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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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Commission file number 0-28194
DIGENE CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 52-1536128
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9000 Virginia Manor Road
Beltsville, Maryland 20705
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (301) 470-6500
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
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(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 (section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of 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. [ ]
Based upon the last sale price of the registrant's Common Stock on
September 10, 1999, the aggregate market value of the 9,514,504 outstanding
shares of voting stock held by non-affiliates of the registrant was
$132,013,743.
As of September 10, 1999, 14,585,655 shares of the registrant's
Common Stock were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference in
this Report on Form 10-K:
1) The registrant's definitive Proxy Statement for its Annual
Meeting of Stockholders to be filed not later than 120 days
after the close of the fiscal year (incorporated into Part
III).
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TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PART I
Item 1. Business.......................................................................1
Item 2. Properties....................................................................31
Item 3. Legal Proceedings.............................................................31
Item 4. Submission of Matters to a Vote of Our Stockholders...........................31
Executive Officers of Digene..................................................32
PART II
Item 5. Market For Our Common Equity and Related Stockholder Matters..................33
Item 6. Selected Consolidated Financial Data..........................................34
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................35
Item 7A. Quantitative and Qualitative Disclosures About Market Risk....................40
Item 8. Financial Statements and Supplementary Data...................................41
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure...................................59
PART III
Item 10. Directors and Executive Officers..............................................59
Item 11. Executive Compensation........................................................59
Item 12. Security Ownership of Certain Beneficial Owners and Management................59
Item 13. Certain Relationships and Related Transactions................................59
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K...............59
Signatures...............................................................................62
</TABLE>
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PART I
ITEM 1. BUSINESS
We develop, manufacture and market our proprietary DNA and RNA
testing systems for the screening, monitoring and diagnosis of human diseases.
We have developed and are commercializing our patented Hybrid Capture(R) Gene
Analysis System and tests in three areas: women's cancers and infectious
diseases, blood viruses, and pharmaceutical clinical research. Our primary focus
is in women's cancers and infectious diseases where our lead product is the only
FDA approved test for human papillomavirus, or HPV, which is the cause of
greater than 99% of cervical cancer cases. Our product portfolio also includes
DNA tests for the detection of chlamydia, gonorrhea and other sexually
transmitted infections. We believe our Hybrid Capture technology platform
represents a significant improvement over existing technologies because of its
accuracy, speed, ease of use and ability to quantitate DNA and RNA. In the
United States, we market our products through a direct sales force and in other
countries through distributors. Abbott Laboratories, one of the world's leading
medical diagnostic companies, markets and distributes all of our women's cancers
and infectious diseases products and certain of our blood virus products in
Europe, Africa and the Middle East.
Our commercial objective is to become the world leader in gene-based
testing for women's cancers and infectious diseases. We are working to
establish our HPV test as the standard for cervical cancer screening, the
world's largest cancer screening market. Virtually all cases of cervical cancer
are preventable if detected in the precancerous stage. Currently, the Pap smear
is a test used to screen for cervical cancer. The Pap smear is a subjective,
labor intensive test that has limited sensitivity and diagnostic accuracy
leading to equivocal test results and false negative diagnoses, which result in
significant costs to the healthcare system due to over-treatment or
under-diagnosis.
Our HPV test allows physicians to identify women who are most at
risk of having or developing cervical disease and cervical cancer. We intend to
capitalize on our leadership position in HPV testing to obtain a significant
share of the global cervical cancer screening market, both as a primary
screening test and as a follow-up to the Pap smear. We are targeting this
global opportunity primarily by marketing our disease management strategy for
cervical cancer screening to managed care providers in the United States and
government-funded national screening programs outside the United States. In
addition, we have developed a network of women's health advocates, public health
providers and physician organizations to communicate the diagnostic and
cost-effective benefits of HPV testing to physicians, reimbursement providers,
testing laboratories and the public.
We have applied our Hybrid Capture technology to provide for the
simultaneous detection of chlamydia, gonorrhea and other sexually transmitted
infections, in addition to HPV, from a single patient sample. We also can use a
liquid-based Pap smear sample for our DNA tests and have FDA approval to use the
specimen provided by Cytyc Corporation's ThinPrep(R) Pap Test(TM) for our HPV
tests. We believe the ability to perform multiple tests from a single patient
specimen provides greater convenience to patients and their physicians and
reduces healthcare costs by decreasing the frequency of patient visits and
testing.
Our second major focus is in blood viruses where we have developed
unique testing products using our Hybrid Capture System to detect the presence
of hepatitis B virus (HBV) and cytomegalovirus (CMV). These blood viruses are
leading causes of morbidity and death. Our tests detect and measure the amount
of virus in a patient sample, helping physicians determine disease prognosis and
optimize the efficacy of the antiviral therapy. The sensitivity of our blood
virus tests, along with their ability to quantitate viral load, provide a
competitive advantage over other methods. Our CMV test is the only DNA test
cleared for the detection of CMV by the FDA. Abbott, one of the world's leading
providers of HBV tests, is selling our HBV and CMV products in Europe, Africa
and the Middle East where we believe that our HBV test is the leading HBV DNA
test.
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Our Hybrid Capture System utilizes signal amplification and combines
the accuracy of nucleic acid probe diagnostics with the ease of use and
mass-market capabilities of the antibody-based immunodiagnostic systems that are
used routinely by clinical labs today. Our Hybrid Capture technology uses RNA
probes to bind specific DNA sequences to create hybrid DNA:RNA molecules. The
captured hybrids are then reacted with our proprietary signal amplification
system which uses antibodies to detect DNA:RNA hybrids. The Hybrid Capture
System and tests are sensitive, rapid, accurate, objective, non-invasive and
easy to use, and can be performed by laboratory staff using standardized testing
equipment. Recently, we have developed an automated, microplate-based Hybrid
Capture testing system. In the pharmaceutical clinical research area, we are
utilizing the capabilities of our Hybrid Capture System to identify, develop and
validate new gene-based testing opportunities. As a result of the high
throughput capability of the Hybrid Capture System, PE Biosystems entered into
an exclusive technology and marketing partnership with us to address
opportunities in high throughput gene expression screening for pharmaceutical
drug discovery.
We have established a strong proprietary position in our Hybrid
Capture technology. We have an exclusive license to a patent covering
the use of the monoclonal antibodies, which are central to the Hybrid Capture
detection system. Additionally, in July 1999, the European Patent Office
allowed a broad patent covering the entire Hybrid Capture System. We have
exclusive licenses and co-exclusive cross licenses with the Institut Pasteur to
issued and pending patents covering the use of HPV genetic sequences from six
of the thirteen key cancer causing HPV types. We believe that these patents
create a unique proprietary position for Digene in the HPV testing field.
We have achieved a number of important regulatory milestones over the
last year. Our next generation Hybrid Capture II HPV Test received premarket
(PMA) approval from the FDA in March 1999. In 1999, our portfolio of women's
cancers and infectious disease tests was cleared for sale in almost every major
European country and in Brazil and Argentina. In the blood virus area, our
Hybrid Capture CMV Test received 510(k) clearance from the FDA in October 1998.
In addition, we received ISO 9001 certification in June 1999.
We also have achieved a number of important commercial milestones
over the past year. We entered into a partnering arrangement with PE Biosystems
in October 1998 and into a marketing and distribution alliance with Abbott in
May 1999. Our Hybrid Capture HPV Test was used in numerous clinical trials, and
the results of such trials were published in peer reviewed publications. We
developed a program to expand reimbursement coverage for our products,
resulting in coverage in the United States for our Hybrid Capture HPV Tests
from significant managed care providers. Our efforts and accomplishments over
the last year have resulted in continued revenue growth from $12.0 million in
fiscal 1998 to $17.5 million in fiscal 1999.
WOMEN'S CANCERS AND INFECTIOUS DISEASES
We have initially focused on two major disease areas, cervical
cancer and sexually transmitted infections. Cervical cancer is the second most
common cancer among women worldwide. Currently, the primary cervical cancer
screening test is the Pap smear. Although the Pap smear has successfully
reduced deaths caused by cervical cancer in the United States, cervical cancer
remains prevalent in the United States. In addition, cervical cancer rates have
remained at high levels outside the United States. If detected in the
precancerous stage, virtually all cases of cervical cancer are preventable. The
treatment of cervical cancer after it reaches the invasive stage may require
chemotherapy, radiation treatment or surgery, including hysterectomy. These
treatments are expensive and often unsuccessful. Recently, it has been
established that HPV, a sexually transmitted virus, is the primary cause of
cervical cancer and that 99% of cervical cancers contain cancer-causing HPV
sequences. The Pap smear cannot detect HPV. Furthermore, the Pap smear is a
subjective, labor intensive test that has limited sensitivity and diagnostic
accuracy leading to equivocal test results and false negative diagnoses. These
limitations have contributed to continuing high rates of cervical cancer.
Chlamydia is the most common sexually transmitted disease in the
United States and is a major health problem worldwide, with approximately 89
million new cases reported annually. Genital chlamydia infection, if left
untreated, has serious potential consequences, such as infertility, ectopic
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pregnancy, cervicitis and pelvic inflammatory disease. Gonorrhea, which affects
62 million people worldwide, is the second most common sexually transmitted
disease in the United States and may result in severe genital complications in
both women and men if left untreated. If properly detected, both chlamydia and
gonorrhea are easily treatable with low-cost antibiotic therapy. However,
routine and broad-based screening for chlamydia and gonorrhea has been limited
by the insufficient sensitivity of some culture methods, the invasive and
cumbersome specimen collection methods frequently employed, and the time and
cost associated with performing these tests.
We believe our Hybrid Capture HPV Tests could revolutionize cervical
cancer screening around the world by allowing early detection of HPV. Our Hybrid
Capture tests also represent the first effort to accurately detect HPV and the
other major sexually transmitted infections from a single specimen. This may
reduce the overall cost of patient management and help eliminate these serious
health threats. Our Hybrid Capture tests detect the presence of both chlamydia
and gonorrhea in women from cervical swabs, as well as in men through the
collection of urine samples. Preliminary clinical studies on women have
indicated that our Hybrid Capture II Chlamydia Test is capable of detecting
chlamydia in up to 98% of the cases in which the disease is present, while our
Hybrid Capture II Gonorrhea Test is capable of detecting gonorrhea in up to 92%
of the cases in which it is present.
To implement our strategy in the area of women's cancers and
infectious diseases, we intend to:
- create a marketing distribution infrastructure and
marketing communications program appropriate to each
market;
- establish ourselves as the leader in single-sample testing
for women's cancers and infectious diseases;
- validate our products through clinical trials with
respected academic institutions and healthcare providers;
- communicate the diagnostic and cost-effective benefits of
HPV testing to managed care providers, physicians and
government-funded national screening programs and continue
to develop a network of women's health advocates, public
health providers and physician organizations to help
communicate our message to physicians, testing laboratories
and the public; and
- expand reimbursement for our HPV tests from managed care
organizations, third party payors and government-funded
insurance programs.
DISTRIBUTION INFRASTRUCTURE
A key element of our commercialization strategy is to
partner our marketing and sales efforts with established leaders in the field.
We have established a marketing alliance with Abbott for all of our women's
cancers and infectious diseases products and certain of our blood virus testing
products. Under this alliance, Abbott is responsible for sales and marketing of
these Hybrid Capture products in Europe, Africa and the Middle East and our
Hybrid Capture II Chlamydia and Gonorrhea Tests in the United States, when
cleared by the FDA. We are working together with Abbott to promote the use of
HPV testing for primary screening in the European market. In Europe, Abbott is
responsible for marketing activities directed toward obtaining laboratory
endorsements and routine use of HPV testing, and we are responsible for
marketing
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activities directed toward obtaining governmental endorsement of HPV testing,
institutional reimbursement and maximizing consumer awareness and education
of the benefits of HPV testing.
SINGLE-SAMPLE SYSTEM
We are the first to develop tests that detect HPV,
chlamydia, gonorrhea and herpes from a single patient specimen. We believe the
ability to perform multiple tests from a single specimen provides greater
convenience to patients and physicians and reduces healthcare costs by
decreasing the frequency of patient visits and testing. Our single-sample system
is now available in Europe and South America for the detection of HPV, chlamydia
and gonorrhea, and upon receipt of 510(k) clearance from the FDA, the system
will be available in the United States. Our tests also are cost efficient in
that they can be performed using commercial liquid-based Pap smear collection
devices, such as the Cytyc Corporation ThinPrep Pap Test.
CLINICAL TRIAL VALIDATION
Clinical evidence published in medical journals and
presented at important medical meetings has validated our products and
technology platform, the Hybrid Capture System, and the role of HPV in cervical
cancer. These studies include:
- May 1999: a study involving 46,000 women
conducted by Kaiser Permanente and published in
the Journal of the American Medical Association
(JAMA) which concluded that our HPV test
identified 97% of women with high-grade cervical
disease compared with just 76% using the Pap
smear alone;
- July 1999: a six-year study published in The
Lancet which confirmed that persistent HPV
infection is the primary cause of cervical cancer
and, therefore, that new guidelines for cervical
cancer screening should include testing for HPV;
- July 1999: a study involving 1,518 European
women published in The British Journal of Cancer
which confirmed the high sensitivity (98%) of our
HPV test;
- August 1999: a 22-country study completed by the
International Agency for Cancer Research
confirming that HPV is the cause of cervical
cancer in 99.7% of cases worldwide; and
- September 1999: a study involving 2,988 women
in the United Kingdom published in The British
Journal of Cancer reported the high sensitivity
of our test (95%) compared to the Pap smear (79%)
in screening women over age 35 for cervical
disease.
In addition to these studies, we are currently
participating in HPV clinical trials involving more than 100,000 women on four
continents. Successful completion of these clinical trials should help to
accelerate further adoption of our HPV tests. The following is a summary of
these trials:
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<TABLE>
<CAPTION>
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COUNTRY LEAD INVESTIGATOR TRIAL DESCRIPTION SIZE TARGET COMPLETION DATE
<S> <C> <C> <C> <C>
United States National Cancer Institute ALTS Borderline Pap Trial 7,000 Completed*
Canada Newfoundland Department of Health HPV Primary Screening 3,000 Completed*
Mexico Johns Hopkins; Mexican Government HPV Primary Screening 7,500 December 1999
Netherlands Free University of Amsterdam HPV Primary Screening 40,000 December 2001
United Kingdom Imperial Cancer Research Fund HPV Primary Screening 10,000 December 2000
Germany University of Tubingen HPV Primary Screening 8,000 June 2000
Russia University of Turku, Finland HPV Primary Screening 12,000 December 2001
Brazil University of Rio Grande do Sul HPV Primary Screening 2,000 December 2000
Argentina Institut Papincolau HPV Primary Screening 1,000 Completed*
Costa Rica National Cancer Institute HPV Primary Screening 10,000 Completed*
China Cleveland Clinic Foundation HPV Primary Screening 2,500 November 1999
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* Trials have been completed and the results are being prepared for publication.
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</TABLE>
IMPROVING WOMEN'S HEALTH AWARENESS
We actively support the efforts of the American Medical
Women's Association and the National Cervical Cancer Public Education Campaign
to inform women about the link between HPV and cervical cancer. The HPV Summit
1999, a conference dedicated to discussing HPV and related women's health issues
and attended by leading authorities, including physicians, researchers and
women's health advocates, was held in Chamonix, France in February 1999. The
contribution of our HPV test to the early detection of cervical cancer was a
major theme of the summit. As a result of these efforts and growing evidence
supporting HPV testing, an advocacy group of nationally recognized women called
"Women for HPV Testing," the London Express newspaper and Cosmopolitan magazine
have all called on the government of the United Kingdom to adopt HPV testing as
part of the national cervical cancer screening program. In the United States,
the first congressional hearing dedicated to addressing the need to better
inform women about the link between HPV infections and cervical cancer was held
in Washington, D.C. in March 1999, and the Centers for Disease Control (CDC)
held its first hearings about the HPV issue in April 1999.
INCREASING REIMBURSEMENT COVERAGE
We are working to expand reimbursement coverage for our HPV
tests through targeted clinical studies and outcome-oriented research. These
studies are being performed in conjunction with managed care organizations,
university-based clinicians and governmental authorities worldwide. Our efforts
to increase reimbursement coverage were boosted recently when an FDA advisory
panel recommended expanded labeling for our Hybrid Capture tests to incorporate
the signal amplification description. We expect this expanded labeling to
provide a distinct competitive advantage in the market, because reimbursement
levels for amplified tests are up to two times the level for non-amplified
tests.
The Health Care Financing Administration (HCFA),
administrator for Medicaid and Medicare, has established reimbursement for our
HPV test, and the American Medical Association has assigned specific CPT codes
(necessary for reimbursement) for HPV testing. Third party payors and managed
care entities that provide health insurance coverage to 50 million people
currently authorize reimbursement for our HPV test.
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BLOOD VIRUSES
Blood viruses, such as HBV, CMV and HIV, are leading causes of
morbidity and death and, until recently, were untreatable. Rapid, accurate and
ongoing detection of blood viruses and monitoring of viral load is essential for
effective patient management. Over the last several years, antiviral therapies
have been developed to treat these diseases. To maximize the efficacy of these
expensive and sometimes toxic therapies, physicians rely on viral load
monitoring to measure the level of virus present in the patient's system. By
precisely measuring viral load and identifying patients who are not responding
to therapy early in their treatment, physicians are better able to tailor
antiviral therapies by more precisely monitoring individual responses,
recognizing when a patient develops drug resistance and projecting how quickly
the infection will progress to chronic disease.
The commercialization strategy for our blood virus business is to
develop tests for the hepatitis, transplant and AIDS testing markets where the
sensitivity and viral load monitoring capabilities of our Hybrid Capture System
provide a competitive advantage over other methods, and where our products can
be marketed to laboratories through an established market participant such as
Abbott in the case of HBV and CMV in Europe or through our own marketing and
sales efforts. Our Hybrid Capture System utilizes signal amplification and can
detect and quantitate as few as 100 molecules of the HIV virus and as many as
one billion copies of the hepatitis B virus.
We believe our Hybrid Capture HBV Tests are the leading HBV DNA tests
in the European market. These tests are used to monitor viral load to determine
disease prognosis and optimize the efficacy of the antiviral therapy. Currently,
our HBV tests are used by more than 250 laboratories worldwide. We expect that
demand for HBV DNA testing will continue to grow as new hepatitis treatment
guidelines incorporating viral load monitoring are implemented. Our second
important blood virus testing product is our Hybrid Capture CMV Test, which
delivers both qualitative and quantitative viral load information to accurately
differentiate active from latent CMV infection for AIDS, transplant and other
patients with impaired immune systems. We market our CMV test to patients
receiving CMV antiviral therapy, select transplant patients with active CMV
infection needing protective therapy, and AIDS patients at risk of developing
CMV-related organ disease who could benefit from preemptive therapy.
We are currently developing our Hybrid Capture HIV Test based on our
Hybrid Capture technology for HIV viral load monitoring. Our HIV test has been
shown in independent studies to provide highly sensitive, accurate,
reproducible and reliable measurements of HIV viral load. Our HIV test is the
only system which can detect 92% of the HIV genome.
PHARMACEUTICAL CLINICAL RESEARCH
We approach the pharmaceutical clinical research market by seeking to
enter into strategic partnerships that enable us to identify, develop and
validate new gene-based testing opportunities. The first such partnership is our
exclusive technology and marketing partnership with PE Biosystems, one of the
world leaders in this field. Our partnership was formed to address opportunities
in high-throughput gene expression screening for pharmaceutical drug discovery.
In addition, we are expanding our leadership position in cervical cancer disease
management through an active in-licensing program for potential new genetic
markers and through collaborations with vaccine and drug development programs of
major pharmaceutical companies. As part of this effort, we are working with
MedImmune, Inc. in the HPV vaccine area. In 1998, we also acquired Viropath
B.V., a leader in the HPV clinical research field, and we have obtained an
exclusive license to the p53arg gene, a potential risk assessment marker for
cervical disease progression.
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PRODUCTS
Our Hybrid Capture System, which is the basis for all of our gene
analysis testing systems, is a rapid, accurate, easy to use, ultra-sensitive
technology that can be used in virtually any laboratory with standard
equipment. We believe that our Hybrid Capture System is a significant
improvement over other detection technologies because of its specificity, rapid
processing time, improved accuracy and ability to quantitate viral load. We have
developed two versions of our Hybrid Capture technology, the Hybrid Capture I
and Hybrid Capture II Systems. The Hybrid Capture I System, our first generation
DNA hybrid detection system, which is currently being used at more than 600
laboratories worldwide, tests samples individually in polystyrene tubes and has
been approved by the FDA for the follow-up screening of HPV in women with
equivocal Pap smears. The Hybrid Capture II System, which was approved by the
FDA for the detection of HPV in March 1999, uses a 96-well microtiter plate
format that permits simultaneous screening of multiple samples from a single
plate and is designed to be more efficient, less expensive and easier to use
than the Hybrid Capture I System.
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The following table summarizes the commercial and regulatory status
and potential worldwide market of our Hybrid Capture tests:
HYBRID CAPTURE TESTS (1)
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<TABLE>
<CAPTION>
POTENTIAL
OUTSIDE WORLDWIDE
DISEASE TARGET UNITED STATES UNITED STATES MARKET
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<S> <C> <C> <C>
Women's Cancers
and Infectious
Diseases
HPV Approved and marketed as Marketed as a primary test for cervical cancer 150 million(2)
an adjunct to Pap smears screening. Distributed in Europe, Africa and the
for cervical cancer screening. Middle East by Abbott.
Chlamydia and Under review at FDA. Marketed. Distributed in Europe, Africa and the 89 million(3)
Gonorrhea Middle East by Abbott. (chlamydia)
62 million(3)
(gonorrhea)
Herpes Under development. Under development; expect to introduce in 107 million(3)
simplex calendar 2000.
Blood Viruses
HBV Available for research use only. Marketed. Distributed in Europe, Africa and the 300 million(4)
Middle East by Abbott.
CMV Cleared and marketed for Marketed. Distributed in Europe, Africa 1 million(5)
diagnosing infection in organ and the Middle East by Abbott.
transplant, bone marrow
transplant and HIV-positive AIDS
patients.
HIV Available for research use only. Marketed. 41 million(6)
</TABLE>
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(1) As described herein, certain of our products have not received marketing
approvals or clearance from the FDA or certain foreign authorities. There
can be no assurance that any such products will receive approvals on a
timely basis, if at all.
(2) Represents estimate of the total number of Pap smears performed annually.
(3) Represents estimated number of new cases worldwide on an annual basis.
(4) Represents estimated number of cases worldwide of chronic HBV infection.
(5) Represents estimated number of cases worldwide of active CMV infection.
(6) Represents estimated number of cases worldwide.
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SALES AND MARKETING
Our sales and marketing strategy focuses on achieving broad market
acceptance of our Hybrid Capture technology in the areas of women's cancers and
infectious diseases and blood virus testing. We sell our Hybrid Capture products
either directly, or through strategic partners or distributors, to clinical
laboratories and healthcare providers worldwide.
Acceptance of our Hybrid Capture technology requires improving
awareness, both in the United States and in international markets, of the
prevalence and the severity of cervical cancer and sexually transmitted diseases
among women, and, more importantly, identifying our Hybrid Capture tests as a
cost-efficient means of helping to prevent disease. We believe that increased
education and awareness will create a powerful consensus that diseases which are
preventable with the help of a commercially available and cost-effective test
should be targeted by physicians and managed care providers alike. We intend to
promote increased awareness through our active sponsorship of educational
programs, including programs with affiliated "Centers of Excellence," and
through links to the web sites of organizations dedicated to educating the
public and physicians about improvements in healthcare. Additionally, we intend
to continue our public relations campaign, conducted through our expanding
network of women's health advocates, public health providers and physicians
organizations, carrying our message of low cost prevention to physicians,
laboratories and the public.
Currently, we sell our products either directly or through strategic
partners or distributors to more than 1,000 laboratories worldwide.
NORTH AMERICAN MARKET
We currently market our products in the United States and Canada to
substantially all clinical reference laboratories through a direct sales force
supported by technical and customer service representatives.
Adoption of our Hybrid Capture HPV Tests by managed care providers
and the laboratory testing market is essential for rapidly achieving broad based
market acceptance. We have made significant progress in both of these areas.
HCFA has established reimbursement for our HPV test, and the American Medical
Association has assigned specific CPT codes (necessary for reimbursement) for
HPV testing. Third party payors and managed care entities that provide health
insurance coverage to 50 million people currently authorize reimbursement for
our HPV test.
In addition, substantially all major clinical reference laboratories
in the United States offer our HPV test. We work closely with clinical
reference laboratories, third party payors, healthcare providers and their
affiliated physicians to help accelerate the adoption of our HPV test. As part
of this effort, we collaborated with Kaiser Permanente in the study described
under "Business - Women's Cancers and Infectious Diseases - Clinical Trial
Validation" above. We are marketing the data from that study and additional
clinical trial validation data to other managed care providers, physicians and
government-funded national screening programs. As part of this effort, we are
working to establish a "Centers of Excellence" program with a group of the top
academic medical centers in the United States. We are also participating in an
ongoing 7,200 patient National Cancer Institute study designed to establish the
clinical
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utility and the cost effectiveness of HPV testing of women with equivocal Pap
smear results. We expect that the results from this trial will be released in
our current fiscal year.
We market our HPV test to physicians through joint marketing programs
with clinical reference laboratories and through co-marketing arrangements with
other strategic partners. For example, we currently market our HPV test together
with Cytyc Corporation's ThinPrep Pap Test, a sample preparation system which
allows for the automated preparation of cervical cell specimens. The
collaboration with Cytyc is designed to provide physicians with a cost-effective
and practical procedure for better management of those patients with equivocal
Pap smears. The combined single-sample approach, approved by the FDA in
September 1997, enables the use of our HPV test with the Cytyc ThinPrep Pap Test
to eliminate the need for a return office visit to collect a second sample for
HPV DNA testing.
INTERNATIONAL MARKETS
Internationally, we are working to establish HPV testing as the
standard of care for primary cervical cancer screening. We have entered into a
marketing and distribution agreement with Abbott for the distribution of certain
of our products in Europe, Africa and the Middle East. Abbott is one of the
world's leading diagnostic companies. We are working together with Abbott to
promote the use of HPV testing for primary screening in the European market.
In Brazil, our products are sold by Digene do Brazil LTDA, a
majority-owned subsidiary. We use independent distributors in the rest of South
America, Asia and the remaining countries in which we sell our products. In
Japan, Mitsubishi Chemical Company acts as our distributor. Mitsubishi is
working to obtain regulatory approval and reimbursement for our Hybrid Capture
HPV, Chlamydia and Gonorrhea Tests.
TECHNOLOGY
Our Hybrid Capture System utilizes signal amplification and combines
the accuracy of nucleic acid probe diagnostics with the ease of use and
mass-market capabilities of antibody-based immunodiagnostic systems which are
routinely used by virology and immunology laboratories today. Our Hybrid Capture
technology uses RNA probes to bind specific DNA sequences to create hybrid
DNA:RNA molecules. The captured hybrids are then reacted with our proprietary
signal amplification system which uses antibodies to detect DNA:RNA hybrids. Our
Hybrid Capture technology offers a rapid, accurate and easy-to-use detection
system that can be performed in any laboratory with standard equipment. These
capabilities are particularly important in the commercial markets we have
targeted.
We have established a strong proprietary position in our Hybrid
Capture technology. We have an exclusive license to a patent covering the use of
the monoclonal antibodies that are central to the Hybrid Capture System.
Additionally, in July 1999, the European Patent Office granted us a broad patent
covering the entire Hybrid Capture System. We have exclusive licenses and
co-exclusive cross licenses with the Institut Pasteur to issued and pending
patents covering the use of HPV genetic sequences from six patented cancer
causing HPV types. We believe that these patents create a unique proprietary
position for us in the HPV testing field.
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Our Hybrid Capture technology has been applied successfully to a
number of testing formats including: individual tubes (Hybrid Capture I);
96-well microtiter plates (Hybrid Capture II); 384-well test arrays; and DNA
gene chips. Our Hybrid Capture I and II test formats are used in our
commercially available testing products. Using these test systems, it is
possible to economically process between 4 and 360 clinical specimens in a
single technician shift. As part of our partnership efforts, PE Biosystems
offers high throughput gene expression analysis products and services to the
pharmaceutical drug discovery, biotechnology and agricultural markets. The
automated Hybrid Capture gene expression screening service offered by PE
Biosystems employs high capacity automation capable of running 100,000 tests per
day.
The following diagram illustrates the key elements of the Hybrid
Capture System.
[Diagram with explanatory notes showing how our Hybrid Capture
technology platform allows for the detection of specific DNA and RNA
sequences and therefore has potential applications for a variety of
diagnostic and monitoring tests.]
RESEARCH AND DEVELOPMENT
One of our key goals is to expand continually our core technology and
expertise in molecular diagnostics in order to remain at the forefront of DNA
testing for infectious diseases and to capture new high-growth and high-margin
market opportunities. To achieve this goal, we have invested aggressively in
research and development and particularly in clinical trials to validate the
performance of our new products.
Our research programs are geared to deliver continuing improvements
in the detection of cervical cancer and sexually transmitted infections,
including chlamydia, gonorrhea and herpes, and we seek to increase our
technological leadership position in these areas. Further, we are working to
make it possible for a physician to order all four of these tests and cytology
results simultaneously. Our single-sample system is now available in Europe and
South America for the detection of HPV, chlamydia and gonorrhea. We expect to
introduce our herpes test internationally in calendar year 2000. We have
developed our tests so that they can be performed on samples collected for
routine Pap smears, and we have developed our proprietary single patient sample
system which we expect to introduce internationally in calendar year 2000.
We intend to continue our investment in the women's cancers and
infectious diseases and blood virus areas and to expand efforts to automate our
existing tests. We expect that the first of these tests, our automated chlamydia
and gonorrhea test, will be introduced in the United States by Abbott during
calendar year 2000, subject to clearance by the FDA.
MANUFACTURING
Manufacturing our products involves combining more than 200
biological reagents, inorganic and organic reagents and kit components (such as
vials and packaging material) into finished test kits. Biological reagents
include DNA and RNA probes, antibodies and detection reagents. These biological
reagents are currently manufactured in our facility in Beltsville, Maryland. In
December 1999, we expect to relocate our manufacturing operations to a new
facility in Gaithersburg, Maryland. We believe that we currently have sufficient
manufacturing capacity for our existing demand and that the new facility will
allow us to expand our production capability for the foreseeable future.
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We have established a quality control program, including a set of
standard manufacturing and documentation procedures intended to ensure that,
where required, our products are manufactured in accordance with quality service
regulations (QSR). We received ISO 9001 certification in June 1999.
COMPETITION
The medical diagnostics and biotechnology industries are subject to
intense competition. Our competitors in the United States and abroad for
gene-based diagnostic probes include Roche Diagnostics, Bayer Corporation,
Chiron Corporation and Gen-Probe Incorporated. We also compete with Abbott, even
though they act as our marketing partner in Europe, Africa and the Middle East.
We believe the primary competitive factors in the market for
gene-based probe diagnostics and other screening devices are clinical
performance and reliability, ease of use, cost, proprietary position, the
competitor's share of the existing market, regulatory approvals and availability
of reimbursement.
Other companies, including large pharmaceutical and biotechnology
companies, may enter the market for gene-based probe diagnostics. Some of our
products compete against existing screening, monitoring and diagnostic
technologies, including the tissue culture and antigen-based diagnostic
methodologies. In marketing our HPV tests for the follow-up screening of women
with equivocal Pap smears in the United States, we compete with well-established
follow-up procedures, such as Pap smear re-testing, colposcopy and biopsy, which
are widely accepted and have a long history of use. Additionally, in the event
we are able to obtain FDA and applicable foreign approvals to market our HPV
tests for primary cervical cancer screening, either in conjunction with or
separate from the Pap smear, our products will compete against the Pap smear,
which is widely accepted as an inexpensive and, with regular use, adequate
screening test for cervical cancer. Future technological advancements, designed
to improve quality control over sample collection and preservation and to reduce
the Pap smear test's susceptibility to human error, may serve to increase
physician reliance on the Pap smear and solidify its market acceptance. Further,
if marketed as an adjunct to the Pap smear test for primary screening in the
United States, our HPV tests may be seen as adding unnecessary expense to the
accepted cervical cancer screening methodology. Consequently, our HPV tests may
not be able to attain market acceptance as a primary screening test.
We face competition from a variety of technologies in the blood virus
area. There are several advanced technologies commercially available for the
detection and viral load measurement of HBV and HIV. Additionally, there are
several emerging DNA probe amplification technologies to detect CMV being
developed by competitors. Thus, our tests for HBV, CMV or HIV may not be able to
gain market acceptance.
Our existing and potential competitors may be in the process of
seeking FDA or foreign regulatory approval for their respective products or may
also enjoy substantial advantages over us in terms of research and development
expertise, experience in conducting clinical trials, experience in regulatory
matters, manufacturing efficiency, name recognition, sales and marketing
expertise and distribution channels. In addition, many of these companies may
have established third-party reimbursement for their products. We may not be
able to compete effectively against existing or future competitors, which may
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have a material adverse effect on our business, financial condition and results
of operations.
GOVERNMENT REGULATION
The medical devices to be marketed and manufactured by us are subject
to extensive regulation by the FDA and, in some instances, by foreign
governments. Pursuant to the Federal Food, Drug, and Cosmetic Act and the
related regulations, the FDA regulates the clinical testing, manufacture,
labeling, distribution and promotion of medical devices. Noncompliance with
applicable requirements can result in, among other things, fines, injunctions,
civil penalties, recalls or seizures of products, total or partial suspension of
production, failure of the government to grant premarket clearance or premarket
approval for devices, withdrawal of marketing approvals, and criminal
prosecution. The FDA also has the authority to request repair, replacement, or
refund of the cost of any device that we manufacture or distribute.
In the United States, medical devices and diagnostics are classified
into one of three classes (class I, II or III), on the basis of the controls
deemed necessary by the FDA to reasonably assure their safety and effectiveness.
Under FDA regulations, class I devices are subject to general controls (for
example, labeling and adherence to QSR), and class II devices are subject to
general and special controls (for example, performance standards, postmarket
surveillance, patient registries and FDA guidelines). Generally, class III
devices are those which must receive premarket approval (PMA) by the FDA to
ensure their safety and effectiveness (for example, life-sustaining,
life-supporting and implantable devices, or new devices which have not been
found substantially equivalent to legally marketed devices).
Before a new device can be introduced into the market, the
manufacturer generally must obtain marketing clearance through the filing of
either a 510(k) notification or a PMA application. A 510(k) clearance will be
granted if the submitted information establishes that the proposed device is
"substantially equivalent" to a legally marketed class I or II medical device or
to a preamendment class III medical device (i.e., on the market on or before May
28, 1976) for which the FDA has not called for a PMA. It generally takes from
four to twelve months from submission to obtain a 510(k) clearance, but it may
take longer. The FDA may determine that a proposed device is not substantially
equivalent to a legally marketed device or that additional information or data
is needed before a substantial equivalence determination can be made, either of
which could delay market introduction of a new product. A request for additional
data may require that clinical studies of the device's safety and effectiveness
be performed. Additionally, modifications or enhancements that could
significantly affect the safety or effectiveness of the device or that
constitute a major change to the intended use of the device will require new
510(k) submissions.
A PMA application must be filed if a proposed device is not
substantially equivalent to a legally marketed class I or class II device or if
it is a preamendment class III device for which the FDA has called for a PMA. A
PMA application must be supported by valid scientific evidence, including
preclinical and clinical trial data, to demonstrate the safety and effectiveness
of the device. The PMA application must also contain the results of all relevant
bench tests, laboratory and animal studies, a complete description of the device
and its components, a detailed description of the methods, facilities and
controls used to manufacture the device in addition to device labeling and
advertising literature.
If a PMA application is accepted for filing, the FDA begins an
in-depth review of the submission. FDA review of a PMA application generally
takes one to two years from the date the PMA application is accepted for filing,
but may take significantly longer. The PMA review process includes an inspection
of the manufacturer's facilities to ensure that the facilities are in compliance
with the applicable QSR
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requirements. In addition, an advisory committee made up of clinicians and/or
other appropriate experts is typically convened to evaluate the application and
make recommendations to the FDA as to whether the device should be approved. The
PMA process can be expensive, uncertain and lengthy. A number of devices for
which FDA approval has been sought by other companies have never been approved
for marketing.
