			—			—			—			—		$	(87,046	)
Issuance of restricted stock	266,250			3	—			—		—			—			1,751			—			—			(1,751	)		3
Repurchase of restricted stock	—			—	—			—		12,500		$	(49	)		(38	)		—			—			—			(87	)
Amortization and write-off of stock-based compensation	—			—	—			—		—			—			—			—			—			624			624
Employee stock option activity	162,247			2	—			—		—			—			773			—			—			—			775
Non-employee stock option activity	69,845			1	—			—		—			—			291			—			—			—			292
Stock-based 401(k) employer plan match	134,802			1	—			—		—			—			997			—			—			—			998
December 31, 2002	49,362,463			494	—			—		12,500			(49	)		483,824			3,357			(214,995	)		(1,127	)		271,504
Net loss	—			—	—			—		—			—			—			—			(74,497	)		—			(74,497	)	$	(74,497	)
Unrealized losses on marketable securities, net of reclassification adjustment (see disclosure below)	—			—	—			—		—			—			—			(1,833	)		—			—			(1,833	)		(1,833	)
Comprehensive loss	—			—	—			—		—			—			—			—			—			—			—		$	(76,330	)
Retirement of treasury stock	(12,500	)		—	—			—		(12,500	)		49			(49	)		—			—			—			—
Repurchase and retirement of restricted stock	(11,111	)		—	—			—		—			—			(78	)		—			—			—			(78	)
Amortization and write-off of stock-based compensation	—			—	—			—		—			—			—			—			—			746			746
Employee stock option activity	390,765			4	—			—		—			—			1,436			—			—			—			1,440
Non-employee stock option activity	22,400			—	—			—		—			—			106			—			—			—			106
Stock-based 401(k) employer plan match	144,605			1	—			—		—			—			634			—			—			—			635
Stock issuance costs	—			—	—			—		—			—			(342	)		—			—			—			(342	)
December 31, 2003	49,896,622		$	499	—		$	—		—		$	—		$	485,531		$	1,524		$	(289,492	)	$	(381	)	$	197,681
Disclosure of 2003 comprehensive loss reclassification adjustment:
Unrealized holding losses on marketable securities arising during period																														$	(1,516	)
Less: reclassification adjustment for gains included in net loss																															317
Unrealized losses on marketable securities, net of reclassification adjustment																														$	(1,833	)

See accompanying notes to consolidated financial statements

40

CURAGEN CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Year Ended December 31,
	2003			2002			2001
Cash flows from operating activities:
Net loss	$	(74,497	)	$	(90,403	)	$	(42,912	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		8,662			9,287			7,109
Asset impairment restructuring expense		265			9,056			—
Non-monetary compensation		843			612			687
Stock-based 401(k) employer plan match		635			998			741
Minority interest		(5,708	)		(3,887	)		(1,506	)
Changes in assets and liabilities:
Income taxes receivable		1,930			(1,503	)		544
Other current assets		249			401			(5	)
Prepaid expenses		1,648			(595	)		(2,128	)
Intangible and other assets, net		108			66			200
Accounts payable		2,235			(1,050	)		(111	)
Accrued expenses		632			795			(20	)
Accrued payroll and related items		(436	)		376			556
Deferred revenue		400			585			(1,827	)
Deferred rent		—			(59	)		(59	)
Other current liabilities		882			719			782
Net cash used in operating activities		(62,152	)		(74,603	)		(37,949	)
Cash flows from investing activities:
Acquisitions of property and equipment		(6,899	)		(20,339	)		(11,382	)
Payments for intangible assets		(3,613	)		(130	)		(2,583	)
Proceeds from sale of fixed assets		53			31			25
Net inflows (outflows) from purchases and maturities of short-term investments		125,899			74,430			(125,195	)
Gross purchases of marketable securities		(166,188	)		(144,750	)		—
Gross sales of marketable securities		9,566			—			—
Gross maturities of marketable securities		74,500			—			—
Net cash provided by (used in) investing activities		33,318			(90,758	)		(139,135	)
Cash flows from financing activities:
Payments on capital lease obligations		(1,570	)		(2,963	)		(3,518	)
Proceeds from issuance of Common Stock		—			—			85,000
Proceeds from issuance of 454 Life Sciences Corporation Preferred Stock		3,988			—			—
Proceeds from sale-leaseback of equipment		—			—			901
Payments of stock issuance costs		(520	)		—			(125	)
Proceeds from exercise of stock options		1,378			1,104			888
Proceeds from exercise of warrants		—			—			61
Proceeds from issuance of restricted stock		—			3			—
Net cash provided by (used in) financing activities		3,276			(1,857	)		83,207
Net decrease in cash and cash equivalents		(25,558	)		(167,217	)		(93,877	)
Cash and cash equivalents, beginning of year		68,401			235,618			329,495
Cash and cash equivalents, end of year	$	42,843		$	68,401		$	235,618
Supplemental cash flow information:
Interest paid	$	9,097		$	9,367		$	9,767
Income tax benefit payments received	$	2,739			—		$	4,875
Noncash financing transactions:
Obligations under capital leases		—			—		$	901

See accompanying notes to consolidated financial statements

41

CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Organization and Summary of Significant Accounting Policies

Organization—CuraGen Corporation (“CuraGen”) is a genomics-based pharmaceutical development company dedicated to improving the lives of patients by developing novel protein, antibody and small molecule therapeutics in the areas of oncology, inflammatory diseases, obesity and diabetes, and central nervous system disorders. CuraGen’s pipeline of therapeutics is based on internally discovered targets from the human genome that it believes play a role in important mechanisms underlying disease. CuraGen has focused its research efforts on three types of targets: targets that encode protein therapeutics, targets amenable to antibody therapeutic development and targets amenable to small molecule therapeutic development. CuraGen was incorporated in November 1991 and, until March 1993, was engaged primarily in organizational activities, research and development of its technologies, grant preparation and obtaining financing. In June 2000, CuraGen formed 454 Life Sciences Corporation (“454”), a majority-owned subsidiary, established to develop novel nanoscale instrumentation and technologies for rapidly and comprehensively determining the nucleotide sequence—“whole genome sequencing”—of entire genomes.

The 2002 and 2001 consolidated financial statements have been reclassified to conform to the classification used in 2003. All dollar amounts in tabular presentations are shown in thousands, except per share data.

Principles of Consolidation—The consolidated financial statements include CuraGen and 454 (the “Company”). All material intercompany accounts, transactions, and profits have been eliminated in consolidation (see Note 12).

Cash and 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 these investments approximates fair value due to their short maturity. Investments with an original maturity greater than one year are designated as marketable securities, are classified as available-for-sale securities, and are carried at fair value with the unrealized gains and losses reported in stockholders’ equity under the caption “Accumulated other comprehensive income”.

The Company periodically reviews its investment portfolio to determine if there is an impairment that is other than temporary. In testing for impairment, the Company considers, among other factors, the length of time and the extent of a security’s unrealized loss, the financial condition and near term prospects of the issuer, economic forecasts and market or industry trends. If the impairment is determined to be other than temporary, a realized loss is recognized at the date of determination. The cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Interest on debt securities, amortization of premiums, accretion of discounts and realized investment gains are included in interest income. The cost of securities sold is based on the specific identification method.

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 five years, using the straight-line method. Equipment under capital leases is amortized over the shorter of the estimated useful lives or the terms of the leases, ranging from three to five years, using the straight-line method. Leasehold improvements are amortized over the shorter of the estimated lives or the remaining terms of the leases, ranging from six months to five years, 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

42

CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 and fair value of the long-lived asset. An impairment loss is recognized when the carrying value of the long-lived asset exceeds its undiscounted future cash flows and its fair value. The impairment write-down would be the difference between the carrying amounts and the fair value of these long-lived assets. A loss on impairment would be recognized through a charge to earnings.

Deferred Real Estate Costs—Deferred real estate costs of $0.07 million 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 and other assets, net, were amortized over the remaining life of the lease as of the date of occupancy, 69 months, using the straight-line method and were fully amortized and written-off during 2003. Accumulated amortization aggregated $0, $0.07 million and $0.06 million, respectively, as of December 31, 2003, 2002 and 2001. Related amortization expense was $0, $0.01 million and $0.01 million, respectively, for each of the years ended December 31, 2003, 2002 and 2001.

Additional deferred real estate costs of $2.6 million paid during 2001 in connection with the previously planned construction of a new corporate headquarters and protein production facility in Branford, Connecticut, were reclassified to property in progress in February 2002, coincident with the purchase of the land, and were then subsequently written off in November 2002 as plans to construct these facilities were deferred indefinitely (see Note 10).

Licensing Fees—Licensing fees for various research and development purposes were paid during 2003, 2002 and 2001 (see Note 11). These costs, which are included in Intangible and other assets, net, are amortized over the various lives of the licenses ranging from three months to 10 years. Certain fully amortized licensing fees were written-off during 2003, 2002 and 2001. Accumulated amortization aggregated $0.4 million, $0.04 million and $0.09 million, respectively, as of December 31, 2003, 2002 and 2001. Related amortization expense was $0.6 million, $0.08 million and $0.1 million, respectively, for the years ended December 31, 2003, 2002 and 2001.

Licenses acquired for which there is a specific period of benefit, are amortized by the Company over that period. Perpetual licenses taken on potential therapeutic products for which there is no current indication as to whether or not there is a future commercial market for sale, are expensed when incurred.

Financing Costs—The Company includes deferred financing costs incurred in connection with the issuance of convertible subordinated debt in Intangible and other assets, net. These costs are amortized over the life of the debt and, in the event the debt is converted to equity, the Company would reclassify the unamortized deferred financing costs to equity. In the event the debt is repurchased, the Company would net the unamortized deferred financing costs with any gain or loss recognized on the extinguishment of the debt.

Accumulated amortization aggregated $2.8 million, $2.1 million and $1.4 million, respectively, as of December 31, 2003, 2002 and 2001. Related amortization expense was $0.7 million for each of the years ended December 31, 2003, 2002 and 2001.

Patent Application Costs—It is the Company’s practice to seek patent protection on processes and products in various countries. All patent related costs are expensed to general and administrative expenses as incurred, as recoverability of such expenditures is uncertain.

43

CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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. Collaboration revenue is recognized based upon defined metrics of completion that include percentage of completion milestones, and project specific initiatives as defined in each of the respective research plans. The defined metrics are reviewed internally each month to determine the work performed, whether deliverables have been accepted by the collaborator and the appropriate revenue to be recognized.

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 agreement include the fair value of the work performed by each collaborative partner. Revenues were $0, $9.6 million and $5.4 million and expenses were $1.5 million, $11.1 million and $6.9 million under the exchange agreement for the years ended December 31, 2003, 2002 and 2001, respectively. Deferred revenue arising from payments received under collaborative agreements is recognized as income when earned.

Research and Development Expenses—Research and development costs are charged to research and development expenses as incurred unless recoverable under contract. Such costs include personnel costs, supplies and reagents, clinical trial related costs such as contractual services and manufacturing costs, depreciation of lab equipment and allocated facility costs. Amounts related to manufacturing activities, for which the physical drug products will be utilized in research and development and there is no current indication as to whether or not there is a future commercial market for sale of any successful drug development from these therapeutics are expensed as incurred.

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 Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), which recognizes compensation cost based on the intrinsic value of the equity instruments awarded. The Company will continue to apply APB 25 to its stock-based compensation awards to employees.

In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure”, an Amendment of SFAS 123 (“SFAS 148”). SFAS 148 permits two additional transition methods for entities that voluntarily change to the fair value based method of accounting for stock-based compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS 148 became effective for financial statements issued after December 15, 2002, and the adoption of SFAS 148 did not have a material effect on the Company’s financial statements.

For CuraGen options issued to non-employees, the Company records the transactions based upon the difference between the option strike price and the fair value of the equity instrument issued as of the date each option vests and is earned. The Company recorded stock-based compensation expense attributable to non-employees totaling $0.07 million, $0.04 million and $0.7 million, for the years ended December 31, 2003, 2002 and 2001, respectively.

44

CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For CuraGen options issued to employees, CuraGen records the transactions based upon the difference between the option strike price and its closing stock price on the Nasdaq National Market as of the date of issuance. During 2003, 2002 and 2001, no stock-based compensation in connection with options granted to employees was recorded, as all options granted were issued at CuraGen’s closing stock price on the Nasdaq National Market as of the date of issuance.

For 454 options issued to employees, 454 records the transactions based upon the difference between the option strike price and the fair market value of the stock on the date of issuance. During 2003, 2002 and 2001, no stock-based compensation in connection with options granted to employees was recorded as all options granted were issued at the fair market value of the stock on the date of issuance.

For restricted stock issued to employees, the Company records the transactions based upon the difference between its closing stock price on the Nasdaq National Market as of the date of issuance and the cash paid by the employee for the stock. Pursuant to the term of CuraGen’s 1997 Employee, Director and Consultant Stock Plan (“1997 Stock Plan”), the cash required to be paid by employees upon the issuance of restricted stock is equal to the par value of the Company’s Common Stock. Restricted stock awards result in the recognition of unamortized stock-based compensation. Unamortized stock-based compensation is shown as a reduction of stockholders’ equity and is amortized to operating expenses over the period of time during which the restrictions will lapse. Stock-based compensation associated with restricted stock granted to employees during 2002 amounted to $1.7 million, and is being expensed from 2002 to 2005, the period of time over which the restrictions on the stock will lapse. There was no restricted stock issued to employees during 2003 or 2001.

The Company recorded amortization and write-offs of stock-based compensation expense for restricted stock issued to employees of $0.7 million, $0.6 million and $0.03 million, for the years ended December 31, 2003, 2002 and 2001, respectively.

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, 2003, 2002 and 2001.

	Year Ended December 31,
	2003			2002			2001
Net loss, as reported	$	(74,497	)	$	(90,403	)	$	(42,912	)
Stock-based employee compensation expense included in net loss		746			624			31
Total stock-based employee compensation expense determined under Black-Scholes option pricing model		(11,858	)		(16,163	)		(19,609	)
Pro forma net loss	$	(85,609	)	$	(105,942	)	$	(62,490	)
Basic and diluted net loss per share:
As reported	$	(1.51	)	$	(1.85	)	$	(0.89	)
Pro forma	$	(1.74	)	$	(2.16	)	$	(1.30	)

45

CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The assumptions utilized by the Company in deriving the pro forma amounts for the years ended December 31, 2003, 2002 and 2001 are as follows:

	Year Ended December 31,
	2003	2002	2001
Expected dividend yield	0%	0%	0%
Expected stock price volatility—CuraGen	60%	60%	60%
Expected stock price volatility—454	1%	1%	1%
Risk-free interest rate (approximate)	2.00%	2.00%	5.75%
Expected option term in years	Between 3.5 and 9.0	Between 3.9 and 7.5	Between 3.9 and 9.1

The approximate weighted average grant date fair value of options granted during the years ended December 31, 2003, 2002, and 2001 are as follows:

	Year Ended December 31,
	2003		2002		2001
CuraGen	$	3.20	$	7.42	$	18.50
454	$	0.42	$	0.38	$	1.06

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 (see Note 6).

Loss Per Share—Basic loss per share (“LPS”) is computed by dividing net loss by the weighted average number of Common Stock shares outstanding for the period. Diluted LPS reflects the potential dilution that could occur if options 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 50,214,746, 50,516,582 and 50,680,170 for the years ended December 31, 2003, 2002 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 and cash equivalents, 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 has marketable securities which are recorded at fair value. The Company also has convertible subordinated debt (see Note 7 and Note 13).

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.

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CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Segments—The FASB issued Statement of Financial Accounting Standards No. 131, “Disclosures About Segments of an Enterprise and Related Information” 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. An enterprise is required to separately report information about each operating segment that engages in business activities from which the segment may earn revenues and incur expenses, whose separate operating results are regularly reviewed by the chief operating decision maker regarding allocation of resources and performance assessment and which exceeds specific quantitative thresholds related to revenue, profit or loss and assets. During 2003, the Company met these requirements, and accordingly has two reportable segments (see Note 12).

Recently Enacted Pronouncements—In January 2003, the FASB issued FASB Interpretation (“FIN”) No. 46, “Consolidation of Variable Interest Entities—an Interpretation of Accounting Research Bulletin No. 51.” FIN No. 46 clarifies rules for consolidation of special purpose entities. The provisions of FIN No. 46 became effective for financial statements issued after January 31, 2003 and the adoption of FIN No. 46 did not have a material effect on the Company’s financial statements. In December 2003, the FASB issued FIN No. 46(R) which clarifies rules for consolidation of special purpose entities. The Company has evaluated the provisions of this interpretation, and does not believe it will have an impact on its financial statements.

In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities”, (“SFAS 149”) which amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities”. The provisions of SFAS 149 are effective for financial statements issued after June 30, 2003, and the adoption of SFAS 149 did not have a material effect on the Company’s financial statements.

In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (“SFAS 150”) which requires that an issuer classify a financial instrument that is within its scope as a liability, or an asset in some circumstances, where those instruments were previously classified as equity. The provisions of SFAS 150 are effective for financial statements issued after May 15, 2003, and the adoption of SFAS 150 did not have a material effect on the Company’s financial statements.

In December 2003, the FASB issued Statement of Financial Accounting Standards No. 132R (“SFAS 132R”), “Employers’ Disclosures about Pensions and Other Post-retirement Benefits.” SFAS 132R amends the disclosure requirements of SFAS 132 to require additional disclosures about assets, obligations, cash flow and net periodic benefit cost. The statement was effective in 2003 and did not have an impact on the Company’s financial statements.

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CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

2.    Property and Equipment

Property and equipment consisted of the following:

	December 31,
	2003		2002
Laboratory equipment	$	18,854	$	15,476
Leased equipment		2,273		4,549
Leasehold improvements		6,406		5,563
Office equipment		14,015		12,089
Land		4,509		4,475
Property in progress		1,313		718
Total property and equipment		47,370		42,870
Less accumulated depreciation and amortization		23,830		18,534
Total property and equipment, net	$	23,540	$	24,336

Depreciation and amortization expense for property and equipment was $7.3 million, $8.4 million and $6.2 million, for the years ended December 31, 2003, 2002 and 2001, respectively. Property in progress relates primarily to leasehold improvements and laboratory equipment for which the costs were incurred but the assets have not yet been placed in service.

In connection with the restructuring plan in November 2002, the Company recognized as a charge to earnings, a loss on impairment of $9.2 million, primarily related to costs previously incurred in conjunction with the planned construction of a campus facility, including a new corporate headquarters and protein production facility in Branford, Connecticut. Plans to construct these facilities have been deferred indefinitely, pending improvements in the external financing environment, which would afford the Company the ability to finance the future construction costs.

3.    Leases

Capital Leases

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

	December 31,
	2003		2002
Leased equipment	$	2,273	$	4,549
Less accumulated amortization		1,866		3,442
Total leased equipment, net	$	407	$	1,107

The current outstanding lease agreements have remaining terms of three and six months, and interest rates of approximately 9.0%. 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 for $1. The Company did not finance any leased assets during the years ended December 31, 2003 or 2002. During the year ended December 31, 2001, the Company financed $0.1 million of leased assets.

The future minimum lease payments under capital lease obligations at December 31, 2003 were $0.2 million of which $0.004 million represents interest. All future minimum lease payments are due in 2004.

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CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Operating Leases

In 1996, the Company entered into a six-year lease agreement for 26,000 square feet to house its principal research and administrative facility at 555 Long Wharf Drive, New Haven, Connecticut. From 1997 to 2002, the Company amended the original lease to increase its leased space to a total of 36,000 square feet, with a term ending December 2002, with two five year renewal options. In 2001 and 2002, the Company amended the lease to increase its leased space to a total of 50,000 square feet. This additional 14,000 square feet of space has a term ending June 2006, without a renewal option. Also in 2002, the Company amended the lease to increase its leased space to a total of 55,000 square feet. This additional 5,000 square feet of space has a term ending October 2008, without a renewal option. In 2002, the Company exercised the option to renew the lease on 36,000 square feet for one additional five-year period, ending December 2007, and relinquished the second five-year period renewal option. Currently, the Company is attempting to sub-lease approximately 20,000 square feet of unoccupied office space at its New Haven facility. This space is unoccupied as a result of the corporate restructurings in late 2002 and mid 2003, and is not suitable to be built-out as laboratory space.

In 1998, the Company entered into a two-year lease agreement for 32,000 square feet of research and administrative space at 322 East Main Street, Branford, Connecticut. From 1999 to 2002, the Company exercised the first and second of three options to renew for additional two-year terms and amended this lease to increase the leased space to a total of 51,000 square feet. In January 2004, the Company exercised the last of three options to renew this lease for an additional term of two years, through May 2006.

In May 2001, the Company entered into a five-year lease agreement for an additional 20,000 square foot research facility at 16 Commercial Street, Branford, Connecticut. The Company has the option to renew this lease for one additional term of five years.

In January 2002, the Company entered into a non-renewable five-year lease agreement for a 4,000 square foot storage facility in Branford, Connecticut.

In January 2004, the Company entered into a five-year lease agreement for an additional 20,000 square foot research facility at 15 Commercial Street, Branford, Connecticut. The Company has the option to renew this lease for one additional term of five years.

In May 2001, 454 entered into a non-renewable five-year lease agreement for its 16,000 square foot research and administrative facility at 20 Commercial Street, Branford, Connecticut.

Total rent expense under all operating leases for 2003, 2002 and 2001 was approximately $2.3 million, $2.2 million and $1.8 million, respectively.

The future minimum rental payments for all operating leases are as follows as of December 31, 2003:

Year Ended December 31,
2004	$	2,236
2005		1,949
2006		1,586
2007		1,221
2008		300
2009		48
Total	$	7,340

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CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 projects. The loss of any of these major collaborators would not materially effect the Company’s operations. Revenues from collaborative research agreements representing 10% or more of the Company’s total revenues are as follows:

	Year Ended December 31,
	2003				2002				2001
	$		%		$		%		$		%
Company A		*	*		$	9,574	52	%	$	5,384	23	%
Company B	$	3,830	55	%		6,062	33	%		8,332	35	%
Company C		*	*			*	*			4,252	18	%
Company D		946	14	%		—	—			—	—
Company E		993	14	%		—	—			—	—

*less than 10%

5.    Stockholders’ Equity

Authorized Capital Stock

CuraGen’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 and 3,000,000 shares of Non-Voting Common Stock. At December 31, 2003, the Company had reserved 937,500 shares of Common Stock for issuance pursuant to outstanding warrants and 2,350,084 shares of Common Stock for issuance pursuant to the 6% convertible subordinated debt due in 2007 (see Note 7). In addition, 372,980 and 9,047,452 shares of Common Stock had been reserved for issuance pursuant to CuraGen’s 1993 Stock Option and Incentive Award Plan (“1993 Stock Plan”) and CuraGen’s 1997 Stock Plan, respectively.

454’s authorized capital stock consists of 48,000,000 shares of Common Stock, par value of $.01 per share (“454 Common Stock”) and 38,000,000 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, 8,000,000 shares are designated as Series B Convertible Preferred Stock, 6,404,854 shares are designated as Series C Convertible Preferred Stock and 1,595,146 shares are designated as Series D Convertible Preferred Stock. At December 31, 2003, 454 had issued and outstanding: 47,933 shares of 454 Common Stock; 12,000,000 shares of Series A Convertible Preferred Stock; 8,000,000 shares of Series B Convertible Preferred Stock; 6,404,854 shares of Series C Convertible Preferred Stock; and 1,595,146 shares of Series D Convertible Preferred Stock. Additionally, at December 31, 2003, 454 had 4,952,067 shares of Common Stock reserved for issuance pursuant to the 454 2000 Employee, Director and Consultant Stock Plan (“454 2000 Stock Plan”).

Common Stock

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 $12.5 million.

In January 2001, the Company completed a private placement of 3,112,482 shares of unregistered Common Stock for an aggregate purchase price of $85.0 million to Bayer AG.

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CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In March 2001, 454 effected a two-for-one split on both its 454 Common Stock and 454 Preferred Stock, each payable to shareholders in the form of a stock dividend. All share and per share data have been adjusted retroactively to reflect the split.

During 2000 and 2001, all of the Company’s Non-Voting Common Stock was held by Genentech, Inc., and was converted to Voting Common Stock in various installments, with the final conversion occuring in November 2001.

In September 2003, 454 raised an additional $20.0 million from several existing shareholders including the Company and Cooper Hill Partners, L.L.C. The Company contributed $16.1 million in exchange for 6,404,854 shares of Series C Preferred Stock and the minority shareholders received 1,595,146 shares of Series D Preferred Stock in exchange for $3.9 million. As a result of these investments, the Company’s majority ownership in 454 is now approximately 66%.

Stockholder Rights Plan

In March 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 entitles 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.

Stock Options

CuraGen’s 1993 Stock Plan was adopted by its Board of Directors and shareholders 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 CuraGen. Of the 3,000,000 shares of Common Stock which were originally reserved for issuance under the 1993 Stock Plan, options to purchase 372,980 shares were outstanding as of December 31, 2003 and 1,297,988 stock options had been exercised under the 1993 Stock Plan as of December 31, 2003. Effective October 1997, upon a resolution by the Board of Directors, CuraGen will not grant any further options under the 1993 Stock Plan.

51

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, 2001, 2002 and 2003 is as follows:

	Number of Options		Weighted Average Exercise Price
Outstanding January 1, 2001	625,786		$	2.43
Granted	—			—
Exercised	(97,306	)		2.91
Canceled or lapsed	—			—
Outstanding December 31, 2001	528,480			2.34
Granted	—
Exercised	(57,500	)		3.08
Canceled or lapsed	—
Outstanding December 31, 2002	470,980			2.25
Granted	—
Exercised	(98,000	)		1.76
Canceled or lapsed	—
Outstanding December 31, 2003	372,980			2.38
Exercisable December 31, 2001	493,946			2.21
Exercisable December 31, 2002	470,980			2.25
Exercisable December 31, 2003	372,980			2.38

The following table summarizes information about stock options under the 1993 Stock Plan at December 31, 2003:

Range of Exercise Prices	Number of Options Outstanding and Exercisable	Weighted Average Contractual Life	Weighted Average Exercise Price
$0.76-0.885	26,850	0.7	$	0.81
1.155-1.215	74,800	1.6		1.20
1.50-2.05	156,400	2.8		1.83
3.00-5.00	114,930	3.4		4.26
	372,980

CuraGen’s 1997 Stock Plan was approved by its Board of Directors in October 1997 and by its shareholders in January 1998. The 1997 Stock Plan provides for the issuance of stock options and stock grants (“Stock Rights”) to employees, directors and consultants of CuraGen. A total of 3,000,000 shares of Common Stock were originally reserved for issuance under the 1997 Stock Plan; in May 1999, upon approval of the shareholders, the amount reserved was increased to 7,000,000 and in May 2003, upon approval of the shareholders, the amount reserved was increased to 10,500,000. The 1997 Stock Plan is administered by the Compensation Committee of the Board of Directors of CuraGen (“the Compensation Committee”). 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, 2003, CuraGen had 4,960,756 options outstanding under the 1997 Stock Plan and an additional 4,086,696 available for grant. In addition, 1,209,909 stock options had been exercised under the 1997 Stock Plan as of December 31, 2003.

52

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, 2001, 2002 and 2003 is as follows:

	Number of Options		Weighted Average Exercise Price
Outstanding January 1, 2001	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
Granted	2,045,275			10.99
Exercised	(174,592	)		4.66
Canceled or lapsed	(1,199,621	)		26.63
Outstanding December 31, 2002	4,948,953			16.04
Granted	987,375			4.46
Exercised	(315,065	)		3.80
Canceled or lapsed	(660,507	)		19.02
Outstanding December 31, 2003	4,960,756			14.11
Exercisable December 31, 2001	1,523,954			13.27
Exercisable December 31, 2002	2,019,081			14.70
Exercisable December 31, 2003	2,605,882			15.43

The following table summarizes information about stock options under the 1997 Stock Plan at December 31, 2003:

Range of Exercise Prices	Number of Options Outstanding	Weighted Average Contractual Life		Weighted Average Exercise Price
$      2.56-3.78	642,787		5.6	$	3.26
3.8750-4.3340	606,418		6.5		3.96
4.3700-5.0900	707,500		9.1		4.68
5.3150-5.9000	790,804		6.4		5.79
5.9700-8.4800	474,216		6.5		7.13
15.8300-20.0625	601,259		7.7		16.55
22.5000-31.6600	596,255		6.7		26.68
41.1250-58.3340	541,517		5.7		52.39
	4,960,756
Range of Exercise Prices	Number of Options Exercisable	Weighted Average Exercise Price
$      2.56-3.78	530,167	$	3.22
3.8750-4.3340	232,121		3.88
4.3700-5.0900	127,300		4.77
5.3150-5.9000	501,450		5.73
5.9700-8.4800	321,448		7.15
15.8300-20.0625	181,355		16.49
22.5000-31.6600	329,435		26.59
41.1250-58.3340	382,606		52.46
	2,605,882

53

CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

During 2002, the Compensation Committee approved grants for 266,250 shares of restricted stock. Pursuant to the provisions of the 1997 Stock Plan, the exercise price of the restricted stock is equal to the par value of the Company’s Common Stock, and each grant of restricted stock is subject to certain repurchase rights of the Company. During 2002 and 2003, the restrictions lapsed on 21,750 shares and 77,333 shares, respectively, and 12,500 shares and 11,111 shares, respectively, of the previously granted restricted stock were repurchased from employees upon their terminations. All of the repurchased shares were retired upon resolutions by the Board of Directors. As of December 31, 2003, 143,556 shares of restricted stock remain outstanding and will vest in one-third increments on each of the grant anniversary dates, with the lapsing of the repurchase rights.

The 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 Board of Directors of 454. The Board of Directors of 454 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, 2003, 454 had 3,411,984 options outstanding and an additional 1,540,083 available for grant. In addition, 47,933 stock options have been exercised under the 454 2000 Stock Plan as of December 31, 2003.

A summary of all stock option activity under the 454 2000 Stock Plan during the years ended December 31, 2001, 2002 and 2003 is as follows:

	Number of Options		Weighted Average Exercise Price
Outstanding January 1, 2001	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
Granted	1,404,000			2.50
Exercised	(45,333	)		2.50
Canceled or lapsed	(184,600	)		2.50
Outstanding December 31, 2002	3,101,317			2.48
Granted	576,500			2.50
Exercised	(2,600	)		2.50
Canceled or lapsed	(293,233	)		2.50
Outstanding December 31, 2003	3,411,984			2.47
Exercisable December 31, 2001	417,454			2.52
Exercisable December 31, 2002	960,207			2.41
Exercisable December 31, 2003	1,698,680			2.44

54

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, 2003:

Range of Exercise Prices	Number of Options Outstanding	Weighted Average Contractual Life		Weighted Average Exercise Price
$1.25 – 2.50	3,411,984		7.8	$	2.47
Range of Exercise Prices	Number of Options Exercisable	Weighted Average Exercise Price
$1.25 – 2.50	1,698,680	$	2.44

6.    Income Taxes

The Company provides for income taxes using the asset and liability method. The difference between the income tax benefit and the amount that would be computed by applying the statutory Federal income tax rate to net loss is attributable to the following:

	Year Ended December 31,
	2003			2002			2001
Net loss before income tax benefit	$	(74,926	)	$	(91,906	)	$	(46,462	)
Expected tax benefit at 35%	$	26,224		$	32,167		$	16,262
Employee stock options for which no book benefit is available		—			—			(103	)
Minority interest for which no tax benefit is available		1,998			1,360			527
Other items		(146	)		(12	)		(11	)
Connecticut taxes, including research and development credits subject to carryforward, net of federal benefit		5,498			6,539			5,331
Federal research and development credits subject to carryforward		2,394			2,723			2,066
Increase in valuation allowance on deferred tax asset		(35,539	)		(41,274	)		(20,522	)
Total income tax benefit	$	429		$	1,503		$	3,550

The income tax benefits were 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 forgoing carryforward of the research and development credit.

The net deferred income tax assets consisted of the following:

	December 31,
	2003			2002
Total deferred income tax assets	$	164,720		$	129,031
Valuation allowance		(164,720	)		(129,031	)
Total	$	—		$	—

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. A tax benefit of approximately $28.3 million related to stock options, will be credited to equity when the benefit is realized. The increase in the valuation allowance was $35.7 million, $40.7 million, and $22.2 million for the years ended December 31, 2003, 2002 and 2001, respectively.

55

CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For income tax purposes, CuraGen does not file consolidated income tax returns with 454. CuraGen and 454 have tax net operating loss carryforwards available to reduce future federal and Connecticut taxable income and research and development tax credit carryforwards available to offset future federal and Connecticut income taxes as detailed below. Utilization of the net operating loss and tax credit carryforwards may be limited due to changes within each company’s ownership, as defined within Section 382 of the Internal Revenue Code.

Net Operating Loss Carryforwards	Federal		Expire In	Connecticut		Expire In
CuraGen	$	321,603	2007 to 2023	$	286,604	2004 to 2023
454	$	28,517	2020 to 2023	$	28,203	2020 to 2023
Research and Development Tax Credit Carryforwards	Federal		Expire In	Connecticut		Expire In
CuraGen	$	12,619	2008 to 2023	$	9,737	2013 to 2018
454	$	1,146	2020 to 2023	$	1,219	2016 to 2018

7.    6% Convertible Subordinated Debentures Due 2007

During February 2000, the Company completed an offering for $125.0 million of 6% convertible subordinated debentures due February 2, 2007 and received net proceeds of approximately $121.3 million. In addition, also in February 2000, the initial purchasers exercised their option to purchase an additional $25.0 million of 6% convertible subordinated debentures due February 2, 2007, providing the Company with additional net proceeds of approximately $24.3 million. The Company pays cash interest on the notes on February 2 and August 2 of each year. Related interest expense for the each of the years ended December 31, 2003, 2002 and 2001 was $ 9.0 million.

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 at the election of the Company into Common Stock at any time prior to their maturity at a conversion price of $63.8275 per share. The market value of the debentures, based on quoted market prices, was estimated at $133.0 million on December 31, 2003.

See Note 13 which describes the Company’s issuance, on February 17, 2004, of $100.0 million of 4% convertible subordinated notes, due 2011, in addition to the repurchase of $20.0 million of its existing 6% convertible subordinated debentures.

8.    Minority Interest in Subsidiary

In June 2000, CuraGen launched 454, a majority owned subsidiary, to develop novel nanoscale instrumentation and technologies for rapidly and comprehensively determining the nucleotide sequence—“whole genome sequencing”—of entire genomes. CuraGen sold 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 $12.5 million. Simultaneously, 454 sold 8,000,000 shares of Series B Preferred Stock to Soros Fund Management and Cooper Hill Partners and members of CuraGen’s senior management team and related parties for an aggregate purchase price of $20.0 million. In order to complete the funding of 454, and in exchange for 12,000,000 shares of Series A Preferred Stock, CuraGen contributed $20.0 million in cash and certain technologies for conducting genomic analyses. As a result of this contribution of technology to 454, CuraGen recognized a gain of $3.9 million recorded in additional paid-in-capital.

56

CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In September 2003, 454 raised an additional $20.0 million from several existing shareholders including CuraGen and Cooper Hill Partners, L.L.C. CuraGen contributed $16.1 million in exchange for 6,404,854 shares of Series C Preferred Stock and the minority shareholders received 1,595,146 shares of Series D Preferred Stock in exchange for $3.9 million.

9.    Marketable Securities

The Company purchases marketable securities consisting primarily of debt securities, which have been designated as “available-for-sale” as required by Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt and Equity Securities”. Available-for-sale securities are carried at fair value with the unrealized gains and losses reported in stockholders’ equity under the caption “Accumulated Other Comprehensive Income”. The Company periodically reviews its investment portfolio to determine if there is an impairment that is other than temporary, and to date, has not experienced any impairments in its investments that were other than temporary. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Interest on debt securities, amortization of premiums and accretion of discounts is included in interest income. The cost of securities sold is based on the specific identification method.

The amortized cost, gross unrealized gains and losses and estimated fair value based on published closing prices of securities at December 31, 2003 and 2002, by contractual maturity, are shown below. Contractual maturities of mortgage backed and asset-backed securities are allocated in the tables based on the expected maturity date.

	December 31, 2003
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Marketable Securities:
Due in one year or less	$	92,605	$	574	$	(1	)	$	93,178
Due in one through three years		97,375		1,227		(305	)		98,297
Due in three through five years		36,892		207		(178	)		36,921
Total Marketable Securities	$	226,872	$	2,008	$	(484	)	$	228,396
	December 31, 2002
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Marketable Securities:
Due in one year or less	$	31,642	$	321		—		$	31,963
Due in one through three years		101,537		2,526	$	(2	)		104,061
Due in three through five years		11,571		512		—			12,083
Total Marketable Securities	$	144,750	$	3,359	$	(2	)	$	148,107

For the year ended December 31, 2003 the Company realized gross gains of $0.4 million and gross losses of $0.1 million on securities sold. For the year ended December 31, 2002, the Company did not realize any material gains or losses on securities sold.

57

CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

10.    Restructuring and Related Charges

In November 2002, the Company announced a restructuring plan intended to reduce costs and focus its resources on prioritizing, selecting and rapidly advancing its most promising drug candidates. In connection with this restructuring plan, a charge of approximately $11.0 million was recorded in the fourth quarter of 2002. The cash requirements under the November 2002 restructuring plan were $1.9 million, $1.2 million of which was paid in 2002, and $0.7 of which was paid in 2003.

In June 2003, the Company announced a restructuring plan intended to focus resources on continuing to advance its pipeline of protein, antibody, and small molecule therapeutics into preclinical and clinical development. In connection with this restructuring plan, a charge of approximately $2.9 million was recorded in the second quarter of 2003, including $1.8 million related to employee separation costs, $1.0 million of operating lease obligations and $0.1 million of asset impairment costs. The cash requirements under the June 2003 restructuring plan were $2.7 million, of which $1.4 million was paid prior to December 31, 2003. The remaining cash requirements of $1.3 million will be paid through the end of 2008.

11.    License Agreement

In August 2003, 454 entered into a license agreement with Pyrosequencing AB to license specific technology in certain fields of use. As part of this agreement, 454 is required to pay Pyrosequencing AB a minimum non-refundable $4.5 million payment of which $2.5 million was paid in 2003 and $0.5 million is payable in each of the third quarters of 2004, 2005, 2006 and 2007. At December 31, 2003, the Company recorded a $4.5 million intangible asset, a $0.5 million accrued expense for the 2004 minimum payment and a $1.5 million accrued long-term liability for the remaining future minimum payments under this license agreement.

The term of the license is from August 18, 2003 through the latest expiration date of the patents listed in the agreement, which is to be determined on the seventh anniversary of the agreement. The Company is amortizing this asset on a straight-line basis over the estimated useful life of the license which management has determined to be 10 years. During 2003, the Company recorded $0.2 million of amortization expense associated with this license agreement.

12.    Segment Reporting

The FASB issued Statement of Financial Accounting Standards No. 131, “Disclosures About Segments of an Enterprise and Related Information”, 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. An enterprise is required to separately report information about each operating segment that engages in business activities from which the segment may earn revenues and incur expenses, whose separate operating results are regularly reviewed by the chief operating decision maker regarding allocation of resources and performance assessment and which exceeds specific quantitative thresholds related to revenue, profit or loss and assets.

The Company currently operates in two business segments: CuraGen and 454. CuraGen is a genomics-based pharmaceutical company, dedicated to improving the lives of patients by developing a pipeline of novel protein, antibody, and small molecule therapeutics in the areas of oncology, inflammation, obesity and diabetes, and central nervous system disorders. 454, the Company’s majority-owned subsidiary, is developing novel nanoscale instrumentation and technologies for rapidly and comprehensively determining the nucleotide sequence—“whole genome sequencing”—of entire genomes. The operations of 454 are run by a separate management team and governed by a separate Board of Directors made up of members of CuraGen’s management team and Board of

58

CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Directors. During 2003, the Company exceeded the quantitative thresholds described above governing the segment reporting, and as a result, the financial information disclosed herein represents all of the material financial information related to the Company’s reportable business segments. All of the Company’s revenues are generated in the United States and all assets are located in the United States.

	December 31,
	2003			2002			2001
Cash and investments:
CuraGen	$	319,444		$	393,273		$	474,984
454		24,197			21,536			33,365
Total	$	343,641		$	414,809		$	508,349
Total assets:
CuraGen	$	365,906		$	437,908		$	524,547
454		33,260			26,157			35,671
Intercompany eliminations		(22,209	)		(15,536	)		(21,517	)
Total	$	376,957		$	448,529		$	538,701

	Year Ended December 31,
	2003			2002			2001
Revenues:
CuraGen	$	6,918		$	18,246		$	23,475
454		—			—			—
Total	$	6,918		$	18,246		$	23,475
Operating expenses:
CuraGen	$	71,292		$	104,933		$	79,070
454		15,305			10,658			5,610
Total	$	86,597		$	115,591		$	84,680
Net loss:
CuraGen	$	65,151		$	84,572		$	40,652
454		15,054			9,718			3,767
Minority interest in subsidiary loss		(5,708	)		(3,887	)		(1,507	)
Total	$	74,497		$	90,403		$	42,912
Depreciation and amortization:
CuraGen	$	6,983		$	8,519		$	6,850
454		1,679			768			259
Total	$	8,662		$	9,287		$	7,109
Capital expenditures:
CuraGen	$	4,714		$	17,931		$	9,774
454		2,316			2,416			1,716
Intercompany eliminations		(131	)		(8	)		(108	)
Total	$	6,899		$	20,339		$	11,382

59

CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

13.    Subsequent Event

4% Convertible Subordinated Notes due 2011

On February 17, 2004, the Company completed an offering for $100.0 million of 4% convertible subordinated notes due February 15, 2011 and received net proceeds of approximately $97.0 million. The notes 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. Holders may convert their notes into shares of the Company’s Common Stock at any time prior to maturity or their prior redemption or repurchase by the Company at a conversion rate of 103.2429 shares for each $1,000 principal amount of notes, subject to adjustment.

In addition, during the period commencing February 18, 2009, to and including February 14, 2010, the Company has the right to redeem the notes at a redemption price equal to 101.143% of the principal amount of the notes plus accrued and unpaid interest, if any, to, but not including, the redemption date; and beginning on February 15, 2010, the Company has the right to redeem the notes at a redemption price equal to 100.571% of the principal amount of the notes plus accrued and unpaid interest, if any, to, but not including, the redemption date. The Company will pay cash interest on the notes on February 15 and August 15 of each year, beginning on August 15, 2004.

In February 2004, the Company repurchased $20.0 million of the 6% convertible subordinated debentures due 2007, for total consideration of $20.0 million, plus accrued interest of $0.05 million to the date of repurchase. As a result of the transaction, and in accordance with Statement of Financial Accounting Standards No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” (“SFAS 145”), in February 2004, the Company will record a loss of approximately $0.03 million in other income, which includes the write-off of the ratable portion of unamortized deferred financing costs relating to the repurchased debt. The Company has agreed to file a registration statement with the Securities and Exchange Commission by May 17, 2004 for the resale of any shares issued as a result of the conversion of the notes.

14.    Summary of Selected Quarterly Financial Data (Unaudited)

	Quarter Ended
	March 31			June 30			Sept. 30			Dec. 31
2003:
Total revenues	$	1,944		$	1,695		$	787		$	2,492
Total operating expenses		19,410			26,099			19,919			21,169
Net loss		(16,142	)		(23,427	)		(17,477	)		(17,451	)
Net loss per share		(0.33	)		(0.48	)		(0.35	)		(0.35	)
2002:
Total revenues	$	4,812		$	3,659		$	6,019		$	3,756
Total operating expenses		26,068			27,491			27,502			34,530
Net loss		(19,631	)		(22,021	)		(19,882	)		(28,869	)
Net loss per share		(0.40	)		(0.45	)		(0.41	)		(0.59	)

60

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, 2003 and 2002, 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, 2003. 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of CuraGen Corporation and its subsidiary at December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.

/s/Deloitte & Touche LLP

Hartford, Connecticut

January 23, 2004

(except as to Footnote 13, as to which the date is February 17, 2004)

61

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9a.    Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Annual Report on Form 10-K, an evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on that evaluation, the CEO and CFO have concluded that our disclosure controls and procedures were adequate and effective to ensure that material information relating to us, including our consolidated subsidiary, was made known to them by others within those entities, particularly during the period in which this Annual Report on Form 10-K was being prepared.

(b) Changes in Internal Controls

There have been no changes in our internal controls over financial reporting, identified in connection with the above-mentioned evaluation of such internal controls that occurred during our last fiscal year that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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 “Meetings and Committees of the Board of Directors”, “Management and Executive Compensation”, “Section 16(a) Beneficial Ownership Reporting Compliance”, and “Code of Ethics and Corporate Code of Conduct” in our Proxy Statement for the 2004 Annual Meeting of Shareholders.

Item 11.    Executive Compensation

The response to this item is incorporated by reference from the discussion under the caption “Management and Executive Compensation” in our Proxy Statement for the 2004 Annual Meeting of Shareholders.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

The response to this item is incorporated by reference from the discussion under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in our Proxy Statement for the 2004 Annual Meeting of Shareholders.

Item 13.    Certain Relationships and Related Transactions

The response to this item is incorporated by reference from the discussion under the captions “Employment Agreements, Termination of Employment and Change in Control Arrangements” and “Certain Relationships and Related Transactions” in our Proxy Statement for the 2004 Annual Meeting of Shareholders.

Item 14.    Principal Accountant Fees and Services

The response to this item is incorporated by reference from the discussion under the caption “Principal Accountant Fee and Services” in our Proxy Statement for the 2004 Annual Meeting of Shareholders.

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PART IV

Item 15.    Exhibits, Financial Statement Schedules and Reports on Form 8-K.

Item 15 (a)(1)    Financial Statements

The following Financial Statements are included in Item 8:

Item 15 (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 15 (a)(3)    Exhibits

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

Exhibit No.	Description
&&3.1	Restated Certificate of Incorporation of the Registrant dated March 12, 1998, as filed with the Delaware Secretary of State on March 23, 1998 (Filed as Exhibit 3.1)
&&3.2	Certificate of Amendment of the Restated Certificate of Incorporation of the Registrant, dated May 25, 2000, as filed with the Delaware Secretary of State on May 25, 2000, increasing the authorized common stock of the Company from 50,000,000 to 250,000,000 (Filed as Exhibit 3.2)
$$3.3	Certificate of Designation, Series A Junior Participating Preferred Stock (Filed as Exhibit 3.3)
*!!3.4	Amended and Restated Certificate of Incorporation of 454 Life Sciences Corporation dated September 18, 2003
@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 (Filed as Exhibit 4.4)
*4.5	Indenture dated as of February 17, 2004 between the Registrant and The Bank of New York, as trustee

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Exhibit No.	Description
$$10.1	Memorandum of Lease Agreements as amended and restated, through May 8, 2002 (New Haven) by and between the Registrant and Fusco Harbour Associates, LLC (Filed as Exhibit 10.1)
$$10.2	Lease, as amended and restated, through April 23, 2002, (Branford) by and between T.K.J. Associates, LLC and the Registrant (Filed as Exhibit 10.2)
&&10.3	1997 Employee, Director and Consultant Stock Plan, as amended and restated through May 28, 2003 (Filed as Exhibit 10.3)
@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	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)
@10.7	ATP Agreement for Integrated Microfabricated DNA Analysis Device for Diagnosis of Complex Genetic Disorders, dated February 1995 (Filed as Exhibit 10.17)
@10.8	ATP Agreement for Molecular Recognition Technology for Precise Design of Protein-Specific Drugs, dated March 2, 1995 (Filed as Exhibit 10.18)
@10.9	ATP Agreement for Programmable Nanoscale Engines for Molecular Separation, dated May 6, 1997 (Filed as Exhibit 10.19)
–10.10	Registration Rights Agreement dated as of February 2, 2000 among the Registrant and Lehman Brothers Inc., Morgan Stanley & Co. Incorporated and Dain Rauscher Incorporated, as the initial purchasers (Filed as Exhibit 4.2)
+?10.11	Metabolic Disorder Collaboration Agreement, dated January 12, 2001, by and between Bayer Corporation and the Registrant (Filed as Exhibit 10.24)
++*?10.12	Amendment dated December 19, 2003 to Pharmacogenomics Agreement, dated January 12, 2001, by and between the Registrant and Bayer AG (Filed as Exhibit 10.25)
?10.13	Stock Purchase Agreement, dated January 12, 2001, by and between Bayer AG and the Registrant (Filed as Exhibit 10.26)
+?10.14	Restated Collaboration Agreement, dated November 27, 2000, between Abgenix, Inc. and the Registrant (Filed as Exhibit 10.27)
^10.15	Lease, dated May 24, 2001, (Branford) by and between 16 Commercial Street Associates, LLC and the Registrant (Filed as Exhibit 10.27)
^10.16	Lease, dated November 29, 2001, (Branford) by and between 20 Commercial Street Associates, LLC and 454 Life Sciences Corporation (Filed as Exhibit 10.28)
^10.17	Assignment of Purchase Agreement, dated April 10, 2001, by and between the Registrant and Richard E. Beauvais (Filed as Exhibit 10.29)
*^10.18	Addendum dated October 31, 2003, to Employment Agreement, dated April 1, 2002, between the Registrant and Jonathan M. Rothberg (Filed as Exhibit 10.30)
*^10.19	Addendum dated October 31, 2003, to Employment Agreement, dated April 1, 2002, between the Registrant and Christopher K. McLeod (Filed as Exhibit 10.31)
*^10.20	Addendum dated October 31, 2003, to Employment Agreement, dated April 1, 2002, between the Registrant and David M. Wurzer (Filed as Exhibit 10.32)
^^10.21	Employment Agreement, dated May 20, 2002, between the Registrant and Elizabeth A. Whayland (Filed as Exhibit 10.3)

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Exhibit No.	Description
*$10.22	Addendum dated October 31, 2003, to Employment Agreement, dated September 9, 2002, between the Registrant and Timothy M. Shannon (Filed as Exhibit 10.1)
*$$10.23	Addendum dated October 31, 2003, to Employment Agreement, dated December 19, 2002, between 454 Life Sciences Corporation and Richard F. Begley (Filed as Exhibit 10.30)
+$$10.24	Amended and Restated Research and Option Agreement, dated March 31, 2000, by and between the Registrant and Genentech, Inc. (Filed as Exhibit 10.31)
*10.25	Purchase Agreement, dated June 5, 2000, between 454 Life Sciences Corporation, the Registrant and several purchasers
*10.26	Purchase Agreement, dated September 18, 2003, between 454 Life Sciences Corporation, the Registrant and several purchasers
++*10.27	Amended and Restated Technology Transfer and License Agreement, dated June 23, 2003, by and between the Registrant and 454 Life Sciences Corporation
++*10.28	License agreement, dated August 18, 2003, by and between Pyrosequencing AB and 454 Life Sciences Corporation
*10.29	Lease, dated January 13, 2004, (Branford) by and between ZFI Group, LLC and the Registrant
*10.30	Purchase Agreement dated February 10, 2004, between the Registrant and Bear, Stearns & Co., Inc.
*10.31	Registration Rights Agreement dated February 17, 2004 among the Registrant and Bear, Stearns & Co. Inc., as the initial purchaser
*12.1	Ratio of Earnings to Fixed Charges
*14.1	Code of Ethics for the Chief Executive Officer and Senior Financial Officers of the Registrant, dated November 12, 2003
*14.2	Corporate Code of Conduct of the Registrant, dated March 1, 2004
*21.1	Subsidiaries of the Registrant
*23.1	Consent of Deloitte & Touche LLP
*31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*32	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

* Filed herewith.

!! Schedules/exhibits are available at the principal office of the Registrant

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

++ Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 406 of the Securities Act or Rule 24b-2 of the Exchange Act.

@ 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 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.

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? 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, 2000.

^ 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.

^^ 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, 2002.

$ 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, 2002.

$$ 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, 2002.

&& 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, 2003.

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 15 (b)    Reports on Form 8-K

The following Reports on Form 8-K were filed or furnished during the quarter ended December 31, 2003:

On October 23, 2003, we furnished a report on Form 8-K under “Item 12. Results of Operations and Financial Condition”, announcing financial results for the quarter ended September 30, 2003, and providing an update of our significant accomplishments for the third quarter of 2003.

On November 7, 2003, we filed a report on Form 8-K under Item 5, “Other Events and Regulation FD Disclosure”, announcing the completion of the world’s first comprehensive protein interaction map for a multicellular organism, Drosophila melanogaster in collaboration with researchers at The Johns Hopkins University, Wayne State University School of Medicine, and Yale University School of Medicine. The results were published in the online edition of Science.

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SIGNATURES

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

Dated: March 11, 2004	CURAGEN CORPORATION
	By:	/s/    DAVID M. WURZER
		David M. Wurzer Executive Vice President, Chief Financial Officer and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 11, 2004.

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

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EXHIBIT INDEX

Exhibit Number	Description
3.4	Amended and Restated Certificate of Incorporation of 454 Life Sciences Corporation dated September 18, 2003
4.5	Indenture dated as of February 17, 2004 between the Registrant and The Bank of New York, as trustee
10.12	Amendment dated December 19, 2003 to Pharmacogenomics Agreement, dated January 12, 2001, by and between the Registrant and Bayer AG
10.18	Addendum dated October 31, 2003, to Employment Agreement, dated April 1, 2002, between the Registrant and Jonathan M. Rothberg
10.19	Addendum dated October 31, 2003, to Employment Agreement, dated April 1, 2002, between the Registrant and Christopher K. McLeod
10.20	Addendum dated October 31, 2003, to Employment Agreement, dated April 1, 2002, between the Registrant and David M. Wurzer
10.22	Addendum dated October 31, 2003, to Employment Agreement, dated September 9, 2002, between the Registrant and Timothy M. Shannon
10.23	Addendum dated October 31, 2003, to Employment Agreement, dated December 19, 2002, between 454 Life Sciences Corporation and Richard F. Begley
10.25	Purchase Agreement, dated June 5, 2000, between 454 Life Sciences Corporation, the Registrant and several purchasers
10.26	Purchase Agreement, dated September 18, 2003, between 454 Life Sciences Corporation, the Registrant and several purchasers
10.27	Amended and Restated Technology Transfer and License Agreement, dated June 23, 2003, by and between the Registrant and 454 Life Sciences Corporation
10.28	License agreement, dated August 18, 2003, by and between Pyrosequencing AB and 454 Life Sciences Corporation
10.29	Lease, dated January 13, 2004, (Branford) by and between ZFI Group, LLC and the Registrant
10.30	Purchase Agreement dated February 10, 2004, between the Registrant and Bear, Stearns & Co., Inc.
10.31	Registration Rights Agreement dated February 17, 2004 among the Registrant and Bear, Stearns & Co. Inc., as the initial purchaser
12.1	Ratio of Earnings to Fixed Charges
14.1	Code of Ethics for the Chief Executive Officer and Senior Financial Officers of the Registrant, dated November 12, 2003
14.2	Corporate Code of Conduct of the Registrant, dated March 1, 2004
21.1	Subsidiaries of the Registrant
23.1	Consent of Deloitte & Touche LLP
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code).

EX-3.4

EXHIBIT 3.4

RESTATED CERTIFICATE OF INCORPORATION

OF

454 CORPORATION

(Originally incorporated on March 16, 2000)

FIRST: The name of the Corporation is 454 Life Sciences Corporation (hereinafter sometimes referred to as the “Corporation”).

SECOND: The address of the registered office of the Corporation in the State of Delaware is 2711 Centerville Road, Suite 400, in the City of Wilmington, County of New Castle. The name of the registered agent at the address is The Prentice-Hall Corporation System, Inc.

THIRD: (a) The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware; provided, however, that the Corporation shall not have the corporate power to take any action, or to cause or permit any Subsidiary or Affiliate to take any action, to exploit in any manner any Corporate Opportunity unless and until exploitation of such Corporate Opportunity is rejected by CuraGen Corporation (“CuraGen”). The Corporation shall not have the corporate power to take any action, or to cause or permit any Subsidiary or Affiliate to (or to own any Subsidiary or Affiliate that does) take any action, to exploit in any manner any Corporate Opportunity, unless and until such Corporate Opportunity shall be presented to CuraGen (on its own behalf and on behalf of its Subsidiaries and Affiliates) and CuraGen determines that CuraGen shall not (on its own behalf or on behalf of its Subsidiaries and Affiliates) pursue such Corporate Opportunity.

(b) If CuraGen or any of its Affiliates or any director or officer of the Corporation who is a director, officer or employee of CuraGen or any of its Affiliates acquires knowledge of a potential transaction or matter which may be a Competitive Opportunity or otherwise is then exploiting any Competitive Opportunity, the Corporation shall have no interest in, and no expectation that, such Competitive Opportunity be offered to it, any such interest or expectation being hereby renounced so that CuraGen, its Affiliates and such individuals (1) shall have no duty to communicate, or present such Competitive Opportunity to the Corporation, shall have the right to hold any such Competitive Opportunity for CuraGen’s (and its officers’, directors’, agents’, stockholders’, members’, partners’, Affiliates’ or Subsidiaries’) own account, or to recommend, assign or otherwise transfer such Competitive Opportunity to persons other than the Corporation or any Subsidiary of the Corporation and (2) cannot be liable to the Corporation or its stockholders for breach of any fiduciary duty as a stockholder, officer or director of the Corporation or otherwise by reason of the fact that CuraGen or any of its Affiliates pursues or acquires such Competitive Opportunity for itself, directs, sells, assigns or otherwise transfers such Competitive Opportunity to another person, or does not communicate information regarding such Competitive Opportunity to the Corporation.

(c) For the purposes of this Article Third:

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

“Competitive Opportunity” shall mean an investment or business opportunity or prospective economic or competitive advantage in which the Corporation could have an interest or expectancy.

“Corporate Opportunity” shall mean an investment, business or development opportunity in which the Corporation could, but for the provisions of this Article Third, have an interest or expectancy; provided, however, that (i) prior to the closing of a Qualified Public Offering (as such term is defined in Section 4(a)(ii) hereof), “Corporate Opportunity” shall not include an investment, business or development opportunity in the 454 Field, and (ii) after the closing of a Qualified Public Offering, “Corporate Opportunity” shall only include an investment, business or development opportunity in the CuraGen Field.

“CuraGen Field” means drug development and the sale of information and/or services associated with drug development for human therapeutics.

“454 Field” means (a) the design, development, manufacture, production, testing and sale of instrumentation, reagents and software for DNA sequencing and DNA-based analysis, and the aggregation of data obtained from third parties through the use of such instrumentation, to create either an internet portal or database for the sole purpose of generating sales of additional instrumentation and sales of reagents and software for DNA-based analysis and (b) the providing of sequencing services for any and all uses outside of the CuraGen Field.

“Person” shall mean an individual, corporation, partnership, limited liability company, trust, unincorporated organization, or other legal entity, or a governmental body, or their equivalent under the applicable legal system.

“Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, association, joint venture or other business entity of which (i) if a corporation, (x) ten percent (10%) or more of the total voting power of shares of stock entitled to vote in the election of directors thereof or (y) ten percent (10%) or more of the value of the equity interests is at the time owned or controlled, directly or indirectly, by the Person or one or more of its other Subsidiaries, or (ii) if a limited liability company, partnership, association or other business entity, ten percent (10%) or more of the partnership or other similar ownership interests thereof is at the time owned or controlled,

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directly or indirectly, by the Person or one or more of its subsidiaries. The Person shall be deemed to have a ten percent (10%) or greater ownership interest in a limited liability company, partnership, association or other business entity if the Person is allocated ten percent (10%) or more of the limited liability company, partnership, association or other business entity gains or losses or shall be or control the Person managing such limited liability company, partnership, association or other business entity.

FOURTH: The total number of shares of stock which the Corporation shall have authority to issue is eighty-six million (86,000,000) shares, consisting of a class of thirty-eight million (38,000,000) shares of Preferred Stock, par value of one cent ($0.01) per share (the “Preferred Stock”) and a class of forty-eight million (48,000,000) shares of Common Stock, par value of one cent ($0.01) per share (the “Common Stock”).

The Preferred Stock authorized by this Restated Certificate of Incorporation shall be issued in series. The first such series shall be designated Series A Convertible Preferred Stock (“Series A Preferred Stock”) and shall consist of twelve million (12,000,000) shares. The second such series shall be designated Series B Preferred Stock (“Series B Preferred Stock”) and shall consist of eight million (8,000,000) shares. The third such series shall be designated Series C Preferred Stock (“Series C Preferred Stock”) and shall consist of                                          (                )* shares. The fourth such series shall be designated Series D Preferred Stock (“Series D Preferred Stock”) and shall consist of                                                       (                )* shares. The Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock are sometimes collectively referred to herein as the “Series Preferred Stock.”

Except for the Series Preferred Stock, and except as limited by Article FOURTH, Section 6 hereof, the Board of Directors is authorized at any time, and from time to time, to provide for the issuance of shares of Preferred Stock in one or more series, and to determine the designations, preferences, limitations and relative or other rights of the Preferred Stock or any series thereof. For each series other than the Series Preferred Stock, and except as limited by Article FOURTH, Section 6 hereof, the Board of Directors shall determine, by resolution or resolutions adopted prior to the issuance of any shares thereof, the designations, powers, preferences, limitations and relative or other rights thereof, including but not limited to the following relative rights and preferences, as to which there may be variations among different series:

* The total number of authorized shares of Series C Preferred Stock and Series D Preferred Stock shall equal 8,000,000. The shares of Series C Preferred Stock and Series D Preferred Stock shall be offered pro rata to the current holders of Series A Preferred Stock and Series B Preferred Stock. Any shares to be purchased by CuraGen as a result of this process shall be authorized as Series C Preferred Stock and the remaining shares shall be authorized as Series D Preferred Stock.

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(a) The rate and manner of payment of dividends, if any;

(b) Whether shares may be redeemed and, if so, the redemption price and the terms and conditions of redemption;

(c) The amount payable for shares in the event of liquidation, dissolution or other winding up of the Corporation;

(d) Sinking fund provisions, if any, for the redemption or purchase of shares;

(e) The terms and conditions, if any, on which shares may be converted or exchanged;

(f) Voting rights, if any; and

(g) Any other rights and preferences of such shares, to the full extent now or hereafter permitted by the General Corporation Law of the State of Delaware.

The Board of Directors shall have the authority to determine the number of shares that will comprise each series, other than the Series Preferred Stock.

Prior to the issuance of any shares of a series, but after adoption by the Board of Directors of the resolutions establishing such series, the appropriate officers of the Corporation shall file such documents with the State of Delaware as may be required by law.

The relative rights, preferences, privileges, restrictions and other matters relating to the respective classes of the capital stock of the Corporation or the holders thereof are as follows:

1. Definitions.

For purposes of this Article “Junior Shares” shall mean all Common Stock and any other shares of the Corporation other than the Series Preferred Stock.

2. Dividend Rights of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock.

Dividends shall accrue from day to day on each share of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock from the date of original issuance of such share, whether or not funds are legally available therefor and whether or not earned or declared by the Board of Directors, at the rate per annum of $0.125 per share of Series A Preferred Stock, $0.125 per share of Series B Preferred Stock, $0.125 per share of Series C Preferred Stock and $0.125 per share of Series D Preferred Stock (as adjusted for any stock dividends, stock splits, recapitalizations, consolidations or the like occurring after September 18, 2003, with respect to the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock), payable only upon the liquidation, dissolution or winding up of the Corporation within the meaning of Section 3 hereof. The right to such

4

dividends on the Series Preferred Stock shall be cumulative. Each share of Series Preferred Stock shall rank on a parity with each other share of Series Preferred Stock, irrespective of series, with respect to dividends at the respective rates fixed for such series and no dividends shall be declared as paid or set apart for payment on the Series Preferred Stock unless at the same time a dividend bearing the same proportion to the applicable dividend rate shall also be declared or paid or set apart for payment, as the case may be, on the Series Preferred Stock of each other series then outstanding. No dividends shall be paid on any Junior Shares unless (i) the stated dividend provided for in the first sentence of this paragraph shall theretofore have been declared and paid in full on all shares of Series Preferred Stock then outstanding, and (ii) a dividend equal to the dividend declared on such Junior Shares is paid with respect to all outstanding shares of Series Preferred Stock in an amount for each such share of Series Preferred Stock equal to the aggregate amount of such dividends for all Junior Shares into which each such share of Series Preferred Stock could then be converted.

At the time of any conversion of any shares of Series Preferred Stock pursuant to Paragraph 4 of this Article FOURTH, any dividend accrued but unpaid pursuant to the preceding paragraph on such Series Preferred Stock shall not be paid by the Corporation and shall be deemed forfeited as of the effective date of such conversion.

3. Liquidation Preference.

(a) In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, the holders of the Series Preferred Stock shall be entitled to receive an amount from assets and surplus funds, prior and in preference to any distribution from the assets or surplus funds of the Corporation to the holders of the Junior Shares, by reason of their ownership thereof. In the case of the Series A Preferred Stock, subject to the liquidation rights and preferences of any class or series of capital stock of the Company designated to be senior to, or on a parity with, the Series A Preferred Stock, such amount shall equal $2.50 (adjusted for stock splits, stock dividends and other capital transactions occurring after September 18, 2003) for each share of Series A Preferred Stock (the “Series A Liquidation Amount”) then held by such holders of Series A Preferred Stock, and, in addition, an amount equal to all accrued but unpaid dividends on the Series A Preferred Stock as provided in Paragraph 2 above. In the case of the Series B Preferred Stock, subject to the liquidation rights and preferences of any class or series of capital stock of the Company designated to be senior to, or on a parity with, the Series B Preferred Stock, such amount shall equal $2.50 (adjusted for stock splits, stock dividends and other capital transactions occurring after September 18, 2003) for each share of Series B Preferred Stock (the “Series B Liquidation Amount”) then held by such holders of Series B Preferred Stock, and, in addition, an amount equal to all accrued but unpaid dividends on the Series B Preferred Stock as provided in Paragraph 2 above. In the case of the Series C Preferred Stock, subject to the liquidation rights and preferences of any class or series of capital stock of the Company designated to be senior to, or on a parity with, the Series C Preferred Stock, such amount shall equal $2.50 (adjusted for stock splits, stock dividends and other capital transactions occurring after September 18, 2003) for each share of Series C Preferred Stock (the “Series C Liquidation Amount”) then held by such holders of Series C Preferred Stock, and, in addition, an amount equal to all accrued but unpaid dividends on the Series C Preferred Stock as provided in Paragraph 2 above. In the case of the Series D

5

Preferred Stock, subject to the liquidation rights and preferences of any class or series of capital stock of the Company designated to be senior to, or on a parity with, the Series D Preferred Stock, such amount shall equal $2.50 (adjusted for stock splits, stock dividends and other capital transactions occurring after September 18, 2003) for each share of Series D Preferred Stock (the “Series D Liquidation Amount,” and together with the Series A Liquidation Amount, the Series B Liquidation Amount and the Series C Liquidation Amount, the “Series Liquidation Amount”) then held by such holders of Series D Preferred Stock, and, in addition, an amount equal to all accrued but unpaid dividends on the Series D Preferred Stock as provided in Paragraph 2 above. If, upon the occurrence of such event, the assets and funds thus distributed among the holders of the Series Preferred Stock shall be insufficient to permit the payment to such holders of the full preferential amount aforesaid, then the entire assets and funds of the Corporation legally available for distribution shall be distributed ratably among the holders of the Series Preferred Stock in proportion to the amount of Series Preferred Stock held by each holder subject to the liquidation rights and preferences of any class or series of capital stock of the Company designated to be senior to, or on a parity with, the Series Preferred Stock. After payment has been made to the holders of the Series Preferred Stock of the full amounts to which they shall be entitled as aforesaid, all remaining assets and funds of the Corporation shall be distributed in like amounts per share on an as-converted basis among the holders of the Series Preferred Stock and the Junior Shares.

4. Conversion. The holders of the Series Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

(a) Right to Convert.

(i) Each share of Series Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share, at the office of the Corporation or any transfer agent for the Series Preferred Stock, into fully paid and nonassessable shares of Common Stock at the applicable Conversion Rate (as hereinafter defined) in effect at the time of conversion. The number of shares of Common Stock into which each share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock may be converted is hereinafter referred to as the “Series A Conversion Rate,” the “Series B Conversion Rate,” the “Series C Conversion Rate” and the “Series D Conversion Rate,” respectively, and the Series A Conversion Rate, the Series B Conversion Rate, the Series C Conversion Rate and the Series D Conversion Rate are hereinafter referred to collectively as the “Conversion Rates.” The initial Conversion Rate for the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall each be one (1), and such Conversion Rates shall be subject to the adjustments described below. Any adjustment of the Conversion Rate for any series of Preferred Stock shall also cause an appropriate adjustment of the Conversion Price (as hereinafter defined) for such series of Preferred Stock. The amount obtained by dividing $2.50 (adjusted for stock splits of and stock dividends on the Series A Preferred Stock) by the Series A Conversion Rate shall be called the “Series A Conversion Price,” the amount obtained by dividing $2.50 (adjusted for stock splits of and stock dividends on the Series B Preferred Stock) by the Series B Conversion Rate shall be called the “Series B Conversion Price,” the amount obtained by dividing by $2.50 (adjusted for stock splits on and stock dividends of the Series C Preferred Stock) by the Series C Conversion

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Rate shall be called the “Series C Conversion Price,” the amount obtained by dividing by $2.50 (adjusted for stock splits of and stock dividends on the Series D Preferred Stock) by the Series D Conversion Rate shall be called the “Series D Conversion Price” and the Series A Conversion Price, the Series B Conversion Price, the Series C Conversion Price and Series D Conversion Price are herein referred to collectively as the “Conversion Price.”

(ii) Each share of Series B Preferred Stock and Series D Preferred Stock shall automatically be converted into shares of Common Stock at the then effective Series B Conversion Rate or Series D Conversion Rate, as the case may be, in the event of (a) the conversion of seventy-five percent (75%) of all outstanding Series B Preferred Stock and Series D Preferred Stock, taken as a whole, into Common Stock, effective upon such conversion, or (b) the closing of a firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended (or any successor statute for registration of shares in public offerings) covering the offer and sale of Common Stock for the account of the Corporation to the public (other than a registration statement with respect to employee stock option or purchase plans) resulting in the aggregate receipt by the Corporation of at least thirty million dollars ($30,000,000) of gross proceeds (before applicable discounts, commissions and expenses) and the listing of the Common Stock on a nationally recognized stock market or exchange, including the Nasdaq Stock Market, the New York Stock Exchange and the American Stock Exchange (a “Qualified Public Offering”). In the event of such an offering, the person(s) entitled to receive the Common Stock issuable upon such conversion of the Series B Preferred Stock and Series D Preferred Stock shall not be deemed to have converted such Series B Preferred Stock and Series D Preferred Stock until immediately prior to the closing of such sale of securities.

(iii) No fractional shares of Common Stock shall be issued upon conversion of the Series Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to the product of such fraction multiplied by the fair market value of one share of Series Preferred Stock, as reasonably determined by the Corporation’s Board of Directors, payable as promptly as possible.

(b) Mechanics of Conversion. Before any holder of Series Preferred Stock shall be entitled to convert the same into shares of Common Stock, the holder shall surrender the certificate or certificates therefor, duly endorsed, at the principal office of the Corporation or of any transfer agent for the Series Preferred Stock, and shall give written notice to the Corporation at such office that such holder elects to convert the same and shall state therein the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. The Corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series Preferred Stock, or to such holder’s nominee or nominees, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date and time.

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(c) Adjustment for Combinations or Consolidations; Reorganizations, Reclassification, Exchange and Substitution. Any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Corporation’s assets to any entity or other transaction which is effected in such a manner that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock is referred to herein as an “Organic Change.” Prior to the consummation of any Organic Change, the Corporation shall make appropriate provisions to insure that each of the holders of Series Preferred Stock shall thereafter have the right to acquire and receive, in lieu of or in addition to (as the case may be) the shares of Common Stock immediately theretofore acquirable and receivable upon the conversion of such holder’s Series Preferred Stock, such shares of stock, securities or assets as such holder would have received in connection with such Organic Change if such holder had converted its Series Preferred Stock into shares of Common Stock immediately prior to such Organic Change. In each such case, the Corporation shall also make appropriate provisions to insure that the provisions of this Section 4 shall thereafter be applicable to the Series Preferred Stock and to the shares of stock, securities or assets received by each holder upon such Organic Change.

(d) Adjustment for Dividends, Distributions and Common Stock Equivalents. If the Corporation at any time or from time to time after September 18, 2003 (hereinafter referred to as the “Original Issue Date”) shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive a dividend or other distribution to be made only to such holders of Common Stock, but not to the Series Preferred Stock, payable in additional shares of Common Stock, or other securities or rights convertible into or entitling the holder thereof to receive additional shares of Common Stock, directly or indirectly (hereinafter referred to as “Common Stock Equivalents”), without payment of any consideration by such holder for such Common Stock, then and in each such event the maximum number of shares (as set forth in the instrument relating thereto without regard to any provisions contained therein for a subsequent adjustment of such number) of Common Stock issuable in payment of such dividend or distribution or upon conversion or exercise of such Common Stock Equivalents shall be deemed to be issued and outstanding as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date. In each such event each respective Conversion Rate shall be increased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying such Conversion Rate by a fraction,

(i) the numerator of which shall be the sum of (x) the total number of shares of Common Stock issued and outstanding (before conversion of any then outstanding shares of Preferred Stock and excluding Common Stock issuable upon exchange or conversion or exercise of outstanding Common Stock Equivalents) immediately prior to the time of such issuance or the close of business on such record date plus (y) the number of shares of Common Stock issuable in payment of such dividend or distribution or upon conversion or exercise of such Common Stock Equivalents; and

(ii) the denominator of which shall be the total number of shares of Common Stock issued and outstanding (before conversion of any then outstanding shares of Preferred Stock and excluding Common Stock issuable upon exchange or conversion or exercise of

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outstanding Common Stock Equivalents) immediately prior to the time of such issuance or the close of business on such record date;

provided, however, that (A) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, each Conversion Rate computed upon the original issuance thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall be recomputed accordingly as of the close of business on such record date, and thereafter each Conversion Rate shall be adjusted pursuant to this Paragraph 4(d) as of the time of actual payment of such dividends or distributions; (B) if such Common Stock Equivalents provide, with the passage of time or otherwise, for any decrease in the number of shares of Common Stock issuable upon conversion or exercise thereof (or upon the occurrence of a record date with respect thereto), each Conversion Rate computed upon the original issuance thereof (or upon the occurrence of a record date with respect thereto) and any subsequent adjustments based thereon, shall, upon any such decrease becoming effective, be recomputed to reflect such decrease insofar as it affects the rights of conversion or exercise of the Common Stock Equivalents then outstanding; (C) upon the expiration of any rights or conversion or exercise under any unexercised Common Stock Equivalents, each Conversion Rate computed upon the original issuance thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon such expiration, be recomputed as if the only additional shares of Common Stock issued were the shares of such stock, if any, actually issued upon the conversion or exercise of such Common Stock Equivalents; and (D) in the case of Common Stock Equivalents which expire by their terms not more than sixty (60) days after the date of issuance thereof, no adjustment in any Conversion Rate shall be made until the expiration or exercise of all such Common Stock Equivalents, whereupon such adjustments shall be made in the manner provided in clause (C) above.

(e) Adjustment of Series A Conversion Rate, Series B Conversion Rate, Series C Conversion Rate and Series D Conversion Rate for Diluting Issues. The Series A Conversion Rate, the Series B Conversion Rate, the Series C Conversion Rate and the Series D Conversion Rate shall be subject to the following adjustment, in addition to those set forth above. Except as otherwise provided in this subparagraph (e), in the event the Corporation sells or issues any Common Stock or Common Stock Equivalents at a per share consideration (as defined below) less than the applicable Conversion Price for a series of Preferred Stock, then the Conversion Rate and Conversion Price then in effect shall be adjusted as provided in subparagraphs (i), (ii) and (iii) hereof. For the purposes of the foregoing, the per share consideration with respect to the sale or issuance of Common Stock shall be the price per share received by the Corporation, prior to the payment of any expenses, commissions, discounts and other applicable costs. With respect to the sale or issuance of Common Stock Equivalents which are convertible into or exchangeable for Common Stock without further consideration, the per share consideration shall be determined by dividing the maximum number of shares of Common Stock issuable with respect to such Common Stock Equivalents (as set forth in the instrument relating thereto without regard to any provisions contained therein for subsequent adjustment of such number) into the aggregate consideration received by the Corporation upon the sale or issuance of such Common Stock Equivalents. With respect to the issuance of other Common Stock Equivalents, the per share consideration shall be determined by dividing the maximum number of shares of Common Stock

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issuable with respect to such Common Stock Equivalents into the total aggregate consideration received by the Corporation upon the sale or issuance of such Common Stock Equivalents plus the minimum aggregate amount of additional consideration receivable by the Corporation upon the conversion or exercise of such Common Stock Equivalents. The issuance of Common Stock or Common Stock Equivalents for no consideration shall be deemed to be an issuance at a per share consideration of $.00. In connection with the sale or issuance of Common Stock and/or Common Stock Equivalents for non-cash consideration, the fair market value of such consideration shall be determined by the Board of Directors of the Corporation.

As used herein, “Additional Shares of Common Stock” shall mean either shares of Common Stock issued subsequent to the Original Issue Date or, with respect to the issuance of Common Stock Equivalents, the maximum number of shares of Common Stock issuable in exchange for, upon conversion of, or upon exercise of such Common Stock Equivalents issued subsequent to the Original Issue Date.

The Conversion Prices and the Conversion Rates shall be determined and adjusted once only with respect to any single offering of the Corporation’s securities for financing purposes, provided that all closings with respect to any such offering occur within a period of no more than 120 days and, provided further, that an appropriate adjustment shall be made for the benefit of any holder of Series Preferred Stock who converts Series Preferred Stock into Common Stock during such 120 day period.

(i) Upon each issuance of Additional Shares of Common Stock for a per share consideration less than the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price or Series D Conversion Price, as the case may be, in effect on the date of such issuance, the Conversion Rate of such series of Preferred Stock in effect on such date will be adjusted by dividing it by a fraction:

(x) the numerator of which shall be the sum of (a) the total outstanding shares of Common Stock immediately prior to the issuance of such Additional Shares of Common Stock plus the total shares of Common Stock issuable upon conversion of convertible securities and exercise of outstanding options and warrants, plus (b) the number of shares of Common Stock which the aggregate gross consideration received by the Corporation for the total number of such Additional Shares of Common Stock so issued would purchase at the Conversion Price for such series of Preferred Stock, which is in effect immediately prior to such issuance; and

(y) the denominator of which shall be the total outstanding shares of Common Stock immediately after the issuance of such Additional Shares of Common Stock plus the total shares of Common Stock issuable upon conversion of convertible securities and exercise of outstanding options and warrants.

(ii) Upon each issuance of Common Stock Equivalents exchangeable without further consideration into Common Stock for a per share consideration less than the Series A Conversion Price, Series B Conversion Price, Series C Conversion Price or Series D Conversion Price in effect on the date of such issuance, the Conversion Rate of such series of Preferred Stock in effect on such date will be adjusted as in subparagraph

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(i) above on the basis that the related Additional Shares of Common Stock are to be treated as having been issued on the date of issuance of the Common Stock Equivalents, and the aggregate consideration received by the Corporation for such Common Stock Equivalents shall be deemed to have been received for such Additional Shares of Common Stock.

(iii) Upon each issuance of Common Stock Equivalents other than those described in subparagraph (ii) above, for a per share consideration less than the respective Conversion Price in effect on the date of such issuance, the Conversion Rate of such series of Preferred Stock in effect on such date will be adjusted as in subparagraph (i) above on the basis that the related Additional Shares of Common Stock are to be treated as having been issued on the date of issuance of such Common Stock Equivalents, and the aggregate consideration received and the minimum amount receivable by the Corporation on conversion or exercise of such Common Stock Equivalents shall be deemed to have been received for such Additional Shares.

(iv) Once any Additional Shares of Common Stock have been treated as having been issued for the purpose of this subparagraph 4(e), they shall be treated as issued and outstanding shares of Common Stock whenever any subsequent calculations must be made pursuant hereto; provided that on the expiration of any options, warrants or rights to purchase Additional Shares of Common Stock or the termination of any rights to convert or exchange for Additional Shares of Common Stock on account of which an adjustment in a Conversion Rate has been made previously pursuant to this subparagraph 4(e), such Conversion Rate shall forthwith be readjusted to such Conversion Rate as would have been obtained had the adjustment made upon the issuance of such options, warrants, rights, or convertible or exchangeable securities been made upon the basis of the issuance of only the number of shares of Common Stock actually issued upon the exercise of such options, warrants or rights, or upon the conversion or exchange of such securities.

(v) The foregoing notwithstanding, no adjustment of the Conversion Rates or Conversion Prices shall be made as a result of the issuance of:

(a) an aggregate amount of not more than 4,952,667 (as adjusted for any stock dividends, stock splits, recapitalizations, consolidations or the like) shares of Common Stock (or any options, warrants or rights to purchase such shares of Common Stock) issued or issuable to employees, officers, directors or consultants of the Corporation with the approval of the Board of Directors of the Corporation pursuant to any stock option plan, stock incentive or purchase plan or agreement approved by the Board of Directors of the Corporation;

(b) any shares of Common Stock pursuant to which any Conversion Rate or

Conversion Price is adjusted under subparagraphs (c) or (d) of this Paragraph 4;

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(c) any shares of Common Stock issued pursuant to the exchange, conversion, or exercise of any Common Stock Equivalents according to their terms which have previously been incorporated into computations hereunder on the date when such Common Stock Equivalents were issued;

(d) any shares of Common Stock issued upon conversion of the Series Preferred Stock;

(e) securities issued solely in consideration for the acquisition (whether by merger or otherwise) by the Corporation for all or substantially all of the capital stock or assets of any other entity or business organization, or securities issued solely in consideration for the grant by or to the Corporation of marketing rights, distribution rights, license rights or similar rights granted by or to the Corporation in consideration of the exchange of proprietary technology, whether of the Corporation or any other entity, provided the issuance of such securities is approved by a majority of the members of the Board of Directors;

(f) shares of Common Stock issued or issuable to equipment leasing companies in connection with any equipment leasing arrangement to which the Corporation is a party or to an entity in connection with any leasing arrangement in which the Corporation rents or leases real property; or

(g) shares of Common Stock issued or issuable to banks and other financial institutions in connection with any financing arrangements to which the Corporation is a party which have been approved by a majority of the members of the Board of Directors.

(f) No Adjustment. No adjustment in a Conversion Rate or Conversion Price need be made if such adjustment would result in a change in the Conversion Price of less than $.01. Any adjustment of less than $.01 which is not made shall be carried forward and shall be made at the time of and together with any subsequent adjustment which, on a cumulative basis, amounts to an adjustment of $.01 or more in a Conversion Price.

(g) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of a Conversion Rate pursuant to this Paragraph 4, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Series Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the applicable Conversion Rate at the time in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of such series of Preferred Stock.

(h) Notices of Record Date. In the event of any taking by the Corporation of a record of the holders of any class of securities for the purpose of (i) determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any Common Stock Equivalents or any right to subscribe for, purchase or otherwise acquire any

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shares of stock of any class or any other securities or property, or to receive any other right, (ii) effecting any reclassification or recapitalization of its shares of Common Stock outstanding involving a change in the shares of Common Stock, or (iii) merging or consolidating with or into any other corporation, or selling, leasing or conveying all or substantially all its property or business, or liquidating, dissolving or winding up, the Corporation shall mail to each holder of Series Preferred Stock at least twenty (20) days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution, right, reclassification, recapitalization, consolidation, sale, lease, conveyance, liquidation, dissolution or winding up, and the amount and character of such dividend, distribution, right, reclassification, recapitalization, consolidation, sale, lease, conveyance, liquidation, dissolution or winding up. Failure to give such notice shall not in any way affect the legality of such transaction.

(i) Reservation of Stock Issuance Upon Conversion. The Corporation shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of Series Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series Preferred Stock. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all the then outstanding shares of Series Preferred Stock the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.

(j) Notices. Any notice required by the provisions of this Paragraph 4 to be given to the holders of shares of Series Preferred Stock shall be deemed given upon personal delivery; on the fifth (5th) business day following mailing by United States Mail, postage prepaid, by registered or certified mail; on the second (2nd) business day following delivery to a courier service such as DHL or Federal Express; or upon electronic acknowledgement of receipt if sent by fax, in each case to the address and/or fax number of each holder of record as it appears on the books of the Corporation.

(k) No Reissuance of Series Preferred Stock. No share or shares of Series Preferred Stock acquired by the Corporation by reason of redemption, purchase, conversion or otherwise shall be reissued, and all such shares shall be cancelled, retired and eliminated from the shares which the Corporation shall be authorized to issue.

(l) Validity of Shares. The Corporation agrees that it will from time to time take all such actions as may be required to assure that all shares of Common Stock which may be issued upon conversion of any Series Preferred Stock will, upon issuance, be legally and validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof.

(m) Taxes. The Corporation will pay all taxes and other governmental charges that may be imposed in respect of the issue or delivery of shares of Common Stock upon conversion of the Series Preferred Stock.

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(n) Good Faith. If any event occurs as to which in the reasonable opinion of the Board of the Corporation, in good faith, the other provisions of this Paragraph 4 are not strictly applicable but the lack of any adjustment in the Conversion Prices would not in the opinion of the Board fairly protect the conversion rights of the holders of the Series Preferred Stock in accordance with the basic intent and principles of such provisions, or if strictly applicable would not fairly protect the conversion rights of the holders of the Series Preferred Stock in accordance with the basic intent and principles of such provisions, then the Board of the Corporation shall appoint a firm of independent certified public accountants (which may be the regular auditors of the Corporation) of recognized national standing, which shall give their opinion upon the adjustment, if any, to the respective Conversion Prices, on a basis consistent with the basic intent and principles of this Paragraph 4, necessary to preserve, without dilution, the exercise rights of all the registered holders of the Series Preferred Stock. Upon receipt of such opinion, the Board shall forthwith make the adjustments described therein.

5. Voting Rights. Except as otherwise required by law or this Restated Certificate of Incorporation, each share of (i) Common Stock issued and outstanding shall have one (1) vote per share; (ii) Series A Preferred Stock issued and outstanding shall have the number of votes equal to ten (10) times the number of shares of Common Stock into which such share of Series A Preferred Stock could be converted on the record date for the vote or consent of stockholders; (iii) Series B Preferred Stock issued and outstanding shall have the number of votes equal to the number of shares of Common Stock into which such share of Series B Preferred Stock could be converted on the record date for the vote or consent of stockholders; (iv) Series C Preferred Stock issued and outstanding shall have the number of votes equal to ten (10) times the number of shares of Common Stock into which such share of Series C Preferred Stock could be converted on the record date for the vote or consent of stockholders; and (v) Series D Preferred Stock issued and outstanding shall have the number of votes equal to the number of shares of Common Stock into which such share of Series D Preferred Stock could be converted on the record date for the vote or consent of stockholders. The holder of each share of Series Preferred Stock shall be entitled to notice of any stockholders’ meeting in accordance with the by-laws of the Corporation. The holders of Series Preferred Stock shall vote together with holders of the Common Stock upon all matters submitted to a vote of stockholders, except as otherwise required by law or this Restated Certificate of Incorporation.