Modifications to a device that is the subject of an approved PMA, its
labeling or manufacturing process may require approval by the FDA of PMA
supplements or new PMAs. Supplements to a PMA often require the submission of
the same type of information required for an initial PMA, but limited to the
information necessary to support the proposed change.
Although clinical investigations of most devices are subject to the
investigational device exemption (IDE) requirements, clinical investigations of
in vitro diagnostic (IVD) tests are exempt from the IDE requirements, including
FDA approval of investigations, provided the testing meets certain exemption
criteria. IVD manufacturers must also establish distribution controls to assure
that IVDs distributed for the purpose of conducting clinical investigations are
used only for that purpose and not improperly commercialized. Pursuant to
current FDA policy, manufacturers of IVDs labeled for investigational use only
(IUO) or research use only (RUO) are encouraged by the FDA to establish a
certification program under which investigational IVDs are distributed to or
utilized only by individuals, laboratories, or healthcare facilities that have
provided the manufacturer with a written certification of compliance indicating
that the IUO or RUO product will be restricted in use and will, among other
things, meet institutional review board and informed consent requirements.
Export of products subject to the 510(k) notification requirements,
but not yet cleared to market, are permitted provided certain requirements are
met. Unapproved products subject to the PMA requirements must be approved by the
FDA for export under certain circumstances. To obtain FDA export approval,
certain requirements must be met and information must be provided to the FDA,
including, with some exceptions, documentation demonstrating that the product is
approved for import into the country to which it is to be exported and, in some
instances, safety data for the devices. The FDA may not grant export approval
when such approval is necessary, and countries to which the devices are to be
exported may not approve the devices for import. Failure on our part to obtain
export approvals when required could significantly delay and impair our ability
to export our devices and could have a material adverse effect on our business,
financial condition and results of operations.
In April of 1995, we obtained a PMA approval for our HPV test to
detect the presence of HPV in women with equivocal Pap smears. In August of
1997, we obtained FDA approval of a PMA supplement for the use of the HPV test
using the Cytyc sample collection system. We received FDA marketing clearance
for our Hybrid Capture II HPV Test in March 1999. We also intend to submit a PMA
supplement with the FDA to obtain market clearance for use of our Hybrid Capture
II HPV Test as a primary cervical cancer screening test either in conjunction
with or separate from Pap smear testing. We anticipate that a substantial amount
of clinical data will be required to support the PMA supplement. The data we
submit may not be adequate to support the use of the Hybrid Capture II HPV Test
as a primary cervical cancer screening test in the United States. Failure to
obtain FDA approval for the use of the Hybrid Capture II HPV Test as a primary
cervical cancer screening test could have a material adverse effect on our
business, financial condition and results of operations.
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We received FDA marketing clearance for our Hybrid Capture I CMV Test
in October 1998. We submitted three 510(k) notifications for each of our tests
for chlamydia and gonorrhea in April 1998. Upon review of the 510(k)
notification for our tests, the FDA determined that additional data would be
needed. After collecting the necessary data, we submitted the information to
the FDA. These three 510(k) notifications remain pending with the FDA. The FDA
may not grant clearance of these 510(k) notifications in a timely manner, if
at all, and the FDA may require the submission of additional data or find the
products not substantially equivalent and require the submission of a PMA
application.
We are developing tests for HBV and HIV which are class III devices
that will necessitate the collection of extensive clinical data and the eventual
submission and approval of a PMA application. We may not be able to collect
adequate data to support a PMA application for either the HBV test or HIV test,
and when a PMA application is submitted, FDA approval may not be granted in a
timely manner, if at all.
We are exporting our HPV test as a primary cervical cancer screening
test prior to obtaining PMA approval for this use in the United States. We are
also exporting our HBV test and HIV test for clinical use abroad prior to
pursuing PMA approval in the United States. Exportation of the HPV test as a
primary cervical cancer screening test and exports of the HBV test and HIV test
can be undertaken without prior FDA approval of a PMA provided, among other
things, that:
- the marketing of these tests is not contrary to the laws
of the country to which they are intended for import,
- they are manufactured in substantial conformance with the
QSRs and
- we have valid marketing authorization for these products
from any member country of the European Union, Australia,
Canada, Israel, Japan, New Zealand, Switzerland or South
Africa.
We also must provide the FDA with simple notification indicating the
products to be exported and the countries to which they will be exported. FDA
approval must be obtained for exports of products subject to the PMA
requirements if these export conditions are not met. We may not be able to
obtain and maintain valid marketing authorization for these tests from one of
the listed countries, and the FDA may not grant specific export approval. Our
failure to obtain and maintain valid marketing authorization from one of the
listed countries or otherwise meet the FDA export approval requirements, could
have a material adverse effect on our business, financial condition and results
of operations.
We have developed viral and bacterial tests that we distribute in the
United States on a RUO basis. Failure by us or recipients of our RUO devices to
comply with the regulatory limitations on the distribution and use of RUO
devices could result in enforcement action by the FDA that would adversely
affect our ability to distribute the tests prior to obtaining FDA clearance or
approval for them.
Any products manufactured or distributed by us pursuant to FDA
clearances or approvals are subject to pervasive and continuing regulation by
the FDA, including recordkeeping requirements and reporting of adverse
experiences with the use of the device. Device manufacturers are required to
register their establishments and list their devices with the FDA and are
subject to periodic inspections by the FDA and certain state agencies. The
Federal Food, Drug, and Cosmetic Act requires devices to be manufactured in
accordance with QSRs, which impose certain procedural and documentation
requirements upon us with respect to manufacturing and quality assurance
activities.
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The FDA actively enforces regulations prohibiting the promotion of
devices for unapproved ("off label") uses and the promotion of devices for which
premarket clearance or approval has not been obtained. Failure to comply with
these requirements can result in regulatory enforcement action by the FDA and
possible limitations on the promotion of our products.
We and our products are subject to a variety of state laws and
regulations in those states and localities where our products are or will be
marketed. Any applicable state or local regulations may hinder our ability to
market our products in those states or localities. Manufacturers are also
subject to numerous federal, state and local laws relating to such matters as
safe working conditions, manufacturing practices, environmental protection, fire
hazard control and disposal of hazardous or potentially hazardous substances. We
may be required to incur significant costs to comply with such laws and
regulations now or in the future, and such laws or regulations may have a
material adverse effect on our business, financial condition and results of
operations.
The introduction of our developmental stage test products in foreign
markets will also subject us to foreign regulatory clearances, which may impose
additional substantial costs and burdens. International sales of medical devices
are subject to the regulatory requirements of each country. The regulatory
review process varies from country to country and many countries also impose
product standards, packaging requirements, labeling requirements and import
restrictions on devices. In addition, each country has its own tariff
regulations, duties, and tax requirements.
The approval by the FDA and foreign government authorities is
unpredictable and uncertain, and the necessary approvals or clearances may not
be granted on a timely basis or at all. Delays in receipt of, or a failure to
receive, such approvals or clearances could have a material adverse effect on
our business, financial condition and results of operations.
Changes in existing requirements or adoption of new requirements or
policies could adversely affect our ability to comply with regulatory
requirements. Failure to comply with regulatory requirements could have a
material adverse effect on our business, financial condition and results of
operations. We may be required to incur significant costs to comply with laws
and regulations in the future, and laws or regulations may have a material
adverse effect upon our business, financial condition and results of operations.
The Federal Food, Drug, and Cosmetic Act requires devices to be
manufactured in accordance with QSRs which impose certain procedural and
documentation requirements upon us with respect to manufacturing and quality
assurance activities. Noncompliance with QSRs can result in, among other things,
fines, injunctions, civil penalties, recalls or seizures of products, total or
partial suspension of production, failure of the government to grant premarket
clearance or premarket approval for devices, withdrawal of marketing approvals,
and criminal prosecutions. The FDA also has proposed changes to the QSRs which,
if finalized, would likely increase the cost of compliance with the
requirements. Any failure by us to comply with QSR requirements could have a
material adverse effect on our business, financial condition and results of
operations.
We must comply with similar registration requirements of foreign
governments and with import and export regulations when distributing our
products to foreign nations. Each foreign country's regulatory requirements for
product approval and distribution are unique and may require the expenditure of
substantial time, money and effort. The regulation of medical devices in a
number of such jurisdictions, particularly in the European Union, continues to
develop and new laws or regulations may have a material adverse effect on our
business, financial condition and
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results of operations. Noncompliance with state, local, federal, or foreign
regulatory requirements can result in fines, injunctions, civil penalties,
recall or seizure of products, total or partial suspension of production, delay
or denial or withdrawal of premarket clearance or approval of devices and
criminal prosecution.
The IVD directive promulgated by the European Union goes into effect
in June 2000 and we must be in full compliance with such directive by 2003. One
of the critical components of such compliance is ISO 9001 certification, which
we received in June 1999.
LICENSES, PATENTS AND PROPRIETARY INFORMATION
Our success will depend in part on our ability to obtain and maintain
patent protection for our technologies, products and processes, preserve our
trade secrets, and operate without infringing the proprietary rights of other
parties. Because of the substantial length of time and expense associated with
bringing new products through development to the marketplace, the biotechnology
industry places considerable importance on obtaining and maintaining patent and
trade secret protection for new technologies, products and processes. Despite
these precautions, it may be possible for unauthorized third parties to utilize
our technology or to obtain and use information that we regard as proprietary.
The laws of some countries do not protect our proprietary rights in our
technologies, products and processes to the same extent as do the laws of the
United States.
We hold four issued U.S. patents relating to HPV types 35, 43, 44,
and 56. These patents expire in 2007. We have also filed corresponding foreign
patent applications in certain countries. The patents relating to HPV types 35,
43, and 56 have been licensed to Institut Pasteur (see cross license discussion
below). In addition, we are the exclusive, worldwide licensee of a U.S. patent
application and certain corresponding foreign patents and patent applications
relating to HPV type 52 and a U.S. patent and certain corresponding foreign
patents relating to the use of the L1 gene sequence to detect specific HPV types
(see Georgetown license discussion below) as well as certain trade secrets
relating to HPV type 58 (see Kanebo license discussion below).
Through a cross license with Institut Pasteur, we have obtained a
worldwide license to U.S. patents and patent applications and corresponding
foreign patent applications relating to HPV types 39 and 42 and foreign patents
and applications relating to HPV type 33. In return, we have granted to Institut
Pasteur a worldwide license to our three U.S. patents and corresponding foreign
patents and applications relating to HPV types 35, 43, and 56. We have granted
Institut Pasteur the right to extend the scope of the cross license to include
the U.S. patent and corresponding patent applications relating to HPV type 44 at
such time as Institut Pasteur shall have discovered and developed an additional
HPV type which is equivalent in value to HPV type 44. In return for such an
extension, we will receive a license to the new HPV type discovered and
developed by Institut Pasteur. The cross license is co-exclusive, except that
Institut Pasteur has sublicensed its rights to Beckman Instruments, Diagnostic
Pasteur, and their affiliates, and we have sublicensed our rights on a
non-exclusive basis to Toray Fuji Bionics, and its affiliates, for use outside
North America and certain countries in Western Europe. A sublicensee may use
its rights under the cross license to develop additional products or services
that compete with our products. We believe that the cross license terminates on
the last to expire of the underlying patent rights. Any prior termination of the
cross license could have a material adverse effect on our business, financial
condition and results of operations.
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Through a license with Georgetown University, we have obtained
exclusive, worldwide rights to a U.S. patent application and corresponding
foreign patents and patent applications relating to HPV type 52 and to a U.S.
patent and corresponding foreign patents relating to the use of the L1 gene
sequence to detect specific HPV types. Unless terminated earlier, the Georgetown
license will terminate upon the last to expire of the licensed patent rights.
All of the issued foreign patents relating to HPV type 52 and the L1 related
patent will expire in 2008. We are obligated to make certain royalty payments to
Georgetown University based on the percentage of net sales of products
incorporating the licensed technologies.
Through a license with Kanebo, Ltd., we have obtained exclusive,
worldwide rights (except for Japan where Kanebo, Ltd. retained the right to
grant a non-exclusive sublicense to Toray Industries, Inc.) to a foreign patent
application relating to HPV type 58. Unless terminated earlier, the Kanebo
license expires on the later to occur of January 1, 2010 or the expiration of
any patent relating to HPV type 58.
We have filed a U.S. patent application relating to certain aspects
of our Hybrid Capture technology. A foreign filing of this patent has been
granted in Australia and was allowed by the European Patent Office in July 1999.
We have an exclusive license with the University of Hawaii for a patent covering
monoclonal antibodies for detection of DNA:RNA hybrid complexes. We have also
filed U.S. patent applications in the areas of direct DNA probe labeling, signal
amplification and biotin-avidin probe chemistry and our continuous amplification
reaction amplification method. The inventions claimed by these applications may
be used in our DNA probes and any patents that issue from such applications may
provide some ancillary protection for certain aspects of our products. Under
current law, patent applications in the United States are maintained in secrecy
until patents are issued and patent applications in foreign countries are
maintained in secrecy for a period of time after filing. A U.S. patent or any
foreign patents relating to our Hybrid Capture technology may not be issued to
us on a timely basis, or at all.
We have received inquiries regarding possible patent infringements
relating to, among other things, certain aspects of our Hybrid Capture
technology. We believe that the patents of others to which these inquiries
relate are either not infringed by our Hybrid Capture technology or are invalid.
However, we may be subject to further claims that our technology, including our
Hybrid Capture technology, or our products infringe the patents or proprietary
rights of third parties. The defense of any such claims, if made, could be time
consuming and expensive, even if the outcome is favorable. An adverse outcome
could subject us to significant liabilities to third parties, require us to
obtain licenses from third parties, or require us to cease sales of related
products. Any licenses required under any such third party patents or
proprietary rights may not be made available on commercially reasonable terms,
if at all.
The U.S. Patent and Trademark Office or any foreign patent office may
not grant patent protection for the subject matter of any pending patent
applications, and present or future patents may not provide commercially
significant protection to our present or future technologies, products, or
processes. Furthermore, others may develop independently substantially
equivalent proprietary information not covered by patents to which we have
rights or obtain access to our know-how, and others may be issued patents that
may prevent the sale of one or more of our products, or require licensing and
the payment of significant fees or royalties by us to third parties in order to
enable us to conduct our business. Such licenses may not be available or, if
available, may not be on terms acceptable to us or we may not be successful
in any attempt to redesign our products or processes to avoid infringement. Our
failure to obtain these licenses or to redesign our products or processes would
have a material adverse effect on our business, financial condition and results
of operations. Legal standards relating to the scope of claims and the validity
of patents in the biotechnology field are still evolving, and no assurance can
be given as to the degree of protection any patents issued to or licensed by us
will not be infringed by the products of others. Defense and prosecution of
patent claims can be expensive and time consuming, regardless of whether the
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outcome is favorable to us, and can result in the diversion of substantial
resources from our other activities. An adverse outcome could subject us to
significant liabilities to third parties, require us to obtain licenses from
third parties, or require us to cease any related research and development
activities or product sales. In addition, the laws of certain countries may not
protect our intellectual property.
Our success is also dependent upon the skill, knowledge, and
experience of our scientific and technical personnel. To help protect our
rights, we require all employees, consultants, advisors, and collaborators to
enter into confidentiality agreements that prohibit the disclosure of
confidential information to anyone outside Digene and require disclosure and, in
most cases, assignment to Digene of their ideas, developments, discoveries, and
inventions. There can be no assurance, however, that these agreements will
provide adequate protection for our trade secrets, know-how, or other
proprietary information in the event of any unauthorized use or disclosure.
THIRD-PARTY REIMBURSEMENT
Hospitals, physicians, and other healthcare providers rely on
third-party payors, such as government entities, managed care organizations, and
private insurance plans, to reimburse the costs and fees associated with the use
of diagnostic tests. Successful sales of our tests in the United States and
other markets will depend, in part, on the availability of adequate
reimbursement from third-party payors such as government entities, managed care
organizations, and private insurance plans. There is significant uncertainty
concerning third-party reimbursement for the use of any medical test
incorporating new technology. Reimbursement by a third-party payor may depend on
a number of factors, including the payor's determination that the use of our
tests are clinically useful and cost-effective, not experimental or
investigational, medically necessary and appropriate for the specific patient.
Since reimbursement approval is required from each payor individually, seeking
such approvals is a time consuming and costly process which requires us to
provide scientific and clinical support for the use of our tests for their
approved indications to each payor separately. Third-party reimbursement may not
be consistently available for our tests for their approved indications or any of
our other products that may be developed and such third-party reimbursement may
not be adequate. Federal and state governmental agencies are increasingly
considering limiting healthcare expenditures. For example, the United States
Congress is currently considering various proposals to significantly reduce
Medicaid and Medicare expenditures. Such proposals, if enacted, could have a
material adverse effect on our business, financial condition and results of
operations.
Outside the United States, we rely on a network of distributors to
establish reimbursement from third-party payors in their respective territories.
Our distributors have established reimbursement for the HPV test in Germany, the
Czech Republic, and Brazil. Accordingly, the establishment of reimbursement from
third-party payors in such countries is outside our control. Healthcare
reimbursement systems vary from country to country and, accordingly, there can
be no assurance that third-party reimbursement will be made available for our
products under any other reimbursement system. In Europe, Africa and the Middle
East, we are working closely with Abbott on advocacy efforts and to work with
government and/or ministry officials to establish appropriate reimbursement
coverage in the major countries.
Third-party payors are increasingly limiting reimbursement coverage
for medical diagnostic products and in many instances are exerting significant
pressure on medical suppliers to lower their prices. Lack of or inadequate
reimbursement by governmental and other third-party payors for our products
could have a material adverse effect on our business, financial condition and
results of operations.
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PRODUCT LIABILITY
Our business is subject to product liability risks inherent in the
testing, manufacturing and marketing of our tests that are currently being
marketed and sold, as well as our other products in development. There can be no
assurance that product liability claims will not be asserted against us, our
collaborators or licensees. We currently maintain product liability insurance
coverage with a combined single limit of $6,000,000. This coverage may not be
adequate to protect us against future product liability claims, and product
liability insurance may not be available to us in the future on commercially
reasonable terms, if at all. Furthermore, we may not be able to avoid
significant product liability claims and the attendant adverse publicity.
Consequently, a product liability claim or other claim with respect to uninsured
or underinsured liabilities could have a material adverse effect on our
business, financial condition and results of operations.
EMPLOYEES
At September 27, 1999, we employed 124 persons, including 39 in
research and development, 38 in manufacturing, including quality assurance, 24
in sales and marketing and 23 in accounting, finance, administration and
regulatory affairs. We are not a party to any collective bargaining agreements,
and we believe our relationships with our employees are good.
PRINCIPAL EXECUTIVE OFFICES
We were incorporated in Delaware in 1987. Our principal executive
offices are located at 9000 Virginia Manor Road, Beltsville, Maryland 20705.
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ADDITIONAL CONSIDERATIONS
WE HAVE A HISTORY OF OPERATING LOSSES AND ANTICIPATE WE WILL INCUR CONTINUED
LOSSES FOR THE FORESEEABLE FUTURE.
We have had substantial operating losses since incorporation in 1987,
and we have never earned a profit. At June 30, 1999, our accumulated deficit was
approximately $48.7 million. These losses have resulted principally from: (1)
expenses associated with our research and development programs; (2) the
expansion of our manufacturing facilities; and (3) the expansion of our sales
and marketing activities in the United States and abroad.
We expect that these operating losses will continue for the
foreseeable future. Our future profitability depends, in part, on:
- the success of our product development efforts;
- obtaining regulatory approvals for our product candidates
from the FDA and foreign regulatory authorities;
- our ability to expand our manufacturing capabilities to
meet any increase in demand for our products; and
- our sales and marketing activities.
OUR OPERATING RESULTS HAVE, AND MAY CONTINUE TO, FLUCTUATE SIGNIFICANTLY.
Our quarterly operating results have fluctuated significantly in the
past. We believe that they may continue to fluctuate significantly in the future
with lower product revenues in our first and second fiscal quarters (July 1
through December 31) as compared with our third and fourth fiscal quarters of
each year. The lower demand for certain women's health-related medical
procedures during the summer months and the December holiday season in the
United States and Europe primarily causes this fluctuation.
In addition, our quarterly operating results, as well as our annual
results, may fluctuate from period to period due to:
- the degree of market acceptance of our products;
- the timing of regulatory approvals and other regulatory
announcements;
- variations in our distribution channels;
- the timing of new product announcements and introductions
of new products by us and our competitors; and
- product obsolescence resulting from new product
introductions.
Due to any one or more of these or other factors, in one or more
future quarters our results of operations may fall below the expectations of
securities analysts and investors.
WE HAVE LIMITED MANUFACTURING EXPERIENCE, AND OUR MANUFACTURING OPERATIONS MAY
BE INTERRUPTED AS A RESULT OF OUR PLANNED MOVE.
We have limited commercial-scale manufacturing experience and
capabilities, and we anticipate that we will be required to expand our
manufacturing capabilities.
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To address this anticipated expansion, we have entered into a lease
for a new facility in Gaithersburg, Maryland. We intend to relocate our
corporate, research and development and manufacturing operations to this new
facility in December 1999. We cannot begin manufacturing activities at the new
facility until our manufacturing process there has been validated by the FDA.
The FDA may not provide such validation in a timely manner which could delay our
ability to meet the demand for our products. To minimize this potential problem,
we will continue manufacturing certain components in our Beltsville, Maryland
facility until our new facility is validated appropriately and will stockpile
product inventory during the second quarter of fiscal 2000. This stockpiling
will cause an increase in our expenses for that period.
Once the new facility is validated by the FDA, it will still be
subject, on an ongoing basis, to a variety of quality systems regulations,
international quality standards and other regulatory requirements, including
requirements for good manufacturing practices, which are commonly referred to as
"cGMP." The integration of our manufacturing operations into this new facility
may result in problems involving production yield and quality control and
assurance. We may encounter difficulties expanding our manufacturing operations
in accordance with these regulations and standards, which could result in a
delay or termination of manufacturing.
WE MANUFACTURE ALL OF OUR PRODUCTS IN A SINGLE FACILITY.
We face risks inherent in the operation of a single facility for
manufacture of our products. These risks include unforeseen plant shutdowns due
to personnel, equipment or other factors, and the possible inability of our
facility to produce products in quantities sufficient to meet customer demand.
Any delay in the manufacture of our products could result in delays in product
shipment.
OUR PRODUCTS MAY NOT BE FULLY ACCEPTED BY THE MARKET.
We cannot predict whether the worldwide medical community will accept
our technology to the extent we believe is appropriate or to the extent which is
required for us to operate profitably. Our success depends, in part, upon the
acceptance by third-party payors, clinical laboratories and healthcare
providers of our Hybrid Capture technology as a clinically useful and
cost-effective detection, screening and monitoring method in the areas of
women's cancers and infectious diseases and blood viruses.
In addition, our growth and success will depend upon market
acceptance by the medical community of our HPV tests as a primary cervical
cancer screening method and as a follow-up screening method for women with
equivocal Pap smears. This entails acceptance of our HPV tests as a clinically
useful and cost-effective alternative to well-established follow-up procedures,
such as Pap smear re-testing, colposcopy and biopsy. HPV testing, in general, or
our HPV tests, in particular, may not achieve market acceptance on a timely
basis and, in fact, may never achieve market acceptance.
Furthermore, technological advancements designed to improve quality
control over sample collection and preservation, and to reduce the Pap smear
test's susceptibility to human error, may serve to increase physician reliance
on the Pap smear and solidify its market acceptance. If marketed as an adjunct
to the Pap smear test for primary screening in the United States, our HPV tests
may be seen as adding unnecessary expense to the accepted cervical cancer
screening methodology. Consequently, we can provide no assurance that our HPV
tests will be able to achieve market acceptance as a primary screening test on a
timely basis, or at all.
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<PAGE> 25
OUR SALES TO INTERNATIONAL MARKETS ARE SUBJECT TO ADDITIONAL RISKS THAT ARE
BEYOND OUR CONTROL.
Our international sales and operations may be limited or disrupted
by:
- the imposition of government controls;
- export license requirements;
- economic and political instability;
- price controls;
- trade restrictions;
- changes in tariffs; and
- difficulties with foreign distributors.
Generally, the extent and complexity of regulation of medical
products are increasing worldwide, with regulation in some countries already
nearly as exhaustive as that in the United States. We anticipate that this trend
will continue and that the cost and time required to obtain approval to market
in any given country will increase with no assurance that such approval will be
obtained. Additionally, our business, financial condition and results of
operations may be materially and adversely affected by fluctuations in currency
exchange rates as well as increases in duty rates and difficulties in obtaining
required licenses and permits.
We may not be able to successfully commercialize any of our products
in any foreign market beyond the level of commercialization we have already
achieved. In addition, the laws of some countries do not protect our proprietary
rights to the same extent as those of the United States.
WE HAVE LIMITED SALES AND MARKETING EXPERIENCE.
We have limited sales and marketing experience and may be unable to
successfully establish and maintain a significant sales and marketing
organization. Due to the relatively limited market awareness of our products, we
believe that the marketing effort may be a lengthy process.
We intend to continue using a direct sales force as well as a network
of distributors to market and sell our HPV tests, chlamydia and gonorrhea tests
and blood virus tests. Our direct sales force may not succeed in promoting our
products to third-party payors, clinical laboratories, healthcare providers and
government entities. The risks of pursuing this strategy include:
- we may be unable to recruit and retain skilled sales,
marketing, service or support personnel;
- agreements with distributors for U.S. and foreign sales may
not be available on terms commercially reasonable to us, or
at all; and
- our sales and marketing efforts may be unsuccessful.
OUR SALES ARE HIGHLY DEPENDENT ON A SINGLE INTERNATIONAL DISTRIBUTOR.
In May 1999 we entered into a marketing and distribution agreement
with Abbott Laboratories. Under this agreement, Abbott is exclusively
responsible for sales and marketing of certain of our Hybrid Capture products in
Europe, Africa and the Middle East and, when cleared by the FDA, our Hybrid
Capture II Chlamydia and Gonorrhea Tests in the United States. We expect that
sales to Abbott will constitute a significant portion of our total revenues for
the foreseeable future. We could be materially adversely affected by:
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<PAGE> 26
- the loss of Abbott's sales and marketing infrastructure;
- a significant decrease in product shipments to or an
inability to collect receivables from Abbott; or
- any other adverse change in our relationship with Abbott.
OUR SALES ARE HIGHLY DEPENDENT ON REIMBURSEMENTS FROM THIRD-PARTY PAYORS.
Sales of our products in the United States and other markets will
depend, in part, on the availability of adequate reimbursement from third-party
payors, such as government insurance plans, including Medicare and Medicaid in
the United States, managed care organizations and private insurance plans.
Third-party payors often express reluctance to reimburse healthcare providers
for the use of any medical test incorporating new technology, such as ours.
Reimbursement by a third-party payor may depend on a number of factors,
including the payor's determination that our products are clinically useful,
cost-effective, not experimental or investigational, and medically necessary and
appropriate for the specific patient.
Because each payor individually approves reimbursement, seeking such
approvals is a time consuming and costly process which requires us to provide
scientific and clinical support for the use of each of our products to each
payor separately. In addition, third-party payors are increasingly limiting
reimbursement coverage for medical diagnostic products and in many instances are
exerting pressure on medical suppliers to lower their prices. Thus, third-party
reimbursement may not be consistently available for our products or financially
adequate to cover our costs and achieve profitability.
Outside the United States, the responsibility for obtaining
reimbursement approval from third-party payors is handled by our distributors
and, therefore, is out of our direct control. Healthcare reimbursement systems
vary from country to country and, accordingly, we cannot guarantee that
third-party reimbursement will be available for our products under any other
reimbursement system.
FUTURE LEGISLATION COULD AFFECT OUR ABILITY TO ACHIEVE PROFITABILITY.
One of our ongoing concerns is that from time to time, Congress has
considered restructuring the delivery and financing of healthcare services in
the United States. We cannot predict what form of legislation, if any, may be
implemented or the effect of this legislation on our business. It is possible
that future legislation will contain provisions which may adversely affect our
business, financial condition and results of operations. It is also possible
that future legislation could result in modifications to the nation's public and
private healthcare insurance systems, which could negatively affect
reimbursement policies or encourage integration or reorganization of the
healthcare industry in a manner that could negatively affect us. We cannot
predict what legislation, if any, relating to our business or to the healthcare
industry may be enacted.
OUR STRATEGY FOR THE DEVELOPMENT AND COMMERCIALIZATION OF OUR PRODUCTS AND
PRODUCT CANDIDATES IS DEPENDENT IN PART ON COLLABORATIONS WITH THIRD PARTIES.
We have entered into and intend to continue to enter into corporate
collaborations for the development of new products, clinical collaborations with
respect to trials using our products and product candidates and strategic
alliances for the distributions of our Hybrid Capture System and tests. Our
success depends in large part on the efforts of these third parties in
performing their responsibilities. We cannot assure you that we will be able to
enter into arrangements that may be necessary in order to develop and
commercialize our products or that we will realize any of the contemplated
benefits from these
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arrangements. Furthermore, we cannot assure you that any revenues or profits
will be derived from our collaborative and other arrangements.
WE FACE INTENSE COMPETITION IN THE BIOTECHNOLOGY INDUSTRY.
The medical diagnostics and biotechnology industries are subject to
intense competition. We can provide no assurance that we will be able to compete
successfully against existing or future competitors. For certain of our tests,
we also compete against existing detection, screening and monitoring
technologies, including the Pap smear, tissue culture and antigen-based
diagnostic methodologies.
Our existing and potential competitors may be able to develop
technologies that are as effective as, or more effective or easier to interpret
than those offered by us, which would render our products noncompetitive or
obsolete. Moreover, many of our existing and potential competitors have
substantially greater financial, research and development, marketing, sales,
manufacturing, distribution and technological resources than us.
In addition, many of these companies may have established third-party
reimbursement for their products. In marketing our HPV tests for primary
cervical cancer screening either in conjunction with or separate from the Pap
smear, our tests will compete against the Pap smear, which is widely accepted as
an inexpensive and, with regular use, adequate screening test for cervical
cancer. Additionally, in marketing our HPV tests for the follow-up screening of
women with equivocal Pap smears in the United States, we compete with
well-established follow-up procedures, such as Pap smear re-testing, colposcopy
and biopsy, which are also widely accepted and have a long history of use.
We face competition from a variety of technologies in the blood virus
area. There are several advanced technologies commercially available for the
detection and viral load measurement of HIV and hepatitis B virus. Additionally,
there are several emerging DNA probe amplification technologies to detect CMV
being developed by competitors.
WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY RIGHTS, PERMITTING COMPETITORS TO
DUPLICATE OUR PRODUCTS AND SERVICES.
Patent protection for our technologies and products will be a crucial
factor in our ability to develop and commercialize our products. Because of the
substantial length of time and expense associated with bringing new products
through development to the marketplace, the medical diagnostics and
biotechnology industries place considerable importance on obtaining and
maintaining patent and trade secret protection for new technologies, products
and processes. Large pharmaceutical companies consider a strong patent estate
critical when they evaluate whether to enter into a collaborative arrangement to
support the research, development and commercialization of a technology. Without
the prospect of reasonable patent protection, it would be difficult for us or
any corporate partner to justify the time and money that is necessary to
complete the development of a product.
We have obtained rights to certain patents and patent applications
and may, in the future, obtain, or seek rights from third parties to additional
patents and patent applications. We can provide no assurance that patent
applications relating to our products or technologies will result in patents
being issued, that any issued patents will afford adequate protection to us, or
that such patents will not be challenged, invalidated, infringed or
circumvented. Furthermore, we can provide no assurance that others have not
developed, or will not develop, similar products or technologies that will
compete with our products or technologies without infringing upon our
intellectual property rights.
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Any success in protecting our proprietary rights will depend in large
part on our ability to:
- obtain, maintain and enforce patent protection for our
products and technologies both in the United States and
internationally;
- license rights to patents from third parties;
- maintain trade secret protection;
- operate without infringing upon the proprietary rights of
others; and
- prevent others from infringing our proprietary rights.
Any licenses we may be required to secure under any patents or
proprietary rights of third parties may not be made available on terms
acceptable to us, if at all. Moreover, the laws of certain countries may not
protect our proprietary rights to the same extent as United States law.
In addition to the risk that we could be a party to patent
infringement litigation, the U.S. Patent and Trademark Office, or its foreign
counterparts, could require us to participate in patent interference proceedings
that it declares. These proceedings are often expensive and time-consuming, even
if we were to prevail in such a proceeding. We may also be forced to initiate
legal proceedings to protect our patent position or other proprietary rights.
These proceedings typically are costly, protracted and offer no assurance of
success.
We have received inquiries regarding possible patent infringements
relating to, among other things, certain aspects of our Hybrid Capture
technology. We believe that the patents of others to which these inquiries
relate are either not infringed by our Hybrid Capture technology or are invalid.
Nevertheless, we cannot be sure that our patents and patent applications will
adequately protect our Hybrid Capture technology. We can provide no assurance
that we will not be subject to further claims that our technology, including
our Hybrid Capture technology, or our products, infringe the patents or
proprietary rights of third parties.
Our success also is dependent upon the skill, knowledge and
experience of our scientific and technical personnel. To help protect our
rights, we require all employees, consultants, advisors and collaborators to
enter into confidentiality agreements that prohibit the disclosure of
confidential information to anyone outside our company and require disclosure,
and in most cases, assignment to us of their ideas, developments, discoveries
and inventions. We can provide no assurance, however, that these agreements will
provide adequate protection for our trade secrets, know-how or other proprietary
information in the event of any unauthorized use or disclosure.
WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION AND MAY NOT BE ABLE TO OBTAIN
REGULATORY APPROVALS.
The FDA product clearance process is unpredictable and uncertain. We
can provide no assurance that the necessary approvals or clearances for our
product candidates will be granted on a timely basis, or at all. In particular:
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- we may be unable to collect adequate data to support a
premarket approval for either our HIV test or hepatitis B
virus test or to receive approval for those tests in a
timely manner;
- the FDA may determine that our chlamydia and gonorrhea
tests are not substantially equivalent to legally marketed
devices or that additional information or data is needed to
make such a determination;
- we may be unable to obtain or keep valid marketing
authorization from one or more of the countries to which
we export our products;
- we, or recipients of our products that are limited to
research use only, may fail to comply with the user
certification requirements and other regulatory limitations
placed on the distribution and use of these devices, which
could result in an enforcement action by the FDA against
us; or
- we may lose previously received approvals, particularly
the approvals for our HPV tests using our Hybrid Capture I
and II technologies.
Further, we must comply with similar requirements of foreign
governments and with import and export regulations when distributing our
products to foreign nations. Each foreign country's regulatory requirements for
product approval and distribution are unique and may require the expenditure of
substantial time, money and effort. The regulation of medical devices in a
number of jurisdictions, particularly in the European Union, continues to
develop.
CLINICAL TRIALS FOR OUR PRODUCT CANDIDATES ARE EXPENSIVE AND THEIR OUTCOME IS
UNCERTAIN.
Conducting clinical trials is a lengthy, time-consuming and expensive
process. Before obtaining regulatory approvals for the commercial sale of any
products, we or our corporate partners must demonstrate through preclinical
testing and clinical trials that our product candidates are safe and effective
for use in humans. We have incurred and will continue to incur substantial
expense for, and devote a significant amount of time to, preclinical testing and
clinical trials.
Historically, the results from preclinical testing and early clinical
trials have often not predicted results of later clinical trials. A number of
new medical devices have shown promising results in clinical trials, but
subsequently failed to establish sufficient safety and efficacy data to obtain
necessary regulatory approvals. Data obtained from preclinical and clinical
activities is susceptible to varying interpretations, which may delay, limit or
prevent regulatory approval. In addition, regulatory delays or rejections may be
encountered as a result of many factors, including changes in regulatory policy
during the period of product development.
Clinical trials conducted by us, by our collaborators or by third
parties on our behalf may not demonstrate sufficient safety and efficacy to
obtain the requisite regulatory approvals for our product candidates. Regulatory
authorities may not permit us to undertake any additional clinical trials for
our product candidates.
Completion of clinical trials may take several years or more. The
length of time can vary substantially with the type, complexity, novelty and
intended use of the product candidate. Our commencement and rate of completion
of clinical trials may be delayed by many factors, including:
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- our inability to manufacture sufficient quantities of
materials used for clinical trials;
- our inability to recruit patients at the expected rate;
- the failure of clinical trials to demonstrate a product
candidate's efficacy;
- our inability to follow patients adequately after
treatment;
- our inability to predict unforeseen safety issues; and
- the potential for unforeseen governmental or regulatory
delays.