6. Covenants.

(a) In addition to any other rights provided by law, at any time when shares of any series of Preferred Stock are outstanding, except where the vote or written consent of the holders of a greater number of shares of the Corporation is required by this Certificate of Incorporation, without the written consent of the holders of shares of Preferred Stock representing at least sixty percent (60%) of the voting power of the then outstanding shares of Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) as a separate class or, if such amendment would only materially adversely affect any of the rights, preferences, privileges of or limitations provided herein of a series of Preferred Stock, without the vote or written consent of the holders of at least sixty percent (60%) of the then outstanding shares of such series of Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as

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the case may be) as a separate series, the Corporation will not amend, alter or repeal any provision of, or add any provision to, this Restated Certificate of Incorporation (including any amendment, alteration or repeal of this Restated Certificate of Incorporation effected by operation of law or through a merger or consolidation) or by-laws if such action would materially adversely affect any of the preferences, rights, privileges or powers of, or the restrictions provided for the benefit of, the Preferred Stock or any series thereof.

(b) So long as any Series Preferred Stock shall be outstanding, the Corporation shall not without first obtaining the affirmative vote or written consent of the holders of eighty-five percent (85%) of such outstanding shares of Series Preferred Stock, except clause (vii) below which shall require the affirmative vote or written consent of two-thirds (2/3) of outstanding shares of Series Preferred Stock, voting as a single class (provided that, notwithstanding paragraph 5 of this Article Fourth, each holder of Series Preferred Stock shall have one (1) vote per share):

(i) Increase or decrease the number of shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock authorized hereby;

(ii) Authorize or issue shares of any class or series of stock having any dividend or distribution rights superior to or on a parity with the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock or authorize or issue shares of stock of any class or any bonds, debentures, notes or other obligations convertible into or exchangeable for, or having option rights to purchase, any shares of stock of the Corporation having any rights, preferences or privileges superior to or on a parity with the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock;

(iii) Reclassify any outstanding shares into shares having any dividend or distribution rights superior to or on a parity with the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock;

(iv) Repurchase, acquire or retire any shares of Series Preferred Stock or Junior Shares, except from employees, directors or consultants of this Corporation upon termination pursuant to terms of agreements entered into with such persons approved by the Board of Directors of the Corporation and providing for repurchase of such shares at cost;

(v) Undertake or effect any liquidation of the Corporation or any consolidation or merger of the Corporation with or into another corporation or the sale, transfer or conveyance of all or substantially all of the assets of the Corporation to another person or persons in any transaction or series of transactions, if the stockholders of this Corporation hold less than 50% of the outstanding voting equity securities of the successor or surviving corporation in such merger, consolidation, sale or conveyance of assets; provided, however, that the above-referenced consent of holders of Series Preferred Stock shall not be required under this subparagraph (v) if any of such

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transactions results in holders of Series Preferred Stock receiving consideration in the form of cash or publicly traded and readily marketable securities equal to or greater than the Series Liquidation Amount of each share of Series Preferred Stock held by such holders, plus all accrued but unpaid dividends thereon, and provided further that, in each case, such transaction does not involve CuraGen or any affiliates;

(vi) Create any subsidiary that is not a wholly-owned subsidiary, sell or otherwise dispose of any shares of capital stock of any corporation, at least 50% of the outstanding equity securities of which are owned directly or indirectly by the Corporation or by one or more subsidiaries, except to the Corporation or another subsidiary, or permit any subsidiary to issue, sell or otherwise dispose of any shares of its capital stock or the capital stock of any subsidiary except to the Corporation or another subsidiary; or

(vii) Issue or commit to issue to any one party (except pursuant to clauses 6(c)(i) and 6(c)(ii) below), in a single transaction or series of related transactions, more than [16.7% of CuraGen’s holdings] shares of Common Stock or any securities convertible into (except for shares of Common Stock issuable upon conversion of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock), or options, warrants, or rights to purchase, such shares of Common Stock (as adjusted for any stock dividends, stock splits, recapitalizations, consolidations or the like).

(c) The Corporation shall not without first obtaining the affirmative vote or written consent of the holders of a majority of the then outstanding shares of each series of the Corporation’s preferred stock, voting as a single class:

(i) Issue or commit to issue more than 4,952,667 shares of Common Stock or any options, warrants or rights to purchase such shares of Common Stock (as adjusted for any stock dividends, stock splits, recapitalizations, consolidations or the like) to employees, officers, directors or consultants of the Corporation pursuant to any stock option plan, stock incentive or purchase plan or agreement;

(ii) Issue or commit to issue to CuraGen Corporation in the aggregate more than [16.7% of CuraGen’s holdings] shares of Common Stock or any securities convertible into (except for shares of Common Stock issuable upon conversion of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock), or options, warrants, or rights to purchase, such shares of Common Stock (as adjusted for any stock dividends, stock splits, recapitalizations, consolidations or the like);

(iii) Reclassify any outstanding shares into shares having any rights, preferences or privileges superior to the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock; or

(iv) Amend Article III of this Restated Certificate of Incorporation.

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FIFTH: Subject to the provisions of Article FOURTH, Paragraph 6 hereof, the Board of Directors is expressly empowered to adopt, amend or repeal the by-laws of the Corporation. Any adoption, amendment or repeal of the by-laws of the Corporation by the Board of Directors shall require the approval of a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any resolution providing for adoption, amendment or repeal is presented to the Board). The stockholders shall also have power to adopt, amend or repeal the by-laws of the Corporation. In addition to any vote of the holders of any class or series of stock of this Corporation required by law or by this Restated Certificate of Incorporation, the affirmative vote of the holders of at least two-thirds (2/3%) of the voting power of all of the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt, amend or repeal any provisions of the by-laws of the Corporation with respect to the indemnity of the directors, officers, employees or agents of the Corporation or any provisions with respect to the percentage vote required to amend the by-laws.

SIXTH: The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation, and for further definition, limitation and regulations of the powers of the Corporation and of its directors and stockholders:

A. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In addition to the powers and authority expressly conferred upon them by statute or by this Restated Certificate of Incorporation or the by-laws of the Corporation, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation.

B. The directors of the Corporation need not be elected by written ballot unless the by-laws so provide.

C. The books of the Corporation may be kept at such place within or without the State of Delaware as the by-laws of the Corporation may provide or as may be designated from time to time by the Board of Directors of the Corporation.

SEVENTH: No director of this Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director except to the extent that exemption from liability or limitation thereof is not permitted under the General Corporation Law of the State of Delaware as in effect at the time such liability or limitation thereof is determined. No amendment, modification or repeal of this Article shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment, modification or repeal. If the General Corporation Law of the State of Delaware is amended after approval by the stockholders of this Article to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended.

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EIGHTH: The Corporation shall, to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented from time to time, indemnify and advance expenses to (i) its directors and officers, and (ii) any person who at the request of the Corporation is or was serving as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, from and against any and all of the expenses, liabilities, or other matters referred to in or covered by such section as amended or supplemented (or any successor), provided, however, that the Corporation shall be obligated to indemnify any director, officer or such person in connection with a proceeding (or part thereof) initiated by such director, officer or such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The Corporation, by action of its Board of Directors, may provide indemnification or advance expenses to employees and agents of the Corporation or other persons only on such terms and conditions and to the extent determined by the Board of Directors in its sole and absolute discretion. The indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any By-Law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in their official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

NINTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of the General Corporation Law of the State of Delaware or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of the General Corporation Law of the State of Delaware, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths (3/4) in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, such compromise or arrangement and such reorganization shall, if sanctioned by the court to which such application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation.

TENTH: From time to time any of the provisions of this Restated Certificate of Incorporation may be amended, altered, changed or repealed, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by said laws, and all rights at any time conferred upon the stockholders of the Corporation by this Restated Certificate of Incorporation are granted subject to the provisions of this Article.

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IN WITNESS WHEREOF, this Restated Certificate of Incorporation which restates and integrates and further amends the provisions of the Restated Certificate of Incorporation of this Corporation, and which has been duly adopted in accordance with Sections 242 and 245 of the Delaware General Corporation Law, has been executed by its duly authorized officer this September 18, 2003.

454 LIFE SCIENCES CORPORATION
By:	/s/    Richard F. Begley
	Richard F. Begley, Ph.D. President and Chief Executive Officer

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EX-4.5

EXHIBIT 4.5

CURAGEN CORPORATION

AS ISSUER

THE BANK OF NEW YORK, AS TRUSTEE

UP TO $120,000,000 AGGREGATE PRINCIPAL AMOUNT OF

4.0% CONVERTIBLE SUBORDINATED NOTES DUE 2011

INDENTURE

DATED AS OF FEBRUARY 17, 2004

ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE		1
Section 1.1.	Definitions	1
Section 1.2.	Incorporation by Reference of Trust Indenture Act	10
Section 1.3.	Rules of Construction	10
Section 1.4.	Acts of Holders	10
ARTICLE II THE SECURITIES		11
Section 2.1.	Form and Dating	11
Section 2.2.	Execution and Authentication	12
Section 2.3.	Registrar, Paying Agent and Conversion Agent	13
Section 2.4.	Paying Agent to Hold Assets in Trust	14
Section 2.5.	Holder Lists	14
Section 2.6.	Transfer and Exchange	15
Section 2.7.	Replacement Securities	16
Section 2.8.	Outstanding Securities; Determinations of Holders’ Action	16
Section 2.9.	Temporary Securities	17
Section 2.10.	Cancellation	17
Section 2.11.	Persons Deemed Owners	18
Section 2.12.	Additional Transfer and Exchange Requirements	18
Section 2.13.	CUSIP Numbers	24
Section 2.14.	Ranking	24
ARTICLE III REDEMPTION		25
Section 3.1.	The Company’s Right to Redeem; Notice to Trustee	25
Section 3.2.	Selection of Securities to Be Redeemed	25
Section 3.3.	Notice of Redemption	25
Section 3.4.	Effect of Notice of Redemption	26
Section 3.5.	Deposit of Redemption Price	26
Section 3.6.	Securities Redeemed in Part	27
Section 3.7.	Repayment to the Company	27
Section 3.8.	No Sinking Fund	27
ARTICLE IV SUBORDINATION		27
Section 4.1.	Agreement of Subordination	27
Section 4.2.	Liquidation; Dissolution; Bankruptcy	27

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TABLE OF CONTENTS

(continued)

		Page
Section 4.3.	Default on Designated Senior Indebtedness	28
Section 4.4.	Acceleration of Convertible Subordinated Notes	29
Section 4.5.	When Distribution Must Be Paid Over	29
Section 4.6.	Subordination Notice by Company	29
Section 4.7.	Subrogation	30
Section 4.8.	Relative Rights	31
Section 4.9.	Subordination May Not Be Impaired by Company	31
Section 4.10.	Distribution or Notice to Representative	31
Section 4.11.	Rights of Trustee and Paying Agent	31
Section 4.12.	Authorization to Effect Subordination	32
Section 4.13.	Article Applicable to Paying Agents	32
Section 4.14.	Senior Indebtedness Entitled to Rely	32
Section 4.15.	Permitted Payments	32
ARTICLE V PURCHASE AT THE OPTION OF HOLDERS UPON A FUNDAMENTAL CHANGE		32
Section 5.1.	Fundamental Change Put	32
Section 5.2.	Conditions to the Company’s Election to Pay the Fundamental Change Purchase Price in Applicable Stock	36
Section 5.3.	Effect of Fundamental Change Purchase Notice	36
Section 5.4.	Deposit of Fundamental Change Purchase Price	37
Section 5.5.	Securities Purchased in Part	38
Section 5.6.	Covenant to Comply With Securities Laws Upon Purchase of Securities	38
Section 5.7.	Repayment to the Company	38
ARTICLE VI COVENANTS		38
Section 6.1.	Payment of Securities	38
Section 6.2.	SEC and Other Reports to the Trustee	39
Section 6.3.	Compliance Certificate	40
Section 6.4.	Further Instruments and Acts	40
Section 6.5.	Maintenance of Office or Agency of the Trustee, Registrar, Paying Agent and Conversion Agent	40

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TABLE OF CONTENTS

(continued)

		Page
Section 6.6.	Delivery of Information Required Under Rule 144A	41
Section 6.7.	Waiver of Stay, Extension or Usury Laws	41
Section 6.8.	Statement by Officers as to Default	41
ARTICLE VII SUCCESSOR CORPORATION		42
Section 7.1.	When Company May Merge or Transfer Assets	42
ARTICLE VIII DEFAULTS AND REMEDIES		43
Section 8.1.	Events of Default	43
Section 8.2.	Acceleration	44
Section 8.3.	Other Remedies	45
Section 8.4.	Waiver of Existing Defaults	45
Section 8.5.	Control by Majority	45
Section 8.6.	Limitation on Suits	46
Section 8.7.	Rights of Holders to Receive Payment or to Convert	46
Section 8.8.	Collection Suit by Trustee	46
Section 8.9.	Trustee May File Proofs of Claim	47
Section 8.10.	Priorities	47
Section 8.11.	Undertaking for Costs	48
ARTICLE IX TRUSTEE		48
Section 9.1.	Duties of Trustee	48
Section 9.2.	Rights of Trustee	49
Section 9.3.	Individual Rights of Trustee	51
Section 9.4.	Trustee’s Disclaimer	51
Section 9.5.	Notice of Defaults	51
Section 9.6.	Reports by Trustee to Holders	52
Section 9.7.	Compensation and Indemnity	52
Section 9.8.	Replacement of Trustee	53
Section 9.9.	Successor Trustee by Merger	54
Section 9.10.	Eligibility; Disqualification	54
Section 9.11.	Preferential Collection of Claims Against Company	54
ARTICLE X DISCHARGE OF INDENTURE		54

-iii-

TABLE OF CONTENTS

(continued)

		Page
Section 10.1.	Discharge of Liability on Securities	54
Section 10.2.	Repayment to the Company	54
ARTICLE XI AMENDMENTS		55
Section 11.1.	Without Consent of Holders	55
Section 11.2.	With Consent of Holders	56
Section 11.3.	Compliance with Trust Indenture Act	57
Section 11.4.	Revocation and Effect of Consents, Waivers and Actions	57
Section 11.5.	Notation on or Exchange of Securities	58
Section 11.6.	Trustee to Sign Supplemental Indentures	58
Section 11.7.	Effect of Supplemental Indentures	58
ARTICLE XII CONVERSION		58
Section 12.1.	Conversion Right	58
Section 12.2.	Conversion Procedures; Conversion Rate; Fractional Shares	60
Section 12.3.	Adjustment of Conversion Rate	62
Section 12.4.	Consolidation or Merger of the Company	71
Section 12.5.	Notice of Adjustment	72
Section 12.6.	Notice in Certain Events	72
Section 12.7.	Company To Reserve Stock; Registration; Listing	73
Section 12.8.	Taxes on Conversion	74
Section 12.9.	Conversion After Regular Record Date	74
Section 12.10.	Company Determination Final	74
Section 12.11.	Responsibility of Trustee for Conversion Provisions	75
Section 12.12.	Unconditional Right of Holders to Convert	75
ARTICLE XIII TAX TREATMENT		75
Section 13.1.	Tax Treatment	75
ARTICLE XIV MISCELLANEOUS		76
Section 14.1.	Trust Indenture Act Controls	76
Section 14.2.	Notices	76
Section 14.3.	Communication by Holders with Other Holders	77
Section 14.4.	Certificate and Opinion as to Conditions Precedent	77

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TABLE OF CONTENTS

(continued)

		Page
Section 14.5.	Statements Required in Certificate or Opinion	77
Section 14.6.	Separability Clause	78
Section 14.7.	Rules by Trustee, Paying Agent, Conversion Agent, Registrar	78
Section 14.8.	Legal Holidays	78
Section 14.9.	Governing Law; Submission to Jurisdiction; Service of Process	78
Section 14.10.	No Recourse Against Others	79
Section 14.11.	Successors	79
Section 14.12.	Multiple Originals	79

-v-

EXHIBIT A	Form  of Security
EXHIBIT B	Form  of Restrictive Legend for Common Stock Issues Upon Conversion

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INDENTURE, dated as of February 17, 2004, between CURAGEN CORPORATION, a Delaware corporation (the “Company”), and The Bank of New York, a New York banking corporation, as Trustee (the “Trustee”).

Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Company’s 4.0% Convertible Subordinated Notes due 2011:

ARTICLE I

DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.1. Definitions.

“Additional Interest” has the meaning set forth in the Registration Rights Agreement. All references herein or in the Securities to interest accrued or payable as of any date shall include any Additional Interest accrued or payable as of such date as provided in the Registration Rights Agreement.

“Additional Shares” has the meaning set forth in the Registration Rights Agreement.

“Affiliate” of any specified person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Agent Members” has the meaning set forth in Section 2.1(c).

“Applicable Procedures” means, with respect to any transfer or transaction involving a Global Security or beneficial interest therein, the rules and procedures of the Depositary for such Security, in each case to the extent applicable to such transaction and as in effect from time to time.

“Applicable Stock” means (a) the Common Stock and (b) in the event of a transaction referred to in Section 12.4 in which the Securities become convertible into Equity Interests of another person. such Equity Interests or any other Equity Interests into which such Equity Interests shall be reclassified or changed.

“Bankruptcy Law” means Title 11, United States Code, or any similar United States federal or state law for the relief of debtors.

“Board of Directors” means either the board of directors of the Company or any duly authorized committee of such board.

“Board Resolution” means a resolution of the Board of Directors.

“Business Day” means each day of the year other than a Saturday or a Sunday or other day on which banking institutions in the City of New York are required or authorized by law, regulation or executive order to close.

“Cash” means such coin or currency of the United States as at any time of payment is legal tender for the payment of public and private debts.

“Certificated Securities” means Securities that are in substantially the form attached hereto as Exhibit A and that do not include the information called for by footnotes 1 and 2 thereof.

“Closing Sale Price” of a share of Applicable Stock on any date means the closing per share sale price (or, if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on such date as reported by the Nasdaq National Market system or, if the shares of Applicable Stock are not quoted on the Nasdaq National Market system, as reported on a national securities exchange. If the Applicable Stock is not listed for trading on a national securities exchange and not quoted by the Nasdaq National Market on the relevant date, the “Closing Sale Price” shall be the last quoted bid for the Applicable Stock in the over-the-counter market on the relevant date as reported by the National Quotation Bureau or similar organization. If the Applicable Stock is not so quoted, the “Closing Sale Price” shall be the average of the midpoint of the last bid and ask prices for the Applicable Stock on the relevant date from each of at least three nationally recognized independent investment banking firms selected by the Company for this purpose.

“Code” means the Internal Revenue Code of 1986, as amended.

“Common Stock” means the authorized common stock, $0.01 par value per share, of the Company or any other shares of Equity Interest of the Company into which such Common Stock shall be reclassified or changed; provided, that after the consummation of any transaction referred to in Section 12.4, all references to “Common Stock” shall, to the extent necessary to protect the interests of the Holders, become references to “Applicable Stock”.

“Company” means the party named as the “Company” in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, means such successor. The foregoing sentence shall likewise apply to any subsequent successor or successors to such successors.

“Company Request” or “Company Order” means a written request or order signed in the name of the Company by any two Officers, at least one of whom is the Chief Executive Officer or the Chief Financial Officer.

“Conversion Agent” has the meaning set forth in Section 2.3.

“Conversion Notice” has the meaning set forth in Section 12.2(c).

“Conversion Price” means, at any time, $1,000 divided by the Conversion Rate in effect at such time, rounded to two decimal places (rounded up if the third decimal place thereof is 5 or more and otherwise rounded down).

“Conversion Rate” means the number of shares of Common Stock issuable upon conversion of each $1,000 of Principal Amount of Securities, which is initially 103.2429 shares, subject to adjustments as set forth in this Indenture.

“Corporate Trust Office” means the office of the Trustee at which at any time its corporate trust business shall be principally administered, which office at the date hereof is located at 101 Barclay Street, New York, New York 10286, Attention: Corporate Trust Division - Corporate Finance Unit or such other address as the Trustee may designate from time to time by notice to the Holders and the Company, or the principal corporate trust office of any

2

successor Trustee (or such other address as a successor Trustee may designate from time to time by notice to the Holders and the Company).

“Current Market Price” has the meaning set forth in Section 12.3(g).

“Custodian” means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law.

“Default” means, when used with respect to the Securities, any event which is, or after notice or passage of time or both would be, an Event of Default.

“Depositary” means, with respect to any Global Securities, a securities clearing agency that is registered as such under the Exchange Act and is designated by the Company to act as Depositary for such Global Securities (or any successor securities clearing agency so registered), which shall initially be DTC.

“Designated Senior Indebtedness” means any particular Senior Indebtedness if the instrument creating or evidencing the same or the assumption thereof (or related agreements or documents to which the Company is a party) expressly provides that such Indebtedness shall be “Designated Senior Indebtedness” for purposes of this Indenture (provided that such instrument, agreement or other document may place limitations and conditions on the right of such Senior Indebtedness to exercise the rights of Designated Senior Indebtedness.)

“Designated Subsidiary” means any existing or future, direct or indirect, Subsidiary of the Company that would constitute a “significant subsidiary” as such term is defined under Rule 1.02 of Regulation S-X.

“Distributed Assets” has the meaning set forth in Section 12.3(d).

“DTC” means The Depository Trust Company, a New York corporation.

“EDGAR” has the meaning set forth in Section 6.2(b).

“Equity Interest” of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) corporate stock or other equity participations, including partnership interests, whether general or limited, of such Person.

“Event of Default” has the meaning set forth in Section 8.1.

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

“Ex-Dividend Time” means, with respect to any issuance or distribution on Common Stock, the first Trading Day on which the Common Stock trades regular way on the principal securities market on which the Common Stock is then traded without the right to receive such issuance or distribution.

“Expiration Time” has the meaning set forth in Section 12.3(e).

“Fair Market Value” has the meaning set forth in Section 12.3(g).

“Fundamental Change” means the occurrence of any of the following events: (i) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to have beneficial ownership of all shares that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage

3

of time), directly or indirectly, of more than 50% of the total outstanding Voting Stock of the Company; (ii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (together with any new directors whose election to such Board of Directors or whose nomination for election by the stockholders of the Company, was approved by a vote of at least 66²/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of such Board of Directors then in office; (iii) the Company consolidates with or merges with or into any Person or conveys, transfers, sells or otherwise disposes of or leases all or substantially all of its assets to any Person, or any corporation consolidates with or merges into or with the Company, in any such event pursuant to a transaction in which the outstanding Voting Stock of the Company is changed into or exchanged for cash, securities or other property, other than (1) any such transaction where the outstanding Voting Stock of the Company is not changed or exchanged at all (except to the extent necessary to reflect a change in the jurisdiction of incorporation of the Company) or (2) where the stockholders of the Company immediately before such transaction own, directly or indirectly, immediately following such transaction, more than 50% of the total outstanding Voting Stock of the surviving corporation; or (iv) the Company is liquidated or dissolved or adopts a plan of liquidation or dissolution other than in a transaction which complies with the provisions described under Article VII.

A “Fundamental Change” shall not be deemed to have occurred if either:

(1) the last Closing Sale Price of the Common Stock for each of at least five Trading Days within:

(x) the period of the ten consecutive Trading Days immediately after the later of the Fundamental Change or the public announcement of the Fundamental Change, in the case of a Fundamental Change resulting solely from a Fundamental Change in clause (i) of the definition of Fundamental Change; or

(y) the period of the ten consecutive Trading Days immediately preceding the Fundamental Change, in the case of a Fundamental Change resulting from a Fundamental Change in clauses (ii), (iii) or (iv) of the definition of Fundamental Change;

is at least equal to 105% of the quotient where the numerator is the Principal Amount and the denominator is the Conversion Rate in effect on each of such five Trading Days, with such calculation being made for each Trading Day; or

(2) in the case of a merger or consolidation described in clause (iii) of the definition of Fundamental Change, at least 95% of the consideration, excluding cash payments for fractional shares and cash payments pursuant to dissenters’ approval rights, in the merger or consolidation constituting the Fundamental Change, consists of common stock traded on a U.S. national securities exchange or quoted on the Nasdaq National Market (or which shall be so traded or quoted when issued or exchanged in connection with such Fundamental Change) and as

4

a result of such transaction or transactions the Securities become convertible solely into such common stock.

“Fundamental Change Purchase Date” has the meaning set forth in Section 5.1(a).

“Fundamental Change Purchase Notice” has the meaning set forth in Section 5.1(c).

“Fundamental Change Purchase Price” has the meaning set forth in Section 5.1 (a).

“Global Securities” means Securities that are in substantially the form attached hereto as Exhibit A and that include the information called for by footnotes 1 and 2 thereof and that are deposited with the Depositary or its custodian and registered in the name of, the Depositary or its nominee.

“Holder” means a person in whose name a Security is registered on the Registrar’s books.

“Indebtedness” means, with respect to any Person,

(a) all indebtedness, obligations and other liabilities, contingent or otherwise:

(i) for borrowed money, including obligations in respect of overdrafts and any loans or advances from banks, whether or not evidenced by notes or similar instruments, or

(ii) evidenced by credit or loan agreements, bonds, debentures, notes or similar instruments, whether or not the recourse of the lender is to the whole of such Person’s assets or to only a portion thereof, other than any account payable or other accrued current liability or obligation incurred in the ordinary course of business in connection with the obtaining of materials or services;

(b) all reimbursement obligations and other liabilities, contingent or otherwise, with respect to letters of credit, bank guarantees or bankers’ acceptances;

(c) all obligations and liabilities, contingent or otherwise, in respect of leases required, in conformity with generally accepted accounting principles, to be accounted for as capitalized lease obligations on such Person’s balance sheet;

(d) all obligations and other liabilities, contingent or otherwise, under any lease or related document, including a purchase agreement, conditional sale or other title retention agreement, in connection with the lease of real property or improvements thereon (or any personal property included as part of any such lease) which provides that such Person is contractually obligated to purchase or cause a third party to purchase the leased property or pay an agreed upon residual value of the leased property, including such Person’s obligations under such lease or related document to purchase or cause a third party to purchase such leased property or pay an agreed upon residual value of the leased property to the lessor;

(e) all obligations, contingent or otherwise, with respect to an interest rate, currency or other swap, cap, floor or collar agreement or hedge agreement,

5

forward contract or other similar instrument or agreement or foreign currency hedge, exchange, purchase or similar instrument or agreement;

(f) all direct or indirect guarantees or similar agreements to purchase or otherwise acquire or otherwise assure a creditor against loss in respect of, Indebtedness, Obligations or liabilities of another Person or the kind described in clauses (a) through (e);

(g) any and all deferral, renewals, extensions, refinancings and refundings of or amendment, modifications or supplements to any indebtedness, obligation or liability of the kinds described in clauses (a) through (f).

The amount of Indebtedness of any Person at any date shall be (i) the outstanding principal amount of all unconditional obligations described above, as such amount would be reflected on a balance sheet prepared in accordance with United States generally accepted accounting principles, and the maximum liability at such date of such Person for any contingent obligations described above, (ii) the accreted value thereof, in the case of any Indebtedness issued with original issue discount, and (iii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness.

“Indenture” means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof, including the provisions of the TIA that are explicitly incorporated in this Indenture by reference to the TIA.

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset given to secure Indebtedness, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction with respect to any such lien, pledge, charge or security interest).

“Interest Payment Date” has the meaning set forth in Exhibit A attached hereto.

“Issue Date” of any Security means the date on which such Security was originally issued or deemed issued as set forth on the face of the Security.

“Legal Holiday” means any day other than a Business Day.

“Market Price” means the average of the Closing Sale Prices of one share of Applicable Stock for the 20-Trading Day period immediately preceding and including the Business Day immediately preceding the Purchase Date or Fundamental Change Purchase Date, as the case may be (or if the Business Day immediately preceding the Purchase Date or Fundamental Change Purchase Date, as the case may be, is not a Trading Day, then on the last Trading Day immediately preceding the Business Day), appropriately adjusted to take into account the occurrence, during the period commencing on the first of such Trading Days during such 20-Trading Day period and ending on the Purchase Date or Fundamental Change Purchase Date, as the case may be, of any event described in Section 12.3 or Section 12.4.

“Non-Electing Share” has the meaning set forth in Section 12.4.

6

“Obligations” means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

“Officer” means the Chief Executive Officer, the President, the Chief Financial Officer, any Vice President, the Treasurer, or the Secretary of the Company.

“Officers’ Certificate” means a written certificate containing the information specified in Section 14.4 and Section 14.5, signed in the name of the Company by any two Officers, at least one of whom is the Chief Executive Officer or the Chief Financial Officer, and delivered to the Trustee. An Officers’ Certificate given pursuant to Section 6.3 shall be signed by the Chief Financial Officer and one other Officer.

“Opinion of Counsel” means a written opinion containing the information specified in Section 14.4 and Section 14.5, from legal counsel who is reasonably acceptable to the Trustee. The counsel may be an employee of, or counsel to, the Company.

“Paying Agent” has the meaning set forth in Section 2.3.

“Payment Blockage Notice” has the meaning set forth in Section 4.3(b).

“Payment Blockage Period” has the meaning set forth in Section 4.3(b).

“Person” or “Persons” means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, or government or any agency or political subdivision thereof (and for purposes of the definition of “Fundamental Change” shall also have the meaning set forth in such definition).

“Principal Amount” of a Security means the principal amount of the Security as set forth on the face of the Security.

“Purchase Date” has the meaning set forth in Section 4.1(a).

“Purchase Notice” has the meaning set forth in Section 4.1(c).

“Purchase Price” has the meaning set forth in Section 4.1(a).

“QIB” means a “qualified institutional buyer” as defined in Rule 144A.

“Record Date” has the meaning set forth in Section 12.3(g).

“Redemption Date” means, when used with respect to any Security to be redeemed, the date fixed for redemption pursuant to this Indenture.

“Redemption Price” shall mean (i) with respect to a Redemption Date occurring during the period commencing on February 18, 2009 to and including February 14, 2010, an amount equal to 101.143% of the Principal Amount of the Securities to be redeemed plus any accrued and unpaid interest (including any Additional Interest) to, but excluding, the Redemption Date and (ii) with respect to a Redemption Date occurring on or after February 15, 2010, an amount equal to 100.571% of the Principal Amount of the Securities to be redeemed plus any accrued and unpaid interest (including any Additional Interest) to, but excluding, the Redemption Date.

“Reference Period” has the meaning set forth in Section 12.3(d).

“Registrar” has the meaning set forth in Section 2.3.

“Register” has the meaning set forth in Section 2.3.

7

“Registration Rights Agreement” means the Registration Rights Agreement, dated February 17, 2004, between the Company and Bear, Stearns & Co. Inc., as amended, modified or supplemented from time to time.

“Regular Record Date” has the meaning set forth in Exhibit A attached hereto.

“Responsible Officer” means (i) when used with respect to the Trustee, the officer within the Corporate Finance Unit of the Corporate Trust Division of the Trustee (or any successor unit, department or division of the Trustee) located at the Corporate Trust Office of the Trustee, who has direct responsibility for the administration of this Indenture and, for the purposes of Section 9.1(c)(ii) and the second sentence of Section 9.5 shall also include any officer of the Trustee to whom any corporate trust matter is referred because of such person’s knowledge of and familiarity with the particular subject and (ii) when used with respect to the Company, means the Chief Executive Officer, the President or the Chief Financial Officer.

“Restricted Certificated Security” means a Certificated Security which is a Transfer Restricted Security.

“Restricted Global Security” means a Global Security that is a Transfer Restricted Security.

“Restricted Security” means a Restricted Certificated Security or a Restricted Global Security.

“Rule 144A” means Rule 144A under the Securities Act (or any successor provision), as it may be amended from time to time.

“SEC” means the United States Securities and Exchange Commission, or any successor thereto.

“Securities” means any of the Company’s 4.0% Convertible Subordinated Notes due 2011, as amended or supplemented from time to time, issued under this Indenture.

“Securities Act” means the United States Securities Act of 1933, as amended, or any successor statute thereto and the rules and regulations thereunder.

“Senior Indebtedness” means the principal of, premium, if any, interest, including all interest accruing after the commencement of any bankruptcy or similar proceeding, whether or not a claim for post-petition interest is allowed as a claim in the proceeding, and rent payable on or in connection with, and all fees, costs, expenses and other amounts accrued, due or to become due, on or in connection with Indebtedness of the Company outstanding on the date of this Indenture or thereafter created, incurred, assumed, guaranteed or in effect guaranteed by the Company, including all deferrals, renewals, extensions or refundings of, or amendment, modifications or supplements to, the foregoing, unless in the case of any particular Indebtedness, the instrument creating or evidencing the same or the assumption or guarantee thereof expressly provides that such Indebtedness shall not be senior in right of the Securities.

Notwithstanding the foregoing, Senior Indebtedness does not include: (i) Indebtedness that expressly provides that such Indebtedness shall not be senior in right of payment to the Securities or expressly provides that such Indebtedness is on the same basis or junior to the Securities and; (ii) any Indebtedness to any of the Company’s majority-owned subsidiaries, other than Indebtedness to a Subsidiary arising by reason of guarantees by the Company of Indebtedness of such Subsidiary to a person that is not a Subsidiary. Senior Indebtedness does

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not include any of the Company’s obligations with respect to its outstanding 6.0% Convertible Subordinated Debentures due 2007.

“Special Record Date” has the meaning set forth in Exhibit A attached hereto.

“Spin-Off” has the meaning set forth in Section 12.3(d).

“Stated Maturity”, when used with respect to any Security, means February 15, 2011.

“Subsidiary” means any person of which at least a majority of the outstanding Voting Stock shall at the time directly or indirectly be owned or controlled by the Company or by one or more Subsidiaries or by the Company and one or more Subsidiaries.

“TIA” means the United States Trust Indenture Act of 1939 as in effect on the date of this Indenture, provided, however, that in the event the TIA is amended after such date, TIA means, to the extent required by any such amendment, the TIA as so amended.

“Trading Day” means a day during which trading in securities generally occurs on the Nasdaq National Market system or, if the Applicable Stock is not quoted on the Nasdaq National Market system, on the principal U.S. national or regional securities exchange on which the Applicable Stock is then listed or, if the Applicable Stock is not listed on a U.S. national or regional securities exchange, and not quoted on the Nasdaq National Market system, on the principal other market on which the Applicable Stock is then traded (provided that no day on which trading of the Applicable Stock is suspended on such exchange or other trading market will count as a Trading Day) (it being understood that for purposes of this definition a market shall include obtaining quotations as provided in the last sentence of the definition of “Closing Sales Price,” if applicable).

“Transfer Certificate” has the meaning set forth in Section 2.12(f).

“Transfer Restricted Security” has the meaning set forth in Section 2.12(f).

“Trigger Event” has the meaning set forth in Section 12.3(d).

“Trustee” means the party named as the “Trustee” in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor. The foregoing sentence shall likewise apply to any such subsequent successor or successors.

“Unrestricted Certificated Security” means a Certificated Security that is not a Transfer Restricted Security.

“Unrestricted Global Security” means a Global Security that is not a Transfer Restricted Security.

“Voting Stock” of a person means the Equity Interest of such person of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of such person (irrespective of whether or not at the time the Equity Interest of any other class or classes shall have or might have voting power by reason of the happening of any contingency).

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Section 1.2. Incorporation by Reference of Trust Indenture Act.

Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings:

“Commission” means the SEC.

“Indenture Securities” means the Securities.

“Indenture Security Holder” means a Holder.

“Indenture to be Qualified” means this Indenture.

“Indenture Trustee” or “Institutional Trustee” means the Trustee.

“Obligor” on the indenture securities means the Company.

All other TIA terms used but not defined in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions.

Section 1.3. Rules of Construction.

Unless the context otherwise requires:

(a) a term has the meaning assigned to it;

(b) an accounting term not otherwise defined has the meaning assigned to it in accordance with accounting principles generally accepted in the United States as in effect from time to time;

(c) “or” is not exclusive;

(d) “including” means including, without limitation; and

(e) words in the singular include the plural, and words in the plural include the singular.

Section 1.4. Acts of Holders.

(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by the Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company, as described in Section 14.2. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section 1.4.

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(b) The fact and date of the execution by any person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to such officer the execution thereof. Where such execution is by a signer acting in a capacity other than such signer’s individual capacity, such certificate or affidavit shall also constitute sufficient proof of such signer’s authority, if it so states. The fact and date of the execution of any such instrument or writing, or the authority of the person executing the same, may also be proved in any other manner which the Trustee deems sufficient.

(c) The principal amount and serial number of any Security and the ownership of Securities shall be proved by the Register maintained by the Registrar for the Securities.

(d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security.

(e) If the Company shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a Board Resolution, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the outstanding Securities shall be computed as of such record date; provided that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date.

ARTICLE II

THE SECURITIES

Section 2.1. Form and Dating. (a) The Securities shall be designated as the “4.0% Convertible Subordinated Notes due 2011” of the Company. The aggregate principal amount of Securities outstanding at any time may not exceed $120,000,000 except as provided in Section 2.7.

The Securities and the Trustee’s certificate of authentication shall be substantially in the form of Exhibit A attached hereto, which is incorporated in and made a part of this Indenture.

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The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage (provided that any such notation, legend or endorsement required by usage is in a form acceptable to the Company). The Company shall provide any such notations, legends or endorsements to the Trustee in writing. Each Security shall be dated the date of its authentication.

(b) Restricted Global Securities. All of the Securities are being offered and sold within the United States to QIBs in reliance on Rule 144A and shall be issued, initially in the form of one or more Restricted Global Securities, which shall be deposited with the Trustee at its Corporate Trust Office, as custodian for and registered in the name of DTC or the nominee thereof, duly executed by the Company and authenticated by the Trustee as hereinafter provided. Subject to Section 2.1(a), the aggregate principal amount of the Restricted Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary as hereinafter provided.

(c) Global Securities in General. Each Global Security shall represent such of the outstanding Securities as shall be specified therein and each shall provide that it shall initially represent the aggregate amount of outstanding Securities stated thereon, but that the aggregate amount of outstanding Securities represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges, redemptions, repurchases and conversions of such Securities.

Any adjustment of the aggregate principal amount of a Global Security to reflect the amount of any increase or decrease in the amount of outstanding Securities represented thereby shall be made by the Trustee in accordance with instructions given by the Holder thereof as required by Section 2.12 and shall be made on the records of the Trustee and the Depositary.

Neither any members of, or participants in, the Depositary (collectively, the “Agent Members”) nor any other persons on whose behalf Agent Members may act may exercise any rights under this Indenture with respect to any Global Security registered in the name of the Depositary or any nominee thereof, or under any such Global Security, and the Depositary or such nominee, as the case may be, may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner and holder of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing contained herein shall (A) prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or such nominee, as the case may be, or (B) impair, as between the Depositary, its Agent Members and any other person on whose behalf an Agent Member may act, the operation of customary practices of such Persons governing the exercise of the rights of a holder of any Security.

(d) Certificated Securities. Certificated Securities shall be issued only under the limited circumstances provided in Section 2.12(a)(i).

Section 2.2. Execution and Authentication.

The Securities shall be executed on behalf of the Company by any Officer. The signature of the Officer on the Securities may be manual or facsimile.

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A Security bearing the manual or facsimile signature of an individual who was at the time of the execution of the Security an Officer shall bind the Company, notwithstanding that such individual has ceased to hold such office(s) prior to the authentication and delivery of such Securities or did not hold such office(s) at the date of authentication of such Securities.

No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of an authorized signatory, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder.

The Trustee shall authenticate and deliver the Securities for original issuance in an aggregate principal amount of up to $120,000,000 upon one or more Company Orders without any further action by the Company (other than as contemplated below and in Section 14.4 and Section 14.5). The aggregate principal amount due at the Stated Maturity of the Securities outstanding at any time may not exceed the amount set forth in the foregoing sentence except as provided in Section 2.7. In authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall receive and shall be fully protected in relying upon:

(a) a copy of the Board Resolution in or pursuant to which the terms and form of the Securities were established, the issuance and sale of the Securities was authorized, this Indenture was authorized and specified Officers were authorized to establish the form and determine the terms of the Securities and the form of this Indenture, to execute the Securities and this Indenture on behalf of the Company and to take any other necessary actions relating thereto and evidence of any actions taken by authorized Officers pursuant to that Board Resolution, certified by the Secretary, an Assistant Secretary or a Vice President of the Company to have been duly adopted by the Board of Directors or taken by any authorized Officer and to be in full force and effect as of the date of such certificate; and

(b) an Officers’ Certificate delivered in accordance with Section 14.4 and Section 14.5.

(c) an Opinion of Counsel delivered in accordance with Section 14.4 and Section 14.5.

The Trustee shall act as the initial authenticating agent. Thereafter, the Trustee may appoint an authenticating agent acceptable to the Company to authenticate Securities. An authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent.

The Securities shall be issued only in registered form without coupons and only in denominations of $1,000 of principal amount and any integral multiple of $1,000.

Section 2.3. Registrar, Paying Agent and Conversion Agent.

Pursuant to Section 6.5, the Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (“Registrar”), an office or agency where Securities may be presented for redemption, repurchase or payment (“Paying Agent”), an office or agency where Securities may be presented for conversion (“Conversion Agent”) and an

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office or agency where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. Pursuant to Section 6.5, the Company shall at all times maintain a Registrar, Paying Agent, Conversion Agent and an office or agency where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served in the Borough of Manhattan, New York City. The Registrar shall keep a register of the Securities (the “Register”) and of their transfer and exchange.

The Company may have one or more co-registrars, one or more additional paying agents and one or more additional conversion agents. The term Paying Agent includes any additional paying agent, including any named pursuant to Section 6.5. The term Conversion Agent includes any additional conversion agent, including any named pursuant to Section 6.5.

The Company shall enter into an appropriate limited agency agreement with any Registrar, Paying Agent, Conversion Agent or co-registrar (in each case, if such Registrar, agent or co-registrar is a Person other than the Trustee). Each such agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 9.7. The Company or any Subsidiary or an Affiliate of either of them may act as Paying Agent, Registrar, Conversion Agent or co-registrar and, if the Company fails to maintain a Conversion Agent, the Company shall act as such.

The Company hereby initially appoints The Bank of New York as Registrar, Paying Agent and Conversion Agent in connection with the Securities. The initial office of the Registrar, Paying Agent and Conversion Agent shall be the office of the Trustee that is located in the Borough of Manhattan, New York City, which office on the date hereof is 101 Barclay Street, New York, New York 10286, Attention: Corporate Trust Division - Corporate Finance Unit.

Section 2.4. Paying Agent to Hold Assets in Trust.

Except as otherwise provided herein, prior to 10:00 a.m., New York City time, on each due date of payments in respect of any Security, the Company shall deposit with the Paying Agent, cash (in immediately available funds if deposited on the due date), sufficient to make such payments when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all cash and Applicable Stock held by the Paying Agent for the making of payments in respect of the Securities and shall notify the Trustee of any default by the Company in making any such payment. The Company at any time may require a Paying Agent to pay all cash held by it to the Trustee, and to account for any funds disbursed by it, and the Trustee may at any time during the continuance of any such default, upon the written request to the Paying Agent, require such Paying Agent to forthwith pay to the Trustee all cash so held in trust. Upon doing so, the Paying Agent shall have no further liability for such cash.

Section 2.5. Holder Lists.

The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Company shall cause to be furnished to the Trustee on or before each semiannual interest payment date and at such other times as the Trustee may request in writing a list in such

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form and as of such date as the Trustee may reasonably require of the names and addresses of Holders.

Section 2.6. Transfer and Exchange.

(a) Subject to compliance with any applicable additional requirements contained in Section 2.12, when a Security is presented to the Registrar with a request to register a transfer thereof or to exchange such Security for an equal principal amount of Securities of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested; provided, however, that every Security presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by an assignment form and, if applicable, a transfer certificate, each in the form included in Exhibit A attached hereto and in form satisfactory to the Registrar and each duly executed by the Holder thereof or its attorney duly authorized in writing. To permit registration of transfers and exchanges, upon surrender of any Security for registration of transfer or exchange at an office or agency maintained for such purpose pursuant to Section 2.3, the Company shall execute, and the Trustee shall authenticate, Securities of a like aggregate principal amount at the Registrar’s request. Any transfer or exchange shall be without charge, except that the Company or the Registrar may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges that may be imposed in connection with the transfer or exchange of the Securities from the Holder requesting such transfer or exchange.

Neither the Company, the Registrar nor the Trustee shall be required to exchange or register a transfer of (i) any Securities selected for redemption (except, in the case of Securities to be redeemed in part, the portion thereof not to be redeemed), or (ii) any Securities in respect of which a Purchase Notice or a Fundamental Change Purchase Notice has been given and not withdrawn by the Holder thereof in accordance with the terms of this Indenture (except, in the case of Securities to be repurchased in part, the portion thereof not to be repurchased), or (iii) any Securities surrendered for conversion (except, in the case of Securities to be converted in part, the portion thereof not to be converted). All Securities issued upon any transfer or exchange of Securities in accordance with this Indenture shall be valid obligations of the Company, evidencing the same debt and entitled to the same benefits under this Indenture, as the Securities surrendered upon such transfer or exchange.

(b) Any Registrar appointed pursuant to Section 2.3 shall provide to the Trustee such information as the Trustee may reasonably require in connection with the delivery by such Registrar of Securities upon transfer or exchange of Securities.

(c) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Agent Members or other beneficial owners of interests in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

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Section 2.7. Replacement Securities.

If (a) any mutilated Security is surrendered to the Company, the Registrar or the Trustee, or (b) the Company, the Registrar and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, and there is delivered to the Company, the Registrar and the Trustee such security or indemnity as may be requested by them to save each of them harmless, then, in the absence of notice to the Company, the Registrar or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon its written request the Trustee shall authenticate and deliver, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount, bearing a certificate number not contemporaneously outstanding.

In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, or is about to be redeemed by the Company pursuant to Article III or repurchased by the Company pursuant to Article V, the Company in its discretion may, instead of issuing a new Security, pay, redeem or repurchase such Security, as the case may be.

Upon the issuance of any new Securities under this Section 2.7, the Company may require the payment of a sum sufficient to cover any tax, assessment or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee or the Registrar) connected therewith.

Every new Security issued pursuant to this Section 2.7 in lieu of any mutilated, destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder.

The provisions of this Section 2.7 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.

Section 2.8. Outstanding Securities; Determinations of Holders’ Action.

Securities outstanding at any time are all the Securities authenticated by the Trustee, except for:

(a) those cancelled by it,

(b) those paid, redeemed or repurchased pursuant to Section 2.7,

(c) those delivered to it for cancellation, and

(d) those described in this Section 2.8 as not outstanding.

A Security does not cease to be outstanding because the Company or an Affiliate thereof holds the Security; provided, however, that in determining whether the Holders of the requisite principal amount of Securities have given or concurred in any request, demand, authorization, direction, notice, consent, waiver, or other Act hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee

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shall be protected in relying upon any such request, demand, authorization, direction, notice, consent, waiver or other Act, only Securities which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Subject to the foregoing, only Securities outstanding at the time of such determination shall be considered in any such determination.

If a Security is replaced pursuant to Section 2.7, the replaced Security ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser unaware that such Security has been replaced.

If the Paying Agent holds, in accordance with the terms of this Indenture, prior to 10:00 a.m., New York City time, on a Redemption Date, a Purchase Date, a Fundamental Change Purchase Date or Stated Maturity, as the case may be, cash or securities, if permitted hereunder, sufficient to pay Securities payable on that date, then on such Redemption Date, Purchase Date, Fundamental Change Purchase Date or Stated Maturity, as the case may be, such Securities shall cease to be outstanding and interest and Additional Interest, if any, on such Securities shall cease to accrue.

If a Security is converted in accordance with Article XII, then from and after the time of conversion on the date of conversion, such Security shall cease to be outstanding and interest and Additional Interest, if any, on such Security shall cease to accrue.

Section 2.9. Temporary Securities.

Pending the preparation of definitive Securities, the Company may execute, and upon Company Order, the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the Officers executing such Securities may determine, as conclusively evidenced by their execution of such Securities.

If temporary Securities are issued, the Company shall cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at the office or agency of the Company designated for such purpose pursuant to Section 2.3, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of authorized denominations. Until so exchanged the temporary Securities shall in all respects be entitled to the same benefits and subject to the same limitations under this Indenture as definitive Securities.

Section 2.10. Cancellation.

All Securities surrendered for payment, repurchase by the Company pursuant to Article V, conversion, redemption or registration of transfer or exchange shall, if surrendered to any person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it or, if surrendered to the Trustee, shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee. The Company may not issue new

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Securities to replace Securities it has paid or delivered to the Trustee for cancellation or that any Holder has converted pursuant to Article XII. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section 2.10, except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be disposed of by the Trustee in accordance with the Trustee’s customary procedure.

Section 2.11. Persons Deemed Owners.

Prior to due presentment of a Security for registration of transfer, the Company, the Trustee, any Paying Agent and any agent of the Company, the Trustee or the Paying Agent may treat the person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of, Redemption Price, Purchase Price or Fundamental Change Purchase Price, and interest and Additional Interest, if any, on, the Security, for the purpose of receiving cash or Applicable Stock upon conversion and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary.

Section 2.12. Additional Transfer and Exchange Requirements.

(a) Transfer and Exchange of Global Securities.

(i) Certificated Securities shall be issued in exchange for interests in the Global Securities only if (x) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for the Global Securities, (y) the Depositary ceases to be a “clearing agency” registered under the Exchange Act, if so required by applicable law or regulation and a successor Depositary is not appointed by the Company within 90 calendar days, or (z) an Event of Default has occurred and is continuing and the Registrar has received a request from the Depositary requesting such exchange. In either case, the Company shall execute, and the Trustee shall, upon receipt of a Company Order (which the Company agrees to deliver promptly), authenticate and deliver Certificated Securities in an aggregate principal amount equal to the principal amount of such Global Securities in exchange therefor. Only Restricted Certificated Securities shall be issued in exchange for beneficial interests in Restricted Global Securities, and only Unrestricted Certificated Securities shall be issued in exchange for beneficial interests in Unrestricted Global Securities. Certificated Securities issued in exchange for beneficial interests in Global Securities shall be registered in such names and shall be in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver or cause to be delivered such Certificated Securities to the Persons in

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whose name such Securities are so registered. Such exchange shall be effected in accordance with the Applicable Procedures.

(ii) Notwithstanding any other provisions of this Indenture other than the provisions set forth in Section 2.12(a)(i), a Global Security may not be transferred except as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary.

(b) Transfer and Exchange of Certificated Securities. In the event that Certificated Securities are issued in exchange for beneficial interests in Global Securities in accordance with Section 2.12(a)(i), and, on or after such event, Certificated Securities are presented by a Holder to the Registrar with a request:

(x) to register the transfer of the Certificated Securities to a person who shall take delivery thereof in the form of Certificated Securities only; or

(y) to exchange such Certificated Securities for an equal principal amount of Certificated Securities of other authorized denominations,

such Registrar shall register the transfer or make the exchange as requested; provided, however, that the Certificated Securities presented or surrendered for register of transfer or exchange:

(i) shall be duly endorsed or accompanied by a written instrument of transfer in accordance with the proviso to the first paragraph of Section 2.6; and

(ii) in the case of a Restricted Certificated Security, such request shall be accompanied by the following additional information and documents, as applicable:

(A) if such Restricted Certificated Security is being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, or such Restricted Certificated Security is being transferred to the Company or a Subsidiary of the Company, a certification to that effect from such Holder (in substantially the form set forth in the Transfer Certificate); or

(B) if such Restricted Certificated Security is being transferred to a person the Holder reasonably believes is a QIB in accordance with Rule 144A or pursuant to an effective registration statement under

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the Securities Act, a certification to that effect from such Holder (in substantially the form set forth in the Transfer Certificate).

(c) Transfer of a Beneficial Interests in a Restricted Global Security for a Beneficial Interest in an Unrestricted Global Security. Any person having a beneficial interest in a Restricted Global Security may upon request, subject to the Applicable Procedures, transfer such beneficial interest to a person who is required or permitted to take delivery thereof in the form of an Unrestricted Global Security. Upon receipt by the Trustee of written instructions, or such other form of instructions as is customary for the Depositary, from the Depositary or its nominee on behalf of any person having a beneficial interest in a Restricted Global Security and the following additional information and documents in such form as is customary for the Depositary from the Depositary or its nominee on behalf of the person having such beneficial interest in the Restricted Global Security (all of which may be submitted by facsimile or electronically):

(i) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certification to that effect from the Holder (in substantially the form set forth in the Transfer Certificate); or

(ii) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certification to that effect from the Holder (in substantially the form set forth in the Transfer Certificate) and, if the Company or the Trustee so requests, a customary Opinion of Counsel.

The Trustee, as the Registrar, shall reduce or cause to be reduced the aggregate principal amount of the Restricted Global Security by the appropriate principal amount and shall increase or cause to be increased the aggregate principal amount of the Unrestricted Global Security by a like principal amount. Such transfer shall otherwise be effected in accordance with the Applicable Procedures. If no Unrestricted Global Security is then outstanding, the Company shall execute and the Trustee shall, upon receipt of a Company Order (which the Company agrees to deliver promptly), authenticate and deliver an Unrestricted Global Security.

(d) Transfers of Certificated Securities for Beneficial Interest in Global Securities. In the event that Certificated Securities are issued in exchange for beneficial interests in Global Securities and, thereafter, the events or conditions specified in Section 2.12(a)(i) which required such exchange shall cease to exist, the Company shall mail notice to the Trustee and to the Holders stating that Holders may exchange Certificated Securities or interests in Global Securities by complying with the procedures set forth in this Indenture and briefly describing such procedures and the events or circumstances requiring

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that such notice be given. Thereafter, if Certificated Securities are presented by a Holder to a Registrar with a request:

(x) to register the transfer of such Certificated Securities to a person who shall take delivery thereof in the form of a beneficial interest in a Global Security, which request shall specify whether such Global Security shall be a Restricted Global Security or an Unrestricted Global Security, or

(y) to exchange such Certificated Securities for an equal principal amount of beneficial interests in a Global Security, which beneficial interests shall be owned by the Holder transferring such Certificated Securities (provided that in the case of such an exchange, Restricted Certificated Securities may be exchanged only for Restricted Global Securities and Unrestricted Certificated Securities may be exchanged only for Unrestricted Global Securities), the Registrar shall register the transfer or make the exchange as requested by canceling such Certificated Security and causing, or directing the Registrar to cause, the aggregate principal amount of the applicable Global Security to be increased accordingly and, if no such Global Security is then outstanding, the Company shall issue and the Trustee shall, upon receipt of a Company Order (which the Company agrees to deliver promptly) authenticate and deliver a new Global Security; provided, however, that the Certificated Securities presented or surrendered for registration of transfer or exchange:

(1) shall be duly endorsed or accompanied by a written instrument of transfer in accordance with the proviso to the first paragraph of Section 2.6;

(2) in the case of a Restricted Certificated Security to be transferred for a beneficial interest in an Unrestricted Global Security, such request shall be accompanied by the following additional information and documents, as applicable:

(i) if such Restricted Certificated Security is being transferred pursuant to an effective registration statement under the Securities Act, a certification to that effect from such Holder (in substantially the form set forth in the Transfer Certificate); or

(ii) if such Restricted Certificated Security is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certification to that effect from such Holder (in substantially the form set forth in the Transfer Certificate) and, if the Company or the Registrar so requests, a customary Opinion of Counsel;

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(3) in the case of a Restricted Certificated Security to be transferred or exchanged for a beneficial interest in a Restricted Global Security, such request shall be accompanied by a certification from such Holder (in substantially the form set forth in the Transfer Certificate) to the effect that such Restricted Certificated Security is being transferred to a person the Holder reasonably believes is a QIB (which, in the case of an exchange, shall be such Holder) in accordance with Rule 144A.

(4) in the case of an Unrestricted Certificated Security to be transferred or exchanged for a beneficial interest in a Restricted Global Security, such request shall be accompanied by a certification from such Holder (in substantially, the form set forth in the Transfer Certificate) to the effect that such Unrestricted Certificated Security is being transferred to a person the Holder reasonably believes is a QIB (which, in the case of an exchange, shall be such Holder) in accordance with Rule 144A.

(e) Legends.

(1) Except as permitted by the following paragraphs (2), (3) and (4), each Global Security and Certificated Security (and all Securities issued in exchange therefor or upon registration of transfer or replacement thereof) shall bear a legend in substantially the form called for by footnote 2 to Exhibit A and footnote 1 to Exhibit B attached hereto (each a “Transfer Restricted Security”), for so long as it is required by this Indenture to bear such legend. Each Transfer Restricted Security shall have attached thereto a certificate (a “Transfer Certificate”) in substantially the form called for by footnote 3 to Exhibit A attached hereto.

(2) Upon any sale or transfer of a Transfer Restricted Security (x) after the expiration of the holding period applicable to sales of the Securities under Rule 144(k) of the Securities Act, (y) pursuant to Rule 144 or (z) pursuant to an effective registration statement under the Securities Act:

(i) in the case of any Restricted Certificated Security, any Registrar shall permit the Holder thereof to exchange such Restricted Certificated Security for an Unrestricted Certificated Security, or (under the circumstances described in Section 2.12(e)) to transfer such Restricted Certificated Security to a transferee who shall take such Security in the form

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of a beneficial interest in an Unrestricted Global Security, and in each case shall rescind any restriction on the transfer of such Security; provided, however, that the Holder of such Restricted Certificated Security shall, in connection with such exchange or transfer, comply with the other applicable provisions of this Section 2.12; and

(ii) in the case of any beneficial interest in a Restricted Global Security, the Trustee shall permit the beneficial owner thereof to transfer such beneficial interest to a transferee who shall take such interest in the form of a beneficial interest in an Unrestricted Global Security and shall rescind any restriction on transfer of such beneficial interest; provided, that such Unrestricted Global Security shall continue to be subject to the provisions of Section 2.12(a)(ii); and provided, further, that the owner of such beneficial interest shall, in connection with such transfer, comply with the other applicable provisions of this Section 2.12.

(3) Upon the exchange, registration of transfer or replacement of Securities not bearing the legend described in paragraph (1) above, the Company shall execute, and the Trustee upon receipt of a Company Request shall authenticate and deliver Securities that do not bear such legend and that do not have a Transfer Certificate attached thereto.

(4) After the expiration of the holding period pursuant to Rule 144(k) of the Securities Act, the Company shall remove any restriction of transfer on such Security, and the Company shall execute, and the Trustee upon receipt of a Company Request shall authenticate and deliver Securities that do not bear such legend and that do not have a Transfer Certificate attached thereto.

(5) Until the expiration of the holding period applicable to sales of the Securities under Rule 144(k) of the Securities Act or a transfer pursuant to Rule 144 or pursuant to an effective registration statement under the Securities Act, the Applicable Stock issued upon conversion of the Securities shall bear the legend in substantially the form called for by Exhibit B attached hereto.

(f) Transfers to the Company. Nothing contained in this Indenture or in the Securities shall prohibit the sale or other transfer of any Securities (including

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beneficial interests in Global Securities) to the Company or any of its Subsidiaries. The Company shall ensure that if any such securities shall be reissued, such reissuance shall comply with applicable law and any securities reissued as Transfer Restricted Securities shall be assigned a different “CUSIP” number than any other securities.

(g) Amendments to Rule 144(k). Notwithstanding any other provision in this Indenture, if Rule 144(k) as promulgated under the Securities Act is amended to shorten the two-year period under Rule 144(k), then the references to “two years” in the restrictive legend of each Transfer Restricted Security and footnote one to Exhibit A shall be deemed to refer to such shorter period, from and after receipt by the Trustee of the documents described in Section 2.12(e)(2) from the Company or from a Holder of a Transfer Restricted Security; provided that, a Transfer Restricted Security shall not be deemed to refer to such shorter period if to do so would be prohibited by, or would otherwise cause a violation of, the U.S. federal securities laws applicable at the time. As soon as practicable after a Responsible Officer of the Company receives notice of the effectiveness of any such amendment to shorten the two-year period under Rule 144(k), unless causing the Transfer Restricted Securities to refer to such shorter period would otherwise be prohibited by, or would otherwise cause a violation of, the U.S. federal securities laws applicable at the time, the Company will provide to the Trustee the documents described in Section 2.12(e)(2) respecting the effectiveness of such amendment.

Section 2.13. CUSIP Numbers.

The Company may issue the Securities with one or more “CUSIP” numbers (if then generally in use), and, if so, the Trustee shall use “CUSIP” numbers in notices of redemption or repurchase as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption or repurchase and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption or repurchase shall not be affected by any defect in or omission of such numbers. The Company shall promptly notify the Trustee of any change in the CUSIP numbers.

Section 2.14. Ranking.

The Company agrees, and each holder of Securities by accepting the same agrees, that the indebtedness of the Company arising under or in connection with this Indenture and every outstanding Security issued under this Indenture from time to time constitutes and shall constitute a subordinate unsecured general obligation of the Company. The Securities will be subordinated in right of payment to all other existing and future Senior Indebtedness of the Company as provided in Section 4.1 hereof. Notwithstanding the foregoing, nothing in this Section 2.14 shall impair the claims of, or payments to, the Trustee under or pursuant to Sections 8.10 and 9.07, and the Trustee’s rights to compensation, indemnification and reimbursement of expenses under Sections 8.10 and 9.07 are not subordinated.

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ARTICLE III

REDEMPTION

Section 3.1. The Company’s Right to Redeem; Notice to Trustee.

Prior to February 18, 2009, the Securities shall not be redeemable at the Company’s option. On or after February 18, 2009, the Company, at its option, may redeem the Securities in accordance with this Article III for cash at any time as a whole, or from time to time in part, at the Redemption Price.

In the event that the Company elects to redeem the Securities on a date that is after any Regular Record Date but on or before the corresponding Interest Payment Date, the Company shall be required to pay any accrued and unpaid interest and Additional Interest, if any, to the holder of the redeemed Security and not the Holder on the corresponding Regular Record Date.

If the Company elects to redeem Securities, it shall notify the Trustee in writing of the Redemption Date, the principal amount of Securities to be redeemed and the Redemption Price. The Company shall give this notice to the Trustee by a Company Order at least 30 days before the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee).

Section 3.2. Selection of Securities to Be Redeemed.

If fewer than all of the outstanding Securities are to be redeemed, unless the procedures of the Depositary provide otherwise, the Trustee shall select the Securities to be redeemed by lot or on a pro rata basis or by another method the Trustee, in its discretion, considers fair and appropriate. The Trustee shall make the selection within five Business Days after it receives the notice provided for in Section 3.1 from outstanding Securities not previously called for redemption.

Securities and portions of Securities that the Trustee selects shall be in principal amounts of $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company promptly of the Securities or portions of the Securities to be redeemed.

Securities and portions of Securities that are to be redeemed are convertible by the Holder until 5:00 p.m., New York City time, on the second Business Day immediately preceding the Redemption Date. If any Security selected for partial redemption is converted in part before termination of the conversion right with respect to the portion of the Security so selected, the converted portion of such Security shall be deemed (so far as may be) to be the portion selected for redemption. Securities which have been converted during a selection of Securities to be redeemed may be treated by the Trustee as outstanding for the purpose of such selection.

Section 3.3. Notice of Redemption.

At least 20 calendar days but not more than 60 calendar days before a Redemption Date, the Company shall mail a notice of redemption by first-class mail, postage prepaid, to each Holder of Securities to be redeemed. The notice of redemption shall identify the Securities to be redeemed and shall state:

(a) the Redemption Date;

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(b) the Redemption Price;

(c) the Conversion Rate and any adjustments thereto;

(d) the name and address of the Paying Agent and Conversion Agent;

(e) that Securities called for redemption may be converted at any time prior to 5:00 p.m., New York City time, on the second Business Day preceding the Redemption Date;

(f) that Holders who want to convert their Securities must satisfy the requirements set forth in Article XII;

(g) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price;

(h) if fewer than all of the outstanding Securities are to be redeemed, the serial numbers, if any, and principal amounts of the particular Securities to be redeemed;

(i) that, unless the Company defaults in making payment of such Redemption Price, interest and Additional Interest, if any, on Securities called for redemption shall cease to accrue on and after the Redemption Date;

(j) the CUSIP number(s) of the Securities; and

(k) any other information the Company wants to present.

At the Company’s request, the Trustee shall give the notice of redemption in the Company’s name and at the Company’s expense; provided, however, that the Company makes such request at least five Business Days (unless a shorter period shall be satisfactory to the Trustee) prior to the date by which such notice of redemption must be given to Holders in accordance with this Section 3.3; provided, further, that the text of the notice of redemption shall be prepared by the Company.

Section 3.4. Effect of Notice of Redemption.

Once notice of redemption is given, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price, except for Securities which are converted in accordance with the terms of this Indenture. Upon surrender to the Paying Agent, such Securities shall be paid at the Redemption Price.

Section 3.5. Deposit of Redemption Price.

Prior to 10:00 a.m., New York City time, on the applicable Redemption Date, the Company shall deposit with the Paying Agent (or if the Company or a Subsidiary or an Affiliate of either of them is acting as the Paying Agent, shall segregate and hold in trust as provided in Section 2.4) an amount of cash (in immediately available funds if deposited on the Redemption

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Date) sufficient to pay the aggregate Redemption Price of all Securities or portions thereof which are to be redeemed as of such Redemption Date other than Securities or portions of Securities called for redemption which on or prior thereto have been delivered by the Company to the Trustee for cancellation or have been converted.

If the Paying Agent holds, in accordance with the terms hereof, at 10:00 a.m., New York City time, on the applicable Redemption Date, cash sufficient to pay the Redemption Price of any Securities for which notice of redemption is given, then, on such Redemption Date, such Securities shall cease to be outstanding and interest and Additional Interest, if any, on such Securities shall cease to accrue, whether or not such Securities are delivered to the Paying Agent, and the rights of the Holders in respect thereof shall terminate (other than the right to receive the Redemption Price upon delivery of such Securities).

Section 3.6. Securities Redeemed in Part.

Any Certificated Security which is to be redeemed only in part shall be surrendered at the office of the Paying Agent and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security, without charge, a new Security or Securities, of any authorized denomination as requested by such Holder in aggregate principal amount equal to the unredeemed portion of the Security surrendered.

Section 3.7. Repayment to the Company.

To the extent that the aggregate amount of cash deposited by the Company pursuant to Section 3.5 exceeds the aggregate Redemption Price of the Securities or portions thereof which the Company is redeeming as of the Redemption Date, then, promptly after the Redemption Date, the Paying Agent shall return any such excess to the Company together with interest, if any, thereon.

Section 3.8. No Sinking Fund.

The Securities shall not have a sinking fund.

ARTICLE IV

SUBORDINATION

Section 4.1. Agreement of Subordination.

The Company agrees, and each holder of Securities by accepting the same agrees, that the Indebtedness evidenced by the Securities is subordinated in right of payment (to the extent and in the manner provided in this Article IV) to the prior payment in full in cash or payment satisfactory to holders of Senior Indebtedness of all Senior Indebtedness (whether outstanding on the date hereof or hereafter created, incurred or assumed), and that the subordination is for the benefit of the holders of Senior Indebtedness.

Section 4.2. Liquidation; Dissolution; Bankruptcy.

Upon any distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding

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relating to the Company or its property, in an assignment for the benefit of creditors or any marshaling of the Company’s assets and liabilities:

(a) holders of Senior Indebtedness shall be entitled to receive payment in full of all Obligations due in respect of such Senior Indebtedness (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Indebtedness) in cash or other payment satisfactory to the holders of the Senior Indebtedness before holders of the Securities shall be entitled to receive any payment with respect to the Securities; and

(b) until all Senior Indebtedness is paid in full in cash or other payment satisfactory to the holders of the Senior Indebtedness, any distribution to which holders of the Securities would be entitled but for this Article IV shall be made to holders of Senior Indebtedness, as their interests may appear.

Section 4.3. Default on Designated Senior Indebtedness.

Anything in this Indenture to the contrary notwithstanding, no payment of Principal Amount, plus any accrued and unpaid interest (including any Additional Interest) on or other amounts due on the Securities, and no redemption, repurchase or other acquisition of the Securities, shall be made by or on behalf of the Company unless:

(a) full payment of all amounts then due for principal of and interest on, and of all other amounts then due on, all Designated Senior Indebtedness has been made or duly provided for pursuant to the terms of the instruments governing such Designated Senior Indebtedness; and

(b) at the time for, and immediately after giving effect to, any such payment, redemption, repurchase or other acquisition, there shall not exist under any Designated Senior Indebtedness, or any agreement pursuant to which any Designated Senior Indebtedness is issued, any default which shall not have been cured or waived and which default shall have resulted in the full amount of such Designated Senior Indebtedness being declared due and payable.

In addition, if a Responsible Officer of the Trustee at the Corporate Trust Office shall receive written notice from the holders of Designated Senior Indebtedness or their representative (a “Payment Blockage Notice”) that there has occurred and is continuing under such Designated Senior Indebtedness, or any agreement pursuant to which such Designated Senior Indebtedness is issued, any non-payment default, which default shall not have been cured or waived, giving the holders of such Designated Senior Indebtedness the right to declare such Designated Senior Indebtedness immediately due and payable, then, anything in this Indenture to the contrary notwithstanding, no payment of Principal Amount, plus any accrued and unpaid interest (including any Additional Interest) on, or any other amounts due on the Securities, and no redemption, repurchase or other acquisition of the Securities, shall be made by or on behalf of the Company during the period (the “Payment Blockage Period”) commencing on the date of receipt of the Payment Blockage Notice and ending on the earliest of (i) the date on which such default shall have been cured or waived, (ii) 179 days from the receipt of the Payment Blockage Notice and (iii) the date the Payment Blockage Notice is withdrawn by the holders of such

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Designated Senior Indebtedness. Notwithstanding the provisions described in the immediately preceding sentence (but subject to the provisions contained in Section 4.2 and the first sentence of this Section 4.3), unless the holders of such Designated Senior Indebtedness or the representative of such holders shall have accelerated the maturity of such Designated Senior Indebtedness, the Company may resume payments on the Securities after the end of such Payment Blockage Period. Not more than one Payment Blockage Notice may be given in any consecutive 365-day period, irrespective of the number of defaults with respect to one or more issues of Designated Senior Indebtedness during such period.

Section 4.4. Acceleration of Convertible Subordinated Notes.

In the event of the acceleration of the Securities because of an Event of Default, the Company may not make any payment or distribution to the Trustee or any holder of Securities in respect of Obligations with respect to the Securities and may not acquire or purchase from the Trustee or any holder of Securities any Securities until all Senior Indebtedness has been paid in full in cash or other payment satisfactory to the holders of Senior Indebtedness or such acceleration is rescinded in accordance with the terms of this Indenture.

If payment of the Securities is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Indebtedness or trustees of such Senior Indebtedness of the acceleration.

Section 4.5. When Distribution Must Be Paid Over.

In the event that the Trustee, any holder of Securities or any other person receives any payment or distributions of assets of the Company of any kind with respect to the Securities in contravention of any subordination terms contained in this Indenture, whether in cash, property or securities, including, without limitation, by way of set-off or otherwise, then such payment shall be held by the recipient in trust for the benefit of holders of Senior Indebtedness, and shall be immediately paid over and delivered to the holders of Senior Indebtedness or their representative, to the extent necessary to make payment in full of all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution or provision therefor, to or for the holders of Senior Indebtedness; provided, however, that the foregoing shall apply to the Trustee only if a Responsible Officer of the Trustee has actual knowledge (as determined in accordance with Section 4.11) that such payment or distribution is prohibited by this Indenture.

With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article IV, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness, and shall not be liable to any such holders if the Trustee shall in good faith mistakenly pay over or distribute to or on behalf of holders of Securities or the Company or any other person money or assets to which any holders of Senior Indebtedness shall be entitled by virtue of this Article IV.

Section 4.6. Subordination Notice by Company.

The Company shall promptly notify the Trustee in writing of any facts known to the Company that would cause a payment of any Obligations with respect to the Securities or the

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purchase of any Securities by the Company to violate this Article IV, but failure to give such notice shall not affect the subordination of the Securities to the Senior Indebtedness as provided in this Article IV.

Notwithstanding the provisions of this or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Securities, unless and until a Responsible Officer of the Trustee shall have received written notice at the Corporate Trust Office from the Company or a holder of Senior Indebtedness or from any trustee or agent therefor; and, prior to the receipt of any such written notice, the Trustee shall be entitled in all respects to assume that no such facts exist; provided, however, that if a Responsible Officer of the Trustee shall not have received, at least three Business Days prior to the date upon which by the terms hereof any such money may become payable for any purpose, the notice with respect to such money provided for in this Section 4.6, then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it within three Business Days prior to such date.

The Trustee shall be entitled to conclusively rely on the delivery to it of a written notice by a person representing himself to be a holder of Senior Indebtedness (or a trustee or agent on behalf of such holder) to establish that such notice has been given by a holder of Senior Indebtedness (or a trustee or agent on behalf of any such holder). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article, the Trustee may request such person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such person, the extent to which such person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such person under this Article, and if such evidence is not furnished, the Trustee may defer any payment which it may be required to make for the benefit of such person pursuant to the terms of this Indenture pending judicial determination as to the rights of such person to receive such payment.

Section 4.7. Subrogation.

After all Senior Indebtedness is paid in full and until the Securities are paid in full, holders of Securities shall be subrogated (equally and ratably with all other indebtedness pari passu with the Securities) to the rights of holders of Senior Indebtedness to receive distributions applicable to Senior Indebtedness to the extent that distributions otherwise payable to the holders of Securities have been applied to the payment of Senior Indebtedness. A distribution made under this Article IV to holders of Senior Indebtedness that otherwise would have been made to holders of Securities is not, as between the Company and holders of Securities, a payment by the Company on the Securities.

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Section 4.8. Relative Rights.

This Article IV defines the relative rights of holders of Securities and holders of Senior Indebtedness. Nothing in this Indenture shall:

(a) impair, as between the Company and holders of Securities, the obligation of the Company, which is absolute and unconditional, to pay the Principal Amount and interest (including any Additional Interest) on the Securities in accordance with their terms;

(b) affect the relative rights of holders of Securities and creditors (other than with respect to Senior Indebtedness) of the Company, other than their rights in relation to holders of Senior Indebtedness; or

(c) prevent the Trustee or any holder of Securities from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Indebtedness to receive distributions and payments otherwise payable to holders of Securities.

If the Company fails because of this Article IV to pay the Principal Amount, plus any accrued and unpaid interest (including any Additional Interest) on a Security on the due date, the failure is still a Default or Event of Default.

Section 4.9. Subordination May Not Be Impaired by Company.

No right of any holder of Senior Indebtedness to enforce the subordination of the indebtedness evidenced by the Securities shall be impaired by any act or failure to act by the Company or any holder of Securities or by the failure of the Company or any such holder to comply with this Indenture.

Section 4.10. Distribution or Notice to Representative.

Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness, the distribution may be made and the notice given to their representative.

Upon any payment or distribution of assets of the Company referred to in this Article IV, the Trustee and the holders of Securities shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such representative or of the liquidating trustee or agent or other person making any distribution to the Trustee or to the holders of Securities for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article IV.

Section 4.11. Rights of Trustee and Paying Agent.

Notwithstanding the provisions of this Article IV or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee may continue to make payments on the Securities, unless a Responsible Officer of the Trustee shall have received at the Corporate Trust Office at least five Business Days prior to the date of such payment or distribution written notice of facts that would cause such payment or distribution with respect to the Securities to violate this Article IV. Only the Company may give such notice.

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Nothing in this Article IV shall impair the claims of, or payments to, the Trustee under or pursuant to Section 8.1 and Section 9.7 hereof, and the Trustee’s rights to compensation, reimbursement and indemnification under Section 8.10 and Section 9.07 are not subordinated.

The Trustee in its individual or any other capacity may hold Senior Indebtedness with the same rights it would have if it were not Trustee.

Section 4.12. Authorization to Effect Subordination.

Each holder of a Security by the holder’s acceptance thereof authorizes and directs the Trustee on the holder’s behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article IV, and appoints the Trustee to act as the holder’s attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 8.9 hereof at least 30 days before the expiration of the time to file such claim, the holders of any Senior Indebtedness or their representatives are hereby authorized to file an appropriate claim for and on behalf of the holders of the Securities.

Section 4.13. Article Applicable to Paying Agents.

In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term “Trustee” as used in this Article IV shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article IV in addition to or in place of the Trustee; provided, however, that the second and third paragraphs of Section 4.11 shall not apply to the Company or any Subsidiary of the Company if it or such Subsidiary acts as Paying Agent.

Section 4.14. Senior Indebtedness Entitled to Rely.

The holders of Senior Indebtedness shall have the right to rely upon this Article IV, and no amendment or modification of the provisions contained herein shall diminish the rights of such holders unless the holders affected thereby shall have agreed in writing thereto.

Section 4.15. Permitted Payments.

Notwithstanding anything to the contrary in this Article IV, the holders of Securities may receive and retain at any time on or prior to Stated Maturity (i) securities that are subordinated to at least the same extent as the Securities to (a) Senior Indebtedness and (b) any securities issued in exchange for Senior Indebtedness and (ii) payments and other distributions made from any trust created pursuant to Section 10.1.

ARTICLE V

PURCHASE AT THE OPTION OF HOLDERS UPON A FUNDAMENTAL CHANGE

Section 5.1. Fundamental Change Put.

(a) In the event that a Fundamental Change shall occur at any time prior to February 15, 2011, each Holder shall have the right, at the Holder’s option, but subject to the provisions of this Section 5.1, to require the Company to purchase, and upon the

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exercise of such right, the Company shall purchase, all of such Holder’s Securities not theretofore called for redemption, or any portion of the Principal Amount thereof that is equal to $1,000 or an integral multiple thereof, as directed by such Holder pursuant to this Section 5.1, on the date designated by the Company (the “Fundamental Change Purchase Date”) that is a Business Day no later than 35 Business Days after the date of notice pursuant to Section 5.1(b) of the occurrence of a Fundamental Change (subject to extension to comply with applicable law). The Company shall be required to purchase such Securities at a purchase price in cash or subject to fulfillment by the Company of the conditions set forth in this Section 5, shares of Applicable Stock (valued at 95% of the market price of such stock), in an amount or value equal to 100% of the Principal Amount plus any accrued and unpaid interest (including any Additional Interest) to, but excluding, the Fundamental Change Purchase Date (the “Fundamental Change Purchase Price”). In the event that a Fundamental Change Purchase Date is a date that is after any Regular Record Date but on or before the corresponding Interest Payment Date, the Company shall be required to pay accrued and unpaid interest and Additional Interest, if any, to the holder of the repurchased Security and not the Holder on the Regular Record Date.

Subject to the fulfillment by the Company of the conditions set forth in this Section 5, the Company may elect to pay the Fundamental Change Purchase Price by delivering a number of shares of Common Stock equal to (i) the Fundamental Change Purchase Price divided by (ii) 95% of the average of the closing sales prices per share of Common Stock for the five consecutive Trading Days immediately preceding the second Trading Day prior to the Fundamental Change Purchase Date.

(b) No later than 20 calendar days after the occurrence of a Fundamental Change, the Company shall mail a written notice of the Fundamental Change by first class mail to the Trustee (and the Paying Agent if the Trustee is not then acting as Paying Agent) and to each Holder at its address shown in the Register of the Registrar, and to beneficial owners as required by applicable law. The notice shall include a form of Fundamental Change Purchase Notice to be completed by the Holder and shall briefly state, as applicable:

(i) the date of such Fundamental Change and, briefly, the events causing such Fundamental Change;

(ii) the date by which the Fundamental Change Purchase Notice must be delivered to the Paying Agent in order for a Holder to exercise the purchase right pursuant to this Section 5.1;

(iii) the Fundamental Change Purchase Date;

(iv) the Fundamental Change Purchase Price and whether the Fundamental Change Purchase Price will be paid in cash or Applicable Stock;

(v) the name and address of the Paying Agent and Conversion Agent;

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(vi) the Conversion Rate and any adjustments thereto;

(vii) that the Securities as to which a Fundamental Change Purchase Notice has been given may be converted into Common Stock pursuant to Article XII of this Indenture only if the Fundamental Change Purchase Notice has been withdrawn in accordance with the terms of this Indenture;

(viii) that the Securities must be surrendered to the Paying Agent to collect payment;

(ix) that the Fundamental Change Purchase Price for any Security as to which a Fundamental Change Purchase Notice has been duly given and not withdrawn shall be paid promptly following the later of the Fundamental Change Purchase Date and the time of surrender of such Security as described in Section 5.1(b)(viii)

(x) the procedures the Holder must follow to exercise rights under this Section 5.1 and a brief description of such rights;

(xi) briefly, the conversion rights of the Securities, and that the Holder must satisfy the requirements set forth in the Indenture in order to convert the Securities;

(xii) the procedures for withdrawing a Fundamental Change Purchase Notice, including a form of notice of withdrawal;

(xiii) that, unless the Company defaults in making payment of such Fundamental Change Purchase Price, interest (including any Additional Interest), if any, on Securities surrendered for purchase by the Company shall cease to accrue on and after the Fundamental Change Purchase Date; and

(xiv) the CUSIP number(s) of the Securities.

Upon receipt of a Company Request, the Trustee shall give the notice of purchase right in the Company’s name and at the Company’s expense; provided, however, that the Company makes such request at least five Business Days (unless a shorter period shall be satisfactory to the Trustee) prior to the date by which such notice of purchase right must be given to the Holders in accordance with this Section 5.1(b); provided, further, that the text of the notice of purchase right shall be prepared by the Company.

If any of the Securities is in the form of a Global Security, then the Company shall modify such notice to the extent necessary to accord with the procedures of the Depositary applicable to the purchase of Global Securities.

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Simultaneously with delivering the written notice pursuant to this Section 5.1(b), the Company shall publish a notice containing all information specified in such written notice in a newspaper of general circulation in New York, New York or publish such information on the Company’s website, or through such other public medium that reasonably could be expected to inform Holders of such information.

(c) A Holder may exercise its rights specified in clause (a) of this Section 5.1 upon delivery of a written notice (which shall be in substantially the form included on the reverse side of the Securities entitled “Option of Holder to Elect Purchase” and which may be delivered by letter, overnight courier, hand delivery, facsimile transmission or in any other written form and, in the case of Global Securities, may be delivered electronically or by other means in accordance with the Depositary’s customary procedures) of the exercise of such rights (a “Fundamental Change Purchase Notice”) to the Paying Agent at any time on or before the 20th Business Day after the date of the Company’s notice of the Fundamental Change (subject to extension to comply with applicable law).

The Fundamental Change Purchase Notice delivered by a Holder shall state (i) the Fundamental Change Purchase Date, (ii) if certificated Securities, the certificate number or numbers of the Security or Securities which the Holder shall deliver to be purchased (if not certificated, the notice must comply with Applicable Procedures), (iii) the portion of the Principal Amount of the Security which the Holder shall deliver to be purchased, which portion must be $1,000 or an integral multiple thereof, and (iv) that such Security shall be purchased pursuant to the terms and conditions specified in the Securities and this Indenture.

Delivery of a Security (together with all necessary endorsements) to the Paying Agent by book-entry transfer or physical delivery prior to, on or after the Fundamental Change Purchase Date at the offices of the Paying Agent is a condition to receipt by the Holder of the Fundamental Change Purchase Price therefor; provided, however, that such Fundamental Change Purchase Price shall be so paid pursuant to this Section 5.1 only if the Security so delivered to the Paying Agent shall conform in all respects to the description thereof in the related Fundamental Change Purchase Notice, as determined by the Company.

The Company shall purchase from the Holder thereof, pursuant to this Section 5.1, a portion of a Security if the Principal Amount of such portion is $1,000 or an integral multiple of $1,000. Provisions of the Indenture that apply to the purchase of all of a Security pursuant to Section 5.1 through Section 5.6 also apply to the purchase of such portion of such Security.

A Paying Agent shall promptly notify the Company of the receipt by it of any Fundamental Change Purchase Notice or written withdrawal thereof.

Anything herein to the contrary notwithstanding, in the case of Global Securities, any Fundamental Change Purchase Notice may be delivered or withdrawn and such Securities may be surrendered or delivered for purchase in accordance with the Applicable Procedures as in effect from time to time.

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Section 5.2. Conditions to the Company’s Election to Pay the Fundamental Change Purchase Price in Applicable Stock.

The Company may, at its option pay the Fundamental Change Purchase Price payable to Holders pursuant to Section 5.1 in shares of Applicable Stock, if the following conditions are satisfied:

(1) The Company shall have provided written notice of the Fundamental Change to the Trustee (and the Paying Agent if the Trustee is not then acting as Paying Agent) and to each Holder pursuant to Section 5.1(b).

(2) The shares of Applicable Stock to be so issued:

(a) shall be, or shall have been approved for, listing on a national securities exchange or quoted on the Nasdaq National Market, prior to the Fundamental Change Purchase Date;

(b) shall not require registration under the Securities Act or the Exchange Act before such shares may be freely transferable without being subject to any transfer restrictions under the Securities Act or if such registration is required, such registration shall be completed and shall become effective prior to the Fundamental Change Purchase Date;

(c) shall not require qualification or registration with, or approval of, any governmental authority under any state law before such shares may be validly issued or delivered or if such qualification or registration is required or such approval must be obtained, such qualification or registration shall be completed, or such approval shall be obtained, prior to the Fundamental Change Purchase Date; and

(d) shall, upon issuance, be duly and validly issued and fully paid and nonassessable, free and clear of any preemptive or similar rights.

Section 5.3. Effect of Fundamental Change Purchase Notice.

(a) Upon receipt by the Paying Agent of the Fundamental Change Purchase Notice specified in Section 5.1(c), the Holder of the Security in respect of which such Fundamental Change Purchase Notice was given shall (unless such Fundamental Change Purchase Notice is withdrawn as specified in the following paragraph) thereafter be entitled to receive the Fundamental Change Purchase Price with respect to such Security. Such Fundamental Change Purchase Price shall be paid to such Holder, subject to receipt of cash or if the conditions for payment in Applicable Stock set forth in Section 5 are fulfilled, Common Stock by the Paying Agent, promptly following the later of (a) the Fundamental Change Purchase Date with respect to such Security (provided the conditions in Section 5.1(c) have been satisfied) and (b) the time of book-entry transfer or delivery of such Security to the Paying Agent by the Holder thereof in the manner required by Section 5.1(c). Securities in respect of which a Fundamental Change Purchase Notice has been given by the Holder thereof may not be converted pursuant to Article XII on or after the date of the delivery of such

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Fundamental Change Purchase Notice unless such Fundamental Change Purchase Notice has first been validly withdrawn as specified in the following paragraph.

(b) A Fundamental Change Purchase Notice may be withdrawn by means of a written notice (which may be delivered by letter, overnight courier, hand delivery, facsimile transmission or in any other written form and, in the case of Global Securities, may be delivered electronically or by other means in accordance with the Depositary’s customary procedures) of withdrawal delivered by the Holder to the Paying Agent at any time prior to the close of business on the Business Day immediately preceding the Fundamental Change Purchase Date, specifying (a) the Principal Amount of the Security or portion thereof (which must be a Principal Amount of $1,000 or an integral multiple of $1,000 in excess thereof) with respect to which such notice of withdrawal is being submitted, (b) if certificated Securities have been issued, the certificate numbers of the withdrawn Securities, or if not certificated, such notice must comply with Applicable Procedures, and (c) the Principal Amount, if any, which remains subject to the Fundamental Change Purchase Notice. If a Fundamental Change Purchase Notice has been properly withdrawn pursuant to this Section 5.3(b) prior to the Fundamental Change Purchase Date, the Company shall not be obligated to purchase those Securities so identified in such notice of withdrawal.