If a product candidate fails to demonstrate safety and efficacy in
clinical trials, this failure may delay development of other product candidates
and hinder our ability to conduct related preclinical testing and clinical
trials. As a result of these failures, we may also be unable to find additional
collaborators or to obtain additional financing.
CERTAIN KEY COMPONENTS OF OUR PRODUCTS ARE PROVIDED BY A SINGLE SUPPLIER.
Several key components of our products come from single source
suppliers. These suppliers are subject to many strict regulatory requirements
regarding the supply of these components. We cannot be sure that these suppliers
will comply, or have complied, with applicable regulatory requirements or that
they will otherwise continue to supply us with the key components we require. If
suppliers are unable or refuse to supply us, or will supply us only at a
prohibitive cost, we may not be able to access additional sources at acceptable
prices, on a timely basis, if ever.
We acquire these components on a purchase-order basis, meaning that
the supplier is not required to supply us with a specified quantity of product
within a given time period or set-aside part of its inventory for our orders. We
have not arranged for alternative supply sources.
In the event that we cannot obtain sufficient quantities of these
components on commercially reasonable terms, or in a timely manner, we would not
be able to manufacture our products on a timely and cost-competitive basis.
In addition, if any of the components of our products are no longer
available in the marketplace, we may be forced to further develop our technology
to incorporate alternate components. The incorporation of new components into
our products may require us to seek necessary approvals from the FDA or
appropriate foreign regulatory agencies prior to commercialization. We can
provide no assurance that this development would be successful or that, if
developed by us or licensed from third parties, any alternative components would
receive requisite regulatory approval on a timely basis, or at all.
The success of our products based on our Hybrid Capture technology
will depend, in part, on our ability to arrange for the distribution to our
customers of luminometers and related software and equipment with the
capability to analyze the results of our tests. Two suppliers currently provide
us with all of our luminometers. We may be unable to locate other suppliers if
our current suppliers fail to produce luminometers for us in accordance with
specifications, in accordance with applicable regulations and on a timely
basis. Even if we could locate an alternate supplier, that supplier may be more
expensive than our current suppliers and may require substantial lead time. Any
of these events could significantly inhibit our ability to market our Hybrid
Capture products.
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RAPID GROWTH MAY PLACE SIGNIFICANT DEMANDS ON OUR PERSONNEL.
We currently have limited management and administrative resources. If
we are successful in implementing our business strategy, we may experience a
period of rapid growth and expansion which could place significant additional
demands on our management and administrative resources.
OUR SYSTEMS MAY NOT BE YEAR 2000 COMPLIANT.
We have substantially completed an assessment of our manufacturing
and research equipment, computer programs and telephone systems and have
identified the mission-critical equipment, computer programs and systems that
were not year 2000 compliant, at least 80% of which have been upgraded and
vendor-certified for year 2000 compliance. We have also tested a majority of
such mission-critical equipment, computer programs and systems for year 2000
compliance. We expect to complete our upgrade and replacement activities by
November 1999 and complete the remainder of our testing activities by December
1999. During the remainder of calendar 1999, we intend to communicate with our
significant raw material and product vendors to determine their respective
states of year 2000 readiness.
If we, or any third parties upon which we rely, are unable to address
the year 2000 issue in a timely and successful manner, our business could be
materially adversely affected.
WE ARE EXPOSED TO PRODUCT LIABILITY CLAIMS FOR WHICH OUR INSURANCE MAY BE
INADEQUATE.
We may be exposed to liability claims arising from the use of our
products and the commercial sale of our products as well as from use of our
products or product candidates in clinical trials. These claims may be brought
by consumers, our collaborators or licensees or parties selling our products. We
currently carry product liability insurance coverage but we can provide no
assurance that this coverage will be adequate to protect us against future
product liability claims or that product liability insurance will be available
to us in the future on commercially reasonable terms, if at all. Furthermore, we
can provide no assurance that we will be able to avoid significant product
liability claims and the attendant adverse publicity.
WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION CONCERNING ENVIRONMENTAL
MATTERS.
We are subject to a variety of local, state and federal government
regulations relating to the storage, discharge, handling, emission, generation,
manufacture and disposal of toxic, infectious or other hazardous substances used
to manufacture our products. We cannot completely eliminate the risk of
accidental contamination or injury from these materials. Moreover, we cannot be
sure that our collaborative partners are currently complying with the governing
standards. We also cannot be sure that we and our collaborative partners will be
in compliance with such standards in the future or that we will not incur
significant costs to comply with environmental laws and regulations in the
future. If we were to fail to comply with any of these regulations, this failure
could subject us to significant liabilities.
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WE NEED TO SPEND SUBSTANTIAL FUNDS TO BECOME PROFITABLE.
We have spent, and expect to continue to spend in the future,
substantial funds to complete our planned product development efforts, expand
our sales and marketing activities and expand our manufacturing operations. We
expect that our existing capital resources, together with the net proceeds from
this offering, will be adequate to fund our operations through calendar year
2000, but we cannot guarantee that this will be the case.
Our future capital requirements and the adequacy of available funds
will depend on numerous factors, including:
- the successful commercialization of our existing products;
- progress in our product development efforts;
- progress with regulatory affairs activities;
- the cost and timing of expansion of manufacturing
operations;
- the expansion of our European, African and Middle Eastern
sales operations with Abbott;
- the growth and success of effective sales and marketing
activities;
- successful relocation to our new facility;
- the cost of filing, prosecuting, defending and enforcing
patent claims and other intellectual property rights; and
- the development of strategic alliances for the marketing
of our products.
If funds generated from our operations, together with our existing
capital resources, are insufficient to meet current or planned operating
requirements, we will have to obtain additional funds through equity or debt
financing, strategic alliances with corporate partners and others, or through
other sources. We do not have any committed sources of additional financing, and
we cannot provide assurance that additional funding, if necessary, will be
available on acceptable terms, if at all. If adequate funds are not available,
we may have to delay, scale-back or eliminate certain aspects of our operations
or attempt to obtain funds through arrangements with collaborative partners or
others. This may result in the relinquishment of our rights to certain of our
technologies, product candidates, products or potential markets. Therefore, the
inability to obtain adequate funds could have a material adverse impact on our
business, financial condition and results of operations.
CONTROL BY MANAGEMENT
As of September 10, 1999, our Chairman and Chief Executive Officer
and our President, Chief Operating Officer and Chief Financial Officer
beneficially own an aggregate of approximately 37.7% of our outstanding shares
of Common Stock. As a result, these officers, acting together, effectively
control the election of directors and matters requiring approval by our
stockholders.
ANTITAKEOVER CONSIDERATIONS
Our board of directors has the authority, without further action by
the stockholders, to issue from time to time, up to 1,000,000 shares of
Preferred Stock in one or more classes or series, and to fix the rights and
preferences of such Preferred Stock. Our Certificate of Incorporation also
provides for staggered terms for members of the board of directors. We are
subject to provisions of Delaware corporate law which, subject to certain
exceptions, will prohibit us from engaging in any "business combination" with a
person who, together with affiliates and associates, owns 15% or more of our
Common Stock (referred to as an interested stockholder) for a period of three
years following the date that such person became an interested stockholder,
unless the business combination is approved in a prescribed manner.
Additionally, our Bylaws establish an advance notice procedure for stockholder
proposals and for nominating candidates for election as directors. These
provisions of Delaware law and of our Certificate of Incorporation and Bylaws
may have the effect of delaying, deterring or preventing a change in our
control, may discourage bids for the Common Stock at a premium over market price
and may adversely affect the market price, and the voting and other rights of
the holders, of the Common Stock.
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ITEM 2. PROPERTIES
Due to our recent and expected future growth, on March 2, 1998, we
entered into a lease for two buildings, under construction, in Gaithersburg,
Maryland, comprising a total of approximately 90,000 square-feet. We intend to
relocate our operation to this new facility in December 1999. The lease for the
new facility has a term of ten years, and we have two options to extend the term
for a five-year period each.
Our current executive office and manufacturing facility is located in
Beltsville, Maryland. The lease on this 19,780 square-foot facility expires upon
completion of the new facility. In addition, we currently lease a 9,286
square-foot research and development facility in Silver Spring, Maryland on a
month-to-month basis. We will move operations from both of these facilities to
the Gaithersburg, Maryland facility.
ITEM 3. LEGAL PROCEEDINGS
We are not a party to any material legal proceedings and are not
aware of any threatened litigation that could have a material adverse effect on
our business, financial condition and results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF OUR STOCKHOLDERS
Not applicable.
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EXECUTIVE OFFICERS OF DIGENE
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY
<S> <C> <C>
Evan Jones(1) 42 Chief Executive Officer and Chairman of the Board
Charles M. Fleischman(2) 41 President, Chief Operating Officer and Chief Financial
Officer
Robert McG. Lilley(3) 54 Senior Vice President, Global Sales and Marketing
Jeanmarie Curley(4) 39 Vice President, Manufacturing
Attila T. Lorincz, Ph.D.(5) 44 Vice President, Research and Development and Scientific
Director
William J. Payne, Jr., Ph.D.(6) 49 Vice President, Development
Donna Marie Seyfried(7) 41 Vice President, Business Development
Joseph P. Slattery(8) 34 Vice President, Finance and Controller
</TABLE>
- ---------------------
(1) Mr. Jones has served as our Chief Executive Officer since Armonk
Partners acquired a controlling interest in Digene in July 1990 and
as Chairman of the Board since September 1995. He previously served
as our President from July 1990 until June 1999.
(2) Mr. Fleischman has served as our President since June 1999, as Chief
Financial Officer since March 1996 and as Chief Operating Officer
since September 1995. He previously served as our Executive Vice
President from July 1990, when Armonk Partners acquired a
controlling interest in Digene, to June 1999.
(3) Mr. Lilley has served as our Senior Vice President, Global Sales and
Marketing since June 1999, and before that as Vice President, Sales
& Marketing at Digene from July 1998 until June 1999, and as General
Manager for Digene Europe from March 1997 until July 1998. From
September 1994 to February 1997, Mr. Lilley was General Manager for
Europe, Middle East & Africa for Alltel Healthcare Information
Services.
(4) Ms. Curley has served as our Vice President, Manufacturing since
April 1998, and from December 1990 until April 1998, she was our
Director of Manufacturing.
(5) Dr. Lorincz has served as our Vice President, Research and
Development and Scientific Director since December 1990. His
research career includes postdoctoral fellowships at the University
of California. He also serves on a number of advisory committees and
is an Adjunct Associate Professor in the Georgetown University
Medical School Department of Pathology.
(6) Dr. Payne has served as our Vice President, Development since July
1997. From August 1995 to July 1997, he was Vice President, Research
and Development in the IVD Medical Diagnostic division of Sigma
Diagnostics and from July 1993 to July 1995, he was Director of
Research and Development in the IVD Diagnostic Medical division of
Sanofi Diagnostic Pasteur.
(7) Ms. Seyfried has served as our Vice President, Business Development
since October 1996. Ms. Seyfried served as Senior Director, Business
Development of The Perkin-Elmer Corporation from March 1993 to
September 1996.
(8) Mr. Slattery has served as our Vice President, Finance and
Controller since April 1998 and as Controller from February 1996 to
April 1998. From March 1995 to February 1996, Mr. Slattery was
Director, Business Management, for I-NET, Inc., a computer services
company, and from April 1994 to March 1995, he was the Managing
Principal of Payne, Slattery and Company, a management consulting
firm.
32
<PAGE> 35
PART II
ITEM 5. MARKET FOR OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Since our initial public offering of common stock on May 22, 1996,
our common stock has been traded on the Nasdaq National Market under the symbol
"DIGE." The following table sets forth, for the fiscal quarters indicated, the
high and low bid prices for our common stock, as reported by the Nasdaq National
Market.
<TABLE>
<CAPTION>
High Low
<S> <C> <C>
1999
----
Fourth quarter................................................... $ 15 1/8 $ 6 1/4
Third quarter.................................................... 9 1/8 5 1/4
Second quarter................................................... 7 1/8 5 5/8
First quarter.................................................... 11 6 1/2
1998
----
Fourth quarter................................................... 11 3/16 7 3/8
Third quarter.................................................... 11 3/8 6 5/8
Second quarter................................................... 13 3/8 8 1/4
First quarter.................................................... 15 1/4 12
</TABLE>
On September 10, 1999, the closing sale price for the Common Stock,
as reported by the Nasdaq National Market was $13 7/8. As of September 10, 1999,
our Common Stock was held by 169 holders of record.
We have never paid dividends on our Common Stock and do not
anticipate paying any cash dividends on our Common Stock in the foreseeable
future.
(a) Recent Sales of Unregistered Securities.
Since July 1, 1998, in transactions which were exempt from
registration pursuant to Section 4(2) of the Securities Act and Rule 701
promulgated under the Securities Act, Digene issued options to certain
employees, directors, consultants and others to purchase an aggregate of
933,250 shares of our Common Stock at prices per share ranging from $6.19 to
$11.19. Between July 1, 1998 and September 10, 1999, 32 of such employees,
consultants and others exercised options to purchase an aggregate of 286,463
shares at an aggregate price of $406,043.
On July 1, 1998, we issued 181,884 shares of our Common Stock as
consideration for our purchase of all the outstanding capital stock of Viropath
B.V. We acquired these shares from three Dutch individuals and one Dutch
foundation. In addition, we granted options to purchase an aggregate of 50,000
shares of our Common Stock to the three Viropath individual shareholders in
connection with their execution of consulting agreements with us. One-fifth of
these options became exercisable on June 30, 1999 and the remaining options will
become exercisable in equal installments on each of June 30, 2000, 2001, 2002
and 2003. All of these options are exercisable at a price of $9.75 per share.
The options expire on June 29, 2008.
(b) Use of proceeds from Registered Securities.
Not applicable.
33
<PAGE> 36
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below with
respect to Digene's Consolidated Statements of Operations for the fiscal years
ended June 30, 1997, 1998 and 1999 and with respect to Digene's Consolidated
Balance Sheets at June 30, 1998 and 1999 are derived from the audited
Consolidated Financial Statements of Digene which are included elsewhere in this
Form 10-K. Consolidated Statements of Operations data for the fiscal years ended
June 30, 1995 and 1996 and Consolidated Balance Sheet data at June 30, 1995,
1996 and 1997 are derived from Consolidated Financial Statements of Digene not
included herein. The selected consolidated financial data set forth below is
qualified in its entirety by, and should be read in conjunction with, the
Consolidated Financial Statements, the related Notes thereto and Management's
Discussion and Analysis of Financial Condition and Results of Operations
included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
1995 1996 1997
-----------------------------------------------------------
(in thousands, except per share loss)
<S> <C> <C> <C>
Consolidated Statement of Operations Data:
Revenues:
Product sales $ 5,413 $ 6,359 $ 9,434
Research and development contracts 749 381 626
-----------------------------------------------------------
Total revenues 6,162 6,740 10,060
Costs and expenses:
Cost of product sales 2,652 2,895 3,441
Research and development 1,856 2,430 4,131
Selling and marketing 1,375 2,095 5,236
General and administrative 1,245 1,792 4,412
Amortization of intangible assets 330 248 241
-----------------------------------------------------------
Loss from operations (1,296) (2,720) (7,401)
Other income (expense) 14 40 (36)
Interest expense (277) (207) (84)
Interest income 45 252 1,527
-----------------------------------------------------------
Loss from operations before income taxes (1,514) (2,635) (5,994)
Provision for income taxes -- -- --
-----------------------------------------------------------
Net loss before cumulative effect of a
change in accounting principle (1,514) (2,635) (5,994)
Cumulative effect of a change
in accounting principle -- -- --
-----------------------------------------------------------
Net loss $ (1,514) $ (2,635) $ (5,994)
-----------------------------------------------------------
Basic and diluted net loss per share(1) $ (4.11) $ (1.71) $ (0.53)
-----------------------------------------------------------
Weighted average shares outstanding(1) 368 1,545 11,394
AT JUNE 30,
1995 1996 1997
-----------------------------------------------------------
(in thousands)
Consolidated Balance Sheet Data:
Working capital $ 2,107 $ 29,616 $ 21,299
Total assets 4,485 33,174 30,207
Long-term debt, less current maturities 2,812 152 553
Redeemable Convertible Preferred Stock 13,115 -- --
Accumulated deficit (16,698) (19,333) (25,327)
Total stockholders' equity (deficit) (13,004) 30,119 24,266
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
1998 1999
---------------------------------------
(in thousands, except per share loss)
<S> <C> <C>
Consolidated Statement of Operations Data:
Revenues:
Product sales $ 11,980 $ 17,014
Research and development contracts 29 453
-------------------------------------
Total revenues 12,009 17,467
Costs and expenses:
Cost of product sales 3,848 6,112
Research and development 5,285 4,643
Selling and marketing 10,057 10,531
General and administrative 5,690 5,957
Amortization of intangible assets 386 150
-------------------------------------
Loss from operations (13,257) (9,926)
Other income (expense) (83) (184)
Interest expense (164) (30)
Interest income 1,378 985
-------------------------------------
Loss from operations before income taxes (12,126) (9,155)
Provision for income taxes 48 149
-------------------------------------
Net loss before cumulative effect of a
change in accounting principle (12,174) (9,304)
Cumulative effect of a change
in accounting principle (1,915) --
-------------------------------------
Net loss $ (14,089) $ (9,304)
-------------------------------------
Basic and diluted net loss per share(1) $ (1.06) $ (0.65)
-------------------------------------
Weighted average shares outstanding(1) 13,236 14,354
AT JUNE 30,
1998 1999
-------------------------------------
(in thousands)
Consolidated Balance Sheet Data:
Working capital $ 28,428 $ 20,499
Total assets 35,440 28,108
Long-term debt, less current maturities -- --
Redeemable Convertible Preferred Stock -- --
Accumulated deficit (39,416) (48,720)
Total stockholders' equity (deficit) 31,099 23,687
</TABLE>
(1) Computed on the basis described in Note 2 of Notes to Consolidated Financial
Statements.
34
<PAGE> 37
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of our financial condition and results of
operations should be read in conjunction with our Consolidated Financial
Statements and the related Notes to such Consolidated Financial Statements also
included in this Form 10-K. Some of the information that follows are not
statements of historical fact, and reflect our intent, belief or expectations
regarding the anticipated effect of events, circumstances and trends. Such
statements should be considered as forward looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Although we believe
that our expectations are based on reasonable assumptions within the bounds of
our knowledge of our business and operations, there can be no assurance that
actual results will not differ materially from our expectations. Factors that
might cause or contribute to such differences include: uncertainty of future
profitability and cash generation from operations; manufacturing delays while
awaiting regulatory approval for our new manufacturing facility; uncertainty of
clinical trial results for our products under development; uncertainty of market
acceptance of our products by the worldwide medical community; risks inherent in
international transactions, including those relating to our expansion in Europe,
Brazil and elsewhere; our limited sales and marketing experience; the extent of
future expenditures for sales and marketing programs; dependence on third-party
reimbursement from government entities, managed care organizations, and private
insurance plans; dependence on Abbott Laboratories as our principal European
distributor; delay in or failure to obtain regulatory approvals for our products
in development; uncertainty regarding patents and proprietary rights in
connection with our products; our ability to obtain requisite additional
financing to fund our operations beyond calendar 2000; and other factors as set
forth under the caption "Additional Considerations" beginning on page 21.
OVERVIEW
We develop, manufacture and market our patented Hybrid Capture(R)
Gene Analysis System and tests, and we are commercializing these Hybrid Capture
products in three areas: women's health testing, blood virus testing, and
pharmaceutical clinical research. Our primary focus is in women's health where
our lead product is the only FDA approved DNA test for human papillomavirus, or
HPV, which is associated with more than 99% of cervical cancers. We are the
world's leading supplier of HPV tests. Our Hybrid Capture II HPV Test received
PMA marketing approval from the FDA in March 1999. Internationally, our
portfolio of women's health tests is now cleared for sale in almost every major
European country and in Brazil and Argentina. Our objective in the women's
health area is to become the world leader in gene-based testing for women's
cancers and infectious diseases. We have also developed a family of unique blood
virus testing products based on our Hybrid Capture System including tests for
cytomegalovirus (CMV) and hepatitis B. Our CMV Test is the only CMV DNA test
cleared by the FDA; we received 510(k) clearance in October 1998.
Internationally, we are working to establish our HPV Test as the
standard for cervical cancer screening. Pursuant to a Marketing and Distribution
Agreement that became effective in May 1999, our women's health and blood virus
tests are marketed in Europe by Abbott Laboratories and, once FDA clearance is
received, our chlamydia and gonorrhea tests will be marketed by Abbott
Laboratories in the United States. We currently market our Hybrid Capture
products in the United States through a direct sales force supported by
technical and customer service representatives. In the United States, we are
currently marketing our HPV Test for the follow-up screening of women with
equivocal Pap smears. In the pharmaceutical clinical research market we are
using the unique capabilities of our Hybrid Capture System to provide us access
to complimentary early-stage technologies and to link our tests with novel
therapeutics and vaccines.
35
<PAGE> 38
We have incurred substantial operating losses since inception,
resulting principally from expenses associated with our research and development
programs, including preclinical studies, clinical trials and regulatory
submissions for our products and the expansion of our manufacturing facilities
and our global sales and marketing activities. We expect such operating losses
to continue at least through fiscal 2000 as we continue our product development
efforts, seek FDA and foreign regulatory approvals of our products, expand our
manufacturing capabilities and expand our sales and marketing activities. In
March 1998, we entered into a lease agreement for a new facility where we will
consolidate our research and development facility, our corporate office and our
manufacturing facility into one location in Gaithersburg, Maryland, to which we
expect to relocate in December 1999. This new facility will result in increased
operating expenses.
Our quarterly operating results have fluctuated significantly in the
past and we believe that they may continue to fluctuate significantly in the
future with lower product revenues in the first and second fiscal quarters as
compared with the third and fourth fiscal quarters, primarily attributable to
the lower demand for certain women's health-related medical procedures during
the summer months in the United States and Europe, and during the December
holiday season. In addition, our quarterly operating results, as well as annual
results, may fluctuate from period to period due to
- the degree of market acceptance of our products,
- competition, the timing of regulatory approvals and other
regulatory announcements,
- the volume and timing of orders from and shipments to
distributors,
- variations in our distribution channels,
- the timing of new product announcements and introductions by us
and our competitors,
- product obsolescence resulting from new product introductions
and other factors, many of which are outside our control. Due to one or more of
these factors, in one or more future quarters our results of operations may fall
below the expectations of securities analysts and investors. In that event, the
market price of our common stock could be materially and adversely affected.
RESULTS OF OPERATIONS
COMPARISON OF FISCAL YEAR ENDED JUNE 30, 1999 TO FISCAL YEAR ENDED
JUNE 30, 1998
Product sales increased to $17,014,000 in fiscal 1999 from
$11,980,000 in fiscal 1998. The increase was due primarily to increased sales of
our Hybrid Capture tests, primarily HPV tests and related equipment, partially
offset by lower sales of our non-core products. We anticipate that sales of our
HPV tests will account for a substantial portion of our product sales for at
least the next two fiscal years.
Research and development contract revenues increased to $453,000 in
fiscal 1999 from $29,000 in fiscal 1998 due primarily to our performance during
the entire fiscal year under a major research contract with the National
Institutes of Health for the development of tests for herpes simplex virus. We
anticipate that fiscal 2000 research and development contract revenues will
remain approximately the same as they were in fiscal 1999.
36
<PAGE> 39
Cost of product sales increased to $6,112,000 in fiscal 1999 from
$3,848,000 in fiscal 1998 due primarily to increased sales volume. Gross margin
on product sales decreased to 64.1% in fiscal 1999 from 67.9% in fiscal 1998.
This decrease was due primarily to increased sales of lower-margin equipment and
increased write-offs for inventory obsolescence, partially offset by improved
manufacturing efficiencies and product pricing. We expect gross margins to
fluctuate moderately based on product mix in the coming years.
Research and development expenses decreased to $4,643,000 in fiscal
1999 from $5,285,000 in fiscal 1998 due primarily to reductions in expenditures
for clinical trials and laboratory supplies, partially offset by higher
personnel costs. We expect research and development expenses to increase
moderately for the next few fiscal years.
Selling and marketing expenses increased to $10,531,000 in fiscal
1999 from $10,057,000 in fiscal 1998 due to increases in European sales and
marketing programs, partially offset by decreases in expenditures in the United
States associated with lower personnel costs. We expect selling and marketing
expenses to decrease over the next fiscal year as a result of the marketing and
distribution activities performed in Europe, the Middle East and Africa by
Abbott under our Marketing and Distribution Agreement rather than through the
expansion of a Digene sales and marketing force in those areas. Thereafter, we
expect selling and marketing expenses to increase moderately for the following
few fiscal years.
General and administrative expenses increased to $5,957,000 in
fiscal 1999 from $5,690,000 in fiscal 1998, due primarily to costs associated
with the planned December 1999 move to our new facility in Gaithersburg,
Maryland, as well as increases in professional services expense, partially
offset by a reduction in bad debt expense. We expect general and administrative
expenses to increase moderately for the following few fiscal years.
Amortization of intangible assets decreased to $150,000 in fiscal
1999 from $386,000 in fiscal 1998, due primarily to the write-off of certain
intangible assets in fiscal 1998, partially offset by amortization expense
attributable to goodwill associated with our acquisition of Viropath, B.V. on
July 1, 1998. We expect amortization of intangible assets to remain constant in
the next fiscal year.
Interest expense decreased to $30,000 in fiscal 1999 from $164,000
in fiscal 1998 due primarily to the repayment in December 1998 of debt incurred
in February 1997.
Interest income decreased to $985,000 in fiscal 1999 from $1,378,000
in fiscal 1998 due primarily to lower average cash and cash equivalents balances
primarily as a result of negative cash flows from operations.
COMPARISON OF FISCAL YEAR ENDED JUNE 30, 1998 TO FISCAL YEAR ENDED
JUNE 30, 1997
Product sales increased to $11,980,000 in fiscal 1998 from
$9,434,000 in fiscal 1997. The increase was due primarily to increased sales of
our Hybrid Capture tests, primarily HPV, partially offset by lower sales of
equipment and non-core products.
Research and development contract revenues decreased to $29,000 in
fiscal 1998 from $626,000 in fiscal 1997 due primarily to substantial completion
of contract activities during fiscal 1998.
37
<PAGE> 40
Cost of product sales increased to $3,848,000 in fiscal 1998 from
$3,441,000 in fiscal 1997 due to increased sales volume. Gross margin on product
sales increased to 67.9% in fiscal 1998 from 63.5% in fiscal 1997. This increase
was due primarily to sales of higher margin Hybrid Capture tests and increases
in overhead absorption and unit pricing.
Research and development expenses increased to $5,285,000 in fiscal
1998 from $4,131,000 in fiscal 1997 due to the hiring of additional research and
development personnel and increases in clinical trial activity related to the
development of our blood virus and sexually transmitted disease tests and to the
further development of our Hybrid Capture technology.
Selling and marketing expenses increased to $10,057,000 in fiscal
1998 from $5,236,000 in fiscal 1997 due to substantial increases in sales and
marketing programs, the hiring of additional selling and marketing personnel,
and other selling costs incurred under our international distribution
agreements.
General and administrative expenses increased to $5,690,000 in
fiscal 1998 from $4,412,000 in fiscal 1997, due to the hiring of additional
administrative personnel, and costs associated with our expansion into the
European and Brazilian markets.
Amortization of intangible assets increased to $386,000 in fiscal
1998 from $241,000 in fiscal 1997.
Interest expense increased to $164,000 in fiscal 1998 from $84,000
in fiscal 1997 due primarily to debt incurred in February 1997 as a result of
our expansion into the European market.
Interest income decreased to $1,378,000 in fiscal 1998 from
$1,527,000 in fiscal 1997 due primarily to lower average cash and cash
equivalents balances as a result of negative cash flows from operations,
partially offset by the interest income generated by the investment of the net
proceeds from the public offering of our common stock in October 1997.
The $1,915,000 cumulative effect of change in accounting principle
is a result of the early adoption of Statement of Position 98-5, "Reporting on
the Costs of Start-Up Activities". The write-off of the unamortized balance of
capitalized costs was incurred in connection with our acquisition of HPV
customer lists under our 1997 agreements with International Murex Technologies
Corporation to establish a Digene-direct European sales operation for our
women's health products.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, our expenses have significantly exceeded our
revenues, resulting in an accumulated deficit of approximately $48.7 million at
June 30, 1999. We have funded our operations primarily through the sale of
equity securities. At June 30, 1999, we had cash, cash equivalents and
short-term investments aggregating approximately $18,281,000. Net cash used in
our operating activities was $6,073,000 for the fiscal year ended June 30, 1999.
Capital expenditures decreased to $934,000 in fiscal 1999 from
$2,481,000 in fiscal 1998, due primarily to changes in our distribution
agreements requiring a smaller investment in equipment. In March 1998, we
entered into a lease agreement for a new facility in Gaithersburg, Maryland, to
which we expect to relocate in December 1999. The integration of our operations
into this new facility may result initially in inefficiencies and delays.
Specifically, we may encounter difficulties in expanding and/or moving our
manufacturing operations.
38
<PAGE> 41
We do not have any bank financing arrangements.
We anticipate that working capital requirements will increase
moderately for the foreseeable future due to increasing accounts receivable as a
result of expected revenue growth. We have incurred negative cash flows from
operations since our inception, and have expended, and expect to continue to
expend in the future, substantial funds to complete our planned product
development efforts, expand our sales and marketing activities and expand our
manufacturing capabilities. We expect that our existing capital resources will
be adequate to fund our operations through calendar 2000. We cannot give
assurances that we will not need to consume a significant amount of our
available resources more rapidly than we presently anticipate. Our future
capital requirements and the adequacy of available funds will depend on numerous
factors, including the successful commercialization of our products, progress in
our product development efforts and the magnitude and scope of such efforts,
progress with preclinical studies and clinical trials, progress in our
regulatory affairs activities, the cost and timing of expansion of our
manufacturing capabilities, the development and maintenance of effective sales
and marketing activities, the cost of filing, prosecuting, defending and
enforcing patent claims and other intellectual property rights, competing
technological and market developments, and the development of strategic
alliances for the marketing of our products. To the extent that our existing
capital resources and funds generated from operations are insufficient to meet
current or planned operating requirements, we will be required to obtain
additional funds through equity or debt financing, strategic alliances with
corporate partners and others, or through other sources. Although we expect to
seek additional equity financing, we do not have any committed sources of
additional financing, and there can be no assurance that additional funding, if
necessary, will be available on acceptable terms, if at all. If adequate funds
are not available, we may be required to delay, scale back or eliminate certain
aspects of our operations or attempt to obtain funds through arrangements with
collaborative partners or others that may require us to relinquish rights to
certain of our technologies, product candidates, products or potential markets.
If adequate funds are not available, our business, financial condition and
results of operations will be materially and adversely affected.
On July 1, 1998, we purchased all of the outstanding capital stock
of Viropath B.V., a company with limited liability registered in Amsterdam, The
Netherlands, for total consideration of 181,884 shares of our common stock. In
addition, we are obligated to pay royalties, not to exceed $1,000,000, on future
sales of Viropath's licensed HPV products in the field of cervical cancer
testing. We also granted options to purchase an aggregate of 50,000 shares of
our common stock to the three Viropath individual shareholders in connection
with their execution of consulting agreements with us. The options were
compensatory options and were valued on July 1, 1998 at approximately $316,500.
This amount will be expensed ratably over five fiscal years.
YEAR 2000 READINESS DISCLOSURE
We are working to resolve the potential impact of the year 2000 on
the ability of our computerized information programs and systems and certain
manufacturing and other equipment to accurately process information that may be
date-sensitive. Any of our technology that recognizes a date using "00" as the
year 1900 rather than the year 2000 could result in errors or system failures.
We have substantially completed an assessment of our manufacturing
and research equipment, computer programs and telephone systems and have
identified the mission-critical equipment, computer programs and systems that
were not year 2000 compliant, at least 80% of which have been upgraded and
vendor-certified for year 2000 compliance. We have also tested a majority of
such mission-critical equipment, computer programs and systems for year 2000
compliance. We expect to complete our
39
<PAGE> 42
upgrade and replacement activities by November 1999 and complete the remainder
of our testing activities by December 1999. During the remainder of calendar
1999, we intend to communicate with our significant raw material and product
vendors to determine their respective states of year 2000 readiness.
In connection with our planned move to the new facility in
Gaithersburg, Maryland in December 1999, we have upgraded or replaced the
mission-critical computer programs, systems and manufacturing and other
equipment with new computer programs, systems and equipment which the suppliers
have certified or will certify to be year 2000 compliant. In anticipation of the
possibility that our relocation will not occur in 1999, which we do not expect,
we have also made the necessary year 2000-related changes to the few systems,
such as our existing telephone system, that we do not intend to relocate to the
new facility and have developed contingency plans. We do not expect that
continuing our operations in our existing space, if necessary, would be
materially impacted by the advent of the year 2000.
We are in the process of testing our upgraded or replaced computer
programs, systems and equipment and will continue the testing throughout the
remainder of calendar 1999. Based on information developed to date as a result
of our assessment and testing efforts, we do not anticipate that the total cost
of upgrading or replacing our computer programs, systems and equipment will be
material. In anticipation of possible year 2000-related failures and possible
delays in our manufacturing processes in connection with our planned relocation,
we are also formulating contingency plans, including the stockpiling of product
inventory during the second quarter of fiscal 2000. If we, or any third parties
upon which we rely, are unable to address the year 2000 issue in a timely and
successful manner, our business could be materially adversely affected.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Digene is subject to market risk associated with changes in foreign
currency exchange rates and interest rates. Our exchange rate risk is limited to
our operations in Europe and South America. We do not believe that the impact
from foreign currency exchange rate fluctuations will have a material impact on
our financial statements. The net impact of foreign exchange activities on
earnings was immaterial for the years ended June 30, 1997, 1998 and 1999.
Interest rate exposure is primarily limited to the $4.3 million of short-term
investments owned by us. Such securities are debt instruments which generate
interest income for Digene on excess cash balances. We do not actively manage
the risk of interest rate fluctuations; however, such risk is mitigated by the
relatively short term, less than 12 months, nature of these investments. We do
not consider the present rate of inflation to have a significant impact on its
business.
40
<PAGE> 43
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Report of Ernst & Young LLP, Independent Auditors
The Board of Directors and Stockholders
Digene Corporation
We have audited the accompanying consolidated balance sheets of
Digene Corporation as of June 30, 1998 and 1999, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended June 30, 1999. 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 generally accepted
auditing standards. 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 consolidated financial
position of Digene Corporation at June 30, 1998 and 1999, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended June 30, 1999, in conformity with generally accepted accounting
principles.
As discussed in Note 2 of Notes to Consolidated Financial
Statements, in 1998 the Company changed its method of accounting for costs
related to start-up activities.
/s/ Ernst & Young LLP
Washington, DC
August 20, 1999
41
<PAGE> 44
DIGENE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
1998 1999
----------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 18,330,803 $ 13,934,415
Short-term investments 7,181,572 4,347,084
Accounts receivable, less allowance of approximately $209,000
and $170,000 at June 30, 1998 and 1999, respectively 3,072,224 2,356,537
Inventories (Note 6) 3,557,289 2,894,210
Prepaid expenses and other current assets 560,706 1,388,224
--------------------------------
Total current assets 32,702,594 24,920,470
Property and equipment, net (Note 7) 2,627,244 1,737,078
Intangible assets, net (Note 5) -- 1,350,774
Deposits 109,700 100,157
--------------------------------
Total assets $ 35,439,538 $ 28,108,479
================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,424,245 $ 2,503,387
Accrued expenses 542,064 809,811
Accrued payroll 755,490 1,108,236
Current maturities of long-term debt (Note 9) 552,717 --
--------------------------------
Total current liabilities 4,274,516 4,421,434
Accrued rent 54,340 --
Deferred rent 11,980 --
Commitments (Notes 10, 11 and 16)
Stockholders' equity:
Preferred stock, $0.01 per value, 1,000,000 shares authorized, no shares
issued and outstanding
Common stock, $0.01 par value, 50,000,000 shares authorized, 14,117,308 and
14,565,937 shares issued and outstanding at June 30, 1998 and 1999,
respectively 141,173 145,659
Additional paid-in capital 70,373,310 72,514,583
Deferred stock compensation -- (253,200)
Accumulated deficit (39,415,781) (48,719,997)
--------------------------------
Total stockholders' equity 31,098,702 23,687,045
--------------------------------
Total liabilities and stockholders' equity $ 35,439,538 $ 28,108,479
================================
</TABLE>
See accompanying notes.