Section 5.4. Deposit of Fundamental Change Purchase Price.

Prior to 10:00 a.m., New York City time, on the applicable Fundamental Change Purchase Date, the Company shall deposit with the Paying Agent (or if the Company or a Subsidiary or an Affiliate of either of them is acting as the Paying Agent, shall segregate and hold in trust as provided in Section 2.4) an amount of cash (in immediately available funds if deposited on such Business Day) or, if the conditions for payment in Applicable Stock set forth in this Section 5 are fulfilled, Common Stock with a value sufficient to pay the aggregate Fundamental Change Purchase Price of all the Securities or portions thereof which are to be purchased as of such Fundamental Change Purchase Date.

If the Paying Agent holds, in accordance with the terms hereof, at 10:00 a.m., New York City time, on the applicable Fundamental Change Purchase Date, cash or Applicable Stock sufficient to pay the Fundamental Change Purchase Price of any Securities for which a Fundamental Change Purchase Notice has been tendered and not withdrawn pursuant to Section 5.3(b), then, on such Fundamental Change Purchase Date, such Securities shall cease to be outstanding and interest and Additional Interest, if any, on such Securities shall cease to accrue, whether or not such Securities are delivered to the Paying Agent, and the rights of the Holders in respect thereof shall terminate (other than the right to receive the Fundamental Change Purchase Price upon delivery of such Securities).

The Company shall publicly announce the Principal Amount of Securities purchased as a result of such Fundamental Change on or as soon as practicable after the Fundamental Change Purchase Date by publishing a notice containing such information in a newspaper of general circulation in New York, New York or by publishing such information on the Company’s website, or through such other public medium that reasonably could be expected to inform Holders of such information.

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Section 5.5. Securities Purchased in Part.

Any Certificated Security that is to be purchased only in part shall be surrendered at the office of the Paying Agent (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder’s attorney duly authorized in writing) and promptly after the Fundamental Change Purchase Date the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security, without charge, a new Security or Securities, of any authorized denomination or denominations as may be requested by such Holder, in aggregate Principal Amount equal to, and in exchange for, the portion of the Principal Amount of the Security so surrendered that is not purchased.

Section 5.6. Covenant to Comply With Securities Laws Upon Purchase of Securities.

When complying with the provisions of Section 5.1 hereof (provided that such offer or purchase constitutes an “issuer tender offer” for purposes of Rule 13e-4 (which term, as used herein, includes any successor provision thereto) under the Exchange Act at the time of such offer or purchase), and subject to any exemptions available under applicable law, the Company shall: (a) if applicable, comply with Rule 13e-4 and Rule 14e-1 (or any successor provision) under the Exchange Act; (b) file the related Schedule TO (or any successor schedule, form or report) if required under the Exchange Act; and (c) otherwise comply with all United States federal and state securities laws so as to permit the rights and obligations under this Article V to be exercised in the time and in the manner specified therein.

Section 5.7. Repayment to the Company.

To the extent that the aggregate amount of cash or Applicable Stock (valued in accordance with the provisions of Section 5.1(a) hereof) deposited by the Company pursuant to Section 5.4 exceeds the aggregate Fundamental Change Purchase Price of the Securities or portions thereof which the Company is obligated to purchase as of the Fundamental Change Purchase Date then, promptly after the Fundamental Change Purchase Date, the Paying Agent shall return any such excess to the Company together with interest, if any, thereon.

ARTICLE VI

COVENANTS

Section 6.1. Payment of Securities.

The Company shall pay interest on the Securities as provided in the Securities. The Company shall promptly make all payments in respect of the Securities on the dates and in the manner provided in the Securities or pursuant to this Indenture. Principal amount, Redemption Price, Purchase Price and Fundamental Change Purchase Price and accrued and unpaid interest and Additional Interest, if any, shall be considered paid on the applicable date due if by 10:00 a.m., New York City time, on such date the Paying Agent holds, in accordance with this Indenture, cash or securities, if permitted hereunder, sufficient to pay all such amounts then due. The Company shall, to the fullest extent permitted by law, pay interest on overdue principal and overdue installments of interest and Additional Interest, if any, at the rate borne by the Securities

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per annum. All references in this Indenture or the Securities to interest shall be deemed to include Additional Interest, if any, payable pursuant to the Registration Rights Agreement.

Payment of the principal of and interest and Additional Interest, if any, on the Securities shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts or in Applicable Stock, as the case may be.

Subject to Section 3.1 and Section 5.1, the Company shall pay interest and Additional Interest, if any, on the Securities to the Person in whose name the Securities are registered at the close of business on the Regular Record Date next preceding the corresponding Interest Payment Date. Any such interest and Additional Interest, if any, not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may be paid (a) to the Person in whose name the Securities are registered at the close of business on a Special Record Date for the payment of such defaulted interest and Additional Interest, if any, to be fixed by the Trustee, notice whereof shall be given to the Holders not less than 10 calendar days prior to such Special Record Date or (b) at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange.

The Holder must surrender the Securities to the Paying Agent to collect payment of principal. Payment of interest and Additional Interest, if any, on Certificated Securities in the aggregate principal amount of $5,000,000 or less shall be made by check mailed to the address of the Person entitled thereto as such address appears in the Register, and payment of interest and Additional Interest, if any, on Certificated Securities in aggregate principal amount in excess of $5,000,000 shall be made by wire transfer in immediately available funds at the election of such Holder. Notwithstanding the foregoing, so long as the Securities are registered in the name of a Depositary or its nominee, all payments with respect to the Securities shall be made by wire transfer of immediately available funds to the account of the Depositary or its nominee.

Section 6.2. SEC and Other Reports to the Trustee.

(a) The Company shall ensure delivery to the Trustee within 15 calendar days after it files such annual and quarterly reports, information, documents and other reports with the SEC, copies of its annual report and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act in accordance with TIA Section 314(a). In the event the Company is at any time no longer subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, it shall continue to provide the Trustee with reports containing substantially the same information as would have been required to be filed with the SEC had the Company continued to have been subject to such reporting requirements. In such event, such reports shall be provided at the times the Company would have been required to provide reports had it continued to have been subject to such reporting requirements. The Company also shall comply with the other provisions of TIA Section 314(a). Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely conclusively on

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Officers’ Certificates). The Trustee shall have no duty or responsibility to review such reports, information or documents.

(b) The Company intends to file the reports referred to in paragraph (a) above in this Section 6.2 hereof with the SEC in electronic form pursuant to Regulation S-T of the SEC using the SEC’s Electronic Data Gathering, Analysis and Retrieval (“EDGAR”) system. Within 15 days after the Company files with the SEC copies of its annual reports and other information, documents and reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which it is required to file with the SEC pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company shall file the same with the Trustee. The Company also shall comply with the other provisions of TIA 314(a). The Company may deliver such reports to the Trustee by electronic means in replace of mailing such reports, provided, however, the Trustee agrees to such other means in writing. The Trustee shall have no duty to search for or obtain any electronic or other filings that the Company makes with the SEC, regardless of whether such filings are periodic, supplemental or otherwise. Delivery of the reports, information and documents to the Trustee pursuant to this Section 6.2(b) shall be solely for the purposes of compliance with this Section 6.2(b) and with TIA Section 314(a). The Trustee’s receipt of such reports, information and documents shall not constitute notice to it of the contents thereof or of any matter determinable from the content thereof, including the Company’s compliance with any of its covenants hereunder, as to which the Trustee is entitled to rely upon Officers’ Certificates.

Section 6.3. Compliance Certificate.

The Company shall deliver to the Trustee within 120 calendar days after the end of each fiscal year of the Company an Officers’ Certificate, stating whether or not to the knowledge of the signers thereof, the Company is in compliance with all conditions and covenants under this Indenture.

Section 6.4. Further Instruments and Acts.

The Company shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture.

Section 6.5. Maintenance of Office or Agency of the Trustee, Registrar, Paying Agent and Conversion Agent.

The Company shall maintain in the Borough of Manhattan, New York, New York, an office or agency of the Trustee, Registrar, Paying Agent and Conversion Agent where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer, exchange, redemption, repurchase or conversion and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The office of the Trustee located in New York City at Corporate Trust Office, shall initially be such office or agency for all of the aforesaid purposes. The Company shall give prompt written notice to the Trustee of the location, and of any change in the location, of any such office or agency (other than a change in the location of the office of the Trustee). If at any time the

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Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 14.2.

The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, New York, New York, for such purposes.

Section 6.6. Delivery of Information Required Under Rule 144A.

Upon the request of a Holder or any beneficial owner of Securities or holder or beneficial owner of Common Stock issued upon conversion thereof, the Company shall promptly furnish or cause to be furnished the information required pursuant to Rule 144A(d)(4) under the Securities Act to such Holder or any beneficial owner of Securities or holder or beneficial owner of Common Stock, or to a prospective purchaser of any such security designated by any such holder, as the case may be, to the extent required to permit compliance by such Holder or holder with Rule 144A under the Securities Act in connection with the resale of any such security. Whether a person is a beneficial owner shall be determined by the Company to the Company’s reasonable satisfaction.

Section 6.7. Waiver of Stay, Extension or Usury Laws.

The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury or other law wherever enacted, now or at any time hereafter in force, which would prohibit or forgive the Company from paying all or any portion of the Principal Amount, Redemption Price, Purchase Price or Fundamental Change Purchase Price in respect of Securities, or any interest and Additional Interest, if any, on such amounts, as contemplated herein, or which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted.

Section 6.8. Statement by Officers as to Default.

The Company shall deliver to the Trustee, as soon as practicable and in any event within five Business Days after the Company becomes aware of the occurrence of any Default or Event of Default, an Officers’ Certificate setting forth the details of such Default or Event of Default and the action which the Company proposes to take with respect thereto.

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ARTICLE VII

SUCCESSOR CORPORATION

Section 7.1. When Company May Merge or Transfer Assets.

The Company shall not consolidate with or merge with or into any other person or convey, transfer, sell, lease or otherwise dispose of all or substantially all of its properties and assets to any person, unless:

(a) either (i) the Company shall be the continuing corporation or (ii) the Person (if other than the Company) formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance, transfer, sale, lease or other disposition all or substantially all of the properties and assets of the Company substantially as an entirety (1) shall be organized and validly existing under the laws of the United States or any State thereof or the District of Columbia and (2) shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, all of the obligations of the Company under the Securities, this Indenture and the Registration Rights Agreement and, to the extent applicable, otherwise comply with the provisions of Section 12.4;

(b) immediately after giving effect to such transaction, no Default shall have occurred and be continuing; and

(c) the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer, sale, lease or other disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Article VII and that all conditions precedent herein provided for relating to such transaction have been satisfied.

For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise) of the properties and assets of one or more Subsidiaries, which, if such assets were owned by the Company, together with the assets of all of the other Subsidiaries of the Company, would constitute all or substantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company unless such transfer is to the Company or another Subsidiary. The successor Person formed by such consolidation or into which the Company is merged or the successor Person to which such conveyance, transfer, sale, lease or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor had been named as the Company herein; and thereafter, except in the case of a conveyance, transfer, sale, lease or other disposition and any obligations the Company may have under a supplemental indenture, the Company shall be discharged from all obligations and covenants under this Indenture and the Securities. Subject to Section 11.6, the Company, the Trustee and the successor Person shall enter into a supplemental indenture to evidence the succession and substitution of such successor Person and such discharge and release of the Company.

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ARTICLE VIII

DEFAULTS AND REMEDIES

Section 8.1. Events of Default.

So long as any Securities are outstanding, each of the following shall be an “Event of Default”:

(a) the failure by the Company to pay the principal amount of any Security when the same becomes due and payable whether at maturity or upon acceleration;

(b) the failure by the Company to pay any accrued and unpaid interest on any Security and Additional Interest, if any, in each case, when due and payable, and such default shall continue for a period of 30 days;

(c) the failure by the Company to convert any portion of any Security following the exercise by the Holder of the right to convert such Security into Common Stock pursuant to and in accordance with Article XII;

(d) the failure by the Company to redeem any Security, or any portion thereof, called for redemption by the Company pursuant to and in accordance with Article III and;

(e) the failure by the Company to purchase any Security, or any portion thereof, upon the exercise by the Holder of such Holder’s right to require the Company to purchase such Securities pursuant to and in accordance with Article V;

(f) the failure by the Company to provide notice in the event of a Fundamental Change in accordance with Section 5.1(b);

(g) the failure by the Company to perform or observe any other term, covenant or agreement contained in the Securities or the Indenture for a period of 60 calendar days after written notice of such failure has been given, by certified mail, (1) to the Company by the Trustee or (2) to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Securities then outstanding;

(h) there shall have occurred a default under any credit agreement, mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness of the Company or any of its Subsidiaries for money borrowed whether such Indebtedness now exists, or is created after the date of this Indenture, which default (i) involves the failure to pay principal of or any premium or interest on such Indebtedness in an amount in excess of $7.5 million when such Indebtedness becomes due and payable at the stated maturity thereof, and such default shall continue after any applicable grace period or (ii) results in the acceleration of such Indebtedness prior to the stated maturity thereof, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness so unpaid at its stated maturity or the stated maturity of which has been so accelerated, aggregates $10,000,000 or more;

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(i) there shall be a failure by the Company or any of its Subsidiaries to pay final judgments not covered by insurance aggregating in excess of $7,500,000, which judgments are not paid, discharged or stayed for a period of 60 calendar days;

(j) the Company or any Designated Subsidiary, or any group of two or more Subsidiaries that, taken as a whole, would constitute a Designated Subsidiary, pursuant to or under or within the meaning of any Bankruptcy Law:

(i) commences a voluntary case or proceeding;

(ii) consents to the entry of any order for relief against it in an involuntary case or proceeding or the commencement of any case against it;

(iii) consents to the appointment of a Custodian of it or for any substantial part of its property;

(iv) makes a general assignment for the benefit of its creditors;

(v) files a petition in bankruptcy or answer or consent seeking reorganization or relief; or

(vi) consents to the filing of such petition or the appointment of or taking possession by a Custodian; or

(k) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

(i) is for relief against the Company or any Designated Subsidiary in an involuntary case or proceeding, or adjudicates the Company or any Designated Subsidiary insolvent or bankrupt;

(ii) appoints a Custodian of the Company or any Designated Subsidiary or for any substantial part of the property of either; or

(iii) orders the winding up or liquidation of the Company or any Designated Subsidiary, and the order of decree remains unstayed and in effect for 60 days.

Section 8.2. Acceleration.

If an Event of Default (other than an Event of Default specified in Section 8.1(j) or Section 8.1(k) with respect to the Company) occurs and is continuing (including an Event of Default specified in Section 8.1(j) or Section 8.1(k) with respect to one or more Designated Subsidiaries), the Trustee by notice to the Company, or the Holders of at least 25% in aggregate principal amount of the Securities at the time outstanding by notice to the Company and the

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Trustee, may declare the principal amount plus accrued and unpaid interest and Additional Interest, if any, on all the Securities to be immediately due and payable.

Upon such a declaration, such accelerated amount shall be due and payable immediately.

If an Event of Default specified in Section 8.1(j) or Section 8.1(k) occurs with respect to the Company and is continuing, the principal amount plus accrued and unpaid interest and Additional Interest, if any, on all the Securities shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holders.

The Holders of not less than a majority in aggregate principal amount of the Securities at the time outstanding, by notice to the Trustee (and without notice to any other Holder) may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree of a court of competent jurisdiction and if all existing Events of Default have been cured or waived except nonpayment of the Principal Amount plus accrued and unpaid interest and Additional Interest, if any, that have become due solely as a result of acceleration. No such rescission shall affect any subsequent Default or impair any right consequent thereto.

Section 8.3. Other Remedies.

If an Event of Default occurs and is continuing, the Trustee may, but shall not be obligated to, pursue any available remedy to collect the payment of the Principal Amount plus accrued and unpaid interest and Additional Interest, if any, on the Securities or to enforce the performance of any provision of the Securities or this Indenture.

The Trustee may maintain a proceeding even if the Trustee does not possess any of the Securities or does not produce any of the Securities in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of, or acquiescence in, the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative.

Section 8.4. Waiver of Existing Defaults.

Subject to Section 8.7 and Section 11.2, the Holders of a majority in aggregate principal amount of the Securities at the time outstanding, by notice to the Trustee (and without notice to any other Holder), may waive certain provisions of this Indenture relating to the Securities, except for: (a) an Event of Default described in Section 8.1(a), Section 8.1(b), or Section 8.1(c); or (b) a Default in respect of any provision of this Indenture or the Securities, which, under Section 11.2, cannot be amended or modified without the consent of each Holder affected thereby.

When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. This Section 8.4 shall be in lieu of Section 316(a)1(B) of the TIA and such Section 316(a)1(B) is hereby expressly excluded from this Indenture, as permitted by the TIA.

Section 8.5. Control by Majority.

The Holders of a majority in aggregate principal amount of the Securities at the time outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However,

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the Trustee may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines in good faith is prejudicial to the rights of other Holders or would involve the Trustee in personal liability or expense unless the Trustee is provided security or indemnity satisfactory to it. This Section 8.5 shall be in lieu of Section 316(a)1(A) of the TIA and such Section 316(a)1(A) is hereby expressly excluded from this Indenture, as permitted by the TIA.

Section 8.6. Limitation on Suits.

A Holder may not pursue any remedy with respect to this Indenture or the Securities unless:

(a) the Holder gives to the Trustee written notice stating that an Event of Default is continuing;

(b) the Holders of at least 25% in aggregate principal amount of the Securities at the time outstanding make a written request to the Trustee to pursue the remedy;

(c) such Holder or Holders provide to the Trustee security or indemnity satisfactory to the Trustee against any loss, liability or expense;

(d) the Trustee does not comply with the request within 60 days after receipt of such notice, request and offer of security or indemnity; and

(e) the Holders of a majority in aggregate principal amount of the Securities at the time outstanding do not give the Trustee a direction inconsistent with the request during such 60-day period.

A Holder may not use this Indenture to prejudice the rights of any other Holder or to obtain a preference or priority over any other Holder.

Section 8.7. Rights of Holders to Receive Payment or to Convert.

Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of the Principal Amount, Redemption Price, Purchase Price, Fundamental Change Purchase Price or interest and Additional Interest, if any, in respect of the Securities held by such Holder, on or after the respective due dates expressed in the Securities and in this Indenture, and to convert such Securities in accordance with Article XII, or to bring suit for the enforcement of any such payment on or after such respective dates or the right to convert, is absolute and unconditional and shall not be impaired or affected adversely without the consent of such Holder.

Section 8.8. Collection Suit by Trustee.

If an Event of Default described in Section 8.1(a), Section 8.1(b), Section 8.1(d) or Section 8.1(e) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or another obligor on the Securities for the whole amount owing with respect to the Securities and the amounts provided for in Section 9.7.

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Section 8.9. Trustee May File Proofs of Claim.

In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the Principal Amount, Redemption Price, Purchase Price, Fundamental Change Purchase Price or interest and Additional Interest, if any, in respect of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of any such amount) shall be entitled and empowered, by intervention in such proceeding or otherwise:

(a) to file and prove a claim for the whole amount of the Principal Amount, Redemption Price, Purchase Price, Fundamental Change Purchase Price, or interest and Additional Interest, if any, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel or any other amounts due the Trustee under Section 9.7) and of the Holders allowed in such judicial proceeding, and

(b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 9.7.

Nothing contained herein shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

Section 8.10. Priorities.

After an Event of Default any money or other property distributable in respect of the Company’s obligations under this Indenture shall be paid in the following order:

FIRST: to the Trustee (including any predecessor trustee) for amounts due under Section 9.7;

SECOND: to Holders for amounts due and unpaid on the Securities for the Principal Amount, Redemption Price, Purchase Price, Fundamental Change Purchase Price or interest and Additional Interest, if any, as the case may be, ratably, without preference or priority of any kind, according to such amounts due and payable on the Securities; and

THIRD: the balance, if any, to the Company.

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The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section 8.10. At least 10 calendar days prior to such record date, the Trustee shall mail to each Holder and the Company a notice that states the record date, the payment date and the amount to be paid.

Section 8.11. Undertaking for Costs.

In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant (other than the Trustee) in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 8.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 8.7 or a suit by Holders of more than 10% in aggregate principal amount of the Securities at the time outstanding. This Section 8.11 shall be in lieu of Section 315(e) of the TIA and such Section 315(e) is hereby expressly excluded from this Indenture, as permitted by the TIA.

ARTICLE IX

TRUSTEE

Section 9.1. Duties of Trustee.

(a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

(b) Except during the continuance of an Event of Default:

(i) the Trustee need perform only those duties that are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture, but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture, but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein.

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This Section 9.1(b) shall be in lieu of Section 315(a) of the TIA and such Section 315(a) is hereby expressly excluded from this Indenture, as permitted by the TIA.

(c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:

(i) this clause (c) does not limit the effect of clause (b) or (d) of this Section 9.1;

(ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Trustee unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and

(iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 8.5.

Subparagraphs (c)(i), (ii) and (iii) shall be in lieu of Sections 315(d)(1), 315(d)(2) and 315(d)(3) of the TIA, respectively, and such Sections 315(d)(1), 315(d)(2) and 315(d)(3) are hereby expressly excluded from this Indenture, as permitted by the TIA.

(d) The Trustee may refuse to perform any duty or exercise any right or power or expend or risk its own funds or otherwise incur any financial liability unless it receives security or indemnity reasonably satisfactory to it against any loss, liability or expense.

(e) Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee (acting in any capacity hereunder) shall be under no liability for interest on any money received by it hereunder unless otherwise agreed in writing with the Company.

(f) The Trustee shall comply with the reporting requirements set forth in Section 313 of the TIA.

(g) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section.

Section 9.2. Rights of Trustee.

Subject to its duties and responsibilities under the TIA and this Indenture,

(a) the Trustee may conclusively rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document (whether in its original or facsimile form) believed by it to be genuine and to have been signed or presented by the proper party or parties;

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(b) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officers’ Certificate;

(c) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder;

(d) the Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith which it reasonably believes to be authorized or within its rights or powers conferred under this Indenture;

(e) the Trustee may consult with counsel selected by it and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in reliance on such advice or Opinion of Counsel;

(f) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders, pursuant to the provisions of this Indenture, unless such Holders shall have provided to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities which may be incurred therein or thereby;

(g) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution;

(h) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation;

(i) the Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of such Default or Event of Default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Securities and this Indenture;

(j) the rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and

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shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other person employed to act hereunder;

(k) the Trustee may request that the Company deliver an Officers’ Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers’ Certificate may be signed by any person authorized to sign an Officers’ Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded;

(l) to the extent permitted by the TIA, in no event shall the Trustee be responsible or liable for special, indirect, or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action; and

(m) The Trustee shall not be responsible or liable for any failure or delay in the performance of its obligations under this Indenture arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control, including, without limitation, acts of God; earthquakes; fire; flood; terrorism; wars and other military disturbances; sabotage; epidemics; riots; interruptions; loss or malfunctions of utilities, computer (hardware or software) or communication services; accidents; labor disputes; acts of civil or military authority and governmental action.

Section 9.3. Individual Rights of Trustee.

The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee; provided that the Trustee must comply with Section 9.10 and Section 9.11. Any Paying Agent, Registrar, Conversion Agent or co-registrar may do the same with like rights.

Section 9.4. Trustee’s Disclaimer.

The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company’s use or application of the proceeds from the Securities, it shall not be responsible for any statement in any registration statement for the Securities under the Securities Act or in any offering document for the Securities, this Indenture or the Securities (other than its certificate of authentication), or the determination as to which beneficial owners are entitled to receive any notices hereunder.

Section 9.5. Notice of Defaults.

If a Default occurs and if it is known to a Responsible Officer of the Trustee, the Trustee shall give to each Holder notice of the Default within 90 calendar days after it occurs or, if later, within 15 calendar days after it is known to the Trustee, unless such Default shall have been cured or waived before the giving of such notice. Notwithstanding the preceding sentence, except in the case of a Default described in Section 8.1(a), Section 8.1(b), Section 8.1(d) or Section 8.1(e), the Trustee may withhold the notice if and so long as the Responsible Officer of the Trustee or a committee of its Responsible Officers or a committee of its executive officers in

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good faith determines that withholding the notice is in the interest of the Holders. The preceding sentence shall be in lieu of the proviso to Section 315(b) of the TIA and such proviso is hereby expressly excluded from this Indenture, as permitted by the TIA.

Section 9.6. Reports by Trustee to Holders.

Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, the Trustee shall mail to each Holder a brief report dated as of such May 15 that complies with TIA Section 313(a), if required by such Section 313(a). The Trustee also shall comply with TIA Section 313(b).

A copy of each report at the time of its mailing to Holders shall be filed with the SEC and each securities exchange, if any, on which the Securities are listed. The Company agrees to notify the Trustee promptly whenever the Securities become listed on any securities exchange and of any delisting thereof.

Section 9.7. Compensation and Indemnity.

The Company agrees to:

(a) pay to the Trustee from time to time such compensation as the Company and the Trustee shall from time to time agree in writing for all services rendered by it hereunder (which compensation shall not be limited (to the extent permitted by law) by any provision of law in regard to the compensation of a trustee of an express trust);

(b) reimburse the Trustee upon its request for all expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation expenses, advances and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its own negligence or willful misconduct; and

(c) fully indemnify the Trustee or any predecessor Trustee and their agents for, and to hold them harmless against, any and all loss, damage, claim, liability, cost or expense (including attorney’s fees and expenses, and taxes (other than taxes based upon, measured by or determined by the income of the Trustee)) incurred without the Trustee’s negligent action, negligent failure to act or willful misconduct, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim (whether asserted by the Company or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, or in connection with enforcing the provisions of this Section 9.7.

With regard to its indemnification rights under Section 9.7(c) where the Company has assumed the defense in any action or proceeding, the Trustee shall have the right to employ separate counsel in any such action or proceeding and participate in the investigation and defense thereof, and the Company shall pay the reasonable fees and expenses of such separate counsel; provided, however, that the Trustee may only employ separate counsel at the expense of the Company if in the reasonable determination of the Trustee (i) a conflict of interest exists by reason of common representation or (ii) there are legal defenses available to the Trustee that are

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different from or are in addition to those available to the Company or (iii) if all parties commonly represented do not agree as to the action (or inaction) of counsel.

To secure the Company’s payment obligations in this Section 9.7, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, except that held in trust to pay the Principal Amount, Redemption Price, Purchase Price, Fundamental Change Purchase Price or interest and Additional Interest, if any, as the case may be, on particular Securities.

The Company’s payment obligations pursuant to this Section 9.7 and the lien referred to in this Section 9.7 shall survive the discharge of this Indenture and the resignation or removal of the Trustee. When the Trustee incurs expenses after the occurrence of a Default specified in Section 8.1(j) or Section 8.1(k), the expenses including the reasonable charges and expenses of its counsel, are intended to constitute expenses of administration under any Bankruptcy Law.

Section 9.8. Replacement of Trustee.

The Trustee may resign by so notifying the Company; provided, however, that no such resignation shall be effective until a successor Trustee has accepted its appointment pursuant to this Section 9.8. The Holders of a majority in aggregate principal amount of the Securities at the time outstanding may remove the Trustee by so notifying the Trustee and the Company. The Company shall remove the Trustee if:

(a) the Trustee fails to comply with Section 9.10;

(b) the Trustee is adjudged bankrupt or insolvent;

(c) a receiver or public officer takes charge of the Trustee or its property; or

(d) the Trustee otherwise becomes incapable of acting.

If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint, by resolution of its Board of Directors, a successor Trustee.

A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company satisfactory in form and substance to the retiring Trustee and the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, upon payment of all the retiring Trustee’s fees and expenses then due and payable and subject to the lien provided for in Section 9.7.

If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority in aggregate principal amount of the Securities at the time outstanding may petition at the expense of the Company any court of competent jurisdiction at the expense of the Company for the appointment of a successor Trustee.

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If the Trustee fails to comply with Section 9.10, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

Section 9.9. Successor Trustee by Merger.

If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee.

Section 9.10. Eligibility; Disqualification.

The Trustee and any successor Trustee shall at all times satisfy the requirements of TIA Sections 310(a)(1) and 310(b). The Trustee (or its parent holding company) shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. Nothing contained herein shall prevent the Trustee from filing with the Commission the application referred to in the penultimate paragraph of TIA Section 310(b). If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 9.10, it shall resign immediately in the manner and with the effect specified above in this Article.

Section 9.11. Preferential Collection of Claims Against Company.

The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein.

ARTICLE X

DISCHARGE OF INDENTURE

Section 10.1. Discharge of Liability on Securities.

When (i) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced or repaid pursuant to Section 2.7) for cancellation or (ii) all outstanding Securities have become due and payable (whether at the Stated Maturity or upon acceleration, or on any Redemption Date, Purchase Date or Fundamental Change Purchase Date, or upon conversion) and the Company deposits with the Paying Agent or Conversion Agent cash or Applicable Stock sufficient to pay all amounts due and owing on all outstanding Securities (other than Securities replaced pursuant to Section 2.7), and if in either case the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Section 9.7, cease to be of further effect subject to any extension required by Section 12. to effect settlement upon conversion of the Notes. The Trustee shall join in the execution of a document prepared by the Company acknowledging satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers’ Certificate and Opinion of Counsel and at the cost and expense of the Company.

Section 10.2. Repayment to the Company.

The Trustee and the Paying Agent shall return to the Company upon written request any cash or securities held by them for the payment of any amount with respect to the Securities that

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remains unclaimed for two years, subject to applicable unclaimed property law. After return to the Company, Holders entitled to the cash or securities must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person and the Trustee and the Paying Agent shall have no further liability to the Holders with respect to such cash or securities for that period commencing after the return thereof.

ARTICLE XI

AMENDMENTS

Section 11.1. Without Consent of Holders.

The Company and the Trustee may amend this Indenture or the Securities without the consent of any Holder to:

(a) add to the covenants of the Company for the benefit of the Holders of Securities;

(b) surrender any right or power herein conferred upon the Company;

(c) provide for conversion rights of Holders of Securities if any reclassification or change of the Common Stock or any consolidation, merger or sale of all or substantially all of the Company’s assets occurs;

(d) provide for the assumption of the Company’s obligations to the Holders of Securities in the case of a merger, consolidation, conveyance, transfer, sale, lease or other disposition pursuant to Article VII;

(e) increase the Conversion Rate; provided, however, that such increase in the Conversion Rate shall not adversely affect the interests of the Holders of Securities (after taking into account tax and other consequences of such increase);

(f) comply with the requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA;

(g) make any changes or modifications necessary in connection with the registration of the Securities under the Securities Act as contemplated in the Registration Rights Agreement; provided, however, that such action pursuant to this clause (g) does not, in the good faith opinion of the Board of Directors (as evidenced by a Board Resolution), adversely affect the interests of the Holders of Securities in any material respect;

(h) cure any ambiguity, correct or supplement any provision herein which may be inconsistent with any other provision herein or which is otherwise defective, or to make any other provisions with respect to matters or questions arising under this Indenture which the Company may deem necessary or desirable and which shall not be inconsistent with the provisions of this Indenture; provided, however, that such action pursuant to this clause (h)

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does not, in the good faith opinion of the Board of Directors (as evidenced by a Board Resolution), adversely affect the interests of the Holders of Securities in any material respect;

(i) to evidence the succession of another Person to the Company or any other obligor upon the Securities, and the assumption by any such successor of the covenants of the Company or such obligor herein and in the Securities, in each case in compliance with the provisions of this Indenture;

(j) to evidence and provide the acceptance of the appointment of a successor trustee hereunder; or

(k) add or modify any other provisions herein with respect to matters or questions arising hereunder which the Company and the Trustee may deem necessary or desirable and which shall not adversely affect the interests of the Holders of Securities.

Section 11.2. With Consent of Holders.

Except as provided below in this Section 11.2, this Indenture or the Securities may be amended, modified or supplemented, and noncompliance in any particular instance with any provision of this Indenture or the Securities may be waived, in each case with the written consent or affirmative vote of the Holders of at least a majority of the principal amount of the Securities at the time outstanding.

This Indenture and the Securities may not be modified or amended without the written consent or the affirmative vote of each Holder of Securities affected thereby, to:

(a) change the maturity of the principal amount of, or the payment date of any installment of interest or Additional Interest, if any, on, any Security;

(b) reduce the Principal Amount of, or interest or Additional Interest, if any, on, or the Redemption Price, Purchase Price or Fundamental Change Purchase Price of, any Security;

(c) change the currency of payment of Principal Amount of, or interest or Additional Interest, if any, on, or the Redemption Price, Purchase Price or Fundamental Change Purchase Price of, any Security from U.S. Dollars;

(d) impair or adversely affect the rate of accrual of interest or Additional Interest, if any, on any Security, or the manner of calculation thereof;

(e) impair the right of any Holder to institute suit for the enforcement of any payment or with respect to, or conversion of, any Security;

(f) modify the Company’s obligation to maintain a Paying Agent in the Borough of Manhattan, New York City;

(g) impair or adversely affect the conversion rights of the Holder of the Securities as provided in Article XII;

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(h) impair or adversely affect the purchase rights of the Holders of the Securities as provided in Article V;

(i) modify the optional redemption provisions of Article III in a manner adverse to the Holders of the Securities;

(j) reduce the percentage of the Principal Amount of the outstanding Securities the written consent or affirmative vote of whose Holders is required for any amendment, modification or supplement to this Indenture;

(k) reduce the percentage of the Principal Amount of the outstanding Securities the written consent or affirmative vote of whose Holders is required to rescind an acceleration and its consequences or for any waiver of any past Default provided for in this Indenture; or

(l) waive any matter set forth in Section 8.4(a), Section 8.4(b), or Section 8.4(c).

It shall not be necessary for the consent of the Holders under this Section 11.2 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof.

After an amendment under this Section 11.2 becomes effective, the Company shall mail to each Holder a notice briefly describing the amendment.

Nothing contained in this Section 11.2 shall impair the ability of the Company and the Trustee to amend this Indenture or the Securities without the consent of any Holder to provide for the assumption of the Company’s obligations to the Holders of Securities in the case of a merger, consolidation, conveyance, transfer, sale, lease or other disposition pursuant to Article VII.

Section 11.3. Compliance with Trust Indenture Act.

Every supplemental indenture executed pursuant to this Article shall comply with the TIA.

Section 11.4. Revocation and Effect of Consents, Waivers and Actions.

Until an amendment, waiver or other action by Holders becomes effective, a consent thereto by a Holder of a Security hereunder is a continuing consent by the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same obligation as the consenting Holder’s Security, even if notation of the consent, waiver or action is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent, waiver or action as to such Holder’s Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment, waiver or action becomes effective. After an amendment, waiver or action becomes effective, it shall bind every Holder.

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Section 11.5. Notation on or Exchange of Securities.

Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article XI may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for outstanding Securities.

Section 11.6. Trustee to Sign Supplemental Indentures.

The Trustee shall sign any supplemental indenture authorized pursuant to this Article XI if the amendment contained therein does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign such supplemental indenture. In signing such supplemental indenture the Trustee shall receive, and (subject to the provisions of Section 9.1) shall be fully protected in relying upon, an Officers’ Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture.

Section 11.7. Effect of Supplemental Indentures.

Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.

ARTICLE XII

CONVERSION

Section 12.1. Conversion Right.

(a) Subject to and upon compliance with the provisions of this Article XII, a Holder of a Security shall have the right, at such Holder’s option, to convert all or any portion (if the portion to be converted is $1,000 or an integral multiple of $1,000) of the Principal Amount of such Security into a number of shares of Common Stock equal to the product of (x) the Conversion Rate in effect on the date of conversion times (y) the quotient of the Principal Amount at Issuance of the Security or portion thereof surrendered for conversion divided by 1,000:

(i) At any time prior to Stated Maturity unless such Security has been previously redeemed or repurchased by the Company; or

(ii) as provided in clause (b) of this Section 12.1.

With respect to any conversion of a Security during a Registration Default Period following satisfaction of any of the conditions to conversion described in this Indenture (and during the prescribed time periods in respect thereof), a Holder shall be entitled to, 103% of the number

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of shares of Common Stock that the Holder would have otherwise been entitled to upon conversion.

(b) (i) In the event that:

(A) the Company distributes to all holders of its Common Stock rights or warrants entitling them (for a period expiring within 60 days of the Record Date for such distribution) to subscribe for or purchase Common Stock at a price per share of Common Stock less than the Closing Sale Price of the Common Stock on the Business Day immediately preceding the announcement of such distribution;

(B) the Company distributes to all holders of its Common Stock cash or other assets, debt securities or rights or warrants to purchase its securities, including the declaration of any cash dividends, payable quarterly or otherwise, where the Fair Market Value (as determined by the Board of Directors) of such distribution per share of Common Stock exceeds 10% of the Closing Sale Price of the Common Stock on the Business Day immediately preceding the date of declaration of such distribution; or

(C) a Fundamental Change occurs,

then, in each case, the Securities may be surrendered for conversion at any time on and after the date that the Company gives notice to the Holders of such right, which shall be, in the case of (A) or (B), not less than 15 Business Days prior to the Ex-Dividend Time for such distribution, or, in the case of (C), within 15 Business Days after the occurrence of the Fundamental Change, until 5:00 p.m., New York City time, on the earlier of the Business Day immediately preceding the Ex-Dividend Time and the date the Company announces that such distribution shall not take place in the case of (A) or (B), or within 20 Business Days of the Company’s delivery of the notice of the Fundamental Change in the case of (C); provided, however, that in the case of (A) or (B), a Holder of Securities may not surrender Securities for conversion if the Holder shall otherwise participate in such distribution without conversion.

(ii) In addition, in the event that the Company consolidates with or merges into another corporation, or is a party to a binding share exchange pursuant to which the Common Stock would be converted into cash, securities or other property as set forth in Section 12.4, then the Securities may be surrendered for conversion at any time from and after the date which is 15 calendar days prior to the date announced by the Company as the anticipated effective

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time of such transaction until 15 calendar days after the actual date of such transaction.

(c) Notwithstanding the foregoing, a Security in respect of which a Holder has delivered a Fundamental Change Purchase Notice, as the case may be, exercising such Holder’s right to require the Company to repurchase such Security may be converted only if such Fundamental Change Purchase Notice is withdrawn in accordance with Section 4.2(b) or Section 5.2(b) prior to 5:00 p.m., New York City time, on the Business Day immediately preceding such Purchase Date or Fundamental Change Purchase Date.

Section 12.2. Conversion Procedures; Conversion Rate; Fractional Shares.

(a) Each Security shall be convertible at the office of the Conversion Agent into fully paid and nonassessable shares of Common Stock (calculated to the nearest 1/10,000th of a share).

(b) The Conversion Agent shall notify the Company when it receives a Conversion Notice. The Company shall determine the number of shares of Common Stock and/or the amount of cash, if any, that the Holder that submitted the Conversion Notice is entitled to receive upon surrender of the Securities covered by that Conversion Notice. A certificate for the number of full shares of Common Stock into which the Securities are converted (and cash in lieu of fractional shares) shall be delivered to such Holder, assuming all of the other requirements have been satisfied by such Holder, as soon as practicable. Notwithstanding the foregoing, the Company shall not be required to deliver certificates for Common Stock while the stock transfer books for such stock or the security register are duly closed for any purpose, but certificates for Common Stock shall be issued and delivered as soon as practicable after the opening of such books or security register. No cash payment of accrued and unpaid interest or Additional Interest shall be paid by the Company on a converted Security, except as described in Section 12.9. Accrued and unpaid interest and Additional Interest, if any, shall be deemed to be paid in full with the shares of Common Stock issued or cash paid upon conversion, rather than deemed cancelled, extinguished or forfeited.

Except as described in Section 12.9, the Company will not make any payment in cash or Common Stock or other adjustment for accrued and unpaid interest or Additional Interest on any Securities when they are converted. The Company’s delivery to the Holder of the full number of shares of Common Stock into which the Security is convertible, together with any cash payment for such Holder’s fractional shares, shall be deemed to satisfy the Company’s obligation to pay the Principal Amount of the Security and to satisfy its obligation to pay accrued and unpaid interest and Additional Interest, if any through the conversion date. As a result, accrued interest, and Additional Interest are deemed paid in full rather than cancelled, extinguished or forfeited. Notwithstanding the foregoing, accrued interest and Additional Interest, if any, will be payable upon any conversion of Securities made concurrently with or after acceleration of the Securities following an Event of Default.

If a Holder has submitted any or all of its Securities for repurchase, a Holder’s conversion rights on the Securities so subject to repurchase shall expire at 5:00 p.m., New York City time, on the Business Day immediately preceding the Fundamental Change Purchase Date. Notwithstanding the foregoing, a Security in respect of which a Holder has delivered a

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Fundamental Change Purchase Notice exercising such Holder’s right to require the Company to repurchase such Security may be converted only if such Fundamental Change Purchase Notice is withdrawn in accordance with Section 4.2(b) prior to 5:00 p.m., New York City time, on the Business Day immediately preceding the Fundamental Change Purchase Date.

(c) Before any Holder shall be entitled to convert the same into Common Stock, such Holder shall, in the case of Global Securities, comply with the Applicable Procedures of the Depositary in effect at that time, and in the case of Certificated Securities, surrender such Securities, duly endorsed to the Company or in blank, at the office of the Conversion Agent, and shall give written notice to the Company at said office or place in the form of the Conversion Notice attached to the Security (the “Conversion Notice”) that such Holder elects to convert the same and shall state in writing therein the Principal Amount at issuance of Securities to be converted (in whole or in part so long as the Principal Amount to be converted is in multiples of $1,000) and the name or names (with addresses) in which such Holder wishes the certificate or certificates for Common Stock to be issued.

Before any such conversion, a Holder also shall pay all funds required, if any, relating to interest or Additional Interest, if any, on the Securities, as provided in Section 12.9 and all taxes or duties, if any, as provided in Section 12.8.

If more than one Security shall be surrendered for conversion at one time by the same Holder, the number of full shares of Common Stock that shall be deliverable upon conversion shall be computed on the basis of the aggregate Principal Amount at issuance of the Securities (or specified portions thereof to the extent permitted thereby) so surrendered.

If shares of Common Stock to be issued upon conversion of a Restricted Security is to be issued in the name of a Person other than the Holder of such Restricted Security, such Holder shall deliver to the Conversion Agent a certification in substantially the form set forth in a Transfer Certificate dated the date of surrender of such Restricted Security and signed by such Holder, as to compliance with the restrictions on transfer applicable to such Restricted Security. The Company shall not be required to issue Common Stock upon conversion of any such Restricted Security to a Person other than the Holder if such Restricted Security is not so accompanied by a properly completed certification, and the Registrar shall not be required to register Common Stock upon conversion of any such Restricted Security in the name of a Person other than the Holder if such Restricted Security is not so accompanied by a properly completed certification.

(d) A Security shall be deemed to have been converted immediately prior to 5:00 p.m., New York City time, on the date on which all of the conversion requirements set forth in Section 12.2(b) have been satisfied, and the person or persons entitled to receive the Common Stock issuable upon such conversion shall be treated for all purposes as the record Holder or Holders of such Common Stock as of 5:00 p.m., New York City time, on such date.

(e) In case any Certificated Security shall be surrendered for partial conversion, the Company shall execute and the Trustee shall authenticate and deliver to or upon the written order of the Holder of the Security so surrendered, without charge to such Holder (subject to the provisions of Section 12.8), a new Security or Securities in authorized

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denominations in an aggregate principal amount equal to the unconverted portion of the surrendered Certificated Securities.

Section 12.3. Adjustment of Conversion Rate.

The Conversion Rate shall be adjusted from time to time as follows:

(a) In case the Company shall, at any time or from time to time while any of the Securities are outstanding, pay a dividend or make a distribution in Common Stock to all or substantially all holders of its outstanding Common Stock, then the Conversion Rate in effect immediately prior to the close of business on the Record Date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be adjusted so that the Holder of any Security thereafter surrendered for conversion shall be entitled to receive that number of shares of Common Stock which it would have received had such Security been converted immediately prior to the happening of such event as well as such additional shares it would have received as a result of such event. Such adjustment shall become effective immediately prior to the opening of business on the day following the Record Date fixed for such determination. If any dividend or distribution of the type described in this Section 12.3(a) is declared but not so paid or made, the Conversion Rate shall again be adjusted to the Conversion Rate which would then be in effect if such dividend or distribution had not been declared.

(b) In case the Company shall, at any time or from time to time while any of the Securities are outstanding, subdivide its outstanding shares of Common Stock into a greater number of Common Stock or combine its outstanding shares of Common Stock into a smaller number of Common Stock, then the Conversion Rate in effect immediately prior to the close of business on the day upon which such subdivision or combination becomes effective shall be adjusted so that the Holder of any Security thereafter surrendered for conversion shall be entitled to receive that number of shares of Common Stock which it would have received had such Security been converted immediately prior to the happening of such event as well as such additional shares as it would have received as a result of such event. Such adjustment shall become effective immediately prior to the opening of business on the day following the day upon which such subdivision or combination becomes effective.

(c) In case the Company shall, at any time or from time to time while any of the Securities are outstanding, issue rights or warrants for a period expiring within 60 days (other than any rights or warrants referred to in Section 12.3(d)) to all or substantially all holders of its outstanding Common Stock entitling them to subscribe for or purchase Common Stock (or securities convertible into or exchangeable or exercisable for Common Stock), at a price per share of Common Stock (or having a conversion, exchange or exercise price per share of Common Stock) less than the Closing Sale Price of the Common Stock on the Business Day immediately preceding the date of announcement of such issuance (treating the conversion, exchange or exercise price per share of Common Stock of the securities convertible, exchangeable or exercisable into Common Stock as equal to (x) the sum of (i) the price for a unit of the security convertible into or exchangeable or exercisable for Common Stock and (ii) any additional consideration initially payable upon the conversion of or exchange or exercise for such security into Common Stock divided by (y) the number of shares of Common Stock initially underlying such convertible, exchangeable or exercisable

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security), then the Conversion Rate shall be adjusted by multiplying the Conversion Rate in effect at the opening of business on the date after such date of announcement by a fraction:

(i) the numerator of which shall be the number of shares of Common Stock outstanding at the close of business on the date of announcement, plus the total number of additional shares of Common Stock so offered for subscription or purchase (or into which the convertible, exchangeable or exercisable securities so offered are convertible, exchangeable or exercisable); and

(ii) the denominator of which shall be the number of shares of Common Stock outstanding on the close of business on the date of announcement, plus the number of shares of Common Stock (or convertible, exchangeable or exercisable securities) which the aggregate offering price of the total number of shares of Common Stock (or convertible, exchangeable or exercisable securities) so offered for subscription or purchase (or the aggregate conversion, exchange or exercise price of the convertible, exchangeable or exercisable securities so offered) would purchase at such Closing Sale Price of the Common Stock.

Such adjustment shall become effective immediately prior to the opening of business on the day following the Record Date for such determination. To the extent that shares of Common Stock (or securities convertible, exchangeable or exercisable into shares of Common Stock) are not delivered pursuant to such rights or warrants, upon the expiration or termination of such rights or warrants, the Conversion Rate shall be readjusted to the Conversion Rate which would then be in effect had the adjustments made upon the issuance of such rights or warrants been made on the basis of the delivery of only the number of shares of Common Stock (or securities convertible, exchangeable or exercisable into shares of Common Stock) actually delivered. In the event that such rights or warrants are not so issued, the Conversion Rate shall again be adjusted to be the Conversion Rate which would then be in effect if the Record Date fixed for the determination of stockholders entitled to receive such rights or warrants had not been fixed. In determining whether any rights or warrants entitle the holders to subscribe for or purchase shares of Common Stock at less than such Closing Sale Price, and in determining the aggregate offering price of such shares of Common Stock, there shall be taken into account any consideration received for such rights or warrants, the value of such consideration if other than cash, to be determined by the Board of Directors.

(d) (A) In case the Company shall, at any time or from time to time while any of the Securities are outstanding, by dividend or otherwise, distribute to all or substantially all holders of its outstanding shares of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation and the shares of Common Stock are not changed or exchanged), shares of its capital stock, evidences of its Indebtedness or other assets, including securities, but excluding (i) dividends or distributions of Common Stock referred to in Section 12.3(a),

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(ii) any rights or warrants referred to in Section 12.3(c), (iii) dividends and distributions paid exclusively in cash referred to in this Section 12.3(d) and (iv) dividends and distributions of stock, securities or other property or assets (including cash) in connection with the reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance to which Section 12.4 applies (such capital stock, evidence of its indebtedness, other assets or securities being distributed hereinafter in this Section 12.3(d) called the “Distributed Assets”), then, in each such case, subject to paragraphs (D) and (E) of this Section 12.3(d), the Conversion Rate shall be adjusted by multiplying the Conversion Rate in effect immediately prior to the close of business on the Record Date with respect to such distribution by a fraction:

(i) the numerator of which shall be the Current Market Price; and

(ii) the denominator of which shall be such Current Market Price of the Common Stock, less the Fair Market Value on such date of the portion of the distributed assets so distributed applicable to one share of Common Stock (determined on the basis of the number of shares of Common Stock outstanding on the Record Date) on such date.

Such adjustment shall become effective immediately prior to the opening of business on the day following the Record Date for such distribution. In the event that such dividend or distribution is not so paid or made, the Conversion Rate shall again be adjusted to be the Conversion Rate which would then be in effect if such dividend or distribution had not been declared.

(B) If the Board of Directors determines the Fair Market Value of any distribution for purposes of this Section 12.3(d) by reference to the actual or when issued trading market for any distributed assets comprising all or part of such distribution, it must in doing so consider the prices in such market over the same period (the “Reference Period”) used in computing the Current Market Price pursuant to Section 12.3(g) to the extent possible, unless the Board of Directors determines in good faith that determining the Fair Market Value during the Reference Period would not be in the best interest of the Holders.

(C) In the event any such distribution consists of shares of capital stock of, or similar equity interests in, one or more of the Company’s Subsidiaries (a “Spin-Off”), the Fair Market Value of the securities to be distributed shall equal the average of the Closing Sale Prices of such securities on the principal securities market on which such securities are traded for the five consecutive Trading Days commencing on and including the sixth Trading Day of those securities after the effectiveness of the Spin-Off, and the Current Market Price shall be measured for the same period. In the event, however, that an underwritten initial public offering of the securities in the Spin-Off occurs simultaneously with the Spin-Off, Fair Market Value of the securities distributed in the Spin-Off shall mean the initial public offering price of such securities and the Current Market Price shall mean the Closing Sale Price for the Common Stock on the same Trading Day.

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(D) Rights or warrants distributed by the Company to all holders of its outstanding shares of Common Stock entitling them to subscribe for or purchase shares of Equity Interest (either initially or under certain circumstances), which rights or warrants, until the occurrence of a specified event or events (“Trigger Event”), (x) are deemed to be transferred with such shares of Common Stock, (y) are not exercisable and (z) are also issued in respect of future issuances of Common Stock shall be deemed not to have been distributed for purposes of this Section 12.3(d) (and no adjustment to the Conversion Rate under this Section 12.3(d) shall be required) until the occurrence of the earliest Trigger Event. If such right or warrant is subject to subsequent events, upon the occurrence of which such right or warrant shall become exercisable to purchase different distributed assets, evidences of indebtedness or other assets, or entitle the holder to purchase a different number or amount of the foregoing or to purchase any of the foregoing at a different purchase price, then the occurrence of each such event shall be deemed to be the date of issuance and Record Date with respect to a new right or warrant (and a termination or expiration of the existing right or warrant without exercise by the holder thereof). In addition, in the event of any distribution (or deemed distribution) of rights or warrants, or any Trigger Event or other event (of the type described in the preceding sentence) with respect thereto, that resulted in an adjustment to the Conversion Rate under this Section 12.3(d):

(i) in the case of any such rights or warrants which shall all have been redeemed or repurchased without exercise by any holders thereof, the Conversion Rate shall be readjusted upon such final redemption or repurchase to give effect to such distribution or Trigger Event, as the case may be, as though it were a cash distribution, equal to the per share redemption or purchase price received by a holder of shares of Common Stock with respect to such rights or warrants (assuming such holder had retained such rights or warrants), made to all holders of Common Stock as of the date of such redemption or purchase; and

(ii) in the case of such rights or warrants which shall have expired or been terminated without exercise, the Conversion Rate shall be readjusted as if such rights and warrants had never been issued.

(E) For purposes of this Section 12.3(d) and Section 12.3(a), Section 12.3(b) and Section 12.3(c), any dividend or distribution to which this Section 12.3(d) is applicable that also includes (x) shares of Common Stock, (y) a subdivision or combination of Common Stock to which Section 12.3(b) applies or (z) rights or warrants to subscribe for or purchase shares of Common Stock to which Section 12.3(c) applies (or any combination thereof), shall be deemed instead to be:

(i) a dividend or distribution of the evidences of indebtedness, assets, shares of capital stock, rights or warrants, other than such shares of Common

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Stock, such subdivision or combination or such rights or warrants to which Section 12.3(a), Section 12.3(b) and Section 12.3(c) apply, respectively (and any Conversion Rate adjustment required by this Section 12.3(d) with respect to such dividend or distribution shall then be made), immediately followed by

(ii) a dividend or distribution of such shares of Common Stock, such subdivision or combination or such rights or warrants (and any further Conversion Rate adjustment required by Section 12.3(a), Section 12.3(b) and Section 12.3(c) with respect to such dividend or distribution shall then be made), except:

(1) the Record Date of such dividend or distribution shall be substituted as (i) “the date fixed for the determination of stockholders entitled to receive such dividend or other distribution,” “Record Date fixed for such determinations” and “Record Date” within the meaning of Section 12.3(a), (ii) “the day upon which such subdivision or combination becomes effective” within the meaning of Section 12.3(b), and (iii) as “the Record Date fixed for the determination of the stockholders entitled to receive such rights or warrants” and such “Record Date” within the meaning of Section 12.3(c); and

(2) any reduction or increase in the number of shares of Common Stock resulting from such subdivision or combination shall be disregarded in connection with such dividend or distribution.

(e) In case the Company shall, at any time or from time to time after the initial Issue Date while any of the Securities are outstanding, by dividend or otherwise, distribute to all or substantially all holders of its outstanding shares of Common Stock, cash (including any quarterly cash dividends, but excluding any cash that is distributed upon a reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance to which Section 12.4 applies or as part of a distribution referred to in Section 12.3(d)), then, and in each case, immediately after the close of business on such date, the Conversion Rate shall be adjusted by multiplying the Conversion Rate in effect immediately prior to the close of business of such Record Date by a fraction:

(A) the numerator of which shall be equal to the Current Market Price on such date; and

(B) the denominator of which shall be equal to the Current Market Price on the Record Date, less an amount equal to the quotient of (x) the aggregate amount of such cash distribution and (y) the number of shares of Common Stock outstanding on the Record Date.

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Such adjustment shall become effective immediately prior to the opening of business on the day following the Record Date for such distribution. In the event that such distribution is not so made, the Conversion Rate shall again be adjusted to be the Conversion Rate which would then be in effect if such distribution had not been declared.

Notwithstanding the foregoing, adjustments to the conversion rate resulting from any quarterly cash dividends may not cause the conversion rate (as adjusted for any other adjustment) to exceed the quotient obtained by dividing the principal amount of a note by the last reported sale price of our common stock on the cover page of this offering memorandum.

(f) In case a tender offer or exchange offer (other than as part of a stock option exchange offer) made by the Company or any of its Subsidiaries for all or any portion of the Common Stock shall expire, then and in each such case, immediately prior to the opening of business on the day after the date of the last time (the “Expiration Time”) tenders or exchanges could have been made pursuant to such tender offer or exchange offer, the Conversion Rate shall be adjusted so that the same shall equal the rate determined by multiplying the Conversion Rate in effect immediately prior to the close of business on the date of the Expiration Time by a fraction:

(A) the numerator of which shall be the sum of (x) the product of (i) the number of shares of Common Stock outstanding (excluding any tendered or exchanged shares) at the Expiration Time and (ii) the Current Market Price of the Common Stock at the Expiration Time, and (y) the Fair Market Value of the aggregate consideration payable to stockholders based on acceptance (up to any maximum specified in the terms of the tender offer or exchange offer) of all shares validly tendered and not withdrawn as of the Expiration Time; and

(B) the denominator of which shall be the product of the number of shares of Common Stock outstanding (including any tendered or exchanged shares) at the Expiration Time and the Current Market Price of the Common Stock at the Expiration Time.

Such adjustment (if any) shall become effective immediately prior to the opening of business on the day following the Expiration Time. In the event that the Company is obligated to purchase shares pursuant to any such tender offer or exchange offer, but the Company is permanently prevented by applicable law from effecting any such purchases or all or a portion of such purchases are rescinded, the Conversion Rate shall again be adjusted to be the Conversion Rate which would then be in effect if such (or such portion of the) tender offer or exchange offer had not been made. If the application of this Section 12.3(e) to any tender offer or exchange offer would result in a decrease in the Conversion Rate, no adjustment shall be made for such tender offer under this Section 12.3(e).

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To the extent the Company has a rights plan in effect upon the conversion of the Securities, if Holders of the Securities exercising the right of conversion attaching after the date the rights separate from the underlying Common Stock are not entitled to receive the rights that would otherwise be attributable to the Common Stock received upon conversion, the Conversion Rate shall be adjusted as though the rights were being distributed to holders of Common Stock on the date of such separation. If such an adjustment is made and the rights are later redeemed, invalidated or terminated, then a corresponding reversing adjustment shall be made to the Conversion Rate on an equitable basis.

(g) For purposes of this Article XII, the following terms shall have the meanings indicated:

“Current Market Price” on any date means the average of the daily Closing Sale Prices per share of Common Stock for the ten consecutive Trading Days immediately prior to such date; provided, however, that if:

(i) the “ex” date (as hereinafter defined) for any event (other than the issuance or distribution requiring such computation) that requires an adjustment to the Conversion Rate pursuant to Section 12.3(a), Section 12.3(b), Section 12.3(c), Section 12.3(d), Section 12.3(e) or Section 12.3(f) occurs during such ten consecutive Trading Days, the Closing Sale Price for each Trading Day prior to the “ex” date for such other event shall be adjusted by multiplying such Closing Sale Price by the same fraction by which the Conversion Rate is so required to be adjusted as a result of such other event;

(ii) the “ex” date for any event (other than the issuance or distribution requiring such computation) that requires an adjustment to the Conversion Rate pursuant to Section 12.3(a), Section 12.3(b), Section 12.3(c), Section 12.3(d), Section 12.3(e) or Section 12.3(f) occurs on or after the “ex” date for the issuance or distribution requiring such computation and prior to the day in question, the Closing Sale Price for each Trading Day on and after the “ex” date for such other event shall be adjusted by multiplying such Closing Sale Price by the reciprocal of the fraction by which the Conversion Rate is so required to be adjusted as a result of such other event; and

(iii) the “ex” date for the issuance or distribution requiring such computation is prior to the day in question, after taking into account any adjustment required pursuant to clause (1) or (2) of this proviso, the Closing Sale Price for each Trading Day on or after such “ex” date shall be adjusted by adding thereto the amount of any cash and the Fair Market Value (as determined by the Board of Directors in a manner consistent with any determination of such value for purposes of Section 12.3(d), Section 12.3(e) or Section 12.3(f)) of the evidences of Indebtedness, shares of capital stock or assets being distributed applicable to one share of Common Stock as of the close of business on the day before such “ex” date.

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For purposes of any computation under Section 12.3(e), if the “ex” date for any event (other than the tender offer requiring such computation) that requires an adjustment to the Conversion Rate pursuant to Section 12.3(a), Section 12.3(b), Section 12.3(c), Section 12.3(d), Section 12.3(e) or Section 12.3(f) occurs on or after the Expiration Time for the tender or exchange offer requiring such computation and prior to the day in question, the Closing Sale Price for each Trading Day on and after the “ex” date for such other event shall be adjusted by multiplying such Closing Sale Price by the reciprocal of the fraction by which the Conversion Rate is so required to be adjusted as a result of such other event. For purposes of this paragraph, the term “ex” date, when used:

(i) with respect to any issuance or distribution, means the first date on which the Common Stock trade regular way on the relevant exchange or in the relevant market from which the Closing Sale Price was obtained without the right to receive such issuance or distribution;

(ii) with respect to any subdivision or combination of Common Stock, means the first date on which the Common Stock trade regular way on such exchange or in such market after the time at which such subdivision or combination becomes effective; and

(iii) with respect to any tender offer or exchange offer, means the first date on which the Common Stock trade regular way on such exchange or in such market after the Expiration Time of such offer.

Notwithstanding the foregoing, whenever successive adjustments to the Conversion Rate are called for pursuant to this Section 12.3, such adjustments shall be made to the Current Market Price as may be necessary or appropriate to effectuate the intent of this Section 12.3 and to avoid unjust or inequitable results as determined in good faith by the Board of Directors.

“Fair Market Value” means the amount which a willing buyer would pay a willing seller in an arm’s length transaction (as determined by the Board of Directors, whose determination shall be made in good faith and, absent manifest error, shall be final and binding on Holders of the Securities).

“Record Date” means, with respect to any dividend, distribution or other transaction or event in which the holders of Common Stock have the right to receive any cash, securities or other property or in which the Common Stock (or other applicable security) is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of stockholders entitled to receive such cash, securities or other property (whether such date is fixed by the Board of Directors or by statute, contract or otherwise).

(h) The Company shall be entitled to make such additional adjustments in the Conversion Rate, in addition to those required by Section 12.3(a), Section 12.3(b), Section 12.3(c), Section 12.3(d), Section 12.3(e) or Section 12.3(f) if the Board of Directors determines that it is advisable, subject to compliance with Nasdaq Marketplace Rule 4350(i), in order that any dividend or distribution of Common Stock, any subdivision, reclassification or combination of Common Stock or any issuance of rights or warrants referred to above shall not be taxable to the holders of Common Stock for United States federal income tax purposes.

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(i) To the extent permitted by applicable law, the Company may, from time to time, increase the Conversion Rate by any amount for any period of time if such period is at least 20 calendar days, the increase is irrevocable during the period and the Board of Directors, in good faith and absent manifest error, determines that such increase would be in the best interest of the Company, subject to compliance with Nasdaq Marketplace Rule 4350(i). Whenever the Conversion Rate is increased pursuant to the preceding sentence or clause (h) above, the Company shall mail to the Trustee and each Holder at the address of such Holder as it appears in the register of the Securities maintained by the Registrar, at least 15 calendar days prior to the date the increased Conversion Rate takes effect, a notice of the increase stating the increased Conversion Rate and the period during which it shall be in effect.

(j) In any case in which this Section 12.3 shall require that any adjustment be made effective as of or retroactively immediately following a Record Date, the Company may elect to defer (but only for five Trading Days following the filing of the notice referred to in Section 12.5) issuing to the Holder of any Securities converted after such Record Date the Common Stock issuable upon such conversion over and above the Common Stock issuable upon such conversion on the basis of the Conversion Rate prior to 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 Common Stock upon the occurrence of the event requiring such adjustment.

(k) All calculations under this Section 12.3 shall be made to the nearest cent or one-hundredth of a share, with one-half cent and 0.005 of a share, respectively, being rounded upward. Notwithstanding any other provision of this Section 12.3, the Company shall not be required to make any adjustment of the Conversion Rate unless such adjustment would require an increase or decrease of at least 1% in the Conversion Rate as last adjusted. Any lesser adjustment shall be carried forward and shall be made at the time of and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to an increase or decrease of at least 1% in the Conversion Rate as last adjusted. Any adjustments under this Section 12.3 shall be made successively whenever an event requiring such an adjustment occurs.

(l) In the event that at any time, as a result of an adjustment made pursuant to this Section 12.3, the Holder of any Securities thereafter surrendered for conversion shall become entitled to receive any shares of Applicable Stock of the Company other than Common Stock into which the Securities originally were convertible, the Conversion Rate of such other shares so receivable upon conversion of any such Security 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 Common Stock contained in subparagraphs (a) through (j) of this Section 12.3, and the provision of Section 12.1, Section 12.2 and Section 12.4 through Section 12.9 with respect to the Common Stock shall apply on like or similar terms to any such other shares and the determination of the Board of Directors as to any such adjustment shall be conclusive.

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(m) No adjustment shall be made pursuant to this Section 12.3 if the effect thereof would be to reduce the Conversion Price below the par value (if any) of the Common Stock.

Section 12.4. Consolidation or Merger of the Company.

If any of the following events occurs, namely:

(a) any reclassification or change of the outstanding shares of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination);

(b) any merger, consolidation, statutory share exchange or combination of the Company with another Person as a result of which holders of Common Stock shall be entitled to receive stock, securities or other property or assets (including cash) with respect to or in exchange for such Common Stock; or

(c) any sale or conveyance of all or substantially all the properties and assets of the Company as, or substantially as, an entirety to any other Person as a result of which holders of Common Stock shall be entitled to receive stock, securities or other property or assets (including cash) with respect to or in exchange for such Common Stock;

the Company or the successor or purchasing Person, as the case may be, shall execute with the Trustee a supplemental indenture (which shall comply with the Trust Indenture Act as in force at the date of execution of such supplemental indenture, if such supplemental indenture is then required to so comply) providing that such Securities shall be convertible into the kind and amount of shares of stock and other securities or property or assets (including cash) which such Holder would have been entitled to receive upon such reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance had such Securities been converted into Common Stock immediately prior to such reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance assuming such holder of Common Stock did not exercise its rights of election, if any, as to the kind or amount of securities, cash or other property receivable upon such merger, consolidation, statutory share exchange, sale or conveyance (provided, that if the kind or amount of securities, cash or other property receivable upon such merger, consolidation, statutory share exchange, sale or conveyance is not the same for each share of Common Stock in respect of which such rights of election shall not have been exercised (“Non-Electing Share”), then for the purposes of this Section 12.4, the kind and amount of securities, cash or other property receivable upon such merger, consolidation, statutory share exchange, sale or conveyance for each Non-Electing Share shall be deemed to be the kind and amount so receivable per share by a plurality of the Non-Electing Shares). Such supplemental indenture shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article XII. If, in the case of any such reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance, the stock or other securities and assets receivable thereupon by a holder of Common Stock includes shares of stock or other securities and assets of a Person other than the successor or purchasing Person, as the case may be, in such reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance, then such supplemental indenture shall also be executed by such other Person and shall contain such

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additional provisions to protect the interests of the Holders of the Securities as the Board of Directors shall reasonably consider necessary by reason of the foregoing.

The Company shall cause notice of the execution of such supplemental indenture to be mailed to each Holder, at the address of such Holder as it appears on the register of the Securities maintained by the Registrar, within 20 days after execution thereof. Failure to deliver such notice shall not affect the legality or validity of such supplemental indenture.

The above provisions of this Section 12.4 shall similarly apply to successive reclassifications, mergers, consolidations, statutory share exchanges, combinations, sales and conveyances.

If this Section 12.4 applies to any event or occurrence, Section 12.3 shall not apply.

Section 12.5. Notice of Adjustment.

Whenever an adjustment in the Conversion Rate with respect to the Securities is required:

(a) the Company shall forthwith place on file with the Trustee and any Conversion Agent for such securities a certificate of the Chief Financial Officer of the Company, stating the adjusted Conversion Rate determined as provided herein and setting forth in reasonable detail such facts as shall be necessary to show the reason for and the manner of computing such adjustment; and

(b) a notice stating that the Conversion Rate has been adjusted and setting forth the adjusted Conversion Rate shall forthwith be given by the Company or, upon a Company Request, by the Trustee in the name and at the expense of the Company, to each Holder in the manner provided in Section 14.2. Any notice so given shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice.

Section 12.6. Notice in Certain Events.

In case of:

(a) a consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required, or of the sale or conveyance to another Person or entity or group of Persons or entities acting in concert as a partnership, limited partnership, syndicate or other group (within the meaning of Rule 13d-3 under the Exchange Act) of all or substantially all of the property and assets of the Company; or

(b) the voluntary or involuntary dissolution, liquidation or winding up of the Company; or

(c) any action triggering an adjustment of the Conversion Rate referred to in clauses (x) or (y) below;

then, in each case, the Company shall cause to be filed with the Trustee and the Conversion Agent, and shall cause to be given to the Holders of the Securities in the manner provided in Section 14.2, at least 15 days prior to the applicable date hereinafter specified, a notice stating:

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(x) the date on which a record is to be taken for the purpose of any distribution or grant of rights or warrants triggering an adjustment to the Conversion Rate pursuant to this Article XII, or, if a record is not to be taken, the date as of which the holders of record of Common Stock entitled to such distribution, rights or warrants are to be determined; or

(y) the date on which any reclassification, consolidation, merger, sale, conveyance, dissolution, liquidation or winding up triggering an adjustment to the Conversion Rate pursuant to this Article XII is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, conveyance, dissolution, liquidation or winding up.

Failure to give such notice or any defect therein shall not affect the legality or validity of the proceedings described in Section 12.6(a), Section 12.6(b) or Section 12.6(c).

Section 12.7. Company To Reserve Stock; Registration; Listing.

(a) The Company shall, prior to issuance of any Securities hereunder, and from time to time as may be necessary, reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, for the purpose of effecting the conversion of the Securities, such number of its duly authorized Common Stock as shall from time to time be sufficient to effect the conversion of all Securities then outstanding into such Common Stock at any time (assuming that, at the time of the computation of such number of Common Stock, all such Securities would be held by a single Holder). The Company covenants that all Common Stock which may be issued upon conversion of Securities shall upon issue be fully paid and nonassessable and free from all liens and charges and, except as provided in Section 12.8, taxes with respect to the issue thereof.

(b) Except with respect to shares issued upon conversion of a Transfer Restricted Security prior to the second anniversary of the initial Issue Date, if any shares of Applicable Stock which would be issuable upon conversion of Securities hereunder (including, without limitation, in connection with any transaction referred to in Section 12.4) require registration with or approval of any governmental authority before such shares may be issued upon such conversion, the Company shall use its reasonable best efforts to cause such shares to be duly registered or approved, as the case may be, or to cause such shares not to be Transfer Restricted Securities. In addition, in connection with any transaction referred to in Section 12.4, the Company and any parent company of the Company required to issue Applicable Stock upon conversion of a Note shall take such actions as are required to entitle the Company or such parent company, as the case may be, to rely on Section 3(a)(9) of the Securities Act in connection with conversion of the Securities without extending any holding periods under Rule 144 or otherwise permit such Applicable Stock issued upon conversion of the Securities to be resold without requiring registration thereof under the Securities Act. The Company further covenants that so long as the Common Stock shall be quoted on the Nasdaq National Market system, the Company shall use its reasonable best efforts, if permitted by the rules of the Nasdaq National Market system, to keep so quoted all Common Stock issuable

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upon conversion of the Securities, and the Company shall use its reasonable best efforts to list or obtain approval for the quotation of the Common Stock to be delivered upon conversion of the Securities prior to such delivery upon any other national securities exchange or quotation system upon which the outstanding Common Stock is listed or quoted at the time of such delivery.

Section 12.8. Taxes on Conversion.

The issue of stock certificates on conversion of Securities shall be made without charge to the converting Holder for any documentary, stamp or similar issue or transfer taxes in respect of the issue thereof, and the Company shall pay any and all documentary, stamp or similar issue or transfer taxes that may be payable in respect of the issue or delivery of Common Stock on conversion of Securities pursuant hereto. The Company shall not, however, be required to pay any such tax which may be payable in respect of any transfer involved in the issue or delivery of Common Stock or the portion, if any, of the Securities which are not so converted in a name other than that in which the Securities so converted were registered, and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Company the amount of such tax or has established to the satisfaction of the Company that such tax has been paid.

Section 12.9. Conversion After Regular Record Date.

Except as provided in the succeeding paragraph, upon conversion the Holder of Securities shall not be entitled to receive any accrued and unpaid interest or Additional Interest, if any.

If any Securities are surrendered for conversion subsequent to the close of business on any Regular Record Date but prior to the opening of business on the corresponding Interest Payment Date, the Holder of such Securities at the close of business on such Regular Record Date shall receive the interest and Additional Interest, if any, payable on such Securities on such Interest Payment Date notwithstanding the conversion thereof. Securities surrendered for conversion during the period from the close of business on any Regular Record Date to the opening of business on the corresponding Interest Payment Date shall (except in the case of Securities which have been called for redemption on a Redemption Date within such period or Securities surrendered for conversion after acceleration of the Securities) be accompanied by payment by Holders, for the account of the Company, in New York Clearing House funds or other funds acceptable to the Company of an amount equal to the interest and Additional Interest, if any, payable on such interest payment date on the Securities being surrendered for conversion.

Except as described in Section 12.2(a) and this Section 12.9, the Company will not make any payment in cash or other adjustment for Common Stock accrued and unpaid interest or Additional Interest, if any, on a Security when it is converted.

Section 12.10. Company Determination Final.

Except as otherwise provided herein or the Security, the Company or its agents shall be responsible for making all calculations required under the terms of this Article XII. Any determination that the Company or the Board of Directors must make pursuant to this Article XII shall be set forth in a Board Resolution, shall be made in good faith and, absent manifest error,

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shall be final and binding on holders of the Securities. The Company or its agents shall be required to deliver to the Trustee a schedule of its calculations and the Trustee shall be entitled to conclusively rely upon the accuracy of such calculations without independent verification.

Section 12.11. Responsibility of Trustee for Conversion Provisions.

The Trustee has no duty to determine when an adjustment under this Article XII should be made, how it should be made or what it should be. The Trustee makes no representation as to the validity or value of any securities or assets issued upon conversion of Securities. The Trustee shall not be responsible for any failure of the Company to comply with this Article XII. Each Conversion Agent other than the Company shall have the same protection under this Section 12.11 as the Trustee.

The rights, privileges, protections, immunities and benefits given to the Trustee under this Indenture including, without limitation, its rights to be indemnified, are extended to, and shall be enforceable by, other than the Company, the Trustee in each of its capacities hereunder, and each Paying Agent or Conversion Agent, other than the Company, acting hereunder.

Section 12.12. Unconditional Right of Holders to Convert.

Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to convert its Security in accordance with this Article XII and to bring an action against the Company for the enforcement of any such right to convert, and such rights shall not be impaired or affected without the consent of such Holder.

ARTICLE XIII

TAX TREATMENT

Section 13.1. Tax Treatment.

The Company agrees, and by acceptance of beneficial ownership interest in the Securities each beneficial holder of the Securities will be deemed to have agreed, for United States federal income tax purposes (1) to treat the Securities as indebtedness that is subject to Treas. Reg. Sec. 1.1275-4 (the “Contingent Payment Regulations”) and, for purposes of the Contingent Payment Regulations, to treat the fair market value of any stock beneficially received by a beneficial holder upon any conversion of the Securities as a contingent payment and (2) to be bound by the Company’s determination of the “comparable yield” and “projected payment schedule,” within the meaning of the Contingent Payment Regulations, with respect to the Securities. A Holder may obtain the issue price, amount of original issue discount, issue date, yield to maturity, comparable yield and projected payment schedule for the Securities by submitting a written request for such information to the Company at the address set forth in Section 14.2.

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ARTICLE XIV

MISCELLANEOUS

Section 14.1. Trust Indenture Act Controls.

If any provision of this Indenture limits, qualifies, or conflicts with the duties imposed by Section 318(c) of the TIA, such section of the TIA shall control. If any provision of this Indenture expressly modifies or excludes any provision of the TIA that may be so modified or excluded under the TIA, the Indenture provision so modifying or excluding such provision of the TIA shall be deemed to apply.

Section 14.2. Notices.

Any request, demand, authorization, notice, waiver, consent or communication shall be in writing and delivered in person (including by commercial courier services) or mailed by first-class mail, postage prepaid, addressed as follows or transmitted by facsimile transmission (confirmed by guaranteed overnight courier) to the following facsimile numbers:

if to the Company:

CURAGEN CORPORATION

555 Long Wharf Drive, 11^th Floor

New Haven, Connecticut 06511

Attention: Chief Financial Officer

Facsimile No.: (03) 401-3333

with a copy to:

MINTZ, LEVIN, COHN, FERRIS, GLOVSKY & POPEO, P.C.

One Financial Center

Boston, Massachusetts 02111

Attention: Michael Fantozzi, Esq.

Facsimile No.: (617) 542-2241

if to the Trustee:

THE BANK OF NEW YORK

101 Barclay Street

New York, New York 10286

Attention: Corporate Trust Department

Facsimile No.:

The Company or the Trustee by notice given to the other in the manner provided above may designate additional or different addresses for subsequent notices or communications.

Any notice or communication given to a Holder shall be mailed to the Holder, by first-class mail, postage prepaid, at the Holder’s address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed.

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Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not received by the addressee.

If the Company mails a notice or communication to the Holders, it shall mail a copy to the Trustee and each Registrar, Paying Agent, Conversion Agent, or co-registrar.

Notwithstanding the foregoing, in the case of the Trustee, notice must be actually received by the Corporate Trust Office of the Trustee.

Section 14.3. Communication by Holders with Other Holders.

Holders may communicate pursuant to Section 312(b) of the TIA with other Holders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar, the Paying Agent, the Conversion Agent and anyone else shall have the protection of TIA Section 312(c).

Section 14.4. Certificate and Opinion as to Conditions Precedent.

Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee:

(a) an Officers’ Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and

(b) an Opinion of Counsel (except in connection with the original issuance of Securities) stating that, in the opinion of such counsel, all such conditions precedent have been complied with.

Section 14.5. Statements Required in Certificate or Opinion.

Each Officers’ Certificate or Opinion of Counsel with respect to compliance with a covenant or condition provided for in this Indenture shall include:

(a) a statement that each person making such Officers’ Certificate or Opinion of Counsel has read such covenant or condition;

(b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such Officers’ Certificate or Opinion of Counsel are based;

(c) a statement that, in the opinion of each such person, he has made such examination or investigation as is necessary to enable such person to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(d) a statement that, in the opinion of such person, such covenant or condition has been complied with.

In giving such Opinion of Counsel, counsel may rely as to factual matters on an Officers’ Certificate or on certificates of public officials.

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Section 14.6. Separability Clause.

In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 14.7. Rules by Trustee, Paying Agent, Conversion Agent, Registrar.

The Trustee may make reasonable rules for action by or a meeting of Holders. The Registrar, the Conversion Agent and the Paying Agent may make reasonable rules for their functions.

Section 14.8. Legal Holidays.

If any specified date (including a date for giving notice) is a Legal Holiday, the action shall be taken on the next succeeding day that is not a Legal Holiday, and, if the action to be taken on such date is a payment in respect of the Securities, no interest, if any, shall accrue for the intervening period.

Section 14.9. Governing Law; Submission to Jurisdiction; Service of Process.

This Indenture shall be governed by, and construed in accordance with, the laws of the State of New York. The Company submits to the non-exclusive jurisdiction of the courts of the State of New York and the courts of the United States of America, in each case located in the Borough of Manhattan, New York, New York over any suit, action or proceeding arising under or in connection with this Indenture or the transactions contemplated hereby or the Securities. The Company waives any objection that it may have to the venue of any suit, action or proceeding arising under or in connection with this Indenture or the transactions contemplated hereby or the Securities in the courts of the State of New York or the courts of the United States of America, in each case located in the Borough of Manhattan, New York, New York, or that such suit, action or proceeding brought in the courts of the State of New York or the courts of the United States of America, in each case located in the Borough of Manhattan, New York, New York, was brought in an inconvenient court and agrees not to plead or claim the same.

The Company agrees that service of all writs, process and summonses in any suit, action or proceeding arising under or in connection with this Indenture or the transactions contemplated thereby or the Securities against the Company in any court of the State of New York or any United States Federal court, in each case, sitting in the Borough of Manhattan, New York, New York, may be made upon Corporation Service Company at 80 State Street, Albany, New York 12207, whom the Company irrevocably appoints as its authorized agent for service of process. The Company represents and warrants that Corporation Service Company has agreed to act as the Company’s agent for service of process. The Company agrees that such appointment shall be irrevocable until the irrevocable appointment by the Company of a successor in New York, New York as its authorized agent for such purpose and the acceptance of such appointment by such successor. The Company further agrees to take any and all action, including the filing of any and all documents and instruments that may be necessary to continue such appointment in full force and effect as aforesaid. If Corporation Service Company shall cease to act as the agent for service of process for the Company, the Company shall appoint without delay, another such agent and provide prompt written notice to the Trustee of such appointment.

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Section 14.10. No Recourse Against Others.

No recourse under or upon any obligation, covenant or agreement contained in this Indenture, or in any Security, or because of any indebtedness evidenced thereby, shall be had against any incorporator, as such, or against any past, present or future stockholder, officer or director, as such, of the Company or of any successor, either directly or through the Company or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of the Securities by the Holders and as part of the consideration for the issue of the Securities.

Section 14.11. Successors.

All agreements of the Company in this Indenture and the Securities shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor.

Section 14.12. Multiple Originals.

The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture.

* * * *

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the undersigned, being duly authorized, have executed this Indenture on behalf of the respective parties hereto as of the date first above written.

CURAGEN CORPORATION
By:	/s/    JONATHAN M. ROTHBERG
Name:	Jonathan M. Rothberg, Ph.D.
Title:	Chief Executive Officer and President

THE BANK OF NEW YORK As Trustee
By:	/s/    GEOVANNI BARRIS
Name:	Geovanni Barris
Title:	Vice President

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EXHIBIT A

[FORM OF FACE OF SECURITY]

[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND, UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.]¹

[THE SECURITY EVIDENCED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT OF 1933”), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ACQUISITION HEREOF OR A BENEFICIAL INTEREST HEREIN, THE HOLDER:

(1) REPRESENTS THAT IT IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT OF 1933;

(2) AGREES THAT IT SHALL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, RESELL OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY OR THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN, AND IN COMPLIANCE WITH, RULE 144A UNDER THE SECURITIES ACT OF 1933, (C) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT OF 1933 (IF AVAILABLE), (D) PURSUANT TO AN

¹ This legend should be included only if the Security is a Global Security.

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EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933 (IF AVAILABLE) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO AMERICAN STOCK TRANSFER AND TRUST COMPANY, AS TRANSFER AGENT (OR ANY SUCCESSOR TRANSFER AGENT, AS APPLICABLE), SUCH CERTIFICATIONS AND OPINION OF COUNSEL REQUIRED BY THE COMPANY OR THE TRANSFER AGENT OR (E) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT OF 1933 AND THAT CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER; AND

(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE SECURITY EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(C) OR 2(E) ABOVE), A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.]²

[THE HOLDER OF THIS SECURITY IS ENTITLED TO THE BENEFITS OF A REGISTRATION RIGHTS AGREEMENT (AS SUCH TERM IS DEFINED IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF) AND, BY ITS ACCEPTANCE HEREOF, AGREES TO BE BOUND BY AND TO COMPLY WITH THE PROVISIONS OF SUCH REGISTRATION RIGHTS AGREEMENT.]^2.

² This legend should be included only if the Security is a Transfer Restricted Security.

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CURAGEN CORPORATION

4.0% CONVERTIBLE SENIOR NOTES DUE 2011

No.          CUSIP:

CURAGEN CORPORATION, a Delaware corporation (the “Company”, which term shall include any successor corporation under the Indenture referred to on the reverse hereof), for value received, promises to pay to                             , or registered assigns, the principal amount of                      Dollars ($            ) on February 15, 2011

In addition, for value received, the Company hereby promises to pay interest to the Holder of this security from February 17, 2004 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, on February 15 and August 15 in each year (each, an “INTEREST PAYMENT DATE”), commencing on August 15, 2004, at the rate of 4.0% per annum until the principal hereof is paid or made available for payment at February 15, 2011 or upon acceleration, or until such date on which the Securities are converted, redeemed or purchased as provided herein.

Interest, and Additional Interest, if any, on Securities converted after the close of business on a Regular Record Date but prior to the opening of business on the corresponding Interest Payment Date shall be paid to the Holder of the Securities on the Regular Record Date but, upon conversion, the Holder must pay the Company an amount equal to the interest and Additional Interest, if any, which has accrued and shall be paid on such Interest Payment Date. No such payment need be made with respect to Notes converted after a Regular Record Date and prior to the corresponding Interest Payment Date after being called for redemption or upon acceleration.

All references herein to interest accrued or payable as of any date shall, without duplication, be deemed to include Additional Interest, if any, payable pursuant to the Registration Rights Agreement.

Reference is hereby made to the further provisions of this Security set forth on the reverse side of this Security, which further provisions shall for all purposes have the same effect as if set forth at this place.

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IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

Dated:	CURAGEN CORPORATION
	By:	/s/    Jonathan M. Rothberg
	Name:	Jonathan M. Rothberg
	Title:	Chief Executive Officer and President

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TRUSTEE’S CERTIFICATE OF AUTHENTICATION

This is one of the Securities referred to in the within-mentioned Indenture.

Dated: February 17, 2004	THE BANK OF NEW YORK as Trustee
	By:

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[FORM OF REVERSE OF SECURITY]

4.0% CONVERTIBLE SENIOR NOTES DUE 2011

This Security is one of a duly authorized issue of 4.0% Convertible Senior Notes due 2011 (the “Securities”) of CURAGEN CORPORATION, a Delaware corporation (including any successor corporation under the Indenture hereinafter referred to, the “Company”), issued under an Indenture, dated as of February 17, 2004 (the “Indenture”), between the Company and The Bank of New York, a New York banking corporation, as Trustee (the “Trustee”). The terms of the Security include those stated in the Indenture, those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (“TIA”), and those set forth in this Security. This Security is subject to all such terms, and Holders are referred to the Indenture and the TIA for a statement of all such terms. To the extent permitted by applicable law, in the event of any inconsistency between the terms of this Security and the terms of the Indenture, the terms of the Indenture shall control. Capitalized terms used but not defined herein have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.

1. Interest.

Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months. If this Security is redeemed pursuant to Section 6 of this Security or the Holder elects to require the Company to purchase this Security pursuant to Section 7 of this Security, on a date that is after the Regular Record Date and on or before the corresponding Interest Payment Date, interest and Additional Interest, if any, accrued and unpaid hereon to, but excluding, the applicable Redemption Date or Fundamental Change Purchase Date shall be paid to the same Holder to whom the Company pays the principal of this Security. Interest and Additional Interest, if any, accrued and unpaid hereon at the Stated Maturity also shall be paid to the same Holder to whom the Company pays the principal of this security.

Interest and Additional Interest, if any, on Securities converted after the close of business on a Regular Record Date but prior to the opening of business on the corresponding Interest Payment Date shall be paid to the Holder of the Securities on the Regular Record Date but, upon conversion, the Holder must pay the Company an amount equal to interest and Additional Interest, if any, which has accrued and shall be paid on such Interest Payment Date. No such payment need be made with respect to Securities which shall be converted after a Regular Record Date and prior to the corresponding Interest Payment Date after being called for redemption.

All references herein to interest accrued or payable as of any date shall without duplication be deemed to include any Additional Interest, if any, pursuant to the Registration Rights Agreement.