42
<PAGE> 45
DIGENE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1997 1998 1999
------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Product sales $ 9,434,183 $ 11,980,445 $ 17,013,735
Research and development contracts 626,096 28,500 453,364
----------------------------------------------------
Total revenues 10,060,279 12,008,945 17,467,099
Costs and expenses:
Cost of product sales 3,440,963 3,847,725 6,111,774
Research and development 4,131,090 5,284,761 4,643,458
Selling and marketing 5,236,246 10,057,596 10,531,187
General and administrative 4,411,899 5,689,783 5,956,911
Amortization of intangible assets 240,902 385,679 150,086
----------------------------------------------------
Loss from operations (7,400,821) (13,256,599) (9,926,317)
Other income (expense):
Other expense (36,825) (83,047) (183,394)
Interest expense (83,777) (163,625) (30,144)
Interest income 1,526,967 1,377,665 984,708
----------------------------------------------------
Loss from operations before income taxes (5,994,456) (12,125,606) (9,155,147)
Provision for income taxes -- 48,463 149,069
----------------------------------------------------
Net loss before cumulative effect of a change in accounting principle (5,994,456) (12,174,069) (9,304,216)
Cumulative effect of a change in accounting principle -- (1,914,499) --
----------------------------------------------------
Net loss $ (5,994,456) $(14,088,568) $ (9,304,216)
====================================================
Basic and diluted net loss per share $(0.53) $(1.06) $(0.65)
====================================================
Weighted average shares outstanding 11,393,978 13,235,901 14,353,720
====================================================
</TABLE>
See accompanying notes.
43
<PAGE> 46
DIGENE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL DEFERRED
COMMON STOCK PAID-IN STOCK
SHARES AMOUNT CAPITAL COMPENSATION
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at June 30, 1996 11,303,705 $ 113,037 $ 49,339,001 $ --
Exercise of Common Stock options 275,825 2,758 138,620 --
Net loss -- -- -- --
-------------------------------------------------------------------
Balance at June 30, 1997 11,579,530 115,795 49,477,621 --
Issuance of Common Stock,
net of offering costs of $1,845,585 2,250,000 22,500 20,631,915 --
Exercise of Common Stock options 287,778 2,878 263,774 --
Net loss -- -- -- --
-------------------------------------------------------------------
Balance at June 30, 1998 14,117,308 141,173 70,373,310 --
Exercise of Common Stock options 266,745 2,667 326,595 --
Issuance of Common Stock in
connection with the acquisition
Of Viropath 181,884 1,819 1,498,178 --
Grant of Common Stock options
to non-employees -- -- 316,500 (316,500)
Compensatory stock options
earned by nonemployees -- -- -- 63,300
Net loss -- -- -- --
-------------------------------------------------------------------
Balance at June 30, 1999 14,565,937 $ 145,659 $ 72,514,583 $ (253,200)
===================================================================
</TABLE>
<TABLE>
<CAPTION>
TOTAL
ACCUMULATED STOCKHOLDERS'
DEFICIT EQUITY
-------------------------------------
<S> <C> <C>
Balance at June 30, 1996 $(19,332,757) $ 30,119,281
Exercise of Common Stock options -- 141,378
Net loss (5,994,456) (5,994,456)
-------------------------------------
Balance at June 30, 1997 (25,327,213) 24,266,203
Issuance of Common Stock,
net of offering costs of $1,845,585 -- 20,654,415
Exercise of Common Stock options -- 266,652
Net loss (14,088,568) (14,088,568)
-------------------------------------
Balance at June 30, 1998 (39,415,781) 31,098,702
Exercise of Common Stock options -- 329,262
Issuance of Common Stock in
connection with the acquisition
of Viropath -- 1,499,997
Grant of Common Stock options
to non-employees -- --
Compensatory stock options
earned by nonemployees -- 63,300
Net loss (9,304,216) (9,304,216)
-------------------------------------
Balance at June 30, 1999 $(48,719,997) $ 23,687,045
=====================================
</TABLE>
See accompanying notes.
44
<PAGE> 47
DIGENE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1997 1998 1999
----------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (5,994,456) $(14,088,568) $ (9,304,216)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization of property and equipment 461,603 1,068,211 951,364
Amortization of intangible assets 240,902 385,679 150,086
Compensation expense related to stock options -- -- 63,300
Cumulative effect of a change in accounting principle -- 1,914,499 --
Start-up expenses 833,179 -- --
Changes in operating assets and liabilities:
Accounts receivable (2,094,096) 647,918 715,687
Inventories (618,834) (1,132,122) 1,547,736
Prepaid expenses and other current assets (146,933) (114,338) (827,518)
Deposits (22,102) 37,648 (3,241)
Accounts payable 241,476 330,352 79,142
Accrued expenses 250,179 (229,973) 267,747
Accrued payroll 395,794 152,935 352,746
Accrued rent (49,289) (46,278) (54,340)
Deferred rent (24,696) (25,338) (11,980)
---------------------------------------------------
Net cash used in operating activities (6,527,273) (11,099,375) (6,073,487)
INVESTING ACTIVITIES
Purchases of short-term investments (15,045,827) (14,634,204) (8,183,962)
Sales of short-term investments 8,452,522 18,513,915 11,018,450
Capital expenditures (971,111) (2,480,907) (933,934)
Acquisition of customer lists (1,000,000) -- --
Additions to goodwill and intangible assets (3,363) (4,321) --
---------------------------------------------------
Net cash (used in) provided by investing activities (8,567,779) 1,394,483 1,900,554
FINANCING ACTIVITIES
Net proceeds from issuance of Common Stock -- 20,654,415 --
Exercise of Common Stock options 141,378 266,652 329,262
Principal repayments on debt (700,787) (1,338,236) (552,717)
---------------------------------------------------
Net cash (used in) provided by financing activities (559,409) 19,582,831 (223,455)
---------------------------------------------------
Net (decrease) increase in cash and cash equivalents (15,654,461) 9,877,939 (4,396,388)
Cash and cash equivalents at beginning of year 24,107,325 8,452,864 18,330,803
---------------------------------------------------
Cash and cash equivalents at end of year $ 8,452,864 $ 18,330,803 $ 13,934,415
===================================================
Supplemental cash flow information
Interest paid $ 17,000 $ 206,000 $ 30,000
===================================================
</TABLE>
See accompanying notes.
45
<PAGE> 48
DIGENE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF OPERATIONS
Digene Corporation (the "Company" or "Digene") was incorporated in
the state of Delaware in 1987. The Company develops, manufactures and markets
its proprietary Hybrid Capture(R) Gene Analysis System and tests for the
detection, screening and monitoring of human diseases. The Company's products
are designed to help improve clinical outcomes and reduce the overall cost of
disease management. The Company's lead product, the Hybrid Capture II HPV DNA
Test, is the only FDA-approved test for the detection of human papillomavirus
("HPV"), the cause of essentially all cervical cancer. In addition, Digene has
developed and launched tests internationally for the detection and viral load
monitoring of major blood viruses, including cytomegalovirus and hepatitis B
virus, and tests for the detection of two of the most common sexually
transmitted infections, chlamydia and gonorrhea.
On June 28, 1996, Digene Corporation entered into a joint venture
agreement with a Brazilian national to establish Digene do Brasil LTDA, a
majority-owned subsidiary of Digene Corporation. On October 29, 1997, the
Company established a wholly-owned subsidiary, Digene B.V., for the distribution
of the Company's products in Europe. On March 3, 1998, the Company established a
wholly-owned subsidiary, Digene Europe, for the marketing of the Company's
products in Europe. On July 1, 1998, the Company completed the acquisition of
Viropath B.V., a company with limited liability, registered in Amsterdam, The
Netherlands (See Note 5).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
MANAGEMENT ESTIMATES
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of Digene
and its subsidiaries. All significant intercompany transactions have been
eliminated in consolidation.
CASH AND CASH EQUIVALENTS
Cash equivalents, which are stated at cost, consist of highly liquid
investments with original maturities of three months or less.
46
<PAGE> 49
DIGENE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SHORT-TERM INVESTMENTS
The Company classifies its short-term investments as
available-for-sale. Investments in securities that are classified as
available-for-sale and have readily determinable fair values are measured at
fair market value in the consolidated balance sheets. As of June 30, 1998 and
1999, short-term investments are stated at cost, which approximates market.
CONCENTRATION OF CREDIT RISK
The Company performs ongoing credit evaluations of its customers'
financial condition and generally does not require collateral. The Company
maintains reserves for credit losses, and such losses have been within
management's expectations.
IMPAIRMENT OF LONG-LIVED ASSETS
In the event that facts and circumstances indicate that long-lived
assets or other assets may be impaired, an evaluation of recoverability would be
performed. If an evaluation is required, the estimated future undiscounted cash
flows associated with the asset would be compared to the asset's carrying amount
to determine if a write-down is required. If a write-down is required, the
Company would prepare a discounted cash flow analysis to determine the amount of
the write-down.
REVENUE RECOGNITION
Revenue from product sales is recognized upon shipment of goods.
Revenue from research and development contracts is recognized as research and
development activities are performed.
SIGNIFICANT CUSTOMERS
For the years ended June 30, 1997, 1998 and 1999, the Company
generated 42%, 42%, and 50%, respectively, of total revenues from a single
customer.
COMPREHENSIVE INCOME
Effective July 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130").
SFAS No. 130 establishes new rules for the reporting and display of
comprehensive income and its components. Comprehensive income includes all
changes in equity during a period except those resulting from the issuance of
shares of stock and distributions to stockholders. For the years ended June 30,
1997, 1998 and 1999 the Company's comprehensive loss approximates its net loss
and as such no disclosure is presented in the consolidated financial statements.
47
<PAGE> 50
DIGENE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY VALUATION
The local currency is the functional currency for the Company's
international subsidiaries and, as such, assets and liabilities are translated
into U.S. dollars at year-end exchange rates. Income and expense items are
translated at average exchange rates during the year. Translation adjustments
resulting from changes in exchange rates are not considered material and have
been recognized in the Consolidated Statements of Operations.
RESEARCH AND DEVELOPMENT
The Company expenses its research and development costs as incurred.
ADVERTISING COSTS
The Company expenses advertising costs as incurred. Advertising
costs amounted to approximately $188,000, $215,000 and $309,000 during fiscal
1997, 1998 and 1999, respectively.
INCOME TAXES
The Company provides for income taxes in accordance with the
liability method. Under this method, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.
NET LOSS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No.
128"). SFAS No. 128 replaced the calculation of primary and fully diluted
earnings per share with basic and diluted earnings per share. Unlike primary
earnings per share, basic earnings per share excludes any dilutive effects of
options, warrants and convertible securities, except as required by Staff
Accounting Bulletin No. 98 ("SAB 98"). The definition of diluted earnings per
share is very similar to the previous definition of fully diluted earnings per
share. All net loss per share amounts for all periods have been presented, and,
where appropriate, restated to conform to the SFAS No. 128 requirements.
STOCK-BASED COMPENSATION
The Company accounts for its stock-based compensation in accordance
with the provisions of APB No. 25 and has provided the pro forma disclosures of
net loss and net loss per share in accordance with Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
No. 123") in Note 13 of these Notes to Consolidated Financial Statements.
48
<PAGE> 51
DIGENE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CHANGE IN ACCOUNTING PRINCIPLE
In April 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
98-5, "Reporting the Costs of Start-up Activities" ("SOP 98-5"), which requires
that costs related to start-up activities be expensed as incurred. Prior to
1998, the Company capitalized $2,497,172 for the acquisition of Murex's HPV
customer lists related to the Customer Transfer Agreement (See Note 4).
Effective April 1, 1998, the Company elected early adoption of SOP 98-5. The
effect of adoption of SOP 98-5 was to increase net loss by $1,914,499 to expense
costs that had been capitalized prior to 1998.
RECLASSIFICATION
Certain 1997 and 1998 balances have been reclassified to conform
with the 1999 presentation.
3. MARKETING AND DISTRIBUTION AGREEMENT
On April 17, 1998, Abbott Laboratories ("Abbott") and International
Murex Technologies Corporation (together with its affiliates, "Murex") entered
into an agreement pursuant to which Abbott acquired all of the outstanding
shares of Murex's common stock. Effective May 7, 1999, the Company entered into
a Marketing and Distribution Agreement ("Abbott Agreement") with Abbott, and
thereby created an exclusive marketing alliance for Digene's Women's Health and
Blood Virus testing products in certain geographic areas. The Abbott Agreement
calls for Abbott to assume sales and marketing responsibility for all of
Digene's Hybrid Capture products in Europe, the Middle East and Africa and for
Digene's Hybrid Capture II chlamydia and gonorrhea tests in the United States.
The Abbott Agreement replaces all previous agreements between the Company and
Murex. In connection with these previous agreements, Murex owned an equity
interest in the Company. This equity interest was sold by Murex during fiscal
1998. Abbott will act as the sole distributor for Digene's HBV and HPV products
in Europe, the Middle East and Africa through December 31, 2003. In addition,
Abbott will act as the sole distributor in the United States for Digene's Hybrid
Capture chlamydia and gonorrhea tests.
4. CUSTOMER TRANSFER AGREEMENT
Effective February 1, 1997, the Company acquired Murex's HPV
customer lists for approximately $2,500,000 in exchange for promissory notes in
the aggregate amount of $1,702,750 and cash of $1,000,000. In accordance with an
agency agreement, which was superseded by the Abbott Agreement, the Company
agreed to pay to Murex costs of approximately $853,000 over eleven months, which
costs had been expensed during the year ended June 30, 1997. The intangible
asset recorded to account for the Murex customer lists was written off during
1998 (See Note 2--"Change in Accounting Principle").
49
<PAGE> 52
DIGENE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. ACQUISITION OF VIROPATH B.V.
On July 1, 1998, the Company issued 181,884 shares of its Common
Stock, par value $0.01 per share, as consideration for its purchase of all of
the outstanding capital stock (the "Shares") of Viropath B.V., a company with
limited liability, registered at Amsterdam, The Netherlands ("Viropath"). The
181,884 shares of the Company's Common Stock were recorded at $8.247 per share,
in accordance with the Stock Purchase Agreement, and resulted in total
consideration of approximately $1.5 million. In accordance with the Stock
Purchase Agreement, seventy percent of these shares were held in escrow until
July 1, 1999. The remaining thirty percent of these shares will be held in
escrow by the Company until January 1, 2000. In addition, the Company is
obligated to pay royalties on future sales of Viropath's licensed products, not
to exceed $1 million. Through June 30, 1999, the Company has not been required
to pay any such royalties. The acquisition was accounted for using the purchase
method and resulted in an excess of purchase price over the fair value of net
assets acquired of approximately $1.5 million, which the Company recorded as
goodwill and is amortizing over ten years using the straight-line method. As of
June 30, 1999, goodwill and the related accumulated amortization was $1,500,860
and $150,086, respectively. The results of operations of Viropath have been
consolidated with those of the Company since the date of acquisition. The
operating results of Viropath are not considered material to the consolidated
financial statements of the Company, and accordingly, pro forma financial
information has not been presented for this acquisition.
In addition, the Company granted options to purchase an aggregate of
50,000 shares of its Common Stock to the three Viropath individual shareholders
in connection with their execution of consulting agreements with the Company.
The options are exercisable in equal installments on each of June 30, 1999,
2000, 2001, 2002 and 2003 at an exercise price of $9.75 per share. The options
expire on June 29, 2008. The options were compensatory options and were valued
on July 1, 1998 at approximately $316,500. This amount will be expensed ratably
over the vesting period of the options. During fiscal 1999, the Company
recognized $63,300 of compensation expense related to these options.
6. INVENTORIES
Inventories are stated at the lower of cost or market on a first-in,
first-out basis.
Inventories consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
1998 1999
------------------------------
<S> <C> <C>
Finished goods $ 1,341,391 $ 1,100,661
Work in process 1,773,977 1,636,552
Raw materials 780,421 894,537
------------------------------
3,895,789 3,631,750
Obsolescence reserve (338,500) (737,540)
------------------------------
$ 3,557,289 $ 2,894,210
==============================
</TABLE>
50
<PAGE> 53
DIGENE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. PROPERTY AND EQUIPMENT
Property and equipment, including leasehold improvements, are stated
at cost and depreciated or amortized using the straight-line method over the
estimated useful lives of three to five years. Leasehold improvements are
amortized over the lesser of the related lease term or the useful life.
Property and equipment consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
1998 1999
------------------------------
<S> <C> <C>
Furniture, fixtures and
office equipment $ 1,324,978 $ 1,413,735
Machinery and equipment 3,911,642 3,287,618
Leasehold improvements 930,764 925,415
------------------------------
6,167,384 5,626,768
Accumulated depreciation
and amortization (3,540,140) (3,889,690)
------------------------------
$ 2,627,244 $ 1,737,078
==============================
</TABLE>
8. INCOME TAXES
Significant components of the provision for income taxes on
operations consist of the following:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1997 1998 1999
----------------------------------
<S> <C> <C> <C>
Current:
Federal $-- $ -- $ --
State -- -- --
Foreign -- 48,463 149,069
---------------------------------
Total current -- 48,463 149,069
Deferred:
Federal -- -- --
State -- -- --
Foreign -- -- --
---------------------------------
Total deferred -- -- --
------------------------ --------
Total provision
for income taxes $-- $48,463 $149,069
=================================
</TABLE>
There is no net tax benefit recorded for the change in accounting
principle because such benefit creates a deferred tax asset which the Company
has fully reserved.
51
<PAGE> 54
DIGENE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. INCOME TAXES (CONTINUED)
The components of loss from operations before income taxes are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1997 1998 1999
-------------------------------------------------
<S> <C> <C> <C>
United States $ (5,923,876) $ (9,971,255) $ (9,018,900)
Foreign (70,580) (2,154,351) (136,247)
-------------------------------------------------
$ (5,994,456) $(12,125,606) $ (9,155,147)
=================================================
</TABLE>
The following is a summary of the items which caused recorded income
taxes attributable to continuing operations to differ from taxes computed using
the statutory federal income tax rate for the years ended June 30, 1997, 1998,
and 1999:
<TABLE>
<CAPTION>
JUNE 30,
1997 1998 1999
-------------------------------------------------
<S> <C> <C> <C>
Tax benefit
at statutory rate $ (2,098,000) $ (4,244,000) $(3,204,000)
Effect of:
State income tax, net (300,000) (606,000) (458,000)
Foreign tax -- 48,463 149,069
Stock options (1,142,000) (1,005,000) (863,000)
Other (49,000) 114,000 55,000
Foreign losses
not used -- 861,000 37,000
Valuation allowance 3,589,000 4,880,000 4,433,000
-------------------------------------------------
Provision for income taxes $ -- $ 48,463 $ 149,069
=================================================
</TABLE>
The Company's net deferred tax assets are as follows:
<TABLE>
<CAPTION>
JUNE 30,
1998 1999
--------------------------------
<S> <C> <C>
Net operating loss carryforwards $ 12,636,000 $ 16,840,000
Research and development credits 828,000 1,083,000
Patent costs, net 577,000 491,000
Research and developmental
deferral, net 1,346,000 1,125,000
Murex customer lists 899,000 857,000
Other 812,000 1,568,000
--------------------------------
Deferred tax assets 17,098,000 21,964,000
Valuation allowance (17,098,000) (21,964,000)
--------------------------------
Net deferred tax assets $ -- $ --
================================
</TABLE>
52
<PAGE> 55
DIGENE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. INCOME TAXES (CONTINUED)
Due to the Company's net operating loss carryforwards, the Company
did not recognize a tax provision for the year ended June 30, 1997. The Company
recognized a tax provision of $48,463 and $149,070 for the years ended June 30,
1998 and 1999, respectively, which related to the Company's foreign operations.
At June 30, 1999, the Company had tax net operating loss carryforwards for
income tax purposes of approximately $42 million. Approximately $7.7 million of
the net operating loss carryforwards is attributable to exercised stock options,
the benefit of which, when realized, will directly increase additional paid-in
capital. At June 30, 1999, the Company also had research and development credit
carryforwards of approximately $1,083,000. In 1990, the Company experienced a
change in ownership pursuant to Section 382 of the Internal Revenue Code, which
will cause the utilization of pre-change losses and credits to be limited.
Subject to this limitation, the Company's net operating loss carryforwards and
tax credits expire, if unused, at various dates from 2003 through 2019.
Realization of total deferred tax assets is contingent upon the generation of
future taxable income. Due to the uncertainty of realization of these tax
benefits, the Company has provided a valuation allowance for the full amount of
its deferred tax assets.
9. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
1998 1999
---------------------------------
<S> <C> <C>
Net Notes payable to Murex (See Note 4),
net of unamortized discount $ 537,424 $ --
Note payable to lessor 15,293 -
---------------------------------
552,717 --
Current maturities of long-term debt (552,717) -
---------------------------------
Long-term debt, less current maturities $ -- $ -
---------------------------------
</TABLE>
The unsecured notes payable to Murex arose in conjunction with the
Company's acquisition of Murex's HPV customer list (See Note 4), are
noninterest-bearing and have been discounted at 10%. The Company made payments
totaling $1,577,864, $1,420,000 and $557,750 and incurred interest expense of
$76,107, $128,830 and $20,326 for the years ended June 30, 1997, 1998 and 1999,
respectively.
The note payable to lessor represented the financing of a portion of
leasehold improvements made by the lessor under terms of the lease agreement for
the Company's research and development facility. The note, in the original
principal amount of $200,000, was paid during fiscal 1999. A $75,000 certificate
of deposit, which was assigned to the lessor as collateral for the lease
obligation, will be returned to the Company.
53
<PAGE> 56
DIGENE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. LEASE COMMITMENTS
On March 2, 1998, the Company entered into a lease for two
buildings, under construction, in Gaithersburg, Maryland, comprising a total of
approximately 90,000 square feet. The Company intends to relocate its operation
to this new facility in December 1999. The lease for the new facility has a
ten-year term and the Company has two consecutive rights to extend the term of
the lease for five years each.
The Company's executive office and manufacturing facility is located
in Beltsville, Maryland. The Company's research and development facility is
located in Silver Spring, Maryland. These leases expire upon the completion of
the new facility.
Future minimum rental commitments under these and other operating
lease agreements, including the agreements mentioned above, are as follows as of
June 30, 1999:
<TABLE>
<S> <C>
2000 $ 1,140,881
2001 1,441,308
2002 1,462,821
2003 1,483,469
2004 1,520,556
Thereafter 8,769,331
--------------
$15,818,366
==============
</TABLE>
Rent expense was $449,449, $763,126, and $678,394 for the years
ended June 30, 1997, 1998 and 1999, respectively.
11. EMPLOYMENT AGREEMENTS
The Company has executed employment agreements with certain key
executives under which the Company is required to pay the following base
salaries over the next three years:
<TABLE>
<S> <C>
2000 $ 739,375
2001 427,500
2002 124,493
-------------
$1,291,368
=============
</TABLE>
12. COMMON STOCK
On October 20, 1997, the Company issued 2,250,000 shares of Common
Stock in a public offering, which generated net proceeds of approximately
$20,654,000.
54
<PAGE> 57
DIGENE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. COMMON STOCK OPTIONS
In March 1996, the Company adopted the Digene Corporation Omnibus
Plan (the "Omnibus Plan"). Pursuant to the Omnibus Plan, officers or other
employees of the Company may receive options to purchase Common Stock. The
Omnibus Plan is administered by the Compensation Committee. 2,000,000 shares
have been reserved for issuance under the Omnibus Plan.
In October 1996, the Company adopted the Digene Corporation
Directors' Stock Option Plan (the "Directors' Plan"). Pursuant to the Directors'
Plan, directors of the Company may receive options to purchase Common Stock. The
Directors' Plan is administered by the Board of Directors. 500,000 shares have
been reserved for issuance under the Directors' Plan.
In September 1997, the Company adopted the Digene Corporation 1997
Stock Option Plan (the "1997 Stock Option Plan"). Pursuant to the 1997 Stock
Option Plan, consultants and other non-employees of the Company may receive
options to purchase Common Stock. The 1997 Stock Option Plan is administered by
the Board of Directors. 500,000 shares have been reserved for issuance under the
1997 Stock Option Plan.
Prior to March 1996, the Company had adopted Stock Option Plans (the
"Option Plans") under which 2,622,821 shares of Common Stock were reserved for
issuance upon exercise of options. The Option Plans provide for grants of stock
options to employees (including officers and employee directors), directors and
consultants of the Company. The Option Plans were previously administered by the
Board of Directors and presently are being administered by the Compensation
Committee, which determines recipients and types of awards to be granted,
including the exercise price, number of shares subject to the award and the
exercisability thereof. The Company does not intend to grant further options
under these Option Plans.
The terms of all stock options granted may not exceed ten years. The
exercise price of options granted, as determined by the Compensation Committee,
approximates fair value.
Common stock options activity is as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1997 1998 1999
-------------------------------------------------------------------------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 2,660,582 $ 4.14 2,812,333 $ 5.43 2,712,162 $ 6.42
Options granted 460,000 10.14 486,500 11.69 933,250 8.77
Options exercised (275,825) .52 (287,778) .93 (266,745) 1.23
Options canceled or expired (32,424) 8.66 (298,893) 11.15 (201,138) 10.17
---------- ---------- ----------
Outstanding at end of year 2,812,333 5.43 2,712,162 6.42 3,177,529 7.31
========== ========== ==========
Options exercisable at year-end 1,288,218 2.53 1,131,492 1.81 1,434,192 4.72
========== ========== ==========
</TABLE>
55
<PAGE> 58
DIGENE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. COMMON STOCK OPTIONS (CONTINUED)
The following table summarizes information about fixed-price stock
options outstanding at June 30, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------------------------------------
AVERAGE WEIGHTED-
NUMBER REMAINING AVERAGE
RANGE OF OUTSTANDING AT CONTRACTUAL EXERCISE
EXERCISE PRICES JUNE 30, 1999 LIFE (YEARS) PRICE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$0.01-$2.00 533,967 1.5 $ 1.15
$2.01-$5.00 319,522 1.5 2.30
$5.01-$8.00 353,399 8.7 6.49
$8.01-$11.00 1,751,641 7.8 9.55
$11.01-$13.25 219,000 8.1 12.89
-----------
3,177,529 6.2 7.31
===========
</TABLE>
<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
------------------------------------------
WEIGHTED-
NUMBER AVERAGE
RANGE OF EXERCISABLE AT EXERCISE
EXERCISE PRICES JUNE 30, 1999 PRICE
- --------------------------- ------------------------------------------
<S> <C> <C>
$0.01-$2.00 533,967 $1.15
$2.01-$5.00 295,099 2.25
$5.01-$8.00 62,638 5.94
$8.01-$11.00 542,488 9.43
$11.01-$13.25 -- --
---------
1,434,192 4.72
=========
</TABLE>
If the compensation cost for the Company's stock option plans had
been determined based upon the fair value at the grant date for options under
the plans consistent with the methodology prescribed under SFAS No. 123, the
Company's net loss in fiscal 1997, 1998 and 1999 would have been approximately
$7,594,000 and $16,574,000, and $12,842,000 or $0.67, $1.25, and $0.89 per
share, respectively. The effect of applying SFAS No. 123 on 1997, 1998 and 1999
pro forma net loss as stated above is not necessarily representative of the
effects on reported net loss for future years due to, among other things, (1)
the vesting period of the stock options and (2) the fair value of additional
stock options in future years.
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option pricing fair value model with the following
weighted-average assumptions used for grants:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1997 1998 1999
---------------------------------
<S> <C> <C> <C>
Dividend yield 0.00% 0.00% 0.00%
Expected volatility 73% 73% 77%
Risk-free interest rate 6.5% 6.5% 6.0%
Expected life of the
option term (in years) 6.6 5.5 6.1
</TABLE>
The weighted average fair values of the options granted during the
years ended June 30, 1997, 1998 and 1999 were $8.03, $7.99, and $6.26,
respectively.
56
<PAGE> 59
DIGENE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. NET LOSS PER SHARE
The following table sets forth the computation of basic and diluted
net loss per share:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1997 1998 1999
----------------------------------------------------
<S> <C> <C> <C>
Numerator:
Net loss $ (5,994,456) $(14,088,568) $ (9,304,216)
====================================================
Denominator:
Denominator for
basic and diluted
earnings per
share--weighted-
average shares 11,393,978 13,235,901 14,353,720
====================================================
Basic and diluted
net loss per share $ (0.53) $ (1.06) $ (0.65)
====================================================
</TABLE>
The following table sets forth the computation of basic and diluted
net loss per share to reflect the cumulative effect of a change in accounting
principle:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1997 1998 1999
----------------------------------------------------
<S> <C> <C> <C>
Basic and diluted loss per common share
Net loss before cumulative
effect of a change in
accounting principle $ (0.53) $ (0.92) $ (0.65)
Cumulative effect
of a change in
accounting principle (0.00) (0.14) (0.00)
----------------------------------------------------
Net loss $ (0.53) $ (1.06) $ (0.65)
====================================================
</TABLE>
15. RETIREMENT PLAN
The Company sponsors a 401(k) Profit Sharing Plan (the "Plan"),
which covers all employees who have completed ninety days of service. The Plan
stipulates that employees may elect an amount between 1% and 15% of their total
compensation to contribute to the Plan. Employee contributions are subject to
Internal Revenue Service limitations. All employees who have completed 1,000
hours of service during the plan year and are employed by the Company on the
last day of the plan year are eligible to share in discretionary Company
contributions. Employees vest in employer contributions over five years. No
contributions were made by the Company during the years ended June 30, 1997,
1998 and 1999.
57
<PAGE> 60
DIGENE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. OTHER COMMITMENTS AND CONTINGENCIES
The Company's access to various probes, diagnostic techniques and a
key product component were acquired under agreements requiring the Company to
pay future royalties up to 4.0% of applicable future net sales on certain
products. During fiscal 1997, 1998 and 1999, total royalties amounted to
$396,665, $769,930, and $655,062, respectively.
During fiscal 1999, the Company executed a purchase commitment with
a vendor to acquire $1,125,000 of equipment. As of June 30, 1999, the Company
has recorded a prepaid expense of $281,250 related to this obligation.
17. SEGMENT REPORTING
Effective July 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and
Related Information" ("SFAS No. 131"). SFAS No. 131 changes the way public
companies report segment information in annual financial statements and also
requires those companies to report selected segment information in interim
financial reports to stockholders. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
The Company operates one business segment which develops, manufactures and
markets proprietary DNA and RNA tests for the detection, screening and
monitoring of human diseases. Worldwide operations are summarized by geographic
region in the following table:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1997 1998
ASSETS REVENUES ASSETS REVENUES
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
North America $29,450,973 $ 4,244,576 $34,396,189 $ 4,776,036
Europe -- 4,342,175 445,434 4,938,758
South America 312,604 881,048 597,915 1,619,334
Pacific Rim -- 592,480 -- 674,817
------------------------------------------------------------------------------
$29,763,577 $10,060,279 $35,439,538 $12,008,945
==============================================================================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1999
ASSETS REVENUES
------------------------------------
<S> <C> <C>
North America $27,575,447 $ 5,930,026
Europe 165,583 9,055,571
South America 367,449 1,860,242
Pacific Rim -- 621,260
------------------------------------
$28,108,479 $17,467,099
====================================
</TABLE>
58
<PAGE> 61
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
No change of accountants and/or disagreements on any matter of
accounting principles or financial statement disclosures have occurred within
the last two years.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- Directors. The information with respect to directors
required by this item is incorporated herein by
reference to Digene's definitive Proxy Statement for its
Annual Meeting of Stockholders, scheduled to be held on
October 28, 1999, which shall be filed with the
Securities and Exchange Commission within 120 days from
the end of the Digene's fiscal year (the "1999 Proxy
Statement").
- Executive Officers. The information with respect to
executive officers required by this item is set forth in
Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
The information required under this item is incorporated herein by
reference to the 1999 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required under this item is incorporated herein by
reference to the 1999 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by
reference to the 1999 Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) - Consolidated Financial Statements of Digene
Corporation:
Report of Independent Auditors
Consolidated Balance Sheets as of June 30,
1998 and 1999
Consolidated Statements of Operations for
the fiscal years ended June 30, 1997,
1998, and 1999
Consolidated Statements of Stockholders'
Equity for the fiscal years ended June 30,
1997, 1998, and 1999
Consolidated Statements of Cash Flows for
the fiscal years ended June 30, 1997, 1998
and 1999
Notes to Consolidated Financial Statements
59
<PAGE> 62
<TABLE>
<S> <C> <C>
- Financial Statement Schedules:
Schedule II - Valuation and Qualifying
Accounts and Reserves
All other schedules for which provision is
made in the applicable accounting regulation
of the Commission are not required under the
related instructions or are inapplicable and
therefore have been omitted.
- Exhibits:
3.1 Amended and Restated Certificate of Incorporation of Digene.**
3.2 * Amended and Restated Bylaws of Digene.
4.1 Specimen Common Stock Certificate.**
10.2 1989 Special Employee Stock Option Plan.**
10.3 1990 Stock Option Plan.**
10.4 1991-A Stock Option Plan.**
10.5 1991-B Stock Option Plan.**
10.6 1996 Omnibus Plan.**
10.7 ! Employment Agreement dated as of May 1, 1996 between Digene and Evan
Jones, as amended.**
10.8 ! Employment Agreement dated as of May 1, 1996 between Digene and Charles
M. Fleischman, as amended.**
10.11 Lease Agreement dated January 13, 1988 between Digene and West Farm
Associates Limited Partnership.**
10.12 Lease Agreement dated June 20, 1991 between Digene and Murkirk Manor
Associates Limited Partnership.**
10.14 License Agreement dated September 1, 1995 between Digene and Institut
Pasteur.**
10.15 Cross-License Agreement dated April 1, 1990 among Life Technologies, Inc.
and Institut Pasteur.**
10.16 License Agreement dated December 1, 1983 between Bethesda Research
Laboratories, a division of Life Technologies, Inc. and Georgetown
University.**
10.18 License Agreement dated December 19, 1990 between Digene and Life
Technologies, Inc.**
10.26 Registration Rights Agreement dated as of May 24, 1996 between Digene,
Armonk Partners, Murex Diagnostics Corporation and Certain Other
Stockholders.**
10.28 License Agreement dated September 27, 1995 between Digene and Kanebo,
Ltd.**
10.30 *** Agency and Sales Representation Agreement between
Digene and Murex dated as of February 1, 1997.
(Incorporated by reference to Exhibit 10.1 of the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997.)
</TABLE>
60
<PAGE> 63
<TABLE>
<S> <C> <C>
10.31 *** Customer Transfer Agreement between Digene and Murex dated as of February 1, 1997.
(Incorporated by reference to Exhibit 10.2 of the Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997.)
10.32 First Amendment to the Distribution Agreement between Digene and Murex
dated as of February 1, 1997. (Incorporated by reference to Exhibit 10.3 of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997.)
10.33 ! Employment Agreement dated as of September 3, 1996 between Digene and
Donna Marie Seyfried. (Incorporated by reference to Exhibit 10 of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30,
1996.)
10.34 Director's Stock Option Plan. (Incorporated by reference to Exhibit A of
Digene's Proxy Statement filed pursuant to Section 14(a) of the Securities
Exchange Act, dated September 20, 1996.)
10.35 ! Employment Agreement dated as of July 11, 1997 between Digene and William
J. Payne. (Incorporated by reference to Exhibit 10.1 to Digene's Registration
Statement on Form S-3, File No. 333-35463, dated November 12, 1997.)
10.36 1997 Stock Option Plan. (Incorporated by reference to Exhibit 99 of Digene's
Registration Statement on Form S-8, dated November 24, 1997.)
10.37 Stock Purchase Agreement dated as of June 30, 1998 by and among Digene and
Stichting Researchfonds Pathologie, Ewald C.R.M. Keijser, Christophorus
J.L.M. Meijer and Jan M. M. Walboomers. (Incorporated by reference to Exhibit
10.37 of Digene's Annual Report on Form 10-K for the fiscal year ended June
30, 1998.)
10.38 Lease dated as of March 2, 1998 by and between Digene and ARE -
Metropoliton Grove I, LLC. (Incorporated by reference to Exhibit 10.1 of
Digene's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998.)
10.39 ! Employment Agreement dated as of December 22, 1998 between Digene and
Joseph P. Slattery. (Incorporated by reference to Exhibit 10.2 of Digene's
Quarterly Report on Form 10-Q for the quarter ended December 31, 1998.)
10.40 ! Employment Agreement dated as of December 22, 1998 between Digene and
Jeanmarie P. Curley. (Incorporated by reference to Exhibit 10.1 of Digene's
Quarterly Report on Form 10-Q for the quarter ended December 31, 1998.)
10.41 * Marketing and Distribution Agreement between Digene and Abbott Laboratories,
**** dated May 7, 1999.
21 * Subsidiaries of the Registrant.
23.1 * Consent of Ernst & Young LLP, Independent Auditors.
27 * Financial Data Schedule.
</TABLE>
- --------------------
* Filed herewith.
** Incorporated by reference to the like-numbered exhibits to Digene's
Registration Statement on Form S-1, File No. 333-2968, dated March 29,
1996.
*** Confidential status has been granted for certain portions thereof pursuant
to a Commission Order granted June 3, 1997. Such provisions have been filed
separately with the Commission.
**** Confidential treatment has been requested for certain portions thereof
pursuant to a Confidential Treatment Request filed September 28, 1999. Such
provisions have been filed separately with the Commission.
! Constitutes a management contract or compensatory plan required to be filed
as an exhibit to this Form 10-K.
(b) Reports on Form 8-K.
NONE.
61
<PAGE> 64
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.
DIGENE CORPORATION
September 28, 1999 By: /s/ Evan Jones
---------------------------------
Chairman and Chief Executive Officer
We, the undersigned directors and officers of Digene Corporation, do
hereby constitute and appoint each of Evan Jones and Charles M. Fleischman, each
with full power of substitution, our true and lawful attorney-in-fact and agent
to do any and all acts and things in our names and in our behalf in our
capacities stated below, which acts and things either of them may deem necessary
or advisable to enable Digene Corporation to comply with the Securities Exchange
Act of 1934, as amended, any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Annual Report on
Form 10-K, including specifically, but not limited to, power and authority to
sign for any or all of us in our names, in the capacities stated below, any and
all amendments (including post-effective amendments) hereto; and we do hereby
ratify and confirm all that they shall do or cause to be done by virtue hereof).
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C>
/s/ Evan Jones Chairman and Chief Executive September 28, 1999
- -------------------------------------------- Officer (principal executive officer)
Evan Jones
/s/ Charles M. Fleischman President, Chief Operating Officer, September 28, 1999
- -------------------------------------------- Chief Financial Officer and
Charles M. Fleischman Director (principal financial officer)
/s/ Joseph P. Slattery Vice President, Finance and September 28, 1999
- ------------------------------------------- Controller (principal accounting officer)
Joseph P. Slattery
/s/ Wayne T. Hockmeyer Director September 28, 1999
- --------------------------------------------
Wayne T. Hockmeyer
/s/ John H. Landon Director September 28, 1999
- ------------------------------------------
John H. Landon
/s/ Joseph M. Migliara Director September 28, 1999
- -----------------------------------------
Joseph M. Migliara
/s/ John J. Whitehead Director September 28, 1999
- ------------------------------------------
John J. Whitehead
</TABLE>
<PAGE> 65
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C> <C>
3.1 Amended and Restated Certificate of Incorporation of Digene.**
3.2 * Amended and Restated Bylaws of Digene.
4.1 Specimen Common Stock Certificate.**
10.2 1989 Special Employee Stock Option Plan.**
10.3 1990 Stock Option Plan.**
10.4 1991-A Stock Option Plan.**
10.5 1991-B Stock Option Plan.**
10.6 1996 Omnibus Plan.**
10.7 ! Employment Agreement dated as of May 1, 1996 between Digene and Evan Jones, as
amended.**
10.8 ! Employment Agreement dated as of May 1, 1996 between Digene and Charles M.
Fleischman, as amended.**
10.11 Lease Agreement dated January 13, 1988 between Digene and West Farm Associates
Limited Partnership.**
10.12 Lease Agreement dated June 20, 1991 between Digene and Murkirk Manor Associates
Limited Partnership.**
10.14 License Agreement dated September 1, 1995 between Digene and Institut
Pasteur.**
10.15 Cross-License Agreement dated April 1, 1990 among Life
Technologies, Inc. and Institut Pasteur.**
10.16 License Agreement dated December 1, 1983 between Bethesda Research Laboratories, a
division of Life Technologies, Inc. and Georgetown University.**
10.18 License Agreement dated December 19, 1990 between Digene and Life Technologies,
Inc.**
10.26 Registration Rights Agreement dated as of May 24, 1996 between Digene, Armonk
Partners, Murex Diagnostics Corporation and Certain Other Stockholders.**
10.28 License Agreement dated September 27, 1995 between Digene and Kanebo,
Ltd.**
10.30 *** Agency and Sales Representation Agreement between Digene and Murex dated as of
February 1, 1997. (Incorporated by reference to Exhibit 10.1 of the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997.)
10.31 *** Customer Transfer Agreement between Digene and Murex dated as of February 1, 1997.
(Incorporated by reference to Exhibit 10.2 of the Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997.)
10.32 First Amendment to the Distribution Agreement between Digene and Murex dated as of
February 1, 1997. (Incorporated by reference to Exhibit 10.3 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1997.)
10.33 ! Employment Agreement dated as of September 3, 1996 between Digene and Donna
Marie Seyfried. (Incorporated by reference to Exhibit 10 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996.)
10.34 Director's Stock Option Plan. (Incorporated by reference to Exhibit A of Digene's Proxy
Statement filed pursuant to Section 14(a) of the Securities Exchange Act, dated
September 20, 1996.)
</TABLE>
63
<PAGE> 66
<TABLE>
<S> <C> <C>
10.35 ! Employment Agreement dated as of July 11, 1997 between Digene and William J. Payne.
(Incorporated by reference to Exhibit 10.1 to Digene's Registration Statement on Form
S-3, File No. 333-35463, dated November 12, 1997.)
10.36 1997 Stock Option Plan. (Incorporated by reference to Exhibit 99 of Digene's
Registration Statement on Form S-8, dated November 24, 1997.)
10.37 Stock Purchase Agreement dated as of June 30, 1998 by and among Digene and Stichting
Researchfonds Pathologie, Ewald C.R.M. Keijser, Christophorus J.L.M. Meijer and Jan
M. M. Walboomers. (Incorporated by reference to Exhibit 10.37 of the Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30, 1998.)
10.38 Lease dated as of March 2, 1998 by and between Digene and ARE - Metropoliton Grove
I, LLC. (Incorporated by reference to Exhibit 10.1 of Digene's Quarterly Report on Form
10-Q for the quarter ended March 31, 1998.)
10.39 ! Employment Agreement dated as of December 22, 1998 between Digene and Joseph P.
Slattery. (Incorporated by reference to Exhibit 10.2 of Digene's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1998.)
10.40 ! Employment Agreement dated as of December 22, 1998 between Digene and Jeanmarie
P. Curley. (Incorporated by reference to Exhibit 10.1 of Digene's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1998.)
10.41 * Marketing and Distribution Agreement between Digene and Abbott
**** Laboratories, dated May 7, 1999.
21 * Subsidiaries of the Registrant.
23.1 * Consent of Ernst & Young LLP, Independent Auditors.
27 * Financial Data Schedule.
</TABLE>
- --------------------
* Filed herewith.
** Incorporated by reference to the like-numbered exhibit to Digene's
Registration Statement on Form S-1, File No. 333-2968, dated March 29,
1996.
*** Confidential status has been granted for certain portions thereof pursuant
to a Commission Order granted June 3, 1997. Such provisions have been filed
separately with the Commission.
**** Confidential treatment has been requested for certain portions thereof
pursuant to a Confidential Treatment Request filed September 28, 1999. Such
provisions have been filed separately with the Commission.
! Constitutes a management contract or compensatory plan required to be filed
as an exhibit to this Form 10-K.
64
<PAGE> 67
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Digene Corporation
We have audited the consolidated financial statements of Digene Corporation as
of June 30, 1998 and 1999 and for each of the three years in the period ended
June 30, 1999 and have issued our report thereon dated August 20, 1999 (included
elsewhere in this report). Our audits also included the financial statement
schedule listed in Item 14(a) of this report. The schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
/s/ Ernst & Young LLP
Washington, DC
August 20, 1999
65
<PAGE> 68
DIGENE CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE
BEGINNING OF AT END
CLASSIFICATION PERIOD ADDITIONS DEDUCTIONS PERIOD
- -------------- ------------ ----------------------------- -------
<S> <C> <C> <C> <C>
Allowance for doubtful accts:
Year ended June 30, 1997 $ 61 -- -- $ 61
Year ended June 30, 1998 61 150 (2) (1) 209
Year ended June 30, 1999 209 -- (39) (1) 170
Reserve for inventory obsolescence:
Year ended June 30, 1997 $250 89 -- $339
Year ended June 30, 1998 339 -- -- 339
Year ended June 30, 1999 339 399 -- 738
</TABLE>
(1) "Deductions" represent accounts written off during the period less
recoveries of accounts previously written off.
66
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
DIGENE CORPORATION
(A DELAWARE CORPORATION)
----------------------
ARTICLE I
OFFICES
1. REGISTERED OFFICE. The registered office of the Corporation
in the State of Delaware shall be as stated in the Certificate of Incorporation
or at such other location in the State of Delaware to which the registered
office shall be changed by action of the Board of Directors.
2. ADDITIONAL OFFICES. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation
may require.
ARTICLE II
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by, or in the name
of, the Corporation by the Chairman or Vice-Chairman of the Board of Directors,
if any, or by the President or a Vice-President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the
Corporation certifying the number of shares owned by him in the Corporation.
If such certificate is countersigned by a transfer agent other than the
Corporation or its employee or by a registrar other than the Corporation or its
employee, any or all signatures on the certificate may be a facsimile. In case
any officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue.
The Corporation may issue a new certificate of stock in place of any
certificate theretofore issued by it, alleged to have been lost, stolen, or
destroyed. The Board of Directors, in its sole discretion and as a condition
precedent to the issuance thereof, may require the owner
<PAGE> 2
of any lost, stolen, or destroyed certificate, or his legal representative, to
give the Corporation a bond sufficient to indemnify the Corporation against any
claim that may be made against it on account of the alleged loss, theft or
destruction of any such certificate or the issuance of any such new
certificate.
2. FRACTIONAL SHARE INTERESTS. The Corporation may, but shall
not be required to, issue fractions of a share. In lieu thereof, it shall
either pay in cash the fair value of fractions of a share, as determined by the
Board of Directors, to those entitled thereto or issue scrip or fractional
warrants in registered or bearer form over the manual or facsimile signature of
an officer of the Corporation or of its agent, exchangeable as therein provided
for full shares, but such scrip or fractional warrants shall not entitle the
holder to any rights of a shareholder except as therein provided. Such scrip
or fractional warrants may be issued subject to the condition that the same
shall become void if not exchanged for certificates representing full shares of
stock before a specified date, or subject to the condition that the shares of
stock for which such scrip or fractional warrants are exchangeable may be sold
by the Corporation and the proceeds thereof distributed to the holders of such
scrip or fractional warrants, or subject to any other conditions which the
Board of Directors may determine.
3. STOCK TRANSFERS. Upon compliance with provisions restricting
the transfer or registration of transfer of shares of stock, if any, transfers
or registration of transfers of shares of stock of the Corporation shall be
made on the stock ledger of the Corporation by the registered holder thereof,
or by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the Corporation or with a transfer agent or a
registrar, if any, and on surrender of the certificate or certificates for such
shares of stock properly endorsed and the payment of all taxes due thereon.
Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, the Corporation
shall issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books. Upon receipt of proper
transfer instructions from the registered owner of uncertificated shares, such
uncertificated shares shall be canceled and issuance of new equivalent
uncertificated shares or certificated shares shall be made to the person
entitled thereto and the transaction shall be recorded upon the books of the
Corporation.
4. RECORD DATE FOR STOCKHOLDERS. For the purpose of determining
the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to or dissent
from any corporate action in writing without a meeting, or for the purpose of
determining stockholders entitled to receive payment of any dividend or other
distribution or the allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion, or exchange of stock, or for the purpose
of any other lawful action, the directors may fix, in advance, a date as the
record date for any such determination of stockholders. Such date shall not be
more than sixty days nor less than ten days before the date of such meeting,
nor more than sixty days prior to any other action. If no record date is
fixed, the
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record date for the determination of stockholders entitled to notice of or to
vote at a meeting of stockholders shall be at the close of business on the day
next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held; the record date for determining stockholders entitled to consent to
corporate action shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in Delaware, its principal
place of business, or an officer or agent of the Corporation having custody of
the book in which proceedings of the meetings of stockholders are recorded; the
record date for determining stockholders for any other purpose shall be at the
close of business on the day on which the Board of Directors adopts the
resolution relating thereto. When a determination of stockholders of record
entitled to notice of or to vote at any meeting of stockholders has been made
as provided in this paragraph, such determination shall apply to any
adjournment thereof; provided, however, that the Board of Directors may fix a
new record date for the adjourned meeting.
5. MEANING OF CERTAIN TERMS. As used herein in respect of the
right to notice of a meeting of stockholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in writing in lieu of a
meeting, as the case may be, the term "share" or "shares" or "share of stock"
or "shares of stock" or "stockholder" or "stockholders" refers to an
outstanding share or shares of stock and to a holder or holders of record of
outstanding shares of stock when the Corporation is authorized to issue only
one class of shares of stock, and said reference is also intended to include
any outstanding share or shares of stock and any holder or holders of record of
outstanding shares of stock of any class upon which or upon whom the
Certificate of Incorporation confers such rights where there are two or more
classes or series of shares of stock or upon which or upon whom the General
Corporation Law of the State of Delaware ("DGCL") confers such rights
notwithstanding that the Certificate of Incorporation may provide for more than
one class or series of shares of stock, one or more of which are limited or
denied such rights thereunder; provided, however, that no such right shall vest
in the event of an increase or a decrease in the authorized number of shares of
stock of any class or series which is otherwise denied voting rights under the
provisions of the Certificate of Incorporation.
6. STOCKHOLDER MEETINGS.
(a) TIME. The annual meeting shall be held on the date
and at the time fixed, from time to time, by the directors. A special meeting
shall be held on the date and at the time as shall be designated from time to
time by the directors and stated in the notice of the meeting.
(b) PLACE. Annual meetings and special meetings shall be
held at such place, within or without the State of Delaware, as the directors
may, from time to time, fix. Whenever the directors shall fail to fix such
place, the meeting shall be held at the registered office of the Corporation in
the State of Delaware.
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(c) CALL. Annual meetings may be called by the directors
or by any officer instructed by the directors to call the meeting. Special
meetings of the stockholders, for any purpose or purposes, unless otherwise
prescribed by statute or by the Certificate of Incorporation, may be called by
the Chairman of the Board and shall be called by the Chairman of the Board or
Secretary at the request in writing of a majority of the Board of Directors, or
at the request in writing of stockholders owning a majority in amount of the
entire capital stock of the Corporation issued and outstanding and entitled to
vote. Such request shall state the purpose or purposes of the proposed
meeting.
(d) NOTICE OR WAIVER OF NOTICE. Written notice of all
meetings shall be given, stating the place, date, and hour of the meeting and
stating the place within the city or other municipality or community at which
the list of stockholders of the Corporation may be examined. The notice of a
special meeting shall in all instances state the purpose or purposes for which
the meeting is called. A copy of the notice of any meeting shall be given,
personally or by mail, not less than ten days nor more than sixty days before
the date of the meeting, unless the lapse of the prescribed period of time
shall have been waived, and directed to each stockholder at his record address
or at such other address which he may have furnished by request in writing to
the Secretary of the Corporation. Notice by mail shall be deemed to be given
when deposited in the United States mail, postage prepaid. If a meeting is
adjourned to another time, not more than thirty days hence, and/or to another
place, and if an announcement of the adjourned time and/or place is made at the
meeting, it shall not be necessary to give notice of the adjourned meeting
unless the directors, after adjournment, fix a new record date for the
adjourned meeting. Notice need not be given to any stockholder who submits a
written waiver of notice by him before or after the time stated therein.
Attendance of a person at a meeting of stockholders shall constitute a waiver
of notice of such meeting, except when the stockholder attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any written
waiver of notice.
(e) STOCKHOLDER LIST. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing
the address of each stockholder and the number of shares registered in the name
of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a
place within the city or other municipality or community where the meeting is
to be held, which place shall be specified in the notice of the meeting, or if
not so specified, at the place where the meeting is to be held. The list shall
also be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present. The
stock ledger shall be the only evidence as to who are the stockholders entitled
to examine the stock ledger, the list required by this section or the books of
the Corporation, or to vote at any meeting of stockholders.
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(f) CONDUCT OF MEETING. Meetings of the stockholders
shall be presided over by one of the following officers in the order of
seniority and if present and acting -- the Chairman of the Board, the
Vice-Chairman of the Board, the President, a Vice-President, or, if none of the
foregoing is in office and present and acting, by a chairman of the meeting to
be chosen by the stockholders. The order of business and all other matters of
procedure at every meeting of the stockholders shall be determined by such
presiding individual. The Secretary of the Corporation, or in his absence, an
Assistant Secretary, shall act as secretary of every meeting, but if neither
the Secretary nor an Assistant Secretary is present, the Chairman of the
meeting shall appoint a secretary of the meeting. Business transacted at any
special meeting shall be limited to the purposes stated in the notice of such
meeting.
(g) PROXY REPRESENTATION. As set forth in the DGCL,
every stockholder may authorize another person or persons to act for him by
proxy in all matters in which a stockholder is entitled to participate, whether
by waiving notice of any meeting, voting or participating at a meeting, or
expressing consent or dissent without a meeting. No proxy shall be voted or
acted upon after three years from its date, unless such proxy provides for a
longer period. A duly executed proxy shall be irrevocable if it states that it
is irrevocable and, if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the Corporation generally.
(h) INSPECTORS AND JUDGES. The Board of Directors, in
advance of any meeting, shall appoint one or more inspectors of election or
judges of the vote, as the case may be, to act at the meeting or any
adjournment thereof and to make a written report thereof. The Board of
Directors may designate one or more persons as alternate inspectors or judges
to replace any inspector or judge who fails to act. If an inspector or judge
is not appointed, the person presiding at the meeting shall appoint one or more
inspectors or judges to act at the meeting. Each inspector or judge, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector or judge at such meeting with
strict impartiality and according to the best of his ability. The inspectors
or judges shall (i) determine the number of shares of stock outstanding and the
voting power of each, (ii) determine the shares of stock represented at the
meeting, (iii) determine the existence of a quorum, (iv) determine the validity
and effect of proxies, (v) receive votes, ballots or consents, (vi) hear,
determine and retain for a reasonable period of record of the disposition of
any challenges made to any determination by the inspectors, (vii) certify their
determination of the number of shares represented at the meeting, and their
count of all votes and ballots, and (viii) do such acts as are proper to
conduct the election or vote with fairness to all stockholders. The inspectors
or judges may appoint or retain other persons or entities to assist the
inspectors or judges in the performance of their duties.
(i) QUORUM. The holders of a majority of the stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at a meeting of stockholders
for the transaction of any business, except as provided by statute or in the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented
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at any meeting of stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have the power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
(j) VOTING. When a quorum is present at any meeting, the
vote of the holders of a majority of the stock having voting power present in
person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which, by express provision of statute
or the Certificate of Incorporation, a different vote is required, in which
case such express provision shall govern and control the decision of such
question. Unless otherwise provided in the Certificate of Incorporation, each
stockholder shall at every meeting of the stockholders be entitled to one vote
in person or by proxy for each share of stock having voting power held by such
stockholder. Notwithstanding the foregoing, in the election of directors, a
plurality of the votes of the shares present in person or represented by proxy
at the meeting and entitled to vote on the election of directors shall so
elect. In the election of directors, voting need not be by ballot. Voting by
ballot shall not be required for any other corporate action except as otherwise
provided by the DGCL.
(k) STOCKHOLDER PROPOSALS. To be properly brought before
an annual meeting of stockholders, business must be (a) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the
Board of Directors, (b) otherwise properly brought before the meeting by or at
the direction of the Board of Directors, or (c) otherwise properly brought
before the meeting by a stockholder. In addition to any other applicable
requirements for business to be properly brought before an annual meeting by a
stockholder pursuant to clause (c) of the preceding sentence, the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be given, either by
personal delivery or by U.S. mail, postage prepaid, or by a nationally
recognized overnight courier service to the Secretary of the Corporation not
later than 120 days in advance of the anniversary date of the Corporation's
proxy statement for the Corporation's annual meeting of stockholders in the
previous calendar year. A stockholder's notice to the Secretary shall set
forth as to each matter the stockholder proposes to bring before the annual
meeting (i) a brief description of the business desired to be brought before
the annual meeting (including the specific proposal to be presented) and the
reasons for conducting such business at the annual meeting, (ii) the name and
record address of the stockholder proposing such business, (iii) the class and
number of shares of the Corporation that are beneficially owned by the
stockholder and (iv) any material interest of the stockholder in such business.
In the event that a stockholder attempts to bring business
before an annual meeting without complying with the provisions of this section,
the chairman of the meeting shall declare to the meeting that the business was
not properly brought before the meeting in
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accordance with the foregoing procedures, and such business shall not be
transacted. The chairman of any annual meeting, for good cause shown and with
proper regard for the orderly conduct of business at the meeting, may waive in
whole or in part the operation of this section.
No business shall be conducted at the annual meeting except in
accordance with the procedures set forth in this section; provided, however,
that nothing in this section shall be deemed to preclude discussion by any
stockholder of any business properly brought before the annual meeting.
7. STOCKHOLDER ACTION WITHOUT MEETINGS. Unless otherwise
provided in the Certificate of Incorporation, any action required to be taken
at any annual or special meeting of stockholders of the Corporation, or any
action which may be taken at any annual or special meeting of such
stockholders, may be taken without a meeting, without prior notice and without
a vote, if a consent or consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
1. FUNCTIONS AND DEFINITION. The business and affairs of the
Corporation shall be managed by the Board of Directors of the Corporation,
which may exercise all such powers of the Corporation and do all such lawful
acts and things as are not by statute or by the Certificate of Incorporation or
these Bylaws directed or required to be exercised or done by the stockholders.
The use of the phrase "whole Board" herein refers to the number of directors
which the Corporation would have if there were no vacancies.
2. QUALIFICATIONS AND NUMBER. A director need not be a
stockholder, a citizen of the United States, or a resident of the State of
Delaware. The Board of Directors shall consist of not less than one nor more
than ten persons. The number of directors constituting the whole Board may be
increased or decreased from time to time by action of the Board of Directors.
3. ELECTION AND TERM. Classes of directors shall be elected at
the annual meeting of stockholders pursuant to the terms set forth in the
Certificate of Incorporation and these Bylaws. Any director may resign at any
time upon prior written notice to the Corporation. Vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, or by the sole remaining director. In the case of newly created
directorships, the class of each
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new directorship shall be set by a majority of the directors then in office,
though less than a quorum. If there are no directors in office, then an
election of directors may be held in the manner provided by statute. If, at
the time of filling any vacancy or newly created directorship, the directors
then in office shall constitute less than a majority of the whole Board (as
constituted immediately prior to any such increase), the Court of Chancery may,
upon application of any stockholder or stockholders holding at least ten
percent of the total number of shares at the time outstanding having the right
to vote for such directors, order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office. Directors who are elected to fill vacancies and
newly created directorships shall hold office until the next election of the
class for which such directors shall have been chosen, and until their
successors shall be elected and qualified.
4. NOMINATION OF DIRECTORS. Nominations for the election of
directors shall be made by the Board of Directors or a committee appointed by
the Board of Directors or by any stockholder entitled to vote in the election
of directors generally. However, any stockholder entitled to vote in the
election of directors generally may nominate one or more persons for election
as directors at a meeting only if written notice of such stockholder's intent
to make such nomination or nominations has been given, either by personal
delivery or by U.S. mail, postage prepaid, to the Secretary of the Corporation
not later than (a) with respect to an election to be held at an annual meeting
of stockholders, 120 days in advance of the anniversary date of the
Corporation's proxy statement for the Corporation's annual meeting of
stockholders in the previous calendar year, and (b) with respect to an election
to be held at a special meeting of stockholders for the election of directors,
the close of business on the tenth day following the date on which notice of
such meeting is first given to stockholders. Each notice shall set forth: (i)
the name and address under which the stockholder who intends to make the
nomination appears on the Corporation's books and the name and address of the
person or persons to be nominated; (ii) the class and number of shares of the
Corporation's capital stock that are beneficially owned by the stockholder and
a representation that the stockholder intends to appear in person or by proxy
at the meeting to nominate the person or persons specified in the notice; (iii)
a description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; (iv) such other information regarding each nominee proposed by
such stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission, had the
nominee been nominated, or intended to be nominated, by the Board of Directors;
and (v) the consent of each nominee to serve as a director of the Corporation
if so elected. The Chairman of the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing procedure.
The Chairman of any such meeting, for good cause shown and with proper regard
for the orderly conduct of business at the meeting, may waive in whole or in
part the operation of this paragraph.
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5. MEETINGS.
(a) TIME. The Board of Directors may hold regular
meetings at such time as the Board shall fix, except that the first meeting of
a Board with newly elected members shall be held as soon after the election as
the directors may conveniently assemble.
(b) PLACE. Meetings shall be held at such place within
or without the State of Delaware.
(c) CALL. No call shall be required for regular meetings
for which the time and place have been fixed. Special meetings may be called
by or at the direction of the Chairman of the Board, the Vice-Chairman of the
Board, if any, or the President, or of a majority of the directors in office.
(d) NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice
shall be required for regular meetings for which the time and place have been
fixed. Written, oral, or any other mode of notice of the time and place shall
be given for special meetings. Notice given by telephone, telegram or similar
means shall be delivered not less than twenty-four hours prior to the meeting.
Notice given by U.S. mail shall be delivered not less than four days prior to
the meeting. The notice of any special meeting need not specify the purpose of
the meeting. Any requirement of furnishing a notice of a special meeting shall
be waived by any director who signs a written waiver of such notice before or
after the time stated therein or who attends such special meeting.
(e) QUORUM AND ACTION. A majority of the whole Board
shall constitute a quorum, except when a vacancy or vacancies prevents such
majority, whereupon a majority of the directors in office shall constitute a
quorum, provided, that such majority shall constitute at least one-third of the
whole Board. A majority of the directors present, whether or not a quorum is
present, may adjourn a meeting to another time and place without notice other
than announcement at the meeting, until a quorum is present. Except where the
DGCL may require a greater number, the act of the Board shall be the act by the
affirmative vote of a majority of the directors present at a meeting, a quorum
being present.
(f) CHAIRMAN OF THE MEETING. The Chairman of the Board,
if any and if present and acting, shall preside at all meetings. Otherwise,
the President, if any and if present and acting, or any other director chosen
by the Board, shall preside.
6. REMOVAL OF DIRECTORS. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any director or the entire Board
of Directors may be removed, only for cause, by the holders of a majority of
shares entitled to vote at an election of directors.
7. ACTION IN WRITING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors may be taken without a
meeting if all members of the Board or committee, as
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the case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board or committee.
8. COMMITTEES OF DIRECTORS. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority to amend the Certificate of Incorporation (except that a committee
may, to the extent authorized in the resolution or resolutions providing for
the issuance of shares of stock adopted by the Board of Directors as provided
in Section 151(a) of the DGCL, fix the designations and any of the preferences
or rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the Corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the Corporation or
fix the number of shares of any series of stock or authorize the increase or
decrease of the shares of any series), to adopt an agreement of merger or
consolidation, to recommend to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, to recommend
to the stockholders a dissolution of the Corporation or a revocation of a
dissolution, or to amend the Bylaws of the Corporation; and, unless the
resolution or the Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend, to authorize
the issuance of stock or to adopt a certificate of ownership and merger. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors. Each committee
shall keep regular minutes of its meetings and report the same to the Board of
Directors when required.
9. TELEPHONE MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, members of the Board of
Directors, or any committee designated by the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
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10. COMPENSATION OF DIRECTORS. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, the Board of Directors shall have
the authority to fix the compensation of directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as director. No such payment shall preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be
allowed like compensation for attending committee meetings.
ARTICLE IV
OFFICERS
1. ELECTIONS; NUMBER; QUALIFICATIONS. The officers of the
Corporation shall be elected by the Board of Directors, and shall include a
Chairman of the Board, a President, one or more Vice Presidents, a Secretary,
one or more Assistant Secretaries, a Treasurer and such other officers as the
Board of Directors shall choose. The Board of Directors may, by resolution,
create, increase, reduce or eliminate the number of offices to be filled by
vice presidents, assistant vice presidents, assistant secretaries or assistant
treasurers. The Board of Directors may choose such other officers and appoint
such agents as it shall deem necessary who shall hold office for such terms and
shall exercise such powers and perform such duties as the Board shall
determine. Any two or more offices may be held by the same individual.
2. ELECTION AND TERMINATION. The officers of the Corporation
shall be chosen by the Board of Directors at the annual meeting of the Board
following the annual meeting of stockholders or as soon thereafter as
conveniently possible. Each officer shall hold office until his successor
shall have been chosen and shall have qualified or until his earlier
resignation or removal. Any vacancy occurring in any office of the Corporation
shall be filled by the Board of Directors.
3. SALARIES. The salaries of all corporate officers and agents
shall be fixed from time to time as may be authorized by the Board of
Directors. No officer shall be prevented from receiving such salary by reason
of being a director.
4. (a) CHAIRMAN OF THE BOARD. The Chairman of the Board
shall be the chief executive officer of the Corporation and shall, in general,
supervise, manage and control all of the business and affairs of the
Corporation. He shall preside at all meetings of stockholders and at all
meetings of directors and committees of directors at which he is present. He
shall perform such other duties as usually pertain to the office or as may be
designated by the Board of Directors.
(b) PRESIDENT. The President shall be the Chief
Operating Officer of the Corporation and shall perform such duties as may be
assigned to him by the Board of Directors
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or the Chairman of the Board. In the absence of the Chairman of the Board or
in the event of his inability or refusal to act, the President shall preside at
all meetings of stockholders and at all meetings of directors and committees of
directors at which he is present and shall perform the other duties of the
Chairman of the Board. He shall perform such other duties as usually pertain
to the office or may be designated by the Board of Directors.
(c) VICE PRESIDENT. Any Vice President shall perform
such duties as from time to time may be assigned to him by the Board of
Directors or the Chairman of the Board. In the absence of the President or in
the event of his inability or refusal to act, the Vice President (or in the
event there be more than one Vice President, the Vice Presidents in the order
designated by the Board of Directors, or in the absence of any designation,
then in the order of their election) shall perform the duties of the President,
and when so acting shall have all the powers of and be subject to all the
restrictions upon the President.
(d) THE SECRETARY AND ASSISTANT SECRETARIES. The
Secretary or Assistant Secretaries shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all proceedings of
the meetings of the stockholders and directors in the minute book of the
Corporation. He shall cause all notices to be duly given in accordance with
the provisions of these Bylaws and as required by law, and shall perform such
other duties as may be prescribed by the Board of Directors or Chairman of the
Board, under whose supervision he shall be. He shall see that the lists,
books, reports, statements, certificates and other documents and records
required by law are properly kept and filed. He shall have charge and custody
of the seal of the Corporation, and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when as affixed,
it may be attested by his signature.
(e) THE TREASURER AND ASSISTANT TREASURERS. The
Treasurer and Assistant Treasurers shall have the custody of the corporate
funds and securities, shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation, shall deposit all monies
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors, and shall
render a report and account of the transactions of the Corporation and of the
financial condition of the Corporation whenever so required by the Board of
Directors.
5. RESIGNATIONS; REMOVAL; FILLING OF VACANCIES. Any officer may
resign at any time by giving notice of such resignation to the Board of
Directors, the Chairman of the Board or President or the Secretary of the
Corporation. Unless otherwise specified in such notice, such resignation shall
be effective upon receipt of such notice by the Board of Directors or such
officer. Any officer may be removed at any time, either for or without cause,
by action of the Board of Directors. Any vacancy in any office may be filled
at any time by action of the Board of Directors.
6. BONDING. Except as otherwise provided in the Certificate of
Incorporation or the Bylaws, none of the officers, assistant officers or other
employees, agents or representatives
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of the Corporation shall be required to give bond unless the Board of Directors
shall in its discretion require any such bond or bonds. Any bond so required
shall be payable to the Corporation in such amount and with such conditions and
security as the Board of Directors may require.
ARTICLE V
INSTRUMENTS, DEPOSITS, CHECKS, PROXIES
1. EXECUTION OF INSTRUMENTS. The Chairman of the Board,
President or any Vice President may enter into any contract or execute and
deliver any instrument in the name and on behalf of the Corporation, subject to
the control of the Board of Directors. The Board of Directors may authorize
any officer or officers, or agent or agents, to enter into any contract or
execute and deliver any instrument in the name and on behalf of the
Corporation, and such authorization may be general or confined to specific
instances.
2. DEPOSITS. Funds of the Corporation may be deposited from time
to time to the credit of the Corporation with such depositories as may be
selected by the Board of Directors or by any committee, officer or officers,
agent or agents of the Corporation to whom such power may be delegated from
time to time by the Board of Directors.
3. CHECKS, DRAFTS, ETC. All checks, bills of exchange and other
orders for payment of money, promissory notes, acceptances or other evidences
of indebtedness are to be signed by such officer or officers, employee or
employees, agent or agents of the Corporation, and in such manner, as are
authorized by resolution of the Board of Directors, or are authorized by any
committee, officer or officers, employee or employees, of the Corporation to
whom such power is delegated from time to time by the Board of Directors. To
the extent authorized by the Board of Directors such signature or signatures
may be facsimiles.
4. PROXIES. Proxies to vote with respect to shares of stock of
other Corporations owned by or standing in the name of the Corporation may be
executed and delivered from time to time on behalf of the Corporation by the
Chairman of the Board, the President or any Vice President, or by any other
person or persons thereunto authorized by the Board of Directors.
ARTICLE VI
DIVIDENDS
1. DECLARATION. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
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2. RESERVE. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors from time to time, in their absolute discretion,
think proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the Board of Directors shall think conducive to the
interests of the Corporation, and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.
ARTICLE VII
MISCELLANEOUS
1. FISCAL YEAR. The fiscal year of the Corporation shall be
determined by the Board of Directors.
2. NOTICES.
(a) Whenever, under the provisions of the statutes or of
the Certificate of Incorporation or of these Bylaws, notice is required to be
given to any director or stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, addressed to
such director or stockholder, at his address as it appears on the records of
the Corporation, with postage thereon prepaid, and such notice shall be deemed
to be given at the time when the same shall be deposited in the United States
mail. Notice to directors may also be given by telegram.
(b) Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
Bylaws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be
deemed equivalent thereto.
3. AMENDMENT OF BYLAWS. These Bylaws may be altered, amended or
repealed from time to time, and new Bylaws may be made and adopted by action of
the stockholders or by action of the Board of Directors, when such power is
conferred upon the Board of Directors by the Certificate of Incorporation, at
any regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or of the Board of Directors (if notice of
such alteration, amendment, repeal or adoption of new Bylaws be contained in
the notice of such special meeting).
4. SEAL. The corporate seal shall be a flat-faced circular die
and shall have inscribed thereon the name of the Corporation, the year of its
organization and the words "Corporate Seal, Delaware."
Amended by the Board of Directors on June 28, 1999.