2. Method of Payment.

Payment of the principal of and interest and Additional Interest, if any, on the Securities shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts or in Applicable Stock, as the case may be. The Holder must surrender the Securities to the Paying Agent to collect payment of principal. Payment of interest and Additional Interest, if any, on Certificated Securities in the aggregate principal amount of $5,000,000 or less shall be made by check mailed to the address of the Person entitled thereto as such address appears in the Register and payment of interest and

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Additional Interest, if any, on Certificated Securities in aggregate principal amount in excess of $5,000,000 shall be made by wire transfer in immediately available funds at the election of such Holder. Notwithstanding the foregoing, so long as the Securities are registered in the name of a Depositary or its nominee, all payments with respect to the Securities shall be made by wire transfer of immediately available funds to the account of the Depositary or its nominee.

3. Paying Agent, Registrar, Conversion Agent.

Initially, The Bank of New York shall act as Paying Agent, Registrar and Conversion Agent. The Company may appoint and change any Paying Agent, Registrar and Conversion Agent without notice, other than notice to the Trustee; provided that the Company shall maintain at least one Paying Agent in Borough of Manhattan, New York, New York, which shall initially be an office or agency of the Trustee. The Company or any of its Subsidiaries or any of their Affiliates may act as Paying Agent, Registrar or Conversion Agent.

4. Indenture.

The Securities are general unsecured obligations of the Company limited to up to $120,000,000 aggregate principal amount. The Indenture does not limit other indebtedness of the Company, secured or unsecured.

5. Subordination.

The indebtedness evidenced by the Securities is, to the extent and in the manner provided in the Indenture, subordinate and junior in right of payment to the prior payment in full in cash of all Senior Indebtedness. Any Holder by accepting this Security agrees to and shall be bound by such subordination provisions and authorizes the Trustee to give them effect.

6. Redemption of the Notes by the Company.

The Securities are redeemable for cash at the option of the Company, in whole or in part, at any time or from time to time on, or after February 18, 2009 at the Redemption Price.

Notice of redemption pursuant to this Section of this Security shall be mailed at least 20 calendar days but not more than 60 calendar days before the Redemption Date to each Holder of Securities to be redeemed at the Holder’s registered address. If cash sufficient to pay the Redemption Price of all Securities (or portions thereof) to be redeemed on the Redemption Date is deposited with the Paying Agent prior to 10:00 a.m., New York City time, on the Redemption Date, then, on such Redemption Date interest and Additional Interest, if any ceases to accrue on such Securities or portions thereof. Securities in denominations larger than $1,000 of principal amount may be redeemed in part but only in integral multiples of $1,000 of principal amount.

7. Purchase by the Company at the Option of the Holder or Upon a Fundamental Change.

In the event that a Fundamental Change shall occur at any time prior to the Stated Maturity, each Holder shall have the right, at the Holder’s option, but subject to the provisions of the Indenture, to require the Company to purchase all or any part of such Holder’s Notes not theretofore called for redemption, or any portion of the Principal Amount at issuance thereof that is equal to $1,000 or an integral multiple thereof. The Company shall be required to purchase such Notes at a purchase price in cash equal to 100% of the Principal Amount plus any accrued and unpaid interest and Additional Interest, if any to, but excluding, the Fundamental Change Purchase Date. The Company may, at its option, in lieu of paying the Fundamental Change

A-7

Purchase Price in cash, pay the Fundamental Change Purchase Price in Common Stock valued at 95% of the average of the Closing Sales Prices of the Common Stock for the five consecutive Trading Days immediately preceding the second Trading Day prior to the Fundamental Change Purchase Date. To exercise such right, a Holder shall deliver a Fundamental Change Purchase Notice to the Paying Agent at any time on or before the 20th Business Day after the date of the Company’s notice of the Fundamental Change (subject to extension to comply with applicable law).

Holders have the right to withdraw any Purchase Notice or Fundamental Change Purchase Notice by delivering to the Paying Agent a written notice of withdrawal in accordance with the provisions of the Indenture.

If the Paying Agent holds, in accordance with the terms hereof, at 10:00 a.m., New York City time, on the applicable Fundamental Change Purchase Date, cash or Applicable Stock sufficient to irrevocably pay the Fundamental Change Purchase Price, as the case may be, of any Securities for which a Fundamental Change Purchase Notice, as the case may be, has been tendered and not withdrawn pursuant to the Indenture, then, on such Fundamental Change Purchase Date, as the case may be, such Securities shall cease to be outstanding and interest and Additional Interest, if any, on such Securities shall cease to accrue, whether or not such Securities are delivered to the Paying Agent, and the rights of the Holders in respect thereof shall terminate (other than the right to receive the Fundamental Change Purchase Price, as the case may be, upon delivery of such Securities).

8. Conversion.

Subject to and in compliance with the provisions of the Indenture (including, without limitation, the conditions to conversion of this Security set forth in Section 12.1 thereof), a Holder is entitled, at such Holder’s option, to convert the Holder’s Security (or any portion of the principal amount thereof that is $1,000 or an integral multiple $1,000), into fully paid and nonassessable shares of Common Stock at the Conversion Rate in effect on the date of conversion. The number of shares of Common Stock issuable upon conversion of each $1,000 of Principal Amount of Securities is initially 103.2429 shares of Common Stock, and is subject to adjustment in certain events as set forth in the Indenture.

A Security in respect of which a Holder has delivered a Fundamental Change Purchase Notice, as the case may be, exercising the right of such Holder to require the Company to purchase such Security may be converted only if such Fundamental Change Purchase Notice is withdrawn in accordance with the terms of the Indenture.

Except as described in the Indenture, the Company will not make any payment in cash or Common Stock or other adjustment for accrued and unpaid interest or Additional interest on any Securities when they are converted. The Company’s delivery to the Holder of the full number of shares of Common Stock into which the Security is convertible, together with any cash payment for such Holder’s fractional shares, shall be deemed to satisfy the Company’s obligation to pay the Principal Amount of the Security and to satisfy its obligation to pay accrued and unpaid interest and Additional Interest, if any through the conversion date. As a result, accrued interest and Additional Interest are deemed paid in full rather than cancelled, extinguished or forfeited. Notwithstanding the foregoing, accrued interest and Additional

A-8

Interest, if any, will be payable upon any conversion of Securities made concurrently with or after acceleration of the Securities following an Event of Default.

Before any Holder shall be entitled to convert any Securities into Common Stock, such Holder shall, in the case of Global Securities, comply with the Applicable Procedures of the Depositary in effect at that time, and in the case of Certificated Securities, complete and manually sign the conversion notice on the back of the Securities (or a facsimile thereof), deliver the completed conversion notice and the Security to be converted to the office of the Conversion Agent and, if required by the Conversion Agent, furnish appropriate endorsements and transfer documents. Before any such conversion, a Holder also shall pay all funds required, if any, relating to interest or Additional Interest, if any, on the Securities, as provided in the Indenture, and all taxes or duties, if any, as provided in the Indenture.

If the Company (i) reclassifies the Common Stock, (ii) is a party to a consolidation, merger or binding share exchange or (iii) sell or conveys all or substantially all of its properties or assets to any Person, the right to convert a Security into shares of Common Stock may be changed into a right to convert it into securities, cash or other assets of the Company or such other Person, in each case in accordance with the Indenture.

9. Denominations; Transfer; Exchange.

The Securities are in fully registered form, without coupons, in denominations of $1,000 of principal amount and integral multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. Neither the Company, the Trustee or the Registrar shall be required to exchange or register a transfer of (i) any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or (ii) any Securities in respect of which a Fundamental Change Purchase Notice has been given and not withdrawn by the Holder thereof in accordance with the terms of this Indenture (except, in the case of a Security to be repurchased in part, the portion of the Security not to be repurchased) or (iii) any Securities surrendered for conversion.

10. Persons Deemed Owners.

The registered Holder of this Security may be treated as the owner of this Security for all purposes.

11. Unclaimed Money or Securities.

The Trustee and the Paying Agent shall return to the Company upon written request any cash or securities held by them for the payment of any amount with respect to the Securities that remains unclaimed for two years, subject to applicable unclaimed property law. After return to the Company, Holders entitled to the money or securities must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person.

12. Amendment; Waiver.

Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent or affirmative vote of the Holders of at least a majority in aggregate principal amount of the outstanding Securities and (ii) certain Defaults may be

A-9

waived with the written consent or affirmative vote of the Holders of a majority in aggregate principal amount of the outstanding Securities.

Without the consent of any Holder, the Company and the Trustee may amend the Indenture or the Securities to:

(a) add to the covenants of the Company for the benefit of the Holders of Securities;

(b) surrender any right or power herein conferred upon the Company;

(c) provide for conversion rights of Holders of Securities if any reclassification or change of the Common Stock or any consolidation, merger or sale of all or substantially all of the Company’s assets occurs;

(d) provide for the assumption of the Company’s obligations to the Holders of Securities in the case of a merger, consolidation, conveyance, transfer, sale, lease or other disposition pursuant to Article VII;

(e) increase the Conversion Rate; provided, however, that such increase in the Conversion Rate shall not adversely affect the interests of the Holders of Securities (after taking into account tax and other consequences of such increase);

(f) comply with the requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA;

(g) make any changes or modifications necessary in connection with the registration of the Securities under the Securities Act as contemplated in the Registration Rights Agreement; provided, however, that such action pursuant to this clause (g) does not, in the good faith opinion of the Board of Directors (as evidenced by a Board Resolution), adversely affect the interests of the Holders of Securities in any material respect;

(h) cure any ambiguity, correct or supplement any provision herein which may be inconsistent with any other provision herein or which is otherwise defective, or to make any other provisions with respect to matters or questions arising under this Indenture which the Company may deem necessary or desirable and which shall not be inconsistent with the provisions of this Indenture; provided, however, that such action pursuant to this clause (h) does not, in the good faith opinion of the Board of Directors (as evidenced by a Board Resolution), adversely affect the interests of the Holders of Securities in any material respect;

(i) to evidence the succession of another Person to the Company or any other obligor upon the Securities, and the assumption by any such successor of the covenants of the Company or such obligor herein and in the Securities, in each case in compliance with the provisions of this Indenture;

(j) to evidence and provide the acceptance of the appointment of a successor trustee hereunder; or

A-10

(k) add or modify any other provisions herein with respect to matters or questions arising hereunder which the Company and the Trustee may deem necessary or desirable and which shall not adversely affect the interests of the Holders of Securities.

13. Defaults and Remedies.

If any Event of Default other than as a result of certain events of bankruptcy, insolvency or reorganization of the Company or its designated Subsidiaries occurs and is continuing, the principal of all the Securities may be declared due and payable in the manner and with the effect provided in the Indenture. If an Event of Default occurs as a result of certain events of bankruptcy, insolvency or reorganization of the Company or its designated Subsidiaries, the principal of all the Securities shall become due and payable immediately without any declaration or other act on the part of the Trustee or any Holder, all as and to the extent provided in the Indenture.

14. Trustee Dealings with the Company.

Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee.

15. Calculations in Respect of Securities.

The Company or its agents shall be responsible for making all calculations called for under the Securities including, but not limited to, determination of the Market Price and Closing Sale Price of the Applicable Stock, the number of shares of Applicable Stock and/or the amount of cash issuable or payable upon conversion and the amounts of interest and Additional Interest, if any, on the Securities. Any calculations made in good faith and without manifest error shall be final and binding on Holders of the Securities. The Company or its agents shall be required to deliver to the Trustee a schedule of its calculations and the Trustee shall be entitled to conclusively rely upon the accuracy of such calculations without independent verification.

16. No Recourse Against Others.

No recourse under or upon any obligation, covenant or agreement contained in the Indenture, or in this Security, or because of any indebtedness evidenced thereby, shall be had against any incorporator, as such, or against any past, present or future stockholder, officer or director, as such, of the Company or of any successor, either directly or through the Company or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of the Securities by the Holders and as part of the consideration for the issue of the Securities.

17. Authentication.

This Security shall not be valid until an authorized signatory of the Trustee signs, manually or by facsimile, the Trustee’s Certificate of Authentication on the other side of this Security.

A-11

18. Abbreviations.

Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with right of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act).

19. INDENTURE TO CONTROL; GOVERNING LAW.

IN THE CASE OF ANY CONFLICT BETWEEN THE PROVISIONS OF THIS SECURITY AND THE INDENTURE, THE PROVISIONS OF THE INDENTURE SHALL CONTROL. THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to:

if to the Company:

CURAGEN CORPORATION

555 Long Wharf Drive, 11^th Floor

New Haven, Connecticut 06511

Attention: Chief Financial Officer

Facsimile No.: (403) 401-3333

with a copy to:

MINTZ, LEVIN, COHN, FERRIS, GLOVSKY & POPEO, P.C.

One Financial Center

Boston, Massachusetts 02111

Attention: Michael Fantozzi, Esq.

Facsimile No.: (617) 542-2241

20. Registration Rights.

The Holders of the Securities are entitled to the benefits of a Registration Rights Agreement, dated as of February 17, 2004, between the Company and Bear, Stearns & Co. Inc., as amended, modified or supplements in accordance therewith, including the receipt of Additional Interest upon a Registration Default (as defined in such agreement).

A-12

ASSIGNMENT FORM

To assign this Security, fill in the form below:

I or we assign and transfer this Security to

(Insert assignee’s soc. sec. or tax ID no.)

                                                             (Print or type assignee’s name, address and zip code) and irrevocably appoint                                                           agent to transfer this Security on the books of the Company. The agent may substitute another to act for him.

Your Signature(s):

Date:                                     

(Sign exactly as your name(s) appears on the other side of this Security)

Signature Guaranteed

Participant in a Recognized Signature

Guarantee Medallion Program

By:                        

Authorized Signatory

A-13

OPTION OF HOLDER TO ELECT PURCHASE

If you wish to have this Security purchased by the Company pursuant to Article V (Purchase at the Option of Holders Upon a Fundamental Change) of the Indenture, check the box: Article V ¨.

If you wish to have a portion of this Security purchased by the Company pursuant to Article V of the Indenture, as applicable, state the amount (in Principal Amount): $                    .

If certificated, the certificate numbers of the Securities to be delivered for purchase are: .

Any purchase of Securities pursuant hereto shall be pursuant to the terms and conditions specified in the Indenture.

Your Signature(s):

Date:                                                      

(Sign exactly as your name(s) appears on the other side of this Security)

Signature Guaranteed

Participant in a Recognized Signature

Guarantee Medallion Program

By:                        

Authorized Signatory

A-14

CONVERSION NOTICE

To convert this Security into Common Stock of the Company, check the box ¨.

To convert only part of this Security, state the principal amount to be converted (which must be $1,000 or an integral multiple of $1,000):                    .

Please check one:

¨ I certify that neither I nor any other Person shall become a 10% Stockholder upon satisfaction by the Company of the Conversion Obligation underlying this Conversion Notice in Common Stock.

¨ I do not certify that neither I nor any other Person shall become a 10% Stockholder upon satisfaction by the Company of the Conversion Obligation underlying this Conversion Notice in Common Stock.

“10% Stockholder” means a Person that owns, directly or indirectly, applying the provisions of Section 958(a) of the Internal Revenue Code of 1986, as amended (the “Code”), or by attribution, applying the provisions of Section 958(b) of the Code, 10% or more of the outstanding shares of Common Stock.

If you want the stock certificate made out in another person’s name fill in the form below:

(Insert the other person’s soc. sec. or tax ID no.)

(Print or type the other person’s name, address and zip code) Your Signature(s):

Date:                                     

(Sign exactly as your name(s) appears on the other side of this Security)

Signature Guaranteed

Participant in a Recognized Signature

Guarantee Medallion Program

By:                        

Authorized Signatory

A-15

TRANSFER CERTIFICATE³

RE: 4.0% CONVERTIBLE SENIOR NOTES DUE 2011 (THE “SECURITIES”) OF

CURAGEN CORPORATION (THE “COMPANY”)

This certificate relates to $             principal amount of Securities owned in (check applicable box) ¨ book-entry ¨ definitive form by                                  (the “Transferor”).

The Transferor has requested a Registrar or the Trustee to exchange or register the transfer of such Securities.

In connection with such request and in respect of each such Security, the Transferor does hereby certify that the Transferor is familiar with transfer restrictions relating to the Securities as provided in Section 2.6 and Section 2.12 of the Indenture dated February         , 2004 between the Company and The Bank of New York, as Trustee (the “Indenture”), and the transfer of such Security is being made pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”) (check applicable box) or the transfer or exchange, as the case may be, of such Security does not require registration under the Securities Act because (check applicable box):

¨ Such Security is being transferred to the Company or a Subsidiary; or

¨ Such Security is being transferred to a Qualified Institutional Buyer in compliance with Rule 144A under the Securities Act; or

¨ Such Security is being transferred pursuant to and in compliance with an exemption from the registration requirements under the Securities Act in accordance with Rule 144 (or any successor thereto) (“Rule 144”) under the Securities Act; or

¨ Such Security is being transferred to an institutional investor that is an “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) that has transferred a letter making certain representations, warranties and agreements relating to restrictions on transfer and an opinion of counsel to as transfer agent (or any successor transfer agent, as applicable) that such transfer is in compliance with the Securities Act.

¨ Such Security is being transferred pursuant to an effective registration statement under the Securities Act; or

¨ Such Security is being acquired for the Transferor’s own account, without transfer.

The Transferor acknowledges and agrees that, if the transferee shall hold any such Securities in the form of beneficial interests in a Global Security which is a “restricted security” within the meaning of Rule 144 under the Securities Act, then such transfer can only be made pursuant to Rule 144A under the Securities Act and such transferee must be a “qualified institutional buyer” (as defined in Rule 144A).

Date:                             

Signature(s) of Transferor

³ This certificate should only be included if this Security is a Transfer Restricted Security.

A-16

(If the registered owner is a corporation, partnership or fiduciary, the title of the person signing on behalf of such registered owner must be stated. ) Signature Guaranteed

Participant in a Recognized Signature Guarantee Medallion Program
By:
	Authorized Signatory

A-17

EXHIBIT B

[FORM OF RESTRICTIVE LEGEND FOR

COMMON STOCK ISSUED UPON CONVERSION]⁴

THE SECURITY EVIDENCED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT OF 1933”), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ACQUISITION HEREOF, THE HOLDER:

(1) REPRESENTS THAT IT IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT OF 1933;

(2) AGREES THAT IT SHALL NOT, WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THE SECURITY UPON THE CONVERSION OF WHICH THE SHARES OF COMMON STOCK EVIDENCED HEREBY WERE ISSUED, RESELL OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT OF 1933 (IF AVAILABLE), (C) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933 (IF AVAILABLE) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT PRIOR TO SUCH TRANSFER, FURNISHES TO, AS TRANSFER AGENT (OR ANY SUCCESSOR TRANSFER AGENT, AS APPLICABLE), CERTIFICATIONS AND OPINION OF COUNSEL REQUIRED BY THE COMPANY OR TRANSFER AGENT OR (D) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT OF 1933 AND THAT CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER; AND (3) AGREES THAT IT SHALL DELIVER TO EACH PERSON TO WHOM THE SECURITY EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(B) OR 2(D) ABOVE), A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.]

⁴ This legend should be included only if the Security is a Global Security.

B-1

EX-10.12

Exhibit 10.12

[GRAPHIC] 555 Long Wharf Drive, 11^th Floor New Haven, CT 06511 Phone (203) 401-3330 Fax (203) 401-3333

December 19, 2003

Bayer Corporation

400 Morgan Lane

West Haven, CT 06516-4175

ATTN: Legal Department

RE: Amendment to Pharmacogenomics Agreement dated January 12, 2001

Gentlemen:

Reference is hereby made to the Pharmacogenomics Agreement dated January 12, 2001 between Bayer Corporation and CuraGen Corporation, as amended to date (as so amended, the “Agreement”). Capitalized terms used herein but not otherwise defined shall have the meanings ascribed to them in the Agreement.

WHEREAS, the Set-up Phase of the Agreement has been successfully completed and the Production Phase has commenced as of August 15, 2002; and

WHEREAS, Bayer wishes to reduce the minimum number of Predictive Toxicogenomic Screens specified in Appendix B from [*****], which will increase the unit costs to CuraGen of providing such pharmacogenomic services; and

WHEREAS, the minimum financial obligation specified in section 5.00(c), which translates into [****************

*************************************], does not change; and

WHEREAS, the decrease in spending on predictive Toxicogenomic Screen will be made up by additional Pharmacogenomic activities including the use for target validation.

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

WHEREAS, the parties desire to amend the Agreement effective as of January 1, 2003 to reflect the foregoing.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto, intending to be legally bound, do hereby agree as follows:

The following amendments are to be incorporated into Appendix B:

1. Instead of a per screen price of [*****] in the Unit Price Section for Predictive Toxicogenomic Screens, the pricing will now be based on two portions:

1.1 [**************************************************************************************************

*******************************************************************************************************

****************************************************************************************************]

1.2 [**************************************************************************************************

*******************************************************************************************************

****************************************************************************************************]

2. The minimum level of all pharmacogenomic services in aggregate is [**********] per full year of the Production Phase Term. No minimum level for the Predictive Toxicogenomics Screen is specified.

3. SNP Analysis Pricing: Due to the large variation in the number of exons per gene, the unit pricing for SNP Analysis is understood to analyze the SNPs across [*****] exons.

4. Miscellaneous: Except as amended hereby, the Agreement shall remain in full force and effect. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original.

[Remainder of page intentionally left blank]

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

If the foregoing accurately sets forth our understanding, please so signify by signing and returning a duplicate copy of this letter, whereupon this letter agreement shall take effect as an amendment to the Agreement.

Very truly yours,
CuraGen Corporation
By:	/s/ Christopher K. McLeod
	Name: Christopher K. McLeod
	Title: Executive Vice President

ACCEPTED AND AGREED:
Bayer AG
By:	/s/ Dr. Karlsson
	Name: Dr. Karlsson
	Title: PH-R Head
By:	/s/ Dr. van den Kerckhoff
	Name: Dr. van den Kerckhoff
	Title: Patents and Licensing

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

EX-10.18

EXHIBIT 10.18

Interoffice Memorandum

To:	Personnel File
From:	Jonathan M. Rothberg, CEO and President
Date:	October 31, 2003
Re:	Addendum to Employment Agreement

I, Jonathan M. Rothberg, (“the Executive”) signed an Employment Agreement (“the Agreement”) with my employer, CuraGen Corporation (“the Company”), on or about April 1, 2002. The Agreement provides that it shall be renewed on an annual basis unless either the Company or the Executive notifies the other party of his/her/its intent not to renew the Agreement on or before October 31 (Section 2A. Term).

The Executive and the Company have agreed to modify the terms of that Agreement as follows:

1. (Section 2 Term.)

There shall be no one year term of employment and either the Executive or CuraGen may terminate employment with or without cause and with or without notice.

2. (Section 6. Disability or Death)

The Agreement provides that the Company may terminate the Agreement upon the Executive’s death or disability.

3. (Section 10. Termination)

The Agreement provides that CuraGen may terminate the Agreement for performance reasons or for cause.

4. (Section 10E and Section 12A. Benefits Upon Termination)

If the Company terminates the Executive’s employment because of performance reasons (as defined in Agreement), disability or death, or without cause, the Executive or his/her estate shall receive benefits. The benefits are: (i) salary continuation at the salary the Executive was receiving at the time of termination; and (ii) the Executive’s continued participation (or in the case of death the Executive’s family’s continued participation) in any employee health and welfare benefit 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 months from the date of termination of the Executive’s employment. Other than under Section 12 in the event of a Change of Control, the Executive shall not be entitled to more than twelve (12) months of salary continuation and continued participation in any health or welfare benefit plan if the Executive’s employment is terminated for (1) performance reasons; (2) death; (3) disability; or (4) without cause.

Unless explicitly changed in this Addendum, all other terms of the Agreement shall remain in full force and effect.

/s/    Jonathan M. Rothberg

Jonathan M. Rothberg

/s/    Robert E. Patricelli

Robert E. Patricelli

EX-10.19

EXHIBIT 10.19

Interoffice Memorandum

To:	Personnel File
From:	Christopher K. McLeod, EVP
Date:	October 31, 2003
Re:	Addendum to Employment Agreement

I, Christopher K. McLeod, (“the Executive”) signed an Employment Agreement (“the Agreement”) with my employer, CuraGen Corporation (“the Company”), on or about April 1, 2002. The Agreement provides that it shall be renewed on an annual basis unless either the Company or the Executive notifies the other party of his/her/its intent not to renew the Agreement on or before October 31 (Section 2A. Term).

The Executive and the Company have agreed to modify the terms of that Agreement as follows:

1. (Section 2 Term.)

There shall be no one year term of employment and either the Executive or CuraGen may terminate employment with or without cause and with or without notice.

2. (Section 6. Disability or Death)

The Agreement provides that the Company may terminate the Agreement upon the Executive’s death or disability.

3. (Section 10. Termination)

The Agreement provides that CuraGen may terminate the Agreement for performance reasons or for cause.

4. (Section 10E and Section 12A. Benefits Upon Termination)

If the Company terminates the Executive’s employment because of performance reasons (as defined in Agreement), disability or death, or without cause, the Executive or his/her estate shall receive benefits. The benefits are: (i) salary continuation at the salary the Executive was receiving at the time of termination; and (ii) the Executive’s continued participation (or in the case of death the Executive’s family’s continued participation) in any employee health and welfare benefit 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 months from the date of termination of the Executive’s employment. Other than under Section 12 in the event of a Change of Control, the Executive shall not be entitled to more than twelve (12) months of salary continuation and continued participation in any health or welfare benefit plan if the Executive’s employment is terminated for (1) performance reasons; (2) death; (3) disability; or (4) without cause.

Unless explicitly changed in this Addendum, all other terms of the Agreement shall remain in full force and effect.

/s/    Christopher K. McLeod

Christopher K. McLeod

/s/    Jonathan M. Rothberg

Jonathan M. Rothberg

EX-10.20

EXHBIT 10.20

Interoffice Memorandum

To:	Personnel File
From:	David M. Wurzer, CFO & Executive Vice-President
Date:	October 31, 2003
Re:	Addendum to Employment Agreement

I, David M. Wurzer, (“the Executive”) signed an Employment Agreement (“the Agreement”) with my employer, CuraGen Corporation (“the Company”), on or about April 1, 2002. The Agreement provides that it shall be renewed on an annual basis unless either the Company or the Executive notifies the other party of his/her/its intent not to renew the Agreement on or before October 31 (Section 2A. Term).

The Executive and the Company have agreed to modify the terms of that Agreement as follows:

1. (Section 2 Term.)

There shall be no one year term of employment and either the Executive or CuraGen may terminate employment with or without cause and with or without notice.

2. (Section 6. Disability or Death)

The Agreement provides that the Company may terminate the Agreement upon the Executive’s death or disability.

3. (Section 10. Termination)

The Agreement provides that CuraGen may terminate the Agreement for performance reasons or for cause.

4. (Section 10E and Section 12A. Benefits Upon Termination)

If the Company terminates the Executive’s employment because of performance reasons (as defined in Agreement), disability or death, or without cause, the Executive or his/her estate shall receive benefits. The benefits are: (i) salary continuation at the salary the Executive was receiving at the time of termination; and (ii) the Executive’s continued participation (or in the case of death the Executive’s family’s continued participation) in any employee health and welfare benefit 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 months from the date of termination of the Executive’s employment. Other than under Section 12 in the event of a Change of Control, the Executive shall not be entitled to more than twelve (12) months of salary continuation and continued participation in any health or welfare benefit plan if the Executive’s employment is terminated for (1) performance reasons; (2) death; (3) disability; or (4) without cause.

Unless explicitly changed in this Addendum, all other terms of the Agreement shall remain in full force and effect.

/s/    David M. Wurzer

David M. Wurzer

/s/    Jonathan M. Rothberg

Jonathan M. Rothberg

EX-10.22

EXHBIT 10.22

Interoffice Memorandum

To:	Personnel File
From:	Timothy M. Shannon, Senior VP of R&D and CMO
Date:	October 31, 2003
Re:	Addendum to Employment Agreement

I, Timothy M. Shannon, (“the Executive”) signed an Employment Agreement (“the Agreement”) with my employer, CuraGen Corporation (“the Company”), on or about October 24, 2002. The Agreement provides that it shall be renewed on an annual basis unless either the Company or the Executive notifies the other party of his/her/its intent not to renew the Agreement on or before October 31 (Section 2A. Term).

The Executive and the Company have agreed to modify the terms of that Agreement as follows:

1. (Section 2 Term.)

There shall be no one year term of employment and either the Executive or CuraGen may terminate employment with or without cause and with or without notice.

2. (Section 6. Disability or Death)

The Agreement provides that the Company may terminate the Agreement upon the Executive’s death or disability.

3. (Section 10. Termination)

The Agreement provides that CuraGen may terminate the Agreement for performance reasons or for cause.

4. (Section 10E and Section 12A. Benefits Upon Termination)

If the Company terminates the Executive’s employment because of performance reasons (as defined in Agreement), disability or death, or without cause, the Executive or his/her estate shall receive benefits. The benefits are: (i) salary continuation at the salary the Executive was receiving at the time of termination; and (ii) the Executive’s continued participation (or in the case of death the Executive’s family’s continued participation) in any employee health and welfare benefit 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 months from the date of termination of the Executive’s employment. Other than under Section 12 in the event of a Change of Control, the Executive shall not be entitled to more than twelve (12) months of salary continuation and continued participation in any health or welfare benefit plan if the Executive’s employment is terminated for (1) performance reasons; (2) death; (3) disability; or (4) without cause.

Unless explicitly changed in this Addendum, all other terms of the Agreement shall remain in full force and effect.

/s/    Timothy M. Shannon

Timothy M. Shannon

/s/    Jonathan M. Rothberg

Jonathan M. Rothberg

EX-10.23

EXHIBIT 10.23

Interoffice Memorandum

To:	Personnel File
From:	Richard F. Begley, CEO
Date:	October 31, 2003
Re:	Addendum to Employment Agreement

I, Richard F. Begley, (“the Executive”) signed an Employment Agreement (“the Agreement”) with my employer, 454 Life Sciences Corporation (“the Company”), on or about December 20, 2002. The Agreement provides that it shall be renewed on an annual basis unless either the Company or the Executive notifies the other party of his/her/its intent not to renew the Agreement on or before October 31 (Section 2A. Term).

The Executive and the Company have agreed to modify the terms of that Agreement as follows:

1. (Section 2 Term.)

There shall be no one year term of employment and either the Executive or 454 Life Sciences may terminate employment with or without cause and with or without notice.

2. (Section 6. Disability or Death)

The Agreement provides that the Company may terminate the Agreement upon the Executive’s death or disability.

3. (Section 10. Termination)

The Agreement provides that 454 Life Sciences may terminate the Agreement for performance reasons or for cause.

4. (Section 10E and Section 12A. Benefits Upon Termination)

If the Company terminates the Executive’s employment because of performance reasons (as defined in Agreement), disability or death, or without cause, the Executive or his/her estate shall receive benefits. The benefits are: (i) salary continuation at the salary the Executive was receiving at the time of termination; and (ii) the Executive’s continued participation (or in the case of death the Executive’s family’s continued participation) in any employee health and welfare benefit 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 months from the date of termination of the Executive’s employment. Other than under Section 12 in the event of a Change of Control, the Executive shall not be entitled to more than twelve (12) months of salary continuation and continued participation in any health or welfare benefit plan if the Executive’s employment is terminated for (1) performance reasons; (2) death; (3) disability; or (4) without cause.

Unless explicitly changed in this Addendum, all other terms of the Agreement shall remain in full force and effect.

/s/    Richard F. Begley

Richard F. Begley

/s/    Jonathan M. Rothberg

Jonathan M. Rothberg

EX-10.25

EXHIBIT 10.25

PURCHASE AGREEMENT

PURCHASE AGREEMENT dated as of June 5, 2000, among 454 Corporation, a Delaware corporation (the “Company”), CuraGen Corporation (“CuraGen”) and the several purchasers named in the attached Schedule 1 and Schedule 1-A (individually a “Purchaser” and collectively the “Purchasers”).

WHEREAS, (A) the Company and CuraGen wish to issue and sell to certain of the Purchasers up to an aggregate of 2,500,00 Units (the “Units”), each consisting of (i) one share of the Company’s authorized but unissued Series B Preferred Stock, $0.01 par value per share (the “Series B Preferred Stock”), and (ii) a warrant (the “Warrant”) to purchase 0.375 of a share of CuraGen’s authorized but unissued Common Stock, $0.01 par value per share (the “CuraGen Common Stock,” and the shares of CuraGen Common Stock issuable upon exercise of the Warrants shall be referred to as the “CuraGen Conversion Shares”), subject to adjustment in certain circumstances, and (B) the Company wishes to issue and sell to certain of the Purchasers up to an aggregate of 1,500,00 shares of the Series B Preferred Stock; and

WHEREAS, the Purchasers, severally, wish to purchase the Series B Preferred Stock and Warrants on the terms and subject to the conditions set forth in this Agreement;

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained in this Agreement, the parties agree as follows:

§1. THE UNITS AND THE SERIES B PREFERRED STOCK

§1.01. Issuance, Sale and Delivery of the Units and the Series B Preferred Stock. Subject to the terms and conditions hereinafter set forth, (A) the Company and CuraGen hereby agree to issue and sell to the Purchasers listed on Schedule 1, and each such Purchaser hereby agrees to purchase from the Company and CuraGen, the number of Units set forth opposite the name of such Purchaser under the heading “Number of Units to be Purchased” on Schedule 1, at the purchase price of $10.00 per Unit, and (B) the Company hereby agrees to issue and sell to each Purchaser listed on Schedule 1-A, and each such Purchaser hereby agrees to purchase from the Company, the number of shares of Series B Preferred Stock (and no Warrants) set forth opposite the name of such Purchaser under the heading “Shares of 454 Corporation Series B Preferred Stock to be Purchased” on Schedule 1-A, at the purchase price of $5.00 per share.

§1.02. Closing. The closing shall take place, with executed documents transmitted via telecopier on June 6, 2000, or at such other date and time as may be agreed upon among the Purchasers, the Company and CuraGen (such closing being called the “Closing” and such date and time being called the “Closing Date”). At the Closing, (i) the Company shall issue and deliver to each Purchaser a stock certificate or certificates, and (ii) CuraGen shall issue and deliver to a Warrant to each Purchaser purchasing a Unit, both in definitive form, registered in the name of such Purchaser, representing (a) with respect to Purchasers purchasing Units, the number of shares of Series B Preferred Stock and Warrants set forth opposite the name of such Purchaser under the headings “Shares of 454 Corporation Series B Preferred Stock to be Issued” and “Curagen Warrants to be Issued,” respectively on Schedule 1, and (b) with respect to Purchasers purchasing only Series B Preferred Stock, the number of shares of Series B Preferred

Stock set forth opposite the name of such Purchaser under the headings “Shares of 454 Corporation Series B Preferred Stock to be Purchased” on Schedule 1-A.

§1.03. Payment of Purchase Price. (A) As payment in full for the Units being purchased by it at the Closing, and against delivery of the stock certificates and Warrants therefor as aforesaid, on the Closing Date for such Closing each Purchaser listed on Schedule 1 (i) shall deliver to the Company an amount equal to $5.00 for each Unit being purchased by such Purchaser at such Closing; and (ii) shall deliver to CuraGen an amount equal to $5.00 for each Unit being purchased by such Purchaser at such Closing.

(B) As payment in full for the Series B Preferred Stock being purchased by it at the Closing, and against delivery of the stock certificates therefor as aforesaid, on the Closing Date for such Closing each Purchaser listed on Schedule 1-A shall deliver to the Company an amount equal to $5.00 for each share of Series B Preferred Stock being purchased by such Purchaser at such Closing.

(C) The such payments in Sections 1.03(A) and (B) to the Company and CuraGen shall be referred to collectively as the “Purchase Price”. Payment of the Purchase Price shall be made by wire transfer in immediately available funds to the respective accounts of the Company and CuraGen.

§2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to the Purchasers that, except as set forth in the Disclosure Schedules attached hereto:

§2.01. Organization, Qualification and Corporate Power. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. The Company is duly licensed or qualified in each jurisdiction in which the nature of the business transacted by it requires such licensing or qualification, unless the failure to so qualify does not have a material adverse effect on the business operations or financial condition of the Company. The Company has the corporate power and authority to own and hold its properties and to carry on its business as now conducted and as proposed to be conducted, to execute, deliver and perform this Agreement and the Registration Rights Agreement to be dated as of the Closing Date by and among the Company and the other parties thereto, the Software License Agreement to be dated as of the Closing Date by and between the Company and CuraGen, the Beta Test Site Agreement to be dated as of the Closing Date by and between the Company and CuraGen, the Technology Transfer and License Agreement to be dated as of the Closing Date by and between the Company and CuraGen, and the Facilities and Services Agreement to be dated as of the Closing Date by and between the Company and CuraGen, (collectively, the “Investor Agreements”), and, upon the due filing of the Charter (defined below), to issue, sell and deliver the Series B Preferred Stock and to issue and deliver the shares of Common Stock, $0.01 par value per share, of the Company (“Common Stock”) issuable upon conversion of the Series B Preferred Stock (the “Conversion Shares”).

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§2.02. Authorization of Agreements, etc.

(a) The execution and delivery by the Company of this Agreement and the Investor Agreements, the performance by the Company of its obligations hereunder and thereunder, the issuance, sale and delivery of the Series B Preferred Stock and the issuance and delivery of the Conversion Shares have been duly authorized by all requisite corporate action and will not violate any provision of law, any order of any court or other agency of government, the Certificate of Incorporation of the Company, as amended by the Restated Certificate of Incorporation in the form attached hereto as Exhibit A (as so amended, the “Charter”), or the By-laws of the Company, or any provision of any indenture, agreement or other instrument to which the Company, any of its subsidiaries or any of their respective properties or assets is bound, or conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument, or result in the creation or imposition of any lien, charge, restriction, claim or encumbrance of any nature whatsoever upon any of the properties or assets of the Company or any of its subsidiaries, except as provided in the Facilities and Services Agreement dated the date hereof by and between the Company and CuraGen.

(b) Upon the filing of the Charter, the Series B Preferred Stock will have been duly authorized and, when issued in accordance with this Agreement, will be validly issued, fully paid and nonassessable shares of Series B Preferred Stock with no personal liability attaching to the ownership thereof and will be free and clear of all liens, charges, restrictions, claims and encumbrances. Upon the filing of the Charter, the Conversion Shares will have been duly reserved for issuance upon conversion of the Series B Preferred Stock and, when so issued, will be duly authorized, validly issued, fully paid and nonassessable shares of Common Stock with no personal liability attaching to the ownership thereof and will be free and clear of all liens, charges, restrictions, claims and encumbrances. Neither the issuance, sale or delivery of the Series B Preferred Stock nor the issuance or delivery of the Conversion Shares is subject to any preemptive right of stockholders of the Company or to any right of first refusal or other right in favor of any person.

(c) Validity. This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with its terms. The Investor Agreements, when executed and delivered in accordance with this Agreement, will constitute the legal, valid and binding obligations of the Company and of the other parties thereto, enforceable in accordance with their respective terms.

(d) Authorized Capital Stock. Upon the filing of the Charter the authorized capital stock of the Company shall consist of (i) 15,000,000 shares of Preferred Stock, $0.01 par value (the “Preferred Stock”), of which (a) 6,000,000 shares have been designated Series A Preferred Stock and will be issued and outstanding upon the closing of this Purchase agreement, as set forth on Schedule 2.02, (b) 4,000,000 shares have been designated Series B Preferred Stock and will be issued and outstanding following the Closing and (c) 5,000,000 shares remain undesignated and (ii) 20,000,000 shares of Common Stock. No shares of Common Stock are issued or outstanding. The stockholders of record and holders of subscriptions, warrants, options, convertible securities, and other rights (contingent or other) to purchase or otherwise acquire from the

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Company (or, to the best of the Company’s knowledge, from any other person or entity) any equity securities of the Company, and the number of shares of Common Stock or Preferred Stock and the number of such subscriptions, warrants, options, convertible securities, and other such rights held by each, are as set forth in the attached Schedule 2.02. The designations, powers, preferences, rights, qualifications, limitations and restrictions in respect of each class and series of authorized capital stock of the Company are as set forth in the Charter, a copy of which is attached as Exhibit A, and all such designations, powers, preferences, rights, qualifications, limitations and restrictions, upon the filing of the Charter, will be valid, binding and enforceable and in accordance with all applicable laws. Except as set forth in the attached Schedule 2.02, (i) no person owns of record or is known to the Company to own beneficially any share of Common Stock or Preferred Stock, (ii) no subscription, warrant, option, convertible security, or other right (contingent or other) to purchase or otherwise acquire from the Company (or from any other person or entity) any equity securities of the Company is authorized or outstanding and (iii) there is no commitment by the Company to issue shares, subscriptions, warrants, options, convertible securities, or other such rights or to distribute to holders of any of its equity securities any evidence of indebtedness or asset. Except as provided for in the Charter or as set forth in the attached Schedule 2.02, the Company has no obligation (contingent or other) to purchase, redeem or otherwise acquire any of its equity securities or any interest therein or to pay any dividend or make any other distribution in respect thereof. There are no voting trusts or agreements, stockholders’ agreements, pledge agreements, buy-sell agreements, rights of first refusal, preemptive rights or proxies relating to any securities of the Company or any of its subsidiaries (whether or not the Company or any of its subsidiaries is a party thereto). All of the outstanding securities of the Company were issued in compliance with all applicable federal and state securities laws.

§2.03. Litigation, Compliance with Law. There is no (i) action, suit, claim, proceeding or investigation pending or, to the best of the Company’s knowledge, threatened against or affecting the Company, at law or inequity, or before or by any Federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, (ii) arbitration proceeding relating to the Company pending under collective bargaining agreements or otherwise, or (iii) governmental inquiry pending or, to the best of the Company’s knowledge, threatened against or affecting the Company (including without limitation any inquiry as to the qualification of the Company to hold or receive any license or permit), and, to the best of the Company’s knowledge, there is no basis for any of the foregoing. The Company is not in default with respect to any order, writ, injunction or decree known to or served upon the Company of any court or of any Federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign. There is no action or suit by the Company pending or threatened against others. To the best of the Company’s knowledge, the Company has complied in all material respects with all laws, rules, regulations and orders applicable to its business, operations, properties, assets, products and services, and the Company has all necessary permits, licenses and other authorizations required to conduct its business as conducted and as proposed to be conducted. There is no existing law, rule, regulation or order, and the Company is not aware of any proposed law, rule, regulation or order, whether Federal or state, which would prohibit or restrict the Company from, or otherwise

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materially adversely affect the Company in, conducting its business in any jurisdiction in which it is now conducting business or in which it proposes to conduct business.

§2.04. Title to Properties. The Company has good and marketable title to all of its properties and assets, and all such properties and assets are free and clear of mortgages, pledges, security interests, liens, charges, claims, restrictions and other encumbrances, except for liens for or current taxes not yet due and payable and minor imperfections of title, if any, not material in nature or amount and not materially detracting from the value or impairing the use of the property subject thereto or impairing the operations or proposed operations of the Company.

§2.05. Taxes. The Company has filed all tax returns, Federal, state, county and local, required to be filed by it, and the Company has paid all taxes shown to be due by such returns as well as all other taxes, assessments and governmental charges which have become due or payable, including without limitation all taxes which the Company is obligated to withhold from amounts owing to employees, creditors and third parties. There is no tax lien, whether imposed by any Federal, state, county or local taxing authority, outstanding against the assets, properties or business of the Company.

§2.06. Other Agreements. The Company is in full compliance with all of the terms and provisions of its Charter and By-laws.

§2.07. Governmental Approvals. Subject to the accuracy of the representations and warranties of the Purchasers set forth in Section 3, no registration or filing with, or consent or approval of or other action by, any Federal, state or other governmental agency or instrumentality is or will be necessary for the valid execution, delivery and performance by the Company of this Agreement or the Investor Agreements, the issuance, sale and delivery of the Series B Preferred Stock or, upon conversion thereof, the issuance and delivery of the Conversion Shares, other than filings pursuant to federal and state securities laws in connection with the sale of the Series B Preferred Stock.

§2.08. Disclosure. The Company’s representations and warranties in this Agreement and in the Schedules and Exhibits to this Agreement, do not contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained herein or therein not misleading. None of the statements, documents, certificates or other items prepared or supplied by the Company with respect to the transactions contemplated hereby contains an untrue statement of a material fact or omits a material fact necessary to make the statements contained therein not misleading. There is no fact which the Company has not disclosed to the Purchasers and their counsel in writing and of which the Company is aware which materially and adversely affects or could materially and adversely affect the business, prospects, financial condition, operations, property or affairs of the Company or any of its subsidiaries.

§2.09. Offering of the Series B Preferred Stock. Neither the Company nor any person authorized or employed by the Company as agent, broker, dealer or otherwise in connection with the offering or sale of the Series B Preferred Stock or any security of the Company similar to the Series B Preferred Stock has offered the Series B Preferred Stock or any such similar security for sale to, or solicited any offer to buy the Series B Preferred Stock or any such similar security from, or otherwise approached or negotiated with respect thereto with, any person or persons,

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and neither the Company nor any person acting on its behalf has taken or will take any other action (including, without limitation, any offer, issuance or sale of any security of the Company under circumstances which might require the integration of such security with Series B Preferred Stock under the Securities Act or the rules and regulations of the Commission thereunder), in either case so as to subject the offering, issuance or sale of the Series B Preferred Stock to the registration provisions of the Securities Act.

§2.10. Brokers. The Company has no contract, arrangement or understanding with any broker, finder or similar agent with respect to the transactions contemplated by this Agreement.

§2.11. Ownership and Nondisclosure Agreement. Each employee, consultant and contractor of the Company identified on Schedule 2.11 has entered into and executed a Ownership and Nondisclosure Agreement in the form attached to this Agreement as Exhibit B or an employment or consulting agreement containing substantially similar terms.

§2.12. Status of Proprietary Assets.

(a) Ownership. The Company has full title and ownership of, or has license to, all patents, patent applications, trademarks, service marks, trade names, copyrights, moral rights, mask works, trade secrets, confidential and proprietary information, compositions of matter, formulas, designs, proprietary rights, know-how and processes (all of the foregoing collectively referred to as the “Proprietary Assets”) necessary to enable it to carry on its business as now conducted and as presently proposed to be conducted, without any conflict with or infringement of the rights of others. A complete list of all the Company’s Proprietary Assets is set forth on Schedule 2.12 to this Agreement. To the best of the Company’s knowledge, no third party has any ownership right, title, interest, claim in or lien on any of the Company’s Proprietary Assets and the Company has taken, and in the future the Company will use its best efforts to take, all steps reasonably necessary to preserve its legal rights in, and the secrecy of, all its Proprietary Assets, except those for which disclosure is required for legitimate business or legal reasons.

(b) Licenses; Other Agreements. The Company has not granted, and, there are not outstanding, any options, licenses or agreements of any kind relating to any Proprietary Asset of the Company, nor is the Company bound by or a party to any option, license or agreement of any kind with respect to any of its Proprietary Assets. The Company is not obligated to pay any royalties or other payments to third parties with respect to the marketing, sale, distribution, manufacture, license or use of any Proprietary Assets or any other property or rights.

(c) No Infringement. To the best of the Company’s knowledge, the Company has not violated or infringed, and is not currently violating or infringing, and the Company has not received any communications alleging that the Company (or any of its employees or consultants) has violated or infringed or, by conducting its business as proposed, would violate or infringe, any Proprietary Asset of any other person or entity.

(d) No Breach by Employee. The Company is not aware that any employee or consultant of the Company is obligated under any agreement (including licenses,

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covenants or commitments of any nature) or subject to any judgment, decree or order of any court or administrative agency, or any other restriction that would interfere with the use of his or her best efforts to carry out his or her duties for the Company or to promote the interests of the Company or that would conflict with the Company’s business as proposed to be conducted. The carrying on of the Company’s business by the employees and contractors of the Company and the conduct of the Company business as presently proposed, will not, to the best of the Company’s knowledge, conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which any of such employees or contractors or the Company is now obligated. The Company does not believe it is or will be necessary to utilize any inventions of any employees of the Company (or persons the Company currently intends to hire) made prior to their employment by the Company which have not otherwise become property of the Company. At no time during the conception of or reduction of any of the Proprietary Assets to practice was any developer, inventor or other contributor to such patents operating under any grants from any governmental entity or agency or private source, performing research sponsored by any governmental entity or agency or private source or subject to any employment agreement or invention assignment or nondisclosure agreement or other obligation with any third party that could adversely affect the Company’s rights in such Proprietary Assets.

§3. REPRESENTATIONS AND WARRANTIES OF CURAGEN

CuraGen represents and warrants to the Purchasers that:

§3.01. Organization, Qualification and Corporate Power. (a) CuraGen is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. CuraGen is duly licensed or qualified in each jurisdiction in which the nature of the business transacted by it requires such licensing or qualification, unless the failure to so qualify does not have a material adverse effect on the business operations or financial condition of CuraGen. CuraGen has the corporate power and authority to own and hold its properties and to carry on its business as now conducted and as proposed to be conducted, to execute, deliver and perform this Agreement and the Investor Agreements, to issue, sell and deliver the Warrants and to issue and deliver the CuraGen Conversion Shares.

(b) CuraGen owns all of the capital stock of GeneScape Corporation (the “Subsidiary”). Except for such Subsidiary, CuraGen does not (i) own of record or beneficially, directly or indirectly, (A) any shares of capital stock or securities convertible into capital stock of any other corporation or (B) any participating interest in any partnership, joint venture or other non-corporate business enterprise or (ii) control, directly or indirectly, any other entity. The Subsidiary is a corporation duly incorporated, validly existing and in good standing under the laws of its respective jurisdiction of incorporation and is duly licensed or qualified to transact business as a foreign corporation and is in good standing in each jurisdiction in which the nature of the business transacted by it or the character of the properties owned or leased by it requires such licensing or qualification except where the failure to be so qualified or licensed does not and will not have a material adverse effect on the business operations or financial condition of the Subsidiary. The Subsidiary has the corporate power and authority to own and hold its properties and to carry on its business as now conducted and as proposed to be conducted.

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§3.02. Authorization of Agreements, etc.

(a) The execution and delivery by CuraGen of this Agreement and the Investor Agreements, the performance by CuraGen of its obligations hereunder and thereunder, the issuance, sale and delivery of the Warrants and the issuance and delivery of the CuraGen Conversion Shares have been duly authorized by all requisite corporate action and will not violate any provision of (i) law, any order of any court or other agency of government, (ii) the Certificate of Incorporation or By-laws of CuraGen, or (iii) any provision of any indenture, agreement or other instrument to which CuraGen, any of its subsidiaries or any of their respective properties or assets is bound, or conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument, or result in the creation or imposition of any lien, charge, restriction, claim or encumbrance of any nature whatsoever upon any of the properties or assets of CuraGen or any of its subsidiaries, except as provided in the Facilities and Services Agreement dated the date hereof by and between the Company and CuraGen, and except with respect to clause (iii) above, for such violations, conflicts and breaches that, individually and in the aggregate with all other such violations, conflicts and breaches, would not have a material adverse effect on the business, financial condition or results of operations of CuraGen.

(b) The CuraGen Conversion Shares have been duly reserved for issuance upon exercise of the Warrants and, when so issued, will be duly authorized, validly issued, fully paid and nonassessable shares of CuraGen Common Stock with no personal liability attaching to the ownership thereof and will be free and clear of all liens, charges, restrictions, claims and encumbrances.

(c) Validity. This Agreement has been duly executed and delivered by CuraGen and constitutes the legal, valid and binding obligation of CuraGen, enforceable in accordance with its terms. The Investor Agreements, when executed and delivered in accordance with this Agreement, will constitute the legal, valid and binding obligations of CuraGen, enforceable in accordance with their respective terms.

(d) CuraGen represents and warrants that since March 7, 2000, CuraGen has filed all reports (“Designated SEC Reports”) required to be filed by it with the Securities Exchange Commission (“SEC”) pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As of their respective dates, the Designated SEC Reports complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to the Designated SEC Reports, and none of the Designated SEC Reports, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading except to the extent superseded by a Designated SEC Report filed subsequently and prior to the date hereof. As of their respective dates, the financial statements of CuraGen included in the Designated SEC Reports complied as to form in all material respects with applicable accounting requirements and the published rules and

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regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of CuraGen as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).

§4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS

Each Purchaser severally represents and warrants to each of the Company and CuraGen that:

(a) such Purchaser is an “accredited investor” within the meaning of Rule 501 of Regulation D under the Securities;

(b) such Purchaser has sufficient knowledge and experience in investing in companies similar to the Company and CuraGen in terms of the Company’s and CuraGen’s stage of development so as to be able to evaluate the risks and merits of such Purchaser’s investment in each of the Company and CuraGen and such Purchaser is able financially to bear the risks thereof;

(c) such Purchaser has had an opportunity to discuss each of the Company’s and CuraGen’s business, management and financial affairs with the management of the Company and CuraGen;

(d) the securities being purchased by such Purchaser are being acquired for such Purchaser’s own account for the purpose of investment and not with a view to or for sale in connection with any distribution thereof; and

(e) such Purchaser understands that (i) the securities (the Units, the Series B Preferred Stock, the Warrants and the Conversion Shares and the CuraGen Conversion Shares) have not been registered under the Securities Act by reason of their issuance in a transaction exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof or Rule 506 promulgated under the Securities Act, (ii) the Warrants and the Series B Preferred Stock and, upon conversion or exercise thereof, the Conversion Shares and the CuraGen Conversion Shares, must be held indefinitely unless a subsequent disposition thereof is registered under the Securities Act or is exempt from such registration, (iii) each of the Warrants, the shares of Series B Preferred Stock, the Conversion Shares and the CuraGen Conversion Shares will bear a legend to such effect and (iv) each of the Company and CuraGen will make a notation on its transfer books to such effect.

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§5. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS

The obligation of each Purchaser to purchase and pay for the Units or Series B Preferred Stock to be purchased by it on a Closing Date is, at such Purchaser’s option, subject to the satisfaction, on or before such Closing Date, of the following conditions:

§5.01. Opinion of Company’s Counsel. The Purchasers shall have received from Mintz Levin Cohn Ferris Glovsky and Popeo, PC, counsel for the Company and CuraGen, an opinion dated the Closing Date, substantially in the form of Exhibit C attached to this Agreement.

§5.02. All Proceedings to be Satisfactory. All corporate and other proceedings to be taken by each of the Company and CuraGen in connection with the transactions contemplated hereby and all documents incident thereto shall be satisfactory in form and substance to the Purchasers and their counsel, and the Purchasers and their counsel shall have received all such counterpart originals or certified or other copies of such documents as they reasonably may request.

§5.03. Supporting Documents. The Purchasers and their counsel shall have received copies of the following documents:

(a) a certificate of the Secretary of State of the State of Delaware dated as of a recent date as to the existence and good standing of the Company;

(b) a certificate of the Secretary of the Company dated the Closing Date and certifying: (i) that attached thereto is a true and complete copy of the Charter and Bylaws of the Company as in effect on the date of such certification; (ii) that attached thereto is a true and complete copy of all resolutions adopted by the Board of Directors of the Company authorizing the execution, delivery and performance of this Agreement and the Investor Agreements, the designation, issuance, sale and delivery of the Series B Preferred Stock and the reservation, issuance and delivery of the Conversion Shares, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated by this Agreement; (iii) the representations and warranties as set forth in Section 2 hereof are true and correct in all material respects; and

(c) such additional supporting documents and other information with respect to the operations and affairs of the Company as the Purchasers or their counsel reasonably may request.

§5.04. Investor Agreements. The Company and each of the other parties thereto (other than the Purchasers) shall have executed and delivered the Investor Agreements in the form attached hereto as Exhibit D through Exhibit H.

All such documents required under this Section 5 shall be satisfactory in form and substance to the Purchasers and their counsel.

§6. COVENANTS OF THE COMPANY

The Company covenants and agrees with each of the Purchasers that so long as such Purchaser owns any of the Series B Preferred Stock or Conversion Shares, and until such time as

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the completion of an underwritten public offering of the Company’s securities pursuant to which the aggregate price paid by the public for the purchase of securities is at least $30,000,000 shall have occurred:

§6.01. Financial Statements, Reports, etc. The Company shall furnish to each Purchaser:

(a) within ninety (90) days after the end of each fiscal year of the Company, a consolidated balance sheet of the Company and its subsidiaries as of the end of such fiscal year and the related consolidated statements of income, stockholders’ equity and cash flows for the fiscal year then ended, prepared in accordance with generally accepted accounting principles and audited by a firm of independent public accountants of recognized national standing selected by the Board of Directors of the Company and reasonably acceptable to the Purchasers; and

(b) within forty-five (45) days after the end of each fiscal quarter in each fiscal year (other than the last fiscal quarter in each fiscal year), a consolidated balance sheet of the Company and its subsidiaries and the related consolidated statements of income, stockholders’ equity and cash flows, unaudited but prepared in accordance with generally accepted accounting principles and certified by the Chief Financial Officer of the Company, such consolidated balance sheet to be as of the end of such fiscal quarter and such consolidated statements of income, stockholders’ equity and cash flows to be for such fiscal quarter and for the period from the beginning of the fiscal year to the end of such fiscal quarter, in each case with comparative statements for the corresponding period in the prior fiscal year.

§6.02. Corporate Existence. The Company shall maintain and cause each of its subsidiaries to maintain their respective corporate existence, rights and franchises in full force and effect.

§6.03. Properties, Business, Insurance. The Company shall maintain and cause each of its subsidiaries to maintain as to their respective properties and business, with financially sound and reputable insurers, insurance against such casualties and contingencies and of such types and in such amounts as is customary for companies similarly situated, which insurance shall be deemed by the Company to be sufficient.

§6.04. Inspection, Consultation and Advice. The Company shall permit and cause each of its subsidiaries to permit each Purchaser and such persons as it may designate, at such Purchaser’s expense, to visit and inspect any of the properties of the Company and its subsidiaries, examine their books and take copies and extracts therefrom, discuss the affairs, finances and accounts of the Company and its subsidiaries with their officers, employees and public accountants (and the Company hereby authorizes said accountants to discuss with such Purchaser and such designees such affairs, finances and accounts), and consult with and advise the management of the Company and its subsidiaries as to their affairs, finances and accounts, all at reasonable times and upon reasonable notice.

§6.05. Keeping of Records and Books of Account. The Company shall keep, and cause each subsidiary to keep, adequate records and books of account, in which complete entries will

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be made in accordance with generally accepted accounting principles consistently applied, reflecting all financial transactions of the Company and such subsidiary, and in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made.

§6.06. Payment of Taxes. The Company shall pay and discharge all taxes, assessments and governmental charges or levies imposed upon it or upon its income, profits or business, or upon any properties belonging to it, prior to the date on which penalties attach thereto, and all lawful claims which, if unpaid, might become alien or charge upon any properties of the Company, provided that the Company shall not be required to pay any such tax, assessment, charge, levy or claim which is being contested in good faith and by appropriate proceedings if the Company shall have set aside on its books sufficient reserves, if any, with respect thereto, or where the failure to so pay would not have a material adverse effect on the business, assets, operations or financial condition, taken as a whole.

§7. OBSERVER RIGHTS

§7.01 Appointment of Observer. The group consisting of CLSP, L.P., CLSP II, L.P., CLSP-SBS I, L.P. and CLSP-SBS II, L.P. (collectively, the “Casdin Group”) and the group consisting of Quantum Industrial Partners LDC and Quantum Partners LDC (collectively, the “Soros Group”) shall have the right to agree upon and designate, in a non-voting observer capacity, one representative of both the Casdin Group and the Soros Group (or, at the option of the Casdin Group and the Soros Group, one representative for each of the Casdin Group and the Soros Group) reasonably acceptable to the Company (“Designee,” or if applicable, “Designees”) to attend and observe all meetings of the Company’s Board of Directors (the “Board”) (whether in person, telephonic or otherwise) and such Designee or Designees shall be entitled to receive notices of and to attend meetings of the Board, concurrently with the members of the Board, and in the same manner. If the Designee or Designees are unable to attend a Board meeting, the Casdin Group and the Soros Group shall have the right to select a replacement Designee or Designee reasonably acceptable to the Company to attend in his or their place. The right to attend the Board meetings and receive the information described herein shall not apply to (i) the presentation of information or discussions at Board meetings involving matters which, if provided to or attended by the Designee or Designees, or its or their affiliates (including the Casdin Group entities or their affiliates and the Soros Group entities and their affiliates), would in the reasonable opinion of counsel to the Company, jeopardize the attorney client privilege that would otherwise be afforded to such information or meeting or (ii) any particular matter in which the Designee or Designees or its or their affiliates (including the Casdin Group entities or their affiliates and the Soros Group entities and their affiliates) have an interest that in the determination of a majority of the Board conflicts with the business of the Company. The Casdin Group and the Soros Group agree, and shall cause any Designee or Designees to agree in writing prior to attending any meeting of the Board (whether in person, telephonic or otherwise), not to reveal to any person or entity (including any entity or employee of such entity in which the Casdin Group entities and their affiliates and/or the Soros Group entities and their affiliates has an equity interest) outside of the Casdin Group and the Soros Group any confidential information learned as a result of the rights granted by this Section 7.01 concerning the organization, business or finances of the Company or any information concerning a third party which the Company is under a duty to keep confidential.

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§7.02 Termination of Observer Rights. The observer rights granted to both the Casdin Group and the Soros Group in Section 7.01 shall terminate and be of no further force or effect immediately prior to the earliest to occur of:

(a) the effective date of the registration statement in the Initial Public Offering; or

(b) the consummation of the sale of all, or substantially all, of the Company’s assets or capital stock, either through a direct sale, merger, reorganization, consolidation or other form of business combination or acquisition in which the Company is the target of such acquisition and/or voting control of the equity securities of the Company is transferred to a third party unaffiliated with the Company.

Furthermore, the observer rights granted to the Casdin Group in Section 7.01 shall terminate and be of no further force or effect upon the earliest to occur of:

(a) such time as the Casdin Group holds less than 50% of the Series B Preferred Stock it purchased on the date hereof pursuant to the Purchase agreement; or

(b) such time as a director, officer or employee of the Casdin Group or their affiliates becomes a member of the Board.

Furthermore, the observer rights granted to the Soros Group in Section 7.01 shall terminate and be of no further force or effect upon the earliest to occur of:

(a) such time as the Soros Group holds less than 50% of the Series B Preferred Stock it purchased on the date hereof pursuant to the Purchase agreement; or

(b) such time as a director, officer or employee of the Soros Group or their affiliates becomes a member of the Board.

§8. TAG-ALONG RIGHTS

§8.01. Right to Participate in Sale.

(a) Opportunity to Participate. If CuraGen proposes to enter into an agreement to sell or otherwise dispose of for value (such sale or other disposition for value being referred to as a “Tag-Along Sale”) more than 1,000,000 shares (as adjusted for any stock dividends, stock splits, recapitalizations, consolidations or the like) of Common Stock in a single or series of transactions, then CuraGen shall afford the holders of shares of the Series B Preferred Stock the opportunity to participate proportionately in such Tag-Along Sale (the person(s) being afforded the opportunity to participate proportionately in such Tag-Along Sale being referred to as the “Tag-Along Stockholders”) in accordance with this Section 8. For purposes of this Section 8, the term “Common Stock” shall include shares of Common Stock issuable upon the conversion of securities convertible into Common Stock.

(b) Number of Shares. The number of shares of Common Stock that each Tag-Along Stockholder will be entitled to include in such Tag-Along Sale (the “Tag-Along Allotment”) shall

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be determined by multiplying (i) the number of shares of Common Stock held by such Tag-Along Stockholder immediately prior to the consummation of the Tag-Along Sale by (ii) a fraction, the numerator of which shall equal the number of shares of Common Stock proposed to be sold or otherwise disposed of by CuraGen pursuant to the Tag-Along Sale and the denominator of which shall equal the total number of shares of Common Stock that are beneficially owned by (A) CuraGen and (B) any other holder of shares of Common Stock that had the right to “tag-along” in the Tag-Along Sale on the day immediately prior to the consummation of the Tag-Along Sale Date.

§8.02. Sale Notice. CuraGen shall provide each Tag-Along Stockholder and the Company with written notice (the “Tag-Along Sale Notice”) not less than 14 days prior to the proposed date of the Tag-Along Sale (the “Tag-Along Sale Date”). Each Tag-Along Sale Notice shall be accompanied by a copy of any agreement relating to the Tag-Along Sale (if available) and shall set forth: (a) the name and address of each proposed purchaser of shares of Common Stock in the Tag-Along Sale; (b) the number of shares of Common Stock proposed to be sold; (c) the proposed amount and form of consideration to be paid for such shares of Common Stock and the terms and conditions of payment offered by each proposed purchaser; (d) the aggregate number of shares of Common Stock held of record by CuraGen as of the close of business on the day immediately preceding the date of the Tag-Along Notice (the “Tag-Along Notice Date”); (e) the Tag-Along Stockholder’s Tag-Along Allotment assuming the Tag-Along Stockholder elected to sell the maximum number of shares of Common Stock possible; and (f) the Tag-Along Sale Date.

§8.03. Tag-Along Notice. Any Tag-Along Stockholder wishing to participate in the Tag-Along Sale shall provide written notice (the “Tag-Along Notice”) to the party proposing the Tag-Along Sale no less than 7 days prior to the Tag-Along Sale Date. The Tag-Along Notice shall set forth the number of shares of Common Stock that such Tag-Along Stockholder elects to include in the Tag-Along Sale, which shall not exceed such Tag-Along Stockholder’s Tag-Along Allotment. The Tag-Along Notice given by any Tag-Along Stockholder shall constitute such Tag-Along Stockholder’s binding agreement to sell the shares of Common Stock specified in the Tag-Along Notice on the terms and conditions applicable to the Tag-Along Sale; provided, however, that in the event that there is any material change in the material terms and conditions of such Tag-Along Sale applicable to the Tag-Along Stockholder (including, but not limited to, any decrease in the purchase price that occurs other than pursuant to an adjustment mechanism set forth in the agreement relating to the Tag-Along Sale) after such Tag-Along Stockholder gives it Tag-Along Notice, then, notwithstanding anything herein to the contrary, the Tag-Along Stockholder shall have the right to withdraw from participation in the Tag-Along Sale with respect to all of its shares of Common Stock affected thereby. If the proposed purchases does not consummate the purchase of all of the shares of Common Stock requested to be included in the Tag-Along Sale by any Tag-Along Stockholder on the same terms and conditions applicable to CuraGen, then CuraGen shall not consummate the Tag-Along Sale of any of its shares of Common Stock to such purchaser, unless the shares of CuraGen and the Tag-Along Stockholders are reduced or limited pro rata in proportion to the respective number of shares of Common Stock actually sold in any such Tag-Along Sale and all other terms and conditions of the Tag-Along Sale are the same for CuraGen and the Tag-Along Stockholders, subject to the provisions set forth in §8.01.

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If a Tag-Along Notice from any Tag-Along Stockholder is not received by the Party proposing the Tag-Along Sale prior to the 7 day period specified above, then CuraGen shall have the right to consummate the Tag-Along Sale without the participation of such Tag-Along Stockholder, but only on terms and conditions which are no more favorable in any material respect to CuraGen (and in any event, at no greater a purchase price) than as stated in the Tag-Along Sale Notice and only if such Tag-Along Sale occurs on a date within 90 days of the Tag-Along Sale Date. If such Tag-Along Sale does not occur within such 90 day period, the shares of Common Stock that were to be subject to such Tag-Along Sale thereafter shall continue to be subject to all of the restrictions contained in this Agreement.

§8.04. Delivery of Certificates. On the Tag-Along Sale Date, each Tag-Along Stockholder shall deliver a certificate or certificates for the shares of Common Stock to be sold in connection with the Tag-Along Sale, duly endorsed for transfer with signatures guaranteed, to the purchaser in the manner and at the address indicated in the Tag-Along Notice against delivery of immediately available funds in the amount of the purchase price for such shares of Common Stock.

§8.05. Limitation on CuraGen Acquiring Capital Stock of the Company. CuraGen will not acquire in the aggregate more than 1,000,000 shares of Common Stock or any securities convertible into (except for shares of Common Stock issuable upon conversion of the Series A Preferred Stock or Series B Preferred Stock), or options, warrants, or rights to purchase, such shares of Common Stock (as adjusted for any stock dividends, stock splits, recapitalizations, consolidations or the like).

§8.06. Termination of Rights. The rights contained in this Section 8 shall terminate shall terminate and be of no further force or effect immediately prior to the earliest to occur of:

(a) the effective date of the registration statement in the Initial Public Offering; or

(b) the consummation of the sale of all, or substantially all, of the Company’s assets or capital stock, either through a direct sale, merger, reorganization, consolidation or other form of business combination or acquisition in which the Company is the target of such acquisition and/or voting control of the equity securities of the Company is transferred to a third party unaffiliated with the Company.

§9. MISCELLANEOUS

§9.01. Expenses. Each party hereto will pay its own expenses in connection with the transactions contemplated hereby, whether or not such transactions shall be consummated.

§9.02. Survival of Agreements. All covenants, agreements, representations and warranties made herein or in an agreement, certificate or instrument delivered to the Purchasers pursuant to or in connection with this Agreement shall survive the execution and delivery of this Agreement and the Investor Agreements, the issuance, sale and delivery of the Series B Preferred Stock and Warrants, and the issuance and delivery of the Conversion Shares and the CuraGen Conversion Shares, and all statements contained in any certificate or other instrument delivered

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by each of the Company and CuraGen hereunder or thereunder or in connection herewith or therewith shall be deemed to constitute representations and warranties made by the Company and CuraGen, respectively.

§9.03. Brokerage. Each party hereto will indemnify and hold harmless the others against and in respect of any claim for brokerage, finder’s fees or other commissions relative to this Agreement or to the transactions contemplated hereby, based in any way on agreements, arrangements or understandings made or claimed to have been made by such party with any third party.

§9.04. Parties in Interest. All representations, covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. Without limiting the generality of the foregoing, all representations, covenants and agreements benefiting the Purchasers shall inure to the benefit of any and all subsequent holders from time to time of the Series B Preferred Stock, Warrants, Conversion Shares or CuraGen Conversion Shares.

§9.05. Notices. All notices, requests, consents and other communications hereunder shall be in writing and shall be delivered in person or mailed by certified or registered mail, return receipt requested, or telexed or delivered by a recognized overnight carrier, addressed as follows:

(a) if to the Company, at

322 East Main Street

Branford, Connecticut 06405

(b) if to CuraGen, at

555 Long Wharf Drive, 11^th Floor

New Haven, Connecticut 06511

(c) if to any Purchaser, at the address of such Purchaser set forth in Schedule 1;

or, in any such case, at such other address or addresses as shall have been furnished in writing by such party to the others.

§9.06. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware.

§9.07. Entire Agreement. This Agreement, including the Schedules and Exhibits hereto, constitutes the sole and entire agreement of the parties with respect to the subject matter hereof. All Schedules and Exhibits hereto are hereby incorporated herein by reference.

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

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§9.09. Amendments and Waivers. This Agreement may be amended or modified, and provisions hereof may be waived, with the written consent of the Company and the holders of at least two-thirds (2/3) of the outstanding Series B Preferred Stock, except for any amendment, modification or waiver which adversely affects the rights of the holders of the Series B Preferred Stock, in which case written consent of 100% of the holders of the outstanding Series B Preferred Stock shall be required.

§9.10. Severability. If any provision of this Agreement shall be declared void or unenforceable by any judicial or administrative authority, the validity of any other provision and of the entire Agreement shall not be affected thereby.

§9.11. Titles and Subtitles. The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting any term or provision of this Agreement.

§9.12. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

(a) “person” shall mean an individual, corporation, trust, partnership, joint venture, unincorporated organization, government agency or any agency or political subdivision thereof, or other entity.

(b) “subsidiary” shall mean, as to the Company or CuraGen, any corporation, limited liability company or other entity of which more than 50% of the outstanding stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether or not at the time stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned by the Company or CuraGen, or by one or more of its subsidiaries, or by the Company or CuraGen and one or more of their subsidiaries.

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IN WITNESS WHEREOF, the Company, CuraGen and the Purchasers have executed this Agreement as of the day and year first above written.

454 Corporation
By:	/s/    Jonathan M. Rothberg
	Name:	Jonathan M. Rothberg
	Title:	Chief Executive Officer and President

CuraGen Corporation
By:	/s/    Jonathan M. Rothberg
	Name:	Jonathan M. Rothberg
	Title:	Chief Executive Officer and President

PURCHASERS:

/s/    Michael J. Rothberg        

Michael J. Rothberg

/s/    Jonathan M. Rothberg        

Jonathan M. Rothberg

/s/    Henry M. Rothberg        

Henry M. Rothberg

/s/    Lillian R. Rothberg        

Lillian R. Rothberg

/s/    Gianpiero Molinari        

Gianpiero Molinari

/s/    Henry B. Rothberg        

Henry B. Rothberg

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/s/    David A. Rothberg        

David A. Rothberg

MFIC LLC
By:	/s/    Chris McLeod
Name:	Chris McLeod
Title:

Mintz Levin Investments LLC
By:	/s/    R. Robert Popeo
Name:	R. Robert Popeo
Title:	Chairman

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Quantum Industrial Partners LDC
By:	/s/    Richard D. Holahan
Name:	Richard D. Holahan
Title:	Attorney-in-Fact

Quantum Partners LDC
By:	/s/    Richard D. Holahan
Name:	Richard D. Holahan
Title:	Attorney-in-Fact

CLSP, L.P.
By:	Cooper Hill Partners, LLC its General Partner
By:	/s/    Jeffrey W. Casdin
Name:	Jeffrey W. Casdin
Title:	CEO

CLSP-SBS I, L.P.
By:	Cooper Hill Partners, LLC its General Partner
By:	/s/    Jeffrey W. Casdin
Name:	Jeffrey W. Casdin
Title:	CEO

CLSP-SBS II, L.P.
By:	Cooper Hill Partners, LLC its General Partner
By:	/s/    Jeffrey W. Casdin
Name:	Jeffrey W. Casdin
Title:	CEO

CLSP II, L.P.
By:	Cooper Hill Partners, LLC its General Partner
By:	/s/    Jeffrey W. Casdin
Name:	Jeffrey W. Casdin
Title:	CEO

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EX-10.26

EXHIBIT 10.26

EXECUTION COPY

PURCHASE AGREEMENT

PURCHASE AGREEMENT dated as of September 18, 2003, among 454 Corporation, a Delaware corporation (the “Company”), CuraGen Corporation (“CuraGen”) and the several purchasers named in the attached Schedule 1 (individually a “Purchaser” and collectively the “Purchasers”).

WHEREAS, (A) the Company wishes to issue and sell to CuraGen 6,404,854 shares of the Company’s authorized but unissued Series C Preferred Stock, $0.01 par value per share (the “Series C Preferred Stock”), and (B) the Company wishes to issue and sell to the Purchasers up to an aggregate of 1,595,146 shares of the Company’s authorized but unissued Series D Preferred Stock, $0.01 par value per share (the “Series D Preferred Stock”); and

WHEREAS, CuraGen wishes to purchase the Series C Preferred Stock on the terms and subject to the conditions set forth in this Agreement; and

WHEREAS, the Purchasers, severally, wish to purchase the Series D Preferred Stock on the terms and subject to the conditions set forth in this Agreement;

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained in this Agreement, the parties agree as follows:

§1. THE SERIES C PREFERRED STOCK AND THE SERIES D PREFERRED STOCK

§1.01. Issuance, Sale and Delivery of the Series C Preferred Stock and the Series D Preferred Stock. Subject to the terms and conditions hereinafter set forth, (A) the Company hereby agrees to issue and sell to CuraGen and CuraGen hereby agrees to purchase from the Company, 6,404,854 shares of Series C Preferred Stock at the purchase price of $2.50 per share; and (B) the Company hereby agrees to issue and sell to each Purchaser listed on Schedule 1, and each such Purchaser hereby agrees to purchase from the Company, the number of shares of Series D Preferred Stock set forth opposite the name of such Purchaser under the heading “Shares of 454 Corporation Series D Preferred Stock to be Purchased” on Schedule 1, at the purchase price of $2.50 per share.

§1.02. Closing. The closing shall take place, with executed documents transmitted via telecopy on September 18, 2003, or at such other date and time as may be agreed upon among the Purchasers, the Company and CuraGen (such closing being called the “Closing” and such date and time being called the “Closing Date”). At the Closing, the Company shall (i) issue and deliver to CuraGen a stock certificate, registered in the name of CuraGen, representing 6,404,854 shares of Series C Preferred Stock and (ii) issue and deliver to each Purchaser a stock certificate or certificates, registered in the name of such Purchaser, representing the number of shares of Series D Preferred Stock set forth opposite the name of such Purchaser under the headings “Shares of 454 Corporation Series D Preferred Stock to be Purchased” on Schedule 1.

§1.03. Payment of Purchase Price. (A) As payment in full for the Series C Preferred Stock being purchased by it at the Closing, and against delivery of the stock certificate therefor as aforesaid, on the Closing Date for such Closing CuraGen shall deliver to the Company an amount equal to $2.50 for each share of Series C Preferred Stock being purchased by CuraGen at such Closing.

(B) As payment in full for the Series D Preferred Stock being purchased by it at the Closing, and against delivery of the stock certificates therefor as aforesaid, on the Closing Date for such Closing each Purchaser listed on Schedule 1 shall deliver to the Company an amount equal to $2.50 for each share of Series D Preferred Stock being purchased by such Purchaser at such Closing.

(C) The payments in Sections 1.03(A) and (B) to the Company shall be referred to collectively as the “Purchase Price.” Payment of the Purchase Price shall be made by wire transfer in immediately available funds to the account of the Company.

§2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to the Purchasers that, except as set forth in the Disclosure Schedules attached hereto:

§2.01. Organization, Qualification and Corporate Power. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. The Company is duly licensed or qualified in each jurisdiction in which the nature of the business transacted by it requires such licensing or qualification, unless the failure to so qualify does not have a material adverse effect on the business operations or financial condition of the Company. The Company has the corporate power and authority to own and hold its properties and to carry on its business as now conducted and as proposed to be conducted, to execute, deliver and perform this Agreement, the Amended and Restated Registration Rights Agreement to be dated as of the Closing Date by and among the Company and the other parties thereto (the “Registration Rights Agreement”), the Waiver and Amendment No. 1 to the Purchase Agreement to be dated as of the Closing Date by and among the Company and the other parties thereto (the “Waiver Agreement”) and, upon the due filing of the Charter (defined below), to issue, sell and deliver the Series C Preferred Stock and the Series D Preferred Stock and to issue and deliver the shares of Common Stock, $0.01 par value per share, of the Company (“Common Stock”) issuable upon conversion of the Series C Preferred Stock and Series D Preferred Stock (the “Conversion Shares”).

§2.02. Authorization of Agreements, etc.

(a) The execution and delivery by the Company of this Agreement, the Registration Rights Agreement and the Waiver Agreement, the performance by the Company of its obligations hereunder and thereunder, the issuance, sale and delivery of the Series C Preferred Stock and Series D Preferred Stock and the issuance and delivery of the Conversion Shares have been duly authorized by all requisite corporate action and will not violate any provision of law, any order of any court or other agency of government, the Certificate of Incorporation of the Company, as amended by the

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Restated Certificate of Incorporation in the form attached hereto as Exhibit A (as so amended, the “Charter”), or the By-laws of the Company, or any provision of any indenture, agreement or other instrument to which the Company, any of its subsidiaries or any of their respective properties or assets is bound, or conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument, or result in the creation or imposition of any lien, charge, restriction, claim or encumbrance of any nature whatsoever upon any of the properties or assets of the Company or any of its subsidiaries.

(b) Upon the filing of the Charter, the Series C Preferred Stock and Series D Preferred Stock will have been duly authorized and, when issued in accordance with this Agreement, will be validly issued, fully paid and nonassessable shares of Series C Preferred Stock and Series D Preferred Stock with no personal liability attaching to the ownership thereof and will be free and clear of all liens, charges, restrictions, claims and encumbrances. Upon the filing of the Charter, the Conversion Shares will have been duly reserved for issuance upon conversion of the Series C Preferred Stock and Series D Preferred Stock and, when so issued, will be duly authorized, validly issued, fully paid and nonassessable shares of Common Stock with no personal liability attaching to the ownership thereof and will be free and clear of all liens, charges, restrictions, claims and encumbrances. Neither the issuance, sale nor delivery of the Series C Preferred Stock and the Series D Preferred Stock nor the issuance or delivery of the Conversion Shares is subject to any preemptive right of stockholders of the Company or to any right of first refusal or other right in favor of any person.

(c) Validity. This Agreement, the Registration Rights Agreement and the Waiver Agreement have been duly executed and delivered by the Company and each constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with its terms.

(d) Authorized Capital Stock. Upon the filing of the Charter the authorized capital stock of the Company shall consist of (i) 38,000,000 shares of Preferred Stock, $0.01 par value (the “Preferred Stock”), of which (a) 12,000,000 shares have been designated Series A Preferred Stock, $0.01 par value per share (the “Series A Preferred Stock”), and are issued and outstanding, (b) 8,000,000 shares have been designated Series B Preferred Stock, $0.01 par value per share (the “Series B Preferred Stock”), and are issued and outstanding, (c) 6,404,854 shares have been designated Series C Preferred Stock and will be issued and outstanding following the Closing, (d) 1,595,146 shares have been designated Series D Preferred Stock and will be issued and outstanding following the Closing and (e) 10,000,000 shares remain undesignated and (ii) 48,000,000 shares of Common Stock. 47,933 shares of Common Stock are issued or outstanding. Schedule 2.02 attached hereto sets forth the summary capitalization table of the Company. The designations, powers, preferences, rights, qualifications, limitations and restrictions in respect of each class and series of authorized capital stock of the Company are as set forth in the Charter, a copy of which is attached as Exhibit A, and all such designations, powers, preferences, rights, qualifications, limitations and restrictions, upon the filing of the Charter, will be valid, binding and enforceable and in accordance with all applicable laws. Except as set forth above or in the attached Schedule 2.02, (i) no person

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owns of record or is known to the Company to own beneficially any share of Common Stock or Preferred Stock, (ii) no subscription, warrant, option, convertible security, or other right (contingent or other) to purchase or otherwise acquire from the Company (or from any other person or entity) any equity securities of the Company is authorized or outstanding and (iii) there is no commitment by the Company to issue shares, subscriptions, warrants, options, convertible securities, or other such rights or to distribute to holders of any of its equity securities any evidence of indebtedness or asset. Except as provided for in the Charter or as set forth in the attached Schedule 2.02, the Company has no obligation (contingent or other) to purchase, redeem or otherwise acquire any of its equity securities or any interest therein or to pay any dividend or make any other distribution in respect thereof. There are no voting trusts or agreements, stockholders’ agreements, pledge agreements, buy-sell agreements, rights of first refusal, preemptive rights or proxies relating to any securities of the Company or any of its subsidiaries (whether or not the Company or any of its subsidiaries is a party thereto). All of the outstanding securities of the Company were issued in compliance with all applicable federal and state securities laws.

§2.03. Litigation, Compliance with Law. There is no (i) action, suit, claim, proceeding or investigation pending or, to the best of the Company’s knowledge, threatened against or affecting the Company, at law or in equity, or before or by any Federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, (ii) arbitration proceeding relating to the Company pending under collective bargaining agreements or otherwise, or (iii) governmental inquiry pending or, to the best of the Company’s knowledge, threatened against or affecting the Company (including without limitation any inquiry as to the qualification of the Company to hold or receive any license or permit), and, to the best of the Company’s knowledge, there is no basis for any of the foregoing. The Company is not in default with respect to any order, writ, injunction or decree known to or served upon the Company of any court or of any Federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign. There is no action or suit by the Company pending or threatened against others. To the best of the Company’s knowledge, the Company has complied in all material respects with all laws, rules, regulations and orders applicable to its business, operations, properties, assets, products and services, and the Company has all necessary permits, licenses and other authorizations required to conduct its business as conducted and as proposed to be conducted. There is no existing law, rule, regulation or order, and the Company is not aware of any proposed law, rule, regulation or order, whether Federal or state, which would prohibit or restrict the Company from, or otherwise materially adversely affect the Company in, conducting its business in any jurisdiction in which it is now conducting business or in which it proposes to conduct business.

§2.04. Title to Properties. The Company has good and marketable title to all of its properties and assets, and all such properties and assets are free and clear of mortgages, pledges, security interests, liens, charges, claims, restrictions and other encumbrances, except for liens for or current taxes not yet due and payable and minor imperfections of title, if any, not material in nature or amount and not materially detracting from the value or impairing the use of the property subject thereto or impairing the operations or proposed operations of the Company.

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§2.05. Taxes. The Company has filed all tax returns, Federal, state, county and local, required to be filed by it, and the Company has paid all taxes shown to be due by such returns as well as all other taxes, assessments and governmental charges which have become due or payable, including without limitation all taxes which the Company is obligated to withhold from amounts owing to employees, creditors and third parties. There is no tax lien, whether imposed by any Federal, state, county or local taxing authority, outstanding against the assets, properties or business of the Company.

§2.06. Other Agreements. The Company is in full compliance with all of the terms and provisions of its Charter, By-laws and any agreement, instrument, judgment, decree, order, statute, rule or government regulation applicable to the Company or to which the Company is a party, where any violation, noncompliance or default would materially and adversely affect or could materially and adversely affect the business, prospects, financial condition, operations, property or affairs of the Company or any of its subsidiaries.

§2.07. Governmental Approvals. Subject to the accuracy of the representations and warranties of CuraGen and the Purchasers set forth in Section 3, no registration or filing with, or consent or approval of or other action by, any Federal, state or other governmental agency or instrumentality is or will be necessary for the valid execution, delivery and performance by the Company of this Agreement, the Registration Rights Agreement or the Waiver Agreement, the issuance, sale and delivery of the Series C Preferred Stock and Series D Preferred Stock or, upon conversion thereof, the issuance and delivery of the Conversion Shares, other than filings pursuant to federal and state securities laws in connection with the sale of the Series C Preferred Stock and Series D Preferred Stock.

§2.08. Disclosure. The Company’s representations and warranties in this Agreement and in the Schedules and Exhibits to this Agreement, do not contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained herein or therein not misleading. None of the statements, documents, certificates or other items prepared or supplied by the Company with respect to the transactions contemplated hereby contains an untrue statement of a material fact or omits a material fact necessary to make the statements contained therein not misleading. There is no fact which the Company has not disclosed to CuraGen and the Purchasers and their counsel in writing and of which the Company is aware which materially and adversely affects or could materially and adversely affect the business, prospects, financial condition, operations, property or affairs of the Company or any of its subsidiaries.

§2.09. Offering of the Series C Preferred Stock and Series D Preferred Stock. Neither the Company nor any person authorized or employed by the Company as agent, broker, dealer or otherwise in connection with the offering or sale of the Series C Preferred Stock and Series D Preferred Stock or any security of the Company similar to the Series C Preferred Stock and Series D Preferred Stock has offered the Series C Preferred Stock or the Series D Preferred Stock or any such similar security for sale to, or solicited any offer to buy the Series C Preferred Stock or the Series D Preferred Stock or any such similar security from, or otherwise approached or negotiated with respect thereto with, any person or persons, and neither the Company nor any person acting on its behalf has taken or will take any other action (including, without limitation, any offer, issuance or sale of any security of the Company under circumstances which might

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require the integration of such security with Series C Preferred Stock or Series D Preferred Stock under the Securities Act or the rules and regulations of the Commission thereunder), in either case so as to subject the offering, issuance or sale of the Series C Preferred Stock or the Series D Preferred Stock to the registration provisions of the Securities Act.

§2.10. Brokers. The Company has no contract, arrangement or understanding with any broker, finder or similar agent with respect to the transactions contemplated by this Agreement.

§2.11. Ownership and Nondisclosure Agreement. Each employee, consultant and contractor of the Company identified on Schedule 2.11 has entered into and executed a Ownership and Nondisclosure Agreement in the form attached to this Agreement as Exhibit B or an employment or consulting agreement containing substantially similar terms.

§2.12. Status of Proprietary Assets.

(a) Ownership. To the best of its knowledge and except as set forth on Schedule 2.12(a), the Company has full title and ownership of, or has license to, all patents, patent applications, trademarks, service marks, trade names, copyrights, moral rights, mask works, trade secrets, confidential and proprietary information, compositions of matter, formulas, designs, proprietary rights, know-how and processes (all of the foregoing collectively referred to as the “Proprietary Assets”) necessary to enable it to carry on its business as now conducted and as presently proposed to be conducted, without any conflict with or infringement of the rights of others. A complete list of all the Company’s material Proprietary Assets is set forth on Schedule 2.12(b) to this Agreement. Except as set forth on Schedule 2.12(a), to the best of the Company’s knowledge, no third party has any ownership right, title, interest, claim in or lien on any of the Company’s Proprietary Assets and the Company has taken commercially reasonable steps necessary to preserve its legal rights in, and the secrecy of, all its Proprietary Assets, except those for which disclosure is required for legitimate business or legal reasons.

(b) Licenses; Other Agreements. Except as set forth on Schedule 2.12(a), the Company has not granted, and, there are not outstanding, any options, licenses or agreements of any kind relating to any Proprietary Asset of the Company, nor, except as set forth on Schedule 2.12(a), is the Company bound by or a party to any option, license or agreement of any kind with respect to any of its Proprietary Assets. Except as set forth on Schedule 2.12(a), the Company is not obligated to pay any royalties or other payments to third parties with respect to the marketing, sale, distribution, manufacture, license or use of any Proprietary Assets or any other property or rights.

(c) No Infringement. To the best of the Company’s knowledge, the Company has not violated or infringed, and is not currently violating or infringing, and the Company has not received any communications alleging that the Company (or any of its employees or consultants) has violated or infringed or, by conducting its business as proposed, would violate or infringe, any Proprietary Asset of any other person or entity.

(d) No Breach by Employee. The Company is not aware that any employee or consultant of the Company is obligated under any agreement (including licenses, covenants or commitments of any nature) or subject to any judgment, decree or order of any

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court or administrative agency, or any other restriction that would interfere with the use of his or her best efforts to carry out his or her duties for the Company or to promote the interests of the Company or that would conflict with the Company’s business as proposed to be conducted. The carrying on of the Company’s business by the employees and contractors of the Company and the conduct of the Company business as presently proposed, will not, to the best of the Company’s knowledge, conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which any of such employees or contractors or the Company is now obligated. The Company does not believe it is or will be necessary to utilize any inventions of any employees of the Company (or persons the Company currently intends to hire) made prior to their employment by the Company which have not otherwise become property of the Company. At no time during the conception of or reduction of any of the Proprietary Assets to practice was any developer, inventor or other contributor to such patents operating under any grants from any governmental entity or agency or private source, performing research sponsored by any governmental entity or agency or private source or subject to any employment agreement or invention assignment or nondisclosure agreement or other obligation with any third party that could adversely affect the Company’s rights in such Proprietary Assets.

§2.13. Financial Statements.

(a) The Company has delivered to the Purchasers (a) audited balance sheets of the Company as of December 31 in each of the years 2001 and 2002 (such 2002 balance sheet, including the notes thereto, is referred to herein as the “Balance Sheet”), and the related audited statements of income, changes in stockholders’ equity and cash flow and the notes thereto for each of the fiscal years then ended, together with the report thereon of the Company’s independent certified public accountants, and (b) an unaudited balance sheet of the Company as of June 30, 2003 (the “Interim Balance Sheet”) and the related unaudited statements of income, changes in stockholders’ equity, and cash flow for the six months then ended, which have been reviewed by the Company’s independent certified public accountants in the context of reviewing CuraGen’s quarterly report on Form 10-Q. Such financial statements and notes fairly present the financial condition and the results of operations, changes in stockholders’ equity and cash flow of the Company as of the respective dates of and for the periods referred to in such financial statements, all in accordance with GAAP, subject, in the case of interim financial statements, to normal recurring year-end adjustments (the effect of which will not, individually or in the aggregate, be materially adverse) and the absence of notes (that, if presented, would not differ materially from those included in the Balance Sheet); the financial statements referred to in this Section 2.13 reflect the consistent application of such accounting principles throughout the periods involved, except as disclosed in the notes to such financial statements. No financial statements of any person other than the Company are required by GAAP to be included in the financial statements of the Company.

(b) Except as disclosed in Schedule 2.13(b) hereto, the Company has no liabilities or obligations of any nature (whether known or unknown and whether absolute, accrued, contingent or otherwise) except for liabilities or obligations reflected or reserved against the Balance Sheet or the Interim Balance Sheet and current liabilities incurred in the ordinary course of business since the respective dates thereof.

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(c) Since the date of the Balance Sheet, there has not been any material adverse change in the business, operations, properties, prospects, assets or condition of the Company, and no event has occurred or circumstance exists that may result in such a material adverse change.

§3. REPRESENTATIONS AND WARRANTIES OF CURAGEN AND THE PURCHASERS

For the purposes of this Section 3, the term “Purchaser” shall include CuraGen. Each Purchaser severally represents and warrants to the Company that:

(a) such Purchaser is an “accredited investor” within the meaning of Rule 501 of Regulation D under the Securities;

(b) such Purchaser has sufficient knowledge and experience in investing in companies similar to the Company in terms of the Company’s stage of development so as to be able to evaluate the risks and merits of such Purchaser’s investment in the Company and such Purchaser is able financially to bear the risks thereof;

(c) such Purchaser has had an opportunity to discuss the Company’s business, management and financial affairs with the management of the Company;

(d) the securities being purchased by such Purchaser are being acquired for such Purchaser’s own account for the purpose of investment and not with a view to or for sale in connection with any distribution thereof; and

(e) such Purchaser understands that (i) the securities (the Series C Preferred Stock, the Series D Preferred Stock and the Conversion Shares) have not been registered under the Securities Act by reason of their issuance in a transaction exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof or Rule 506 promulgated under the Securities Act, (ii) the Series C Preferred Stock and Series D Preferred Stock and, upon conversion or exercise thereof, the Conversion Shares, must be held indefinitely unless a subsequent disposition thereof is registered under the Securities Act or is exempt from such registration, (iii) each of the shares of Series C Preferred Stock, the shares of Series D Preferred Stock and the Conversion Shares will bear a legend to such effect and (iv) the Company will make a notation on its transfer books to such effect.

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§4. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS

The obligation of CuraGen and each Purchaser to purchase and pay for Series C Preferred Stock or Series D Preferred Stock to be purchased by it on a Closing Date is, at CuraGen or such Purchaser’s option, subject to the satisfaction, on or before such Closing Date, of the following conditions:

§4.01. Opinion of Company’s Counsel. CuraGen and the Purchasers shall have received from Day, Berry & Howard LLP, counsel for the Company, an opinion dated the Closing Date, substantially in the form of Exhibit C attached to this Agreement.

§4.02. All Proceedings to be Satisfactory. All corporate and other proceedings to be taken by the Company in connection with the transactions contemplated hereby and all documents incident thereto shall be satisfactory in form and substance to CuraGen, the Purchasers and their respective counsel, and CuraGen, the Purchasers and their respective counsel shall have received all such counterpart originals or certified or other copies of such documents as they reasonably may request.

§4.03. Supporting Documents. CuraGen, the Purchasers and their respective counsel shall have received copies of the following documents:

(a) a certificate of the Secretary of State of the State of Delaware dated as of a recent date as to the existence and good standing of the Company;

(b) a certificate of the Chief Executive Officer of the Company, on behalf of the Company, dated the Closing Date and certifying: (i) that attached thereto is a true and complete copy of the Charter and Bylaws of the Company as in effect on the date of such certification; (ii) that attached thereto is a true and complete copy of all resolutions adopted by the Board of Directors of the Company authorizing the execution, delivery and performance of this Agreement, the Registration Rights Agreement and the Waiver Agreement, the designation, issuance, sale and delivery of the Series C Preferred Stock and the Series D Preferred Stock and the reservation, issuance and delivery of the Conversion Shares, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated by this Agreement; (iii) each of the representations and warranties as set forth in Section 2 hereof is true and correct in all material respects except for those representations or warranties that are qualified by materiality or material adverse effect, and each of the representations and warranties as set forth in Section 2 hereof that is qualified by materiality or material adverse effect is true and correct in all respects; and

(c) such additional supporting documents and other information with respect to the operations and affairs of the Company as CuraGen, the Purchasers or their respective counsel reasonably may request.

§4.04. Registration Rights Agreement. The Company and each of the other parties thereto (other than CuraGen and the Purchaser) shall have executed and delivered the Registration Rights Agreement in the form attached hereto as Exhibit D.

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§4.05. Waiver Agreement. The Company and each of the other parties thereto (other than CuraGen and the Purchaser) shall have executed and delivered the Waiver Agreement in the form attached hereto as Exhibit E.

Such document required under this Section 4 shall be satisfactory in form and substance to CuraGen, the Purchasers and their respective counsel.

§5. COVENANTS OF THE COMPANY

For the purposes of this Section 5, the term “Purchaser” shall include CuraGen. The Company covenants and agrees with each of the Purchasers that so long as such Purchaser owns any of the Series C Preferred Stock, Series D Preferred Stock or Conversion Shares, and until such time as the completion of an underwritten public offering of the Company’s securities pursuant to which the aggregate price paid by the public for the purchase of securities is at least $30,000,000 (the “Initial Public Offering”) shall have occurred:

§5.01. Financial Statements, Reports, etc. The Company shall furnish to each Purchaser:

(a) within ninety (90) days after the end of each fiscal year of the Company, a consolidated balance sheet of the Company and its subsidiaries as of the end of such fiscal year and the related consolidated statements of income, stockholders’ equity and cash flows for the fiscal year then ended, prepared in accordance with generally accepted accounting principles and audited by a firm of independent public accountants of recognized national standing selected by the Board of Directors of the Company and reasonably acceptable to the Purchasers; and

(b) within forty-five (45) days after the end of each fiscal quarter in each fiscal year (other than the last fiscal quarter in each fiscal year), a consolidated balance sheet of the Company and its subsidiaries and the related consolidated statements of income, stockholders’ equity and cash flows, unaudited but prepared in accordance with generally accepted accounting principles and certified by the Chief Financial Officer of the Company, such consolidated balance sheet to be as of the end of such fiscal quarter and such consolidated statements of income, stockholders’ equity and cash flows to be for such fiscal quarter and for the period from the beginning of the fiscal year to the end of such fiscal quarter, in each case with comparative statements for the corresponding period in the prior fiscal year.

§5.02. Corporate Existence. The Company shall maintain and cause each of its subsidiaries to maintain their respective corporate existence, rights and franchises in full force and effect.

§5.03. Properties, Business, Insurance. The Company shall maintain and cause each of its subsidiaries to maintain as to their respective properties and business, with financially sound and reputable insurers, insurance against such casualties and contingencies and of such types and in such amounts as is customary for companies similarly situated, which insurance shall be deemed by the Company to be sufficient.

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§5.04. Inspection, Consultation and Advice. The Company shall permit and cause each of its subsidiaries to permit each Purchaser and such persons as it may designate, at such Purchaser’s expense, to visit and inspect any of the properties of the Company and its subsidiaries, examine their books and take copies and extracts therefrom, discuss the affairs, finances and accounts of the Company and its subsidiaries with their officers, employees and public accountants (and the Company hereby authorizes said accountants to discuss with such Purchaser and such designees such affairs, finances and accounts), and consult with and advise the management of the Company and its subsidiaries as to their affairs, finances and accounts, all at reasonable times and upon reasonable notice.

§5.05. Keeping of Records and Books of Account. The Company shall keep, and cause each subsidiary to keep, adequate records and books of account, in which complete entries will be made in accordance with generally accepted accounting principles consistently applied, reflecting all financial transactions of the Company and such subsidiary, and in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made.

§5.06. Payment of Taxes. The Company shall pay and discharge all taxes, assessments and governmental charges or levies imposed upon it or upon its income, profits or business, or upon any properties belonging to it, prior to the date on which penalties attach thereto, and all lawful claims which, if unpaid, might become alien or charge upon any properties of the Company, provided that the Company shall not be required to pay any such tax, assessment, charge, levy or claim which is being contested in good faith and by appropriate proceedings if the Company shall have set aside on its books sufficient reserves, if any, with respect thereto, or where the failure to so pay materially and adversely affects or could materially and adversely affect the business, prospects, financial condition, operations, property or affairs of the Company or any of its subsidiaries.

§6. OBSERVER RIGHTS

§6.01. Termination of Existing Observer Rights. The group consisting of CLSP, L.P., CLSP II, L.P., CLSP-SBS I, L.P. and CLSP-SBS II, L.P. (collectively, the “Casdin Group”) hereby waive for all time any and all rights it (or any of its successors) had or have under Section 7 of that certain Purchase Agreement dated as of June 6, 2000 among the Company, CuraGen and the Purchasers (as defined therein) (the “Series B Purchase Agreement”).

§6.02. Appointment of Observer. The Casdin Group shall have the right to agree upon and designate, in a non-voting observer capacity, one representative of the Casdin Group reasonably acceptable to the Company (“Designee”) to attend and observe all meetings of the Company’s Board of Directors (the “Board”) (whether in person, telephonic or otherwise) and such Designee shall be entitled to receive notices of and to attend meetings of the Board, concurrently with the members of the Board, and in the same manner. If the Designee is unable to attend a Board meeting, the Casdin Group shall have the right to select a replacement Designee reasonably acceptable to the Company to attend in its place. The right to attend the Board meetings and receive the information described herein shall not apply to (i) the presentation of information or discussions at Board meetings involving matters which, if provided to or attended by the Designee, or its affiliates (including the Casdin Group entities or

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their affiliates), would in the reasonable opinion of counsel to the Company, jeopardize the attorney client privilege that would otherwise be afforded to such information or meeting or (ii) any particular matter in which the Designee or its affiliates (including the Casdin Group entities or their affiliates) have an interest that in the determination of a majority of the Board conflicts with the business of the Company. The Casdin Group agrees, and shall cause any Designee to agree in writing prior to attending any meeting of the Board (whether in person, telephonic or otherwise), not to (i) use (for any purpose other than monitoring its investment in the Company) or (ii) reveal to any person or entity (including any entity or employee of such entity in which the Casdin Group entities and their affiliates has an equity interest) outside of the Casdin Group any confidential information learned as a result of the rights granted by this Section 6.02 concerning the organization, business or finances of the Company or any information concerning a third party which the Company is under a duty to keep confidential.

§6.03 Termination of Observer Rights. The observer rights granted to the Casdin Group in Section 6.02 shall terminate and be of no further force or effect immediately prior to the earliest to occur of:

(a) the effective date of the registration statement relating to an Initial Public Offering; or

(b) the consummation of the sale of all, or substantially all, of the Company’s assets or capital stock, either through a direct sale, merger, reorganization, consolidation or other form of business combination or acquisition in which the Company is the target of such acquisition and/or voting control of the equity securities of the Company is transferred to a third party unaffiliated with the Company.

Furthermore, the observer rights granted to the Casdin Group in Section 6.02 shall terminate and be of no further force or effect upon the earliest to occur of:

(a) such time as the Casdin Group holds less than 50% of the Series B Preferred Stock and Series D Preferred Stock, taken as a whole, it purchased pursuant to the Series B Purchase Agreement (with respect to such Series B Preferred Stock) and this Agreement (with respect to such Series D Preferred Stock); or

(b) such time as a director, officer or employee of the Casdin Group or their affiliates becomes a member of the Board.

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§7. TAG-ALONG RIGHTS

§7.01. Right to Participate in Sale.

(a) Opportunity to Participate. If CuraGen proposes to enter into an agreement to sell or otherwise dispose of for value (such sale or other disposition for value being referred to as a “Tag-Along Sale”) more than 3,073,611 shares (as adjusted for any stock dividends, stock splits, recapitalizations, consolidations or the like) of Common Stock in a single or series of transactions, then CuraGen shall afford the holders of shares of the Series B Preferred Stock and Series D Preferred Stock the opportunity to participate proportionately in such Tag-Along Sale (the person(s) being afforded the opportunity to participate proportionately in such Tag-Along Sale being referred to as the “Tag-Along Stockholders”) in accordance with this Section 7. For purposes of this Section 7, the term “Common Stock” shall include shares of Common Stock issuable upon the conversion of securities convertible into Common Stock.

(b) Number of Shares. The number of shares of Common Stock that each Tag-Along Stockholder will be entitled to include in such Tag-Along Sale (the “Tag-Along Allotment”) shall be determined by multiplying (i) the number of shares of Common Stock held by such Tag-Along Stockholder immediately prior to the consummation of the Tag-Along Sale by (ii) a fraction, the numerator of which shall equal the number of shares of Common Stock proposed to be sold or otherwise disposed of by CuraGen pursuant to the Tag-Along Sale and the denominator of which shall equal the total number of shares of Common Stock that are beneficially owned by (A) CuraGen and (B) any other holder of shares of Common Stock that had the right to “tag-along” in the Tag-Along Sale on the day immediately prior to the consummation of the Tag-Along Sale Date.

§7.02. Sale Notice. CuraGen shall provide each Tag-Along Stockholder and the Company with written notice (the “Tag-Along Sale Notice”) not less than 14 days prior to the proposed date of the Tag-Along Sale (the “Tag-Along Sale Date”). Each Tag-Along Sale Notice shall be accompanied by a copy of any agreement relating to the Tag-Along Sale (if available) and shall set forth: (a) the name and address of each proposed purchaser of shares of Common Stock in the Tag-Along Sale; (b) the number of shares of Common Stock proposed to be sold; (c) the proposed amount and form of consideration to be paid for such shares of Common Stock and the terms and conditions of payment offered by each proposed purchaser; (d) the aggregate number of shares of Common Stock held of record by CuraGen as of the close of business on the day immediately preceding the date of the Tag-Along Notice (the “Tag-Along Notice Date”); (e) the Tag-Along Stockholder’s Tag-Along Allotment assuming the Tag-Along Stockholder elected to sell the maximum number of shares of Common Stock possible; and (f) the Tag-Along Sale Date.

§7.03. Tag-Along Notice. Any Tag-Along Stockholder wishing to participate in the Tag-Along Sale shall provide written notice (the “Tag-Along Notice”) to the party proposing the Tag-Along Sale no less than 7 days prior to the Tag-Along Sale Date. The Tag-Along Notice shall set forth the number of shares of Common Stock that such Tag-Along Stockholder elects to include in the Tag-Along Sale, which shall not exceed such Tag-Along Stockholder’s Tag-Along Allotment. The Tag-Along Notice given by any Tag-Along Stockholder shall constitute such

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Tag-Along Stockholder’s binding agreement to sell the shares of Common Stock specified in the Tag-Along Notice on the terms and conditions applicable to the Tag-Along Sale; provided, however, that in the event that there is any material change in the material terms and conditions of such Tag-Along Sale applicable to the Tag-Along Stockholder (including, but not limited to, any decrease in the purchase price that occurs other than pursuant to an adjustment mechanism set forth in the agreement relating to the Tag-Along Sale) after such Tag-Along Stockholder gives its Tag-Along Notice, then, notwithstanding anything herein to the contrary, the Tag-Along Stockholder shall have the right to withdraw from participation in the Tag-Along Sale with respect to all of its shares of Common Stock affected thereby. If the proposed purchaser does not consummate the purchase of all of the shares of Common Stock requested to be included in the Tag-Along Sale by any Tag-Along Stockholder on the same terms and conditions applicable to CuraGen, then CuraGen shall not consummate the Tag-Along Sale of any of its shares of Common Stock to such purchaser, unless the shares of CuraGen and the Tag-Along Stockholders are reduced or limited pro rata in proportion to the respective number of shares of Common Stock actually sold in any such Tag-Along Sale and all other terms and conditions of the Tag-Along Sale are the same for CuraGen and the Tag-Along Stockholders, subject to the provisions set forth in §7.01.

If a Tag-Along Notice from any Tag-Along Stockholder is not received by the party proposing the Tag-Along Sale prior to the 7 day period specified above, then CuraGen shall have the right to consummate the Tag-Along Sale without the participation of such Tag-Along Stockholder, but only on terms and conditions which are no more favorable in any material respect to CuraGen (and in any event, at no greater a purchase price) than as stated in the Tag-Along Sale Notice and only if such Tag-Along Sale occurs on a date within 90 days of the Tag-Along Sale Date. If such Tag-Along Sale does not occur within such 90 day period, the shares of Common Stock that were to be subject to such Tag-Along Sale thereafter shall continue to be subject to all of the restrictions contained in this Agreement.

§7.04. Delivery of Certificates. On the Tag-Along Sale Date, each Tag-Along Stockholder shall deliver a certificate or certificates for the shares of Common Stock to be sold in connection with the Tag-Along Sale, duly endorsed for transfer with signatures guaranteed, to the purchaser in the manner and at the address indicated in the Tag-Along Notice against delivery of immediately available funds in the amount of the purchase price for such shares of Common Stock.

§7.05 Limitation on CuraGen Acquiring Capital Stock of the Company. CuraGen will not acquire in the aggregate more than [16.7% of CuraGen’s holdings] shares of Common Stock or any securities convertible into (except for shares of Common Stock issuable upon conversion of the Series A Preferred Stock and Series B Preferred Stock outstanding on the date hereof and the Series C Preferred Stock or Series D Preferred Stock to issued pursuant to the terms of this Agreement), or options, warrants, or rights to purchase, such shares of Common Stock (as adjusted for any stock dividends, stock splits, recapitalizations, consolidations or the like).

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§7.06. Termination of Rights. The rights contained in this Section 7 shall terminate and be of no further force or effect immediately prior to the earliest to occur of:

(a) the effective date of the registration statement relating to an Initial Public Offering; or

(b) the consummation of the sale of all, or substantially all, of the Company’s assets or capital stock, either through a direct sale, merger, reorganization, consolidation or other form of business combination or acquisition in which the Company is the target of such acquisition and/or voting control of the equity securities of the Company is transferred to a third party unaffiliated with the Company.

§7.07. Waiver of Other Rights. Each of the Purchasers hereby waives for all time any and all rights it (or any of its successors) had or have under Section 8 (other than Section 8.05) of the Series B Purchase Agreement.

§8. MISCELLANEOUS

§8.01. Expenses. Each party hereto will pay its own expenses in connection with the transactions contemplated hereby, whether or not such transactions shall be consummated. Notwithstanding the foregoing, the Company will pay the costs and expenses incurred by CuraGen in connection with the transactions contemplated hereby.

§8.02. Survival of Agreements. Regardless of any investigation made at any time by or on behalf of CuraGen or the Purchasers, all covenants, agreements, representations and warranties made herein or in an agreement, certificate or instrument delivered to CuraGen and the Purchasers pursuant to or in connection with this Agreement, the Registration Rights Agreement or the Waiver Agreement, shall survive the execution and delivery of this Agreement, the Registration Rights Agreement and the Waiver Agreement, the issuance, sale and delivery of the Series C Preferred Stock and Series D Preferred Stock, and the issuance and delivery of the Conversion Shares for an indefinite period of time (except for the representations and warranties contained in Sections 2.03, 2.04, 2.06, 2.07, 2.08, 2.09, 2.10, 2.11, 2.12 and 2.13 hereof, which shall survive until the close of business on the date that is twenty-four (24) months from the date hereof, and the representations and warranties contained in Section 2.05, which shall survive until the termination of the applicable statute of limitations), and all statements contained in any certificate or other instrument delivered by the Company hereunder or thereunder or in connection herewith or therewith shall be deemed to constitute representations and warranties made by the Company.

§8.03. Brokerage. Each party hereto will indemnify and hold harmless the others against and in respect of any claim for brokerage, finder’s fees or other commissions relative to this Agreement or to the transactions contemplated hereby, based in any way on agreements, arrangements or understandings made or claimed to have been made by such party with any third party.

§8.04. Parties in Interest. All representations, covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. Without limiting the generality of the foregoing, all representations, covenants and agreements benefiting

15

CuraGen and the Purchasers shall inure to the benefit of any and all subsequent holders from time to time of the Series C Preferred Stock, Series D Preferred Stock or Conversion Shares.

§8.05. Notices. All notices, requests, consents and other communications hereunder shall be in writing and shall be delivered in person or mailed by certified or registered mail, return receipt requested, or telexed or delivered by a recognized overnight carrier, addressed as follows:

(a) if to the Company, at

20 Commercial Street

Branford, CT 06405

(b) if to CuraGen, at

555 Long Wharf Drive, 11^th Floor

New Haven, Connecticut 06511

(c) if to any Purchaser, at the address of such Purchaser set forth in Schedule 1;

or, in any such case, at such other address or addresses as shall have been furnished in writing by such party to the others.

§8.06. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware.

§8.07. Entire Agreement. This Agreement, including the Schedules and Exhibits hereto, constitutes the sole and entire agreement of the parties with respect to the subject matter hereof. All Schedules and Exhibits hereto are hereby incorporated herein by reference.

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

§8.09. Amendments and Waivers. This Agreement may be amended or modified, and provisions hereof may be waived, with the written consent of the Company, CuraGen and the holders of at least two-thirds (2/3) of the outstanding Series D Preferred Stock, except for any amendment, modification or waiver which adversely affects the rights of the holders of the Series D Preferred Stock, in which case written consent of 100% of the holders of the outstanding Series D Preferred Stock shall be required.

§8.10. Severability. If any provision of this Agreement shall be declared void or unenforceable by any judicial or administrative authority, the validity of any other provision and of the entire Agreement shall not be affected thereby.

16

§8.11. Titles and Subtitles. The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting any term or provision of this Agreement.

§8.12. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

(a) “person” shall mean an individual, corporation, trust, partnership, joint venture, unincorporated organization, government agency or any agency or political subdivision thereof, or other entity.

(b) “subsidiary” shall mean, as to the Company, any corporation, limited liability company or other entity of which more than 50% of the outstanding stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether or not at the time stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned by the Company, or by one or more of its subsidiaries, or by the Company and one or more of its subsidiaries.

17

IN WITNESS WHEREOF, the Company, CuraGen and the Purchasers have executed this Agreement as of the day and year first above written.

454 Corporation
By:	/s/    Richard F. Begley, Ph.D.
	Name:	Richard F. Begley, Ph.D.
	Title:	Chief Executive Officer and President

CuraGen Corporation
By:	/s/    Jonathan M. Rothberg
	Name:	Jonathan M. Rothberg
	Title:	Chief Executive Officer and President

PURCHASERS:

/s/    Michael J. Rothberg

Michael J. Rothberg

/s/    Jonathan M. Rothberg

Jonathan M. Rothberg

/s/    Gianpiero Molinari

Gianpiero Molinari

/s/    Henry B. Rothberg

Henry B. Rothberg

/s/    David A. Rothberg

David A. Rothberg

/s/    Celia R. Meadow

Celia R. Meadow

/s/    Deborah J. Rothberg

Deborah J. Rothberg

/s/    Judith Rothberg

Judith Rothberg

/s/    Bonnie E. Rothberg

Bonnie E. Rothberg

/s/    Gioel Molinari

Gioel Molinari

/s/    Jason Molinari

Jason Molinari

/s/    Micol Molinari

Micol Molinari

/s/    Henry B. Rothberg

Henry B. Rothberg, as Custodian for Alex Rothberg under the Connecticut Uniform Transfers to Minors Act

/s/    Henry B. Rothberg

Henry B. Rothberg, as Custodian for Rebecca Rothberg under the Connecticut Uniform Transfers to Minors Act

/s/    Henry B. Rothberg

Henry B. Rothberg, as Custodian for Samantha Rothberg under the Connecticut Uniform Transfers to Minors Act

/s/    David A. Rothberg

David A. Rothberg, as Custodian for Daniel B. Rothberg under the Connecticut Uniform Transfers to Minors Act

/s/    David A. Rothberg

David A. Rothberg, as Custodian for Jason B. Rothberg under the Connecticut Uniform Transfers to Minors Act

/s/    Deborah J. Rothberg

Deborah J. Rothberg, as Custodian for Analise Rothberg under the Connecticut Uniform Transfers to Minors Act

/s/    Celia R. Meadow

Celia R. Meadow, as Custodian for Simone Meadow under the Connecticut Uniform Transfers to Minors Act

/s/    Celia R. Meadow

Celia R. Meadow, as Custodian for Averill Meadow under the Connecticut Uniform Transfers to Minors Act

/s/    Celia R. Meadow

Celia R. Meadow, as Custodian for Herschel Meadow under the Connecticut Uniform Transfers to Minors Act

/s/    Jonathan M. Rothberg

Jonathan M. Rothberg, as Custodian for Jordana Rothberg under the Connecticut Uniform Transfers to Minors Act

/s/    Jonathan M. Rothberg

Jonathan M. Rothberg, as Custodian for Noah Rothberg under the Connecticut Uniform Transfers to Minors Act

/s/    Jonathan M. Rothberg

Jonathan M. Rothberg, as Custodian for Elana Rothberg under the Connecticut Uniform Transfers to Minors Act

/s/    Michael J. Rothberg

Michael J. Rothberg, as Custodian for Andrew Rothberg under the Florida Uniform Transfers to Minors Act

/s/    Michael J. Rothberg

Michael J. Rothberg, as Custodian for Justin Rothberg under the Florida Uniform Transfers to Minors Act

/s/    Robert E. Patricelli

Robert E. Patricelli

Henry M. Rothberg, Lillian R. Rothberg, and Michael J. Rothberg, as Trustees of the Henry M. Rothberg Family Trust u/i/d 12/4/00
BY TRUSTEES:
	/s/    Henry M. Rothberg
	Henry M. Rothberg, Trustee
	/s/    Lillian R. Rothberg
	Lillian R. Rothberg, Trustee
	/s/    Michael J. Rothberg
	Michael J. Rothberg, Trustee

Lillian R. Rothberg, Henry M. Rothberg, and Michael J. Rothberg, as Trustees of the Lillian R. Rothberg Family Trust u/i/d 12/4/00
BY TRUSTEES:
	/s/    Lillian R. Rothberg
	Lillian R. Rothberg, Trustee
	/s/    Henry M. Rothberg
	Henry M. Rothberg, Trustee
	/s/    Michael J. Rothberg
	Michael J. Rothberg, Trustee

Jonathan M. Rothberg Family Limited Partnership
	/s/    Jonathan M. Rothberg
	By:	Jonathan M. Rothberg
	Its:	Its General Partner

MFIC LLC
By:	/s/    Chris McLeod
Name:	Chris McLeod
Title:	Manager

Mintz Levin Investments LLC

By:

Name:

Title:

Quantum Industrial Partners LDC
By:	*
Name:
Title:

* Not a purchaser

Quantum Partners LDC
By:	*
Name:
Title:

CLSP, L.P.
By:	Cooper Hill Partners, LLC its General Partner
By:	/s/    Jeffrey W. Casdin
Name:	Jeffrey W. Casdin
Title:	CEO

CLSP-SBS I, L.P.
By:	Cooper Hill Partners, LLC its General Partner
By:	/s/    Jeffrey W. Casdin
Name:	Jeffrey W. Casdin
Title:	CEO

CLSP-SBS II, L.P.
By:	Cooper Hill Partners, LLC its General Partner
By:	/s/    Jeffrey W. Casdin
Name:	Jeffrey W. Casdin
Title:	CEO

CLSP II, L.P.
By:	Cooper Hill Partners, LLC its General Partner
By:	/s/    Jeffrey W. Casdin
Name:	Jeffrey W. Casdin
Title:	CEO

* Not a purchaser

EXECUTION COPY

WAIVER AND

AMENDMENT NO. 1 TO PURCHASE AGREEMENT

WAIVER AND AMENDMENT NO. 1 TO PURCHASE AGREEMENT (“Waiver and Amendment No. 1”) dated as of September 18, 2003, among 454 Corporation, a Delaware corporation (the “Company”), CuraGen Corporation, a Delaware corporation (“CuraGen”), and the several purchasers named in the attached Schedule 1 (individually, a “Purchaser” and collectively the “Purchasers”).

WHEREAS, the Company, CuraGen and certain purchasers entered into a Purchase Agreement (the “Purchase Agreement”) dated as of June 5, 2000 in connection with the issuance by the Company of Units (as defined in the Purchase Agreement); and

WHEREAS, in order to facilitate the proposed issuance by the Company of shares of Series C Preferred Stock and Series D Preferred Stock, pursuant to a purchase agreement dated the date hereof among the Company, CuraGen and certain purchasers (the “Proposed Financing”), the Company and the other parties hereto desire to waive and modify Section 8.05 of the Purchase Agreement in accordance with the provisions of the Purchase Agreement.

NOW, THEREFORE, IT IS AGREED:

Section 1. Waiver of Section 8.05 of the Purchase Agreement. The undersigned hereby waive the application of the restrictions set forth in Section 8.05 of the Purchase Agreement to the Proposed Financing.

Section 2. Amendment of Section 8.01(a) of the Purchase Agreement. Section 8.01(a) of the Purchase Agreement is hereby deleted in its entirety and replaced with the following:

(a) Opportunity to Participate. If CuraGen proposes to enter into an agreement to sell or otherwise dispose of for value (such sale or other disposition for value being referred to as a “Tag-Along Sale”) more than 3,073,611 shares (as adjusted for any stock dividends, stock splits, recapitalizations, consolidations or the like) of Common Stock in a single or series of transactions, then CuraGen shall afford the holders of shares of the Series B Preferred Stock the opportunity to participate proportionately in such Tag-Along Sale (the person(s) being afforded the opportunity to participate proportionately in such Tag-Along Sale being referred to as the “Tag-Along Stockholders”) in accordance with this Section 8. For purposes of this Section 8, the term “Common Stock” shall include shares of Common Stock issuable upon the conversion of securities convertible into Common Stock.

Section 3. Amendment of Section 8.05 of the Purchase Agreement. Section 8.05 of the Purchase Agreement is hereby deleted in its entirety and replaced with the following:

§8.05 Limitation on CuraGen Acquiring Capital Stock of the Company. CuraGen will not acquire in the aggregate more than 3,073,611 shares of Common Stock or any securities convertible into (except for shares of Common Stock issuable upon conversion of the Series A Preferred Stock and the Series B Preferred Stock outstanding on the date hereof and any Series C Preferred Stock of the Company or any Series D Preferred Stock of the Company to be issued pursuant to a purchase agreement dated September 18, 2003 among the Company, CuraGena and certain purchasers), or options, warrants, or rights to purchase, such shares of Common Stock (as adjusted for any stock dividends, stock splits, recapitalizations, consolidations or the like).

Section 4. Further Assurances. Each party hereby agrees, at any time and from time to time after the date hereof, at the reasonable request of the other parties, to execute and deliver such other agreements, certificates or instruments as may be reasonably requested in order to more effectively amend the Purchase Agreement as set forth above or to confirm this Waiver and Amendment No. 1.

Section 5. Effect of Waiver and Amendment. The parties hereby ratify and confirm all of the provisions of the Purchase Agreement, as modified hereby, and agree and acknowledge that the same as so amended remains in full force and effect.

Section 6. Governing Law. This Waiver and Amendment No. 1 shall be governed by and construed in accordance with the laws of the State of Delaware.

Section 7. Counterparts. This Waiver and Amendment No. 1 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.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the Company, CuraGen and the Purchasers have executed this Waiver and Amendment No. 1 as of the day and year first above written.

454 Corporation
By:	/s/    Richard F. Begley, Ph.D.
	Name:	Richard F. Begley, Ph.D.
	Title:	Chief Executive Officer and President

CuraGen Corporation
By:	/s/    Jonathan M. Rothberg
	Name:	Jonathan M. Rothberg
	Title:	Chief Executive Officer and President

PURCHASERS:

/s/    Michael J. Rothberg

Michael J. Rothberg

/s/    Jonathan M. Rothberg

Jonathan M. Rothberg

/s/    Gianpiero Molinari

Gianpiero Molinari

/s/    Henry B. Rothberg

Henry B. Rothberg

/s/    David A. Rothberg

David A. Rothberg

/s/    Celia R. Meadow

Celia R. Meadow

/s/    Deborah J. Rothberg

Deborah J. Rothberg

/s/    Judith Rothberg

Judith Rothberg

/s/    Bonnie E. Rothberg

Bonnie E. Rothberg

/s/    Gioel Molinari

Gioel Molinari

/s/    Jason Molinari

Jason Molinari

/s/    Micol Molinari

Micol Molinari

/s/    Henry B. Rothberg

Henry B. Rothberg, as Custodian for Alex Rothberg under the Connecticut Uniform Transfers to Minors Act

/s/    Henry B. Rothberg

Henry B. Rothberg, as Custodian for Rebecca Rothberg under the Connecticut Uniform Transfers to Minors Act

/s/    Henry B. Rothberg

Henry B. Rothberg, as Custodian for Samantha Rothberg under the Connecticut Uniform Transfers to Minors Act

/s/    David A. Rothberg

David A. Rothberg, as Custodian for Daniel B. Rothberg under the Connecticut Uniform Transfers to Minors Act

/s/    David A. Rothberg

David A. Rothberg, as Custodian for Jason B. Rothberg under the Connecticut Uniform Transfers to Minors Act

/s/    Deborah J. Rothberg

Deborah J. Rothberg, as Custodian for Analise Rothberg under the Connecticut Uniform Transfers to Minors Act

/s/    Celia R. Meadow

Celia R. Meadow, as Custodian for Simone Meadow under the Connecticut Uniform Transfers to Minors Act

/s/    Celia R. Meadow

Celia R. Meadow, as Custodian for Averill Meadow under the Connecticut Uniform Transfers to Minors Act

/s/    Celia R. Meadow

Celia R. Meadow, as Custodian for Herschel Meadow under the Connecticut Uniform Transfers to Minors Act

/s/    Jonathan M. Rothberg

Jonathan M. Rothberg, as Custodian for Jordana Rothberg under the Connecticut Uniform Transfers to Minors Act

/s/    Jonathan M. Rothberg

Jonathan M. Rothberg, as Custodian for Noah Rothberg under the Connecticut Uniform Transfers to Minors Act

/s/    Jonathan M. Rothberg

Jonathan M. Rothberg, as Custodian for Elana Rothberg under the Connecticut Uniform Transfers to Minors Act

/s/    Michael J. Rothberg

Michael J. Rothberg, as Custodian for Andrew Rothberg under the Florida Uniform Transfers to Minors Act

/s/    Thomas R. Patricelli

Thomas R. Patricelli

/s/    Alison J. Patricelli

Alison J. Patricelli

Henry M. Rothberg, Lillian R. Rothberg, and Michael J. Rothberg, as Trustees of the Henry M. Rothberg Family Trust u/i/d 12/4/00
BY TRUSTEES:
	/s/    Henry M. Rothberg
	Henry M. Rothberg, Trustee
	/s/    Lillian R. Rothberg
	Lillian R. Rothberg, Trustee
	/s/    Michael J. Rothberg
	Michael J. Rothberg, Trustee

Lillian R. Rothberg, Henry M. Rothberg, and Michael J. Rothberg, as Trustees of the Lillian R. Rothberg Family Trust u/i/d 12/4/00
BY TRUSTEES:
	/s/    Lillian R. Rothberg
	Lillian R. Rothberg, Trustee
	/s/    Henry M. Rothberg
	Henry M. Rothberg, Trustee
	/s/    Michael J. Rothberg
	Michael J. Rothberg, Trustee

Jonathan M. Rothberg Family Limited Partnership
	/s/    Jonathan M. Rothberg
	By:	Jonathan M. Rothberg
	Its:	Its General Partner

MFIC LLC
By:	/s/    Chris Mcleod
Name:	Chris Mcleod
Title:	Manager

Mintz Levin Investments LLC

By:

Name:

Title:

Quantum Industrial Partners LDC
By:	*
Name:
Title:

Quantum Partners LDC
By:	*
Name:
Title:

CLSP, L.P.
By:	Cooper Hill Partners, LLC its General Partner
By:	/s/    Jeffrey W. Casdin
Name:	Jeffrey W. Casdin
Title:	CEO

CLSP-SBS I, L.P.
By:	Cooper Hill Partners, LLC its General Partner
By:	/s/    Jeffrey W. Casdin
Name:	Jeffrey W. Casdin
Title:	CEO

CLSP-SBS II, L.P.
By:	Cooper Hill Partners, LLC its General Partner
By:	/s/    Jeffrey W. Casdin
Name:	Jeffrey W. Casdin
Title:	CEO

CLSP II, L.P.
By:	Cooper Hill Partners, LLC its General Partner
By:	/s/    Jeffrey W. Casdin
Name:	Jeffrey W. Casdin
Title:	CEO

EX-10.27

EXHIBIT 10.27

AMENDED AND RESTATED TECHNOLOGY TRANSFER AND LICENSE

AGREEMENT

by and between

CURAGEN CORPORATION

and

454 CORPORATION

June 24, 2003

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

TABLE OF CONTENTS

		Page
ARTICLE 1. DEFINITIONS		1
1.1	AFFILIATE	1
1.2	BETA SITE AGREEMENT	2
1.3	CONFIDENTIAL INFORMATION	2
1.4	“CONTROL” OR “CONTROLLED”	2
1.5	CORE KNOW-HOW	2
1.6	CORE PATENT RIGHTS	2
1.7	CORE TECHNOLOGY	2
1.8	CURAGEN FIELD	2
1.9	CURAGEN PROCESS IMPROVEMENT	3
1.10	CURAGEN PROPRIETARY SOFTWARE	3
1.11	“CURAGEN THIRD PARTY PROCESS IMPROVEMENT”	3
1.12	“EFFECTIVE DATE”	3
1.13	FIRST COMMERCIAL SALE	3
1.14	454 FIELD	3
1.15	454 PROCESS IMPROVEMENTS	3
1.16	“454 THIRD PARTY PROCESS IMPROVEMENT”	3
1.17	“INSTRUMENT”	3
1.18	“NET SALES”	3
1.19	“NON-COMPETITION PERIOD”	4
1.20	“OTHER FIELDS”	4
1.21	“REAGENTS”	4
1.22	“ROYALTY-BEARING SERVICES”	4
1.23	“SEQUENCING SERVICES”	4
1.24	“SOFTWARE”	4
1.25	SOFTWARE LICENSE AGREEMENT	4
1.26	“TECHNOLOGY”	5
1.27	“THIRD PARTY”	5
ARTICLE 2. TECHNOLOGY TRANSFER		5
2.1.	GRANT OF RIGHTS TO 454
2.1.1	Scope of Technology License	5
2.1.2	Retained Rights of CuraGen	5
2.1.3	Royalties	5
2.1.4	CuraGen Process Improvements	6
2.1.5	CuraGen Third Party Process Improvements	6
2.1.6	Grant of Software License to 454	6
2.1.7	Non-Competition in CuraGen Field	6
2.1.8	Consideration for the Grant of Rights	7
2.2.	GRANT OF RIGHTS TO CURAGEN	7
2.2.1.	Grant of Technology License	7
2.2.2.	Grant of Beta Test License	8
2.2.3.	Supply of Instruments and Reagents	8
2.3.	RIGHTS IN OTHER FIELDS	9
2.3.1.	Rights in Other Fields	9
2.3.2.	Right of First Negotiation	9
2.4.	CORPORATE OPPORTUNITY	9
2.5	ROYALTIES ON SALES OF ROYALTY-BEARING SERVICES	10
2.5.1	Royalties; Accounting	10
2.5.2	Third Party Royalty Offset	10

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

i

2.5.3	Royalty Term	10
2.5.4	Payment Terms	10
2.5.5	Overdue Royalties	11
2.5.6	Records Retention; Review	12
2.6	EARLY ACCESS TO ROYALTY-BEARING SERVICES	12
2.7	APPROVAL OF CERTAIN CONTRACTS	12
2.8	SALES TO HUMAN HEALTH CARE COMPANIES	13
2.9	SEQUENCING SERVICES FOR CURAGEN	13
ARTICLE 3. LIMITATION OF LIABILITY		13
3.1.	CURAGEN LIMITATION OF LIABILITY AND RIGHT TO INDEMNIFICATION	13
3.2.	454 LIMITATION OF LIABILITY AND RIGHT TO INDEMNIFICATION	13
3.3.	INDEMNIFICATION PROCEDURES	14
ARTICLE 4. TREATMENT OF CONFIDENTIAL INFORMATION		14
4.1.	CONFIDENTIAL INFORMATION	14
4.2.	REPRESENTATION	14
4.3.	PROPRIETARY MATERIALS	15
4.4.	PUBLICITY	15
ARTICLE 5. REPRESENTATIONS AND WARRANTIES		15
5.1.	REPRESENTATIONS, WARRANTIES AND COVENANTS OF CURAGEN	15
5.2.	REPRESENTATIONS, WARRANTIES AND COVENANTS OF 454	16
ARTICLE 6. PATENT PROSECUTION AND INFRINGEMENT		16
6.1.	RIGHTS IN THE CORE TECHNOLOGY	16
6.2.	PATENT COORDINATORS	17
6.3.	NOTIFICATION OF INFRINGEMENT OR BREACH	17
6.4.	ENFORCEMENT OF RIGHTS IN THE CORE TECHNOLOGY	17
6.5.	RIGHTS IN IMPROVEMENT	18
6.6.	LIMITATION ON WARRANTIES	18
6.7.	LIMITATION ON DAMAGES	18
ARTICLE 7. TERM		18
7.1.	TERM	18
7.2.	TERMINATION	18
7.2.1.	Right to Terminate	18
7.2.2.	Bankruptcy	18
7.2.3.	Surviving Provisions	19
ARTICLE 8. MISCELLANEOUS		19
8.1.	NOTICES	19
8.2.	ENTIRE AGREEMENT	19
8.3.	NO IMPLIED WAIVERS: RIGHTS CUMULATIVE	20
8.4.	AMENDMENTS	20
8.5.	SUCCESSORS AND ASSIGNS	20
8.6.	GOVERNING LAW	20
8.7.	FORCE MAJEURE	20
8.8.	FURTHER ASSURANCES	20
8.9.	SEVERABILITY	20
8.10.	HEADINGS	21
8.11.	INTERPRETATION	21
8.12.	EXECUTION IN COUNTERPARTS	21
8.13.	TERMINATION OF ORIGINAL AGREEMENT	21

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

ii

SCHEDULE A - CORE PATENT RIGHTS	23
SCHEDULE B - THIRD PARTY ROYALTIES	24
SCHEDULE C - TERMS OF SUPPLY OF INSTRUMENTS, REAGENTS AND SOFTWARE	25
SCHEDULE D - PROMOTION OF SEQUENCING SERVICES	26
EXHIBIT A - FORM OF SOFTWARE LICENSE AGREEMENT	27
EXHIBIT B - FORM OF BETA SITE AGREEMENT	28

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

iii

AMENDED AND RESTATED

TECHNOLOGY TRANSFER AND LICENSE AGREEMENT

THIS AMENDED AND RESTATED TECHNOLOGY TRANSFER AND LICENSE AGREEMENT (this “Agreement”) is dated as of June 24, 2003 (the “Restated Effective Date”) and is made by and between CuraGen Corporation, a Delaware corporation (“CuraGen”), and 454 Corporation, a Delaware corporation (“454”).

RECITALS

WHEREAS, 454 was formed to develop and exploit certain technology, methods and software developed at CuraGen for DNA-based analysis; and

WHEREAS, pursuant to the terms of the Technology Transfer and License Agreement dated as of June 6, 2000 by and between CuraGen and 454 (the “Original Agreement”), CuraGen exclusively licensed to 454 certain technology related to DNA-based analysis and certain improvements to such technology made and/or obtained by CuraGen for 454 to design, produce and sell equipment, instrumentation and reagents for DNA-based analysis in the 454 Field (as defined below) and 454 granted to CuraGen certain preferential access to such instrumentation, reagents and technology and certain improvements to such technology made by 454 for CuraGen to use in the CuraGen Field (as defined below); and

WHEREAS, the parties hereto wish to amend the Original Agreement to, inter alia, expand the permissible activities contemplated by the 454 Field, and to provide for the payment of a royalty by 454 to CuraGen in connection with 454’s providing of certain Sequencing Services (as defined below) and;

WHEREAS, the parties wish to set forth in a single document the terms and conditions of the Original Agreement, as so amended.

NOW, THEREFORE, in consideration of the mutual covenants set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, CuraGen and 454 agree as follows:

ARTICLE 1. DEFINITIONS

All capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth below.

1.1 “Affiliate” means any corporation, firm, limited liability company, partnership or other entity which directly or indirectly controls or is controlled by or is under common control with a party. For purposes of this Section 1.1 of this Agreement, “control” means ownership, directly or through one or more Affiliates, of more than fifty percent (50%) of the shares of stock entitled to vote for the election of directors, in the case of a corporation, or more than fifty percent (50%) of the equity interests in the case of any other type of legal entity, status as a

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

general partner in any partnership, or any other arrangement whereby a party controls or has the right to control the Board of Directors or equivalent governing body of a corporation or other entity.

1.2 “Beta Site Agreement” has the meaning set forth in Section 2.2.2.

1.3 “Confidential Information” means the Core Technology and the prosecution files pertaining to the Core Patent Rights (both of which shall be deemed to be Confidential Information of 454), all proprietary information of 454, including 454’s business plans, mission, vision, specific technology, employees, advisors and consultants, all information concerning the terms of this Agreement and any other information which is disclosed by one party (the “disclosing party”) to the other party (the “receiving party”) pursuant to this Agreement. Notwithstanding the foregoing, Confidential Information shall not include information which: (a) is available to the public at the time of disclosure or becomes publicly known through no breach by the receiving party of the undertakings hereunder; (b) is disclosed, without restriction on further disclosure or use to the receiving party by a Third Party having a lawful right to make such disclosure; (c) the receiving party can establish by reasonable proof was in its possession at the time of disclosure or was subsequently and independently developed by employees of the receiving party who had no knowledge of the information disclosed; (d) is reasonably necessary to file or prosecute patent applications, to apply for regulatory approval to test or market products or services, or to prosecute or defend litigation so long as the receiving party uses reasonable efforts to secure confidential treatment when available; or (e) is approved for release by written authorization of the disclosing party. Notwithstanding the foregoing, the exception set forth in clause (c) above shall not apply to the Core Technology or the prosecution files pertaining to the Core Patent Rights.

1.4 “Control” or “Controlled” means with respect to any Technology, the possession by a party of the ability to grant a license or sublicense of such Technology as provided herein without violating the terms of any agreement or arrangement between such party and any Third Party.

1.5 “Core Know-How” means Technology Controlled by CuraGen as of the Effective Date relating to the use of any invention claimed in the Core Patent Rights.

1.6 “Core Patent Rights” means the provisional patent applications owned in whole or in part by CuraGen on the Effective Date that are listed on Schedule A attached hereto; any patent claims filed by CuraGen claiming inventions included in such provisional patent applications; patents issuing from such patent claims; and all divisionals, continuations, continuations-in-part (but solely to the extent directed to claims included in such provisional patent applications), divisions and renewals, all letters patent granted thereon, and all reissues, reexaminations and extensions thereof.

1.7 “Core Technology” means the Core Know-How and Core Patent Rights.

1.8 “CuraGen Field” means [****************************************************************************]

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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1.9 “CuraGen Process Improvement” means any Technology conceived or reduced to practice by CuraGen during the term of this Agreement which is covered by a claim of the Core Patent Rights.

1.10 “CuraGen Proprietary Software” has the meaning set forth in the Software License Agreement.

1.11 “CuraGen Third Party Process Improvement” means any Technology (a) that is conceived or developed by any Third Party, (b) for which rights become Controlled by CuraGen at any time during the term of this Agreement and (c) that would constitute a CuraGen Process Improvement if it had been conceived or reduced to practice by CuraGen during such time period.

1.12 “Effective Date” means June 6, 2000, the Effective Date of the Original Agreement.

1.13 “First Commercial Sale” means the date of the first commercial sale (other than for purposes of obtaining regulatory approval or for purposes of conducting preliminary testing) of any Royalty-Bearing Service by or on behalf of 454 to a Third Party in an arms-length transaction.

1.14 “454 Field” means (a) [**************************************************************************

*******************************] and (b) [*************************].

1.15 “454 Process Improvement” means any Technology conceived or reduced to practice by 454 during the term of this Agreement which is covered by a claim of the Core Patent Rights.

1.16 “454 Third Party Process Improvement” means any Technology (a) that is conceived or developed by any Third Party, (b) for which rights become Controlled by 454 at any time during the term of this Agreement period and (c) that would be a 454 Process Improvement if it had been conceived or reduced to practice by 454 during such time period.

1.17 “Instrument” means any device, equipment or instrument covered by a claim under the Core Patent Rights which is used to conduct DNA sequencing and/or analyze the results of such DNA sequencing, including, without limitation, the correlation of gene sequence expression and variation with disease, drug response or prognosis.

1.18 “Net Sales” means as to each calendar quarter during the Term, the gross invoiced sales prices charged by or on behalf of 454 or its Affiliates or sublicensees on all sales of Royalty-Bearing Services to a Third Party, less the following amounts:

(a) trade, quantity and cash discounts actually allowed;

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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(b) discounts, refunds, rebates, chargebacks, retroactive price adjustments, billing errors and any other allowances (including, without limitation, government-mandated and managed health care-negotiated rebates) actually granted which effectively reduce the net selling price;

(c) product returns, refunds, credits and allowances actually granted;

(d) any sales and other taxes or duties imposed on the sale or delivery of the Royalty-Bearing Service (excluding any taxes based on income); and

(e) freight, postage, packing, shipping, customs duties, excises, tariffs, surcharges, other governmental charges (excluding federal, state or local taxes based on income or franchise taxes) and insurance charges actually allowed or paid for delivery of the Royalty-Bearing Service.

Such amounts shall be determined from the books and records of 454 and maintained in accordance with the generally accepted accounting principles, consistently applied. For purposes of clarity, any upfront fee or periodic subscription fees charged by 454 in exchange for Royalty-Bearing Services in exchange for the right to commercially exploit Royalty-Bearing Services are specifically included in Net Sales.

1.19 “Non-Competition Period” means a period of [********] years; provided, that, if CuraGen terminates this Agreement in accordance with Section 7.2.1 of this Agreement, the Non-Competition Period means a period of [********] years.

1.20 “Other Fields” means all fields other than the CuraGen Field and the 454 Field.

1.21 “Reagents” means any chemical compound or mixture of chemical compounds covered by a claim under the Core Patent Rights developed for use in an Instrument.

1.22 “Royalty-Bearing Services” means the provision by 454 to any Third Party of [***********************].

1.23 “Sequencing Services” means the use of Instruments to [***********************************].

1.24 “Software” means any computer programs and software covered by a claim under the Core Patent Rights developed for use on an Instrument, including any upgrades, modifications and enhancements made for such programs and software. For purposes of this Agreement the term “Software” shall not indicate CuraGen Proprietary Software.

1.25 “Software License Agreement“ has the meaning set forth in Section 2.1.6.

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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1.26 “Technology” means and includes all inventions, discoveries, data, formulations, techniques and know-how, whether or not patentable or copyrightable, including any Instruments.

1.27 “Third Party” means any entity other than CuraGen and 454 and their respective Affiliates.

ARTICLE 2. TECHNOLOGY TRANSFER

2.1. Grant of Rights to 454.

2.1.1. Scope of Technology License. Subject to the terms and conditions of this Agreement, CuraGen hereby grants to 454 and its Affiliates a perpetual, exclusive (even as to CuraGen, except as provided in Section 2.1.2 and 2.2.1 of this Agreement), worldwide license or sublicense (as the case may be), with the right to grant sublicenses, under CuraGen’s interest in the Core Technology, any CuraGen Process Improvements and any CuraGen Third Party Process Improvements (which, in the last case, 454 elects to license pursuant to Section 2.1.5 of this Agreement) (a) to make, have made, use, sell, have sold, import, and have imported Instruments, Reagents and Software and to provide Sequencing Services, in any case solely within the 454 Field and (b) to otherwise exploit the Core Technology, CuraGen Process Improvements and such CuraGen Third Party Process Improvements, in each case for all purposes solely within the 454 Field. The foregoing licenses to 454 under the Core Technology shall be terminable by CuraGen only in accordance with Section 7.2 of this Agreement.

2.1.2. Retained Rights of CuraGen. Notwithstanding anything to the contrary in Section 2.1.1 above, 454 hereby acknowledges and agrees that no license is granted to 454 and its Affiliates under this Agreement to exploit the Core Technology, CuraGen Process Improvements and the CuraGen Third Party Process Improvements for any purpose outside the 454 Field.

2.1.3. Royalties. The licenses from CuraGen to 454 set forth in Section 2.1.1 of this Agreement shall be royalty-free and without a duty of accounting on the part of 454 to CuraGen except (a) to the extent that fees, milestones, royalties or other payments are due to an entity other than CuraGen or 454 or a wholly-owned subsidiary of CuraGen or 454 (“Third Party Royalties”) on account of 454’s exploitation of such license and (b) as provided in Section 2.5 below with respect to Royalty-Bearing Services. All such Third Party Royalties known to CuraGen as of the Effective Date are described on Schedule B attached hereto. Unless otherwise required by the Third Party, 454 hereby agrees, with respect to all Core Technology and CuraGen Process Improvements and all CuraGen Third Party Process Improvements it licenses from CuraGen under this Agreement, to pay all such Third Party Royalties and provide all related reports directly to the appropriate Third Parties within the time periods specified by the pertinent agreements with such Third Parties. CuraGen shall have the right, upon reasonable notice, to inspect and audit 454’s books and records during normal business hours to ensure that appropriate reports are made and Third Party Royalties paid to such Third Parties as

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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contemplated by the foregoing sentence. To the extent that CuraGen and 454 are both engaged in the exercise of rights under a license from a Third Party to Technology included in the Core Technology, CuraGen Process Improvements or CuraGen Third Party Process Improvements, CuraGen and 454 shall mutually agree on a reasonable allocation of any Third Party Royalties due thereunder based on the relative value of the license in the CuraGen Field and the 454 Field.

2.1.4 CuraGen Process Improvements. CuraGen shall notify 454 in writing of any patentable CuraGen Process Improvement within thirty (30) days of the filing of any patent application (including any provisional patent application) covering such CuraGen Process Improvement, which notice shall contain a copy of such application. Immediately as of such filing date, CuraGen shall be deemed to have granted to 454 the license described in Section 2.1.1 above with respect to such CuraGen Process Improvement. Representatives of the parties shall meet on a semi-annual basis, or more frequently at the option of either party, to disclose and exchange information and know-how regarding all CuraGen Process Improvements, whether or not patentable.

2.1.5 CuraGen Third Party Process Improvements. CuraGen shall notify 454 in writing of any CuraGen Third Party Process Improvement which becomes Controlled by CuraGen during the term of this Agreement, which notice shall contain a description of such CuraGen Third Party Process Improvement and any royalties that would be payable by 454 with respect to a sublicense thereof, in complete enough form to allow for proper evaluation thereof by 454. 454 shall provide CuraGen with written notice within five (5) business days of the date of its receipt of such notice if it finds the disclosure insufficient for such evaluation. 454 shall have [********] days from the date of such notice to provide a written response to CuraGen as to whether or not it wishes to sublicense such CuraGen Third Party Process Improvement. If the response is not received within such [********] period, as such period may be extended by written agreement of both parties, or if 454 indicates in its response that it does not wish to obtain a sublicense to such CuraGen Third Party Process Improvement, 454 shall thereafter have no right to sublicense such CuraGen Third Party Process Improvement and CuraGen shall have no further obligation to 454 with respect thereto. If 454 indicates in its response that it wishes to obtain a license to such CuraGen Third Party Process Improvement, CuraGen shall be deemed to have granted to 454 the sublicense described in Section 2.1.1 with respect to such CuraGen Third Party Process Improvement as of the date of such response.

2.1.6 Grant of Software License to 454. Subject to the terms and conditions of this Agreement, in furtherance of the grant of the license in Section 2.1.1 above, CuraGen hereby agrees to grant 454 a license to certain software of CuraGen useful for the organization and analyses of expression data on substantially the terms set forth in the form of Software License Agreement attached hereto as Exhibit A (the “Software License Agreement”).

2.1.7 Non-Competition in the CuraGen Field. Notwithstanding anything to the contrary contained herein, 454 hereby acknowledges and agrees that in partial consideration for the grant of the license in Section 2.1.1 above, during the term of this Agreement and, following the termination of this Agreement, for a period equal to the Non-Competition Period, (i) prior to the closing of a Qualified Public Offering, 454 shall not engage independently or with any Third

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

6

Party in any business, venture or activity outside the 454 Field, and (ii) after the closing of a Qualified Public Offering, 454 shall not engage independently or with any Third Party in any business, venture or activity within the CuraGen Field. For the purposes of this Agreement, a “Qualified Public Offering” means a firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended (or any successor statute for registration of shares in public offerings) covering the offer and sale of Common Stock of 454 for the account of 454 to the public (other than a registration statement with respect to employee stock option or purchase plans) resulting in the aggregate receipt by 454 of at least [***********] of gross proceeds (before applicable discounts, commissions and expenses) and the listing of the Common Stock of 454 on a nationally recognized stock market or exchange, including the Nasdaq Stock Market, the New York Stock Exchange and the American Stock Exchange.

2.1.8 Consideration for the Grant of Rights. In exchange and as consideration for CuraGen’s grant of rights to 454 under this Section 2.1 and certain other consideration and upon the terms and subject to the conditions set forth in this Agreement, 454 has, on the Effective Date, issued and delivered to CuraGen twelve million (12,000,000) shares of 454’s Series A Preferred Stock, $.01 par value per share (the “Shares”).

2.2. Grant of Rights to CuraGen.

2.2.1. Grant of Technology License.

(a) Scope of License. Subject to the terms and conditions of this Agreement, 454 hereby grants to CuraGen and its Affiliates a perpetual, co-exclusive (with 454) worldwide license or sublicense (as the case may be), with the right to grant sublicenses, to 454’s interest in any Core Technology, 454 Process Improvements or 454 Third Party Process Improvements (which, in the latter case, CuraGen elects to license pursuant to Section 2.2.1(d) of this Agreement) to exploit such Core Technology, 454 Process Improvements and 454 Third Party Process Improvements within the CuraGen Field.

(b) No Accounting; Third Party Royalties. The license from 454 to CuraGen set forth in Section 2.2.1(a) of this Agreement shall be without a duty of accounting on the part of CuraGen to 454 and shall be royalty-free except to the extent that Third Party Royalties are due on account of CuraGen’s exploitation of such license. Unless otherwise required by the Third Party, CuraGen hereby agrees, with respect to all Core Technology, 454 Process Improvements and 454 Third Party Process Improvements it licenses from 454 under this Agreement, to pay all such Third Party Royalties and provide all related reports directly to the Third Party in the time periods specified by the pertinent agreements. 454 shall have the right, upon reasonable notice, to inspect and audit CuraGen’s books and records during normal business hours to ensure that appropriate reports are made and Third Party Royalties paid to such Third Parties as contemplated by the foregoing sentence. To the extent that CuraGen and 454 are both engaged in the exercise of rights under a license from a Third Party to Technology included in the Core Technology, 454 Process Improvements or 454 Third Party Process Improvements, CuraGen and 454 shall mutually agree on a reasonable allocation of any Third

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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Party Royalties due thereunder based on the relative value of the license in the CuraGen Field and the 454 Field.

(c) 454 Process Improvements. During the Term of the Agreement, 454 shall notify CuraGen in writing of any patentable 454 Process Improvement within thirty (30) days of the filing of any patent application (including any provisional patent application) covering such 454 Process Improvement, which notice shall contain a copy of such application. Immediately as of such filing date, 454 shall be deemed to have granted to CuraGen the license described in Section 2.2.1 above with respect to such 454 Process Improvement. Representatives of the parties either shall meet on a semi-annual basis, or more frequently at the option of either Party, to disclose and exchange information and know-how regarding all 454 Process Improvements, whether or not patentable.

(d) 454 Third Party Process Improvements. 454 shall notify CuraGen in writing of any 454 Third Party Process Improvement which becomes Controlled by 454 during the Term of the Agreement, which notice shall contain a description of such 454 Third Party Process Improvement and any royalties that would be payable by CuraGen with respect to a sublicense thereof, in complete enough form to allow for proper evaluation thereof by CuraGen. CuraGen shall provide 454 with written notice within five (5) business days of the date of its receipt of such notice if it finds the disclosure insufficient for such evaluation. CuraGen shall have [*********] days from the date of such notice to provide a written response to 454 as to whether or not it wishes to sublicense such 454 Third Party Process Improvement. If the response is not received within such [*********] period, as such period may be extended by written agreement of both parties, or if CuraGen indicates in its response that it does not wish to obtain a sublicense to such 454 Third Party Process Improvement, CuraGen shall thereafter have no right to sublicense such 454 Third Party Process Improvement and 454 shall have no further obligation to CuraGen with respect thereto. If CuraGen indicates in its response that it wishes to obtain a license to such 454 Third Party Process Improvement, 454 shall be deemed to have granted to CuraGen the sublicense described in Section 2.2.1 with respect to such 454 Third Party Process Improvement as of the date of such response.

2.2.2. Grant of Beta Test Site License. 454 and CuraGen hereby agree that, during the term of this Agreement, CuraGen shall have the option to serve as the exclusive beta test site for all Instruments, Reagents and Software developed by 454 for use in the CuraGen Field on substantially the terms contained in the form of Beta and Production Product Supply Agreement attached hereto as Exhibit B (the “Beta Site Agreement”).

2.2.3. Supply of Instruments, Reagents and Software. During the term of this Agreement and on a non-exclusive basis, 454 will sell to CuraGen for use as provided herein, and CuraGen will purchase from 454, Instruments, Reagents and Software in accordance with the terms set forth on Schedule C attached hereto. In the event there is a conflict between this Agreement and the Beta Site Agreement with respect to the supply of Instruments, Reagents and Software, the terms of the Beta Site Agreement shall control.

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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2.3 Rights in Other Fields.

2.3.1. Rights in Other Fields. Unless prohibited by confidentiality obligations to Third Parties and subject to any restrictions provided herein or in the Certificate of Incorporation of CuraGen, if either party becomes aware of the potential use in Other Fields of Core Technology, it shall promptly advise the other party of said use and provide a summary of the information in its possession relating to such potential use. In the event that either party wishes to develop or commercialize any such Core Technology for any use in such Other Field, it shall first provide written notice to the other party and shall offer the other party the right of first negotiation described in Section 2.3.2 hereof.

2.3.2. Right of First Negotiation. In the event that either party has a right of first negotiation as provided in Section 2.3.1, the other party (the “Offering Party”) shall give written notice to the party having such right (the “Receiving Party”) specifying in reasonable detail the Other Field in which the Offering Party intends to develop and commercialize the Core Technology and the uses within the Other Field for which the Offering Party intends to develop and commercialize such Core Technology (the “Offer”). The Receiving Party shall have [*********] days after the date of the Offer to provide a written response to the Offering Party (the “Response”) as to whether or not it wishes to enter into negotiations with the Offering Party with respect to such rights. If the Response states that the Receiving Party wishes to enter into negotiations with the Offering Party, the parties shall negotiate in good faith the licensing of such rights to such Core Technology for a period of [*********] days from the date of the Response. If the Response is not received within the [*********] day response period or if the Receiving Party declines to enter into negotiations or if the parties do not agree upon and execute a written agreement within the [*********] day negotiation period, as such period may be extended by written agreement of both parties, the Offering Party shall thereafter have the right, alone or in collaboration with a Third Party, to pursue development, commercialization or licensing of the Core Technology in such Other Field and for the uses which were the subject of the Offer.

2.4 Corporate Opportunity. 454 hereby acknowledges that CuraGen has certain rights (a) under Section 2.3.1 hereof, to conduct business under certain conditions in Other Fields, and (b) under Section 1.1 of the Beta Agreement to conduct business within the 454 Field, and hereby agrees that if CuraGen or any director or officer of 454 who is a director, officer or employee of CuraGen acquires knowledge of any potential transaction or matter which may be a Corporate Opportunity or otherwise is then exploiting any Corporate Opportunity (whether such Corporate Opportunity is in the 454 Field, the CuraGen Field or Other Fields), 454 shall have no interest in, and no expectation that, such Corporate Opportunity be offered to it, any such interest or expectation being hereby renounced so that CuraGen and such individuals (1) shall have no duty to communicate, or present such Corporate Opportunity to 454, shall have the right to hold any such Corporate Opportunity for CuraGen’s (and its officers’, directors’, agents’, stockholders’, members’, partners’, Affiliates’ or Subsidiaries’) own account, or to recommend, assign or otherwise transfer such Corporate Opportunity to persons other than 454 or any Subsidiary of 454, and (2) cannot be liable to 454 or its stockholders for breach of any fiduciary duty as a stockholder, officer or director of 454 or otherwise by reason of the fact that CuraGen pursues or acquires such Corporate Opportunity for itself, directs, sells, assigns or otherwise transfers such Corporate Opportunity to another person, or does not communicate information regarding such Corporate Opportunity to 454. For purposes of this Section 2.4, “Corporate Opportunity” shall

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

9

mean an investment or business opportunity or prospective economic or competitive advantage in which 454 could, but for the provisions of this Section 2.4, have an interest or expectancy.

2.5 Royalties on Sales of Royalty-Bearing Services.

2.5.1 Royalties; Accounting. In consideration of the grant of the license by CuraGen hereunder, and subject to the other terms of this Agreement, commencing on the date of First Commercial Sale of any Royalty-Bearing Service and continuing for the remainder of the Royalty Term, 454 shall pay to CuraGen a royalty of [********] of the total Net Sales of all Royalty-Bearing Services sold by 454 and/or its Affiliates and/or its sublicensees.

2.5.2 Third Party Royalty Offset. In the event that during the Royalty Term, 454 is required (a) to enter into any agreement with any Third Party to obtain a license to an issued patent or patents in the absence of which the sale of a Royalty-Bearing Service would cause it to infringe such patent in a given country (each, a “Third Party Agreement”) and (b) to make royalty payments under such Third Party Agreements, then, solely to the extent the royalties paid under such Third Party Agreements exceed [************], the royalties due to CuraGen pursuant to Section 2.5.1 above for such Royalty-Bearing Service may be reduced by [************] of the amount by which such royalty payments exceed [************]; provided, that, any such reductions under this Section 2.5.2 shall in no event reduce the royalty for such Royalty-Bearing Service in any such country payable pursuant to Section 2.5.1 above to less than [************].

2.5.3 Royalty Term. 454 shall pay royalties with respect to each Royalty-Bearing Service on a country-by-country basis commencing on the date of First Commercial Sale of such Royalty-Bearing Service until and continuing to the later of (a) the last-to-expire of the Core Patent Rights whose claims cover the manufacture, use or sale of such Royalty-Bearing Service in such country, or (b) [***********] years from the First Commercial Sale of such Royalty-Bearing Service in such country (the “Royalty Term”). Following such Royalty Term, 454 shall have a fully paid-up, irrevocable, freely transferable and sublicensable license in such country under the relevant Core Patent Rights and Core Technology, to develop, have developed, make, have made, use, have used, sell, have sold, offer for sale, import and have imported such Royalty-Bearing Service in such country. The parties hereby acknowledge and agree that (a) royalties may be payable hereunder for a Royalty-Bearing Service for which no Core Patent Rights exist or for which no license is granted by CuraGen and (b) under such circumstances, such royalties shall be in consideration of the commercial advantage and background information gained from the license hereunder.

2.5.4 Payment Terms.

(a) Timing of Payments. 454 shall make all royalty payments owed to CuraGen in United States Dollars, quarterly within thirty (30) days following the end of each calendar quarter for which such royalties are deemed to occur (as provided in the next sentence), using the wire transfer provisions of this Section 2.5.4. For purposes of determining when a sale of any Royalty-Bearing Service occurs under this Agreement, the sale shall be deemed to occur on the earlier of (a) the date the Royalty-Bearing Service is shipped or provided, as the case may

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

10

be or (b) the date of the invoice to the purchaser of the Royalty-Bearing Service. Each royalty payment shall be accompanied by a report for each country in which sales of Royalty-Bearing Services occurred in the calendar quarter covered by such statement, specifying: the gross sales (if available) and Net Sales in each country’s currency; the applicable royalty rate under this Agreement; the royalties payable in each country’s currency, including an accounting of deductions taken in the calculation of Net Sales; the applicable exchange rate to convert from each country’s currency to United States Dollars under this Section 2.5.4; and the royalties payable in United States Dollars.

(b) Foreign Currency Exchange. All royalties shall be payable in full in the United States in United States Dollars, regardless of the countries in which sales are made. For the purpose of computing Net Sales for Royalty-Bearing Services sold in any currency other than United States Dollars, the quarterly royalty payment will be calculated as follows:

(A/B) x C = United States Dollars royalty payment on foreign sales, where

A = foreign “Net Sales” (as defined above) per quarter;

B = foreign exchange conversion rate, expressed in local currency per United States Dollar (using as the applicable foreign exchange rate the average of the rate published in the western edition of The Wall Street Journal, or any other mutually agreed upon source, for the last business day of the calendar quarter); and

C = the royalty rate applicable to such Net Sales under this Agreement.

(c) Tax Withholding; Restrictions on Payment. All payments hereunder shall be made free and clear of any taxes, duties, levies, fees or charges, except for withholding taxes (to the extent applicable). 454 shall make any applicable withholding payments due on behalf of CuraGen and shall promptly provide CuraGen with written documentation of any such payment sufficient to satisfy the requirements of the United States Internal Revenue Service relating to an application by CuraGen for a foreign tax credit for such payment. If by law, regulations or fiscal policy of a particular country, remittance of royalties in United States Dollars is restricted or forbidden, written notice thereof shall promptly be given to CuraGen, and payment of the royalty shall be made by the deposit thereof in local currency to the credit of CuraGen in a recognized banking institution designated by CuraGen by written notice to 454. When in any country the law or regulations prohibit both the transmittal and the deposit of royalties on sales in such country, royalty payments shall be suspended for as long a such prohibition is in effect and as soon as such prohibition ceases to be in effect, all royalties that 454 would have been under an obligation to transmit or deposit but for the prohibition shall forthwith be deposited or transmitted, to the extent allowable.

(d) Wire Transfers. All payments hereunder shall be made to CuraGen by bank wire transfer in immediately available funds to the account designated by CuraGen by written notice to 454 from time to time.

2.5.5 Overdue Royalties. All royalties not paid within the time period set forth in this Article 2 shall bear interest at a rate of [************] per month from the due date until paid in full.

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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2.5.6 Records Retention; Review.

(a) Royalties. 454 and its Affiliates and/or sublicensees shall keep for at least three (3) years from the end of the calendar year to which they pertain complete and accurate records of sales by 454, or its Affiliates and/or sublicensees, as the case may be, of each Royalty-Bearing Service, in sufficient detail to allow the accuracy of the royalties to be confirmed.

(b) Review. At the request of CuraGen, upon at least [************] days prior written notice from CuraGen (except as otherwise provided herein), 454 shall permit an independent certified public accountant reasonably selected by CuraGen and reasonably acceptable to 454 to inspect (during regular business hours) the relevant records required to be maintained by 454 under this Section 2.5.6. At CuraGen’s request (which shall not be made more frequently than once per year during the term), the accountant shall be entitled to review the then-preceding three (3) years of 454’s records under this Section 2.5.6 for purposes of verifying 454’s royalty calculations. In every case the accountant must have previously entered into a confidentiality agreement with both parties substantially similar to the provisions of Article 4 and limiting the disclosure and use of such information by such accountant to authorized representatives of the parties and the purposes germane to this Section 2.5.6. Results of any such review shall be made available to both parties and shall be binding on both parties. CuraGen agrees to treat the results of any such accountant’s review of the 454’s records under this Section 2.5.6 as Confidential Information of 454 subject to the terms of Article 4. If any review reveals a deficiency in the calculation of royalties resulting from any underpayment by 454, 454 shall promptly pay CuraGen the amount remaining to be paid (plus interest thereon at the rate provided in Section 2.5.5 above), and if such underpayment is by [************] or more, 454 shall pay all costs and expenses of the review.

2.6 Early Access to Royalty-Bearing Services. In partial consideration of the rights granted to it hereunder, 454 hereby agrees for a period of not less than [*******] months prior to the provision by it of any Royalty-Bearing Service and/or the shipment by it to any Third Party of an Instrument that provides a Royalty-Bearing Service, it will first offer such Royalty-Bearing Service exclusively to CuraGen, under either the Beta Site Agreement or under a separate agreement, as the case may be, on the terms set forth on Schedule C attached hereto and such additional terms as may be mutually acceptable to the parties.

2.7 Approval of Certain Contracts. Notwithstanding anything to the contrary contained in this Agreement, 454 hereby agrees that during the period commencing on the Restated Effective Date and continuing through [***********************], without the prior written approval of CuraGen, it shall not enter into any agreement (a) [*****************************************

********************************************************************] or (b) [*****************************

****************************************************************] or (c) [*******************************

******************************************]. 454 hereby further agrees that CuraGen may withhold any approval under subsection (a) above if CuraGen determines, (i) [**************************************************************

********************************************************]

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

12

or (ii) [************************************************************************ **************************].

2.8 Sales to Human Health Care Companies. The Parties hereby agree that during the period commencing on the Restated Effective Date and continuing through the [****************************] all promotional activities by 454 with respect to human health care companies shall be performed in accordance with Schedule D attached hereto.

2.9 Sequencing Services for CuraGen. 454 hereby agrees that it shall perform any Sequencing Services that CuraGen may request in writing from time to time during the term of this Agreement either for itself or as part of a collaboration at its fully-burdened cost. Any collaboration work that is solely Sequencing Services (to which CuraGen consents) will be priced at market and 454 will pay CuraGen the Section 2.5 royalty.

ARTICLE 3. LIMITATION OF LIABILITY

3.1. CuraGen Limitation of Liability and Right to Indemnification. CuraGen and its Affiliates, and their respective directors, officers, employees and agents, shall not be liable for any loss, damage, injuries or other casualty of any kind, or by whomsoever caused, to the person or property of anyone, including 454, arising out of or resulting from (i) the lack of freedom of 454 to use the Core Technology, any CuraGen Process Improvement or any CuraGen Third Party Process Improvement without infringing the intellectual property rights of any Third Party (except to the extent represented by CuraGen in Section 5.1(d) of this Agreement) or (ii) the use of the Core Technology, any CuraGen Process Improvement or any CuraGen Third Party Process Improvement in any product made, used or sold or service (including any Instrument or Royalty-Bearing Service) performed by 454 or a licensee of 454 (except CuraGen) (a “CuraGen Loss”). 454, for itself, its successors and assigns, shall indemnify and hold CuraGen and its Affiliates, and their respective directors, officers, employees and agents, harmless from and against any and all claims, demands, liabilities, suits or actions, actual or threatened (including all reasonable expenses and attorney’s fees incurred or imposed on CuraGen in connection therewith) for any CuraGen Loss.

3.2. 454 Limitation of Liability and Right to Indemnification. 454 and its Affiliates, and their respective directors, officers, employees and agents, shall not be liable for any loss, damage, injuries or other casualty of any kind, or by whomsoever caused, to the person or property of anyone, including CuraGen arising out of or resulting from (i) the lack of freedom of CuraGen to use the Core Technology, any 454 Process Improvement or any 454 Third Party Process Improvement without infringing the intellectual property rights of any Third Party or (ii) the use of the Core Technology, any 454 Process Improvement or any 454 Third Party Process Improvement in any product made, used or sold or service performed by CuraGen or a licensee of CuraGen (except 454) (a “454 Loss”). CuraGen, for itself, its successors and assigns, shall indemnify and hold 454 and its Affiliates, and their respective directors, officers, employees and agents, harmless from and against all claims, demands, liabilities, suits or actions,

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

13

actual or threatened (including all reasonable expenses and attorney’s fees incurred or imposed on 454 in connection therewith) for any 454 Loss.

3.3. Indemnification Procedures.

A party seeking indemnification under this Article 3 (the “indemnified party”) shall give prompt notice of the claim to the other party (the “indemnifying party”). If the indemnifying party is not contesting the indemnity obligation, the indemnified party shall permit the indemnifying party to control any litigation or threatened litigation relating to such claim and the settlement or other disposition of any such claim, provided that the indemnifying party shall act reasonably and in good faith with respect to all matters relating to the defense and settlement or other disposition of any such claim as the settlement or other disposition relates to the persons being indemnified under this Article 3 and the indemnifying party shall not settle or otherwise resolve any such claim without prior notice to the indemnified party. If the settlement or other disposition of any such claim involves anything other than the payment of money by the indemnifying party, the consent of the indemnified party shall be required, which consent shall not be unreasonably withheld or delayed. The indemnified party shall cooperate with the indemnifying party in its defense of any claim for which indemnification is sought under this Article 3.

ARTICLE 4. TREATMENT OF CONFIDENTIAL INFORMATION

4.1. Confidential Information. CuraGen and 454 each recognizes that the other party’s Confidential Information constitutes highly valuable and proprietary confidential information. Subject to the right of each party to exploit the licenses granted to it in Article 2 of this Agreement in keeping with the terms and conditions of Article 2 of this Agreement, CuraGen and 454 each agrees that it will keep confidential and will cause its employees, consultants, Affiliates, licensees and sublicensees to keep confidential, all Confidential Information of the other party that is disclosed to it, or to any of its employees, consultants, Affiliates, licensees and sublicensees, pursuant to or in connection with this Agreement. Neither CuraGen nor 454 nor any of their respective employees, consultants, Affiliates, licensees and sublicensees shall use Confidential Information of the other party for any purpose whatsoever except as expressly permitted in this Agreement. In the event that either party desires to make a presentation or disclosure to any potential licensee or sublicensee which includes Confidential Information relating to the Core Technology, such party shall do so solely under the terms of an agreement that imposes non-disclosure and non-use restrictions on the potential licensee or sublicensee.

4.2. Representation. CuraGen and 454 each represent that all of its employees and the employees of its Affiliates, and any consultants to such party or its Affiliates, who shall have access to Confidential Information of the other party are bound by written obligations to maintain such information in confidence and not to use such information except as expressly permitted herein. Each party hereby agrees to enforce all such confidentiality obligations to which its employees and consultants and those of its Affiliates are obligated.

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

14

4.3. Proprietary Materials. For purposes of this Section, “Proprietary Materials” means confidential or proprietary tangible biological, chemical, or physical materials (“Materials”) that are developed, discovered, or acquired by a party and which are furnished by one party (the “Supplier”) to the other party (the “Recipient”) in connection with the performance of this Agreement. The Recipient shall not use Proprietary Materials for any purpose other than exercising any rights granted to it or reserved by it hereunder. The Recipient shall use the Proprietary Materials only in compliance with all applicable federal, state, and local laws and regulations. The Recipient shall not transfer any Proprietary Materials to any third party without the prior written consent of the Supplier, except as expressly permitted hereby. Upon the expiration or termination of this Agreement, the Recipient shall at the instruction of Supplier either destroy or return any unused Proprietary Materials, which is not the subject of the grant of a continuing license hereunder.

4.4. Publicity. Neither party may publicly disclose the terms of this Agreement without the prior written consent of the other party; provided, however, that either party may make such a disclosure to the extent required by law or by the requirements of any nationally recognized securities exchange, quotation system or over-the-counter market on which such party has its securities listed or traded. The parties, upon the execution of this Agreement, will agree to a news release for publication in general circulation and industry periodicals; provided, however, that such news release shall be issued only at such time as both parties mutually agree. Once any written statement is approved for disclosure by both parties, either party may make subsequent public disclosure of the contents of such statement without the further approval of the other party.

ARTICLE 5. REPRESENTATIONS AND WARRANTIES

5.1. Representations, Warranties and Covenants of CuraGen. CuraGen represents, warrants and covenants to 454 as follows:

(a) CuraGen is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware with corporate powers adequate for executing, delivering and performing its obligations under this Agreement.

(b) The execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of CuraGen.

(c) The execution, delivery and performance of this Agreement do not and will not conflict with or contravene any provision of the charter documents or by-laws of CuraGen or any agreement, document, instrument, indenture or other obligation of CuraGen.

(d) To its knowledge, CuraGen owns and has the right to license the Core Technology and the consummation of the transactions contemplated by this Agreement will not alter or impair such right. To its knowledge, no material claims have been asserted against CuraGen, and no claims are pending against CuraGen in writing, regarding CuraGen’s

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

15

ownership or use of the Core Technology. CuraGen makes no representations or warranties of non-infringement of the proprietary rights of other parties.

5.2. Representations, Warranties and Covenants of 454. 454 represents, warrants and covenants to CuraGen as follows:

(a) 454 is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware with corporate powers adequate for executing and delivering, and performing its obligations under this Agreement.

(b) The execution, delivery and performance of this Agreement and the Shares have been duly authorized by all necessary corporate action on the part of 454.

(c) The execution, delivery and performance of this Agreement and the Shares do not and will not conflict with or contravene any provision of the charter documents or bylaws of 454 or any agreement, document, instrument, indenture or other obligation of 454.

ARTICLE 6. PATENT PROSECUTION AND INFRINGEMENT

6.1. Rights in the Core Technology. 454 shall be responsible, at 454’s sole expense, for the preparation, filing and prosecution and maintenance of such patent applications and patents included in the Core Patent Rights as 454 shall determine in its sole discretion; provided, however, that upon the request of CuraGen, 454 shall use patent counsel selected by CuraGen, the caliber of whom shall be reasonably acceptable to 454; and, provided further, that CuraGen shall reimburse 454 for the cost of preparation, filing, prosecution and maintenance of all such patent applications and patents that are directed primarily to the CuraGen Field. 454 shall keep CuraGen’s Patent Coordinator (as defined below) informed as to the status of the patent applications and the patents included in the Core Technology and shall consult with CuraGen’s Patent Coordinator with respect to any substantive decisions and communications in such prosecutions and shall give due consideration to the advice and comments of the CuraGen Patent Coordinator; provided, however, that any such decision and the substance of any such communication shall be finally determined by 454 in its sole discretion. Such patent counsel shall provide copies to CuraGen of all filings and correspondence with any patent offices, administrative boards or courts which 454 sends or receives in connection with the filing, prosecution or maintenance of the Core Patent Rights, and shall provide CuraGen with advance drafts of all substantive communications to be made by 454 with any patent offices, administrative boards or courts in connection with the filing, prosecution or maintenance of the Core Patent Rights. 454 shall provide advance written notice to CuraGen if, for any reason, it elects not to perform or continue the preparation, filing, prosecution or maintenance of any of the patent applications or patents included in the Core Patent Rights, in which case, CuraGen shall have the right to do so at its sole expense; provided, however, that if CuraGen shall so elect to perform or continue the preparation, filing, prosecution or maintenance of any of the patent applications or patents included in the Core Patent Rights, 454 shall, at its election, either (i) give up its license with respect to such patent applications or patents or (ii) reimburse CuraGen for all reasonable expenses incurred to perform or continue the preparation, filing, prosecution or

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

16

maintenance of such patent applications or patents. If, pursuant to the preceding sentences, CuraGen assumes responsibility for the preparation, filing, prosecution or maintenance of any patent applications or patents included in the Core Patent Rights, 454 shall fully cooperate and assist CuraGen in furtherance thereof.