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT 10.41
MARKETING AND DISTRIBUTION
AGREEMENT
BY AND BETWEEN
ABBOTT LABORATORIES
AND
DIGENE CORPORATION
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
TABLE OF CONTENTS
ARTICLE 1. - DEFINITIONS......................................................3
1.1 "Affiliate"......................................................3
1.2 "Africa".........................................................3
1.3 "Amplified Reimbursement"........................................4
1.4 "Analyte"........................................................4
1.5 "AUP"............................................................4
1.6 "Base Sales".....................................................4
1.7 "Book Value".....................................................4
1.8 "Business Day"...................................................4
1.9 "Calendar Quarter"...............................................5
1.10 "Certificate of Analysis"........................................5
1.11 "Change of Control"..............................................5
1.12 "CMV"............................................................5
1.13 "CMV Territory"..................................................5
1.14 "Confidential Information".......................................6
1.15 "Contract Year"..................................................7
1.16 "CT/GC"..........................................................7
1.17 "CT/GC Clearance"................................................7
1.18 "CT/GC Non-U.S. AUP".............................................7
1.19 "CT/GC Products".................................................8
1.20 "CT/GC U.S. AUP".................................................8
1.21 "CT/GC Specifications"...........................................9
1.22 "CT/GC Territory"................................................9
1.23 "Delivered "and "Delivery".......................................9
1.24 "Designated Country".............................................9
1.25 "Digene Equipment"...............................................9
1.26 "Digene Products"................................................9
1.27 "Digene Trademarks"..............................................9
1.28 "Distributor"....................................................9
1.29 "Distributor Territories".......................................10
1.30 "Distribution Agreement"........................................10
1.31 "Effective Date"................................................10
1.32 "Equipment".....................................................10
1.33 "Europe"........................................................10
1.34 "FDA"...........................................................10
1.35 "Field".........................................................10
1.36 "Fully Burdened Manufacturing Cost".............................10
1.37 "HBV"...........................................................10
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REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
1.38 "HBV AUP".......................................................11
1.39 "HBV Products"..................................................11
1.40 "HBV Specifications"............................................11
1.41 "HBV Territory".................................................12
1.42 "HPV"...........................................................12
1.43 "HPV AUP".......................................................12
1.44 "HPV Products"..................................................12
1.45 "HPV Specifications"............................................13
1.46 "HPV Territory".................................................13
1.47 "Hybrid Capture(R) Technology"..................................13
1.48 "Hybrid Capture for Digene Products"............................13
1.49 "Improvement"...................................................13
1.50 "Incremental Sales".............................................14
1.51 "Initial Term"..................................................14
1.52 "Innovation"....................................................14
1.53 "Middle East"...................................................14
1.54 "Minimum Transfer Price"........................................14
1.55 "Murex Entities"................................................15
1.56 "Net Sales".....................................................15
1.57 "Non-Amplified Reimbursement"...................................16
1.58 "Non-proprietary Equipment".....................................16
1.59 "Other Products"................................................16
1.60 "Other Product Specifications"..................................16
1.61 "Party".........................................................17
1.62 "Patents".......................................................17
1.63 "Product".......................................................17
1.64 "Product Accessories"...........................................17
1.65 "Purchase Price"................................................17
1.66 "Recall"........................................................17
1.67 "SHARP".........................................................17
1.68 "SHARP Territory"...............................................17
1.69 "Shipped Products"..............................................17
1.70 "Specifications"................................................17
1.71 "Term"..........................................................17
1.72 "Territory".....................................................18
1.73 "Third Party"...................................................18
1.74 "Trade".........................................................18
1.75 "Trade Secrets".................................................18
1.76 "Transition Period".............................................18
1.77 "United States".................................................18
1.78 "Validation Protocols"..........................................19
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
1.79 "Warranty Period"...............................................19
1.80 "Work With".....................................................19
1.81 "Year 2000 Compliant"...........................................19
ARTICLE 2. - APPOINTMENT TO MARKET AND DISTRIBUTE.............................20
2.1 Exclusive Appointment for CT/GC..................................20
2.2 Exclusive Appointment for HBV....................................20
2.3 Exclusive Appointment for HPV....................................21
2.4 Additional Territories...........................................21
2.5 Noncompetition...................................................22
2.6 Trade Costs......................................................23
2.7 Selling Price....................................................23
2.8 Contracting Rights...............................................23
2.9 Distributor Territories..........................................23
2.10 Non-Exclusive Appointment for Equipment..........................24
ARTICLE 3. - MARKETING AND PROMOTION..........................................25
3.1 Abbott's General Marketing and Promotion Responsibilities........25
3.2 Digene's General Promotional Responsibilities....................25
3.3 Development of Promotional and Marketing Materials...............26
3.4 Marketing Plans..................................................26
3.5 Sales Reports....................................................27
3.6 Support..........................................................28
3.7 Product Samples..................................................28
3.8 Marketing Steering Committee.....................................28
ARTICLE 4. - SALES PERFORMANCE THRESHOLDS.....................................29
4.1 Net Sales Thresholds for CT/GC...................................29
4.2 Net Sales Thresholds for HBV.....................................32
4.3 Net Sales Thresholds for HPV.....................................34
4.4 Exercise of Rights...............................................37
4.5 Wind-down Activities.............................................37
4.6 Factors Affecting Net Sales......................................38
ARTICLE 5. - MANUFACTURE AND SUPPLY...........................................38
5.1 Supply...........................................................38
5.2 Forecasting......................................................43
5.3 Orders...........................................................44
5.4 Failure to Supply Product........................................44
5.5 Failure to Supply Digene Equipment...............................47
5.6 Supply Allocation................................................48
5.7 Ordering Processing..............................................48
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
5.8 Safety Stock.....................................................48
5.9 Hazardous Classification Labeling................................49
ARTICLE 6. - PRICE AND TERMS..................................................49
6.1 Purchase Price for Equipment.....................................49
6.2 Product Transfer Price...........................................51
6.3 Minimum Transfer Price...........................................52
6.4 Year-End Reconciliation..........................................52
6.5 Royalty Obligations..............................................52
6.6 Payment Terms....................................................53
6.7 Foreign Exchange.................................................53
ARTICLE 7. - SHIPMENT AND DELIVERY............................................53
7.1 Shipment.........................................................53
7.2 Delivery.........................................................54
7.3 Export Licenses: Import Certificates; Customs and
Regulatory Approval for Delivery of Shipped Products
Outside the United States........................................54
7.4 Title and Risk of Loss...........................................55
7.5 Taxes............................................................55
7.6 Certificate of Analysis..........................................55
ARTICLE 8. - ACCEPTANCE OF SHIPPED PRODUCT; INSPECTION OF
MANUFACTURING FACILITY...........................................55
8.1 Digene Testing...................................................55
8.2 Abbott Testing...................................................56
8.3 Abbott Inspection................................................58
ARTICLE 9. - REGULATORY COMPLIANCE AND MEDICAL COMPLAINTS.....................58
9.1 No Modification..................................................58
9.2 Regulatory Compliance............................................58
9.3 Customer Complaints..............................................59
ARTICLE 10. - RECALL OR WITHDRAWAL............................................59
10.1 Event of Recall and Withdrawal...................................59
10.2 Expense of Recall................................................60
ARTICLE 11. - BOOKS AND RECORDS...............................................60
11.1 Examination Rights...............................................60
11.2 Reconciliation of Underpayment or Overcharge.....................61
11.3 Costs of Examination.............................................62
ARTICLE 12. - PATENTS AND TRADEMARKS..........................................62
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REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
12.1 Trademark License...............................................62
12.2 Trademark Ownership.............................................63
12.3 Infringement....................................................64
12.4 Possible Removal From Market....................................64
12.5 Third Party Claims for Infringement.............................65
12.6 Co-Labeled Product..............................................65
12.7 Limitation of Liability.........................................65
ARTICLE 13. - REPRESENTATIONS AND WARRANTIES..................................66
13.1 Digene Representations and Warranties...........................66
13.2 Replacement or Repair...........................................67
13.3 Third Party Distributors........................................68
13.4 Limitation on Warranties........................................68
13.5 Patent Representations and Warranties...........................68
13.6 General Representations and Warranties..........................69
ARTICLE 14. - GENERAL INDEMNIFICATION.........................................70
14.1 Digene Indemnification..........................................70
14.2 Abbott Indemnification..........................................70
14.3 Cooperation.....................................................71
14.4 Insurance.......................................................71
ARTICLE 15. TERM AND TERMINATION..............................................71
15.1 Term............................................................71
15.2 Termination for Cause...........................................72
15.3 Termination By Digene For Abbott's Failure to
Achieve Net Sales Thresholds....................................73
15.4 Termination By Abbott for Change of Control.....................73
15.5 Partial Termination By Digene For Abbott's Failure
to Market in Particular Country.................................74
15.6 Continuation of Force Majeure...................................76
15.7 Accrued Obligations.............................................76
15.8 Additional Remedies for Breach..................................76
ARTICLE 16. - CONSEQUENCES OF TERMINATION.....................................76
16.1 Buy-out of Equipment and Inventory..............................76
16.2 Termination Fee.................................................77
16.3 Residual Payments...............................................77
ARTICLE 17. - CONFIDENTIALITY AND PUBLIC ANNOUNCEMENTS........................78
17.1 Confidentiality.................................................78
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REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
17.2 Handling of Trade Secrets.......................................78
17.3 Confidential Treatment..........................................79
17.4 Public Announcements............................................79
ARTICLE 18. - FORCE MAJEURE..................................................80
ARTICLE 19. - IMPROVEMENTS, INNOVATIONS, DIGENE PRODUCTS;
DEVELOPMENT PROJECTS............................................81
19.1 First Right of Negotiation......................................81
19.3 Third Party Licenses............................................84
19.4 Determination of Improvements or Innovations....................84
19.5 [*****].........................................................86
19.6 Development Projects............................................86
19.7 Testing Service Rights..........................................88
19.8 R&D Expenses....................................................88
19.9 Products Outside the Scope of the Agreement.....................88
ARTICLE 20. - TRANSFER, MODIFICATION OR TERMINATION OF OBLIGATIONS
UNDER THE MUREX AGREEMENTS......................................88
20.1 General.........................................................89
20.2 Distribution of HBV.............................................89
20.3 Distribution of HPV.............................................89
20.4 Distribution of CMV.............................................89
20.5 Distribution of SHARP Signal System Products....................90
20.6 Murex-Only Labeled Products.....................................92
20.7 Continuing Obligations Under the Murex Agreements...............92
20.8 Transition Period...............................................93
20.9 Termination of the Murex Agreements.............................97
ARTICLE 21. - MISCELLANEOUS...................................................98
21.1 Relationship of the Parties.....................................98
21.2 Successors and Assignment.......................................98
21.3 Binding Effect..................................................99
21.4 Entire Agreement................................................99
21.5 Governing Law...................................................99
21.6 Dispute Resolution.............................................100
21.7 Notices........................................................100
21.8 Severability...................................................101
21.9 Interpretation.................................................101
21.10 Amendments.....................................................102
21.11 Waiver.........................................................102
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REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
21.12 Survival.......................................................102
21.13 Headings.......................................................102
21.14 Counterparts...................................................103
21.15 Mutual Drafting................................................103
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REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
MARKETING AND DISTRIBUTION AGREEMENT
THIS AGREEMENT is made, as of the Effective Date, by and between Abbott
Laboratories, an Illinois corporation having its principal place of business at
100 Abbott Park Road, Abbott Park, Illinois 60064-6400 ("Abbott"), and Digene
Corporation, a Delaware corporation having its principal place of business at
9000 Virginia Manor Road, Beltsville, Maryland 20705 ("Digene").
WITNESSETH:
WHEREAS, Digene is engaged in the development, manufacture, marketing and
distribution of medical diagnostic products;
WHEREAS, Digene has entered into: (i) a Distribution Agreement with Murex
Diagnostics Corporation dated August 1, 1997; (ii) an Agency and Sales
Representation Agreement with Murex Diagnostics Corporation dated February 1,
1997; (iii) a Customer Transfer Agreement with Murex Diagnostics Corporation
dated February 1, 1997; (iv) an Escrow Agreement dated February 1, 1997 among
Digene, Murex Diagnostics Corporation and Reid & Priest LLP; (v) a Distribution
Agreement with Murex Biotech Limited dated February 28, 1996, as amended
February 1, 1997; (vi) a Development and License Agreement with International
Murex Technologies Corporation dated May 31, 1994 (and the related escrow
agreement); (vii) a letter agreement dated May 31, 1994 with International
Murex Technologies Limited; (viii) a Development and License Agreement with
International Murex Technologies Corporation dated
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REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
April 14, 1993 (and the related escrow agreement); and (ix) a Distribution
Agreement with International Murex Technologies Corporation dated May 19, 1992,
as amended on May 26, 1993 and April 4, 1996, (collectively the "Murex
Agreements") for the distribution and development of certain Digene products
(Murex Biotech Limited, Murex Diagnostics Corporation and International Murex
Technologies Limited were at all relevant times subsidiaries or affiliates of
International Murex Technologies Corporation and together with International
Murex Technologies Corporation are hereinafter referred to as "Murex");
WHEREAS, on or about April 17, 1998, Abbott acquired International Murex
Technologies Corporation pursuant to an Acquisition Agreement dated March 13,
1998, and as a result thereof, assumed the obligations of Murex under the Murex
Agreements;
WHEREAS, Digene desires to transfer certain obligations under the Murex
Agreements to Abbott, to enter into a new distribution arrangement with Abbott
regarding the development, manufacture, marketing and distribution of certain
of its products in certain territories in the world and, in connection
therewith, to terminate the Murex Agreements;
WHEREAS, Digene and Abbott wish to collaborate to expand the development
and utilization of certain Digene products;
WHEREAS, Abbott, through its Diagnostics Division ("ADD"), is engaged in
the development, manufacture, marketing and distribution of medical diagnostic
products;
WHEREAS, Abbott desires to accept the transfer of certain obligations
under the Murex Agreements, to enter into a new distribution arrangement with
Digene regarding the
2
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REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
development, manufacture, marketing and distribution of certain Digene products
and, in connection therewith, to terminate the Murex Agreements; and
WHEREAS, in accordance with the terms and conditions hereof, Digene is
willing to appoint Abbott as a distributor of certain Digene products in
certain territories, and Abbott is willing to accept such appointment.
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and upon the terms and subject to conditions set forth below,
Abbott and Digene hereby agree as follows:
ARTICLE 1. - DEFINITIONS
The following words and phrases, when used herein with initial capital
letters, shall have the meanings set forth or referenced below:
1.1 "Affiliate" shall mean, with respect to each Party (as hereinafter
defined), any legal entity which is, directly or indirectly, controlling,
controlled by or under common control with such Party. For purposes of this
definition, a Party shall be deemed to control another entity if it owns or
controls, directly or indirectly, more than fifty percent (50%) of the voting
equity of the other entity (or other comparable ownership interest for an
entity other than a corporation).
1.2 "Africa" shall mean those countries and territories set forth on
Schedule 1.2.
1.3 "Amplified Reimbursement" shall mean reimbursement under the
Medicare/Medicaid CPT code for reimbursement as an amplified assay, which as of
the Effective Date (as hereinafter defined) is 87491 (CT) and 87591 (GC).
3
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REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
1.4 "Analyte" shall mean an individual compound, nucleic acid or fragment
thereof, bacteria, virus, fungus, mycoplasm or other substance which is the
target of quantitative or qualitative measurement.
1.5 "AUP" shall mean average unit selling price.
1.6 "Base Sales" shall mean the Net Sales (as hereinafter defined) in
calendar year 1998 of each Product (as hereinafter defined) sold by Digene and
its Affiliates in the same Territory (as hereinafter defined) in which Abbott
and its Affiliates are granted distribution rights hereunder with respect to
such Product, as set forth on Schedule 1.6.
1.7 "Book Value" shall mean the Purchase Price (as hereinafter defined)
of the Digene Equipment (as hereinafter defined), less accumulated depreciation
on a straight-line basis for four (4) years with $0.00 residual value, in
accordance with generally accepted accounting principles in the United States
(as hereinafter defined) ("GAAP"), consistently applied.
1.8 "Business Day" means any day other than a day which is a Saturday or
Sunday or other day on which commercial banks in New York, New York are
authorized or required to remain closed.
1.9 "Calendar Quarter" shall mean a period of three (3) consecutive
calendar months commencing on January 1, April 1, July 1 or October 1 of any
Contract Year (as hereinafter defined).
1.10 "Certificate of Analysis" shall mean finished goods test results
accompanying the release of Products.
4
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REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
1.11 "Change of Control" shall mean: (a) the consolidation or merger of
Digene or any Affiliate of Digene holding or controlling a majority of the
assets relating to the business of Digene which is the subject of this
Agreement, with or into any Third Party (as hereinafter defined); (b) the
assignment, sale, transfer, lease or other disposition of all or substantially
all of the assets of Digene and its Affiliates taken as a whole; or (c) the
acquisition by any Third Party or group of Third Parties acting in concert, of
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission ("SEC") under the Securities Exchange Act of 1934, as
amended) of shares of voting stock of Digene, the result of which in the case
of any transaction described in clauses (a), (b) and (c) above is that
immediately after the transaction the shareholders of Digene immediately before
the transaction own less than fifty percent (50%) of the outstanding shares of
the surviving corporation in a transaction specified in clause (a) above or the
acquiror in a transaction specified in clause (b) or (c) above.
1.12 "CMV" shall have the meaning set forth in Section 20.4.
1.13 "CMV Territory" shall mean Europe (as hereinafter defined), the
Middle East (as hereinafter defined) and Africa.
1.14 "Confidential Information" shall mean any and all technical data,
information, materials and other know-how, including Trade Secrets (as
hereinafter defined), presently owned by or developed by or licensed to, or on
behalf of, Digene or Abbott which relates to the development, manufacture,
promotion, marketing, distribution, sale or use of (a) any Product or Digene
Products, (b) any Improvement (as hereinafter defined) or Innovation (as
hereinafter defined), (c) any Digene Equipment, (d) a development project
described in Article 19 during the
5
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Term (as hereinafter defined), (e) any Abbott products, and (f) any
information, including financial data, relating to the business of either of
the Parties and/or of their Affiliates, which a Party and/or its Affiliates
discloses to the other Party and/or its Affiliates in writing and identifies as
being confidential, or if disclosed orally, visually or through some other
media, is identified as confidential at the time of disclosure and is
summarized in writing within thirty (30) days of such disclosure and identified
as confidential, except any portion thereof which:
(a) is known to the receiving Party and/or its Affiliates at the time
of the disclosure, as evidenced by its written records;
(b) is disclosed to the receiving Party and/or its Affiliates by a
Third Party having a legal right to do so;
(c) becomes patented, published or otherwise part of the public
domain through no fault of the receiving Party and/or its Affiliates; or
(d) is independently developed by or for the receiving Party and/or
its Affiliates without use of Confidential Information disclosed
hereunder, as evidenced by its written records.
1.15 "Contract Year" shall mean a calendar year during the Term, except
that the first Contract Year shall begin on the Effective Date and shall end on
December 31, 1999.
1.16 "CT/GC" shall mean Digene's diagnostic assay utilizing Hybrid
Capture(R) Technology (as hereinafter defined) designed to detect the presence
of gonorrhea and/or chlamydia in a sample in accordance with the CT/GC
Specifications (as hereinafter defined),
6
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including any Improvements thereto (except as provided in Section 19.2),
consisting of the CT/GC Products (as hereinafter defined).
1.17 "CT/GC Clearance" shall have the meaning set forth in Section 4.1.
1.18 "CT/GC Non-U.S. AUP" shall mean (a) for the purpose of payment of the
transfer price under Section 6.2(a), (i) in the first Contract Year, the amount
set forth on Schedule 1.18 and (ii) for each subsequent Contract Year, the Net
Sales of each CT/GC Product sold by Abbott and its Affiliates in the CT/GC
Territory (as hereinafter defined), excluding the United States, during the
first nine (9) months of the immediately preceding Contract Year, divided by
the number of units of each such CT/GC Product sold by Abbott and its
Affiliates in the CT/GC Territory, excluding the United States, during the
first nine (9) months of the immediately preceding Contract Year, which
calculation shall be provided to Digene by written notice from Abbott no later
than December 1 of such immediately preceding Contract Year, and (b) for the
purposes of year-end reconciliation under Section 6.4 the Net Sales of CT/GC
sold by Abbott and its Affiliates in the CT/GC Territory, excluding the United
States, during the immediately preceding Contract Year divided by the number of
units of each such CT/GC Product sold by Abbott and its Affiliates in the CT/GC
Territory, excluding the United States, during the immediately preceding
Contract Year.
1.19 "CT/GC Products" shall mean each of the CT/GC products listed by part
number on Schedule 1.19.
1.20 "CT/GC U.S. AUP" shall mean (a) for the purpose of payment of the
transfer price under Section 6.2(b), (i) in the first Contract Year, the amount
set forth on Schedule 1.20
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
and (ii) for each subsequent Contract Year, the Net Sales of each CT/GC Product
sold by Abbott and its Affiliates in the United States during the first nine
(9) months of the immediately preceding Contract Year, divided by the number of
units of each such CT/GC Product sold by Abbott and its Affiliates in the
United States during the first nine (9) months of the immediately preceding
Contract Year, which calculation shall be provided to Digene by written notice
from Abbott no later than December 1 of such immediately preceding Contract
Year, and (b) for the purposes of year-end reconciliation under Section 6.4 the
Net Sales of CT/GC sold by Abbott and its Affiliates in the United States
during the immediately preceding Contract Year divided by the number of units
of each such CT/GC Product sold by Abbott and its Affiliates in the United
States during the immediately preceding Contract Year.
1.21 "CT/GC Specifications" shall mean the characteristics of CT/GC set
forth on Schedule 1.21 as such specifications may be amended from time to time
pursuant to Section 21.10.
1.22 "CT/GC Territory" shall mean the United States, Europe, the Middle
East and Africa, as may be amended in accordance with Sections 2.4 or 15.5.
1.23 "Delivered "and "Delivery" shall have the meanings ascribed to them
in Section 7.1.
1.24 "Designated Country" shall mean a country in the Territory to which
Shipped Products (as hereinafter defined) shall be delivered.
1.25 "Digene Equipment" shall mean the DML 2000 Luminometers, DCR 1 Tube
Luminometers and other system equipment listed on Schedule 1.25.
8
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
1.26 "Digene Products" shall mean all existing and new products
principally utilizing Hybrid Capture for Digene Products (as hereinafter
defined), including any Improvements thereto sold or to be sold by Digene in
the Field other than Products and Other Products.
1.27 "Digene Trademarks" shall mean the trademarks of Digene as set forth
on Schedule 1.27.
1.28 "Distributor" shall mean a Third Party with whom Digene has a
Distribution Agreement (as hereinafter defined) in effect on the Effective Date
in the Territory for Products as set forth on Schedule 1.28.
1.29 "Distributor Territories" shall mean those countries identified on
Schedule 1.29, as may be amended from time to time in accordance with the
provisions of Section 2.9.
1.30 "Distribution Agreement" shall mean each agreement between Digene and
any Distributor for the development, manufacture, marketing and/or distribution
of Products in the Territory, as set forth on Schedule 1.30.
1.31 "Effective Date" shall mean the date on which the last Party
executes this Agreement.
1.32 "Equipment" shall mean Digene Equipment and Non-proprietary Equipment
(as hereinafter defined).
1.33 "Europe" shall mean those countries and territories listed on
Schedule 1.33.
1.34 "FDA" shall mean the United States Food and Drug Administration and
any successor agency thereto.
1.35 "Field" shall mean the in vitro human diagnostic market.
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
1.36 "Fully Burdened Manufacturing Cost" shall mean the cost of goods
produced, including direct labor, direct materials and allocable manufacturing
overhead incurred in the manufacture of the Products and the purchase and
packaging of Digene Equipment, all determined in accordance with generally
accepted industry standards and GAAP, consistently applied.
1.37 "HBV" shall mean Digene's diagnostic assay utilizing Hybrid Capture
Technology designed to detect the presence of Hepatitis B Virus in a sample in
accordance with the HBV Specifications (as hereinafter defined), including any
Improvements thereto (except as provided in Section 19.2), consisting of the
HBV Products (as hereinafter defined).
1.38 "HBV AUP" shall mean (a) for the purpose of payment of the transfer
price under Section 6.2(c), (i) in the first Contract Year, the amount set
forth on Schedule 1.38 and (ii) for each subsequent Contract Year, the Net
Sales of each HBV Product sold by Abbott and its Affiliates in the HBV
Territory (as hereinafter defined) during the first nine (9) months of the
immediately preceding Contract Year, divided by the number of units of each
such HBV Product sold by Abbott and its Affiliates in the HBV Territory during
the first nine (9) months of the immediately preceding Contract Year, which
calculation shall be provided to Digene by written notice from Abbott no later
than December 1 of such immediately preceding contract year, and (b) for the
purposes of year-end reconciliation under Section 6.4 the Net Sales of HBV sold
by Abbott and its Affiliates in the HBV Territory during the previous Contract
Year, divided by the number of units of each such HBV Product sold by Abbott
and its Affiliates in the HBV Territory during the immediately preceding
Contract Year.
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
1.39 "HBV Products" shall mean each of the HBV products listed by part
number on Schedule 1.39.
1.40 "HBV Specifications" shall mean the characteristics of HBV set forth
on Schedule 1.40, as such specifications may be amended from time to time
pursuant to Section 21.10.
1.41 "HBV Territory" shall mean Europe, the Middle East and Africa, as may
be amended in accordance with Sections 2.4 or 15.5.
1.42 "HPV" shall mean Digene's diagnostic assay utilizing Hybrid Capture
Technology designed to detect the presence of Human Papillomavirus in a sample
in accordance with the HPV Specifications (as hereinafter defined), including
any Improvements thereto (except as provided in Section 19.2), consisting of
HPV Products (as hereinafter defined).
1.43 "HPV AUP" shall mean (a) for the purpose of payment of the transfer
price under Section 6.2(d), (i) in the first Contract Year, the amount set
forth on Schedule 1.43 and (ii) for each subsequent Contract Year, the Net
Sales of each such HPV Product sold by Abbott and its Affiliates in the HPV
Territory (as hereinafter defined) during the first nine (9) months of the
immediately preceding Contract Year, divided by the number of units of each
such HPV Product sold by Abbott and its Affiliates in the HPV Territory during
the first nine (9) months of the immediately preceding Contract Year, which
calculation shall be provided to Digene by written notice from Abbott no later
than December 1 of such immediately preceding Contract Year, and (b) for the
purposes of year-end reconciliation under Section 6.4 the Net Sales of HPV sold
by Abbott and its Affiliates in the HPV Territory during the previous Contract
Year, divided by the
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
number of units of each such HPV Product sold by Abbott and its Affiliates in
the HPV Territory during the immediately preceding Contract Year.
1.44 "HPV Products" shall mean each of the HPV products listed by part
number on Schedule 1.44.
1.45 "HPV Specifications" shall mean the characteristics of HPV set forth
on Schedule 1.45, as such specifications may be amended from time to time
pursuant to Section 21.10.
1.46 "HPV Territory" shall mean Europe, the Middle East and Africa, as may
be amended in accordance with Sections 2.4 or 15.5.
1.47 "Hybrid Capture(R) Technology" shall mean the [***********************
********************************************************************************
*******************************************************************************]
1.48 "Hybrid Capture for Digene Products" shall mean the methods for
performing Hybrid Capture I and Hybrid Capture II assays in coated tube and
96-well microplates for nucleic acid sequences that involve antibody
recognition of double-stranded sequences and which is claimed by the Patents.
1.49 "Improvement" shall mean any improvement, modification or adjustment
of or to any Product or Digene Product, as the case may be, which provides no
recognized or a moderate, but not significant, benefit to customers in terms of
the testing method, performance and/or automation. Examples of Improvements
include, but are not limited to, the following: [*******************************
********************************************************************************
********************************************************************************
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
********************************************************************************
********************************************************************************
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1.50 "Incremental Sales" shall mean the Net Sales of a Product or
Products in the twelve (12) months preceding a Change in Control in excess of
Base Sales of such Product or Products.
1.51 "Initial Term" shall mean the period beginning on the Effective Date
and ending, with respect to CT/GC on December 31 of the fifth full Contract
Year after CT/GC Clearance and, with respect to HBV and HPV, on December 31,
2003.
1.52 "Innovation" shall mean any significant development, improvement,
modification or adjustment of or to any Product which results in a technology
restatement or a unique competitive advantage which provides significant
customer benefit in terms of the testing method, performance and/or automation.
Examples of Innovations include, but are not limited to, the following: [*******
********************************************************************************
*******************************************************************************]
1.53 "Middle East" shall mean those countries and territories set forth on
Schedule 1.53.
1.54 "Minimum Transfer Price" shall mean the minimum price Digene shall
invoice Abbott and its Affiliates for any Product as set forth on Schedule
1.54.
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
1.55 "Murex Entities" shall mean Murex Diagnostic Corporation, Murex
Biotech Limited, International Murex Technologies Corporation, International
Murex Technologies Limited and any Murex Affiliate obligated to perform
activities pursuant to any of the Murex Agreements.
1.56 "Net Sales" shall mean the total of the gross amount billed or
invoiced to Third Parties for the sale of a Product in the Field, less:
(a) rebates granted and allowances, trade, quantity or cash discounts
actually allowed and taken.
(b) retroactive price reductions imposed by government authorities;
(c) fees, commissions or rebates lawfully paid pursuant to contracts
with group purchasing organizations;
(d) amounts actually repaid a Third Party by reason of rejection or
return of defective Product; and
(e) upcharges paid by Third Parties as part of a reagent agreement
plan or similar arrangement;
provided, however, that if any Product is sold by Abbott or its Affiliates in
combination with other components which have commercial utility other than use
in combination with such Product (together, a "Combination Product"), Net Sales
of such Product shall be the gross invoiced price of such Combination Product
billed to customers by Abbott or its Affiliates, less the allowances and
adjustment referred to above, multiplied by the fraction A/(A+B), where A is
the gross selling price of the Product sold separately during the period in
question, and B is the
14
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
gross selling price of such other components sold separately during the period
in question; provided, further, that if any Combination Product is sold by
Abbott or its Affiliates and the gross selling price for the Product or such
other components is not determinable, then the gross amount billed or invoiced
to Third Parties for the sale of such Product shall be deemed to be an amount
equal to the percentage of the gross sales price, less the allowances and
adjustments referred to above, for the Combination Product which is equal to
the percentage of the fair market value of the Product and such other
components in the Combination Product represented by the fair market value of
the Product.
1.57 "Non-Amplified Reimbursement" shall mean reimbursement under the
Medicare/Medicaid CPT code for reimbursement as a non-amplified assay, which as
of the Effective Date is 87490 (CT) and 87590 (GC).
1.58 "Non-proprietary Equipment" shall mean the equipment available for
purchase from Third Parties, as set forth on Schedule 1.58, which is utilized
in connection with Digene Equipment, and which has been specified and validated
under the Validation Protocol (as hereinafter defined) for use in connection
with Products.
1.59 "Other Products" shall mean CMV and SHARP(TM) (as hereinafter
defined).
1.60 "Other Product Specifications" shall mean the characteristics of CMV
or SHARP, as the case may be, set forth on Schedule 1.60, as such
specifications may be amended from time to time pursuant to Section 21.10.
1.61 "Party" shall mean Digene or Abbott, and "Parties" shall mean Digene
and Abbott.
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
1.62 "Patents" shall mean the patents and patent applications (including
any patents that issue based upon such patent applications) set forth on
Schedule 1.62.
1.63 "Product" shall mean CT/GC, HBV and HPV, or any combination of the
foregoing, including the Product Accessories (as hereinafter defined), manuals,
labeling, packaging and package inserts thereto.
1.64 "Product Accessories" shall mean proprietary sample collection
devices, reagents, and/or other consumables that may be used in connection with
Products, as set forth on Schedule 1.64.
1.65 "Purchase Price" shall mean the price for Equipment purchased by
Abbott and its Affiliates from Digene hereunder, more fully described in
Section 6.1.
1.66 "Recall" shall have the meaning set forth in Section 10.1.
1.67 "SHARP" shall have the meaning set forth in Section 20.5.
1.68 "SHARP Territory" shall mean Europe, the Middle East and Africa.
1.69 "Shipped Products" shall have the meaning set forth in Section 7.1.
1.70 "Specifications" shall mean collectively the CT/GC Specifications,
the HBV Specifications and the HPV Specifications.
1.71 "Term" shall mean the Initial Term and any extensions thereto, unless
otherwise terminated earlier in accordance with the terms and conditions of
Article 15.
1.72 "Territory" shall mean collectively the CT/GC Territory, the HBV
Territory and the HPV Territory, as may be amended in accordance with Sections
2.4 or 15.5.
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
1.73 "Third Party" shall mean a natural person, corporation, partnership,
trust, joint venture, governmental authority or other legal entity or
organization other than the Parties and/or their Affiliates.
1.74 "Trade" shall mean potential customers, including, without
limitation, hospitals, physician office laboratories, reference laboratories,
alternate site facilities and group purchasing organizations, but shall not
include a Distributor during the term of such Distributor's Distribution
Agreement.
1.75 "Trade Secrets" shall mean the technical or non-technical data,
formulae, patterns, compilations, programs, devices, methods, techniques,
drawings, processes, financial data, financial plans, marketing plans, product
plans and the like, owned or licensed by a Party and/or its Affiliates: (a)
from which a Party and/or its Affiliates derives actual or potential economic
value by being held in secrecy and not known by Third Parties who are not under
an obligation of confidentiality with respect thereto; or (b) which gives such
Party an actual or potential advantage over Third Party competitors who do not
know or use it.
1.76 "Transition Period" shall have the meaning set forth in Section 20.8.
1.77 "United States" shall mean the fifty (50) states of the United
States, including its territories and possessions and the District of Columbia
and Puerto Rico.
1.78 "Validation Protocols" shall mean the Validation Protocols set forth
on Schedule 3.6.
1.79 "Warranty Period" shall have the meaning ascribed to it in Section
13.1(b).
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
1.80 "Work With" shall mean to provide reasonable assistance, to consult,
to offer advice and to take other reasonable steps designed to help resolve
technical or quality or customer problems and to provide a professional,
unified image to customers, and timely cooperation in the execution of
distribution, sales, marketing and promotion programs or the adjustments of any
Net Sales thresholds under this Agreement; provided, however, that "Work With"
shall not mean incurring any capital expenditures or incurring any expenses
other than direct salary, travel and accommodation costs of Abbott or Digene
employees, as the case may be. For the purposes of this definition, a failure
to "Work With" shall include a habitual neglect or failure to perform the
activities outlined in this Agreement over a commercially reasonable period of
time or failure to act in good faith, on a timely basis at the request of the
other Party. A failure to "Work With" shall be a material breach for the
purposes of Section 15.2.
1.81 "Year 2000 Compliant" shall mean having no lesser functionality with
respect to records containing dates before or after January 1, 2000, than
previously with respect to dates prior to January 1, 2000.
ARTICLE 2. - APPOINTMENT TO MARKET AND DISTRIBUTE
2.1 Exclusive Appointment for CT/GC. Subject to the terms and conditions
of this Agreement, Digene hereby appoints Abbott and its Affiliates for the
Term as Digene's exclusive distributor, subject to the rights of existing
Distributors, of CT/GC in the CT/GC Territory for use in the Field and Abbott
hereby accepts such appointment. As part of such appointment under this Section
2.1, Abbott shall have the right to appoint sub-distributors in those countries
or
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
territories in the CT/GC Territory in which Abbott generally uses
sub-distributors to distribute Abbott diagnostic products. As exclusive
distributor hereunder, Abbott and its Affiliates shall have the sole and
exclusive right, subject to the rights of existing Distributors, to market,
promote, sell and distribute CT/GC in the CT/GC Territory for use in the Field,
which right shall operate to exclude all others, including Digene, its
Affiliates and all Third Parties.
2.2 Exclusive Appointment for HBV. Subject to the terms and conditions of
this Agreement, Digene hereby appoints Abbott and its Affiliates for the Term
as the exclusive distributor, subject to the rights of existing Distributors,
of HBV in the HBV Territory for use in the Field and Abbott hereby accepts such
appointment. As part of such appointment under this Section 2.2, Abbott shall
have the right to appoint sub-distributors in those countries or territories in
the HBV Territory in which Abbott generally uses sub-distributors to distribute
Abbott diagnostic products. As exclusive distributor hereunder, Abbott and its
Affiliates shall have the sole and exclusive right, subject to the rights of
existing Distributors, to market, promote, sell and distribute HBV in the HBV
Territory for use in the Field, which right shall operate to exclude all
others, including Digene, its Affiliates and all Third Parties.
2.3 Exclusive Appointment for HPV. Subject to the terms and conditions of
this Agreement, Digene hereby appoints Abbott and its Affiliates for the Term
as the exclusive distributor, subject to the rights of existing Distributors,
of HPV in the HPV Territory for use in the Field and Abbott hereby accepts such
appointment. As part of such appointment under this Section 2.3, Abbott shall
have the right to appoint sub-distributors in those countries or territories in
the HPV Territory in which Abbott generally uses sub-distributors to distribute
Abbott
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
diagnostic products. As exclusive distributor hereunder, Abbott and its
Affiliates shall have the sole and exclusive right, subject to the rights of
existing Distributors, to market, promote, sell and distribute HPV in the HPV
Territory for use in the Field, which right shall operate to exclude all
others, including Digene, its Affiliates and all Third Parties.