6.2. Patent Coordinators. CuraGen and 454 shall each appoint a “Patent Coordinator” who shall be a person designated from time to time to serve as such Party’s primary liaison with the other Party on matters relating to patent filing, prosecution, maintenance and enforcement specified in this Article 6. Each Party may replace its Patent Coordinator at any time by notice in writing to the other Party. The initial Patent Coordinators shall be:

For CuraGen (the “CuraGen Patent Coordinator”): [****************]

For 454 (the “454 Patent Coordinator”): [**************]

6.3. Notification of Infringement or Breach. Each party shall notify the other of any infringement of any patent included in the Core Technology, or of any breach of any agreement pertaining to Confidential Information by any person and shall provide the other with the available evidence, if any, of such infringement or breach, in each case to the extent known to such party.

6.4. Enforcement of Rights in the Core Technology. If CuraGen or 454 has actual notice of infringement of any Core Technology, the respective officers of CuraGen and 454 shall confer to determine in good faith an appropriate course of action to enforce the parties’ rights in such Core Technology or otherwise abate the infringement. If 454 determines that enforcement of the parties’ rights in the Core Technology is appropriate, 454 shall have the right, but not the obligation, at its own expense, to take appropriate action to enforce such right; provided, however, that if 454 elects to so act, CuraGen shall have the right to participate in such enforcement by agreeing to bear a percentage of the costs of such enforcement in such amount as the parties shall determine not to exceed [************]. All amounts recovered in any action to enforce the parties’ rights in the Core Technology undertaken by 454 and CuraGen, whether by judgment or settlement, shall be retained by 454 and CuraGen pro rata according to the respective percentages of expenses borne by them in enforcing their rights to the Core Technology rights. If, within a reasonable period of time after notice of such infringement or breach, 454 has not commenced action to enforce such rights or thereafter ceases to pursue diligently such action, CuraGen shall have the right, but not the obligation at its expense, to take appropriate action to enforce such rights as its sole remedy hereunder. All amounts recovered in any action to enforce Core Technology rights undertaken by CuraGen at its expense, whether by judgment or settlement, shall be retained by CuraGen. CuraGen and 454 shall fully cooperate with each other in the planning and execution of any action to enforce their rights in the Core Technology. Neither CuraGen nor 454 shall enter into any settlement that includes a license to use the Core Technology in a field reserved for or exclusively licensed to the other party hereunder, an agreement not to enforce the Core Technology or any statement prejudicial to the validity or enforceability of the Core Technology without the consent of the other party, which consent shall not be unreasonably withheld or delayed.

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

17

6.5. Rights in Improvements. Each party shall be responsible, at its sole expense, for the preparation, filing and prosecution and maintenance of such patent applications and patents pertaining to improvements made by such party to the Core Patent Rights as it shall determine in its sole discretion.

6.6. Limitation on Warranties. Nothing in this Agreement shall be construed as a representation made or warranty given by either party hereto that any license granted hereunder, or that the use of any Technology licensed hereunder, will not infringe the patent or proprietary rights of any other person. IN ADDITION, 454 ACKNOWLEDGES THAT THE CORE TECHNOLOGY, ANY CURAGEN PROCESS IMPROVEMENT AND/OR ANY CURAGEN THIRD PARTY PROCESS IMPROVEMENT IS LICENSED TO 454 AS IS AND 454 EXPRESSLY HEREBY WAIVES ANY WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO SUCH TECHNOLOGY OF 454, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. CURAGEN ACKNOWLEDGES THAT THE CORE TECHNOLOGY, ANY 454 PROCESS IMPROVEMENT AND/OR ANY 454 THIRD PARTY PROCESS IMPROVEMENT IS LICENSED TO CURAGEN AS IS AND CURAGEN EXPRESSLY HEREBY WAIVES ANY WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO SUCH TECHNOLOGY OF 454, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

6.7. Limitation on Damages. NEITHER PARTY TO THIS AGREEMENT SHALL BE ENTITLED TO RECOVER FROM THE OTHER ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES UNDER ANY CIRCUMSTANCES.

ARTICLE 7. TERM

7.1. Term. Subject only to Section 7.2 of this Agreement, this Agreement shall be effective as of the date hereof and shall continue in full force and effect in perpetuity, it being understood that, in the event of a termination by a Third Party of a party’s license to any Technology sublicensed to the other party hereunder, the other party’s sublicense to such Technology shall terminate upon the termination of such license by the Third Party.

7.2. Termination.

7.2.1. Right to Terminate for Breach. CuraGen shall have the right to terminate this Agreement (including without limitation the license granted under Section 2.1 of this Agreement) in the event 454 breaches this Agreement by giving thirty (30) days written notice thereof to 454.

7.2.2. Right to Terminate for Bankruptcy. In the event that either party files for protection under bankruptcy laws, makes an assignment for the benefit of creditors, appoints or suffers appointment of a receiver or trustee over its property, files a petition under any bankruptcy or insolvency act or has any such petition filed against it which is not discharged

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

18

within sixty (60) days of the filing thereof, then the other party may terminate this Agreement effective immediately upon written notice to such party.

7.2.3. Surviving Provisions. Termination of this Agreement for any reason shall be without prejudice to rights which expressly survive termination in accordance with the terms of this Agreement, including without limitation, rights that survive under Articles 3 and 4 and Sections 7.2.3, 8.1,8.6, 8.9 and 8.10, all of which shall survive such termination.

ARTICLE 8. MISCELLANEOUS

8.1. Notices. All notices, requests and other communications to CuraGen or 454 hereunder shall be in writing, shall refer specifically to this Agreement, and shall be (a) personally delivered, (b) sent by facsimile transmission, (c) sent by certified mail, return receipt requested, postage prepaid, or (d) sent by recognized courier service providing evidence of delivery, in each case to the respective address specified below (or to such address as may be specified in writing in accordance herewith to the other party hereto):

If to CuraGen:	CuraGen Corporation
	555 Long Wharf Drive
	New Haven, CT 06511
	Attention: President
If to 454:	454 Life Sciences
	20 Commercial Street
	Branford, CT06405
	Attention: President
In each case, with a copy to:	Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
	One Financial Center
	Boston, MA 02111
	Tel.: (617) 542-6000
	Fax: (617) 542-2241
	Attention: Jeffrey M. Wiesen, Esq.

Any notice or communication given in conformity with this Section 8.1 shall be deemed to be effective when received by the addressee, if delivered by hand or by courier, when confirmed by the addressee if delivered by facsimile and five (5) days after mailing, if mailed.

8.2. Entire Agreement. This Agreement constitutes, on and as of the date hereof, the entire agreement of CuraGen and 454 with respect to the subject matter hereof, and all prior or contemporaneous understandings or agreements, whether written or oral, between CuraGen and 454 with respect to such subject matter are hereby superseded in their entirety.

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

19

8.3. No Implied Waivers: Rights Cumulative. No failure on the part of CuraGen or 454 to exercise and no delay in exercising any fight, power, remedy or privilege under this Agreement, or provided by statute or at law or in equity or otherwise, shall impair, prejudice or constitute a waiver of any such right, power, remedy or privilege or be construed as a waiver of any breach of this Agreement or as an acquiescence therein, nor shall any single or partial exercise of any such right, power, remedy or privilege preclude any other or further exercise thereof or the exercise of any other right, power, remedy or privilege.

8.4. Amendments. This Agreement may be amended, modified, superseded or canceled, and any of the terms may be waived, only by a written instrument executed by each party or, in the case of waiver, by the party or parties waiving compliance. The delay or failure of any party at any time or times to require performance of any provisions shall in no manner affect the rights at a later time to enforce the same. No waiver by any party of any condition or of the breach of any term contained in this Agreement, whether by conduct, or otherwise, in any one or more instances, shall be deemed to be, or considered as, a further or continuing waiver of any such condition or of the breach of such term or any other term of this Agreement.

8.5. Successors and Assigns. The terms and provisions of this Agreement shall inure to the benefit of, and be binding upon, CuraGen and 454, and their respective successors and assigns.

8.6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Connecticut, without regard to the application of principles of conflicts of law.

8.7. Force Majeure. Neither CuraGen nor 454 shall be liable for failure of or delay in performing obligations set forth in this Agreement, and neither shall be deemed in breach of its obligations, if such failure or delay is due to natural disasters or any causes beyond the reasonable control of CuraGen or 454. In event of such force majeure, the party affected thereby shall use reasonable efforts to cure or overcome the same and resume performance of its obligations hereunder.

8.8. Further Assurances. Each of CuraGen and 454 agrees to duly execute and deliver, or cause to be duly executed and delivered, such further instruments and do and cause to be done such further acts and things, including, without limitation, the execution of such additional assignments, agreements, documents and instruments, that may be necessary or as the other party hereto may at any time and from time to time reasonably request in connection with this Agreement or to carry out more effectually the provisions and purposes of, or to better assure and confirm unto such other party its rights and remedies under, this Agreement.

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

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

20

applicable law, CuraGen and 454 hereby waive any provision of law that would render any provision hereof prohibited or unenforceable in any respect.

8.10. Headings. Headings used herein are for convenience only and shall, not in any way affect the construction of, or be taken into consideration in interpreting, this Agreement.

8.11. Interpretation. Each of CuraGen and 454 hereby acknowledges and agrees that: (i) each party and its counsel reviewed and negotiated the terms and provisions of this Agreement and have contributed to its revision; (ii) the rule of construction to the effect that any ambiguities are resolved against the drafting party shall not be employed in the interpretation of this Agreement; and (iii) the terms and provisions of this Agreement shall be construed fairly as to all parties hereto and not in a favor of or against any party, regardless of which party was generally responsible for the preparation of this Agreement.

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

8.13. Termination of Original Agreement. The parties acknowledge and agree that (a) the Original Agreement is hereby terminated as of the Restated Effective Date and (b) except as provided in this Agreement, all rights, obligations and licenses of 454 and/or CuraGen under the Original Agreement shall terminate and shall be of no further force and effect on and after such Restated Effective Date.

[Remainder of page intentionally left blank]

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

21

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their respective corporate names by their respective authorized representatives as of the date first above written.

CURAGEN CORPORATION
By:	/s/    CHRISTOPHER K. MCLEOD
Name: Christopher K. McLeod
Title: Executive Vice President

454 CORPORATION
By:	/s/    RICHARD BEGLEY
Name: Richard Begley
Title: Chief Executive Officer and President

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

22

Schedule A

Core Patent Rights

Pending Patent Applications

Filing Date	Serial Number	Title
[*********************]	[*********************]	[*********************]
[*********************]	[*********************]	[*********************]

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

23

Schedule B

Third Party Royalties

None

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

24

Schedule C

Terms of Supply of Instruments, Reagents and Software

The transfer price for all Instruments, Reagents and Software supplied by 454 to CuraGen under Section 2.2.3 of this Agreement shall be equal to the lower of (a) [**********************************************************************] and (b) [**********************************************************************************************************

* ********************]

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

25

Schedule D

Sales to Human Health Care Companies

[*******************************************************************************************************

*******************************************************************************************************]

[*******************************************************************************************************

*******************************************************************************************************]

[*******************************************************************************************************

*******************************************************************************************************]

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

26

EXHIBIT A

Form of Software License Agreement

See Tab 5

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

27

EXHIBIT B

Form of Beta Site Agreement

See Tab 6

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

28

EX-10.28

EXHIBIT 10.28

LICENSE AGREEMENT

This License Agreement (this “Agreement”) is made effective as of 18 August, 2003 (the “Effective Date”) by and between Pyrosequencing AB (publ), a corporation existing under the laws of Sweden, having its registered office at Vallongatan 1, SE-752 28 Uppsala, Sweden (“Licensor”), and 454 Corporation, a Delaware corporation with a principal place of business at 20 Commercial Street, Branford, Connecticut, USA 06405 (“Licensee”). Licensor and Licensee are each hereafter referred to individually as a “Party” and together as the “Parties”.

WHEREAS, Licensor is the owner of or otherwise controls certain proprietary Licensed Patent Rights and Licensed Technology (as defined below);

WHEREAS, Licensee desires to obtain a license from Licensor under such Licensed Patents Rights and Licensed Technology to develop and commercialize Licensed Products and to perform Licensed Services;

WHEREAS, Licensor desires to grant such license to Licensee on the terms and subject to the conditions of this Agreement; and

WHEREAS, the Parties acknowledge that the intent of this Agreement is to allow the Licensee to exclusively develop and market products based on the Licensed Technology within the Exclusive Field; and

WHEREAS, Licensor has no intention of competing with Licensee in the Exclusive Field (as defined below) and Licensee has no intention of utilizing Licensed Technology to compete with Licensor outside of the Field.

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

1. DEFINITIONS

Whenever used in the Agreement with an initial capital letter, the terms defined in this Article 1 shall have the meanings specified.

1.1 “Affiliate” shall mean any corporation, firm, limited liability company, partnership or other entity which directly controls or is controlled by or is under common control with a Party to this Agreement. For purposes of this Section 1.1, “control” means ownership, directly or indirectly through one or more Affiliates, of fifty percent (50%) or more of the shares of stock entitled to vote for the election of directors, in the case of a corporation, or fifty percent (50%) or more of the equity interests in the case of any other type of legal entity, status as a general partner in any partnership, or any other arrangement whereby a Party controls or has the

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

right to control the Board of Directors or equivalent governing body of a corporation or other entity. CuraGen Corporation (“CuraGen”), a Delaware corporation with a place of business at 555 Long Wharf Drive, New Haven, Connecticut, USA, 06511 is hereby deemed by the Parties to be an Affiliate of Licensee for all purposes hereunder and during the entire Term of this Agreement.

1.2 “Co-Exclusive Field” shall mean sequencing applications performing [********************************], including but not limited to the performance of the following activities, or any compenent step or process included within such activities, with respect to any or all organisms and for whatever purposes or purposes: (a) [***********************] (b) [***********************************] (c) [***************************************] and (d) [********************************************************************************************

***************************************************************************************************

**************************************************************************************************]

1.3 “Confidential Information” shall mean with respect to a Party (the “Receiving Party”), all information (whether or not such information is oral, written or in any other form, or expressly stated to be confidential, and includes, but not limited to this Agreement and its terms and conditions (except as provided in Section 5.3), any information gathered during the performance of this Agreement or activities of the Disclosing Party (as defined below), with particular regard to know-how, technical data, intellectual property and regulatory data) which is disclosed by the other Party (the “Disclosing Party”) to the Receiving Party hereunder or to any of its employees, consultants, Affiliates, licensees or sublicensees, except to the extent that the Receiving Party can demonstrate by written record or other suitable physical evidence that such information, (a) as of the date of disclosure is known to the Receiving Party or its Affiliates other than by virtue of a prior confidential disclosure to such Party or its Affiliates; (b) as of the date of disclosure is in, or subsequently enters, the public domain, through no fault or omission of the Receiving Party; (c) is obtained from a Third Party having a lawful right to make such disclosure free from any obligation of confidentiality to the Disclosing Party; or (d) is independently developed by or for the Receiving Party without reference to or reliance upon any Confidential Information of the Disclosing Party.

1.4 “Control” or “Controlled” shall mean with respect to any intellectual property rights or Technology, the possession by a Party of the ability to grant a license or sublicense of such intellectual property rights, or Technology as provided for herein without violating the terms of any arrangement or agreements between such Party and any Third Party.

1.5 “Cost of Goods” shall mean the cost of [**************************************************************], to be calculated in accordance with internationally generally accepted accounting principles, including but not limited to the following direct costs: (a) components and raw materials purchased from Third Parties and incorporated into such Licensed Products; (b) salary, wages and bonuses paid to persons assembling, manufacturing, inspecting, packaging or handling such Reagent Products; and (c) the following direct overhead costs to the extent attributable to such Reagent Products: rent, utilities and equipment depreciation.

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

2

1.6 “Exclusive Field” shall mean sequencing applications performing [***************************************], including but not limited to the performance of the following activities, or any compenent step or process included within such activities, with respect to any or all organisms and for whatever purposes or purposes: (a) [********************

*******************************************] (b) [*********************************************] (c) [**************************] and (d) [**************************************************************

**************************************************************************************************

**************************************************************************************************]

1.7 “Field” shall mean sequencing applications performing [*****************************************], including but not limited to the performance of the following activities, or any component step or process included within such activities, with respect to any or all organisms and for whatever purpose or purposes: (a) [*******************************

******************************] (b) [*************************] (c) [************************************] and (d) [*********************************************************************************************

***************************************************************************************************

**************************************************************************************************]

1.8 “First Commercial Sale” shall mean the date of the first transaction, transfer or disposition for value to a Third Party of a Licensed Product or Licensed Service by or on behalf of the Licensee.

1.9 “FTE” shall mean the equivalent of the scientific work of one (1) competent scientific person working full time for a year. The term “full time” shall be defined by reference to the labor laws or customs of the country where the relevant individual is employed.

1.10 “Hardware Products” shall mean Licensed Products that consist of hardware or instruments used in SBS [*****

***************************************************************************************************

**************************************************************************************************]

1.11 “Improvements” shall mean any enhancement, invention or discovery Controlled by Licensor [********

***************************************************************************************************

**************************************************************************************************]

1.12 “Indemnitee” shall mean either a Licensee Indemnitee or a Licensor Indemnitee as defined in Article 8.

1.13 “Licensed Patent Rights” means all Patent Rights that claim or cover Licensed Technology or Improvements.

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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1.14 “Licensed Product” shall mean any product, the manufacture, use, sale of which would, absent the license granted to Licensee hereunder, infringe any Valid Claim included in the Licensed Patent Rights.

1.15 “Licensed Services” shall mean any service performed by Licensee for a Third Party, the performance of which would, absent the license granted to Licensee hereunder, infringe any Valid Claim included in the Licensed Patent Rights.

1.16 “Licensed Technology” shall mean and include all Technology, whether or not patentable, that is useful for the performance of SBS within the Field and that is Controlled by Licensor as of the Effective Date. Licensed Technology specifically does not include (a) [*******************************************] and (b) [*********************

*******************************].

1.17 “Net Sales” shall mean the gross amount billed by Licensee to Third Parties worldwide for the sales of Reagent Products and/or Hardware Products, less (a) allowances for normal and customary trade, quantity and cash discounts actually allowed and taken, (b) transportation, insurance and postage charges, if prepaid by Licensee or any Affiliate, (c) credits, rebates, returns (including, but not limited to, wholesaler and retailer returns), to the extent actually allowed, and (d) sales, use and other taxes similarly incurred to the extent stated on the invoice as a separate item.

1.18 “Patent Rights” shall mean the rights and interests in and to issued patents and pending patent applications (including inventor’s certificates and utility models) in any country or jurisdiction within the Territory, including all provisionals, substitutions, continuations, continuations-in-part, divisionals, supplementary protection certificates, renewals, all letters patent granted thereon, and all reissues, reexaminations, extensions, confirmations, revalidations, registrations, patents of addition thereof, PCTs and foreign counterparts, Controlled by a Party.

1.19 “Process Cycle” shall mean the performance of sequencing [**********************************

***************************************************************************************************

**************************************************************************************************]

1.20 “Pyrosequencing Kit” shall mean all reagents, equipment, components, kits and instructions for preparation and operation that are necessary and sufficient for Licensee to sequence a sample.

1.21 “Reagent Products” shall mean Licensed Products that consist of reagents that are used to perform SBS excluding any kits, reagents or components that are used for Sample Preparation and excluding any hardware or instruments.

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

4

1.22 “Related Technology” shall mean any Technology related to the Field and Controlled by Licensor during the Term, which is not Licensed Technology or Improvements.

Related Technology does not include any Technology of a Third Party that becomes a controlling shareholder of Licensor.

1.23 “Sample Preparation” shall mean any reagents, methods and instruments that are used to prepare a nucleic acid sample for sequencing (including amplification of the sample) up to the initiation of the SBS process.

1.24 “Sequencing by Synthesis” or “SBS” shall mean Licensors’ proprietary process for determining the sequence of genetic material by synthesizing from a template derived from such material.

1.25 “Sublicensee” shall mean any Third Party to whom Licensee grants a sublicense of some or all of the rights granted to Licensee under this Agreement.

1.26 “Technology” shall mean and include any and all proprietary ideas, inventions, discoveries, biologic materials, data, results, formulae, designs, specifications, methods, processes (including, without limitation, purification processes), formulations, techniques, ideas, know-how, technical information (including, without limitation, structural and functional information), process information, and any and all proprietary enzymological, chemical, quality control assay, control and manufacturing data, reagents and materials.

1.27 “Technology Transfer” shall mean the process by which Licensor will enable Licensee to fully exploit in a reasonable manner, the rights and licenses granted to Licensee hereunder, including without limitation, by conveying information relating to the preparation or sourcing of Reagents, by training Licensee in using the Licensed Technology and by delivering to Licensee the proprietary materials that are included within the Licensed Technology, all as more fully set forth herein.

1.28 “Term” shall mean the period commencing on the Effective Date and continuing until the expiration or termination of this Agreement in accordance with the terms hereof (including Section 9).

1.29 “Territory” shall mean everywhere.

1.30 “Third Party” shall mean any person or entity other than Licensee and Licensor.

1.31 “Valid Claim” shall mean a claim in an issued, unexpired patent within the Licensed Patent Rights that (a) has not been revoked, held invalid, or declared unpatentable or unenforceable in a decision of a court or other body of competent jurisdiction that is unappealable or unappealed within the time allowed for appeal, (b) has not been rendered unenforceable through disclaimer or otherwise, and (c) is not lost through an interference proceeding.

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

5

2. GRANT OF RIGHTS

2.1 License to Licensee.

2.1.1 Grant of License. For any and all uses within the Field, subject to the terms and conditions of this Agreement, Licensor hereby grants to Licensee a Semi-Exclusive, royalty-bearing license, including the right to grant sublicenses in accordance with Section 2.1.2, under the Licensed Patent Rights and under all of Licensor’s right, title and interest in and to the Licensed Technology and Improvements, to make, have made, use, have used, sell, offer for sale, have sold, import, and have imported Licensed Products and to perform and have performed Licensed Services in the Territory. For purposes of this Agreement, the term “Semi-Exclusive” shall mean that the license granted herein to Licensee shall be exclusive (even as pertaining to Licensor) within the Field, provided, however, that Licensor hereby retains the right to perform activities within the Co-Exclusive Field without the right to grant further licenses or sublicenses within the Co-Exclusive Field. The Parties hereby acknowledge and agree that Third Party purchasers of products from Licensor for use within the Co-Exclusive Field shall be entitled to use such products within the Co-Exclusive Field, and Third Party recipients of services within the Co-Exclusive Field from Licensor will be entitled to use the materials and data resulting from such services, in both cases free and clear of any claim for a royalty, or other claim, of Licensee, based on or arising under Licensee’s rights hereunder in the Licensed Patents. Licensor shall include the following restrictive language, or language which is substantially equivalent, on all packaging, labels, promotional literature and contracts for products that include or are composed of sequencing applications that are capable, with or without modification, of being used within the Field:

Restriction on Use. [**********************************************************************************

***************************************************************************************************

***************************************************************************************************

***************************************************************************************************

**************************************************************************************************]

Licensor shall modify such language as necessary to comply with the laws and regulations of the place of sale of any particular product governed by this Section provided that the resulting language is legally effective to prevent infringement by Licensor, its agents and employees, and the purchase of such product, of Licensee’s rights within the Exclusive Field, and further provided that Licensor shall discontinue sales of such products in any jurisdiction where such legally effective prevention is not reasonably attainable.

2.1.2 Right to Sublicense

[**********************************************************************************************************

***********************************************************************************************************

***********************************************************************************************************

***********************************************************************************************************]

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

6

shall include the following restrictive language, or language which is substantially equivalent, on all packaging, labels, promotional literature and contracts for Licensed Products:

Restriction on Use. [************************************************ **********************************

***************************************************************************************************

***************************************************************************************************

***************************************************************************************************

**************************************************************************************************]

Licensee shall modify such language as necessary to comply with the laws and regulations of the place of sale of any Licensed Product provided that the resulting language is legally effective to prevent infringement by Licensee, its agents and employees, and the purchase of such Licensed Product, of Licensor’s rights outside of the Field, and further provided that Licensee shall discontinue sales of the Licensed Product in any jurisdiction where such legally effective prevention is not reasonably attainable. To the extent the above notice language converts a sale of Licensed Products into a license, or sublicense, of Licensed Products and any of the rights licensed hereunder, Licensor hereby consents in advance to the grant of all such licenses and sublicenses.

2.1.3 Warranty Concerning Licensed Patent Rights. Licensor hereby represents and warrants that all of the Licensed Patent Rights as of the Effective Date are listed on Schedule A attached hereto and made a part hereof. Licensee covenants that Licensor shall update Schedule A by written notice to Licensee on an annual basis during the Term to include any new patents and patent applications not previously listed. The inclusion or exclusion of a patent or patent application from Schedule A is not to be deemed a conclusive indication of whether that patent or application is or should be considered a “Licensed Patent Right” for purposes of this Agreement. Licensor further warrants that it has no sequencing technology other than SBS in development as of the Effective Date.

2.2 Grant of Option to Related Technology. Licensor shall notify Licensee of any Related Technology and hereby grants to Licensee an exclusive option under Licensor’s right, title and interest in Related Technology until December 31, 2007 (the “Option”). Such Option, as it relates to any particular item of Related Technology, shall be in effect for a period of up to six (6) months from the date of disclosure of such Related Technology pursuant to this Section 2.2 (the “Option Period”). Licensee shall exercise the Option by providing written notice to Licensor within the Option Period of its intent to exercise such Option, at which time the Parties shall in good faith negotiate an agreement for the commercial exploitation of such Related Technology in the Field, which agreement shall contain commercially reasonable terms and conditions. In the event that Licensee fails to exercise the Option as to any particular item of Related Technology or if the Parties fail to enter into a license agreement for the Related Technology with respect to which Licensee exercised its Option, Licensor shall have the right, subject to the other terms and conditions set forth herein, to license such Related Technology to Third Parties with no further obligation to Licensee under the Option.

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

7

2.3 Exclusivity. Licensee agrees not to sell Licensed Products or Licensed Services to Third Parties during the Term for use outside of the Field. For the purposes of clarity, provided that Licensee has otherwise complied with the requirements of this Agreement, including without limitation, Section 2.1.2, Licensee shall not be in breach of this Section 2.3 if a Third Party purchaser of Licensed Products or Licensed Services engages in activities that are not permitted by the terms of any such sale; provided, however, that promptly after becoming aware of such activities by such Third Party purchaser, Licensee shall direct such Third Party purchaser to cease such activities and, unless such Third Party purchaser does promptly cease such activities, Licensee shall not provide such Licensed Products or Licensed Services that are part of such activities to such Third Party purchaser. Licensor agrees not to sell, transfer or convey any rights, licenses, products or components to Third Parties during the Term that could assist or enable such Third Party to manufacture, use, sell or import products, or perform services, within the Exclusive Field. For the purposes of clarity, provided that Licensor has otherwise complied with the requirements of this Agreement, including without limitation, Section 2.1.1, Licensor shall not be in breach of this Section 2.3 if a Third Party engages in activities that are not permitted by the terms of any such sale, transfer or conveyance; provided, however, that promptly after becoming aware of such activities by such Third Party, Licensor shall direct such Third Party to cease such activities and, unless such Third Party does promptly cease such activities, Licensor shall not sell, transfer or convey such rights, licenses, products or components that are part of such activities to such Third Party.

2.4 Obligations to Third Party Licensors. The Parties hereby acknowledge that certain of the Licensed Patent Rights are Controlled by the Licensor by virtue of a license or other agreement between the Licensor and a Third Party (each a “Third Party Licensor”) who owns or otherwise Controls such Patent Rights. The Parties further acknowledge that such agreements contain certain payment or other requirements or obligations pertaining to the grant of sublicenses, or the activities of sublicensees, under such agreements (each such license or agreement is a “Third Party Agreement”).

2.5 Notice. Attached hereto as Exhibit 2.5 are copies of all Third Party Agreements to which Licensor is a party as of the Effective Date. The Third Party Agreements attached hereto have been redacted to remove terms which are not relevant to the Licensee. Licensor agrees to provide prompt notice to the Licensee of any additional Third Party Agreements it enters into during the Term along with a redacted copy of such Third Party Agreements.

2.6 Obligations under Third Party Agreements Licensee hereby agrees to conform to the obligations and restrictions imposed upon it as a sublicensee (a “Sublicensee Party”) under a Third Party Agreement(s), as such obligations and restrictions are set forth in Exhibit 2.5 as amended from time-to-time during the Term. Under certain Third Party Agreements, the Third Party Licensor is entitled to receive payments on account of sales of products by sublicensees (“Third Party Payments”). Licensee hereby assumes the obligation to make all such Third Party Payments as are attributable to the sale of Licensed Products and Licensed Services, by it, its Affiliates and its Sublicensees, as and when required under the

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

8

applicable Third Party Agreements. Each Party further agrees that the Licensee shall have the right, but not the obligation, to fulfill the Licensor’s obligations under any Third Party Agreement, except for obligations under the Third Party Agreements disclosed on Exhibit 2.6, if the Licensor shall fail to do so in a timely and complete manner, in order to avoid a loss or curtailment of the Licensee’s rights under such Third Party Agreement, and that the Licensor shall reimburse the Licensee for all reasonable costs and expenses incurred in so fulfilling such obligations of the Licensor.

2.7 Representation Concerning Third Party Agreements. Licensor hereby represents and warrants, except as disclosed on Exhibit 2.6, as follows: (a) the execution and delivery of this Agreement is not a violation or breach of its obligations under any Third Party Agreement, (b) Licensor has not committed an event of default or breach of any of its obligations under any Third Party Agreement, (c) Licensor will provide Licensee with prompt notice of any alleged event of default or breach of obligations committed by Licensor under any of the Third Party Agreements, (d) the copies of the Third Party Agreements attached hereto as Exhibit 2.5 are true, accurate and, except for the redactions permitted under Section 2.5, complete versions of such agreements, (e) there are no other Third Party Agreements as of the Effective Date and (f) Licensor is not, as of the Effective Date, negotiating any other Third Party Agreements.

3. DEVELOPMENT AND COMMERCIALIZATION

3.1 Commercialization.

3.1.1 Responsibility within the Exclusive Field. From and after the Effective Date, Licensee shall have full control and authority over the development and commercialization of Licensed Products within the Exclusive Field in the Territory. Licensee shall own all data, results and all other information arising from any such activities within the Exclusive Field under this Agreement, and all of the foregoing information, documentation and materials shall be considered Confidential Information of Licensee. All activities relating to development and commercialization under this Agreement shall be undertaken at Licensee’s sole cost and expense, except as otherwise expressly provided in this Agreement.

3.1.2 Responsibility within the Co-Exclusive Field. The Parties shall, from and after the Effective Date, each have the right to independently develop and commercialize products, in the Territory, for use within the Co-Exclusive Field. The Parties shall independently own all data, results and all other information arising from any such activities within such Fields under this Agreement, and all of the foregoing information, documentation and materials shall be considered Confidential Information. All activities relating to development and commercialization within such Fields under this Agreement shall be undertaken at each Party’s cost and expense, except as otherwise expressly provided in this Agreement.

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

9

3.1.3 Diligence. Licensee will exercise commercially reasonable efforts and diligence and comply with all applicable laws in developing and commercializing Licensed Products. If (a) a First Commercial Sale does not occur prior to [**************], or (b) prior to a First Commercial Sale, Licensee fails to allocate a minimum of [***************] per year to developing Licensed Products, then Licensor may, by written notice to Licensee, convert the License granted to Licensee under Section 2.1.1 to a non-exclusive license. All other terms and conditions shall continue in full force and effect in accordance with their terms except that the amounts payable under Article 4 shall be renegotiated in good faith, from time to time, so as to be no more than the amounts payable under the most-favorable non-exclusive license of any of the Licensed Patent Rights granted by the Licensor to a Third Party on an arms length basis at that time, or at any time, during the Term. Licensee shall promptly disclose the terms of each license of the Licensed Patent Rights which it has granted, or which it grants, during the Term so that Licensee may monitor compliance with this Section.

3.2 Technology Transfer. Licensor shall enable Licensee to exercise the licenses granted hereunder by Licensor to Licensee, by undertaking and completing a Technology Transfer as set forth herein. The Licensee acknowledges that the information provided by the Licensor is of extreme importance and very valuable for the Licensor and a breach of the confidentiality in respect of the information disclosed under the Technology Transfer would be extremely severe for the Licensor. The Technology Transfer consists of two phases, the Initial Technology Transfer (as defined in Section 3.2.1), which the Parties aim to complete within one hundred and twenty (120) days after the Effective Date, and the Additional Technology Transfer (as defined in Section 3.2.2). The Licensor shall free of charge provide the Licensee with personnel which will during up to [*****************] assist the Licensee with Initial Technology Transfer. In the event the completion of Initial Technology Transfer requires more than [*********************] by the Licensor, the Licensee shall reimburse the Licensor at the then current cost price for personnel assisting the Licensee (as of July 2003, at cost price per hour per person amounts to [*********************************] per hour). In addition, Licensee shall reimburse Licensor for all its other costs related to such assistance (including materials) during the Technology Transfer.

3.2.1 Initial Technology Transfer. The purpose of the Initial Technology Transfer shall be to enable Licensee to utilize the Licensed Technology to manufacture the Pyrosequencing Kit in its then current form, including (a) [*****************************], (b) [************************************************************], and (c)[**************************************************************************************](“Initial Technology Transfer”).

3.2.2 Additional Technology Transfer. The Parties acknowledge that Licensor will continue to update and augment the technology transfer to Licensee during the Term in order to enable Licensee to fully exploit the rights and licenses granted to Licensee hereunder (“Additional Technology Transfer”). Such update and augmentation shall, when requested by Licensee, typically take place two times per year. Except as provided in Section 3.2, Licensee shall reimburse the Licensor for its costs for personnel assisting the Licensee

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

10

during Additional Technology Transfer at cost price per hour per person and for all its other costs related to such assistance during the Additional Technology Transfer.

3.2.3 Training and Consultation. The Parties acknowledge that the Technology Transfer will include training and consultation services to be provided by Licensor. Such training and consultation shall be conducted at both Parties’ sites. Licensee shall have reasonable access to such of Licensor’s employees, consultant and advisors as Licensee may request in connection with the Technology Transfer. Representatives of Licensee may from time to time, following reasonable notice to Licensor and during regular business hours, to a reasonable extent visit Licensor’s facilities to monitor activities in order to develop a more complete understanding of the Licensed Technology. For the avoidance of doubt, Licensee shall reimburse Licensor for all its costs related to such training and consultation services as stated in this Section 3.2.

3.2.4 Maximum assistance. The Licensor is not obliged to in total provide more than [*******] for the Initial Technology Transfer and the Additional Technology Transfer.

3.2.5 Option to acquire Pyrosequencing Kits. Licensor hereby grants Licensee an option to acquire Pyrosequencing Kits from Licensor. Licensee shall exercise the option by providing written notice to Licensor of its intent to exercise such option, at which time the Parties shall in good faith negotiate an agreement for the supply.

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

11

4. PAYMENTS AND ROYALTIES

4.1 License Fee.

4.1.1 Upfront Fee. In consideration of the grant of the license described in Section 2.1 hereof, and subject to the terms and conditions set forth herein, Licensee hereby agrees to pay Licensor a non-refundable upfront license fee in the amount of two million five hundred thousand dollars ($2,500,000) payable as follows: (a) two million dollars ($2,000,000) shall be payable in cash within ten (10) days of the Effective Date and (b) five hundred thousand dollars ($500,000) shall be payable in cash upon the acceptance by the Licensee that the Initial Technology Transfer has been successfully completed. Such acceptance shall not be unreasonably withheld.

4.1.2 Annual Payments. In further consideration of the grant of the license by Licensor hereunder, and subject to the terms and conditions set forth herein, including without limitation the acceptance by Licensee that the Initial Technology Transfer has been successfully completed (such acceptance shall not be unreasonably withheld), Licensee hereby agrees to pay Licensor a non-refundable fee of five hundred thousand dollars ($500,000) in cash payable on each of the first four (4) anniversaries of the Effective Date.

4.2 Payment of Royalties; Royalty Rates; Minimum Royalties

4.2.1 Royalty Payments. In further consideration of the grant of the license by Licensor hereunder, and subject to the other terms of this Agreement (including the remainder of this Section 4), commencing on the date of the First Commercial Sale of each Licensed Product or Licensed Service in each country in the Territory and continuing until the expiration or termination of the last Licensed Patent Rights claiming the manufacture, use, sale or importation of a Licensed Product, or the performance of a Licensed Service, in any country in the Territory, Licensee shall pay to Licensor a royalty on Licensed Product sold, and Licensed Services performed, by Licensee in each country in the Territory according to the following table:

Item Sold	Royalty Base and Rate
[**************]	[****] of Net Sales
[**************]	[****] of Net Sales
[**************]	[****] of Cost of Goods

Except for transfers pursuant to Section 4.6, sales or other disposals of Reagent Products and Hardware Products other than in a bona fide arms length transaction exclusively for cash, shall be deemed to constitute a sale at the relevant open market price in the country in which the sale

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

12

or other disposal occurs, or, if that price is not ascertainable, a reasonable price assessed on an arms length basis for the supply of Reagent Products or Hardware Products.

The rates set forth in the table above shall be automatically decreased by [*************] of the amount indicated in the table effective for royalties payable on or after January 1, 2014 and prior to December 31, 2014 and shall be automatically decreased by an additional [****************] of the amount indicated in the table effective for royalties payable on or after January 1, 2015.

Anything herein to the contrary notwithstanding, the royalty on Net Sales of Hardware Products described above shall not accrue or become payable unless and until a patent issues in the US or a major European Union country with claims as set forth in patent application number [*********].

4.2.2 Third Party Royalty Offset. All Third Party Payments and, in the event that Licensee, in order to exploit the license granted to it under Section 2.1 of this Agreement in any country, makes payments to one or more Third Parties (with the Third Party Payments such amounts are “FTO Payments”) as consideration for a license to an issued patent or patents, in the absence of which the Licensed Product or Licensed Service could not legally be manufactured, used, sold or imported into such country, then Licensee shall have the right to reduce the royalties as set forth herein. If FTO Payments and the payments due under Section 4.2.1 in respect of a Licensed Product or Licensed Service exceed, in the aggregate, [***********] of the Net Sales for Reagent Products, or exceed [***********] of the Net Sales for Hardware Products, or exceed [***********] of the Cost of Goods for Licensed Services, in any country, then the amounts that would otherwise be due to Licensor pursuant to Section 4.2.1 above shall be reduced by an amount equal to [***********] of such FTO Payments. Notwithstanding the foregoing, such reductions shall in no event reduce such royalty for such Licensed Product or Licensed Service in any such country to less than [***********] of the rates otherwise specified above.

4.2.3 Credit for Annual Payments and Exclusivity Payments. [***********] of the third and fourth annual payments made under Section 4.1.2 and of each Exclusivity Payment paid under Section 4.3.1 shall be credited against royalties payable under Section 4.2 as and when such royalties become due and payable, until such credit has been taken in full.

4.3 Exclusivity Payments.

4.3.1 Payment. To maintain the Semi-Exclusive status of the license granted by Licensor hereunder, and subject to the other terms and conditions of this Agreement, Licensee shall pay Licensor non-refundable exclusivity payments as set forth herein (“Exclusivity Payments”). On each of the [***********] anniversaries of the Effective Date, the Exclusivity Payment shall be [*******************] and thereafter, the Exclusivity Payment will be reduced to [***********

********************************] for the [*********] anniversary, and [****************************] for each anniversary thereafter. In the

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

13

event that Licensee fails to make the Exclusivity Payments as called for herein, then Licensor may, by written notice to Licensee, convert the License granted to Licensee under Section 2.1.1 to a non-exclusive license. All other terms and conditions shall continue in full force and effect in accordance with their terms except that the amounts payable under Article 4 shall be renegotiated in good faith, from time to time, so as to be no more than the amounts payable under the most-favorable non-exclusive license of any of the Licensed Patent Rights granted by the Licensor to a Third Party on an arms length basis at that time, or at any time, during the Term. Licensor shall promptly disclose the terms of each license of the Licensed Patent Rights which it has granted, or which it grants, during the Term so that Licensee may monitor compliance with this Section.

4.4 Payment Terms.

4.4.1 Payment of Royalties and Other Payments. Unless otherwise expressly provided, Licensee shall make any fees, license or royalty payments owed to Licensor hereunder in arrears, [******************************************]. Each royalty payment shall be accompanied by a report for each country in the Territory in which sales of Licensed Products or Licensed Services occurred in the calendar quarter covered by such statement, specifying: the total Net Sales, the total Cost of Goods, the applicable royalty rate under this Agreement; and the royalties payable.

4.4.2 Overdue Royalties. Subject to the other terms of this Agreement, any payments not paid within the time period set forth in this Section 4 shall bear interest at a rate of [***************] per month from the due date until paid in full, provided that in no event shall said annual rate exceed the maximum interest rate permitted by law in regard to such payments. Such royalty payment when made shall be accompanied by all interest so accrued.

4.4.3 Currency. All amounts referred to herein are in United States dollars. All payments made hereunder shall be made in United States dollars. With respect to sales outside of the United States, payments shall be calculated based on currency exchange rates for the last day of the quarter in respect of which such payment is owing. The exchange rate shall be obtained from the Wall Street Journal, Eastern U.S. Edition, or, if not available, the rate reported by a similar agency as agreed to by the Parties.

4.4.4 Tax Withholding; Restrictions on Payment. All payments hereunder shall be made free and clear of any taxes, duties, levies, fees or charges, except for withholding taxes (to the extent applicable). Licensee shall make any applicable withholding payments due on behalf of Licensor and shall provide Licensor upon request with such written documentation regarding any such payment as available to Licensee relating to an application by Licensor for a foreign tax credit for such payment with the United States Internal Revenue Service.

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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4.5 Records Retention; Review.

4.5.1 Royalties. Commencing as of the date of First Commercial Sale of the first Licensed Product or Licensed Service hereunder, Licensee and its Affiliates shall keep for at least three (3) years from the end of the calendar year to which they pertain complete and accurate records of sales by Licensee or its Affiliates, as the case may be, of each Licensed Product or Licensed Service, in sufficient detail to allow the accuracy of the payments hereunder to be confirmed.

4.5.2 Review. Subject to the other terms of this Section 4.5.2, at the request of Licensor, which shall not be made more frequently than [*****************] during the Term, upon at least [***************] days’ prior written notice from Licensor, and at the expense of Licensor (except as otherwise provided herein), Licensee shall permit an independent certified public accountant reasonably selected by Licensor and reasonably acceptable to Licensee to inspect (during regular business hours) the relevant records required to be maintained by Licensee under this Section 4.5. In every case the accountant must have previously entered into a confidentiality agreement with both Parties substantially similar to the provisions of Section 5 and limiting the disclosure and use of such information by such accountant to authorized representatives of the Parties and the purposes germane to this Section 4.5. Results of any such review shall be binding on both Parties absent manifest error. Each Party agrees to treat the results of any such accountant’s review of the other Party’s records under this Section 4.5 as Confidential Information of the other Party subject to the terms of Section 5. If any review reveals a deficiency in the calculation and/or payment of royalties by Licensee, then (a) Licensee shall promptly pay Licensor the amount remaining to be paid, and (b) if such underpayment is by seven [******************] or more, Licensee shall pay the reasonable out-of-pocket costs and expenses incurred by Licensor in connection with the review.

4.5.3 Other Parties. Licensee shall include in any agreement with its Affiliates terms requiring such party to retain records as required in this Section 4.5 and to permit Licensor to inspect such records as required by this Section 4.5.

4.6 Internal Research and Development Uses. The Parties acknowledge that, anything herein to the contrary notwithstanding, Licensee shall make no payments hereunder in connection with the use of the Licensed Technology for internal research and development purposes or the internal use of the results, information or data generated in connection with such use. “Internal research and development”, as used in this Section 4.6, shall be defined as the development by Licensee or CuraGen of Licensed Products and Licensed Services, the completion of the Technology Transfer and other internal research and development efforts.

5. TREATMENT OF CONFIDENTIAL INFORMATION

5.1 Confidential Obligations. Licensor and Licensee each recognize that the other Party’s Confidential Information constitutes highly valuable and proprietary confidential information. Licensor and Licensee each agree that during the Term and for [******] years thereafter, it will keep confidential, and will cause its employees and consultants to keep

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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confidential, all Confidential Information of the other Party. Neither Licensor nor Licensee nor any of their respective employees and consultants shall under any circumstances use Confidential Information of the other Party for any purpose whatsoever other than exercising any rights granted to it or reserved by it hereunder. Without limiting the foregoing, each Party may disclose information to the extent such disclosure is necessary to (a) file and prosecute patent applications and/or maintain patents which are filed or prosecuted in accordance with the provisions of this Agreement, or (b) file, prosecute or defend litigation in accordance with the provisions of this Agreement or (c) comply with applicable laws, regulations (including regulations of any nationally recognized securities exchange, quotation system or over-the-counter market on which such Party has its securities listed or traded) or court orders; provided, however, that if a Party is required to make any such disclosure of the other Party’s Confidential Information in connection with any of the foregoing, it will give reasonable advance notice to the other Party of such disclosure requirement and will use reasonable efforts to assist such other Party in efforts to secure confidential treatment of such information required to be disclosed.

5.2 Limited Disclosure and Use. Licensor and Licensee each agree that any disclosure of the other Party’s Confidential Information to any of its employees and consultants shall be made only if and to the extent necessary to carry out its rights and responsibilities under this Agreement and shall be limited to the maximum extent possible consistent with such rights and responsibilities and shall only be made to the extent any such persons are bound by written confidentiality obligations, at least as restrictive as those provisions of this Agreement, to maintain the confidentiality thereof and not to use such Confidential Information except as expressly permitted by this Agreement. Licensor and Licensee each further agree not to disclose or transfer the other Party’s Confidential Information to any Third Parties under any circumstance without the prior written approval from the other Party (such approval not to be unreasonably withheld), except as otherwise expressly permitted by this Agreement. Each Party shall take such action, and shall cause the Third Parties to whom it has disclosed Confidential Information pursuant to this Section 5.2, take such action, to preserve the confidentiality of each other’s Confidential Information as it would customarily take to preserve the confidentiality of its own Confidential Information, using, in all such circumstances, not less than reasonable care. Each Party, upon the request of the other Party, will return all the Confidential Information disclosed or transferred to it by the other Party pursuant to this Agreement, including all copies and extracts of documents and all manifestations in whatever form, within sixty (60) days of such request or, if earlier, the termination or expiration of this Agreement; provided however, that a Party may retain (a) any Confidential Information of the other Party relating to any license which expressly survives such termination and (b) one (1) copy of all other Confidential Information in inactive archives solely for the purpose of establishing the contents thereof.

5.3 Publicity. Anything in this Article 5 to the contrary notwithstanding, Licensee shall have the right to issue a press release that will include a description of the technology which is the subject matter of this Agreement, the identity of the Licensor and the Licensee, a description of the Semi-Exclusive nature of the grant and a description of the Field. Neither Party may publicly disclose the terms or any other matter of fact regarding this Agreement without the prior written consent of the other Party, which consent shall not be

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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unreasonably withheld or delayed; provided, however, that either Party may make such a disclosure to the extent required by law or by the requirements of any nationally recognized securities exchange, quotation system or over-the-counter market on which such Party has its securities listed or traded. In the event that such disclosure is required as aforesaid, the disclosing Party shall make reasonable efforts to provide the other Party with notice beforehand and to coordinate with the other Party with respect to the wording and timing of any such disclosure. Licensee, CuraGen and Licensor, upon the execution of this Agreement, will issue a joint press release with respect to this transaction in the form attached hereto as Exhibit 5.3. Either Party may make subsequent public disclosure of the contents of such press release without the further approval of the other Party.

5.4 Equitable relief. Each Party further understands and agrees that money damages may not be a sufficient remedy for any breach of this Agreement particularly regarding this Article 5, by either Party hereto or any of such Party’s representatives and that the non-breaching Party will be entitled to equitable relief, including injunction and specific performance, as a remedy for any such breach. Such remedies shall not be deemed to be the exclusive remedies for a breach by either party of this Agreement, but shall be in addition to all other remedies available at law or equity.

5.5 Certain Rights and Obligations of CuraGen. The Parties and CuraGen acknowledge and intend that, for the benefit of both Parties, CuraGen will have substantial access to Confidential Information of Licensor during the Term of this Agreement. Subject to the other terms and conditions set forth herein, including without limitation Article 10, the Parties and CuraGen agree that CuraGen shall have the same rights and obligations under this Article 5 as if CuraGen were an additional “Licensee.” For avoidance of doubt, CuraGen’s rights and obligations under this Article 5 shall be direct and shall not constitute or create a guaranty by CuraGen of Licensee’s obligations or liabilities hereunder.

6. PROVISIONS CONCERNING THE FILING, PROSECUTION AND MAINTENANCE OF PATENT RIGHTS

6.1 Patent Filing, Prosecution and Maintenance. Subject to the other terms of this Section 6.1, Licensor shall be responsible for preparing, filing, prosecuting, obtaining and maintaining, at its sole cost, expense and discretion, all Licensed Patent Rights in the relevant major market countries as reasonably decided by Licensor, typically the United States, the relevant major market countries within the European Union and Japan. Licensor: (i) will inform Licensee of all patent applications within Licensed Patent Rights and other patent filings that are relevant to the Field on the Effective Date by providing Schedule A, (ii) will annually update Schedule A, and (iii) will provide Licensee with a copy of any patent application within Licensed Patent Rights and other patent filings that are relevant to the Field at the time of such filing. If Licensor decides to not preserve a Licensed Patent Right (all or in part), Licensee may undertake to make such preservation at its own expense, in which case Licensor will assign to Licensee all of its rights to such patent application and invention and any subsequently issued patent thereon

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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in the country or countries in which Licensee undertakes such filing(s), each of which thereafter will be owned solely by Licensee. However, Licensor shall in such case have the right to royalty free sublicensable licenses on all such Licensed Patent Rights outside the Exclusive Field, free of charge.

6.2 Notice of Infringement. If, during the Term, either Party learns of any actual, alleged or threatened infringement by a Third Party of any Licensed Patent Rights under this Agreement, such Party shall promptly notify the other Party and shall provide such other Party with available evidence of such infringement.

6.3 Infringement of Patent Rights within the Field. Licensee shall have the first right (but not the obligation), at its own expense and with legal counsel of its own choice, to bring suit (or take other appropriate legal action) against any actual, alleged or threatened infringement of the Licensed Patent Rights where a substantial part of such infringing activity is within the Exclusive Field. Licensor shall have the right, at its own expense, to be represented in any such action by Licensee by counsel of Licensor’s own choice; provided, however, that under no circumstances shall the foregoing affect the right of Licensee to control the suit as described in the first sentence of this Section 6.3. If Licensee does not file any action or proceeding against such infringement within [***********] after the later of (i) Licensee’s notice to Licensor under Section 6.2 above, (ii) Licensor’s notice to Licensee under Section 6.2 above, or (iii) a written request from Licensor to take action with respect to such infringement, then Licensor shall have the right (but not the obligation), at its own expense, to bring suit (or take other appropriate legal action) against such actual, alleged or threatened infringement, with legal counsel of its own choice, but shall not be permitted to settle any such suit without the prior consent of Licensee, which consent shall not be unreasonably withheld. Any damages, monetary awards or other amounts recovered within the Field, whether by judgment or settlement, pursuant to any suit, proceeding or other legal action taken under this Section 6.3, shall applied as follows:

(a) First, to reimburse the Parties for their respective costs and expenses (including reasonable attorneys’ fees and costs) incurred in prosecuting such enforcement action;

(b) Second, to Licensee in reimbursement for lost sales (net of royalties) associated with Licensed Products and Licensed Services and to Licensor in reimbursement for lost royalties owing hereunder based on such lost sales;

(c) Third, any amounts remaining shall be allocated [***********] to each Party.

If a Party brings any such action or proceeding hereunder, the other Party agrees to be joined as party plaintiff if necessary to prosecute such action or proceeding, and to give the Party bringing such action or proceeding reasonable assistance and authority to file and prosecute the suit; provided, however, that neither Party shall be required to transfer any right, title or interest in or to any property to the other Party or any Third Party to confer standing on a Party hereunder.

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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6.4 Claimed Infringement. In the event that a Party becomes aware of any claim that the practice by Licensee of Licensed Patent Rights infringes the intellectual property rights of any Third Party, such Party shall promptly notify the other Party. In any such instance, the Parties shall cooperate and shall mutually agree upon an appropriate course of action. Each Party shall provide to the other Party copies of any notices it receives from Third Parties regarding any patent nullity actions, any declaratory judgment actions, any alleged infringement of Licensed Patent Rights or any alleged misappropriation of intellectual property with respect to Licensed Technology. Such notices shall be provided promptly, but in no event after more than [*************] days following receipt thereof.

6.5 Patent Invalidity Claim. If a Third Party at any time asserts a claim that any Licensed Patent Right is invalid or otherwise unenforceable (an “Invalidity Claim”), whether as a defense in an infringement action brought by Licensor or Licensee pursuant to Section 6.3 or in an action brought against Licensor or Licensee under Section 6.4, the Parties shall cooperate with each other in preparing and formulating a response to such Invalidity Claim. Neither Party shall settle or compromise any Invalidity Claim without the consent of the other Party, which consent shall not be unreasonably withheld.

7. REPRESENTATIONS AND WARRANTIES

7.1 Licensor Representations. Licensor represents and warrants to Licensee as of the Effective Date that:

(a) the execution and delivery of this Agreement and the performance of the transactions contemplated hereby have been duly authorized by all appropriate Licensor corporate action;

(b) this Agreement is a legal and valid obligation binding upon Licensor and enforceable in accordance with its terms, and the execution, delivery and performance of this Agreement by the Parties does not conflict with any agreement, instrument or understanding to which Licensor is a party or by which it is bound;

(c) Licensor has the full right and legal capacity to grant the rights granted to Licensee hereunder without violating the rights of any Third Party as of the Effective Date;

(d) To the best of Licensor’s knowledge, Licensed Patent Rights have been properly filed and prosecuted and Licensor is the sole owner or exclusive licensee of the Licensed Patent Rights and Licensed Technology;

(e) Licensor is not aware of any Third Party patent, patent application or other intellectual property rights that it is infringing as it is commercializing its product portfolio as of the Effective Date; and

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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(f) Licensor is not aware of any infringement by a Third Party of the Licensed Patent Rights in Schedule A as of the Effective Date.

7.2 Licensee Representations. Licensee represents and warrants to Licensor as of the Effective Date that:

(a) the execution and delivery of this Agreement and the performance of the transactions contemplated hereby have been duly authorized by all appropriate Licensee corporate action; and

(b) this Agreement is a legal and valid obligation binding upon Licensee and enforceable in accordance with its terms, and the execution, delivery and performance of this Agreement by the Parties does not conflict with any agreement, instrument or understanding to which Licensee is a party of or by which it is bound.

7.3 No Warranties.

7.3.1 Nothing in this Agreement is or shall be construed as:

(a) a warranty or representation by either Party as to the validity or scope of any patent application or patent licensed hereunder;

(b) a warranty or representation that anything made, used, sold or otherwise disposed of under any license granted pursuant to this Agreement is or will be free from infringement of patents, copyrights, and other rights of third parties.

7.3.2 Except as expressly set forth in this Agreement, NEITHER PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED. THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR OF TITLE OR OF NON-INFRINGEMENT OF ANY PATENT, COPYRIGHT, TRADEMARK, OR OTHER RIGHTS OF THIRD PARTIES, OR ANY OTHER EXPRESS OR IMPLIED WARRANTIES.

8. INDEMNIFICATION AND PARENT COMPANY GUARANTEE

8.1 Indemnification.

8.1.1 Licensee Indemnity. Subject to Section 8.1.2 below, Licensee shall indemnify, defend and hold harmless Licensor and its respective directors, officers,

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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employees, stockholders and agents and their respective successors, heirs and assigns (the “Licensor Indemnitees”) from and against any liability, damage, loss or expense (including reasonable attorneys’ fees and expenses of litigation) incurred by or imposed upon such Licensor Indemnitees, or any of them, in connection with any Third Party claims, suits, actions, demands or judgments, including, without limitation, personal injury and product liability matters, to the extent arising out of (a) any material breach of this Agreement by Licensee, or (b) the gross negligence or willful misconduct on the part of Licensee or any Affiliate, in any such case under this Section 8.1.1, except to the extent of Licensor’s responsibility therefor under Section 8.1.2 below.

8.1.2 Licensor Indemnity. Subject to Section 8.1.1 above, Licensor shall indemnify, defend and hold harmless Licensee and its respective directors, officers, employees, and agents, and their respective successors, heirs and assigns (the “Licensee Indemnitees”), from and against any liability, damage, loss or expense (including reasonable attorneys’ fees and expenses of litigation) incurred by or imposed upon such Licensee Indemnitees, or any of them, in connection with any Third Party claims, suits, actions, demands or judgments, including, without limitation, personal injury and product liability matters (but excluding any patent infringement matters, which are governed by Section 6 above), to the extent arising out of (a) any material breach of this Agreement by Licensor, or (b) the gross negligence or willful misconduct on the part of Licensor or any Affiliate, in any such case under this Section 8.1.2, except to the extent of Licensee’s responsibility therefor under Section 8.1.1 above.

8.2 Indemnification Procedures. In the event that any Indemnitee is seeking indemnification under Section 8.1 above from a Party (the “Indemnifying Party”), the other Party shall notify the Indemnifying Party of such claim with respect to such Indemnitee as soon as reasonably practicable after the Indemnitee receives notice of the claim, and the Party (on behalf of itself and such Indemnitee) shall permit the Indemnifying Party to assume direction and control of the defense of the claim (including the right to settle the claim solely for monetary consideration) and shall cooperate as requested (at the expense of the Indemnifying Party) in the defense of the claim. The indemnification obligations under Article 8 shall not apply to any harm suffered as a direct result of any delay in notice to the Indemnifying Party hereunder or to amounts paid in settlement of any claim, demand, action or other proceeding if such settlement is effected without the consent of the Indemnifying Party, which consent shall not be withheld or delayed unreasonably. The Indemnitee, its employees and agents, shall reasonably cooperate with the Indemnifying Party and its legal representatives in the investigation of any claim, demand, action or other proceeding covered by Section 8.1.

8.3 Parent Company Guarantee. For so long as Licensee is a majority-owned subsidiary of CuraGen, CuraGen hereby guarantees as for its own debt, the obligations of the Licensee under Sections 4.1 and 9.2.2 of this Agreement.

8.4 Limitation of Liability. IN NO EVENT SHALL EITHER PARTY OR ANY OF THEIR AFFILIATES BE LIABLE FOR SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL EXEMPLARY, PUNITIVE, MULTIPLE OR OTHER INDIRECT

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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DAMAGES OF THE OTHER PARTY, ARISING OUT OF OR RELATING TO THE EXECUTION AND DELIVERY OF THIS AGREEMENT, ITS PERFORMANCE HEREUNDER OR THE EXERCISE OF THE RIGHTS CONVEYED HEREIN, OR FOR LOSS OF PROFITS, LOSS OF DATA OR LOSS OF USE DAMAGES ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT WHETHER IN CONTRACT, WARRANTY, NEGLIGENCE, TORT, STRICT LIABILITY OR OTHERWISE, REGARDLESS OF ANY NOTICE OF SUCH DAMAGES.

9. TERM AND TERMINATION

9.1 Term; Expiration. The Term shall expire upon the expiration of all Licensed Patent Rights listed on Schedule A as such Schedule A exists on the seventh (7th) anniversary of the Effective Date. Upon the expiration of the Term of this Agreement, Licensee shall have a fully paid-up, irrevocable, freely transferable and sublicensable license under all of Licensors right, title and interest in the Licensed Technology and Improvements and Licensed Patent Rights listed on Schedule A as such Schedule A exists on the seventh (7th) anniversary of the Effective Date, to make, have made, use, have used, sell, have sold, offer for sale, import and have imported Licensed Products and to perform and have performed Licensed Services in the Territory, for any and all uses within the Field, subject only to the surviving provisions of this Agreement.

9.2 Termination Rights for Breach.

9.2.1 Termination for Breach. Subject to the other terms of this Agreement, this Agreement and the rights and options granted herein may be terminated by either Party upon any material breach by the other Party of any material obligation or condition, effective thirty (30) days after giving written notice to the breaching Party of such termination in the case of a payment breach and ninety (90) days after giving written notice to the breaching Party of such termination in the case of any other breach, which notice shall describe such breach in reasonable detail. The foregoing notwithstanding, if such default or breach is cured or remedied or shown to be non-existent within the aforesaid thirty (30) or ninety (90) day period, the notice shall be automatically withdrawn and of no effect. However, prior to giving any notice of termination for breach, the Parties shall first attempt to resolve any disputes as to the existence of any breach as set forth in Article 10.

9.2.2 Voluntary Termination. Licensee shall have the right to terminate this Agreement at any time upon ninety (90) days written notice to Licensor. If the Licensee terminates this Agreement pursuant to this Section 9.2.2 before it has paid the Licensor a license fee under Section 4.1 amounting to [**************************], the Licensee shall pay the difference between the amount it has paid as license fee under Section 4.1 and [***************************] within thirty (30) days after such termination; provided, however, that Licensee shall have no obligation to make any such payment if at the time of such termination Licensee has tried in good faith but has been unable to obtain the right to practice under a patent or patents, in the absence of which, a Licensed Product

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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or Licensed Service could not legally be manufactured, used, sold or imported in or into a country or jurisdiction and this materially impacts the commercialization of such Licensed Product or Licensed Service.

9.3 Termination for Bankruptcy. In the event that either Party files for protection under bankruptcy laws, makes an assignment for the benefit of creditors, appoints or suffers appointment of a receiver or trustee over its property, files a petition under any bankruptcy or insolvency act or has any such petition filed against it which is not discharged within sixty (60) days of the filing thereof, then the other Party may terminate this Agreement effective immediately upon written notice to such Party.

9.4 Effects of Termination.

9.4.1 Termination for Licensee Breach. Upon any termination of this Agreement by Licensor under Section 9.2.1 or by Licensee pursuant to Section 9.2.2, as of the effective date of such termination all relevant licenses and sublicenses granted by Licensor to Licensee hereunder shall terminate automatically. Notwithstanding the foregoing, (a) no such termination of this Agreement shall be construed as a termination of any valid sublicense of any Sublicensee hereunder, and thereafter each such Sublicensee shall be considered a direct licensee of Licensor, provided that (i) such Sublicensee is then in full compliance with all terms and conditions of its sublicense, (ii) all accrued payments obligations to Licensor have been paid, and (iii) such Sublicensee agrees in writing to assume all applicable obligations of Licensee under this Agreement, and (b) Licensee and its Affiliates and Sublicensees shall have the right, for six (6) months or such longer time period (if any) on which the Parties mutually agree in writing, to sell or otherwise dispose of all Licensed Products then on hand, and to perform Licensed Services, with royalties to be paid to Licensor as provided for in this Agreement.

9.4.2 Termination for Licensor Breach. Upon any termination of this Agreement by Licensee under Section 9.2.1, as of the effective date of such termination, Licensee thereafter automatically shall have a fully sublicensable and transferable, fully paid up (subject to the remainder of this Section 9.4), exclusive license in the Territory under the Licensed Patent Rights and Licensed Technology, to make, have made, use, have used, sell, have sold, offer for sale, import and have imported Licensed Products and to perform and have performed Licensed Services in the Territory, for any and all uses within the Field, provided that Licensee shall pay, for the remainder of any royalty term under Section 4.4 above, in lieu of any payments including license fees or royalties it would otherwise owe to Licensor under this Agreement, a royalty equal [************] of the royalty rate that would otherwise apply with respect to the Licensed Products and Licensed Services hereunder.

9.5 Remedies. Except as otherwise expressly set forth in this Agreement, the termination provisions of this Article 9 are in addition to any other relief and remedies available to either Party at law.

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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9.6 Surviving Provisions. Notwithstanding any provision herein to the contrary, the rights and obligations of the Parties set forth in Sections 4.2, 4.4, 4.5, 5, 7.3, 8, 9.4, 9.5, 9.6, 10, 11.1, 11.3, 11.4, and Section 1 to the extent any defined terms are used in other surviving Section, as well as any rights or obligations otherwise accrued hereunder (including any accrued payment obligations), shall survive the expiration or termination of the Term. Without limiting the generality of the foregoing, Licensee shall have no obligation to make any payment of license fees or royalty payment to Licensor that has not accrued prior to the effective date of any termination of this Agreement, but shall remain liable for all such payment obligations accruing prior to the effective date of such termination.

10. DISPUTES

10.1 Negotiation. The Parties recognize that a bona fide dispute as to certain matters may from time to time arise during the term of this Agreement which relates to either Party’s rights and/or obligations hereunder. In the event of the occurrence of such a dispute, either Party may, by written notice to the other Party, have such dispute referred to their respective senior officials designated below or their successors, for attempted resolution by good faith negotiations within thirty (30) days after such notice is received. Said designated senior officials are as follows:

For Licensee: Chief Executive Officer

For Licensor: Chief Executive Officer

In the event the designated senior officials are not able to resolve such dispute within the thirty (30) day period, either Party may invoke the provisions of Section 10.2.

10.2 Arbitration. Subject to Section 10.1, any dispute, controversy or claim initiated by either Party arising out of, resulting from or relating to this Agreement, or the performance by either Party of its obligations under this Agreement (other than bona fide Third Party actions or proceedings filed or instituted in an action or proceeding by a Third Party against a Party), whether before or after termination of this Agreement, shall be finally resolved by binding arbitration. Whenever a Party shall decide to institute arbitration proceedings, it shall give written notice to that effect to the other Party. Any such arbitration shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by a panel of three arbitrators appointed in accordance with such rules. Any such arbitration shall be held in London, England. The arbitrators shall have the authority to grant injunctions and/or specific performance and to allocate between the parties the costs of arbitration in such equitable manner as they determine. Judgment upon the award so rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award and an order of enforcement, as the case may be. In no event shall a demand for arbitration be made after the date when institution of a legal or equitable proceeding based upon such claim, dispute or other matter in question would be barred by the applicable statute of limitations. Notwithstanding the foregoing, either Party shall have the right, without waiving any right or remedy available to such Party under this Agreement or otherwise, to seek and obtain from any

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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court of competent jurisdiction any interim or provisional relief that is necessary or desirable to protect the rights or property of such Party, pending the selection of the arbitrators hereunder or pending the arbitrators’ determination of any dispute, controversy or claim hereunder.

11. MISCELLANEOUS

11.1 Notification. All notices, requests and other communications hereunder shall be in writing, shall be addressed to the receiving party’s address set forth above or to such other address as a party may designate by notice hereunder, and shall be either (i) delivered by hand, (ii) made by facsimile transmission (to be followed with written fax confirmation), (iii) sent by private courier service providing evidence of receipt, or (iv) sent by registered or certified mail, return receipt requested, postage prepaid. All notices, requests and other communications hereunder shall be deemed to have been given either (i) if by hand, at the time of the delivery thereof to the receiving party at the address of such party set forth above, (ii) if made by telecopy or facsimile transmission, at the time that receipt thereof has been acknowledged by the recipient, (iii) if sent by private courier, on the day such notice is delivered to the recipient, or (iv) if sent by registered or certified mail, on the fifth (5^th) business day following the day such mailing is made.

11.2 Language. This Agreement has been prepared in the English language and the English language shall control its interpretation.

11.3 Governing Law. This Agreement will be construed, interpreted and applied in accordance with the laws of the Commonwealth of Massachusetts (excluding its body of law controlling conflicts of law).

11.4 Limitations. Except as expressly set forth in this Agreement, neither Party grants to the other Party any right or license to any of its intellectual property and nothing in this Agreement shall be construed as a transfer of ownership of the License Patent Rights or the Licensed Technology.

11.5 Entire Agreement. This is the entire Agreement between the Parties with respect to the subject matter hereof and supersedes all prior representations, understandings and agreements between the Parties with respect to the subject matter hereof. No modification shall be effective unless in writing with specific reference to this Agreement and signed by the Parties.

11.6 Waiver. The terms or conditions of this Agreement may be waived only by a written instrument executed by the Party waiving compliance. The failure of either Party at any time or times to require performance of any provision hereof shall in no manner affect its rights at a later time to enforce the same. No waiver by either Party of any condition or term shall be deemed as a continuing waiver of such condition or term or of another condition or term.

11.7 Headings. Section and subsection headings are inserted for convenience of reference only and do not form part of this Agreement.

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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11.8 Assignment. Neither this Agreement nor any right or obligation hereunder may be assigned, delegated or otherwise transferred, in whole or part, by either Party without the prior express written consent of the other; provided, however, that either Party may, without the written consent of the other, assign this Agreement and its rights and delegate its obligations hereunder to its Affiliates, or in connection with the transfer or sale of all or substantially all of such Party’s assets or business, or in the event of its merger, consolidation, change in control or similar transaction. Any permitted assignee shall assume all obligations of its assignor under this Agreement. Any purported assignment in violation of this Section 11.8 shall be wholly void and invalid, the assignee shall acquire no rights whatsoever and the other party shall not recognize, nor shall it be required to recognize the assignment. This provision limits each Party’s rights and power to assign this agreement and/or the rights hereunder. The terms and conditions of this Agreement shall be binding upon and inure to the benefit of the permitted successors and assigns of the parties.

11.9 Force Majeure. Neither Party shall be liable for failure of or delay in performing obligations set forth in this Agreement, and neither shall be deemed in breach of its obligations, if such failure or delay is due to natural disasters or any causes beyond the reasonable control of such Party. In event of such force majeure, the Party affected thereby shall use reasonable efforts to cure or overcome the same and resume performance of its obligations hereunder.

11.10 Construction. The Parties hereto acknowledge and agree that: (i) each Party and its counsel reviewed and negotiated the terms and provisions of this Agreement and have contributed to its revision; (ii) the rule of construction to the effect that any ambiguities are resolved against the drafting Party shall not be employed in the interpretation of this Agreement; and (iii) the terms and provisions of this Agreement shall be construed fairly as to all Parties hereto and not in favor of or against any Party, regardless of which Party was generally responsible for the preparation of this Agreement.

11.12 Severability. If any provision(s) of this Agreement are or become invalid, are ruled illegal by any court of competent jurisdiction or are deemed unenforceable under then current applicable law from time to time in effect during the Term hereof or otherwise affects the validity of any other material provision of this Agreement, it is the intention of the Parties that the remainder of this Agreement shall not be affected thereby provided that a Party’s rights under this Agreement are not materially affected. The Parties hereto covenant and agree to renegotiate any such term, covenant or application thereof in good faith in order to provide a reasonably acceptable alternative to the term, covenant or condition of this Agreement or the application thereof that is invalid, illegal or unenforceable, it being the intent of the Parties that the basic purposes of this Agreement are to be effectuated.

11.13 Status. Nothing in this Agreement is intended or shall be deemed to constitute a partner, agency, employer-employee, or joint venture relationship between the Parties.

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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11.14 Section 365(n). All licenses granted under this Agreement are deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of right to “intellectual property” as defined in Section 101 of such Code. The Parties agree that Licensee may fully exercise all of its rights and elections under the U.S. Bankruptcy Code, regardless of whether either Party files for bankruptcy in the United States or other jurisdiction. The Parties further agree that, in the event Licensee elects to retain its rights as a licensee under such Code, Licensee shall be entitled to complete access to any technology licensed to it hereunder and all embodiments of such technology. Such embodiments of the technology shall be delivered to the Licensee not later than:

(a) the commencement of bankruptcy proceedings against the licensor, upon written request, unless the licensor elects to perform its obligations under the Agreement, or

(b) if not delivered under Section 11.14 above, upon the rejection of this Agreement by or on behalf of Licensee, upon written request.

11.15 Export Compliance. Licensee and its Affiliates and Sublicensees shall comply with all United States laws and regulations controlling the export of certain commodities and technical data, including without limitation all Export Administration Regulations of the United States Department of Commerce. Among other things, these laws and regulations prohibit or require a license for the export of certain types of commodities and technical data to specified countries. Licensee hereby gives written assurance that it will comply with, and will cause its Affiliates and Sublicensees to comply with, all United States export control laws and regulations, that it bears sole responsibility for any violation of such laws and regulations by itself or its Affiliates or Sublicensees, and that it will indemnify, defend, and hold Licensor harmless (in accordance with Section 8) for the consequences of any such violation.

11.16 Further Assurances. Each Party agrees to execute, acknowledge and deliver such further instructions, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.

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

[Remainder of page intentionally left blank]

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representative.

454 CORPORATION		PYROSEQUENCING AB (PUBL)
By:	/s/    Richard F. Begley	By:	/s/    Erik Wallden
Title:	President and CEO	Title:	President

CuraGen hereby acknowledges its obligations under Article 5 and Section 8.3 in this Agreement.

CURAGEN CORPORATION
By:	/s/    Christopher K. Mcleod
Title:	Executive Vice President

Certain confidential information contained in this Exhibit, marked by brackets and asterisks, were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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EX-10.29

EXHIBIT 10.29

LEASE AGREEMENT

- Between –

CURAGEN CORPORATION (Tenant)

- And –

ZFI GROUP, LLC (Landlord)

TABLE OF CONTENTS

	PAGE NO.
PREMISES	1
TERM AND USE	1
RENT	1
TENANT’S REPAIRS	3
INSURANCE	3
ALTERATIONS AND IMPROVEMENTS	4
ENVIRONMENTAL COMPLIANCE AND INDEMNIFICATIONS	5
TENANT’S PROPERTY	7
UTILITIES AND FUEL	7
ASSIGNMENT AND SUBLETTING	7
DAMAGE OR DESTRUCTION	7
CONDEMNATION	8
DEFAULT	8
OPTION TO RENEW	9
HOLDING OVER	9
RIGHT OF FIRST REFUSAL TO PURCHASE	10
SUBORDINATION	10
NOTICES	10
SECURITY DEPOSIT	11
LANDLORD’S RULES AND REGULATIONS	11
LANDLORD’S RIGHT TO PERFORM TENANT’S COVENANTS	11
LIENS	11
WASTE	11
INSPECTION BY LANDLORD	12
SURRENDER OF PREMISES	12
ESTOPPEL CERTIFICATE	12
LIMITATION OF LIABILITY	12
RIGHTS OF LANDLORD; NON-WAIVER	12
BROKER	12
ENTIRE AGREEMENT; AMENDMENT	13
SIGNAGE	13
QUIET ENJOYMENT	13
NOTICE OF LEASE	13
PARKING	13
MISCELLANEOUS	13
EXHIBIT A – LEGAL DESCRIPTION
EXHIBIT B – TENANT IMPROVEMENTS

Exhibit 10.34

LEASE AGREEMENT

LEASE AGREEMENT made and entered into as of January 12, 2004, between ZFI Group, LLC (hereinafter known as “Landlord”), whose principal place of business is 105 North Main Street, Branford, Connecticut 06405, and CuraGen Corporation (hereinafter known as “Tenant”) whose principal place of business is 555 Long Wharf Drive, 11^th 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 15 Commercial Street, Branford, Connecticut 06405 (the “Premises”). 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 April 1, 2004 (hereinafter known as the “Commencement Date”) and shall end on March 31, 2009, unless earlier terminated as provided in the next sentence (hereinafter known as “End of Term”). In the event the Tenant elects to terminate this Lease by written notice to Landlord, the Term of the Lease shall terminate and shall thereafter continue as a month-to-month Lease under the same terms and conditions provided for herein 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 and Common Area Charges shall continue as scheduled herein until the Landlord has signed a lease with a new tenant. Landlord shall grant Tenant access to the Premises upon execution of this Lease; provided, Tenant does not unreasonably interfere with Landlord’s current business. Landlord agrees to cooperate with Tenant in Tenant obtaining all permits, approvals and the like necessary to use the Premises as intended herein. Landlord shall deliver the possession of the Premises to Tenant on the Commencement Date free of all other tenants and parties in possession. Landlord shall pay Tenant $100,000.00 per day (the “Late Penalty”) for each day that Landlord is unable to deliver the Premises to Tenant within ninety (90) days of the date of this Lease Agreement. If the Premises are not delivered to Tenant by May 30, 2004, Tenant shall be permitted to cancel the Lease and Landlord shall indemnify Tenant for all costs and expenses incurred by Tenant in accordance with this Lease, including Tenant’s attorney’s fees and the Late Penalty, from the Commencement Date through Tenant’s Termination Date.

The Premises shall be used by the Tenant for office and lab use.

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 beginning on the Commencement Date of the Lease shall be paid as follows:

From April 1, 2004 to March 31, 2009, the Base Rent is $170,000 per year, payable in equal installments of $14,166.67 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 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, 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 not include wages, salaries and benefits of employees above the level of Building manager; costs of painting, decorating or installing improvements in areas of the Building other than public areas; leasing commissions and other costs of leasing vacant space in the Building; depreciation of the Building and improvements therein; interest, amortization or other payments on loans to Landlord, whether secured or unsecured; income, excess profits or franchise taxes; ground lease rental; capital expenditures (except as described above); legal expenses relating to the sale, financing or leasing of the Building; costs of services or other benefits not offered to Tenant or for which Tenant is charged directly; costs incurred due to Landlord’s violation of laws (including any violation of any law existing on the date hereof); amounts paid to Landlord or Landlord’s subsidiaries or affiliates for goods and services furnished to the Building, to the extent in excess of competitive market rates for the same; costs reimbursed to Landlord by others, including (without limitation) items covered by insurance and items under warranty; costs arising from the presence of Hazardous Materials in, on or about the Building, including (without limitation) the removal and/or monitoring thereof, unless the presence of said Hazardous Materials was caused by the activities of the Tenant or its agents, servants or employees.

During the first lease year, the Tenant shall pay $1,700.00 (to be calculated by Owner) 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 at the end of each Lease year. 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 sixty (60) days after the end of each Lease Year. Tenant shall have the right to inspect any bills and receipts used by the Landlord to determine the CAC Contribution.

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.

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4. If any installment of Rent as provided for in this Lease is not received at the Landlord’s address within ten (10) days after the same is due and payable, the Tenant shall pay an additional amount equal to five percent (5%) 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. The Lease Year shall be prorated for any period not consisting of twelve (12) 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. Tenant shall be solely responsible for the repair, maintenance and replacement of the heating and air conditioning systems of the Premises during the term of the Tenant’s possession of the Premises. The Tenant acknowledges that the present heating and air conditioning system serving the Premises is not adequate for the Tenant’s proposed use of the Premises. Tenant shall be responsible for the maintenance of the roof for a period of one (1) year from the date Tenant completes the tenant improvement work set forth on Exhibit B. For purposes of this provision, the date that Tenant completes such work shall be deemed to be the date Tenant notifies Landlord in writing that such work is complete (the “Tenant Completion Date Notice”). On and after the first year anniversary of the Tenant Completion Date Notice and during the remaining term of this Lease, Landlord shall be responsible for the repair and replacement of the roof. Except in the case of a bona fide emergency, the Tenant agrees to give the Landlord twenty four hours notice prior to entering upon the roof.

The Tenant, at its own expense, shall provide all structural repairs and replacements to the Premises and the Building and the replacement of all mechanical systems serving the Premises, including without limitation, the heating and air conditioning systems.

The Tenant will contract for landscaping, snow plowing, shoveling, sanding, salting of sidewalks, entrances, stairs and stoops, as well as to be certain that the parking areas and Premises are safe for use by the Tenant’s employees, visitors and invitees.

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 reasonable amounts as the Landlord shall reasonably 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

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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 reasonably 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 within ten (10) days of written 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 not less than one million dollars ($1,000,000.00) combined single limit, two million dollars ($2,000,000.00) general aggregate and ten million dollars ($10,000,000.00) in Umbrella limits. 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 issued under valid and enforceable policies in form and substance then standard in the State of Connecticut, issued by insurers having an “AM Best” rating of A- or better. Prior to 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 thirty (30) 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.

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.

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. Building alterations and/or improvements will be of equal or greater quality than the existing facility. Approval by Landlord shall not be unreasonably withheld, delayed or conditioned. Landlord approves Tenant’s plans attached hereto as Exhibit B and acknowledges that Tenant may expand the parking area, erect a utility shed and install its own security system. 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 (as defined herein), shall

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be and remain upon and be surrendered with the Premises at the End of Term. If the Landlord requests at least ninety (90) days prior to the End of Term 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 and provide copies of same to the Landlord. 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 INDEMNIFICATIONS

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, but not limited to, 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., 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 directly from its 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 twenty-four (24) hours of the release. The Tenant covenants and agrees to forever indemnify and hold the Landlord harmless from all costs or liabilities, including reasonable attorney’s fees, 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.

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Tenant hereby agrees to defend, indemnify and hold harmless Landlord and its successors and assigns from and against any and all claims, losses, damages, liabilities, judgments, costs and expenses (including, without limitation, attorneys’ fees and costs incurred in the investigation, defense and settlement of claims or remediation of contamination) incurred by the Landlord as a result of or in connection with the presence at or removal of hazardous materials or wastes or Polluting Substances from the Premises caused or generated by Tenant and/or its agents, servants and employees. Tenant shall bear, pay and discharge, as and when the same become due and payable, any and all such judgments or claims for damages, penalties or otherwise against the Landlord, shall hold the Landlord harmless against all claims, losses, damages, liabilities, costs and expenses, and shall assume the burden and expense of defending all suits, administrative proceedings, and negotiations of any description with any and all persons, political subdivisions or government agencies arising out of any of the occurrences set forth above. This paragraph shall survive termination of this Lease.

3. Landlord represents that the Premises are in compliance with all Environmental Laws. Landlord shall deliver to Tenant copies of such environmental reports as the Landlord has in its possession. Landlord is not required to conduct any additional environmental testing or surveys as part of this Lease. Tenant shall perform such further environmental testing and surveys as it deems necessary to determine the current environmental status of the Premises to be used by the parties as a “baseline” in the future if any environmental issues arise with respect to Tenant’s use and occupancy of the Premises.

4. Landlord hereby covenants with Tenant that Landlord shall comply with all Environmental Laws applicable with respect to the common areas of the Premises and obtain all necessary permits and approvals applicable to the discharge, generation, manufacturing, removal, transportation, treatment, storage, disposal and handling of Hazardous Materials or Wastes as apply to the activities of Landlord, its directors, officers, employees, agents, contractors, subcontractors, licensees, invitees, successors and assigns at the property.

5. Landlord hereby agrees to defend, indemnify and hold harmless Tenant, its employees, agents, contractors, subcontractors, licensees, invitees, successors and assigns from and against any and all claims, losses, damages, liabilities, judgments, costs and expenses (including, without limitation, attorneys’ fees and costs incurred in the investigation, defense and settlement of claims or remediation of contamination) incurred by such indemnified parties as a result of or in connection with the presence at or removal of hazardous materials or wastes from the Premises (unless the hazardous materials or waste were caused or generated by Tenant). Landlord shall bear, pay and discharge, as and when the same become due and payable, any and all such judgments or claims for damages, penalties or otherwise against such indemnified parties, shall hold such indemnified parties harmless against all claims, losses, damages, liabilities, costs and expenses, and shall assume the burden and expense of defending all suits, administrative proceedings, and negotiations of any description with any and all persons, political subdivisions or government agencies arising out of any of the occurrences set forth above. This paragraph shall survive termination of this Lease.

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TENANT’S PROPERTY

Any trade fixtures, equipment and other personal property installed in or attached to the Premises by the Tenant, (except for mechanical systems such as heating and air conditioning equipment sufficient for office use) shall remain the property of the Tenant and may be removed by the Tenant at any time during this lease (“Tenant’s Property”) provided such removal does not cause any damage to the Premises or render the same untenantable. Any mechanic systems such as heating and air conditioning of a quality and character greater than office use may be removed by the Tenant and shall be deemed Tenant’s Property. The Tenant shall pay for the cost or repairing any damages to the Premises resulting from such installation or removal of Tenant’s Property. 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

Landlord agrees to furnish all existing utilities to Tenant during the term of this Lease including without limitation, electricity, gas, sewer and telephone lines. All utilities will be billed in the name of the Tenant. 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. Landlord grants Tenant permission to install antennas on the roof of the Building, at its sole cost and expense, provided the installation, maintenance and repair thereof does not cause any damage to the roof of the Premises. Tenant agrees to remove any such antenna at the expiration of the term of this Lease and repair or replace the roof if necessary. Landlord shall not be required to enhance or improve the existing utility services or mechanicals serving the Premises.

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, delayed or conditioned. In the event of an assignment, or sale of the Tenant, all rights and guarantees provided to the Landlord will survive the assignment and the assignee shall execute an instrument agreeing to be bound by the terms of this Lease as the same may be amended.

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 of the Premises 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.

In the event the damage is caused by the negligent or willful conduct of the Tenant, or its agents, servants or employees, the Tenant shall make all necessary and required repairs to put the Premises into substantially the same condition it was prior to the damage and shall continue to make any and all payments required under the terms of this Lease.

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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 ninety (90) days after the occurrence, then the Landlord shall notify the Tenant within fifteen (15) 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 the Landlord cannot repair the damage and receive appropriate authority for use and occupancy after the ninety (90) day period. No damages, compensation or claim shall be payable to the Landlord or the Tenant, by reason of inconvenience, loss of business, or annoyance arising from any damage, or repair thereof.

In the event the damage is caused by the negligent or willful conduct of the Tenant, or its agents, servants or employees, the Tenant shall make all necessary and required repairs to put the Premises into substantially the same condition it was prior to the damage and shall continue to make any and all payments required under the terms of this Lease.

CONDEMNATION

If the Premises, or so much of the Premises 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 Premises, the contract value of this Lease, and rights to all such rewards shall be retained by the Landlord. Tenant may make a claim against the condemning authority for its own losses including, without limitation, relocation costs and the cost of its property.

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 after receipt of written notice from Landlord; or files a petition in Bankruptcy or is the subject of an involuntary bankruptcy petition that is not dismissed within ninety (90) days; or the Tenant dissolves.

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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 an 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 reletting of the Premises.

OPTION TO RENEW

The Tenant shall have one option to extend the Term of this lease by five years, beginning April 1, 2009, and continuing through March 31, 2014. Such renewal shall be upon the same terms and conditions as are applicable to the first term, except for Base Rent. The ensuing five-year option shall be at the current rent rate plus a percentage thereof, which shall be equal to the percentage increase in the Consumer Price Index for All Urban Consumer – All Items (CPI-U) as published by the Bureau of Labor Statistics of the United States Department of Labor for the period of April 2004 to March 31, 2009. Notice to renew must be given in writing, certified mail, return receipt requested, not less than six (6) months prior to the expiration of the Term, time being of the essence. Notwithstanding the foregoing, should Tenant neglect to exercise an option on the applicable date, Tenant’s right to exercise its option shall not expire until thirty (30) days after notice by Landlord, of Tenant’s failure to exercise its option.

HOLDING OVER

The Tenant shall pay to the Landlord Rent equal to one hundred and twenty-five percent (125%) of the Rent and Common Area Charges payable at the End of Term or as calculated for any period of renewal. 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.

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RIGHT OF FIRST REFUSAL TO PURCHASE

During the initial term, Tenant shall have a thirty (30) day Right of First Refusal to Purchase the Premises for the price that the owner is asking on the open market not to exceed $3,500,000.00. Tenant may exercise such right at any time during such thirty (30) day period by giving written notice to Landlord.

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; provided such mortgagee or ground lessor enters into a Subordination, Nondisturbance and Attornment Agreement with Tenant in form and substance acceptable to Tenant. The Tenant shall at any time execute, acknowledge and deliver to the Landlord any subordination, nondisturbance and attornment 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:

Chris Zane

ZFI Group, LLC

105 North Main Street

Branford, CT 06405

To Tenant at:

Terrie B. Estes, Director, Financial Planning

CuraGen Corporation

555 Long Wharf Drive, 11^th floor

New Haven, CT 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.

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SECURITY DEPOSIT

Contemporaneously with the execution of this Lease, the Tenant has deposited with the Landlord two month’s rent equal to the sum of twenty eight thousand three hundred and thirty three dollars and thirty-three cents ($28,333.33). The security deposit will be held by the Landlord, without liability for interest, 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. 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 after thirty (30) days prior written notice. 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 after ten (10) days written demand for payment as used in this lease, and after such ten (10) day period interest of eighteen percent (18%) per year or the maximum rate allowable by law shall accrue and be due and payable.

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 ninety (90) 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.

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INSPECTION BY LANDLORD

Upon twenty four (24) hours notice and during normal business hours, 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 six (6) months 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 reasonable wear and tear excepted. 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.

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.

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

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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.

SIGNAGE

Tenant shall have the right to affix Tenant’s signs on the Premises; provided Tenant complies with local laws, rules and ordinances. No signage shall be placed on the roof of the Premises.

QUIET ENJOYMENT

Landlord agrees that Tenant, upon paying all rent and other charges provided for herein and observing and keeping the covenants and conditions of this Lease, shall lawfully and quietly hold and enjoy the Premises during the Term without hindrance or molestation by Landlord, or by any person or persons lawfully claiming by, through, or under Landlord.

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.

PARKING

Tenant shall have exclusive use of the parking spaces in and around the Premises. Landlord represents that there shall be twelve (12) assigned parking spaces available immediately upon executing this lease document. The Tenant shall provide insurance for public liability for use of the twelve (12) parking spaces naming the Landlord as an insured and in the amount of $1,000,000.00 per occurrence, $2,000,000.00 in the general aggregate and $10,000,000.00 on Umbrella limits.

MISCELLANEOUS

Governing Law. This Agreement shall be governed by and enforced in accordance with the laws of the State of Connecticut.

Severability. If any provision of this Agreement or the application thereof shall be deemed invalid, illegal or unenforceable to any extent it is intended that there shall be no affect on the remainder of the terms of this Agreement.

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

Binding Effect. Each and every term, provision, covenant and agreement herein contained shall be binding upon and inure to the benefit of the parties hereto, and their respective heirs, legal representatives, successors and assigns.

Attorneys Fees and Costs. In the event that any party shall breach the terms of this Agreement, the breaching party shall be liable to the non-breaching party for any fees and costs incurred in the enforcement of this Agreement, including, but not limited to reasonable attorneys fees and costs of enforcement.

Waiver. Each party waives the right to have any dispute to this Agreement tried to a jury and agrees that this is a commercial transaction.

Cooperative Drafting. The parties acknowledge that this Agreement was drafted cooperatively between the parties and their attorneys and that neither party shall be entitled to claim the benefit of any ambiguity from the drafting thereof.

Successors Bound. The terms of this Lease and any amendments thereto shall be binding on the heirs, successors and assigns of the parties hereto.

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:
ZFI Group, LLC
/s/    Chris Zane
Chris Zane
Member
Tenant:
CuraGen Corporation
/s/    David Wurzer
David Wurzer
Executive Vice President and Chief Financial Officer
/s/    Terrie B. Estes
Terrie B. Estes
Director of Financial Planning

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EXHIBIT A

- Legal Description of Premises -

EXHIBIT B

- Tenant’s Improvements -

Tenant Improvements to include, but not limited to the following:

1. Refurbishment of existing office and creation of additional offices.

2. New parking spaces: 20 more parking spaces are required to obtain Town of Branford approval, given the square footage and use of the premises.

3. Installation of walls, floors and ceilings in the facility.

4. Plumbing, electrical, drains (including increasing the pipe capacity from the building to the sewer).

5. Sprinklers lowered to the ceiling heights.

6. HVAC installation.

7. Back-up electrical generator installed.

8. Exterior sign modified.

9. Installation of process equipment and support utilities, including high purity water system and steam.

EX-10.30

Exhibit 10.30

CuraGen Corporation

$100,000,000

4.0% Convertible Subordinated Notes due 2011

PURCHASE AGREEMENT

February 10, 2004

BEAR, STEARNS & CO. INC.

c/o Bear, Stearns & Co. Inc.

383 Madison Avenue

New York, New York 10179

Ladies and Gentlemen:

CuraGen Corporation, a Delaware corporation (the “Company”), hereby confirms its agreement with you (the “Initial Purchaser”), as set forth below.

1. The Transactions. Subject to the terms and conditions herein contained, the Company proposes to issue and sell to the Initial Purchaser $100,000,000 aggregate principal amount of its 4.0% Convertible Subordinated Notes due 2011 (the “Firm Notes”). In addition, the Company has granted to the Initial Purchaser an option to purchase up to an additional $20,000,000 aggregate principal amount of its 4.0% Convertible Subordinated Notes due 2011 (the “Optional Notes” and, together with the Firm Notes, the “Notes”). The Notes shall be convertible into shares of common stock, par value $0.01 per share, of the Company (the “Common Stock”) together with the rights (the “Rights”) evidenced by such Common Stock to the extent provided in the Stockholder Rights Agreement, dated March 27, 2002, between the Company and American Stock Transfer & Trust Company (the “Stockholder Rights Agreement”), subject to and in accordance with the terms of the Notes. The Common Stock and accompanying Rights into which the Notes may be converted are referred to herein as the “Conversion Shares.” The Notes will (i) have the terms and provisions which are described in the Offering Memorandum (as defined below) under the heading “Description of Notes” and such other terms as are reasonable and customary and (ii) be issued pursuant to the provisions of the Indenture (the “Indenture”), to be dated February 17, 2004, between the Company and The Bank of New York, a New York banking corporation, as trustee (the “Trustee”). The Notes and the Conversion Shares hereinafter are referred to collectively as the “Securities.”

The sale of the Notes to the Initial Purchaser (the “Offering”) will be made without registration of the Securities under the Securities Act of 1933, as amended (together with the rules and regulations of the Securities and Exchange Commission (the “Commission”) promulgated thereunder, the “Securities Act”), in reliance upon the exemption therefrom provided by Section 4(2) of the Securities Act.

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In connection with the sale of the Notes, the Company has prepared a preliminary offering memorandum dated February 9, 2004 (the “Preliminary Offering Memorandum”) and will prepare promptly an offering memorandum dated the date hereof, in form and substance reasonably satisfactory to you (the “Offering Memorandum”), setting forth information regarding the Company, the Securities and the terms of the Offering and the transactions contemplated by the Offering Documents (as defined below). The Preliminary Offering Memorandum and the Offering Memorandum will incorporate by reference the Company’s (i) Annual Report on Form 10-K for the year ended December 31, 2002, (ii) Quarterly Reports on Form 10-Q for the quarters ended March 31, 2003, June 30, 2003 and September 30, 2003, (iii) Proxy Statement for the annual meeting of stockholders of the Company held on May 28, 2003, (iv) Current Reports on Form 8-K filed with the Commission on January 8, 2003, January 10, 2003, January 30, 2003, March 4, 2003, June 20, 2003, August 20, 2003, August 22, 2003, September 5, 2003, September 19, 2003 and November 7, 2003, (v) the description of Common Stock contained on page 2 of the Company’s Registration Statement on Form 8-A and (vi) the description of the Preferred Stock Purchase Rights under the Stockholder Rights Agreement contained on pages 2-4 of the Company’s Registration Statement on Form 8-A (other than information in the documents that is deemed not to be filed with the Commission) (all such documents listed in clauses (i) through (vi) referred to herein as the “Incorporated Documents”). Any references herein to the Preliminary Offering Memorandum or the Offering Memorandum shall be deemed to include, in each case, all amendments and supplements thereto and the Incorporated Documents and any amendments thereto made prior to the completion of the Offering. The Company hereby confirms that it has authorized the use of the Preliminary Offering Memorandum and the Offering Memorandum in connection with the offering and resale of the Notes by the Initial Purchaser.

The Company understands that the Initial Purchaser proposes to make an offering of the Notes only on the terms and in the manner set forth in the Offering Memorandum and Sections 3, 4 and 10 hereof as soon as the Initial Purchaser deems advisable after this Agreement has been executed and delivered, solely to persons whom the Initial Purchaser reasonably believes to be qualified institutional buyers (“QIBs”) as defined in Rule 144A under the Securities Act, as such rule may be amended from time to time (“Rule 144A”), in transactions under Rule 144A.

The Initial Purchaser and their direct and indirect transferees of the Notes will be entitled to the benefits of the Registration Rights Agreement to be dated as of February 17, 2004, among the parties hereto (the “Registration Rights Agreement”) pursuant to which the Company will agree, among other things, to file (i) a registration statement (the “Registration Statement”) on the appropriate form with the Commission registering the resale of the Securities under the Securities Act and (ii) to use its best efforts to cause any such Registration Statement to be declared effective.

This Agreement, the Securities, the Registration Rights Agreement and the Indenture are herein referred to as the “Offering Documents.”

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2. Representations and Warranties of the Company. The Company represents and warrants to and agrees with the Initial Purchaser that:

(a) The Preliminary Offering Memorandum, as of the date set forth on the front cover thereof does not, and the Offering Memorandum, as of the date set forth on the front cover thereof, as of the Closing Date and as of the Additional Closing Date, if any (each as defined in Section 3 hereof), does not and will not, and any supplement or amendment thereto will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, provided however, that the Company makes no representation or warranty as to the information relating to the Initial Purchaser furnished to the Company in writing by the Initial Purchaser expressly for use in the Preliminary Offering Memorandum, and actually used in, the Offering Memorandum or any amendment or supplement thereto.

(b) Subsequent to the respective dates as of which information is given in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum), except as disclosed in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum), the Company has not declared, paid or made any dividends or other distributions of any kind on or in respect of its capital stock and there has been no material adverse change or any development involving a prospective material adverse change, whether or not arising from transactions in the ordinary course of business, in or affecting (i) the business, condition (financial or otherwise), results of operations, stockholders’ equity or properties of the Company and the subsidiary of the Company listed on Exhibit A hereto (the “Subsidiary”), individually or taken as a whole; (ii) the long-term debt or capital stock of the Company or the Subsidiary; or (iii) the ability of the Company to consummate the Offering or any of the other transactions contemplated by the Offering Documents (any such change or development being a “Material Adverse Effect”). Since the date of the latest balance sheet included or incorporated by reference in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum), neither the Company nor the Subsidiary has incurred or undertaken any known liabilities or obligations, whether direct or indirect, liquidated or contingent, matured or unmatured, or entered into any transactions, including any acquisition or disposition of any business or asset, which are material to the Company and the Subsidiary, individually or taken as a whole, except for liabilities, obligations and transactions which are disclosed in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum).

(c) The authorized, issued and outstanding capital stock of the Company is as set forth in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering

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Memorandum) under the caption “Capitalization” and, after giving effect to the Offering, will be as set forth in the column headed “As Adjusted” under the caption “Capitalization.” Except as disclosed in the Offering Memorandum, and except as set forth in that certain Purchase Agreement among the Subsidiary, the Company and the several purchasers named therein, dated as of June 5, 2000, as amended and that certain Purchase Agreement among the Subsidiary, the Company and the several purchasers named therein, dated as of September 18, 2003, all of the issued and outstanding shares of capital stock of the Company are fully paid and non-assessable and have been duly and validly authorized and issued, in compliance with all applicable state, federal and foreign securities laws and are not in violation of or subject to any preemptive or similar right that does or will entitle any person, upon the issuance or sale of any security, to acquire from the Company or the Subsidiary any Common Stock or other security of the Company or the Subsidiary or any security convertible into, or exercisable or exchangeable for, Common Stock or any other such security (any “Relevant Security”).

(d) The Conversion Shares have been duly authorized and reserved, and if and when issued upon conversion of the Notes in accordance with their terms and the Indenture, will be validly issued, fully paid and non-assessable, free of any preemptive or similar rights; will have been issued in compliance with all applicable state, federal and foreign securities laws, will not have been issued in violation of or subject to any preemptive or similar right that does or will entitle any person to acquire any Relevant Security from the Company or the Subsidiary upon issuance or sale of the Notes or the Conversion Shares, and will not be subject to any restriction upon the voting or, except as disclosed in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum), transfer thereof pursuant to applicable law or the Company’s certificate of incorporation, bylaws or governing documents or any agreement to which the Company or the Subsidiary is a party or by which either of them may be bound.

(e) The Common Stock (including the Conversion Shares) conforms in all material respects to the descriptions thereof contained in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum). Except as disclosed in, and as of the date or dates disclosed in, the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum) and except for options to purchase 3,726,334 shares of common stock of the Subsidiary, neither the Company nor the Subsidiary has outstanding warrants, options to purchase, or any preemptive rights or other rights to subscribe for or to purchase, or any contracts or commitments to issue or sell, any Relevant Security. Except (i) for (a) 12 million shares of series A preferred stock of the Subsidiary, (b) 8 million shares of series B preferred stock of the Subsidiary, (c) 6,404,854 shares of series C preferred stock of the Subsidiary, (d) 1,595,146 shares of series D preferred stock of the Subsidiary, (e) 47,933 shares of common stock of the Subsidiary, and (f) outstanding options to purchase

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3,726,334 shares of common stock of the Subsidiary, (ii) as disclosed in, and as of the date or dates disclosed in, the Offering Memorandum (or, if the Offering Memorandum is not in existence, the Preliminary Offering Memorandum), and (iii) as set forth in that certain Purchase Agreement among the Subsidiary, the Company and the several purchasers named therein, dated as of June 5, 2000, as amended and that certain Purchase Agreement among the Subsidiary, the Company and the several purchasers named therein, dated as of September 18, 2003, there are no outstanding subscriptions, rights, warrants, options, calls, convertible securities, commitments of sale or rights related to or entitling any person to purchase or otherwise to acquire any shares of, or any security convertible into or exchangeable or exercisable for, the capital stock of, or other ownership interest in, the Company or the Subsidiary.

(f) The Subsidiary is the only “significant subsidiary” of the Company within the meaning of Regulation S-X promulgated under the Securities Act. Except as set forth in that certain (i) Purchase Agreement among the Subsidiary, the Company and the several purchasers named therein, dated as of June 5, 2000, as amended, (ii) Purchase Agreement among the Subsidiary, the Company and the several purchasers named therein, dated as of September 18, 2003 and (iii) Amended and Restated Registration Rights Agreement among the Subsidiary and the investors named therein, dated as of September 18, 2003, all of the issued shares of capital stock of or other ownership interests in the Subsidiary have been duly and validly authorized and issued and are fully paid and non-assessable and the shares of capital stock or other ownership interests in the Subsidiary held by the Company are owned directly or indirectly by the Company free and clear of any lien, charge, mortgage, pledge, security interest, claim, equity, trust or other encumbrance, preferential arrangement, defect or restriction of any kind whatsoever (any “Lien”).

(g) Each of the Company and the Subsidiary has been duly organized and validly exists as a corporation in good standing under the laws of its jurisdiction of incorporation. Each of the Company and the Subsidiary has all requisite corporate power and authority to carry on its business as it is currently being conducted and as described in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum), and to own, lease and operate its respective properties. Each of the Company and the Subsidiary is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the character or location of its properties (owned, leased or licensed) or the nature or conduct of its business makes such qualification necessary, except for those failures to be so qualified or in good standing which (individually and in the aggregate) could not reasonably be expected to have a Material Adverse Effect.

(h) The Company has the requisite corporate power and authority to execute, deliver and perform its obligations under the Notes. The Notes have been duly and validly authorized by the Company for issuance and, when executed by the Company and authenticated by the Trustee in accordance

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with the provisions of the Indenture and when delivered to and paid for by the Initial Purchaser in accordance with the terms hereof, will have been duly executed, issued and delivered and will constitute valid and legally binding obligations of the Company, entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms except that the enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors’ rights generally and (ii) general principles of equity (regardless of whether such enforcement is considered in a proceeding at law or in equity) ((i) and (ii) collectively, the “Enforceability Exceptions”) and will be convertible into the Conversion Shares in accordance with their terms. At the Closing Date, the Notes will be in the form contemplated by the Indenture.

(i) The Company has the requisite corporate power and authority to execute, deliver and perform its obligations under the Indenture. The Indenture has been duly and validly authorized by the Company and meets the requirements for qualification under the Trust Indenture Act of 1939, as amended (the “TIA”), and, when executed and delivered by the Company (assuming the due authorization, execution and delivery by the Trustee), will constitute a valid and legally binding agreement of the Company, enforceable against the Company in accordance with its terms except that (i) the enforcement thereof may be limited by the Enforceability Exceptions and (ii) rights to indemnity and contribution may be limited under applicable law by considerations of public policy.

(j) The Company has the requisite corporate power and authority to execute, deliver and perform its obligations under the Registration Rights Agreement. The Registration Rights Agreement has been duly and validly authorized by the Company and when executed and delivered by the Company (assuming the due authorization, execution and delivery by the Initial Purchaser), will constitute a valid and legally binding agreement of the Company, enforceable against the Company in accordance with its terms except that (i) the enforcement thereof may be limited by the Enforceability Exceptions and (ii) rights to indemnity and contribution may be limited under applicable law by considerations of public policy.

(k) The Company has the requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement. This Agreement has been duly and validly authorized by the Company and when executed and delivered by the Company (assuming the due authorization, execution and delivery by the Initial Purchaser), will constitute a valid and legally binding agreement of the Company, enforceable against the Company in accordance with its terms except that (i) the enforcement thereof may be limited by the Enforceability Exceptions and (ii) rights to indemnity and contribution may be limited under applicable law by considerations of public policy. The Securities, the Indenture and the Registration Rights Agreement conform in all

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material respects to the descriptions thereof in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum).

(l) There exists as of the date hereof (after giving effect to the transactions contemplated by each of the Offering Documents) no event or condition that would constitute a default or an event of default (in each case as defined in each of the Offering Documents) under any of the Offering Documents that would result in a Material Adverse Effect.

(m) The execution, delivery, and performance of this Agreement, the Indenture or the Registration Rights Agreement and consummation of the transactions contemplated by the Offering Documents do not and will not conflict with, require consent under or result in a breach of any of the terms and provisions of, or constitute a default (or an event which with notice or lapse of time, or both, would constitute a default) under, violate or result in the creation or imposition of any Lien upon any property or assets of the Company or the Subsidiary pursuant to, (i) any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant, instrument, franchise, license or permit to which the Company or the Subsidiary is a party or by which the Company or the Subsidiary or their respective properties, operations or assets may be bound; (ii) any provision of the certificate or articles of incorporation, bylaws, or other organizational documents of the Company or the Subsidiary, or (iii) any law, rule, regulation, ordinance, directive, judgment, decree or order of any judicial, regulatory or other legal or governmental agency or body, domestic or foreign having jurisdiction over the Company, the Subsidiary or any of its or their properties; except (in the case of clauses (i) and (iii) above) as could not reasonably be expected to have a Material Adverse Effect.

(n) Each of the Company and the Subsidiary has all necessary consents, approvals, authorizations, orders, registrations, qualifications, licenses, filings and permits of, with and from all judicial, regulatory and other legal or governmental agencies and bodies and all third parties, foreign and domestic (collectively, the “Consents”), to own, lease and operate its properties and conduct its business as it is now being conducted and as disclosed in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum), except for those Consents the absence of which could not reasonably be expected to result in a Material Adverse Effect, and each such Consent is valid and in full force and effect, and except as disclosed in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum) neither the Company nor the Subsidiary has received notice of any investigation or proceedings which results in or, if decided adversely to the Company or the Subsidiary, could reasonably be expected to result in, the revocation of, or imposition of a materially burdensome restriction on, any Consent. Each of the Company and the Subsidiary is in compliance with all

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applicable laws, rules, regulations, ordinances, directives, judgments, decrees and orders, foreign and domestic, except as disclosed in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum) or where failure to be in compliance could not reasonably be expected to have a Material Adverse Effect. No Consent contains a materially burdensome restriction not adequately disclosed in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum).

(o) No Consent of, with or from any judicial, regulatory or other legal or governmental agency or body or any third party, foreign or domestic, is required by the Company for the execution, delivery and performance of this Agreement or consummation of the Offering and the other transactions contemplated by the Offering Documents, including the issuance, sale and delivery of the Notes (and the issuance of the Conversion Shares upon conversion of the Notes), except such Consents as may be required under state securities or blue sky laws and in the case of the Registration Statement, such as will be obtained under the Securities Act. Neither the issuance by the Company of the Securities pursuant to the terms of this agreement nor the issuance by the Company of the Conversion Shares results or will result in the Initial Purchaser being deemed an Acquiring Person (as defined in the Stockholder Rights Agreement).

(p) Except as disclosed in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum), there is no judicial, regulatory, arbitral or other legal or governmental proceeding or other litigation or arbitration, domestic or foreign, pending to which the Company or the Subsidiary is a party or of which any property, operations or assets of the Company or the Subsidiary is the subject which, individually or in the aggregate, if determined adversely to the Company or the Subsidiary, could reasonably be expected to have a Material Adverse Effect and to the best of the Company’s knowledge, no such proceeding, litigation or arbitration is threatened or contemplated, except as could not reasonably be expected to have a Material Adverse Effect.

(q) The financial statements, including the notes thereto, included in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum) present fairly in all material respects, as of the dates and for the periods specified, the financial position, cash flows and results of operations of the Company and its consolidated subsidiary for which financial statements are included in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum); except as otherwise stated in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum); such financial statements have been prepared in conformity with United States generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as

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otherwise noted therein) and the selected consolidated financial data set forth under the caption “Selected Consolidated Financial Data,” in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum) present fairly in all material respects, as of the dates and for the periods specified, on the basis stated in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum), the information included therein. No other financial statements are required to be included in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum) if the Offering Memorandum were included in a registration statement filed pursuant to the Securities Act. The other financial and statistical information included or incorporated by reference in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum) presents fairly in all material respects the information included therein and, if so required, has been prepared on a basis consistent with that of the financial statements that are included in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum) and is derived from the books and records of the respective entities presented therein and, to the extent such information is a range, projection or estimate, is based on the good faith belief and estimates of the management of the Company. The financial information included in the Incorporated Documents, including the information under Item 1 (“Business”), Item 7 (“Management’s Discussion and Analysis of Financial Condition and Results of Operations”) and Item 7A (“Quantitative and Qualitative Disclosures About Market Risk”) in the Form 10-K for the year ended December 31, 2002 has been derived from the Company’s consolidated financial statements included in the Incorporated Documents or from the Company’s accounting books and records generally.

(r) Deloitte & Touche LLP, which has examined certain of such financial statements as set forth in its reports included in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum), is an independent public accounting firm as required by the Securities Act and the Securities Exchange Act of 1934, as amended (together with the rules and regulations of the Commission promulgated thereunder, the “Exchange Act”).

(s) The Company is subject to and in full compliance with the reporting requirements of Section 13 or 15(d) of the Exchange Act and files reports with the Commission on the EDGAR System. The Common Stock is registered pursuant to Section 12(g) of the Exchange Act and the outstanding shares of Common Stock are listed for quotation on the Nasdaq National Market, and the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or de-listing the Common Stock from the Nasdaq National Market, nor has the Company received any notification that the Commission or the Nasdaq National Market is contemplating terminating such registration or listing.

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(t) The Company has filed in a timely manner each document or report required to be filed by it pursuant to the Exchange Act including, without limitation, the Incorporated Documents; each such document or report (including any financial statements) and any amendment thereto at the time it was filed, conformed in all material respects to the requirements of the Exchange Act and the Securities Act; and none of such documents or reports on the date of its filing contained an untrue statement of any material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made.

(u) There are no agreements, contracts, indentures, leases or other instruments (including, without limitation, any voting agreement), which are required to be filed as exhibits to the Incorporated Documents, which are not so filed as required.

(v) The Company and the Subsidiary maintain a system of internal accounting and other controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with United States generally accepted accounting principles and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accounting for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

(w) Neither the Company nor any of its affiliates (within the meaning of Rule 144 under the Securities Act) has taken, directly or indirectly, any action that constitutes or is designed to cause or result in, or which could reasonably be expected to constitute, cause or result in, the stabilization or manipulation of the price of any security to facilitate the sale or resale of the Securities.

(x) None of the Company or the Subsidiary or any of their respective affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act) directly, or through any agent, (i) sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of any “security” (as defined in the Securities Act) which is or could be integrated with the sale of the Securities in a manner that would require the registration under the Securities Act of the Securities or (ii) engaged in any form of general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act) in connection with the offering of the Securities or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act. Assuming the accuracy of the Initial Purchaser’s representations and warranties set forth in Section 10 hereof, the offer and sale of the Notes to the Initial Purchaser and the Initial Purchaser’s resale of the Notes in the manner

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contemplated by this Agreement and the Offering Memorandum does not require registration under the Securities Act and the Indenture does not require qualification under the TIA.

(y) Except as described in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum), no holder of any Relevant Security has any rights to require registration of any Relevant Security as part or on account of, or otherwise in connection with the Offering and any of the other transactions contemplated by the Offering Documents, and any such rights so disclosed have been effectively waived by the holders thereof, and any such waivers remain in full force and effect.

(z) Neither the Company nor the Subsidiary is now and, immediately after the sale of the Notes, as contemplated hereunder and application of the net proceeds of such sale as described in the Offering Memorandum under the caption “Use of Proceeds,” will be an “investment company” or be controlled by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

(aa) There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees of indebtedness by the Company to or for the benefit of any of the officers or directors of the Company or any of their respective family members.

(bb) Each of the Company and the Subsidiary owns or leases all such material properties as are necessary to the conduct of their respective businesses as presently operated and as proposed to be operated as described in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum). The Company and the Subsidiary have good and marketable title in fee simple to all real property and good and marketable title to all personal property (excluding Intellectual Property, which is covered in subsection (cc) below) owned by them, in each case free and clear of all Liens except such as are described in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the Preliminary Offering Memorandum) or such as could not reasonably be expected to have a Material Adverse Effect; and any real property and buildings held under lease or sublease by the Company and the Subsidiary are held by them under valid, subsisting and enforceable leases with such exceptions as are not material to, and do not interfere with, the use made and proposed to be made of such property and buildings by the Company and the Subsidiary. Neither the Company nor the Subsidiary has received any notice of any claim adverse to its ownership of any real or personal property (excluding Intellectual Property, which is covered in subsection (cc) below) or of any claim against the continued possession of any real property, whether owned or held under lease or sublease by the Company or the Subsidiary.

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(cc) The Company (i) owns or possesses adequate rights to use Company patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, formulae, customer lists, and know-how and other intellectual property (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures, “Intellectual Property”) necessary for the conduct of its business as being conducted and as described in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the Preliminary Offering Memorandum) relating to the Company’s 53135 product, (ii) to the Company’s knowledge, owns or possesses adequate rights to use third party patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, formulae, customer lists, and know-how and other intellectual property (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures, “Third Party Intellectual Property”) necessary for the conduct of their respective businesses as being conducted and as described in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the Preliminary Offering Memorandum) relating to the Company’s 53135 product, and (iii) to the Company’s knowledge, has no reason to believe that the conduct of its business relating to the Company’s 53135 product conflicts with, and has not received any notice of any claim of conflict with, any such right of others.

To the Company’s knowledge, none of the patents owned or licensed by the Company or the Subsidiary are invalid or unenforceable. To the Company’s knowledge, all technical information developed by and belonging to the Company or the Subsidiary which has not been patented has been kept confidential, except such information, the disclosure of which could not reasonably be expected to have a Material Adverse Effect. To the Company’s knowledge, there is no infringement by third parties of any Intellectual Property of the Company or the Subsidiary, and there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the Company’s or the Subsidiary’s rights in or to any Intellectual Property or Third Party Intellectual Property, and the Company is unaware of any facts which would form a reasonable basis for any such claim, except for such facts which could not reasonably be expected to have a Material Adverse Effect. There is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others that the Company or the Subsidiary infringes or otherwise violates any patent, trademark, copyright, trade secret or other proprietary rights of others, and is unaware of any facts which would form a reasonable basis for any such claim, except for such facts which could not reasonably be expected to have a Material Adverse Effect.

(dd) The Company has duly filed or caused to be filed with the U.S. Patent and Trademark Office (the “PTO”) and applicable foreign and international patent authorities certain patent applications described in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the

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Preliminary Offering Memorandum) and owned by the Company. To the Company’s knowledge, the Company has complied with the PTO’s duty of candor and disclosure, and complied with such duty that any other applicable patent office may have, regarding prosecution of the patent applications and made no misrepresentation in the patent applications. Except as set forth in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the Preliminary Offering Memorandum) and except as could not reasonably be expected to have a Material Adverse Effect, the Company is not aware of any facts material to a determination of patentability regarding the patent applications not called to the attention of the PTO that would preclude the grant of a patent for the patent applications; and the Company has secured with appropriate legal instruments clear title to the patent applications.

(ee) The Company and the Subsidiary maintain insurance in such amounts and covering such risks as the Company reasonably considers adequate for the conduct of its business and the value of its properties and as is customary for companies engaged in similar businesses in similar industries, all of which insurance is in full force and effect, except where the failure to maintain such insurance could not reasonably be expected to have a Material Adverse Effect. There are no material claims by the Company or the Subsidiary under any such policy or instrument as to which any insurance company has indicated that it intends to deny liability or defending under a reservation of rights clause. The Company reasonably believes that it will be able to renew its existing insurance as and when such coverage expires or will be able to obtain replacement insurance adequate for the conduct of the business and the value of its properties at a cost that could not reasonably be expected to have a Material Adverse Effect.

(ff) The Company has in effect insurance, subject to customary minimums, maximums and exclusions, covering the Company and its directors and officers for liabilities or losses arising in connection with this Offering, including, without limitation, liabilities or losses arising under the Securities Act, the Exchange Act, and applicable foreign securities laws.

(gg) Each of the Company and the Subsidiary has prepared, in a manner it reasonably believes to be accurate, and timely filed all federal, state, foreign and other tax returns that are required to be filed by it (except in any case in which the failure so to file would not have a Material Adverse Effect) and has paid or made provision for the payment of all taxes, assessments, governmental or other similar charges, including without limitation, all sales and use taxes and all taxes which the Company or the Subsidiary is obligated to withhold from amounts owing to employees, creditors and third parties, with respect to the periods covered by such tax returns (whether or not such amounts are shown as due on any tax return) except for any such taxes, assessments or charges that would not have a Material Adverse Effect. No deficiency assessment with respect to a proposed material adjustment of the Company’s or the Subsidiary’s federal, state, local or foreign taxes is pending or, to the Company’s knowledge,

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threatened. The accruals and reserves on the books and records of the Company and the Subsidiary in respect of tax liabilities for any taxable period not finally determined are reasonably adequate to meet any assessments and related liabilities for any such period, the Company and the Subsidiary have not incurred any liability for taxes other than in the ordinary course of its business. There is no material tax Lien, whether imposed by any federal, state, foreign or other taxing authority, outstanding against the assets, properties or business of the Company or the Subsidiary.

(hh) No collective bargaining agreement covering any employee of the Company or the Subsidiary exists that is binding on either the Company or the Subsidiary, and to the Company’s knowledge no petition has been filed or proceeding instituted by an employee or group of employees of either the Company or the Subsidiary with the National Labor Relations Board seeking recognition of a bargaining representative. To the Company’s knowledge, no organizational effort currently is being made or threatened by or on behalf of any labor union to organize any employees of either the Company or the Subsidiary, and there currently is no labor strike or organized work stoppage in effect by the employees of either the Company or the Subsidiary.

(ii) No “prohibited transaction” (as defined in either Section 406 of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder (“ERISA”) or Section 4975 of the Internal Revenue Code of 1986, as amended from time to time (the “Code”)), “accumulated funding deficiency” (as defined in Section 302 of ERISA) or other event of the kind described in Section 4043(b) of ERISA (other than events with respect to which the 30-day notice requirement under Section 4043 of ERISA has been waived) has occurred with respect to any employee benefit plan (as defined in Section 3(3) of ERISA) for which the Company or the Subsidiary would have any liability; each employee benefit plan (as defined in Section 3(3) of ERISA) for which the Company or the Subsidiary would have any liability is in compliance in all material respects with applicable law, including (without limitation) ERISA and the Code; the Company has not incurred and does not expect to incur material liability under Title IV of ERISA with respect to the termination of, or withdrawal from any “pension plan” (as defined in Section 3(2)); and each pension plan (as defined in Section 3(2)) for which the Company would have any material liability that is intended to be qualified under Section 401(a) of the Code is so qualified and, to the Company’s knowledge, nothing has occurred, whether by action or by failure to act, which could cause the loss of such qualification.

(jj) There has been no storage, generation, transportation, handling, treatment, disposal, discharge, emission or other release of any kind of toxic or hazardous substances or wastes regulated under Environmental Laws (“Hazardous Substances”) by the Company or the Subsidiary (or, to the Company’s knowledge, any other entity for whose acts or omissions the Company is liable) upon any property now or previously owned or leased by the

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Company or the Subsidiary, to the Company’s or Subsidiary’s knowledge, upon any other property, in violation of any applicable law, rule, regulation, order, judgment, decree or permit relating to pollution or protection of human health and the environment (“Environmental Law”), except for any such violations that could not reasonably be expected to have a Material Adverse Effect. To the Company’s or Subsidiary’s knowledge, without independent investigation, there has been no disposal, discharge, emission or other release of any kind onto such property of any Hazardous Substances in violation of Environmental Laws, except for any such violation that could not reasonably be expected to have a Material Adverse Effect. Neither the Company nor the Subsidiary has agreed to assume, undertake or provide indemnification for any liability of any other person under any Environmental Law, including any obligation for cleanup or remedial action. There is no pending or, to the Company’s knowledge, threatened administrative, regulatory or judicial action, claim or notice of noncompliance or violation, investigation or proceedings pursuant to any Environmental Law against the Company or any Subsidiary, which could reasonably be expected to have a Material Adverse Effect.

(kk) Neither the Company, the Subsidiary, nor to the Company’s knowledge, any of its officers, directors, employees or agents has at any time during the last five years (i) made any unlawful contribution to any candidate for foreign office, or failed to disclose fully any contribution in violation of law, or (ii) made any payment to any federal or state governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments required or permitted by the laws of the United States of any jurisdiction thereof.

(ll) Neither the Company nor the Subsidiary (i) is in violation of its certificate of incorporation, bylaws, or other organizational documents or (ii) is in default under, and no event has occurred which, with notice or lapse of time or both, would constitute a default under or result in the creation or imposition of any Lien upon any of its property or assets pursuant to, any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant, instrument, franchise, license or permit to which it is a party or by which it is bound or to which any of its property or assets is subject, except (in the case of clause (ii) above) defaults or Liens disclosed in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum) or that could not (individually or in the aggregate) reasonably be expected to have a Material Adverse Effect.

(mm) Except as described in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum), none of the Company or the Subsidiary is in default under any of the contracts described in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum), has received a notice or claim of any such default or has

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knowledge of any breach of such contracts by the other party or parties thereto, except such defaults or breaches as would not, individually or in the aggregate, have a Material Adverse Effect.

(nn) Neither the Company nor the Subsidiary has taken or will take any action that would cause this Agreement or the issuance or sale of the Securities to violate Regulation T, U or X of the Board of Governors of the Federal Reserve System, in each case as in effect, or as the same may hereafter be in effect, on the Closing Date (and, if any Optional Notes are purchased, as of the Additional Closing Date).

(oo) No securities of the Company or any of the Subsidiary are (i) of the same class (within the meaning of Rule 144A under the Securities Act) as the Notes and (ii) listed on a national securities exchange registered under Section 6 of the Exchange Act or quoted in a U.S. automated interdealer quotation system.

(pp) The statistical, industry-related and market-related data included in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the most recent Preliminary Offering Memorandum) are based on or derived from sources which the Company reasonably and in good faith believes are reliable and accurate, and such data agree with the sources from which they are derived.

(qq) The Company has not distributed and, prior to the later to occur of the (i) Closing Date (ii) if any Optional Notes are purchased, the Additional Closing Date and (iii) completion of the distribution of the Notes, will not distribute any offering material in connection with the offer and sale of the Notes other than the Preliminary Offering Memorandum and the Offering Memorandum.

(rr) The certificates for the shares of Common Stock (including the Conversion Shares) conform to the requirements of the Nasdaq National Market and the Delaware General Corporation Law.

(ss) The Company is in compliance with applicable provisions of the Sarbanes-Oxley Act that are effective and is actively taking steps to ensure that it will be in compliance with other applicable provisions of the Sarbanes-Oxley Act upon the effectiveness of such provisions.

(tt) The Company has implemented the “disclosure controls and procedures” (as defined in Rules 13a-14(c) and 15d-14(c) of the Exchange Act) required in order for the Chief Executive Officer and Chief Financial Officer of the Company to engage in the review and evaluation process mandated by the Exchange Act. The Company’s “disclosure controls and procedures” are reasonably designed to ensure that all information (both financial and non-financial) required to be disclosed by the Company in the

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reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the specified time periods, and that all such information is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure and to make the certifications of the Chief Executive Officer and Chief Financial Officer of the Company required under the Exchange Act with respect to such reports.

(uu) Since December 31, 2002, the Company has not informed its auditors or the audit committee of the board of directors of the Company (or persons fulfilling the equivalent function) of (i) any significant deficiencies in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial data nor any material weaknesses in internal controls over financial reporting; (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls.

(vv) Except as disclosed in the Offering Memorandum (or, if the Offering Memorandum is not in existence, the Preliminary Offering Memorandum), there are no outstanding guarantees or other known contingent obligations of the Company or the Subsidiary that could reasonably be expected to have a Material Adverse Effect.

3. Purchase, Sale and Delivery of the Notes.

(a) On the basis of the representations, warranties, agreements and covenants herein contained and subject to the terms and conditions herein set forth, the Company agrees to issue and sell to the Initial Purchaser, and the Initial Purchaser agrees to purchase from the Company, at 97.0% of their principal amount, the respective aggregate principal amount of the Firm Notes set forth on Schedule 1 hereto.

(b) In addition, on the basis of the representations, warranties, agreements and covenants herein contained and subject to the terms and conditions herein set forth, the Company hereby grants an option to the Initial Purchaser, to purchase up to $20,000,000 in aggregate principal amount of Optional Notes from the Company at the same price as the purchase price to be paid by the Initial Purchaser for the Firm Notes, plus accrued interest, if any, from the Closing Date (as hereinafter defined) to the Additional Closing Date (as hereinafter defined). The option granted hereunder may be exercised at any time, on or before the thirtieth day following the date of the Offering Memorandum upon written notice by the Initial Purchaser to the Company, which notice may be given from time to time on one or more occasions. Such notice shall set forth (i) the amount (which shall be an integral multiple of $1,000 in aggregate principal amount at issuance) of Optional Notes as to which the Initial Purchaser is exercising the option and (ii) the time, date and place at

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which such Optional Notes will be delivered (which time and date may be simultaneous with, but not earlier than, the Closing Date (as hereinafter defined) and in such case, the term “Closing Date” shall refer to the time and date of delivery of the Firm Notes and the Optional Notes). Such time and date of delivery, if subsequent to the Closing Date, is called the “Additional Closing Date.” The Additional Closing Date must be not later than eight full business days after the date the Initial Purchaser exercises the option, with the actual date determined by the Initial Purchaser. The Initial Purchaser may cancel the option at any time prior to its expiration by giving written notice of such cancellation to the Company.

(c) Delivery of and payment for the Firm Notes shall be made at the offices of Morrison & Foerster LLP, 1290 Avenue of the Americas, New York, New York, 10104, at 9:00 a.m., New York time, on February 17, 2004, or at such other date as the Initial Purchaser and the Company may agree upon, such time and date being herein referred to as the “Closing Date.” The Firm Notes shall be delivered on the Closing Date against payment of the purchase price therefore by wire transfer of immediately available funds to an account specified in writing to the Initial Purchaser by the Company. One or more global securities representing the Firm Notes shall be registered by the Trustee in the name of Cede & Co., the nominee of The Depository Trust Company (“DTC”), credited to the accounts of such of its participants as the Initial Purchaser shall request, upon notice to the Company at least 48 hours prior to the Closing Date.

(d) Delivery to the Initial Purchaser of and payment for the Optional Notes shall be made on the Additional Closing Date in the same manner and in the same office and at the same time of day as payment for the Firm Notes.

4. Offering by the Initial Purchaser. The Initial Purchaser proposes to make an offering of the Notes at the price and upon the terms set forth in the Offering Memorandum as soon as practicable after this Agreement is entered into and as in the judgment of the Initial Purchaser is advisable. The Initial Purchaser may from time to time thereafter change the price and other selling terms.

5. Certain Covenants. For purposes of this Section 5, “Closing Date” shall refer to the Closing Date for the Firm Notes and any Additional Closing Date for the Optional Notes. The Company covenants and agrees with the Initial Purchaser that:

(a) The Company will not amend or supplement the Preliminary Offering Memorandum or the Offering Memorandum or any amendment or supplement thereto of which the Initial Purchaser shall not previously have been advised and furnished a copy for a reasonable period of time prior to the proposed amendment or supplement and as to which the Initial Purchaser shall not have given its consent, other than by filing documents under the Exchange Act that are incorporated by reference therein, without the consent

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of the Initial Purchaser (which consent shall not be unreasonably withheld). The Company will promptly, upon the reasonable request of the Initial Purchaser or counsel to the Initial Purchaser, make any amendments or supplements to the Offering Memorandum that may be reasonably necessary or advisable in connection with the resale of the Notes by the Initial Purchaser.

(b) The Company will cooperate with the Initial Purchaser in arranging for the qualification or exemption of the Notes for offer and sale under the securities or “Blue Sky” laws of such jurisdictions as the Initial Purchaser may designate and will continue any such qualifications or exemptions in effect for as long as may be necessary to complete the distribution of the Notes by the Initial Purchaser; provided, however, that in connection therewith the Company shall not be required to qualify as a foreign corporation or to execute a general consent to service of process in any jurisdiction or to take any other action that would subject it to general service of process or to taxation in respect of doing business in any jurisdiction in which it is not otherwise subject.

(c) If, at any time prior to the completion of the resale by the Initial Purchaser of the Notes, any event shall occur as a result of which it is necessary, in the opinion of counsel for the Initial Purchaser, to amend or supplement the Offering Memorandum in order to make such Offering Memorandum not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, or if for any other reason it shall be necessary to amend or supplement the Offering Memorandum in order to comply with applicable laws, rules or regulations, the Company shall notify the Initial Purchaser of any such event and (subject to Section 5(a)) forthwith amend or supplement such Offering Memorandum at its own expense so that, as so amended or supplemented, such Offering Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading and will comply with all applicable laws, rules or regulations.

(d) The Company will, without charge, provide to the Initial Purchaser and to counsel to the Initial Purchaser as many copies of each of the Preliminary Offering Memorandum, the Offering Memorandum or any amendment or supplement thereto as the Initial Purchaser or its counsel may reasonably request.

(e) During the period of three years from the Closing Date, the Company will furnish to the Initial Purchaser (a) as soon as practicable after mailing, a copy of each report and other communication (financial or otherwise) of the Company mailed to the Trustee or the holders of the Notes, stockholders or any national securities exchange on which any class of securities of the Company may be listed other than materials filed with the Commission via EDGAR and (b) from time to time, subject to compliance with applicable

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securities laws, such other information concerning the Company and the Subsidiary as the Initial Purchaser may reasonably request.

(f) The Company will apply the net proceeds from the sale of the Notes materially as set forth under “Use of Proceeds” in the Offering Memorandum.

(g) None of the Company or any of its respective affiliates (as defined in Rule 144(a) under the Security Act) will sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any “security” (as defined in the Securities Act) which could be integrated with the sale of the Notes in a manner which would require the registration under the Securities Act of the Notes.

(h) For so long as the Notes constitute “restricted” securities within the meaning of Rule 144(a)(3) under the Securities Act, the Company will not, and will not permit any of the Subsidiary to, solicit any offer to buy or offer to sell the Notes by means of any form of general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act) or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act.

(i) For so long as any of the Notes remain outstanding and are “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act and not able to be sold in their entirety by a seller under Rule 144 under the Securities Act (or any successor provision), the Company will make available, upon request, to any such seller of such Notes the information specified in Rule 144A(d)(4) under the Securities Act, unless the Company is then subject to Section 13 or 15(d) of the Exchange Act.

(j) During the period from the Closing Date until two years after the Closing Date, without the prior written consent of the Initial Purchaser, the Company will not, and will not permit any of its “affiliates” (as defined in Rule 144(a) under the Securities Act) to, resell any of the Securities which constitute “restricted securities” under Rule 144 that have been reacquired by any of them.

(k) The Company will not take any action prohibited by Regulation M under the Exchange Act, in connection with the distribution of the Securities contemplated hereby.

(l) The Company will (i) permit the Notes to be included for quotation on the PORTAL Market and (ii) permit the Notes to be eligible for clearance and settlement through The Depository Trust Company.

(m) The Company will use its reasonable best efforts to list the Conversion Shares for quotation on the Nasdaq National Market as promptly as

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practicable but in no event later than the time that the Registration Statement is declared effective in accordance with the Registration Rights Agreement.

(n) The Company will, at all times, reserve and keep available, free of preemptive rights, enough shares of Common Stock for the purpose of enabling the Company to satisfy its obligations to issue the Conversion Shares upon conversion of the Notes.

(o) During the period of 90 days from the date of the Offering Memorandum, without the prior written consent of the Initial Purchaser, the Company (i) will not, directly or indirectly, issue, offer, sell, agree to issue, offer or sell, solicit offers to purchase, grant any call option, warrant or other right to purchase, purchase any put option or other right to sell, pledge, borrow or otherwise dispose of any Relevant Security, or make any announcement of any of the foregoing, (ii) will not establish or increase any “put equivalent position” or liquidate or decrease any “call equivalent position” (in each case within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder) with respect to any Relevant Security, and (iii) will not otherwise enter into any swap, derivative or other transaction or arrangement that transfers to another, in whole or in part, any economic consequence of ownership of a Relevant Security, whether or not such transaction is to be settled by delivery of Relevant Securities, other securities, cash or other consideration, other than the sale of Notes as contemplated by this Agreement, the issuance of the Conversion Shares, and the Company’s issuance of Common Stock upon (i) the conversion or exchange of convertible or exchangeable securities outstanding on the date hereof; (ii) the exercise of currently outstanding options; (iii) the exercise of currently outstanding warrants; and (iv) the grant and exercise of options under, or the issuance and sale of shares pursuant to, employee and director stock option plans in effect on the date hereof, each as described in the Offering Memorandum. The Company will not file a registration statement under the Securities Act in connection with any transaction by the Company or any person that is prohibited pursuant to the foregoing, except for (i) the Company’s filing of registration statements pursuant to the Registration Rights Agreement, and (ii) registration statements on Form S-8 relating to employee benefit plans.

(p) The Company will do and perform all things required to be done and performed by it under this Agreement and the other Offering Documents prior to or after the Closing Date and will use its reasonable best efforts to satisfy all conditions on its part to the obligations of the Initial Purchaser to purchase and accept delivery of the Notes.

6. Expenses. Whether or not the Offering is consummated or this Agreement is terminated (pursuant to Section 12 or otherwise), the Company agrees to pay the following costs and expenses and all other costs and expenses incident to the performance by the Company of its obligations hereunder: (i) the negotiation, preparation, printing, typing, reproduction, execution and delivery of this Agreement and

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of the other Offering Documents, any amendment or supplement to or modification of any of the foregoing and any and all other documents furnished pursuant hereto or thereto or in connection herewith or therewith; (ii) the preparation, printing or reproduction of each Preliminary Offering Memorandum, the Offering Memorandum and each amendment or supplement to any of them; (iii) the delivery (including postage, air freight charges and charges for counting and packaging) of such copies of each Preliminary Offering Memorandum, the Offering Memorandum and all amendments or supplements to any of them as may be reasonably requested for use in connection with the offer and sale of the Notes; (iv) the preparation, printing, authentication, issuance and delivery of certificates for the Notes and the Conversion Shares, including any stamp taxes in connection with the original issuance and sale of the Securities; (v) the reproduction and delivery of this Agreement and the other Offering Documents, the preliminary and supplemental “Blue Sky” memoranda and all other agreements or documents reproduced and delivered in connection with the offering of the Securities; (vi) the exemption from, or registration or qualification of the Securities for offer and sale under the securities or Blue Sky laws of the several states (including filing fees and the reasonable fees, expenses and disbursements of counsel to the Initial Purchaser relating to such registration and qualification); (vii) the transportation and other expenses incurred by or on behalf of Company representatives in connection with presentations to and related communications with prospective purchasers of the Notes; (viii) the fees and expenses of the Company’s accountants and the fees and expenses of counsel (including local and special counsel, if any) for the Company; (ix) fees and expenses of the Trustee including fees and expenses of its counsel; (x) all expenses and listing fees incurred in connection with the application for quotation of the Notes on the PORTAL Market; (xi) all expenses and listing fees incurred in connection with the application for listing for quotation of the Common Stock on the Nasdaq National Market; (xii) all expenses incurred in connection with the performance of the Company’s obligations under the Registration Rights Agreement; and (xiii) any fees charged by investment rating agencies for the rating of the Notes.

7. Conditions of the Initial Purchaser’s Obligations. For purposes of this Section 7, “Closing Date” shall refer to the Closing Date for the Firm Notes and any Additional Closing Date for the Optional Notes. The obligations of the Initial Purchaser to purchase and pay for the Notes are subject to the absence from any certificates opinions, written statements or letters furnished to the Initial Purchaser pursuant to this Section 7 of any misstatement or omission and to the following additional conditions unless waived in writing by the Initial Purchaser:

(i) The Initial Purchaser shall have received an opinion in form and substance reasonably satisfactory to the Initial Purchaser, dated the Closing Date, of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., counsel to the Company covering the matters set forth on Exhibit B hereto.

(ii) The Initial Purchaser shall have received an opinion in form and substance reasonably satisfactory to the Initial Purchaser, dated the Closing Date, of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.,

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intellectual property counsel to the Company, covering the matters set forth on Exhibit C hereto.

(iii) The Initial Purchaser shall have received an opinion of Morrison & Foerster LLP, counsel to the Initial Purchaser, dated the Closing Date, with respect to the sufficiency of certain legal matters relating to this Agreement and such other related matters as the Initial Purchaser may require.

(iv) The Initial Purchaser shall have received from Deloitte & Touche LLP, independent public accountants for the Company, on each of the date hereof and the Closing Date, in form and substance reasonably satisfactory to the Initial Purchaser and Morrison & Foerster LLP, counsel to the Initial Purchaser, letters dated the date hereof and the Closing Date confirming that is an independent public accountant within the meaning of the Exchange Act and the applicable published rules and regulations thereunder and containing such other statements and information as is ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial and statistical information contained or incorporated by reference in the Offering Memorandum.

(v) The Initial Purchaser shall have received from each of the officers and directors listed on Schedule 2 hereto an executed Lock-Up Agreement in substantially the form of Exhibit D hereto.

(vi) The representations and warranties of the Company contained in this Agreement shall be true and correct on and as of the Closing Date; the Company shall have complied in all material respects with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date.

(vii) None of the issuance and sale of the Securities pursuant to this Agreement or any of the transactions contemplated by any of the other Offering Documents shall be enjoined (temporarily or permanently) and no restraining order or other injunctive order shall have been issued; and there shall not have been any legal action, statute, order, decree or other administrative proceeding enacted, instituted or overtly threatened against the Company or against the Initial Purchaser relating to the issuance of the Securities or the Initial Purchaser’s activities in connection therewith or any other transactions contemplated by this Agreement or the Offering Memorandum, or the other Offering Documents.

(viii) Subsequent to the date of this Agreement and since the date of the most recent financial statements in the Offering Memorandum (exclusive of any amendment or supplement thereto after the date hereof), there shall not have occurred (i) any change, or any development involving a

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prospective change, in or affecting the business, condition (financial or other), properties, or results of operations of the Company or the Subsidiary, not disclosed in the Offering Memorandum that is, in the judgment of the Initial Purchaser, so material and adverse as to make it impracticable or inadvisable to proceed with the offering of the Securities on the terms and in the manner contemplated by the Offering Memorandum, or (ii) any event or development relating to or involving the Company or the Subsidiary, or any of their respective officers or directors that makes any material statement made in the Offering Memorandum untrue or that, in the opinion of the Company and its counsel or the Initial Purchaser and their counsel, requires the making of any addition to or change in the Offering Memorandum in order to state a material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

(ix) The Initial Purchaser shall have received certificates, dated the Closing Date and signed by the president and chief executive officer and the chief financial officer of the Company (in their capacities as such), to the effect that:

a. All of the representations and warranties of the Company set forth in this Agreement are true and correct as if made on and as of the Closing Date and, as of the Closing Date all agreements, conditions and obligations of the Company to be performed, satisfied or complied with hereunder on or prior the Closing Date have been duly performed, satisfied or complied with in all material respects.

b. The issuance and sale of the Notes pursuant to this Agreement and the Offering Memorandum and the consummation of the transactions contemplated by the Offering Documents have not been enjoined (temporarily or permanently) and no restraining order or other injunctive order has been issued and there has not been any legal action, order, decree or other administrative proceeding instituted or, to such officers’ knowledge, threatened against the Company relating to the issuance of the Securities or the Initial Purchaser’ activities in connection therewith or in connection with any other transactions contemplated by this Agreement or the Offering Memorandum or the other Offering Documents.

c. Subsequent to the date of this Agreement and since the date of the most recent financial statements in the Offering Memorandum (exclusive of any amendment or supplement thereto after the date hereof), there has not occurred (i) any material adverse change, or any development involving a prospective material adverse change, in or affecting the business, condition (financial or other), properties, or results of operations of the Company or the Subsidiary, not contemplated by the Offering Memorandum, or (ii) any event or development relating to or involving the Company or the Subsidiary, or any of their respective

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officers or directors that makes any material statement made in the Offering Memorandum untrue or that requires the making of any addition to or change in the Offering Memorandum in order to state a material fact necessary in order to make the statements made therein, in light of the circumstances under which they are made, not misleading.

d. At the Closing Date and after giving effect to the consummation of the transactions contemplated by the Offering Memorandum, there exists no Default or Event of Default (as defined in the Indenture).

(x) Each of the Offering Documents and each other agreement or instrument executed in connection with the transactions contemplated thereby shall be reasonably satisfactory in form and substance to the Initial Purchaser and shall have been executed and delivered by all the respective parties thereto (other than the Initial Purchaser) and shall be in full force and effect, and there shall have been no material amendments, alterations, modifications or waivers of any provision thereof since the date of this Agreement.

(xi) All proceedings taken in connection with the issuance of the Notes and the transactions contemplated by this Agreement, the other Offering Documents and all documents and papers relating thereto shall be reasonably satisfactory to the Initial Purchaser and counsel to the Initial Purchaser.

(xii) The Notes shall have been approved for trading on PORTAL.

(xiii) Since the date of this Agreement, there shall not have been any announcement by any “nationally recognized statistical rating organization,” as defined for purposes of Rule 436(g) under the Securities Act, that (A) it is downgrading its rating assigned to any debt securities of the Company, or (B) it is reviewing its rating assigned to any debt securities of the Company with a view to possible downgrading, or with negative implications, or direction not determined.

(xiv) On or before the Closing Date, the Initial Purchaser shall have received the Registration Rights Agreement executed by the Company and such agreement shall be in full force and effect.

(xv) The Company shall have furnished or caused to be furnished to the Initial Purchaser such further certificates and documents as the Initial Purchaser shall have reasonably requested.

(xvi) At the Closing Date, the Company and the Trustee shall have entered into the Indenture and the Initial Purchaser shall have received counterparts, conformed as executed, thereof and the Notes shall

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have been duly executed and delivered by the Company and duly authenticated by the Trustee.

All such opinions, certificates, letters, schedules, documents or instruments delivered pursuant to this Agreement will comply with the provisions hereof only if they are reasonably satisfactory in all material respects to the Initial Purchaser and counsel to the Initial Purchaser. The Company shall furnish to the Initial Purchaser such conformed copies of such opinions, certificates, letters, schedules, documents and instruments in such quantities as the Initial Purchaser shall reasonably request.

8. Indemnification.

(a) The Company shall indemnify and hold harmless (i) the Initial Purchaser, (ii) each person, if any, who controls the Initial Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and (iii) the respective officers, directors, partners, employees, representatives and agents of the Initial Purchaser or any controlling person, from and against any and all losses, liabilities, claims, damages and expenses whatsoever as incurred (including but not limited to reasonable attorneys’ fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any investigation or litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in (A) the Preliminary Offering Memorandum or the Offering Memorandum, or (B) any materials or information provided to investors by the Company, or with the written approval of the Company, in connection with the marketing of the Securities, including any road show or investor presentations made to investors by the Company (whether in person or electronically) (“Marketing Materials”), or (ii) the omission or alleged omission to state in the Preliminary Offering Memorandum or the Offering Memorandum, or in any Marketing Materials, a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the Company will not be liable in any such case to the extent, but only to the extent, that any such loss, liability, claim, damage or expense arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Initial Purchaser expressly for use therein; provided, further, that the foregoing indemnity agreement with respect to any Preliminary Offering Memorandum shall not inure to the benefit of the Initial Purchaser if it failed to deliver an Offering Memorandum (as then amended or supplemented, provided by the Company to the Initial Purchaser in the requisite quantity and on a timely basis to permit proper delivery on or prior to the Closing Date) to the person asserting any losses, liabilities, claims, damages and

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expenses caused by any untrue statement or alleged untrue statement of a material fact contained in any Preliminary Offering Memorandum, or caused by an omission or alleged omission to state therein a material fact necessary to make the statements therein; in light of the circumstances under which they were made, not misleading, if such material misstatement or omission or alleged material misstatement or omission was cured, as determined by a court of competent jurisdiction in a decision not subject to further appeal, in such Offering Memorandum and such Offering Memorandum was required by law to be delivered at or prior to the written confirmation of sale to such person. The parties acknowledge and agree that such information provided by or on behalf of the Initial Purchaser consists solely of the material identified in Section 16 hereof. This indemnity agreement will be in addition to any liability that the Company may otherwise have, including under this Agreement.

(b) The Initial Purchaser shall indemnify and hold harmless (i) the Company, (ii) each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and (iii) the officers, directors, partners, employees, representatives and agents of the Company, from and against any and all losses, liabilities, claims, damages and expenses whatsoever as incurred (including but not limited to attorneys’ fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any investigation or litigation, commenced or threatened, or any claim whatsoever and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the Offering Memorandum, or arise out of or are based upon the omission or alleged omission to state in the Preliminary Offering Memorandum or the Offering Memorandum a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that any such loss, liability, claim, damage or expense arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Initial Purchaser expressly for use therein; provided, however, that in no case shall the Initial Purchaser be liable or responsible for any amount in excess of the discounts and commissions received by such Initial Purchaser. The parties acknowledge and agree that such information provided by or on behalf of the Initial Purchaser consists solely of the material identified in Section 16 hereof. This indemnity will be in addition to any liability that the Initial Purchaser may otherwise have, including under this Agreement.

(c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the

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indemnifying party under such subsection, notify each party against whom indemnification is to be sought in writing of the commencement thereof (but the failure so to notify an indemnifying party shall not relieve it from any liability which it may have under this Section 8 except to the extent (but only to the extent) that such action is not otherwise made known to the indemnifying party and such indemnifying party is not aware of such action and it has been materially prejudiced (including the forfeiture of important rights and defenses)). In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate, at its own expense in the defense of such action, and to the extent it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel satisfactory to such indemnified party; provided, however, that counsel to the indemnifying party shall not (except with the written consent of the indemnified party) also be counsel to the indemnified party. Notwithstanding the foregoing, the indemnified party or parties shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such indemnified party or parties unless (i) the employment of such counsel shall have been authorized in writing by one of the indemnifying parties in connection with the defense of such action, (ii) the indemnifying parties shall not have employed counsel to take charge of the defense of such action within a reasonable time after notice of commencement of the action, (iii) the indemnifying party does not diligently defend the action after assumption of the defense, or (iv) such indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them which are different from or additional to those available to one or all of the indemnifying parties (in which case the indemnifying party or parties shall not have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events such fees and expenses of one such counsel and any local counsel shall be borne by the indemnifying parties. No indemnifying party shall, without the prior written consent of the indemnified parties, effect any settlement or compromise of, or consent to the entry of judgment with respect to, any pending or threatened claim, investigation, action or proceeding in respect of which indemnity or contribution may be or could have been sought by an indemnified party under this Section 8 or Section 9 hereof (whether or not the indemnified party is an actual or potential party thereto), unless (x) such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such claim, investigation, action or proceeding and (ii) does not include a statement as to or an admission of fault, culpability or any failure to act, by or on behalf of the indemnified party, and (y) the indemnifying party confirms in writing its indemnification obligations hereunder with respect to such settlement, compromise or judgment.

9. Contribution. In order to provide for contribution in circumstances in which the indemnification provided for in Section 8 is for any reason held to be unavailable from an indemnifying party or is insufficient to hold harmless a party

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indemnified thereunder, the Company, on the one hand, and the Initial Purchaser, on the other hand, shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnification provision (including any investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claims asserted, but after deducting in the case of losses, liabilities, claims, damages and expenses suffered by the Company, any contribution received by the Company from persons, other than the Initial Purchaser, who may also be liable for contribution, including persons who control the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to which the Company and the Initial Purchaser may be subject, in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand, and the Initial Purchaser, on the other hand, from the offering of the Notes or, if such allocation is not permitted by applicable law or indemnification is not available as a result of the indemnifying party not having received notice as provided in Section 8, in such proportion as is appropriate to reflect not only the relative benefits referred to above but also the relative fault of the Company, on the one hand, and the Initial Purchaser, on the other hand, in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Initial Purchaser, on the other hand, shall be deemed to be in the same proportion as (i) the total proceeds from the offering of the Notes (net of discounts but before deducting expenses) received by the Company bear to (ii) the discounts and commissions received by the Initial Purchaser, respectively. The relative fault of the Company, on the one hand, and of the Initial Purchaser, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Initial Purchaser and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Initial Purchaser agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation (even if the Initial Purchaser were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to above. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in Section 8 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any judicial, regulatory or other legal or governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 9, (i) in no case shall the Initial Purchaser be required to contribute any amount in excess of the amount by which the total price at which the Notes resold by such Initial Purchaser in the initial placement of such Notes were offered to investors exceeds the amount of any damages which the Initial Purchaser has otherwise been required to pay by reason of any untrue or alleged untrue statement or omission or alleged omission and (ii) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to

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contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 9, (A) each person, if any, who controls the Initial Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and (B) the respective officers, directors, partners, employees, representatives and agents of the Initial Purchaser or any controlling person shall have the same rights to contribution as such Initial Purchaser, and (1) each person, if any, who controls any Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and (2) the officers, directors, employees, representatives and agents of the Company shall have the same rights to contribution as the Company, subject in each case to clauses (i) and (ii) of this Section 9. Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties under this Section 9, notify such party or parties from whom contribution may be sought, but the failure to so notify such party or parties shall not relieve the party or parties from whom contribution may be sought from any obligation it or they may have under this Section 9 or otherwise except to the extent (but only to the extent) that such action is not otherwise made known to the indemnifying party and such indemnifying party is not aware of such action and it has been materially prejudiced (including the forfeiture of important rights and defenses). No party shall be liable for contribution with respect to any action or claim settled without its prior written consent, provided that such written consent shall not be unreasonably withheld or delayed. The Initial Purchaser’s obligations to contribute pursuant to this Section 9 are several in proportion to the respective principal amount of the Notes purchased by each of the Initial Purchaser hereunder and not joint.

10. Offering of Securities; Restrictions on Transfer. The Initial Purchaser represents and warrants that it is a QIB. The Initial Purchaser acknowledges and agrees with the Company as to itself only that (i) the Notes and the Conversion Shares have not been and will not be registered under the Securities Act in connection with the initial offering of the Notes; (ii) it is purchasing the Notes pursuant to a private sale exemption from registration under such Act and it is not acquiring the Notes with the intention of offering or selling the Notes in a transaction that would violate the Securities Act or the securities laws of any state in the United States or any other applicable jurisdiction in which it offers or sells Notes or distributes the Preliminary Offering Memorandum or the Offering Memorandum; (iii) it has not and will not solicit offers for, or offer or sell, the Securities by any form of general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act) or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act; and (iv) it has and will solicit offers for the Securities only from, and will offer the Securities only to, persons whom such Initial Purchaser reasonably believes to be QIBs or, if any such person is buying for one or more institutional accounts for which such person is acting as fiduciary or agent, only when such person has represented to such Initial Purchaser that each such account is a QIB, to whom notice has been given that such sale or delivery is being made in reliance on Rule 144A and, in each case, in transactions under Rule 144A.

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11. Survival Clause. The respective representations, warranties, agreements, covenants, and indemnities of the Company, and the Initial Purchaser set forth in this Agreement shall remain in full force and effect, regardless of (i) any investigation made by or on behalf of the Company, any of its officers or directors, the Initial Purchaser or any controlling person referred to in Sections 8 and 9 hereof and (ii) delivery of and payment for the Notes, and shall, subject to Section 14 hereof, be binding upon and shall, subject to Section 14 hereof inure to the benefit of, any successors, permitted assigns, heirs, legal representatives of the Company, the Initial Purchaser and indemnified parties referred to in Section 8 hereof. The respective agreements, covenants, and indemnities set forth in Sections 6, 8, 9, 11 and 12 hereof shall remain in full force and effect, regardless of any termination of this Agreement.

12. Termination. (a) This Agreement may be terminated in the sole discretion of the Initial Purchaser by notice to the Company given in the event that (x) the Company has failed, refused or been unable to satisfy all conditions and obligations on its part to be performed or satisfied hereunder on or prior to the Closing Date or (y) if, at or prior to the Closing Date or at or prior to the Additional Closing Date, as the case may be:

(i) any domestic or international event or act or occurrence has materially disrupted, or in the opinion of the Initial Purchaser will in the immediate future materially disrupt, the market for the Company’s securities or securities in general;

(ii) trading on the New York Stock Exchange, or the Nasdaq National Market, shall have been suspended or made subject to material limitations, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required, on the New York Stock Exchange or the Nasdaq National Market, or by order of the Commission or other regulatory body or governmental authority having jurisdiction;

(iii) a banking moratorium has been declared by any state or federal authority or if any material disruption in commercial banking or securities settlement or clearance services shall have occurred;

(iv) (A) there shall have occurred any outbreak or escalation of hostilities or acts of terrorism involving the United States or there is a declaration of a national emergency or war by the United States, or (B) there shall have been any other calamity or crisis or any change in political, financial or economic conditions if the effect of any such event in (A) or (B), in the judgment of the Initial Purchaser, makes it impracticable or inadvisable to proceed with the offering, sale and delivery of the Notes or the Optional Notes, as the case may be, on the terms and in the manner contemplated by the Offering Memorandum; or

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(v) any debt securities of the Company shall have been downgraded or placed on any “watch list” for possible downgrading by any “nationally recognized statistical rating organization” as defined for purposes of Rule 436(g) under the Securities Act.

(b) Subject to paragraph (c) below, termination of this Agreement pursuant to this Section 12 shall be without liability of any party to any other party except as provided in Section 11 hereof.

(c) If this Agreement shall be terminated pursuant to any of the provisions hereof, or if the sale of the Notes provided for herein is not consummated because any condition to the obligations of the Initial Purchaser set forth herein is not satisfied or because of any refusal, inability or failure on the part of the Company to perform any agreement herein or comply with any provision hereof, the Company will, subject to demand by the Initial Purchaser, reimburse the Initial Purchaser for all out-of-pocket expenses (including the reasonable fees and the expenses of their counsel), incurred by the Initial Purchaser in connection herewith.

13. Notices. All communications hereunder shall be in writing and, if sent to the Initial Purchaser, shall be hand delivered, facsimiled, mailed by first-class mail, or couriered by next-day air courier and confirmed in writing to the Initial Purchaser c/o Bear Stearns & Co. Inc., 383 Madison Avenue, New York, New York 10179, Attention: Stephen Parish, Equity Capital Markets, facsimile number: (212) 272-2969 and with a copy to Morrison & Foerster LLP, 1290 Avenue of the Americas, New York, New York 10104, Attention: James R. Tanenbaum, Esq., facsimile number: (212) 468-7900. If sent to the Company, shall be delivered, mailed, couriered or telecopied and confirmed in writing, to CuraGen Corporation, 555 Long Wharf Drive, 11^th Floor, New Haven Connecticut, 06511, Attention: David M. Wurzer, facsimile number: (203) 401-3333, and with a copy to Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., One Financial Center, Boston Massachusetts 02111, Attention: Michael Fantozzi, Esq., facsimile number: (617) 542-2241.

14. Successors. This Agreement shall inure to the benefit of and be binding upon the Initial Purchaser and the Company and their respective successors, permitted assigns and legal representatives, and nothing expressed or mentioned in this Agreement is intended or shall be construed to give any other person any legal or equitable right, remedy or claim under or in respect of this Agreement, or any provisions herein contained; this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of such persons and for the benefit of no other person except that (i) the indemnities of the Company contained in Section 8 of this Agreement shall also be for the benefit of any person or persons who control the Initial Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and (ii) the indemnities of the Initial Purchaser contained in Section 8 of this Agreement shall also be for the benefit of the directors of the Company, its officers, employees and agents and any person or persons who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange

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Act. No purchaser of Notes from the Initial Purchaser will be deemed a successor or an assign because of such purchase. Prior to the closing on the Closing Date, no party may assign this Agreement or any of its rights hereunder without the prior written consent of the other party or parties.

15. No Waiver; Modifications in Writing. No failure or delay on the part of the Company or the Initial Purchaser in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to the Company or the Initial Purchaser at law or in equity or otherwise. No waiver of or consent to any departure by the Company or the Initial Purchaser from any provision of this Agreement shall be effective unless signed in writing by the party entitled to the benefit thereof; provided that notice of any such waiver shall be given to each party hereto as set forth below. Except as otherwise provided herein, no amendment, modification or termination of any provision of this Agreement shall be effective unless signed in writing by or on behalf of the Company and the Initial Purchaser. Any amendment, supplement or modification of or to any provision of this Agreement, any waiver of any provision of this Agreement, and any consent to any departure by the Company or the Initial Purchaser from the terms of any provision of this Agreement shall be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Agreement, no notice to or demand on the Company in any case shall entitle the Company to any other or further notice or demand in similar or other circumstances.

16. Information Supplied by the Initial Purchaser. The statements set forth in the third paragraph, third sentence of the tenth paragraph and eleventh paragraph in the Offering Memorandum under the heading “Plan of Distribution” constitute the only information furnished by the Initial Purchaser to the Company for purposes of Sections 2(a), 8(a) and 8(b) hereof.

17. Entire Agreement. This Agreement constitutes the entire agreement among the parties hereto and supersedes all prior agreements, representations, warranties, understandings and arrangements, oral or written, among the parties hereto with respect to the subject matter hereof.

18. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAW.

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

If the foregoing correctly sets forth our understanding, please indicate your acceptance thereof in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement between the Company and the Initial Purchaser.

Very truly yours,
CURAGEN CORPORATION
a Delaware corporation
By:	/s/ David M. Wurzer
	Name: David M. Wurzer
	Title: Executive Vice President and      Chief financial Officer

The foregoing Agreement is hereby confirmed and accepted as of the date first above written.

BEAR, STEARNS & CO. INC.
By:	/s/ Stephen Parish
	Name: Stephen Parish Title:   Senior Managing Director

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Schedule 1

Initial Purchaser	Principal Amount of Notes
Bear, Stearns & Co. Inc.	$	100,000,000
Total	$	100,000,000

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Schedule 2

Jonathan M. Rothberg, Chairman

Ronald M. Cresswell

David R. Ebsworth

Vincent T. DeVita, Jr.

John H. Forsgren

Robert E. Patricelli

Patrick J. Zenner

Jonathan M. Rothberg

David M. Wurzer

Christopher K. McLeod

Timothy M. Shannon

Elizabeth A. Whayland

Richard F. Begley

* Note: List shall also include those spouses, family members, trusts, partnerships, etc. through which the above individuals hold securities.

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Exhibit A

Subsidiary	Jurisdiction of Incorporation
454 Life Sciences Corporation	Delaware

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Exhibit B

Form of Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

1. Each of the Company and the Subsidiary has been duly incorporated in the State of Delaware, and each of the Company and the Subsidiary validly exists as a corporation in good standing under the laws of its respective jurisdiction of incorporation, with the requisite corporate power and authority to own its properties and conduct its businesses as described in the Offering Memorandum. Each of the Company and the Subsidiary is duly qualified and in good standing as a foreign corporation in the specified jurisdictions set forth on Schedule A annexed to this opinion letter.

2. The Company has the authorized capitalization as set forth in the Offering Memorandum, and all of the authorized shares of capital stock of the Company conform in all material respects to the descriptions thereof contained in the Offering Memorandum in the section entitled “Description of Capital Stock”. All shares of Common Stock outstanding on the date of the Offering Memorandum have been duly and validly authorized and issued, are fully paid and non-assessable. To such counsel’s knowledge, except as disclosed and as of the date or dates disclosed in the Offering Memorandum, there are (i) no outstanding securities of the Company convertible into or evidencing the right to subscribe for any shares of capital stock of the Company, (ii) no outstanding or authorized options, warrants, calls, subscriptions, rights, commitments or any other instruments or agreements of any character obligating the Company to issue any shares of its capital stock or any securities convertible into or evidencing the right to subscribe for any shares of such stock and (iii) no agreements or arrangements with respect to the voting, sale or transfer of any shares of capital stock of the Company to which the Company is a party, and, to such counsel’s knowledge, subsequent to the date or dates disclosed in the Offering Memorandum, no other securities described in clauses (i) and (ii) were issued or granted, other than options which were granted or exercised under, or shares of Common Stock which were issued or sold pursuant to, the Company’s employee and director stock option plans, each plan as described in the Offering Memorandum.

3. All of the outstanding shares of capital stock or other equity securities of each Subsidiary held by the Company, to such counsel’s knowledge, are held free and clear of all Liens, other than the Liens under the Purchase Agreement among the Subsidiary, the Company and the several purchasers named therein, dated as of June 5, 2000, as amended, that certain Purchase Agreement among the Subsidiary, the Company and the several purchasers named therein, dated as of September 18, 2003 and the Amended and Restated Registration Rights Agreement among the Subsidiary and the investors named therein, dated as of September 18, 2003, and limitations on voting rights and are duly authorized, validly issued, fully paid and non-assessable.

4. The Company has the requisite corporate power and authority to execute and deliver the Purchase Agreement, the Registration Rights Agreement and the Indenture, to

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perform its obligations thereunder, to issue and sell and deliver the Notes to the Initial Purchaser and to issue and deliver the Conversion Shares.

5. The Registration Rights Agreement has been duly authorized, executed and delivered by the Company and (assuming that the Registration Rights Agreement is the valid and legally binding obligation of the Initial Purchaser) constitutes a valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms, except that the enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws and court decisions now or hereafter in effect relating to or affecting creditors’ rights generally; and (ii) general principles of equity (regardless of whether such enforcement is considered in a proceeding at law or in equity) (clauses (i) and (ii) together, the “Enforceability Exceptions”); (iii) the fact that any rights to indemnity or contribution thereunder may be limited by federal or state securities laws and public policy considerations; and (iv) [exception for liquidated damages to be added].

6. The Purchase Agreement has been duly authorized, executed and delivered by the Company (assuming that the Purchase Agreement is the valid and legally binding obligation of the Initial Purchase) constitutes a valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms, except that the enforcement thereof may be limited by the Enforceability Exceptions and the fact that any rights to indemnity or contribution thereunder may be limited by federal or state securities laws and public policy considerations.

7. The Indenture has been duly authorized, executed and delivered by the Company and (assuming that the Indenture is the valid and legally binding obligation of the Trustee) constitutes a valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms, except that the enforcement thereof may be limited by the Enforceability Exceptions.

8. The Notes have been duly authorized, executed and issued by the Company and, when duly authenticated by the Trustee in accordance with the terms of the Indenture and delivered to and paid for by the Initial Purchaser in accordance with the terms of the Purchase Agreement, will constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms, except that the enforcement thereof may be limited by the Enforceability Exceptions, and will be entitled to the benefits of the Indenture and the Registration Rights Agreement.

9. The Conversion Shares have been duly authorized and reserved for issuance upon conversion of the Notes and, when issued upon conversion of the Notes in accordance with the terms of the Notes and the Indenture, will be validly issued, fully paid and non-assessable, and such issuance of the Conversion Shares will not be subject to any preemptive rights under (i) the Company’s Certificate of Incorporation or By-laws, (ii) Delaware General Corporation Law or (iii) to such counsel’s knowledge, under the express terms or provisions of any material agreement or other instrument to which the Company is a party.

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10. The execution and delivery by the Company of the Purchase Agreement, the Registration Rights Agreement and the Indenture, the issuance of the Notes and the performance by the Company of its obligations thereunder do not and will not (A) conflict with or result in a breach of any of the express terms and provisions of, or constitute a default (or an event that with notice or lapse of time, or both, would constitute a default) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of the Subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan agreement or any other agreement or instrument filed as an exhibit to the 2002 10-K or 2003 10-Qs, or any franchise, license or permit known to such counsel to which the Company or the Subsidiary is a party or by which the Company or the Subsidiary or their respective properties or assets are otherwise bound or (B) violate or conflict with any provision of the certificate of incorporation or by-laws of the Company or the Subsidiary or, to such counsel’s knowledge, any judgment, decree, order, statute, rule or regulation of any court or any judicial, regulatory or other legal or governmental agency or body.

11. No consent, approval, authorization or qualification of or with any federal, Connecticut, New York or Delaware State court, governmental agency or body is required for the issue and sale of the Notes and the issuance of the Conversion Shares, the execution and delivery by the Company of the Purchase Agreement, the Registration Rights Agreement or the Indenture, the consummation by the Company of the transactions contemplated thereby or the performance by the Company of its obligations thereunder, except such as may be required (i) in connection with the Company registering the Securities for resale pursuant to the Registration Rights Agreement, (ii) under applicable state securities or “blue sky” laws in connection with the purchase and sale of the Securities or in connection with the resale of the Notes or the underlying Conversion Shares or (iii) in connection with the qualification of the Indenture under the Trust Indenture Act of 1939, as amended.

12. Each of the Indenture and the Registration Rights Agreement conform in all material respects to the description thereof contained in the Offering Memorandum.

13. To such counsel’s knowledge, except as set forth in the Offering Memorandum, there are no judicial, regulatory or other legal or governmental proceedings pending to which the Company or any of the Subsidiaries is a party or of which any property of the Company or the Subsidiaries is the subject that are required to be described in the Offering Memorandum and are not so described and, to such counsel’s knowledge, no such proceedings are threatened by governmental authorities or others.

14. Assuming (i) all of the representations and warranties of the Initial Purchaser and the Company set forth in the Purchase Agreement are true and correct, (ii) compliance by the Initial Purchaser and the Company with their respective covenants set forth in the Purchase Agreement and (iii) all of the representations and warranties made in accordance with the Offering Memorandum by the purchasers to whom the Initial Purchaser initially resells the Notes are true and correct, it is not necessary in connection

40

with the offer, sale and delivery of the Notes to the Initial Purchaser pursuant to the Purchase Agreement or the offer, sale and delivery of the Notes by the Initial Purchaser to the initial purchasers therefrom, in the manner contemplated by the Purchase Agreement and as described in the Offering Memorandum, to register the Securities under the Securities Act of 1933, as amended, or to qualify the Indenture under the Trust Indenture Act of 1939, as amended.

15. The Company is not and, immediately after giving effect to the offering and sale of the Notes and the application of the proceeds thereof as described in the Offering Memorandum, will not be required to register as an “investment company,” as defined in the Investment Company Act of 1940, as amended.

16. When the Notes are issued and delivered pursuant to the Purchase Agreement, such Notes will not be of the same class (within the meaning of Rule 144A under the Securities Act) as securities of the Company that are listed on a national securities exchange registered under Section 6 of the Exchange Act or that are quoted on a United States automated inter-dealer quotation system.

17. The statements in the Offering Memorandum under the captions “Description of the Notes”, “Description of Capital Stock,” insofar as such statements purport to summarize the provisions of the Indenture, the Registration Rights Agreement, the Notes and the Common Stock (including the Conversion Shares), fairly summarize such provisions.

18. The statements in the Offering Memorandum under the caption “Certain U.S. Federal Income Tax Considerations,” insofar as they purport to constitute summaries of matters of United States federal income and, in the case of non-resident aliens, estate tax law and regulations or legal conclusions with respect thereto, constitute accurate summaries of the matters described therein in all material respects.

19. Each document incorporated by reference in the Offering Memorandum (except for the financial statements and related schedules included therein as to which such counsel need express no opinion) complied, when filed with the Commission, as to form, in all material respects with the Exchange Act and the rules and regulations of the Commission promulgated thereunder.

In addition, such opinion shall also contain a statement that such counsel has participated in conferences with officers and representatives of the Company, representatives of the independent auditors for the Company and the Initial Purchaser at which the contents of the Offering Memorandum (including the documents incorporated by reference therein) and related matters were discussed and, no facts have come to the attention of such counsel that causes such counsel to believe that the Offering Memorandum (including the documents incorporated by reference therein), as of its date (or any amendment thereof or supplement thereto made prior to the Closing Date as of the date of such amendment or supplement) and as of the Closing Date, contained or contains an untrue statement of a material fact or omitted or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of

41

the circumstances under which they were made, not misleading (it being understood that such counsel need express no belief or opinion with respect to the financial statements, including the related notes, and schedules and all other financial data included or incorporated by reference therein).

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Exhibit C

Form of Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC

1. We have disclosed or intend to disclose to the United States Patent and Trademark Office any references known by us to be material to the patentability of the claimed inventions of the United States patent applications of the Company being prosecuted by us listed on Schedule A in accordance with 37 C.F.R. § 1.56.

2. To our knowledge, the Company is the sole assignee of each of the United States patent applications of the Company being prosecuted by us listed on Schedule A as pending for which a serial number has been issued; or to our knowledge all inventors on such patent applications are under an obligation to assign all of their rights in such applications to the Company, except for the cases listed on Schedule B.

3. To our knowledge, the Company has not received any notice of infringement with respect to any patent, trademark or copyright or any notice of misappropriation of trade secrets in relation to the Company’s currently contemplated 53135 product.

4. Based on our knowledge of the Company’s currently contemplated 53135 product as described to us by the Company, the Company is not currently violating any patent right of a third party which we are aware of.

5. We are not aware of any pending or threatened legal or governmental proceedings relating to patent rights, copyrights trademark rights, trade secrets, or other proprietary rights of the Company (other than the patent prosecution or trademark proceedings themselves).

6. To the best of our knowledge, the statements under the captions in the Preliminary Offering Memorandum entitled “RISK FACTORS”, subsections on pages xx-xx, and entitled “Technology”, “Competition”, and Intellectual Property” on pages xx-xx, insofar as such matters constitute matters of law or legal conclusions are accurate and correct in all material respects and fairly present such matters.

7. With respect to United States patent, trademark, copyright and trade secret matters, nothing has come to our attention which would lead us to believe that the statements under the captions in the Preliminary Offering Memorandum entitled “RISK FACTORS”, subsections on pages xx-xx, and entitled “Technology”, “Competition”, and Intellectual Property” on pages xx-xx, as of the date thereof and at any Closing Date, contain any untrue statement of material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, not misleading.

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Exhibit D

Form of Lock-Up Agreement

February 10, 2004

Bear, Stearns & Co. Inc.

383 Madison Avenue

New York, New York 10179

Attention: Equity Capital Markets

CuraGen Corporation Lock-Up Agreement

Ladies and Gentlemen:

This letter agreement (this “Agreement”) relates to the proposed offering (the “Offering”) by CuraGen Corporation a Delaware corporation (the “Company”), of its 4.0% Convertible Subordinated Notes due 2011 (the “Notes”) in an aggregate principal amount of up to $120 million (including the Initial Purchaser option to purchase additional Notes).

In order to induce you (the “Initial Purchaser”) to purchase Notes in the Offering, the undersigned hereby agrees that, without the prior written consent of Bear, Stearns & Co. Inc. (“Bear Stearns”), during the period from the date hereof until ninety (90) days from the date of the Offering Memorandum (the “Lock-Up Period”), the undersigned (a) will not, directly or indirectly, issue, offer, sell, agree to issue, offer or sell, solicit offers to purchase, grant any call option, warrant or other right to purchase, purchase any put option or other right to sell, pledge, borrow or otherwise dispose of any Relevant Security (as defined below), and (b) will not establish or increase any “put equivalent position” or liquidate or decrease any “call equivalent position” with respect to any Relevant Security (in each case within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder) with respect to any Relevant Security, or otherwise enter into any swap, derivative or other transaction or arrangement that transfers to another, in whole or in part, any economic consequence of ownership of a Relevant Security, whether or not such transaction is to be settled by delivery of Relevant Securities, other securities, cash or other consideration. The foregoing sentence shall not apply to: (1) the transfer of shares of a Relevant Security by the undersigned as a gift or gifts; (2) the transfer of shares of a Relevant Security by the undersigned to its affiliates, as such term is defined in Rule 405 under the Securities Act and (3) the exercise of stock options granted pursuant to the Company’s or its subsidiary’s stock option plans. Notwithstanding the foregoing, the undersigned may transfer Relevant Securities pursuant to (1) or (2) above, provided that, each resulting transferee of Relevant Securities executes and delivers to you an agreement satisfactory to you certifying that such transferee is bound by the terms of this Agreement and has been in compliance with the terms hereof since the date first above written as if it had been an original party hereto. As used herein “Relevant Security” means the Stock, any other equity security of the Company or any of its subsidiaries and any security

44

convertible into, or exercisable or exchangeable for, any Stock or other such equity security.

The undersigned hereby authorizes the Company during the Lock-Up Period to cause any transfer agent for the Relevant Securities to decline to transfer, and to note stop transfer restrictions on the stock register and other records relating to, Relevant Securities for which the undersigned is the record holder and, in the case of Relevant Securities for which the undersigned is the beneficial but not the record holder, agrees during the Lock-Up Period to cause the record holder to cause the relevant transfer agent to decline to transfer, and to note stop transfer restrictions on the stock register and other records relating to, such Relevant Securities. The undersigned hereby further agrees that, without the prior written consent of Bear Stearns, during the Lock-up Period the undersigned (x) will not file or participate in the filing with the Securities and Exchange Commission of any registration statement, or circulate or participate in the circulation of any preliminary or final prospectus or other disclosure document with respect to any proposed offering or sale of a Relevant Security and (y) will not exercise any rights the undersigned may have to require registration with the Securities and Exchange Commission of any proposed offering or sale of a Relevant Security.