2.4 Additional Territories. Promptly after the Effective Date, but no
later than December 31, 1999, the Parties shall commence good faith exclusive
negotiations to expand the territories covered by this Agreement with respect
to each Product subject to any existing agreements between Digene and a Third
Party; provided, however, that neither Party shall be obligated to enter into
such an arrangement after completing such good faith negotiations. In the event
that prior to December 31, 1999, Digene receives an unsolicited request from a
Third Party, which Digene desires to pursue, to negotiate or enter into an
agreement to market and distribute any Product in territories not covered by
this Agreement, Digene shall provide prompt written notice to Abbott with
respect to the Product and the territories for which it has received an
unsolicited request. Abbott shall provide written notice to Digene within ten
(10) Business Days of Abbott's receipt of Digene's notice of the unsolicited
request of whether it will commence good faith exclusive negotiations with
Digene regarding such Product and territories pursuant to this Section 2.4.
Such negotiations shall be deemed to commence on the date of Abbott's notice to
Digene. In the event that Abbott does not so notify Digene that it desires to
commence such negotiations, Digene may enter into negotiations and an agreement
with respect to such Product in such territories. In the event the Parties do
not enter into an expanded contractual relationship within sixty (60) days
after the commencement of good faith exclusive
20
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
negotiations, then, from the conclusion of such negotiations or the expiration
of such sixty (60) day period, whichever first occurs, until December 31, 2001,
Digene shall not enter into any distribution agreement with a Third Party with
respect to one or more Products in territories not covered by this Agreement,
the terms of which, when considered in their entirety, are materially more
favorable to the Third Party than the terms finally offered to or by Abbott in
such negotiations. Digene shall have no obligation under this Section 2.4 with
respect to any Product if Abbott is in material breach of this Agreement or if,
with respect to such Product, Abbott's distribution rights are non-exclusive or
have terminated.
2.5 Noncompetition. During the Term, Abbott and its Affiliates shall not,
directly or indirectly, promote, market, distribute or sell [*****************
*****************************************************************************
*******************************************************************************
*******************************************].
2.6 Trade Costs. Abbott and its Affiliates shall be responsible for
payment of all rebates, discounts, management fees, service allowances, credits
and taxes associated with the sale by Abbott or its Affiliates of Shipped
Products.
2.7 Selling Price. Abbott and its Affiliates shall, in their sole
discretion, determine the final sales price of Shipped Products sold by Abbott
and its Affiliates to the Trade; provided, however, that any discount to the
sales price of Products shall be consistent with the overall discounting policy
of Abbott in connection with the sale of its diagnostic products and, when
considered in relation to the percentage discount applicable to Abbott
diagnostic products which
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
are sold together with or in connection with the Products, shall not materially
adversely affect Net Sales.
2.8 Contracting Rights. During the Term, Abbott and its Affiliates shall
have the exclusive right, subject to the Distribution Agreements, to contract
with the Trade for the sale of Products in the applicable Territory.
2.9 Distributor Territories. Digene shall terminate existing agreements,
arrangements and understandings regarding the distribution of Products with
Distributors in the Territory, unless such termination violates either the
terms of any such agreement, arrangement or understanding, any applicable law,
or both or such termination requires any payment by Digene. In such event,
Digene shall use commercially reasonable efforts to negotiate, at Digene's
cost, an arrangement whereby such agreement, arrangement or understanding (a)
is terminated, or (b) is converted to non-exclusive; provided, however, that
Digene shall have no obligations under this sentence if the cost of termination
or conversion is, in Digene's sole judgment, unreasonable. For the
non-exclusive Distributor Territories, a list of which is set forth on Schedule
1.30, Abbott's and its Affiliates' appointment hereunder shall be co-exclusive
for the applicable Products as of the Effective Date and shall remain
co-exclusive for such Products until termination of the applicable agreement,
arrangement or understanding with a Distributor, at which time, the Distributor
Territories that are subject to such agreement, arrangement or understanding
shall become part of the applicable Territory for such Products. For the
exclusive Distributor Territories, a list of which is set forth on Schedule
1.30, Abbott and its Affiliates shall have no rights to distribute the
applicable Products therein until termination of the applicable agreement,
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
arrangement or understanding with a Distributor, at which time, the Distributor
Territories that are subject to such agreement, arrangement or understanding
shall become part of the applicable Territory for such Products.
2.10 Non-Exclusive Appointment for Equipment. Subject to the terms and
conditions of this Agreement, Digene hereby appoints Abbott and its Affiliates
for the Term as the non-exclusive distributor of Equipment in the Territory for
use with respect to Products and in the CMV Territory with respect to CMV in
the Field and Abbott accepts such appointment. As part of such appointment
under this Section 2.10, Abbott shall have the right to appoint
sub-distributors in those countries or territories in the Territory in which
Abbott generally uses sub-distributors to distribute Abbott diagnostic
products.
ARTICLE 3. - MARKETING AND PROMOTION
3.1 Abbott's General Marketing and Promotion Responsibilities. Abbott
shall use commercially reasonable efforts to promote, market, sell and
distribute CT/GC, HBV, HPV, CMV, SHARP and Equipment in each country in the
CT/GC Territory, the HBV Territory, the HPV Territory, the CMV Territory and
the SHARP Territory, respectively, as the case may be. Such efforts may
include, but shall not be limited to, preparing collateral marketing materials,
conducting advertising, presenting educational seminars, participating in
customer visitations, displaying exhibits at trade shows and ensuring
representation and attendance at industry meetings, all of which shall be
performed in accordance with Abbott's usual and customary practices with regard
to other Abbott-distributed diagnostic products of similar market potential.
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Abbott shall, on an on-going basis, and at Abbott's cost, train and supervise
the appropriate personnel within the ADD sales force in the promotion and sale
of Shipped Products.
3.2 Digene's General Promotional Responsibilities. For the initial
training, Digene shall provide training personnel in such reasonable scope,
time and quantity as the Parties may mutually agree to train ADD's sales force.
In addition Digene, at Digene's cost, shall provide reasonable assistance to
Abbott in the preparation of appropriate sales force training materials.
Further, Digene shall attend, at Digene's expense, major trade shows during the
Term, as mutually agreed by the Parties, to provide Abbott with necessary
technical and Product and Other Product information support.
3.3 Development of Promotional and Marketing Materials. Promptly after
the Effective Date, Digene shall deliver to Abbott copies of all promotional
and marketing materials owned or controlled by Digene to be used by Abbott and
its Affiliates in the promotion and sale of Products and Other Products
hereunder. During the Term, Abbott shall develop and prepare, at Abbott's sole
discretion and at its cost, promotional and marketing materials for use in its
sale of Shipped Products. Abbott shall appropriately and with visual prominence
consistent with the use of its name, use Digene, Hybrid Capture, the names of
Products, Other Products and Digene Equipment and Digene Trademarks in all
promotional and marketing materials prepared for use in the sale of Shipped
Products.
3.4 Marketing Plans. Abbott shall develop and prepare, at Abbott's sole
discretion and at its cost, all marketing plans for the promotion and sale of
Shipped Products; provided, however, that Abbott shall provide to Digene prior
to implementation, any marketing plans
24
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
developed by Abbott with respect to Products for Digene's review and comment
only. As part of such marketing plans, Abbott and Digene shall mutually agree
to activities within such plans that shall be Digene's responsibility. The
marketing plans of Abbott shall be considered Confidential Information. With
respect to marketing plans regarding HPV, Abbott and Digene shall perform
marketing activities as follows:
(a) Digene shall be primarily responsible for marketing
activities directed toward obtaining governmental endorsement of HPV
testing, institutional reimbursement for use of the HPV test, and
maximizing consumer awareness and education of the benefits of HPV
testing, which activities shall be subject to the approval of Abbott which
will not be unreasonably withheld. In performing such activities, Digene
shall exercise the same diligence and shall commit the same level of
effort as it does when it markets and promotes Digene Products and the
Products outside the HPV Territory;
(b) in addition to its overall marketing responsibilities, Abbott
shall have the sole responsibility for marketing activities directed
toward obtaining laboratory endorsement and systematic use of HPV testing;
and
(c) Abbott and Digene shall Work With each other in good faith and
use commercially reasonable efforts to promote HPV testing for primary
screening in the HPV Territory, subject to applicable regulatory approvals
and restrictions.
3.5 Sales Reports. Abbott shall provide to Digene within forty-five (45)
days after each Calendar Quarter, a sales report reflecting the sales of
Products, by product part number and by country, by Abbott and its Affiliates.
Each such report shall provide Net Sales dollars and
25
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
unit sales of Products, listed separately by product, by product part number
and by country, for that Calendar Quarter, and for that year-to-date. These
sales reports shall be considered Confidential Information.
3.6 Support. During the Term, Abbott and its Affiliates and
subcontractors shall provide its customers purchasing Shipped Products with the
same level of training, support and service that Abbott provides with respect
to other Abbott-distributed diagnostic products it sells to the Trade. Abbott
and its Affiliates shall use commercially reasonable efforts to instruct from
time to time all customers purchasing Products and Other Products to utilize
Equipment that has been specified and validated under the Validation Protocols
for Equipment used in connection with Products and Other Products. The
Validation Protocols shall be as set forth on Schedule 3.6.
3.7 Product Samples. During the Term, Digene shall make available to
Abbott Products in such quantities as may be reasonably requested by Abbott and
its Affiliates and reasonably satisfactory to Digene, at [*****] price, to be
used by Abbott and its Affiliates and sub-distributors to demonstrate and
sample the Products to the Trade in the Territory subject to reconciliation
under Section 6.4.
3.8 Marketing Steering Committee. Abbott and Digene shall create a
Marketing Steering Committee which will be responsible for reviewing and
recommending general marketing and promotional responsibilities for Products
under this Article 3, recommending marketing plans and resolving operational
issues which may arise from time to time. The Marketing Steering Committee
shall consist of two (2) representatives from Abbott and two (2)
26
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
representatives from Digene, as designated from time to time by each respective
Party. The Marketing Steering Committee shall meet in person or by telephone at
least twice per year. Either Party may replace one or both of its
representatives on the Marketing Steering Committee at any time after providing
five (5) Business Days written notice to the other Party. The members of the
Marketing Steering Committee shall Work With each other in good faith to
satisfy their responsibilities under this Section 3.8.
ARTICLE 4. - SALES PERFORMANCE THRESHOLDS
4.1 Net Sales Thresholds for CT/GC. As of the Effective Date, the FDA
has not cleared CT/GC for use in the United States. Until 510(k) clearance by
the FDA to market CT/GC (as filed with the FDA as of the Effective Date) in the
United States has been obtained, Digene is able to deliver CT/GC to Abbott for
resale in the United States, and CT/GC meets the automation specifications set
forth on Schedule 4.1 and has been internally validated by Digene pursuant to
the Validation Protocols ("CT/GC Clearance"), Abbott shall not be subject to
any Net Sales thresholds for CT/GC. Abbott shall be subject to Net Sales
thresholds for CT/GC in the CT/GC Territory at the completion of the [********]
following the Contract Year in which CT/GC Clearance was obtained and
thereafter, as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
CPT Code Net Sales in [***] Net Sales in [***] Net Sales in [***]
- -------- ------------------ ------------------ ------------------
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Non-Amplified $[***] $[***] The greater of
Reimbursement $[***] or the Net
Sales in the [***]
- ------------------------------------------------------------------------------------------------
</TABLE>
27
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Amplified $[***] $[***] The greater of
Reimbursement $[***] or the Net
Sales in the [***]
- ------------------------------------------------------------------------------------------------
</TABLE>
(a) Abbott Achieves Thresholds. If Abbott and its Affiliates achieve
each Net Sales threshold set forth above during the Term, this
Agreement shall be extended automatically on an exclusive basis with
respect to CT/GC in the CT/GC Territory for an additional Contract Year
and shall continue to be extended for an additional Contract Year for
each subsequent Contract Year in which the Net Sales threshold is
achieved. If Abbott and its Affiliates do not have Net Sales in the
[******] following the Contract Year in which CT/GC Clearance was
obtained which meet the Net Sales threshold established for such
Contract Year or if after the Initial Term, Abbott and its Affiliates
do not have Net Sales in any subsequent Contract Year which meet the
Net Sales threshold established for Contract Years after the Initial
Term, Digene, at its sole discretion, may elect, within one hundred and
twenty (120) days following the completion of such Contract Year, to
convert this Agreement [**********************************************
***********************] following the Contract Year in which the Net
Sales threshold was not achieved. [************************************
******************************************************************
******]. If Digene elects to so convert this Agreement, Digene shall
provide Abbott with written notice of such election and such
[************************] shall become applicable immediately upon
Abbott's receipt of the notification.
28
<PAGE> 37
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(b) Abbott Fails to Achieve Thresholds. If Abbott and its Affiliates
do not achieve the Net Sales threshold for CT/GC for the [******]
following the Contract Year in which CT/GC Clearance was obtained,
Digene, at its sole discretion, may elect, within one hundred and
twenty (120) days following the completion of such [******], to convert
this Agreement [**********************************************
******************************************] If Digene elects to so
convert this Agreement, Digene shall provide Abbott with written notice
of such election and such [*************************] shall become
applicable immediately upon Abbott's receipt of notification.
[*********************************************************************
**********************************************************************
***********************].
At the expiration of the Term, if Abbott was then [*************************],
Abbott and Digene shall engage in a wind-down for a period of [******]
commencing at the expiration of the Term as more fully described in Section
4.5.
4.2 Net Sales Thresholds for HBV. During the Term, Abbott shall be
subject to Net Sales thresholds for HBV at the completion of the [******] and
each subsequent Contract Year, if any, as follows:
<TABLE>
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
[********] [********] Each Contract Year
Following the[***]
- ------------------------------------------------------------------------------------------------
$[***] $[***] Actual Net Sales in
the [***]
- ------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE> 38
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(a) Abbott Achieves Thresholds. If Abbott and its Affiliates achieve
each Net Sales threshold set forth above during the Term, this
Agreement shall be extended automatically on an exclusive basis with
respect to HBV in the HBV Territory for [***************************]
and shall continue to be extended for [********************************
************************************************************************
***]. After the Initial Term, if Abbott and its Affiliates do not have
Net Sales in any subsequent Contract Year which meets the Net Sales
threshold established for Contract Years after the Initial Term,
Digene, at its sole discretion, may elect, within one hundred and
twenty (120) days following the completion of such Contract Year, to
convert this Agreement [********************************************
**************************] following the Contract Year in which the Net
Sales threshold was not achieved. [********************************
****************************************************************************
****************************************************************************]
If Digene elects to so convert this Agreement, Digene shall provide Abbott with
written notice of such election and such [******************************] shall
become applicable immediately upon Abbott's receipt of the notification.
(b) Abbott Fails to Achieve Thresholds. If Abbott and its Affiliates
do not achieve the Net Sales threshold for HBV for the [********],
Digene, at its sole discretion, may elect, within one hundred and
twenty (120) days following the completion of such [********], to
convert this Agreement [********************************************
******************************************] If Digene elects to so
convert
30
<PAGE> 39
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
this Agreement, Digene shall provide Abbott with written notice of such
election and such [*************************] shall become applicable
immediately upon Abbott's receipt of the notification. In addition, if
Abbott and its Affiliates do not achieve the Net Sales threshold for
HBV for the [********], and if Abbott was then [************
***********], Digene, at its sole discretion and upon written notice to
Abbott, may terminate this Agreement with respect to HBV only and
provide Abbott with a wind-down period of [********] commencing at the
expiration of the Term, as more fully described in Section 4.5.
[********************************************************************
*****************************************************************************]
4.3 Net Sales Thresholds for HPV. During the Term, Abbott shall be
subject to Net Sales thresholds for HPV at the completion of each of the
[********], inclusive, and each subsequent Contract Year, if any, as follows:
<TABLE>
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
[***] [***] [***] [***]
- -----------------------------------------------------------------------------------------------
$[***] $[***] $[***] $[***]
- -----------------------------------------------------------------------------------------------
</TABLE>
(a) Abbott Achieves Thresholds. If Abbott and its Affiliates achieve
the Net Sales thresholds set forth above for each of the [********],
this Agreement shall continue automatically after each such Contract
Year on an exclusive basis with respect to HPV in the HPV Territory for
an additional Contract Year. After the [********], the following shall
apply:
31
<PAGE> 40
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(i) If Abbott and its Affiliates have Net Sales of HPV in
the HPV Territory in the [********] of between [********] and
[********], Digene shall elect, at its sole discretion, either
to: [*********************************************************
**************************************************************
**************************************************************
**************************************************************
**************************************************************
**************************************************************
**************************************************************
*************************************************];
(ii) If Abbott and its Affiliates have Net Sales of HPV in
the HPV Territory in the [********] of greater than [********]
but less than [********], Digene shall elect, at its sole
discretion, either to: [****************************************
****************************************************************
****************************************************************
****************************************************************
*************************************************************
************************************************************
************************************************************
*************************************************]; and
(iii) If Abbott and its Affiliates have Net Sales of HPV in
the HPV Territory in the [********] of [********] or greater,
Abbott, and not Digene, shall elect, at Abbott's sole
discretion, either to: [****************************
32
<PAGE> 41
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
****************************************************************
****************************************************************
****************************************************************
****************************************************************
***************************************************************
***************************************************************
*****************************************************
***********************]; provided, however, that in the event
Abbott fails to notify Digene of its election within one hundred
twenty (120) days of the end of the [*****], Digene shall
provide Abbott with prompt written notice of such failure and
Abbott shall have thirty (30) days from receipt of such notice
to notify Digene in writing of Abbott's election under this
Section 4.3(a)(iii). If Abbott fails to so notify Digene within
such thirty (30) day period, Digene may, at its sole discretion,
[*************************************************************
**************************************************************
**************************************************************
*******************************************************************************
*****************************************************************************];
(b) Abbott Fails to Achieve Thresholds. If Abbott and its
Affiliates do not achieve the Net Sales threshold for HPV for
any of the [*********], inclusive, Digene, at its sole
discretion, may elect, within one hundred and twenty (120) days
following the completion of each such Contract Year, to
[**************
33
<PAGE> 42
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***********************************]. If Digene elects to
[************************] and Abbott was then [************
************] Digene shall provide Abbott with written notice of
such election and Abbott and Digene shall engage in a wind-down
for a period of [*********] commencing at the expiration of the
Term, as more fully described in Section 4.5. [****************
*****************************************************************************].
4.4 Exercise of Rights. Digene shall have one hundred and twenty (120)
days from the date on which it is determined that Abbott did not achieve a Net
Sales threshold set forth in this Article 4 to advise Abbott in writing that
Digene is electing to assert the particular right associated with Abbott's
failure to achieve such Net Sales threshold. In the event Digene does not
provide Abbott with such written election within the one hundred and twenty
(120)-day period, Digene shall be deemed to have waived such threshold
requirement and Digene shall be precluded from asserting Abbott's failure to
achieve such Net Sales threshold at any other time thereafter, except as
provided in Sections 15.4(b) and 19.2(b)(ii)(A).
4.5 Wind-down Activities. During a wind-down period Abbott's rights
shall convert to [***********************************************************
*******], and Digene and Abbott shall continue to perform their respective
duties and be bound to their respective obligations hereunder with respect to
manufacturing, supplying, selling and distributing [************]. During such
wind-down period, Abbott and its Affiliates shall only [***********************
**************************************************************************
***************************************************************************
*****************************************
34
<PAGE> 43
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
******************************************************************************
******************************************************************************
***********************************************************************
*****************************************************************************].
4.6 Factors Affecting Net Sales. In the event Abbott's Net Sales with
respect to any Product is materially adversely impacted as a result of: delays
in Digene obtaining CT/GC Clearance as contemplated by Section 4.1; changes in
reimbursement structure; Digene's failure to supply Abbott with Product in
accordance with the terms and conditions of Articles 5 or 18; Recalls; other
actions by regulatory authorities or by Digene as described in Section 12.4; or
any adverse change in the performance of the Product or failure to meet
Specifications, the Parties shall meet and negotiate in good faith an agreement
with respect to the appropriate downward adjustment to the applicable Net Sales
thresholds set forth above.
ARTICLE 5. - MANUFACTURE AND SUPPLY
5.1 Supply.
(a) Supply. Upon the terms and subject to the conditions of this
Agreement, Digene shall manufacture, or cause to be manufactured, and
provide to Abbott such quantities of Products, Other Products and
Equipment as are consistent with the forecasting and ordering
provisions set forth in Sections 5.2 and 5.3.
(b) Labeling and Package Inserts. Digene, at its expense, shall
translate and modify each Product's, CMV's and Digene Equipment's
documentation and labeling into
35
<PAGE> 44
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Spanish, Italian, French, and German and Abbott shall be responsible
for translation into any other language so that such Products, CMV and
Digene Equipment comply with all local requirements for sale and
clinical use in each country or region of the applicable Territory.
Each Party shall assist the other Party with such translation at such
other Party's request. Further, subject to the requirements of
applicable law, Digene shall include on all Products a co-branded label
identifying Abbott and Digene with equal prominence, which co-branded
label shall be reasonably satisfactory to both Parties.
(c) Registrations.
(i) Requirements. Digene shall own and hold and shall have
all right, title and interest in and to all registrations with
respect to Product and CMV that have been or will be filed in
the name of Digene. Digene, at its sole expense, except as
otherwise provided in this Section 5.1(c)(i) and as provided in
Section 19.6(b), shall be responsible for completing and
maintaining all documentation, including technical (e.g., the
international products master file) and all legal documentation
required for regulatory approvals for marketing Products and CMV
in the Territory and the CMV Territory, as the case may be. The
Parties shall Work With each other to complete such
registrations. To the extent a Designated Country requires
regulatory documentation necessary to market Products and CMV to
be filed in the name of a local Affiliate, Abbott shall promptly
notify Digene in writing of Abbott's intent to seek such
registrations and, if Digene does not have or does not seek to
create such a local Affiliate, then
36
<PAGE> 45
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Abbott, at Abbott's sole expense, shall be responsible for
completing and maintaining all documentations, including
technical, and all legal documentation required for regulatory
approvals for marketing Products and CMV in such Designated
Country. Further, Abbott shall own and hold and shall have all
right, title and interest in and to all registrations with
respect to Products and CMV that Abbott paid for pursuant to the
immediately preceding sentence; provided, however, that Abbott
shall not own or have any proprietary interest in or to any
Confidential Information disclosed by Digene hereunder with
respect to such registrations, unless otherwise agreed in
writing by the Parties. The Parties shall Work With each other
to prepare and submit all such regulatory filings in such
Designated Country.
(ii) Transfers. In the event Abbott does not have exclusive
distribution rights with respect to a Product hereunder and
Digene desires to access and use any registrations obtained by
Abbott under Section 5.1(c)(i) with respect to such Product or
CMV, Digene shall so advise Abbott in writing. Promptly after
receipt of such request, Abbott shall, to the extent permissible
under applicable law, provide Digene access and use of the
registrations requested by Digene, provided that Digene
reimburses Abbott for Abbott's direct expense in obtaining such
registrations in accordance with the following formula: Digene
shall reimburse Abbott at [********] of Abbott's direct expense,
and such reimbursement percentage shall be reduced in [********]
for each Contract Year in which such
37
<PAGE> 46
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
registrations are owned and held by Abbott and in which Abbott
retains any marketing and distribution rights hereunder
(excluding any wind-down periods described in Article 4) with
respect to the Products and/or CMV to which such registrations
apply; provided, however, that Digene shall only be obligated to
reimburse Abbott for [**********************] determined pursuant
to such formula for any periods during which Abbott's rights to
such Product and/or CMV are [*************] hereunder. In the
event Abbott does not have any marketing and distribution rights
hereunder with respect to a Product and/or CMV the registration
rights of which have been requested by Digene, Abbott shall, to
the extent permissible under applicable law, transfer to Digene
all right, title and interest in and to such registrations.
(d) Changes. Digene shall notify Abbott in writing of any
proposed changes in Digene's manufacturing process which affect fit,
form or function of Product or Other Product. Upon the request of
Abbott, Digene shall provide to Abbott representative samples of such
changed Product or Other Product in sufficient quantities for the sole
purpose of evaluating such proposed change in Digene's manufacturing
process. Upon such notice of any proposed change after receipt of such
representative samples, Abbott may evaluate and communicate to Digene
its approval or disapproval of such change within forty-five (45) days
after the date of notice; provided, however, that Abbott shall not
unreasonably withhold its approval of any such change. A failure to
notify by Abbott within forty-five (45) days after the date of notice
by Digene shall be deemed to
38
<PAGE> 47
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
constitute Abbott's approval of such proposed change. Only upon
approval may Digene incorporate such change into the manufacturing
process. Digene shall be obligated only to notify Abbott in writing of
any proposed material changes in Digene's manufacturing process which
do not affect fit, form or function of Product or Other Product but no
action by Abbott shall be required in order for Digene to incorporate
such change.
(e) Certified Vendor. Digene shall use its reasonable
commercial efforts to become an Abbott certified vendor within twelve
(12) months after the Effective Date.
(f) Special Provisions. Digene shall maintain stock of items
critical to the manufacture of Products and Other Products in
accordance with its standard operating procedure for ordering special
materials. Digene shall provide Abbott notice of any change to such
standard operating procedure reasonably likely to affect the production
of Products or Other Products.
(g) Fully Burdened Manufacturing Costs Report. Digene shall
provide to Abbott a written report reflecting a detailed analysis of
the Fully Burdened Manufacturing Costs for Products purchased on a cost
or cost-plus basis for the preceding Calendar Quarter and for Digene
Equipment purchased on a cost or cost-plus basis within forty-five (45)
days after each Contract Year for the preceding Contract Year. Further,
Digene shall advise Abbott in writing sufficiently in advance of any
proposed change in Digene's accounting methodology and treatment so
that Abbott can adjust its record-keeping accordingly to integrate such
change.
39
<PAGE> 48
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
5.2 Forecasting. Within thirty (30) days after the Effective Date, Abbott
shall provide to Digene a written forecast of Abbott and its Affiliates'
purchases of Product, Other Product and Equipment (listed separately) for the
first Contract Year. This forecast shall not be binding on either Party and
shall be used for planning purposes only. Further, on the Effective Date with
respect to the remainder of the first Calendar Quarter of the first Contract
Year, and then on or before the first day of each Calendar Quarter thereafter,
Abbott shall provide to Digene a written rolling forecast estimating by month
Abbott and its Affiliates' purchases of Product, Other Product and Equipment
(listed separately) for the following twelve (12)-month period. The quantity of
Product, Other Product and Equipment listed for the first three (3) months of
each forecast shall be a firm order, which is a guarantee of minimum orders to
be placed during the first three (3) months of each forecast and the remainder
of the forecast shall be used for planning purposes only. In the event Abbott
and its Affiliates place firm orders during a Calendar Quarter that exceed the
amount of the firm order for such Calendar Quarter, Digene shall use its
commercially reasonable efforts to meet any such additional firm orders placed
by Abbott or its Affiliates. Notwithstanding the preceding sentence, Digene
shall have no obligation to fill any additional firm orders to the extent such
additional firm orders exceed the quantities of Product, Other Product and
Equipment (listed separately) contained in the forecast by more than one
hundred fifty percent (150%).
5.3 Orders. All orders shall be placed on Abbott purchase order forms,
which shall specify the quantity ordered, price, the requested delivery date
and any special shipping instructions or invoicing information. Except for the
terms specified in the purchase order in
40
<PAGE> 49
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
accordance with the preceding sentence, the terms and conditions of this
Agreement shall govern all purchases and supersede the general terms of any
purchase order, acknowledgment or invoice form.
5.4 Failure to Supply Product.
(a) In the event Digene is unable to supply Abbott and its
Affiliates with Product (on a Product by Product basis): (i) in
accordance with Abbott's and its Affiliates' firm purchase orders
issued in accordance with Sections 5.2 and 5.3; (ii) as a result of an
uncured material breach by Digene of any covenant, representation or
warranty contained in this Agreement; or (iii) as a result of an event
of force majeure, Abbott, subject to the terms and conditions of
Sections 5.4(b), 5.4(c) and 5.4(d), shall have the right to manufacture
or have manufactured for it any Product which supply is adversely
impacted as described above.
(b) Digene shall notify Abbott in writing as soon as practicable
if Digene is unable or anticipates it will be unable to provide
sufficient quantities of Product as a result of a condition described
in Sections 5.4(a)(i)-(iii). Upon receipt of such notification, Abbott
shall Work With Digene to resolve the failure to supply. If such
failure to supply has not been resolved in the reasonable good faith
judgment of Abbott, which judgment shall not be unreasonably withheld,
within six (6) months from the date Abbott received the notification
from Digene, Abbott shall, on thirty (30) days written notice to
Digene, have the right to manufacture or have manufactured for it such
impacted Product.
41
<PAGE> 50
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(c) In the event Abbott exercises its right to manufacture or
have manufactured for it any Product pursuant to Section 5.4(b), (i)
Abbott shall be obligated to pay to Digene an amount equal to
[********] of the [********] for the impacted Product which Abbott
would have been obligated to pay had Digene continued to manufacture
such Product, until Digene resumes the manufacture of such Product
under Section 5.4(e), and (ii) Digene shall, solely for the period
during which Abbott exercises its rights pursuant to Section 5.4(b),
transfer to Abbott any rights, materials, know-how and documentation
necessary for the manufacture of such Product, if necessary, pursuant
to a fully paid temporary license until Digene resumes manufacture of
the impacted Product under Section 5.4(e). Abbott shall use such
rights, materials, know-how and documentation only for the manufacture
of such Product in accordance with this Section 5.4 and not for any
other purpose.
(d) Notwithstanding the transfer to Abbott of any rights,
materials, know-how, and documentation necessary for the manufacture of
any Product, Digene shall be permitted to cure any condition described
in Section 5.4(a)(i)-(iii). In the event Digene cures any inability to
supply Abbott and its Affiliates with any Product at any time after
Abbott's exercise of its right to manufacture such Product, at Digene's
election, Abbott shall return to Digene all rights, materials,
know-how, and documentation previously transferred pursuant to this
Section and Digene shall resume the manufacture of such Product. Any
rights, materials, know-how, and documentation transferred pursuant to
this Section shall be treated by Abbott and/or its Affiliates as
Confidential Information.
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(e) If Digene elects to exercise its right to resume the
manufacture of such Product, Digene shall pay to Abbott Abbott's direct
cost of capital after amortization and direct expenses for materials,
labor and direct allocable overhead for establishing the capability to
manufacture such Product and Abbott shall transfer and convey to Digene
title to any equipment and other assets represented by such cost.
5.5 Failure to Supply Digene Equipment.
(a) In the event Digene is unable to supply Abbott and its
Affiliates with Digene Equipment (on a product by product basis): (i) in
accordance with Abbott's and its Affiliates' firm purchase orders issued in
accordance with Sections 5.2 and 5.3; (ii) as a result of an uncured material
breach by Digene of any covenant, representation or warranty contained in this
Agreement; or (iii) as a result of an event of force majeure, Abbott shall have
the right to purchase any equipment from Third Parties necessary to perform the
function(s) of Digene Equipment adversely impacted by this Section 5.5(a);
provided, however, that such equipment meets the Validation Protocols set forth
on Schedule 3.6.
(b) Digene shall notify Abbott in writing as soon as practicable
if Digene is unable or anticipates it will be unable to provide sufficient
quantities of Digene Equipment as a result of a condition described in Sections
5.5(a)(i)-(iii). Upon receipt of such notification, Abbott shall Work With
Digene to resolve the failure to supply. If such failure to supply has not been
resolved in the reasonable good faith judgment of Abbott, which judgment shall
not be unreasonably withheld, within thirty (30) days from the date Abbott
received the notification
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REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
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from Digene, Abbott shall, on thirty (30) days written notice to Digene, have
the right to purchase equipment from Third Parties as provided in Section
5.5(a).
(c) If Digene elects to resume supply of Digene Equipment
adversely impacted by Section 5.5(a), Abbott shall no longer have the right to
purchase equipment under Section 5.5(b), but Digene shall afford Abbott a
commercially reasonably time frame in which to sell existing inventory of
alternative equipment purchased pursuant to Section 5.5(b).
5.6 Supply Allocation. In the event of a shortage of Product and/or CMV
during the Term, Digene shall allocate Product and CMV in a reasonable manner
so as to support Abbott and its Affiliates as a supplier of Products and CMV,
and at a minimum, Digene shall allocate its manufacturing capability on a unit
basis such that Abbott and its Affiliates receive the same percentage of
Digene's total output of Products and CMV as Abbott and its Affiliates received
on average during the most recent six (6) months prior to the shortage.
5.7 Ordering Processing. Abbott and its Affiliates shall have the sole
responsibility for solicitation and for receiving and processing orders for
Product from the Trade in the exclusive territories with respect to each
Product. Purchase orders for Products received by Digene from the Trade in such
territories shall be transferred immediately to Abbott for handling and
invoicing. Digene shall promptly forward to Abbott any order it receives during
the Term for Products from the Trade in the applicable Territory.
5.8 Safety Stock. Within thirty (30) days after the first Delivery of
each Product hereunder, Digene shall maintain a six (6) month safety stock of
the critical components (including, but not limited to, cell lines, antibodies,
calibrator and control stocks, and probe sets)
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of each Product, based on the most recent twelve (12) month forecast provided
by Abbott pursuant to Section 5.2. Digene shall rotate the safety stock with
each new manufacturing lot.
5.9 Hazardous Classification Labeling. To the extent required by
applicable law with respect to each Product, Other Product and Equipment,
Digene shall complete, subject to Abbott's prior written approval, which
approval shall not be unreasonably withheld, Product, Other Product and
Equipment analysis forms or, alternatively, Digene shall provide Abbott with
access to all pertinent documentation with respect to each Product, Other
Product and Equipment, including, without limitation, composition, test results
or other relevant Product, Other Product and Equipment data, as deemed
necessary by Abbott. Further, to the extent necessary, the Parties shall
address appropriate labeling matters.
5.10 Expiration Dating. Digene shall use commercially reasonable efforts
to extend to twelve (12) months the expiration dating on Products and CMV, if
applicable, delivered to Abbott. Products and CMV shall have a minimum of six
(6) month expiration dating.
ARTICLE 6. - PRICE AND TERMS
6.1 Purchase Price for Equipment.
(a) Digene Equipment. Abbott shall purchase from Digene all
Digene Equipment needed to implement and perform this Agreement at the
Purchase Price set forth on Schedule 6.1(a). Abbott shall pay for such
Digene Equipment in accordance with Digene's standard payment terms,
which are net thirty (30) days.
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REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(b) Existing Field Equipment. Abbott shall purchase existing
field Equipment from Digene for the purchase price set forth on
Schedule 6.1(b), less accumulated depreciation for each item of
Equipment calculated since the date of shipment of such item by Digene.
Abbott shall pay for such existing field Equipment within thirty (30)
days of the Effective Date. A list of such field Equipment is set forth
on Schedule 6.1(b).
(c) Non-proprietary Equipment. The Purchase Price for
Non-proprietary Equipment shall be as set forth on Schedule 6.1(c);
provided, however, that Abbott and its Affiliates may, at their sole
cost and expense and at their sole discretion, purchase any
Non-proprietary Equipment directly from Third Parties; provided that
such Non-proprietary Equipment meets the Validation Protocols set forth
on Schedule 3.6.
(d) Equipment. To the extent Abbott purchases Digene Equipment
listed on Schedule 6.1(a) and PC Monitor (Product Number 5050-1015) and
Inkjet Printer (Product Number 5050-1028A) from Digene, so that such
purchase constitutes a complete customer system, such Purchase Price
shall not [*************] per unit, adjusted for changes in the
Producer Price Index ("PPI") for in vitro diagnostic
substances-clinical chemistry products-standards and controls (Code
2835-115), as quoted by the U.S. Department of Labor, Bureau of Labor
Statistics (or any successor agency or index), from the PPI published
most recently prior to the Effective Date to the PPI published most
recently prior to the date of such purchase, provided that, in the
event and to the extent such adjustment cannot be passed on to
customers, the amount of the
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adjustment or the portion thereof which cannot be passed on to
customers shall be reduced by [*************].
6.2 Product Transfer Price.
(a) Transfer Price of CT/GC Outside the United States. During the
Term, the transfer price of CT/GC with respect to sales outside the
United States shall be [******] of the CT/GC Non-U.S. AUP, subject to
[***************************************************].
(b) Transfer Price of CT/GC in the United States. During the
Term, the transfer price of CT/GC with respect to sales in the United
States shall be [******] of the CT/GC U.S. AUP, subject to [***********
***************************************].
(c) Transfer Price of HBV. During the Term, the transfer price of
HBV shall be [******] of the HBV AUP, subject to [********************
******************************].
(d) Transfer Price of HPV. During the Term, the transfer price of
HPV shall be [******] of the HPV AUP, subject to [********************
******************************].
(e) Purchase Price for Product Accessories. The purchase price
for Product Accessories is set forth on Schedule 1.64.