The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Agreement and that this Agreement constitutes the legal, valid and binding obligation of the undersigned, enforceable in accordance with its terms. Upon request, the undersigned will execute any additional documents necessary in connection with enforcement hereof. Any obligations of the undersigned shall be binding upon the successors and assigns of the undersigned from the date first above written.

This Agreement shall be governed by and construed in accordance with the laws of the State of New York. Delivery of a signed copy of this letter by facsimile transmission shall be effective as delivery of the original hereof.

Very truly yours,

By:

Print Name:

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EX-10.31

Exhibit 10.31

CURAGEN CORPORATION

4.0% CONVERTIBLE SUBORDINATED NOTES DUE 2011

REGISTRATION RIGHTS AGREEMENT

February 17, 2004

BEAR, STEARNS & CO. INC.

383 Madison Avenue

New York, New York 10179

Ladies and Gentlemen:

CuraGen Corporation, a Delaware corporation (the “Company”), proposes to issue and sell to the initial purchaser named in the purchase agreement (the “Initial Purchaser”), upon the terms set forth in such purchase agreement dated February 10, 2004 (the “Purchase Agreement”), its 4.0% Convertible Subordinated Notes due 2011 (the “Securities”). As an inducement to the Initial Purchaser to enter into the Purchase Agreement and in satisfaction of a condition to the obligations of the Initial Purchaser thereunder, the Company agrees with the Initial Purchaser for the benefit of Holders (as defined herein) from time to time of the Registrable Securities (as defined herein) as follows:

1. Definitions.

Capitalized terms used herein without definition shall have the meanings ascribed to them in the Purchase Agreement. As used in this Agreement, the following defined terms shall have the following meanings:

“Additional Interest” has the meaning assigned thereto in Section 7(a) hereof.

“Additional Shares” has the meaning assigned thereto in Section 7(a) hereof.

“Affiliate” of any specified person means any other person which, directly or indirectly, is in control of, is controlled by, or is under common control with such specified person. For purposes of this definition, control of a person means the power, direct or indirect, to direct or cause the direction of the management and policies of such person whether by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Applicable Amount” means, (i) with respect to the Securities, the principal amount of the Securities and (ii) with respect to shares of Common Stock issued upon conversion of the Securities pursuant to the Indenture, the principal amount of Securities that would then be convertible into such number of shares.

“Business Day” means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in The City of New York are authorized or obligated by law or executive order to close.

“Commission” means the United States Securities and Exchange Commission, or any other federal agency at the time administering the Exchange Act or the Securities Act, whichever is the relevant statute for the particular purpose.

“Common Stock” means the Company’s common stock, par value $0.01 per share.

“DTC” means The Depository Trust Company.

“Effectiveness Period” has the meaning assigned thereto in Section 2(b)(i) hereof.

“Effective Time” means the time at which the Commission declares any Shelf Registration Statement effective or at which any Shelf Registration Statement otherwise becomes effective.

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

“Holder” means any person that is the record owner of Registrable Securities (and includes any person that has a beneficial interest in any Registrable Security in book-entry form).

“Indenture” means the Indenture, dated as of February 17, 2004, between the Company and The Bank of New York, pursuant to which the Securities are to be issued, and as amended and supplemented from time to time in accordance with its terms.

“Issue Date” means the first date of original issuance of the Securities.

“Majority of Holders” means Holders holding over 50% of the aggregate principal amount of Registrable Securities outstanding.

“Notice and Questionnaire” means a Notice of Registration Statement and Selling Securityholder Election and Questionnaire substantially in the form of Appendix A hereto.

“Notice Holder” has the meaning assigned thereto in Section 3(a)(i) hereof.

The term “person” means an individual, partnership, limited liability company, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof.

“Prospectus” means the prospectus included in any Shelf Registration Statement, as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by any Shelf Registration Statement and by all other amendments and supplements to such prospectus, including all material incorporated by reference in such prospectus and all documents filed after the date of such prospectus by the Company under the Exchange Act and incorporated by reference therein.

“Registrable Securities” means all or any portion of the Securities issued from time to time under the Indenture in registered form and the shares of Common Stock issuable upon conversion of such securities until the earliest of: (x) the date on which such security has been registered under the Securities Act and disposed of pursuant to an effective registration

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statement, (y) the date that is two years after the later of (1) the last date of original issuance of the Securities and (2) the last date that the Company or any of its Affiliates was the owner of such Securities (or any predecessor thereto), or such shorter period of time as permitted by Rule 144(k) (or any successor rule or regulation) under the Securities Act or any successor provisions thereunder or (z) its sale to the public pursuant to Rule 144 (or any successor rule or regulation) under the Securities Act.

“Registration Default” has the meaning assigned thereto in Section 7(a) hereof.

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

“Shelf Registration” means a registration effected pursuant to Section 2 hereof.

“Shelf Registration Statement” means a “shelf” registration statement filed under the Securities Act providing for the registration of, and the sale on a continuous or delayed basis by the Holders of, all of the Registrable Securities pursuant to Rule 415 under the Securities Act and/or any similar rule that may be adopted by the Commission, filed by the Company pursuant to the provisions of Section 2 of this Agreement, including the Prospectus contained therein, any amendments and supplements to such registration statement, including post-effective amendments, and all exhibits and all material incorporated by reference in such registration statement, and any additional “shelf” registration statements filed under the Securities Act to permit the registration and sale of Registrable Securities pursuant to Section 3(a)(ii) hereof.

“Suspension Period” has the meaning assigned thereto in Section 2(c) hereof.

“Trust Indenture Act” means the Trust Indenture Act of 1939, or any successor thereto, and the rules, regulations and forms promulgated thereunder, as the same shall be amended from time to time.

The term “underwriter” means any underwriter, or any person deemed to be an underwriter pursuant to the Securities Act and Exchange Act and the respective rules and regulations thereunder, as in effect at any relevant time, of Registrable Securities in connection with an offering thereof under a Shelf Registration Statement.

Wherever there is a reference in this Agreement to a percentage of the “principal amount” of Registrable Securities or to a percentage of Registrable Securities, each share of Common Stock issued upon conversion of the Securities shall represent a principal amount or percentage of Registrable Securities determined based on a quotient, (i) the numerator of which shall be equal to the aggregate principal amount of Securities issued, less the aggregate principal amount of Securities outstanding as of the date of determination, and (ii) the denominator of which shall be equal to the aggregate number of shares of Common Stock issued upon conversion of the Securities as of the date of determination.

2. Shelf Registration.

(a) The Company shall, no later than 90 calendar days following the Issue Date, file with the Commission a Shelf Registration Statement relating to the offer and sale of the Registrable Securities by the Holders from time to time in accordance with the methods of

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distribution elected by such Holders and, thereafter, shall use its reasonable best efforts to cause such initial Shelf Registration Statement to be declared effective under the Securities Act no later than 210 calendar days following the Issue Date; provided, however, that only Holders who are Notice Holders shall be entitled to be named as a selling securityholder in any Shelf Registration Statement as of the date it is declared effective or to use the Prospectus forming a part thereof for offers and resales of Registrable Securities. None of the Company’s securityholders (other than Holders of Registrable Securities) shall have the right to include any of the Company’s securities in the Shelf Registration Statement.

(b) Subject to Section 2(c) hereof, the Company shall use its best efforts:

(i) to keep any Shelf Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 3(j) hereof, in order to permit the Prospectus forming a part thereof to be usable by Holders until the earlier of: (1) two years from the last date of original issuance of any Securities or (2) such shorter period ending on the date that (x) all of the Holders of Registrable Securities that are not Affiliates of the Company are able to sell all Registrable Securities immediately without restriction pursuant to Rule 144(k) under the Securities Act or any successor rule thereto, (y) all Registrable Securities registered under the Shelf Registration Statements have been sold or (z) all Registrable Securities have ceased to be outstanding (such period being referred to herein as the “Effectiveness Period”); and

(ii) after the Effective Time of the initial Shelf Registration Statement to take the actions provided for in Section 3(a)(ii) hereof after the receipt of a completed and signed Notice and Questionnaire from any Holder of Registrable Securities that is not then a Notice Holder.

The Company shall be deemed not to have used its reasonable best efforts to keep any Shelf Registration Statement effective during the Effectiveness Period if the Company voluntarily takes any action that would result in Holders of Registrable Securities covered thereby not being able to offer and sell any of such Registrable Securities under such Shelf Registration Statement during that period, unless such action is (A) required by applicable law and the Company thereafter promptly complies with the requirements of Section 3(j) hereof or (B) permitted pursuant to Section 2(c) hereof.

(c) After the Effective Time of the initial Shelf Registration Statement, the Company may suspend the use of any Prospectus by written notice to the Notice Holders for a period not to exceed an aggregate of 45 calendar days in any 90 calendar day period (each such period, a “Suspension Period”) if:

(i) an event has occurred and is continuing as a result of which the Shelf Registration Statement would, in the Company’s judgment, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and

(ii) the Company determines in good faith that the disclosure of such event at such time would have a material adverse effect on the Company and its subsidiaries taken as a whole;

provided, that in the event the disclosure relates to a previously undisclosed proposed or pending material business transaction, the disclosure of which would impede the Company’s

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ability to consummate such transaction, the Company may extend a Suspension Period from 45 calendar days to 60 calendar days; provided, however, that Suspension Periods (including, without limitation, any such extension of a Suspension Period) shall not exceed an aggregate of 120 calendar days in any 360 calendar day period. Each Holder shall keep confidential any communications received by it from the Company regarding the suspension of the use of the Prospectus, except as required by applicable law.

3. Registration Procedures.

In connection with the Shelf Registration Statements, the following provisions shall apply:

(a) (i) not less than 30 calendar days prior to the time the Company in good faith intends to have the initial Shelf Registration Statement declared effective, the Company shall distribute the Notice and Questionnaire to the Holders of Registrable Securities. The Company shall take action to name as a selling securityholder in the initial Shelf Registration Statement at the Effective Time each Holder that completes, executes and delivers a Notice and Questionnaire to the Company at the address set forth in the Notice and Questionnaire (a “Notice Holder”) prior to or on the 20th calendar day after such Holder’s receipt thereof so that such Holder is permitted to deliver the Prospectus forming a part thereof as of such time to purchasers of such Holder’s Registrable Securities in accordance with applicable law. The Company shall not be required to take any action to name any Holder as a selling securityholder in the initial Shelf Registration Statement at the time of its effectiveness or to enable any Holder to use the Prospectus forming a part thereof for resales of Registrable Securities unless such Holder has returned a completed and signed Notice and Questionnaire to the Company in a timely manner.

(ii) After the Effective Time of the initial Shelf Registration Statement, the Company shall, upon the request of any Holder of Registrable Securities that is not then a Notice Holder, promptly send a Notice and Questionnaire to such Holder. After the Effective Time of the initial Shelf Registration Statement, the Company shall (A) after the date a completed and signed Notice and Questionnaire is delivered to the Company, prepare and file with the Commission (x) a supplement to the Prospectus as promptly as practicable or, if required by applicable law, a post-effective amendment to the Shelf Registration Statement or an additional Shelf Registration Statement as promptly as practicable after the end of each fiscal quarter and (y) any other document required by applicable law, so that the Holder delivering such Notice and Questionnaire is named as a selling securityholder in a Shelf Registration Statement and is permitted to deliver the Prospectus to purchasers of such Holder’s Registrable Securities in accordance with applicable law, and (B) if the Company shall file a post-effective amendment to the Shelf Registration Statement, or an additional Shelf Registration Statement, use its reasonable best efforts to cause such post-effective amendment or such additional Shelf Registration Statement to become effective under the Securities Act as promptly as is practicable; provided, however, that if a Notice and Questionnaire is delivered to the Company during a Suspension Period, the Company shall not be obligated to take the actions set forth in this clause (ii) until the termination of such Suspension Period.

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(b) The Company shall furnish to each Notice Holder, prior to the Effective Time, a copy of the Shelf Registration Statement initially filed with the Commission, and shall furnish to such Notice Holders, prior to the filing with the Commission, copies of each amendment thereto and each amendment or supplement, if any, to the Prospectus included therein (other than supplements solely for the purpose of naming one or more Notice Holders as selling securityholders), and shall use its best efforts to reflect in each such document, at the Effective Time or when so filed with the Commission, as the case may be, such comments as such Notice Holders and their respective counsel reasonably may propose.

(c) The Company shall promptly take such action as may be necessary so that (i) each of the Shelf Registration Statements and any amendment thereto and the Prospectus forming a part thereof and any amendment or supplement thereto (and each report or other document incorporated therein by reference in each case) complies in all material respects with the Securities Act and the Exchange Act and the respective rules and regulations thereunder, as in effect at any relevant time, (ii) each of the Shelf Registration Statements and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (iii) each Prospectus forming a part of any Shelf Registration Statement, and any amendment or supplement to such Prospectus, in the form delivered to purchasers of the Registrable Securities during the Effectiveness Period, does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(d) The Company shall promptly advise each Notice Holder, and shall confirm such advice in writing if so requested by any such Notice Holder:

(i) when the initial Shelf Registration Statement has been filed with the Commission and when the initial Shelf Registration Statement has become effective, in each case making a public announcement thereof in a newspaper of general circulation in The City of New York or by publishing the information on the Company’s website or through such other broad, public medium as the Company may see fit;

(ii) when any supplement to the Prospectus, Shelf Registration Statement or post-effective amendment to a Shelf Registration has been filed with the Commission and, with respect to a Shelf Registration Statement or any post-effective amendment, when the same has been declared effective by the Commission;

(iii) of any request by the Commission for amendments or supplements to any Shelf Registration Statement or the Prospectus included therein or for additional information;

(iv) of the issuance by the Commission of any stop order suspending the effectiveness of any Shelf Registration Statement or the initiation of any proceedings for such purpose;

(v) of the receipt by the Company of any notification with respect to the suspension of the qualification of the securities included in any Shelf Registration Statement for sale in any jurisdiction or the initiation of any proceeding for such purpose; and

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(vi) of the happening of any event or the existence of any state of facts that requires the making of any changes in any Shelf Registration Statement or the Prospectus included therein so that, as of such date, such Shelf Registration Statement and Prospectus do not contain an untrue statement of a material fact and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in the light of the circumstances under which they were made) not misleading (which advice shall be accompanied by an instruction to such Holders to suspend the use of the Prospectus until the requisite changes have been made, which notice need not specify the nature of the event giving rise to such suspension).

(e) The Company shall use its best efforts to prevent the issuance, and if issued to obtain the withdrawal at the earliest possible time, of any order suspending the effectiveness of any Shelf Registration Statement.

(f) As promptly as reasonably practicable furnish to each Notice Holder, upon their request and without charge, at least one (1) conformed copy of the Registration Statement and any amendment thereto, including financial statements but excluding schedules, all documents incorporated or deemed to be incorporated therein by reference and all exhibits (unless requested in writing to the Company by such Notice Holder).

(g) The Company shall, during the Effectiveness Period, deliver to each Notice Holder, without charge, as many copies of each Prospectus in which the Notice Holder is listed as a selling securityholder included in the applicable Shelf Registration Statement and any amendment or supplement thereto as such Notice Holder may reasonably request; and the Company consents (except during a Suspension Period or during the continuance of any event described in Section 3(d) (iii)-(vi) above) to the use of the Prospectus and any amendment or supplement thereto by each of the Notice Holders in connection with the offering and sale of the Registrable Securities covered by the Prospectus and any amendment or supplement thereto during the Effectiveness Period.

(h) Prior to any offering of Registrable Securities pursuant to a Shelf Registration Statement, the Company shall (i) register or qualify or cooperate with the Notice Holders and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or “blue sky” laws of such jurisdictions within the United States as any Notice Holder may reasonably request in writing, (ii) keep such registrations or qualifications or exemption therefrom in effect and comply with such laws so as to permit the continuance of offers and sales in such jurisdictions for so long as may be necessary to enable any Notice Holder or underwriter, if any, to complete its distribution of Registrable Securities pursuant to such Shelf Registration Statement, and (iii) take any and all other actions necessary or advisable to enable the disposition in such jurisdictions of such Registrable Securities; provided, however, that in no event shall the Company be obligated to (A) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to so qualify but for this Section 3(h) or (B) subject itself to general or unlimited service of process or to taxation in any such jurisdiction if they are not now so subject.

(i) Unless any Registrable Securities shall be in book-entry only form, the Company shall cooperate with the Notice Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold pursuant to any Shelf Registration

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Statement, which certificates, if so required by any securities market or exchange upon which any Registrable Securities are quoted or listed, shall be penned, lithographed or engraved, or produced by any combination of such methods, on steel engraved borders, and which certificates shall be free of any restrictive legends and in such permitted denominations and registered in such names as Notice Holders may request in connection with the sale of Registrable Securities pursuant to such Shelf Registration Statement.

(j) Upon the occurrence of any fact or event contemplated by paragraph 3(d)(vi) above, subject to Section 2(c) hereof, the Company shall promptly, but in any event within 10 Business Days following such occurrence, prepare, file (and have declared effective) a post-effective amendment to any Shelf Registration Statement or an amendment or supplement to the related Prospectus included therein or file any other document with the Commission so that, as thereafter delivered to purchasers of the Registrable Securities, the Prospectus will not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. If the Company notifies the Notice Holders of the occurrence of any fact or event contemplated by paragraph 3(d)(vi) above, the Notice Holder shall suspend the use of the Prospectus until the requisite changes to the Prospectus have been made.

(k) Not later than the Effective Time of a Shelf Registration Statement, the Company shall provide a CUSIP number for the debt securities to be sold pursuant to a Shelf Registration Statement.

(l) The Company shall use its best efforts to comply with the Securities Act and the Exchange Act and the respective rules and regulations thereunder, as in effect at any relevant time, and make generally available to its securityholders earnings statements (which need not be audited) satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year), or such shorter period as required by the Securities Act and the Exchange Act and the rules and regulations thereunder, as in effect at any relevant time, commencing on the first day of the first fiscal quarter of the Company commencing after (i) the effective date of a Shelf Registration Statement, (ii) the effective date of each post-effective amendment to such Shelf Registration Statement, or (iii) the date of each filing by the Company with the Commission of an Annual Report on Form 10-K that is incorporated by reference in such Shelf Registration Statement, which statements shall cover said 12-month periods.

(m) Not later than the Effective Time of the initial Shelf Registration Statement, the Company shall use its best efforts to cause the Indenture to be qualified under the Trust Indenture Act; in connection with such qualification, the Company shall cooperate with the Trustee under the Indenture and the Holders (as defined in the Indenture) to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the Trust Indenture Act; and the Company shall execute, and shall use all reasonable efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner. In the event that any such amendment or modification referred to in this Section 3(m) involves the appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture.

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(n) The Company shall enter into such customary agreements and take all such other necessary actions in connection therewith (including those reasonably requested by the holders of a majority of the Registrable Securities being sold) in order to expedite or facilitate disposition of such Registrable Securities; provided, that the Company shall not be required to take any action in connection with an underwritten offering without its consent.

(o) The Company shall make reasonably available for inspection by one or more representatives of the selling Holders, designated in writing by a Majority of Holders whose Registrable Securities are included in a Shelf Registration Statement, any underwriter participating in any disposition pursuant to any Shelf Registration Statement, and any attorney, accountant or other agent retained by such Notice Holders or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, and (B) cause the Company’s officers, directors and employees to make reasonably available for inspection all information reasonably requested by such Notice Holders or any such underwriter, attorney, accountant or agent in connection with such Shelf Registration Statement, in each case, as is customary for similar due diligence examinations; provided, however, that such persons shall, at the Company’s request, first agree in writing with the Company that any information that is reasonably and in good faith designated by the Company in writing as confidential at the time of delivery, or inspection, as the case may be, of such information shall be kept confidential by such persons and shall be used solely for the purposes of exercising rights under this Agreement, unless such disclosure is made in connection with a court proceeding or required by law, or such records, information or documents become available to the public generally or through a third party without an accompanying obligation of confidentiality; and provided further that, if the foregoing inspection and information gathering would otherwise disrupt the Company’s conduct of its business, such inspection and information gathering shall, to the greatest extent possible, be coordinated on behalf of the Notice Holders and the other parties entitled thereto by one counsel designated by and on behalf of the Notice Holders and other parties.

(p) The Company will use its best efforts to cause the Common Stock issuable upon conversion of the Securities to be quoted or listed on the Nasdaq National Market or other market or stock exchange on which the Common Stock primarily trades on or prior to the Effective Time of each Shelf Registration Statement hereunder.

(q) The Company will cooperate and assist in any filings required to be made with National Association of Securities Dealers, Inc.

(r) The Company shall use its best efforts to take all other steps necessary to effect the registration, offering and sale of the Registrable Securities covered by each Shelf Registration Statement contemplated hereby.

4. Registration Expenses.

The Company shall bear all fees and expenses incurred in connection with the performance by the Company of its obligations under Sections 2 and 3 of this Agreement whether or not any of the Shelf Registration Statements are declared effective. Such fees and expenses shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (x) with respect to filings required to be made with the National Association of Securities Dealers, Inc. and (y) of compliance with United States federal and state

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securities or Blue Sky laws to the extent such filings or compliance are required pursuant to this Agreement (including, without limitation, reasonable fees and disbursements of the counsel specified in the next sentence in connection with Blue Sky qualifications of the Registrable Securities under the laws of such jurisdictions as the Notice Holders of a majority of the Registrable Securities being sold pursuant to a Shelf Registration Statement may designate)), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities in a form eligible for deposit with The Depository Trust Company), (iii) duplication expenses relating to copies of any Shelf Registration Statement or Prospectus delivered to any Holders hereunder, (iv) fees and disbursements of counsel for the Company in connection with the Shelf Registration Statement, and (v) reasonable fees and disbursements of the Trustee and its counsel and of the registrar and transfer agent for the Common Stock. In addition, the Company shall bear or reimburse the Notice Holders for the reasonable fees and disbursements of one firm of legal counsel for the Holders, which shall initially be counsel to the Initial Purchaser, but which may, upon the written consent of the Initial Purchaser (which shall not be unreasonably withheld), be another nationally recognized law firm experienced in securities law matters designated by the Company. In addition, the Company shall pay the internal expenses of the Company (including, without limitation, all salaries and expenses of officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange on which similar securities of the Company are then listed and the fees and expenses of any person, including special experts, retained by the Company.

5. Indemnification and Contribution.

(a) Indemnification by the Company. The Company shall indemnify and hold harmless each Notice Holder, the Initial Purchaser, and each person, if any, who controls any such Notice Holder or Initial Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any loss, claim, damage, liability or expense whatsoever as incurred (including but not limited to reasonable attorneys’ fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Securities Act, the Exchange Act or otherwise, insofar as any such loss, claim, damage, liability or expense (or action in respect thereof) arises out of, or is based upon, any untrue statement or alleged untrue statement of a material fact contained in the Shelf Registration Statement or any amendment thereto or any related preliminary prospectus or the Prospectus or any amendment thereto of supplement thereof, or arises out of, or is based upon, the omission or alleged omission to state therein any material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Company shall not be liable to any such indemnified party in any such case to the extent that any such loss, claim, damage, liability or expense arises out of, or is based upon, any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of such indemnified party specifically for use therein; and provided further, however, that the Company shall not be liable to any such indemnified party in any such case to the extent that such loss, claim, damage, liability or expense arises from an offer or sale by a Notice Holder of Registrable Securities during a Suspension Period, if such indemnified party is a Notice Holder that received

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from the Company a notice of the commencement of such Suspension Period prior to the making of such offer or sale. The foregoing indemnity agreement is in addition to any liability that the Company may otherwise have to any indemnified party. The Company shall not be liable under this Section 5(a) for any settlement of any action effected without its written consent, which shall not be unreasonably withheld, provided, however, that with respect to actions pursuant to clauses (1), (2) and (3) of Section 5(c), no such consent shall be required.

(b) Indemnification by the Notice Holders. Each Notice Holder, severally and not jointly, shall indemnify and hold harmless the Company, the Initial Purchaser, and each person, if any, who controls the Company or the Initial Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any loss, claim, damage, liability or expense whatsoever as incurred (including but not limited to attorneys’ fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Securities Act, the Exchange Act or otherwise, insofar as any such loss, claim, damage, liability or expense (or action in respect thereof) arises out of, or is based upon, any untrue statement or alleged untrue statement of a material fact contained in the Shelf Registration Statement or any amendment thereto or any related preliminary prospectus or the Prospectus or any amendment thereto or supplement thereof, or arises out of, or is based upon, the omission or alleged omission to state therein any material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission made therein was made in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Notice Holder specifically for use therein. In no event shall the liability of any selling Notice Holder hereunder be greater in amount than the dollar amount of the proceeds received by such Holder upon the sale of the Registrable Securities pursuant to the Shelf Registration Statement giving rise to such indemnification obligation. The foregoing indemnity agreement is in addition to any liability that any Notice Holder may otherwise have to the Company, the Initial Purchaser and any such controlling person.

(c) Notices of Claims, Etc. Promptly after receipt by an indemnified party under this Section 5 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 5, notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability that it may have under this Section 5. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 5 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that the indemnified party shall have the right to employ counsel to represent jointly the indemnified party and its respective directors, employees, officers and controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the indemnified party against the indemnifying

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party under this Section 5 if (1) employment of such counsel has been authorized in writing by the indemnifying party, or (2) such indemnifying party shall not have employed counsel to have charge of the defense of such proceeding within 30 days of the receipt of notice thereof, or (3) such indemnified party shall have reasonably concluded that the representation of such indemnified party and those directors, employees, officers and controlling persons by the same counsel representing the indemnifying party would be inappropriate under applicable standards of professional conduct due to actual or potential differing interests between them or where there may be one or more defenses available to them that are different from, additional to or in conflict with those available to the indemnifying party, and in any such event ((1), (2) or (3)) the fees and expenses of such separate counsel shall be paid by the indemnifying party as incurred. It is understood that the indemnifying party shall not be liable for the fees and expenses of more than one separate firm (in addition to local counsel in each jurisdiction) for all indemnified parties in connection with any proceeding or related proceedings. No indemnifying party shall, without the prior written consent of the indemnified parties, effect any settlement or compromise of, or consent to the entry of judgment with respect to, any pending or threatened claim, investigation, action or proceeding in respect of which indemnity or contribution may be or could have been sought hereunder (whether or not the indemnified party or parties are actual or potential parties thereto) unless (x) such settlement, compromise or judgment (i) includes an unconditional release of such indemnified party from all liability arising out of such claim, action, suit or proceeding and (ii) does not include a statement as to or an admission of fault, culpability or failure to act by or on behalf of any indemnified party, and (y) the indemnifying party confirms in writing its indemnification obligations hereunder with respect to such settlement, compromise or judgment.

(d) Contribution. If the indemnification provided for in this Section 5 is unavailable or insufficient to hold harmless an indemnified party under subsections (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages, expenses or liabilities (or actions in respect thereof) referred to in subSection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the registration of the Registrable Securities pursuant to the Shelf Registration, or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or such Holder or such other indemnified party, as the case may be, on the other, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this Section 5(d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this Section 5(d). The Company and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were

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determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to herein. Notwithstanding any other provision of this Section 5(d), the Holders of the Registrable Securities shall not be required to contribute any amount in excess of the amount by which the gross proceeds received by such Holders from the sale of the Registrable Securities pursuant to the Shelf Registration Statement exceeds the amount of damages which such Holders have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (d), each person, if any, who controls such indemnified party within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as such indemnified party and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as the Company. The Holders’ respective obligations to contribute pursuant to this Section 5 are several in proportion to the respective amount of Registrable Securities they have sold pursuant to a Registration Statement and not joint. The remedies provided for in this Section 5 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity.

(e) Survival. The indemnity and contribution provisions contained in this Section 5 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of the Initial Purchaser, any Holder or any person controlling the Initial Purchaser or Holder, or by or on behalf of the Company, its officers or directors or any person controlling the Company, and (iii) any sale of Registrable Securities pursuant to the Shelf Registration Statement.

6. Holder’s Obligations.

Each Holder agrees, by acquisition of the Registrable Securities, that no Holder of Registrable Securities shall be entitled to sell any of such Registrable Securities pursuant to a Shelf Registration Statement or to receive a Prospectus relating thereto, unless such Holder has furnished the Company with a Notice and Questionnaire as required pursuant to Section 3(a) hereof (including the information required to be included in such Notice and Questionnaire) and the information set forth in the next sentence. Each Notice Holder agrees promptly to furnish to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Notice Holder not misleading and any other information regarding such Notice Holder and the distribution of such Registrable Securities as may be required to be disclosed in the Shelf Registration Statement under applicable law, pursuant to comments from the Commission or as the Company may from time to time reasonably request. Any sale of any Registrable Securities by any Notice Holder shall constitute a representation and warranty by such Notice Holder that the information relating to such Notice Holder and its plan of distribution is as set forth in the Prospectus delivered by such Notice Holder in connection with such disposition, that such Prospectus does not as of the time of such sale contain any untrue statement of a material fact relating to or provided by such Notice Holder or its plan of distribution and that such Prospectus does not as of the time of such sale omit to state any material fact relating to or provided by such Notice Holder or its plan of distribution necessary in order to make the statements in such Prospectus, in the light of the circumstances under which they were made, not misleading.

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7. Additional Interest.

(a) Notwithstanding any postponement of the effectiveness pursuant to Section 2(a) hereof, if:

(i) on or prior to the 90th day following the Issue Date, a Shelf Registration Statement has not been filed with the Commission, or

(ii) on or prior to the 210th day following the Issue Date, such initial Shelf Registration Statement is not declared effective by the Commission, or

(iii) after the effectiveness date of any Shelf Registration Statement, (x) such Shelf Registration Statement ceases to be effective or usable for the offer and sale of Registrable Securities (other than due to a Suspension Period), and the Company fails to file (and have declared effective), within five Business Days, a post-effective amendment to such Shelf Registration Statement or amendment or supplement to the Prospectus contained therein or such other document with the Commission to make such Shelf Registration Statement effective or such Prospectus usable, or (y) the Suspension Periods exceed 45 or 60 calendar days, as applicable, whether or not consecutive, in any 90 calendar day period, or more than 120 calendar days, whether or not consecutive, during any 360 calendar day period during the Effectiveness Period, or

(iv) the Company shall have failed to timely comply with any of its obligations set forth in Section 3(a)(ii) hereof, provided that such failure is not solely due to the failure of a Holder of Registrable Securities to perform its obligations set forth in Section 3(a)(ii) hereof (each of (i) through (iv) a “Registration Default”),

the Company shall be required to pay additional interest (“Additional Interest”), from and including the day following such Registration Default to but excluding the day on which such Registration Default is cured, at a rate per annum equal to an additional one-quarter of one percent (0.25%) of the Applicable Amount to and including the 90th day following such Registration Default, and one-half of one percent (0.50%) thereof from and after the 91st day following such Registration Default. In the event any Registrable Securities that are Securities are converted into Common Stock during the continuance of a Registration Default, the Company will deliver to each Holder converting Securities during the continuance of a Registration Default 103% of the number of shares of Common Stock the Holder would have otherwise received upon conversion (“Additional Shares”) and no Additional Interest shall be payable on such converted Securities.

(b) In the case of a Registration Default described in Sections 7(a)(i)-(iii) above, Additional Interest, if any, shall be payable only to Notice Holders and, in respect of a Registration Default described in Section 7(a)(iv) above, Additional Interest, if any, shall be payable only to Notice Holders to whom such Registration Default relates.

(c) Any amounts to be paid as Additional Interest pursuant to paragraph (a) of this Section 7 shall be paid in cash semiannually in arrears, with the first semiannual payment due on the first interest payment date following the date on which such Additional Interest begins to accrue, to the Notice Holders in whose name the Securities or Common Stock issued upon conversion of the Securities are registered at the close of business on February 15 or August 15, whether or not a Business Day, immediately preceding the relevant interest payment date.

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(d) Except as provided in Section 9(a) hereof, the Additional Interest or Additional Shares as set forth in this Section 7 shall be the exclusive cash (or asset, as the case may be) remedy available to the Holders of Registrable Securities for such Registration Default. In no event shall the Company be required to pay Additional Interest in excess of the applicable maximum amount of one-half of one percent (0.50%) set forth above, regardless of whether one or multiple Registration Defaults exist.

8. Rule 144A.

In the event the Company is not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company hereby agrees with each Holder, for so long as any Registrable Securities remain outstanding, to make available to any Holder in connection with any sale thereof, the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Registrable Securities pursuant to Rule 144A of the Securities Act, as such may be amended from time to time, or any similar or successor rule or regulation hereafter adopted by the Commission.

9. Miscellaneous.

(a) Specific Performance. The parties hereto acknowledge that there would be no adequate remedy at law if the Company fails to perform any of its obligations hereunder and that the Initial Purchaser and the Holders from time to time may be irreparably harmed by any such failure, and accordingly agree that the Initial Purchaser and such Holders, in addition to any other remedy to which they may be entitled at law or in equity and without limiting the remedies available to the Notice Holders under Section 7 hereof, shall be entitled to compel specific performance of the obligations of the Company under this Registration Rights Agreement in accordance with the terms and conditions of this Registration Rights Agreement, in any court of the United States or any State thereof having jurisdiction.

(b) Amendments and Waivers. This Agreement, including this Section 9(b), may be amended, and waivers or consents to departures from the provisions hereof may be given, only by a written instrument duly executed by the Company and a Majority of Holders. Each Holder of Registrable Securities outstanding at the time of any such amendment, waiver or consent or thereafter shall be bound by any amendment, waiver or consent effected pursuant to this Section 9(b), whether or not any notice, writing or marking indicating such amendment, waiver or consent appears on the Registrable Securities or is delivered to such Holder.

(c) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, by telecopier, by courier guaranteeing overnight delivery or by first-class mail, return receipt requested, and shall be deemed given (i) when made, if made by hand delivery, (ii) upon confirmation, if made by telecopier, (iii) one (1) Business Day after being deposited with such courier, if made by overnight courier or (iv) on the date indicated on the notice of receipt, if made by first-class mail, to the parties as follows:

(w) if to a Holder of Registrable Securities, at the most current address given by such Holder to the Company in a Notice and Questionnaire or any amendment thereto;

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(x) if to the Company, to:

CuraGen Corporation

555 Long Wharf Drive, 11^th Floor

New Haven, Connecticut 06511

Attention: Chief Financial Officer

Telephone: (203) 974-6275

Facsimile: (203) 401-3333

with a copy to:

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

One Financial Center

Boston Massachusetts 02111,

Attention: Michael Fantozzi, Esq.

Facsimile: (617) 542-2241

(y) if to the Initial Purchaser, to:

Bear, Stearns & Co. Inc.

383 Madison Avenue

New York, NY 10179

Attention: Stephen Parish

Facsimile: (212) 272-2969

or to such other address as such person may have furnished to the other persons identified in this Section 9(c) in writing in accordance herewith.

(d) Parties in Interest. The parties to this Agreement intend that all Holders of Registrable Securities shall be entitled to receive the benefits of this Agreement and that any Notice Holder shall be bound by the terms and provisions of this Agreement by reason of such election with respect to the Registrable Securities which are included in a Shelf Registration Statement. All the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the respective successors and assigns of the parties hereto and any Holder from time to time of the Registrable Securities to the aforesaid extent. In the event that any transferee of any Holder of Registrable Securities shall acquire Registrable Securities, in any manner, whether by gift, bequest, purchase, operation of law or otherwise, such transferee shall, without any further writing or action of any kind, be entitled to receive the benefits of and, if a Notice Holder, be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement to the aforesaid extent.

(e) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

(f) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

(g) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

(h) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any

16

respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law.

(i) Survival. The respective indemnities, agreements, representations, warranties and other provisions set forth in this Agreement or made pursuant hereto shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Notice Holder, any director, officer or partner of such Holder, any agent or underwriter, any director, officer or partner of such agent or underwriter, or any controlling person of any of the foregoing, and shall survive the transfer and registration of the Registrable Securities of such Holder.

10. Submission to Jurisdiction; Appointment of Agent for Service.

The Company agrees that any suit, action or proceeding against the Company arising out of or based upon this Agreement or the transactions contemplated hereby may be instituted in any state or federal court in The City of New York, New York, and waives any objection which it may now or hereafter have to the laying of venue of any such proceeding, and irrevocably submits to the non-exclusive jurisdiction of such courts in any suit, action or proceeding. The Company expressly accepts the non-exclusive jurisdiction of any such court in respect of any such suit, action or proceeding. The Company agrees that a final judgment in any such proceeding brought in any such court shall be conclusive and binding thereupon and may be enforced in any other court in the jurisdiction to which the Company is or may be subject by suit upon such judgment.

Please confirm that the foregoing correctly sets forth the agreement between the Company and you.

Very truly yours,
CuraGen Corporation
By:	/s/ David M. Wurzer
	Name: David M. Wurzer
	Title:	Executive Vice President and Chief Financial Officer

Accepted as of the date hereof:
Bear, Stearns & Co. Inc.
By:	/s/ Paul S. Rosica
	Name: Paul S. Rosica
	Title:	Senior Managing Director

17

APPENDIX A

CURAGEN CORPORATION

NOTICE OF REGISTRATION STATEMENT AND

SELLING SECURITYHOLDER ELECTION AND QUESTIONNAIRE

4.0% CONVERTIBLE SUBORDINATED NOTES DUE 2011

Notice

CuraGen Corporation (the “Company”) has filed, or intends shortly to file, with the Securities and Exchange Commission (the “Commission”) a registration statement on Form S-3 or such other Form as may be available (the “Shelf Registration Statement”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of the Company’s Convertible Subordinated Notes due 2011 (CUSIP No. 23126RAD3) (the “Notes”), and common stock, par value $0.01 per share, issuable upon conversion thereof (the “Shares” and together with the Notes, the “Transfer Restricted Securities”) in accordance with the terms of the Registration Rights Agreement, dated as of February 17, 2004 (the “Registration Rights Agreement”) between the Company and Bear, Stearns & Co. Inc. A copy of the Registration Rights Agreement is available from the Company. All capitalized terms not otherwise defined herein have the meanings ascribed thereto in the Registration Rights Agreement.

To sell or otherwise dispose of any Transfer Restricted Securities pursuant to the Shelf Registration Statement, a beneficial owner of Transfer Restricted Securities generally will be required to be named as a Selling Securityholder in the related Prospectus, deliver a Prospectus to purchasers of Transfer Restricted Securities, be subject to certain civil liability provisions of the Securities Act and be bound by those provisions of the Registration Rights Agreement applicable to such beneficial owner (including certain indemnification rights and obligations, as described below). To be included in the Shelf Registration Statement, this Notice and Questionnaire must be completed, executed and delivered to the Company at the address set forth herein for receipt prior to or on the 20th calendar day from the receipt hereof (the “Notice and Questionnaire Deadline”). Beneficial Owners that do not complete and return this Notice and Questionnaire prior to the Notice and Questionnaire Deadline and deliver it to the Company as provided below will not be named as Selling Securityholders in the Shelf Registration Statement and, therefore, will not be permitted to sell any Transfer Restricted Securities pursuant to the Shelf Registration Statement.

Certain legal consequences arise from being named as a Selling Securityholder in the Shelf Registration Statement and the related Prospectus. Accordingly, holders and beneficial owners of Transfer Restricted Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a Selling Securityholder in the Shelf Registration Statement and the related Prospectus.

ELECTION

The undersigned holder (the “Selling Securityholder”) of Transfer Restricted Securities hereby elects to include in the Shelf Registration Statement the Transfer Restricted Securities beneficially owned by it and listed below in Item III (unless otherwise specified under Item Ill).

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The undersigned, by signing and returning this Notice and Questionnaire, understands that it will be bound with respect to such Transfer Restricted Securities by the terms and conditions of this Notice and Questionnaire and the Registration Rights Agreement.

Pursuant to the Registration Rights Agreement, the Selling Securityholder has agreed to indemnify and hold harmless the Company and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against certain losses arising in connection with statements concerning the Selling Securityholder made in the Shelf Registration Statement or the related Prospectus in reliance upon the information provided in this Notice and Questionnaire.

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The Selling Securityholder hereby provides the following information to the Company and represents and warrants that such information is accurate and complete:

QUESTIONNAIRE

I.       A. Full Legal Name of Selling Securityholder:
B. Full legal name of registered holder (if not the same as (a) above) through which Transfer Restricted Securities listed in (3) below are held:
C. Full legal name of DTC participant (if applicable and if not the same as (b) above) through which Transfer Restricted Securities listed in Item III are held:
D. Taxpayer identification or social security number of Selling Securityholder:
II.     Address for notices to Selling Securityholders:
	Telephone:                             Fax:                                        E-mail:                                   Contact Person:
III.    Beneficial ownership of Transfer Restricted Securities:
A. Type of Transfer Restricted Securities beneficially owned, and principal amount of Notes or number of shares of Common Stock, as the case may be, beneficially owned:
B. CUSIP No(s). of such Transfer Restricted Securities beneficially owned:
C. Amount of Transfer Restricted Securities that the undersigned wishes to be included in the Shelf Registration Statement:
IV.   Beneficial ownership of the Company’s securities owned by the Selling Securityholder:
EXCEPT AS SET FORTH BELOW IN THIS ITEM IV, THE UNDERSIGNED IS NOT THE BENEFICIAL OR REGISTERED OWNER OF ANY SECURITIES OF THE COMPANY OTHER THAN THE TRANSFER RESTRICTED SECURITIES LISTED ABOVE IN ITEM III (“Other Securities”).
A. Type and amount of Other Securities beneficially owned by the Selling Securityholder:

A-3

B. CUSIP No(s). of such Other Securities beneficially owned:
V.     Relationship with the Company
Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (5% or more) has held any position or office or has had any other material relationship with the Company (or their predecessors or affiliates) during the past three years.
State any exception here:
VI.   Nature of the Selling Securityholder:
	(a)      Is the Selling Securityholder a reporting company under the Exchange Act, a majority owned subsidiary of a reporting company under the Exchange Act, or a registered investment company under the Investment Company Act? If so, please state one.
	If the entity is a majority owned subsidiary or a reporting company, identify the majority stockholder that is a reporting company.
	If the entity is not any of the above, identify the natural person or persons having voting and investment control over the Company’s securities that the entity owns.
	(b)      Is the Selling Securityholder a registered broker-dealer?                     Yes          No
	If yes, state whether the Selling Securityholder received the Transfer Restricted Securities as compensation for underwriting activities and, if so, provide a brief description of the transaction(s) involved.
	State whether the Selling Securityholder is an affiliate of a broker-dealer and if so, list the name(s) of the broker-dealer affiliate(s). For the purposes of this Item VI(b), an “affiliate” of a broker-dealer includes any company that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such broker-dealer, and does not include individuals employed by any such broker-dealers or by their affiliates.                     Yes          No

A-4

If the answer is “Yes”, you must answer the following:

If the Selling Securityholder is an affiliate of a registered broker-dealer, the Selling Securityholder purchased the Transfer Restricted Securities (i) in the ordinary course of business and (ii) at the time of the purchase of the Transfer Restricted Securities, had no agreements or understanding, directly or indirectly, with any person to distribute the Transfer Restricted Securities.

                    Yes          No

If the answer is “No”, state any exceptions here:

If the answer is “No”, this may affect your ability to be included in the Shelf Registration Statement.

VII. Plan of Distribution:

Except as set forth below, the undersigned (including its donees, pledgees, transferees and other successors in interest) intends to distribute the Transfer Restricted Securities listed above in Item III pursuant to the Shelf Registration Statement only as follows (if at all). Such Transfer Restricted Securities may be sold from time to time directly by the undersigned or, alternatively, through underwriters, broker-dealers or agents. If the Transfer Restricted Securities are sold through underwriters or broker-dealers, the Selling Securityholder will be responsible for underwriting discounts or commissions or agent’s commissions. Such Transfer Restricted Securities may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale, or at negotiated prices. Such sales may be effected in transactions (which may involve crosses or block transactions):

1. on any national securities exchange or quotation service on which the Transfer Restricted Securities may be listed or quoted at the time of sale;

2. in the over-the-counter market;

3. in transactions otherwise than on such exchanges or services or in the over-the-counter market; or

4. through the writing of options.

In connection with sales of the Transfer Restricted Securities or otherwise, the undersigned may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the Transfer Restricted Securities and deliver Transfer Restricted Securities to close out such short positions, or loan or pledge Transfer Restricted Securities to broker-dealers that in turn may sell such securities. State any exceptions here:

Note: In no event will such method(s) of distribution take the form of an underwritten offering of the Transfer Restricted Securities without the prior agreement of the Company.

A-5

VIII. (Optional) Submissions after the Shelf Registration becomes effective:

If you are unable to trace your securities back to an individual or entity listed as a selling securityholder in the Shelf Registration Statement, we may need to file a post-effective amendment to the Shelf Registration Statement. This could result in additional delay in your ability to resell your securities pursuant to the Shelf Registration Statement. In order to allow us to determine whether your securities can be traced back to an individual or entity listed as a selling securityholder in the Shelf Registration Statement, please indicate from whom the Transfer Restricted Securities were acquired:

By signing below, the Selling Securityholder acknowledges that it understands its obligation to comply, and agrees it will comply, with the prospectus delivery requirements and other provisions of the Securities Act and Exchange Act and the respective rules and regulations promulgated thereunder, particularly Regulation M thereunder (or any successor rules or regulations), in connection with any offering of Transfer Restricted Securities pursuant to the Shelf Registration Statement. The undersigned agrees that neither it nor any person acting on its behalf will engage in any transaction in violation of such requirements and provisions.

The Selling Securityholder hereby acknowledges its obligations under the Registration Rights Agreement to indemnify and hold harmless certain persons as set forth therein.

If the Selling Securityholder transfers all or any portion of the Transfer Restricted Securities listed in Item III above after the date on which such information is provided to the Company, the Selling Securityholder agrees to notify the transferee(s) at the time of the transfer of its rights and obligations under this Notice and Questionnaire and the Registration Rights Agreement and agrees to deliver a notice of such transfer, in substantially the form attached as Exhibit 1 to this Notice and Questionnaire, to the Trustee and the Company.

By signing below, the Selling Securityholder consents to the disclosure of the information contained herein in its answers to Items I through VI above and the inclusion of such information in the Shelf Registration Statement and the related Prospectus. The Selling Securityholder understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Shelf Registration Statement and the related Prospectus.

In accordance with the Selling Securityholder’s obligation under the Registration Rights Agreement to provide such information as may be required by law for inclusion in the Shelf Registration Statement, the Selling Securityholder agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof at any time while the Shelf Registration Statement remains effective. All notices hereunder and pursuant to the Registration Rights Agreement shall be made in writing at the address set forth below.

By signing below, the undersigned consents to the disclosure of the information contained herein it its answers to Items I through VIII above and the inclusion of such

A-6

information in the Shelf Registration Statement and the related Prospectus. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Shelf Registration Statement and the related Prospectus.

Once this Notice and Questionnaire is executed by the Selling Securityholders and received by the Company, the terms of this Notice and Questionnaire and the representations and warranties contained herein shall be binding on, shall inure to the benefit of and shall be enforceable by the respective successors, heirs, personal representatives and assigns of the Company and the Selling Securityholder with respect to the Transfer Restricted Securities beneficially owned by such Selling Securityholder and listed in Item III above. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without regard to the conflicts-of-laws provisions thereof.

A-7

IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its authorized agent.

Dated:

BENEFICIAL OWNER
By:
	Name: Title:

Please return the completed and executed Notice and Questionnaire for receipt PRIOR TO OR ON THE 20TH CALENDAR DAY FROM RECEIPT HEREOF to:

CuraGen Corporation at:

555 Long Wharf Drive, 11th Floor

New Haven, Connecticut 06511

Attention: Chief Financial Officer

with a copy to:

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo P.C.

One Financial Center

Boston, Massachusetts 02111

Attention: Michael L. Fantozzi, Esq.

A-8

APPENDIX A

Exhibit 1 To

Notice To Transfer Pursuant

To Registration Statement

CuraGen Corporation

555 Long Wharf Drive, 11th Floor

New Haven, Connecticut 06511

Re: CuraGen Corporation’s

4.0% Convertible Subordinated Notes due 2011 (the “Notes”)

Ladies and Gentlemen:

Please be advised that                      has transferred $             aggregate principal amount of the above-referenced Notes or             shares of the Company’s common stock issued on conversion or repurchase of Notes, pursuant to the Registration Statement on Form S-3 (File No. 333-             ) filed by the Company.

We hereby certify that the prospectus delivery requirements, if any, of the Securities Act of 1933, as amended, have been satisfied with respect to the transfer described above and that the above named beneficial owner of the Notes or common stock is named as a selling securityholder in the Prospectus dated                             , or in amendments or supplements thereto, and that the aggregate principal amount of the Notes or number of shares of common stock transferred are [all or a portion of] the Notes or common stock listed in such Prospectus, as amended or supplemented, opposite such owner’s name.

Very truly yours, [name]
By:
	(Authorized Signature)

Dated:

A-9

EX-12.1

Exhibit 12.1

CURAGEN CORPORATION AND SUBSIDIARY

RATIO OF EARNINGS TO FIXED CHARGES

(in thousands, except ratio data)

	Year Ended December 31,
	2003			2002			2001			2000			1999
Loss:
Loss before income tax benefit and minority interest in subsidiary loss	$	(80,634	)	$	(95,793	)	$	(47,968	)	$	(28,706	)	$	(25,763	)
Add: Fixed charges		10,612			10,909			11,153			10,558			1,637
Total loss	$	(70,022	)	$	(84,884	)	$	(36,815	)	$	(18,148	)	$	(24,126	)
Fixed charges:
Interest expense on indebtedness (including amortization of financing costs)	$	9,830		$	10,176		$	10,553		$	10,066		$	1,192
Estimated interest portion of rental expense		782			733			600			492			445
Total fixed charges	$	10,612		$	10,909		$	11,153		$	10,558		$	1,637
Ratio of Earnings to Fixed Charges		(6.60	)		(7.78	)		(3.30	)		(1.72	)		(14.74	)
Deficiency of Earnings Available to Cover Fixed Charges	$	(80,634	)	$	(95,793	)	$	(47,968	)	$	(28,706	)	$	(25,763	)

EX-14.1

EXHIBIT 14.1

CODE OF ETHICS

for the

CHIEF EXECUTIVE OFFICER and SENIOR FINANCIAL OFFICERS

This Code of Ethics applies to the Chief Executive Officer (CEO) and all senior financial officers, including the Chief Financial Officer (CFO) and Vice President of Finance, of CuraGen Corporation and its subsidiaries (collectively, “CuraGen” or the “Company”). The CEO, CFO, Vice President of Finance and senior financial officers are subject to the following specific policies:

• The CEO and all senior financial officers are responsible for full, fair, accurate, timely and understandable disclosure in the periodic reports required to be filed by the Company with the SEC and in other communications made by CuraGen. Accordingly, it is the responsibility of the CEO and each senior financial officer to promptly bring to the attention of the Audit Committee any material information of which he or she may become aware that affects the disclosures made by the Company in its public filings and in other communications made by CuraGen and to assist the Audit Committee in fulfilling its responsibilities to ensure that the Company complies with legal rules and regulations governing the preparation and reporting of financial information and public communications, and to enforce this Code of Ethics.

• The CEO and each senior financial officer shall promptly bring to the attention of the Audit Committee any information he or she may have concerning (a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which could adversely affect the Company’s ability to record, process, summarize and report financial data or (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.

• The CEO and each senior financial officer shall promptly bring to the attention of the Audit Committee any information he or she may have concerning any actual or apparent conflicts of interest between personal and professional relationships.

• The CEO and each senior financial officer shall promptly bring to the attention of the Audit Committee any information he or she may have concerning evidence of a material violation by the Company of the securities or other laws, rules or regulations applicable to the Company.

• The Audit Committee shall report to the Board of Directors any violations of the Code of Ethics by the CEO and the Company’s senior financial officers. The Board of Directors shall then determine, or designate appropriate persons to determine, appropriate actions to be taken in the event of such violations. Such actions shall be reasonably designed to deter wrongdoing and to promote accountability for adherence to the Code of Ethics and to these additional procedures, and shall include written notices to the individual involved that the Board has determined that there has been a violation, censure by the Board, demotion or re-assignment of the individual involved, suspension with or without pay or benefits (as determined by the Board) and termination of individual’s employment. In determining what action is appropriate in a particular case, the Board of Directors or such designee shall take into account all relevant information, including the nature and severity of the violation, whether the violation was a single occurrence or repeated occurrences, whether the violation appears to have been intentional or inadvertent, whether the individual in question had been advised prior to the violation as to the proper course of action and whether or not the individual in question had committed other violations in the past.

Page 1 of 1

EX-14.2

CuraGen Corporation

Exhibit 14.2

CORPORATE CODE OF CONDUCT

FOREWORD

This Corporate Code of Conduct, referred to as the “Code,” is intended to provide associates, as defined below, of CuraGen Corporation and its subsidiaries (collectively “CuraGen” or the “Company”) with a clear understanding of the principles of business conduct and ethics that are expected of them. Every Company associate must acknowledge his or her review of, and agreement to comply with, the Code as a condition of his or her relationship with the Company. The term “associate” means every full-time, part-time, and seasonal employee of the Company and its subsidiaries, all members of the Company’s senior management, including the company’s Chief Executive Officer and Chief Financial Officer, and every member of the Company’s Board of Directors, even if such member is not employed by the Company.

Many of the standards outlined on the following pages will be familiar, for they reflect the fundamental values of fairness and integrity that are a part of our daily lives. Applying these standards to our business lives is an extension of the values by which we are known as individuals and by which we want to be known as a Company.

It is each associate’s responsibility to conduct themselves in an ethical business manner and also to ensure that others do the same. If any associate violates these standards, he or she can expect a disciplinary response, up to and including termination of any employment or other relationship with the Company. Associates who violate the Code may simultaneously violate federal, state, local or foreign laws, regulations or policies. Such associates may be subject to prosecution, imprisonment and fines, and may be required to make reimbursement to the Company, the government or any other person for losses resulting from the violation. They may be subject to punitive or treble damages depending on the severity of the violation and applicable law.

If any breach of the Code is known to an associate, they are obligated to report violations to the third party reporting service the Company has retained, as fully described in the Company’s Whistleblower Policy. This reporting service has been established to anonymously receive such reports. Violations of the Code may also be reported to any member of management, or a member of the Nominating and Governance Committee of the Company’s Board of Directors. The reporting mechanisms are more fully described later in this document. By establishing a confidential and anonymous procedure to accept and process such reports, the Company has attempted to ensure that the good faith efforts of all associates to comply with the Code will not be undermined.

The ultimate responsibility for maintaining the Code rests with each associate. As individuals of personal integrity, we can do no less than to behave in a way that will continue to bring credit to ourselves and to CuraGen.

Effective March 1, 2004

CuraGen Corporation

If the Company requests an associate’s cooperation in connection with any investigation regarding alleged violations of the Code or other matters relating to alleged unlawful conduct, the associate is required to cooperate with that investigation as a condition of continued relationship with the Company. The refusal to cooperate fully with any investigation is a violation of the Code.

Since it is impossible for this Code to describe every situation that may arise, the standards explained in this Code are guidelines that should govern associate conduct at all times. If an associate is confronted with a situation not covered by this Code, or has a question regarding the matters that are addressed in the Code, they are urged to consult with a member of management, or their direct supervisor or the Nominating and Governance Committee.

The provisions of the Code regarding actions the Company will take upon notification of a potential violation of the Code are guidelines which the Company intends to follow. There may be circumstances, however, that in the Company’s judgment require different measures or actions, and in such cases the Company may act outside the provisions of the Code while attempting to be consistent with the principles underlying this Code.

A copy of the Code is posted on CuraGen’s intranet site. Any versions of the Code published prior to March 1, 2004 are rescinded. [References in the Code to specific policies are either incorporated in CuraGen’s Policies and Procedures Manual or are specifically named.] Because the general business atmosphere of CuraGen and economic conditions are always changing, the statements in this policy may be changed, deleted, or supplemented at any time at CuraGen’s discretion. Each associate is responsible for understanding new policies, as they are issued/deleted/changed. The absence of a signed acknowledgement does not exempt an associate from compliance with this Code of Conduct or any other state/federal/Company rules/regulations.

ii Effective March 1, 2004

CuraGen Corporation

TABLE of CONTENTS

Section	TITLE		Page
I.	Implementation of the Code		1
II.	General Requirements		3
III.	Conflicts of Interest		4
IV.	Protection and Proper Use of Company Assets		6
	A.	Proper Use of Company Property	6
	B.	Confidential Information	6
	C.	Accurate Records and Reporting	7
	D.	Document Retention	8
	E.	Corporate Advances	9
V.	Fair Dealing with Customers, Suppliers, Competitors, and Associates		10
	A.	Entertainment and Gifts	10
	B.	Unfair Competition	10
	C.	Antitrust Concerns	11
	D.	Unfair Practices in International Business	13
	E.	Objectivity in Research	13
VI.	Government Relations		14
	A.	Government Procurement	14
	B.	Payments to Officials	14
	C.	Political Contributions	14
VII.	Compliance with Laws, Rules and Regulations		15
	A.	Securities Trades by Company Personnel	15
	B.	Equal Employment Opportunity	16
	C.	Productive Work Environment and Sexual Harassment Policies	16
	D.	Health, Safety & Environment Laws	16
	E.	Whistleblower Policy	17
	F.	Code of Ethics	17
VIII.	Non-Retaliation		18
IX.	Waiver Procedures		19
Appendix	Associate’s Agreement To Comply		20

iii Effective March 1, 2004

CuraGen Corporation

IMPLEMENTATION OF THE CODE

Section I

The Company has attempted to design procedures that ensure maximum confidentiality, anonymity, and, most importantly, freedom from the fear of retaliation for complying with and reporting violations under the Code.

The Company’s Board of Directors has assigned to its Nominating and Governance Committee the task of administering, updating and enforcing the Code. Ultimately, the Board of Directors of the Company is responsible for ensuring that the Nominating and Governance Committee fulfills these responsibilities.

The Nominating and Governance Committee has overall responsibility for overseeing the implementation of the Code. Specific responsibilities include:

• Developing the Code based on legal requirements, regulations and ethical considerations that are raised in the company’s operations;

• Ensuring that the Code is distributed to all associates and that all associates acknowledge the principles of the Code;

• Providing for a reporting mechanism so that associates have a confidential and anonymous method of reporting not only suspected violations of the Code but concerns regarding federal securities or antifraud laws or any federal law relating to fraud against shareholders;

• Conducting internal investigations, with the assistance of counsel, of suspected compliance violations;

• Implementing a training program around the Code and the Company’s reporting mechanism for Code and other violations;

• Auditing and assessing compliance success with the Code;

• Revising and updating the Code to respond to detected violations and changes in the law;

• Evaluating the effectiveness of the Code and improving the Code as necessary.

The Nominating and Governance Committee will provide a summary of all matters considered under the Code to the Board of Directors or a committee thereof at each regular meeting thereof or sooner if warranted by the severity of the matter.

Contact information for the Chairman of the Nominating and Governance Committee is listed on CuraGen’s intranet site. The Chairman of the Nominating and Governance Committee can assist in answering questions or reporting violations or suspected violations under the Code.

1 Effective March 1, 2004

CuraGen Corporation

In conjunction with establishing Whistleblower procedures, the Company has retained a third party reporting service that each associate may contact to report any suspected federal securities or antifraud laws, or any federal law relating to fraud against shareholders. Associates may also report to this service any other concerns they may have with respect to the Company. Associates may make such reports on a completely anonymous and confidential basis. The third party service, will, in turn, provide reports directly to the Chairman of the Audit Committee regarding the confidential reports it receives. The third party service provider may be reached 24 hours per day, 7 days a week at a toll-free number which is provided on CuraGen’s intranet site.

2 Effective March 1, 2004

CuraGen Corporation

GENERAL REQUIREMENTS

Section II

In general, the Company expects that all of its associates will be honest, fair, and accountable in all business dealings and obligations, and its associates will ensure: the ethical handling of conflicts of interest between personal and professional relationships; full, fair, accurate, timely and understandable disclosure in the reports required to be filed by the Company with the Securities and Exchange Commission and in other public communications made by the Company; and compliance with applicable governmental laws, rules and regulations.

3 Effective March 1, 2004

CuraGen Corporation

CONFLICTS OF INTEREST

Section III

Associates should avoid any situation that may involve, or even appear to involve, a conflict between their personal interests and the interests of CuraGen. In dealings with current or potential customers, suppliers, contractors, and competitors, each associate should act in the best interests of the Company to the exclusion of personal advantage. Associates are prohibited from any of the following activities which could represent an actual or perceived conflict of interest:

• No associate or immediate family member of an associate shall have a significant financial interest in, or obligation to, any outside enterprise which does or seeks to do business with the Company or which is an actual or potential competitor of the Company, without prior approval of the Nominating and Governance Committee, or in the case of executive officers or members of the Board of Directors, the full Board of Directors;

• No associate shall conduct a significant amount of business on the Company’s behalf with an outside enterprise which does or seeks to do business with the company if an immediate family member of the associate is a principal, officer or employee of such enterprise, without prior approval of the Nominating and Governance Committee, or in the case of executive officers or members of the Board of Directors, the full Board of Directors;

• No associate or immediate family member of an associate shall serve as a director, officer or in any other management or consulting capacity of any actual or potential competitor of the Company; without prior approval of the Nominating and Governance Committee, or in the case of executive officers or members of the Board of Directors, the full Board of Directors;

• No associate shall use any Company property or information or his or her position at the Company for his or her personal gain;

• No associate shall engage in activities that create personal financial gain as a result of his or her position in obtaining government grants, publications, etc;

• No associate shall engage in activities that are directly competitive with those in which the Company is engaged;

• No associate shall divert a business opportunity from the Company to such individual’s own benefit. If an associate becomes aware of an opportunity to acquire or profit from a business opportunity or investment in which the Company is or may become involved or in which the Company may have an existing interest, the associate should disclose the relevant facts to the Executive Committee or the Nominating and Governance Committee. The associate may proceed to take advantage of such opportunity only if the Company is unwilling or unable to take advantage of such opportunity as notified in writing by the Committee;

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CuraGen Corporation

• No associate or immediate family member of an associate shall receive any loan or advance from the company, or be the beneficiary of a guarantee by the Company of a loan or advance from a third party, except for customary advances or corporate credit in the ordinary course of business or approved by the Audit Committee of the Board of Directors. (See Section IV. E., “Corporate Advances”, for more information on permitted corporate advances.)

In addition, the Audit Committee will review and approve all related-party transactions, as required by the Securities and Exchange Commission, The NASDAQ Stock Market or any other regulatory body to which the Company is subject.

Each associate should make prompt and full disclosure in writing to the Executive Committee or Nominating and Governance Committee of any situation that may involve a conflict of interest. Failure to disclose any actual or perceived conflict of interest is a violation of the Code.

This statement replaces the policy previously issued on November 12, 2003.

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CuraGen Corporation

PROTECTION and PROPER USE of COMPANY ASSETS

Section IV

Proper protection and use of Company assets and assets entrusted to it by others, including proprietary information, is a fundamental responsibility of each associate of the Company. Associates must comply with security programs to safeguard such assets against unauthorized use or removal, as well as against loss by criminal act or breach of trust. The provisions hereof relating to protection of the Company’s property also apply to property of others entrusted to it (including proprietary and confidential information).

A. Proper Use of Company Property

Except in the ordinary course of business the removal of Company property from the Company’s facilities is prohibited, unless authorized by the Company. This applies to furnishings, equipment, and supplies, as well as property created or obtained by the Company for its exclusive use – such as client lists, files, personnel information, reference materials and reports, computer software, data processing programs and databases. Neither originals nor copies of these materials may be removed from the Company’s premises or used for purposes other than the Company’s business without prior written authorization from management.

The Company’s products and services are its property; contributions made by any associate to their development and implementation are the Company’s property and remain the Company’s property even if the individual’s employment or engagement terminates.

Each associate has an obligation to use the time for which he or she receives compensation from the company productively. Work hours should be devoted to activities directly related to the Company’s business or civil and charitable activities approved by the Executive committee.

B. Confidential Information

The Company provides its associates with confidential information relating to the Company and its business with the understanding that such information is to be held in confidence and not communicated to anyone who is not authorized to see it, except as may be required by law. The types of information that each associate must safeguard include (but are not limited to) the Company’s plans and business strategy, unannounced products and/or contracts, sales data, significant projects, customer and supplier lists, patents, patent applications, trade secrets, manufacturing techniques and sensitive financial information, whether in electronic or conventional format. These are costly, valuable resources developed for the exclusive benefit of the Company. No associate shall disclose the Company’s confidential information to an unauthorized third party or use the Company’s confidential information for his or her own personal benefit.

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Each associate is required to be familiar with and abide by the Company’s confidentiality agreement. Upon commencement of association with the Company this agreement is communicated to all Company associates, who are then asked to acknowledge receipt, and is also available upon request from the Human Resources Department.

C. Accurate Records and Reporting

Under law, the Company is required to keep books, records and accounts that accurately and fairly reflect all transactions, dispositions of assets and other events that are the subject of specific regulatory record keeping requirements, including generally accepted accounting principles and other applicable rules, regulations and criteria for preparing financial statements and for preparing periodic reports filed with the Securities and Exchange Commission. All Company reports, accounting records, sales reports, expense accounts, invoices, purchase orders, and other documents must accurately and clearly represent the relevant facts and the true nature of transactions. Reports and other documents should state all material facts of a transaction and not omit any information that would be relevant in interpreting such report or document. Under no circumstance may there be any unrecorded liability or fund of the company, regardless of the purposes for which the liability or fund may have been intended, or any improper or inaccurate entry knowingly made on the books or records of the Company. No payment on behalf of the Company may be approved or made with the intention, understanding or awareness that any part of the payment is to be used for any purpose other than that described by the documentation supporting the payment. In addition, intentional accounting misclassifications (e.g., expense versus capital) and improper acceleration or deferral of expenses or revenues are unacceptable reporting practices that are expressly prohibited.

The Company has developed and maintains a system of internal controls to provide reasonable assurance that transactions are executed in accordance with management’s authorization, are properly recorded and posted, and are in compliance with regulatory requirements. The system of internal controls within the Company includes written policies and procedures, budgetary controls, supervisory review and monitoring, and various other checks and balances, and safeguards such as password protection to access the Company computer system.

The Company has also developed and maintains a set of disclosure controls and procedures to ensure that all of the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms.

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Responsibility for compliance with these internal controls and disclosure controls and procedures rests not solely with the Company’s accounting personnel, but with all associates involved in approving transactions, supplying documentation for transactions, and recording, processing, summarizing and reporting of transactions and other information required by periodic reports filed with the Securities and Exchange Commission. Because the integrity of the company’s external reports to shareholders and the Securities and Exchange Commission depends on the integrity of the Company’s internal reports and record-keeping, all associates must adhere to the highest standards of care with respect to our internal records and reporting. The Company is committed to full, fair, accurate, timely, and understandable disclosure in the periodic reports required to be filed by it with the Securities and Exchange Commission, and it expects each associate to work diligently towards that goal. Any associate who believes the Company’s books and records are not in accord with these requirements should immediately report the matter to the third-party vendor hotline, or to a member of the Audit Committee.

Associates are expected to be familiar with, and to adhere strictly to, these internal controls and disclosure controls and procedures, as applicable.

D. Document Retention

Numerous federal and state statutes require the proper retention of many categories of records and documents that are commonly maintained by companies. In consideration of those legal requirements and the Company’s business needs, all associates must maintain records in accordance with departmental requirements.

Any record, in paper or electronic format, relevant to a threatened, anticipated or actual internal or external inquiry, investigation, matter or lawsuit may not be discarded, concealed, falsified, altered, or otherwise made unavailable, once an associate has become aware of the existence of such threatened, anticipated or actual internal or external inquiry, investigation, matter or lawsuit. When in doubt regarding retention of any record, an associate must not discard or alter the record in question and should seek guidance from the associate’s supervisor, a member of management, or a member of the Nominating and Governance Committee.

Each supervisor is required to be familiar with and abide by the Company’s Records Retention Policy. Upon commencement of association with the Company this policy is communicated to all Company supervisors, who are then asked to acknowledge receipt, and is also available upon request from the Human Resources Department.

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E. Corporate Advances

Under law, the Company may not loan money to certain associates. In limited circumstances the Executive Committee may approve advances. It shall be a violation of the Code for any associate to advance Company funds to any other associate or to himself or herself except for usual and customary business advances for legitimate corporate purposes which are approved by the Executive Committee or pursuant to a corporate credit card for usual and customary, legitimate business purposes.

Company credit cards are to be used primarily for authorized, legitimate business purposes. In circumstances where corporate credit cards are used for personal items, or personal items are part of a larger bill, an associate is expected to identify these items and repay the company in a timely manner.

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FAIR DEALING with CUSTOMERS, SUPPLIERS, COMPETITORS, and ASSOCIATES

Section V

The Company does not seek to gain any advantage through the improper use of favors or other inducements. Good judgment and moderation must be exercised to avoid misinterpretation and adverse effect on the reputation of the Company or its associates. Offering, giving, soliciting or receiving any form of bribe to or from an employee of a customer or supplier to influence that employee’s conduct is strictly prohibited.

A. Entertainment and Gifts

Cash or cash-equivalent gifts must not be given by an associate to any person or enterprise other than customary and inexpensive gifts that would normally not be considered a bribe. All entertainment activities, including tips, should be made with judgment and encompass normally accepted business practices. Gifts, favors, entertainment or other inducements, whether individual or cumulative, may not be accepted by associates or members of their immediate families from any person or organization that does or seeks to do business with, or is a competitor of, the Company, except as common courtesies and usually associated with customary business practices. An especially strict standard applies when suppliers are involved. If a gift unduly influences or makes an associate feel obligated to “pay back” the other party with business, receipt of the gift is unacceptable.

The special considerations relating to gifts to foreign officials and government employees are discussed below.

B. Unfair Competition

Although the free enterprise system is based upon competition, rules have been imposed stating what can and what cannot be done in a competitive environment. The following practices may lead to liability for “unfair competition” and are violations of the Code:

• Disparagement of Competitors. It is not illegal to point out weaknesses in a competitor’s service, product or operation; however, associates may not spread false rumors about competitors or make misrepresentations about their businesses. For example, an associate may not pass on anecdotal or unverified stories about a competitor’s products or services as the absolute truth (e.g., the statement that “our competitors’ diagnostic testing procedures have poor quality control”).

• Disrupting a Competitor’s Business. This includes bribing a competitor’s employees, posing as prospective customers or using deceptive practices such as enticing away employees in order to obtain secrets or destroy a competitor’s organization. For example, it is not a valid form of “market research” to visit a competitor’s place of business posing as a customer.

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• Misrepresentations of Price and Product. Lies or misrepresentations about the nature, quality or character of the Company’s services and products are both illegal and contrary to company policy. An associate may only describe our services and products based on their documented specifications, or expected future performance, not based on anecdote or his or her belief that our specifications are too conservative.

C. Antitrust Concerns

Federal and state antitrust laws are intended to preserve the free enterprise system by ensuring that competition is the primary regulator of the economy. Every corporate decision that involves customers, competitors, and business planning with respect to output, sales and pricing raises antitrust issues. Compliance with the antitrust laws is in the public interest, in the interest of the business community at large, and in our company’s interest.

Failing to recognize antitrust risk is costly. Antitrust litigation can be very expensive and time-consuming. Moreover, violations of the antitrust laws can, among other things, subject the Company and its individual associates to the imposition of injunctions, treble damages, and heavy fines. Criminal penalties may also be imposed, and individual employees can receive heavy fines or even be imprisoned. For this reason, antitrust compliance should be taken seriously at all levels within the Company.

A primary focus of antitrust laws is on dealings between competitors. In all interactions with actual or potential competitors all associates must follow the following rules:

• Never agree with a competitor or a group of competitors to charge the same prices or to use the same pricing methods, to allocate services, customers, private or governmental payor contracts or territories among yourselves, to boycott or refuse to do business with a provider, vendor, payor or any other third party, or to refrain from the sale or marketing of, or limit the supply of, particular products or services;

• Never discuss past, present, or future prices, pricing policies, bundling, discounts or allowances, royalties, terms or conditions of sale, costs, choice of customers, territorial markets, production quotas, allocation of customers or territories, or bidding on a job with a competitor;

• An associate must always be mindful of their conduct. An “agreement” that violates the antitrust laws may be not only a written or oral agreement, but also a “gentlemen’s agreement” or a tacit understanding. Such an “agreement” need not be in writing. It can be inferred from conduct, discussions or communications of any sort with a representative of a competitor;

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• Make every output-related decision (pricing, volume, etc.) independently, in light of costs and market conditions and competitive prices.

Another focus of antitrust law is how a company deals with customers, suppliers, contractors and other third parties. The following practices could raise antitrust issues, and associates should always consult with a member of management or the Nominating and Governance Committee before doing any of the following:

• Refusing to sell to any customers or prospective customer;

• Entering into any new distribution or supply agreement which differs in any respect from those previously approved;

• Conditioning a sale on the customer’s purchasing another product or service, or on not purchasing the product of a competitor;

• Agreeing with a customer on a minimum or maximum resale price of our products;

• Imposing restrictions on the geographic area to which the Company’s customers may resell our products;

• Requiring a supplier to purchase products from the Company as a condition of purchasing products from that supplier;

• Entering into an exclusive dealing arrangement with a supplier or customer; or

• Offering different prices, terms, services or allowances to different customers who compete or whose customers compete in the distribution of commodities.

If CuraGen has a dominant or potentially dominant position with respect to a particular product or market, especially rigorous standards of conduct must be followed. In these circumstances, all associates should consult with a member of management or the Nominating and Governance Committee before selling at unreasonably low prices or engaging in any bundling practices; and keep a member of management or the Nominating and Governance Committee fully informed of competitive strategies and conditions in any areas where the Company may have a significant market position.

Finally, all associates must immediately inform the Executive Committee if local, state or federal law enforcement officials request information from the Company concerning its operations.

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D. Unfair Practices in International Business

Under the Foreign Corrupt Practices Act (“FCPA”), associates of the Company are prohibited from making certain gifts to foreign officials. “Foreign officials” include not only persons acting in an official capacity on behalf of a foreign government, agency, department or instrumentality, but also representatives of international organizations, foreign political parties and candidates for foreign public office. The gift is “corrupt” under the FCPA if it is made for the purpose of:

• Influencing any act or decision of a foreign official in his official capacity;

• Inducing a foreign official to do or omit to do any act in violation of his lawful duty;

• Inducing a foreign official to use his position to affect any decision of the government; or

• Inducing a foreign official to secure any “improper advantage.”

A gift is considered “corrupt” even when paid through an intermediary. Any associate who has any questions whatsoever as to whether a particular gift might be “corrupt” under the FCPA should contact a member of management or the Audit Committee.

E. Objectivity in Research

CuraGen promotes objectivity in research and its success is dependent on the quality of its scientific research. It is therefore critical that an associate’s research not be biased by any personal financial interest or gain (e.g. salary, consulting fees, honoraria, equity interests, patents, etc.). This is true whether the research is performed on our own behalf, for a collaborator, contractor, or any other entity. CuraGen expects associate objectivity in the design, conduct, or reporting of research. An associate who believes that there could be a potential conflict in their ability to be objective should immediately report the matter to their supervisor or a member of the Executive Committee.

This statement replaces the policy statement previously issued.

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CuraGen Corporation

GOVERNMENT RELATIONS

Section VI

Associates must adhere to the highest standards of ethical conduct in all relationships with government employees and must not improperly attempt to influence the actions of any public official.

A. Government Procurement

The U.S. Government and many state and local governments have adopted comprehensive laws and regulations governing their purchases of products from private contractors. These laws and regulations are intended to assure that governmental entities receive pricing, terms, and conditions equivalent to those granted to the company’s most favored commercial customers and that there is full and open competition in contracting.

When selling products or services to government procurement agencies, the Company is accountable for complying with all applicable procurement laws, regulations, and requirements. Certifications to, and contracts with, government agencies are to be signed by an authorized Company associate, based upon knowledge that all requirements have been fully satisfied.

B. Payments to Officials

Payments or gifts shall not be made directly or indirectly to any government official or associate if the gift or payment is illegal under the laws of the country having jurisdiction over the transaction, or if it is for the purpose of influencing or inducing the recipient to do, or omit to do, any act in violation of his or her lawful duty. Under no circumstances should gifts be given to employees of the United States Government.

C. Political Contributions

Company funds, property or services may not be contributed to any political party or committee, or to any candidate for or holder of any office of any government. This does not preclude, where lawful, company expenditures to support or oppose public referendum or separate ballot issues, or, where lawful and when reviewed and approved in advance by Company management, the formation and operation of a political action committee. Associates will not be prohibited from making personal contributions from their own funds, either on their own or in their capacity as representatives of CuraGen, but the contributions will not be eligible for reimbursement by CuraGen.

This statement replaces the policy statement issued December 18, 2002.

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CuraGen Corporation

COMPLIANCE WITH LAWS, RULES AND REGULATIONS

Section VII

A. Securities Trades by Company Personnel

The Company expressly forbids any associate from trading on material non-public information or communicating material non-public information to others in violation of the law. This conduct is frequently referred to as “insider trading.” The Securities Trades by Company Personnel Policy applies to every associate of the Company and extends to activities both within and outside their duties to the Company, including trading for a personal account.

The concept of who is an “insider” is broad. It includes officers, directors and employees of a Company. In addition, a person can be a “temporary insider” if he or she enters into a special confidential relationship in the conduct of a company’s affairs and as a result is given access to information solely for the company’s purpose. A temporary insider can include, among others, a company’s investment advisors, agents, attorneys, accountants and lending institutions, as well as the employees of such organizations. An associate may also become a temporary insider of another company with which our Company has a contractual relationship, to which it has made a loan, to which it provides advice or for which it performs other services.

Trading on inside information is not a basis for liability unless the information is material. This is information that a reasonable investor would consider important in making his or her investment decisions, or information that is likely to have a significant effect on the price of a company’s securities.

Information is non-public until it has been effectively communicated to the marketplace. Tangible evidence of such dissemination is the best indication that the information is public. For example, information found in a report filed with the Securities and Exchange Commission or appearing in a national newspaper would be considered public.

CuraGen’s disclosure policy covers material communications by company officers, board members (directors), the investor relations officer, and other authorized CuraGen spokespersons, with analysts, professional investors or any other holder of the company’s securities who the company may reasonably expect might trade on that information.

Each associate is required to be familiar with and abide by the Company’s Securities Trades by Company Personnel Policy. Upon commencement of association with the Company this policy is communicated to all Company associates, who are then asked to acknowledge receipt, and it is also available upon request from the Human Resources Department as well as CuraGen’s intranet site.

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B. Equal Employment Opportunity

As described in the Company’s Employee Policies and Procedures Manual, the Company makes employment-related decisions without regard to a person’s race, color, religious creed, age, sex, sexual orientation, marital status, national origin, ancestry, present or past history of mental disorder, mental retardation, learning disability or physical disability, including, but not limited to, blindness and genetic predisposition, any other protected category, or any other factor unrelated to a person’s ability to perform the person’s job. “Employment decisions” generally mean decisions relating to hiring, recruiting, training, promotions and compensation, but the term may encompass other employment actions as well.

Each associate is required to be familiar with and abide by the Company’s Equal Employment Opportunity Policy. Upon commencement of association with the Company this policy is communicated to all Company associates, who are then asked to acknowledge receipt, as part of the Employee Policies and Procedures Manual, and is also available upon request from the Human Resources Department.

C. Productive Work Environment and Sexual Harassment Policies

As set forth in the Employee Policies and Procedures Manual, the Company is committed to maintaining a collegial and productive work environment in which all individuals are treated with respect and dignity and which is free of sexual harassment. In keeping with this commitment, the Company will not tolerate sexual or other harassment of associates by anyone, including any supervisor, co-worker, vendor, client or customer, whether in the workplace, at assignments outside the workplace, at company-sponsored social functions or elsewhere.

Each associate is required to be familiar with and abide by the Company’s Productive Work Environment and Sexual Harassment Policies. Upon commencement of association with the Company these policies are communicated to all Company associates, who are then asked to acknowledge receipt, as part of the Employee Policies and Procedures Manual and are also available upon request from the Human Resources Department.

D. Health, Safety & Environment Laws

Health, safety, and environmental responsibilities are fundamental to the Company’s values. Associates are responsible for ensuring that the company complies with all provisions of the health, safety, and environmental laws of the United States and of other countries where CuraGen does business.

The penalties that can be imposed against the company and its associates for failure to comply with health, safety, and environmental laws can be substantial, and include imprisonment and fines.

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Each associate is required to be familiar with and abide by the Company’s Safety Manual. Upon commencement of association with the Company this Manual is communicated to all Company associates, who are then asked to acknowledge receipt, and is also available upon request from the Human Resources Department.

E. Whistleblower Policy

CuraGen’s Whistleblower Policy makes its associates aware of the importance of reporting to CuraGen any suspected violations of criminal law or securities law, acts of fraud against shareholders or questionable auditing or accounting matters. As a publicly traded company, CuraGen prohibits these acts and is committed to protecting employees from adverse employment actions if employees report such activities. This Policy also provides employees with guidance regarding the proper channels to report any suspected violations of criminal law or securities law, acts of fraud against shareholders or questionable auditing or accounting matters.

Each associate is required to be familiar with and abide by the Company’s Whistleblower Policy. Upon commencement of association with the Company this policy is communicated to all Company associates, who are then asked to acknowledge receipt, and is also available upon request from the Human Resources Department as well as on CuraGen’s intranet site.

F. Code of Ethics

CuraGen’s Code of Ethics applies to the Company’s Chief Executive Officer and all senior financial officers, including the Chief Financial Officer and Vice President of Finance. The Policy requires full, fair, accurate, timely and understandable disclosures in the periodic reports required to be filed by the Company with the Securities and Exchange Commission. The policy also places responsibility for the reporting of any violations of the Code of Ethics to the Audit Committee using the channels of communication established by the Company’s Whistleblower Policy.

The Chief Executive Officer and all senior financial officers are required to be familiar with and abide by the Company’s Code of Ethics. This policy is communicated to the appropriate personnel who are asked to acknowledge receipt and is also available from the Human Resources Department as well as on CuraGen’s intranet site.

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NON-RETALIATION

Section VIII

Any associate who reports a suspected violation under the Code by the Company, or its agents acting on behalf of the Company, to a member of management, a supervisor, or the Nominating and Governance Committee, may not be fired, demoted, reprimanded or otherwise harmed for, or because of, the reporting of the suspected violation, regardless of whether the suspected violation involves the associate, the associate’s supervisor or senior management of the Company. In addition, any associate who reports a suspected violation under the Code which the associate reasonably believes constitutes a violation of a federal statute by the Company, or its agents acting on behalf of the Company, to a federal regulatory or law enforcement agency, may not be reprimanded, discharged, demoted, suspended, threatened, harassed or in any manner discriminated against in the terms and conditions of the associate’s employment for, or because of, the reporting of the suspected violation, regardless of whether the suspected violation involves the associate, the associate’s supervisor or senior management of the Company.

The Company will neither tolerate nor condone retaliation against any associate who reasonably believes a violation of the Code or other unlawful activity has occurred and who makes a report of such conduct. If an associate believes that the associate has been a victim of any retaliatory conduct for making such a complaint, the associate should report those concerns to a member of management, a supervisor, or the Nominating and Governance Committee. Alternatively, an associate may file a complaint with the Federal Department of Labor (the “DOL”) within 90 days of the conduct.

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WAIVER PROCEDURES

Section IX

If any situation should arise where a course of action would likely result in a violation of the Code but for which the associate thinks that a valid reason for the course of action exists, the associate should contact either a member of the Executive Committee or a member of the Nominating and Governance Committee to obtain a waiver prior to the time the action is taken. No waivers will be granted after the fact for actions already taken. Except as noted below, the appropriate personnel will review all the facts surrounding the proposed course of action and will determine whether a waiver from any policy in the Code should be granted.

Waiver requests by an executive officer or member of the Board of Directors shall be referred by the Nominating and Governance Committee, with its recommendation, to the Board of Directors or a committee thereof for consideration. If either (i) a majority of the independent directors on the Board of Directors, or (ii) a committee comprised solely of independent directors agrees that the waiver should be granted, it will be granted. The Company will disclose the nature and reasons for the waiver on a Form 8-K to be filed within five days of the waiver with the Securities and Exchange Commission or otherwise as required by the Securities and Exchange Commission or The NASDAQ Stock Market. If the Board denies the request for a waiver, the waiver will not be granted and the associate may not pursue the intended course of action.

It is the Company’s policy only to grant waivers from the Code in limited and compelling circumstances.

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CuraGen Corporation

ASSOCIATE’S AGREEMENT TO COMPLY

APPENDIX

I have read CuraGen Corporation’s Corporate Code of Conduct (the “Code”). I have obtained an interpretation of any provision about which I had a question. I agree to abide by the provisions of the Code. Based on my review, I acknowledge that:

To the best of my knowledge, I am not in violation of, or aware of any violation by others of, any provision contained in the Code;

OR

I have made a full disclosure on the reverse side of this acknowledgement of the facts regarding any possible violation of the provisions set forth in the Code.

In addition, I understand that I am required to report any suspected or actual violation of the Code and I understand that I may make such reports on a fully anonymous basis through the mechanisms described in this Code. I understand that I am required to cooperate fully with the Company in connection with the investigation of any suspected violation. I understand that my failure to comply with the Code or its procedures may result in disciplinary action, up to and including termination.

By:	Date:
Name (Please print):
Department/Location:

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EX-21.1

EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT

GeneScape Corporation

454 Life Sciences Corporation

Digital Life Sciences Corporation

EX-23.1

EXHIBIT 23.1

INDEPENDENT AUDITORS’ CONSENT

We consent to the incorporation by reference in Registration Statements No. 333-56829, No. 333-89465, and No. 333-108119 of CuraGen Corporation on Forms S-8, and Registration Statement No. 333-90321, No. 333-32756, and No. 333-47600 of CuraGen Corporation on Form S-3 of our report dated January 23, 2004 (except as to Footnote 13, as to which the date is February 17, 2004) in this Annual Report on Form 10-K of CuraGen Corporation for the year ended December 31, 2003.

/s/ DELOITTE & TOUCHE LLP

Hartford, Connecticut

March 11, 2004

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS UNDER SECTION 302

I, Jonathan M. Rothberg, certify that:

1. I have reviewed this annual report of CuraGen Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 11, 2004

/s/    JONATHAN M. ROTHBERG, PH.D.        

Jonathan M. Rothberg, Ph.D.

Chief Executive Officer, President and

Chairman of the Board

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS UNDER SECTION 302

I, David M. Wurzer, certify that:

1. I have reviewed this annual report of CuraGen Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 11, 2004

/s/    DAVID M. WURZER

David M. Wurzer

Executive Vice President, Chief Financial Officer

and Treasurer (principal financial and accounting

officer of the registrant)

EX-32

EXHIBIT 32

Certification

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of CuraGen Corporation, a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Annual Report on Form 10-K for the year ended December 31, 2003 (the “Form 10-K”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 11, 2004	By:	/s/    JONATHAN M. ROTHBERG, Ph.D.
		Jonathan M. Rothberg, Ph.D. Chief Executive Officer, President and Chairman of the Board (principal executive officer)
Dated: March 11, 2004	By:	/s/    DAVID M. WURZER
		David M. Wurzer Executive Vice President, Treasurer and Chief Financial Officer (principal financial and accounting officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.