6.3 Minimum Transfer Price. Notwithstanding anything in this Article
6 or any other Section of this Agreement to the contrary, during the Term, the
transfer price for each Product shall be [*********************************
************************************].
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REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
6.4 Year-End Reconciliation. Within forty-five (45) days after the end
of each Contract Year, Abbott and Digene shall reconcile, by product code, [***
*******************************************************************************
************************************]. In such reconciliation [*****************
*********************************************************************
********************************************************************]. The
calculations and results of such reconciliation shall be contained in a written
report submitted to Digene within thirty (30) days after the end of the
immediately preceding Contract Year. The Parties shall make any adjustments as
to overpayments or underpayments, if any, by credit or debit memo, as the case
may be, within fifteen (15) days after Digene's receipt of the report;
provided, however, any such adjustment in the final Contract Year shall be
handled by a check or wire transfer of the overpayment or underpayment to the
affected Party within thirty (30) days after the end of the final
reconciliation.
6.5 Royalty Obligations. Digene shall make, at Digene's sole cost and
expense, all royalty payments due to all relevant Third Parties as a result of
the manufacture, use, sale and importation of Products, Other Products and
Equipment in the affected territories.
6.6 Payment Terms. Digene shall invoice Abbott or its Affiliates for
Products, Product Accessories, Product Samples, Other Products and Equipment
purchased hereunder. Abbott shall pay such invoices in United States dollars
net thirty (30) days from the date of receipt of the invoice. In the event
Abbott fails to make a payment when due, overdue payments shall bear interest
at the rate of one percent (1.0%) per month, or if lower, the highest rate
permitted by law, from the date due until paid.
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REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
6.7 Foreign Exchange. All amounts referred to in this Agreement are
expressed in United States dollars. All payments under this Agreement shall be
made in United States dollars (or other legal currency of the United States).
If Abbott, its Affiliates or its sub-distributors receive revenues from the
sales of Products in a currency other than United States dollars, Net Sales
with respect to such sales shall be converted into United States dollars at the
average exchange rate for such foreign currency calculated monthly by adding
the spot rate at the end of the month immediately prior to the date of sale and
the spot rate at the end of the current month in which such sale occurs divided
by two (2). Rates used shall be those available on Reuters at 9:00 a.m. CST on
the second to last business Day of the month, with the exception of November,
in which the last Business Day of the month shall be used.
ARTICLE 7. - SHIPMENT AND DELIVERY
7.1 Shipment. Delivery shall occur for Products, Other Products and
Equipment purchased from Digene ("Shipped Products") FOB Digene ("Delivery" or
"Delivered"). Unless otherwise agreed, freight charges for Shipped Products
Delivered will be invoiced directly to Abbott by the carrier selected by Abbott
in its sole discretion. Digene may make partial shipments of the Shipped
Products, subject to prompt filling of any resulting back order; provided,
however, that Abbott shall not be responsible for any incremental freight
charges resulting from partial shipments.
7.2 Delivery. For Delivery of Shipped Products, Digene shall ship
Shipped Products ordered by Abbott and its Affiliates in accordance with
shipping instructions provided by Abbott.
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REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
7.3 Export Licenses: Import Certificates; Customs and Regulatory
Approval for Delivery of Shipped Products Outside the United States.
(a) Abbott's Responsibilities. Abbott, [************] shall: (i)
obtain any export license required by the country of manufacture to
export the Shipped Products to the Designated Country; (ii) obtain all
authorizations required to export the Shipped Products from the United
States or import the Shipped Products into the Designated Country;
(iii) obtain, if required, any import or export certificates and other
necessary permits or approvals required by any country from or through
which Shipped Products are to be shipped to Deliver the Shipped
Products to the Designated Country; and (iv) pay all applicable import
and custom duties, taxes and fees.
(b) Digene's Responsibilities. Digene shall take all reasonable
steps to cooperate with Abbott in complying with any import, export or
custom regulations applicable to the Shipped Products, to the extent
consistent with applicable law, including filling out necessary
paperwork or reports to obtain any applicable waiver, exemption or
reduction of such duties in a timely manner.
7.4 Title and Risk of Loss. Title to and risk of loss Shipped
Products shall pass to Abbott at the place and time of Delivery. Any loss or
damage to Shipped Products prior to Delivery shall be at Digene's risk.
7.5 Taxes. Any foreign, federal, state, county or local sales, use,
value-added or excise tax or similar charge, including customs and import
duties, or other tax assessment (other than that assessed against income),
license fee (other than royalties owed to Third Parties) or
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SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
other charge lawfully assessed or charged on the sale or transportation of
Shipped Products sold pursuant to this Agreement after Delivery to Abbott shall
be paid by Abbott.
7.6 Certificate of Analysis. Digene shall provide Abbott with a
Certificate of Analysis with each lot of Products and Other Products sold to
Abbott hereunder certifying compliance with the Specifications and Other
Product Specifications, respectively.
ARTICLE 8. - ACCEPTANCE OF SHIPPED PRODUCT; INSPECTION OF
MANUFACTURING FACILITY
8.1 Digene Testing. Digene shall inspect and test Shipped Products for
conformity to the Specifications or Other Product Specifications, as
applicable, in accordance with its normal quality assurance procedures as such
procedures may be amended from time to time prior to release to Abbott and its
Affiliates. Digene shall notify Abbott prior to any change in its quality
assurance procedures that reasonably may be expected to affect the quality of
the Shipped Product.
8.2 Abbott Testing. All Shipped Products shall be subject to Abbott's or
its Affiliates' inspection and approval. At Abbott's request, Digene shall make
available to Abbott up to four (4) kits per lot for each Product and Other
Product, free of charge, prior to the delivery of Products and Other Products,
to enable Abbott to ensure that the Product or Other Product conforms to the
Specifications or Other Product Specifications, respectively. Abbott or its
Affiliates shall, within ten (10) days after receipt of such Equipment or kits,
inspect and test such Equipment and kits and may reject any Shipped Product
which is:
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(a) not in compliance with the Specifications or Other Product
Specifications, as applicable;
(b) not in compliance with all manufacturing procedures,
in-process controls, testing, specifications and storage conditions, as
set forth in Digene's 510(k), or any foreign equivalent for Shipped
Products, or any subsequent amendments thereto;
(c) not manufactured in accordance with cGMPs with respect to
Products, Other Products and Digene Equipment;
(d) not conforming to instructions agreed upon by the Parties in
writing regarding packaging or transport;
(e) shipped in violation of any applicable statute,
administrative order or regulation;
(f) Recalled by any governmental agency or by Digene for reasons
for which Abbott and its Affiliates are not at fault; or
(g) shipped by Digene with less than six (6) months dating with
respect to Products or CMV.
If Abbott, or its Affiliates, as the case may be, reject any Shipped
Products, it shall give Digene written notice of such rejection within ten (10)
days testing period, accompanied by a written summary of the grounds for
rejection and any documentation of any testing performed by Abbott, or its
Affiliates, as the case may be. Upon receipt of such notice, Digene may request
Abbott, or its Affiliates, as the case may be, to return the rejected Shipped
Product, or samples thereof, for testing by Digene. Abbott's or its Affiliates'
rejection shall be final unless Digene
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notifies Abbott within thirty (30) days after the later of the receipt of the
rejection notice or the rejected Shipped Product, or samples thereof, that
Digene disagrees with Abbott's or its Affiliates' conclusions with respect to
the rejected Shipped Product. If the Parties are unable to resolve the dispute,
samples of the rejected Shipped Product shall be submitted to a mutually
acceptable independent testing laboratory for analysis. The results of the
independent testing laboratory shall be final and binding on the Parties. The
costs of the independent testing laboratory shall be paid by the Party against
whom the discrepancy is resolved. The Parties' inability to agree upon an
independent testing laboratory shall be resolved through the dispute resolution
procedures set forth in Section 21.6. All Products properly rejected by Abbott
or its Affiliates pursuant to the terms and conditions of this Section 8.2 and
not otherwise replaced by Digene in a timely fashion to enable Abbott and its
Affiliates to consummate the available sale to the Trade shall be included in
any calculation with respect to Net Sales thresholds as described in Article 4.
8.3 Abbott Inspection. Digene shall permit Abbott, upon reasonable
notice and during Digene's regular business hours, but no more often than once
in each Contract Year, access to those areas of Digene's manufacturing
facilities where the Products and Other Products are manufactured, tested,
packaged, stored, handled and shipped to verify Digene's compliance with its
obligations hereunder. The Device Master Record shall be available for review
by Abbott on site at Digene's manufacturing facilities upon reasonable notice
from Abbott.
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SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
ARTICLE 9. - REGULATORY COMPLIANCE AND MEDICAL COMPLAINTS
9.1 No Modification. Abbott shall not modify, repackage, reformulate or
alter any Shipped Product, including its label, except with specific written
authorization from Digene.
9.2 Regulatory Compliance. Digene shall be responsible at Digene's
expense for all governmental and regulatory filings in the Territory for
Products, Digene Equipment and in the CMV Territory for CMV. All responses to
governmental agencies concerning the Products, Digene Equipment and CMV shall
be the sole responsibility of Digene, with reasonable assistance from Abbott,
as requested by Digene. Digene shall provide Abbott copies of all filings
and/or responses concerning the Products, Digene Equipment and CMV which occur
after the Effective Date. In the event Digene is unable to obtain or maintain
the requisite governmental approvals to enable Abbott and its Affiliates to
sell Products in any such country in the Territory, Abbott's inability to meet
the Net Sales thresholds described in Article 4 shall be adjusted based on [***
************************************************************************
**************************************************************************
***********], to reflect the adverse impact to Abbott due to the absence of
regulatory clearance.
9.3 Customer Complaints. In the event either Party receives a customer
complaint regarding Shipped Products, such Party shall promptly notify the
other of such complaint. If the Shipped Product giving rise to such complaint
was sold by Abbott, its Affiliates or sub-distributors, then Abbott shall
evaluate the complaint and promptly notify Digene in writing regarding such
evaluation. If Abbott determines that such complaint is due to a matter that is
within Digene's responsibilities hereunder, then Digene, at Abbott's request
and Digene's
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expense, shall assist Abbott or its Affiliates in follow-up resolution of such
complaint. The Parties shall exchange on a confidential basis all pertinent
information regarding a customer complaint with respect to Products and
Equipment sold in the Territory, CMV sold in the CMV Territory and SHARP sold
in the SHARP Territory.
ARTICLE 10. - RECALL OR WITHDRAWAL
10.1 Event of Recall and Withdrawal. In the event: (a) any governmental
or regulatory authority in the Territory, CMV Territory or SHARP Territory
issues a request, directive or order that Shipped Product be recalled or
withdrawn, or such request, directive or order is imminent; (b) a court of
competent jurisdiction orders such recall or withdrawal; or (c) either Party
reasonably determines after consultation with the other that a recall or
withdrawal is necessary or advisable (each a "Recall"), the Parties shall take
all appropriate corrective action.
10.2 Expense of Recall. In the event a Recall results from any cause or
event arising from the manufacture, packaging, shipment of Shipped Products by
Digene or its Affiliates, or other cause or event attributable to Digene, its
Affiliates or Third Parties (excluding Third Parties in privity with Abbott),
Digene shall be responsible for the expense of the Recall. In the event a
Recall results from any cause or event attributable to Abbott, its Affiliates
or sub-distributors and arising from the marketing, promotion, sale or
distribution of Shipped Products by Abbott, its Affiliates or sub-distributors,
or other cause or event attributable to Abbott, its Affiliates or
sub-distributors, Abbott shall be responsible for the expense of the Recall. In
each instance, the Parties shall cooperate to effectuate efficiently the
Recall. For purposes of this Agreement,
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Recall expenses shall include, without limitation, the expenses of notification
and destruction or return of the recalled or withdrawn Shipped Product and
Abbott's, its Affiliates' or sub-distributors' costs for the Shipped Products
recalled or withdrawn.
ARTICLE 11. - BOOKS AND RECORDS
11.1 Examination Rights. For a period of two (2) years following each
Contract Year, Abbott and Digene each shall maintain proper books and records
in accordance with GAAP reflecting Net Sales, CT/GC Non-U.S. AUP, CT/GC U.S.
AUP, HBV AUP, HPV AUP, Minimum Transfer Price, transfer prices, Purchase Price,
Book Value and Fully Burdened Manufacturing Costs and other calculations
required by this Agreement, as appropriate. Upon thirty (30) days' prior
written notice to the other Party (but not more frequently than once in any
Contract Year, unless there is a dispute, then as frequently as is necessary),
a Party may examine the other Party's books and records relating to the matters
described herein, which shall be transferred to, if not already located at, the
other Party's principal place of business. The examining Party shall retain, at
its own expense, an independent certified public accountant not currently
engaged by the examining Party but reasonably acceptable to the other Party to
conduct the examination. The examination shall occur at the other Party's
principal place of business during its normal business hours for the sole
purpose of verifying the accuracy of such calculations. The independent
certified public accountant shall be required to execute a mutually acceptable
confidentiality agreement and shall report to both Parties its final
calculations, in addition to any discrepancy in the calculations made by the
Party whose books and records were
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examined. Such examination rights may be exercised by the Parties only with
respect to books and records for the then current Contract Year and the
immediately preceding Contract Year.
11.2 Reconciliation of Underpayment or Overcharge. Within thirty (30)
days after completion of such examination, the Parties shall reconcile any
underpayment or overcharge, if any, by credit or debit memo; provided, however,
if such adjustment is to occur at the end of the final Contract Year, any
overpayment or underpayment shall be paid by check or wire transfer to the
affected Party within thirty (30) days after completion of the final
reconciliation.
11.3 Costs of Examination. The results of the independent examination
shall be subject to the alternative dispute resolution procedure in Section
21.6. The costs of the independent examination shall be paid by the Party whose
books and records were examined if the results of the independent examination
reflect a discrepancy from such books and records favorable to the Party
requesting the examination of greater than five percent (5%) with respect to
the calculation examined and otherwise such costs shall be paid by the Party
requesting the examination.
ARTICLE 12. - PATENTS AND TRADEMARKS
12.1 Trademark License. Digene hereby grants to Abbott and its
Affiliates a nonexclusive license, with the right to sublicense, to use the
Digene Trademarks in the Field with respect to Products, Other Products and
Digene Equipment to market, promote, distribute and sell Products, Other
Products and Digene Equipment in the Territory, and the CMV Territory and the
SHARP Territory, respectively. On or before January 1 of each Contract Year,
Abbott may
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request a trademark report reflecting all applications by Digene for Digene
Trademarks and the status thereof. In addition, Digene shall, at its expense,
file new applications to register any or all of the Digene Trademarks in any or
all of the countries in the Territory, the CMV Territory and the SHARP
Territory, as may be reasonably requested by Abbott. Abbott shall give Digene
at least ninety (90) days' prior written notice before marketing, promoting,
selling or distributing any Product, Other Product or Digene Equipment under
the Digene Trademarks in any country not identified in the Digene Trademark
report. The Parties shall mutually agree on the trademark approach in any such
country, taking into consideration, among other things, the length of time
required to obtain trademark registration, laws relating to trademark use, the
existence of any conflicting trademark registrations, applications or uses and
the anticipated sales volumes of the relevant Products, Other Products or
Digene Equipment in such country. All representations of the Digene Trademarks
that Abbott intends to use shall be consistent with written guidelines provided
to Abbott by Digene or shall first be submitted to Digene for approval of
design, color and other details, which approval shall not be unreasonably
withheld or will be exact copies of those used by Digene. In addition, Abbott
shall follow the written instructions issued by Digene from time to time for
the purpose of protecting the standards of quality established for the goods
and services sold under Digene Trademarks. Any use of an Abbott trademark by
Digene shall be subject to Abbott's prior approval, which approval may be
withheld by Abbott at Abbott's sole discretion.
12.2 Trademark Ownership. It is understood and agreed that Digene is the
sole and exclusive owner of all rights, title and interests in and to the
Digene Trademarks. Nothing
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contained in this Agreement shall be construed as an assignment to Abbott of
any rights, title or interests in the Digene Trademarks; it being understood
that all rights, title and interests relating to the Digene Trademarks are
expressly reserved by Digene, except for the rights being licensed hereunder.
12.3 Infringement. Each party shall notify the other Party of any
suspected infringements by Third Parties of the Digene Trademarks in the Field
or any patent or other proprietary right of Digene in the Field that may come
to such Party's attention. Digene shall have the initial right to determine
whether any action shall be taken on account of any such infringement, and
Digene shall have the right to employ counsel of its choosing and to direct the
handling of the litigation and any settlement thereof, at Digene's expense. In
the event Digene does not pursue such potential infringement within three (3)
months after notice of such potential infringement, Abbott shall have the right
to take action on its own behalf, to employ counsel of its choosing and to
direct the handling of the litigation and any settlements thereof, at Abbott's
own expense. The Parties agree to cooperate with each other in maintaining,
protecting and defending the Digene Trademarks.
12.4 Possible Removal From Market. In the event that the manufacture,
use, sale or importation for sale of Product, Other Product or Digene Equipment
becomes, or, in the opinion of Digene or Abbott, may become, the subject of any
claim, suit or proceeding for infringement or if the manufacture, use, sale or
importation for sale of the Product, Other Product or Digene Equipment is or,
in the opinion of Digene or Abbott, is likely to be enjoined for infringement,
Digene shall, at its option and expense, do one (1) or more of the following:
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(a) obtain for Abbott, its Affiliates and sub-distributors the
right to use, sell and import for sale the Product, Other Product or
Digene Equipment;
(b) modify the Product, Other Product or Digene Equipment so that
it becomes non-infringing or replace the Product, Other Product or
Digene Equipment with a non-infringing product while remaining in
compliance with Digene's published Specifications, or Other Product
Specifications in effect at the time; or
(c) require that Abbott, its Affiliates and sub-distributors
cease to deliver the Product, Other Product or Digene Equipment in the
affected country.
In the event Digene does not perform (a) or (b) above, and such
nonperformance reduces Abbott's annual Net Sales for such Product by more than
[********], the Parties shall negotiate in good faith an agreement with respect
to [********************************************************************
********************************************].
12.5 Third Party Claims for Infringement. If a Third Party brings a
legal action or administrative proceeding against either or both of the Parties
alleging infringement by a Product, Other Product or Digene Equipment in the
Field in the Territory, the CMV Territory or the SHARP Territory, the Parties
agree that they shall confer in good faith to determine the most effective
means of cooperating to defend their sole and mutual interests.
12.6 Co-Labeled Product. Digene shall sell Products identified by an
Abbott trademark or trade name only to Abbott and its Affiliates or to an
Abbott-appointed sub-distributor.
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
12.7 Limitation of Liability. NEITHER PARTY SHALL BE LIABLE TO THE OTHER
FOR ANY AMOUNTS REPRESENTING LOSS OF BUSINESS, OR INDIRECT, SPECIAL, EXEMPLARY,
CONSEQUENTIAL OR PUNITIVE DAMAGES ARISING FROM THE PERFORMANCE OR
NONPERFORMANCE OF THIS AGREEMENT OR ANY ACTS OR OMISSIONS ASSOCIATED THEREWITH
OR RELATED TO THE USE OF ANY ITEMS OR SERVICES FURNISHED HEREUNDER, WHETHER THE
BASIS OF THE LIABILITY IS BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE AND
STRICT LIABILITY), STATUTORY OR ANY OTHER LEGAL THEORY. IN NO EVENT SHALL THIS
SECTION 12.7 BE DEEMED TO LIMIT LIABILITY FOR LOSS OF PROFITS UNDER THIS
AGREEMENT.
ARTICLE 13. - REPRESENTATIONS AND WARRANTIES
13.1 Digene Representations and Warranties. Digene represents and
warrants that all Products, Other Products and Digene Equipment delivered to
Abbott hereunder shall be:
(a) manufactured in accordance with cGMPs, the Specifications or
Other Product Specifications, as applicable and, after December 31,
1999, ISO 9000 Series;
(b) free from defects in material and workmanship until one (1)
year after date of shipment for the Digene Equipment and/or the shelf
life for Products or Other Products having an expiration date (the
"Warranty Period");
(c) free and clear of any Third Party security interest, lien or
encumbrance;
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(d) manufactured in compliance with all applicable foreign,
federal, state and local laws and regulations in the location of
manufacture; and
(e) Year 2000 Compliant as of July 1, 1999 in accordance with the
following terms:
(i) all Products, Other Products and Digene Equipment that
operate on date data software and hardware; and
(ii) all mission critical hardware and software supplied by
Digene for Products, Other Products and Digene Equipment.
(f) Year 2000 Compliant as of December 1, 1999 with respect to
all mission critical hardware and software used in Digene's
manufacturing process for Products Other Products, and Digene
Equipment.
With respect to clauses (a), (b) and (d) of this Section 13.1, the
Parties acknowledge and agree that unless Digene fails to deliver Products,
Other Products or Digene Equipment consistently to Abbott, at a mutually agreed
upon level, any Product, Other Product or Digene Equipment not conforming to
clauses (a), (b) and (d) of this Section 13.1 shall be handled in accordance
with Section 13.2 and shall not constitute a material breach of this Agreement.
13.2 Replacement or Repair. Digene, at its election, shall repair or
replace Products, Other Products or Digene Equipment returned during the
Warranty Period which fail to meet the warranty set forth in Section 13.1
("Defective Products"). Customers in the Territory, CMV Territory and SHARP
Territory shall return Defective Products to Abbott, its Affiliates or
sub-distributors for return to Digene. Digene, at its election, shall accept
returned Defective
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Products in accordance with the terms of Schedule 13.2 or Abbott, at Digene's
request, shall dispose of such Defective Products appropriately. Digene shall
bear the cost of return shipment of Defective Products to Digene and the cost of
shipping repaired or replaced Defective Products to the customer or Abbott, its
Affiliates or sub-distributors, as the case may be.
13.3 Third Party Distributors. Digene represents and warrants to Abbott
that, except for Distributors, Abbott and its Affiliates, and sub-distributors,
no Third Party has any right of distribution, marketing, promotion or any other
rights to sell Products in the applicable Territory.
13.4 Limitation on Warranties. DIGENE MAKES NO WARRANTIES REGARDING THE
PRODUCTS, OTHER PRODUCTS AND DIGENE EQUIPMENT OTHER THAN THE EXPRESS WARRANTIES
IN THIS ARTICLE AND THERE SHALL BE NO IMPLIED OR STATUTORY WARRANTIES, INCLUDING
ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR
NON-INFRINGEMENT.
13.5 Patent Representations and Warranties.
(a) Digene represents and warrants to Abbott as of the Effective
Date, that:
(i) to its knowledge, there are no Third Party patents,
trademarks or other proprietary rights which are valid and enforceable
and which would be infringed by making, having made, using, selling,
offering for sale or importing Products, Other Products and Digene
Equipment in the Territory, the CMV Territory or the SHARP Territory,
as applicable in accordance with the terms of this Agreement; and
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(ii) to its knowledge, Digene is not, and as a result of the
execution and delivery of this Agreement or the performance of Digene
hereunder will not be in violation of or lose any rights pursuant to
any license, sublicense or agreement previously provided to a Third
Party.
13.6 General Representations and Warranties. Each Party represents and
warrants to the other Party as of the Effective Date as follows:
(a) it is a corporation duly organized and validly existing under the
laws of its state of incorporation;
(b) it has the power and authority to execute and deliver this
Agreement and to perform its obligations hereunder;
(c) the execution, delivery and performance by it of this Agreement
and its compliance with the terms and provisions hereof does not and will not
conflict with or result in a breach of any other agreement or relationship; and
(d) all mission critical hardware and software used in the
Performance of its duties and obligations hereunder shall be Year 2000 Complaint
no later than July 1, 1999, except, however that Digene's mission critical
hardware and software used in Digene's manufacturing process shall be Year 2000
Compliant no later than December 1, 1999.
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
ARTICLE 14. - GENERAL INDEMNIFICATION
14.1 Digene Indemnification. Digene shall indemnify, defend and hold Abbott
and its Affiliates and their officers, directors, employees, and representatives
harmless from and against any and all claims, causes of action, suits,
proceedings, losses, damages, demands, fees, expenses, fines, penalties and
costs (including reasonable attorney's fees) arising out of, relating to or in
connection with: (a) the manufacture, shipment or use of Product, Other Product
or Digene Equipment; (b) the breach of Digene's warranties, representations or
covenants set forth in this Agreement or in the Murex Agreements as provided in
Article 20; (c) any Third Party patent infringement action against Abbott and/or
its Affiliates relating to Products or Other Products; (d) the termination by
Digene of any distributor of Product in the Territory; and/or (e) the wrongful
or negligent acts or omissions on the part of Digene's employees, agents or
representatives.
14.2 Abbott Indemnification. Abbott shall indemnify, defend and hold Digene
and its Affiliates and their officers, directors, employees, and representatives
harmless from and against any and all claims, causes of action, suits,
proceedings, losses, damages, demands, fees, expenses, fines, penalties and
costs (including reasonable attorney's fees) arising out of, relating to or in
connection with: (a) the breach of Abbott's warranties, representations or
covenants set forth in this Agreement or in the Murex Agreements as provided in
Article 20; or (b) the wrongful or negligent acts or omissions on the part of
Abbott's employees, agents or representatives.
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
14.3 Cooperation. Each Party shall promptly notify the other Party of any
claim or potential claim covered by the indemnification provisions of this
Article 14 and shall include sufficient information to enable the other Party to
assess the facts. Each Party shall cooperate with the other Party in the defense
of all such claims. No settlement or compromise shall be binding on a Party
without such Party's prior written consent, which consent shall not be
unreasonably withheld or delayed.
14.4 Insurance. Digene shall procure and maintain during the Term
comprehensive commercial liability insurance, including contractual and products
liability coverage, in aggregate annual limits of Six Million Dollars
($6,000,000). Digene shall provide Abbott with prompt written notice of any
notice of cancellation, modification or reduction of coverage under, such
policies. Digene shall cause Abbott and its Affiliates to be named as additional
insureds on such policies and Digene policies shall be primary with respect to
any indemnification of Abbott and its Affiliates hereunder.
ARTICLE 15. TERM AND TERMINATION
15.1 Term. Subject to early termination as set forth in this Article 15,
this Agreement shall begin on the Effective Date and shall continue until the
last day of the Initial Term. Thereafter, this Agreement, with respect to each
Product and Equipment, [**************************************************
*******************************] shall be extended automatically in accordance
with the terms and conditions of Article 4.
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
15.2 Termination for Cause.
(a) Either Party may terminate this Agreement for cause upon written
notice to the other Party in the event the other Party becomes insolvent or
makes an assignment for the benefit of its creditors, or upon appointment
of a trustee or receiver for the other Party of a material portion of its
assets, or upon filing of a voluntary petition against the other Party
under any bankruptcy or insolvency law, including Section 101 et seq.,
Title 11 of the United States Code (the "U.S. Bankruptcy Code"), or an
involuntary petition against the other Party under any bankruptcy or
insolvency law, including the U.S. Bankruptcy Code, which involuntary
petition remains undismissed or undischarged and in effect for a period of
ninety (90) days.
(b) Either Party may terminate this Agreement for cause (i) on a
Product by Product basis upon written notice to the other Party in the
event the other Party materially breaches this Agreement with respect to a
Product or Products, or (ii) in its entirety upon written notice to the
other Party in the event the other Party materially breaches this Agreement
with respect to all Products or with respect to terms which are not
specific as to Product and fails to cure such breach within sixty (60) days
after receipt of written notice of breach from the non-breaching Party, as
such cure period may be extended for such additional period as the
non-breaching Party reasonably determines that the breaching Party is
diligently pursuing a cure of such breach, to the extent such rights are
provided by Sections 4.2(b) or 4.3(b), as applicable.
15.3 Termination By Digene For Abbott's Failure to Achieve Net Sales
Thresholds. Digene shall have the right to terminate this Agreement with respect
to [*********************
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
************] if Abbott fails to achieve the Net Sales thresholds [*************
*****************], and with respect to [********************************
[*******************] if Abbott fails to achieve the Net Sales thresholds
[*****************************]. In the event of termination pursuant to this
Section 15.3, Abbott and Digene shall continue to perform their obligations
hereunder [*********************************************************************
**********************************************].
15.4 Termination By Abbott for Change of Control. Abbott shall have the
right to terminate this Agreement [************************] prior written
notice to Digene in the event of a Change of Control of Digene wherein the
entity acquiring control of Digene is a material direct competitor of Abbott.
Digene shall provide Abbott written notice of any such Change of Control within
sixty (60) days thereafter. Abbott shall provide written notification to Digene
of the exercise of its termination rights within sixty (60) days of receipt of
the notice of a Change of Control from Digene. The [*****************] period
set forth in this Section 15.4 shall commence on the date Digene receives
written notification of Abbott's exercise of rights under this Section.
Notwithstanding Abbott's right to terminate under this Section 15.4, the Parties
shall be obligated to the following:
(a) CT/GC Clearance. In the event a Change of Control giving Abbott
the right to terminate hereunder occurs earlier than three (3) months prior
to the date of CT/GC Clearance, then Digene shall have the right within
sixty (60) days after CT/GC Clearance to terminate this Agreement with
respect to CT/GC and Equipment (provided
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Abbott does not then have rights to market and distribute [*************
*************************************************].
(b) [********************]. In the event a Change of Control giving
Abbott the right to terminate hereunder occurs and, at the end of the most
recently completed Contract Year preceding such Change of Control, Abbott
did not [***************************************************************
************************************************************************
***********************************************************************
*************************************] then Digene shall have [************
**********************************************************************
********************************************************************
*************************************************].
Digene shall only be obligated to provide Abbott with a [*********] wind-down
under this Section if at the time of such Change of Control Abbott was an
exclusive distributor for such Product.
15.5 Partial Termination By Digene For Abbott's Failure to Market in
Particular Country. In addition to its rights under Section 15.2, Section 15.3
and Section 15.4, Digene shall have the right, on sixty (60) days written
notice, to terminate Abbott's marketing and distribution rights with respect to
a Product and with respect to a country in the Territory if Abbott fails, after
giving consideration to [*******************************************] to
meet its obligations [*****************] hereunder with respect to such Product
in such country and such failure has not been cured; provided, however, that if
Abbott has recorded sales of such Product in such country,
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Abbott may initiate an alternative dispute resolution proceeding under Section
21.6 within such sixty (60) day period, in which event Digene's right to
terminate shall be determined by such proceeding. Solely for the purposes of
this Section 15.5, Abbott shall have sixty (60) days from the receipt of notice
from Digene under this Section 15.5 to cure any failure to meet obligations
[******************]. The partial termination of this Agreement with respect to
a Product and with respect to a country shall be without prejudice to any other
rights of the Parties hereunder. By way of example and for avoidance of doubt,
[******************************************************************************
********************************************************************************
*************************************************************************
********************************************************************************
*******************************************************************************
******************************************************************************
***********************************************].
15.6 Continuation of Force Majeure. Either Party may terminate this
Agreement in the event of force majeure event continues for one hundred eighty
(180) consecutive days and prevents a Party from materially performing its
obligations under this Agreement.
15.7 Accrued Obligations. Termination, expiration, cancellation or
abandonment of this Agreement through any means and for any reason shall not
relieve the Parties of any obligation accruing prior thereto and shall be
without prejudice to the rights and remedies of either Party with respect to any
antecedent breach of any of the provisions of this Agreement.
15.8 Additional Remedies for Breach. Notwithstanding the terms and
conditions of Section 15.2, neither Party shall be obligated to terminate this
Agreement in the event the other
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Party materially breaches this Agreement. The non-breaching Party shall have the
right to seek, in accordance with Section 21.6, other remedies available to it
at law and equity to recover for such breach, without having to terminate the
Agreement.
ARTICLE 16. - CONSEQUENCES OF TERMINATION
16.1 Buy-out of Equipment and Inventory.
(a) In the event of any termination or expiration of this Agreement,
except in the case of Abbott's non-performance, Digene shall, at Abbott's
option, within ninety (90) days after such termination or expiration, [***
********************************************************************
************************************************************************
***************************************************************************
**************************************************************************
******************************************************************].
(b) In the event of any termination of expiration of this Agreement
by reason of Abbott's non-performance, Digene may, at its option, within
ninety (90) days after such termination or expiration, [*****************
**********************************************************************
***************************************************************************
*********************************************************************
*********************************************************************
**********************************************************].
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
16.2 Termination Fee. In the event of termination of this Agreement by
Abbott pursuant to [************], Digene shall pay to Abbott upon the effective
date of such termination, [**************************************************
*************************************************].
16.3 Residual Payments. In the event of any termination of this Agreement
[***********************************************], and in consideration of
Abbott efforts in developing Product sales and goodwill during the Term, Digene
shall pay for [******] following the termination of this Agreement, a residual
to Abbott pursuant to [**************].
ARTICLE 17. - CONFIDENTIALITY AND PUBLIC ANNOUNCEMENTS
17.1 Confidentiality. The Parties acknowledge and agree that during the
Term, each of them and their Affiliates may exchange Confidential Information,
and the disclosure and use of any such Confidential Information shall be
governed by the provisions of this Article 17. Each Party shall use the
Confidential Information of the other Party only for the purpose of the
activities contemplated by this Agreement and may only disclose such
Confidential Information on a need to know basis for the purposes of this
Agreement to a Third Party or employee who is bound by a confidentiality
obligation similar to the terms of this Section 17.1. The Parties shall ensure
that their Affiliates and such Affiliates' officers, directors, employees,
representatives and agents shall keep all Confidential Information exchanged
hereunder confidential and treat such Confidential Information with the same
care as such Party would exercise in the handling of its own confidential or
proprietary information. Notwithstanding the foregoing, any Confidential
Information may be disclosed to the neutral in any alternative dispute
resolution proceeding
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
under Section 21.6, provided that such neutral executes a mutually acceptable
confidentiality agreement prior to the commencement of such proceeding. This
provision shall remain in effect for a period of five (5) years after
termination or expiration of this Agreement for all Confidential Information.
17.2 Handling of Trade Secrets. During the course of its performance
hereunder, a Party (the "Disclosing Party") may desire or be requested to
disclose Confidential Information to the other Party (the "Receiving Party"),
which the Disclosing Party considers a Trade Secret. In such event, the
Disclosing Party first shall inform the Receiving Party, on a non-confidential
basis, the general nature of the Trade Secret information. The Receiving Party
shall have ten (10) days to decide whether it wishes to have such Trade Secrets
disclosed to it and to inform the Disclosing Party in writing that it wishes to
receive such a disclosure. Any Trade Secrets so disclosed between the Parties
shall be marked "Trade Secret," and the Receiving Party shall not disclose or
use such Trade Secret for the Term and thereafter except as expressly permitted
under this Agreement. In the event the Disclosing Party discloses the Trade
Secrets to the Receiving Party without written approval of the Receiving Party
and/or without appropriately marking such information as "Trade Secret" that
Trade Secret shall be handled as Confidential Information under Section 17.1.
17.3 Confidential Treatment. Digene shall seek confidential treatment for
the terms and conditions of this Agreement to the fullest extent permitted by
the SEC and any other governmental agency or self-regulatory organization to
which Digene provides a copy of this Agreement, if at all. Prior to seeking
confidential treatment from the SEC or any other
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
governmental agency or self-regulatory organization for any such document,
Digene shall consult with Abbott and Abbott's counsel and provide them with a
reasonable opportunity to request the inclusion of specified provisions in any
request by Digene for confidential treatment.
17.4 Public Announcements. Neither Party shall make any public announcement
concerning this Agreement, nor make any public statement which includes the name
of the other Party or any of its Affiliates, or otherwise use the name of the
other Party or any of its Affiliates in any public statement or document without
the consent of the other Party, which consent shall not be unreasonably
withheld, except: (a) as may be required by law or judicial order, including
required disclosure under the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, any exchange on which either Party's equity
securities are listed, the National Association of Securities Dealers, Inc.
and/or its subsidiaries; (b) as may be contained in joint marketing materials,
presentations and related activities; (c) that Digene may provide general
information, including aggregate revenue information by region, on a periodic
basis and in response to inquiries; or (d) that either Party may include in a
subsequent public statement or document, information regarding this Agreement
which has already been approved by the other Party.
ARTICLE 18. - FORCE MAJEURE
Neither Party shall be held in breach of this Agreement for failure
to perform any of its obligations hereunder and, subject to the terms and
conditions of Section 15.6, the time required for performance shall be extended
for a period equal to the period of such delay, provided that
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
such delay has been caused by or is a result of any acts of God; acts of the
public enemy; civil strife; wars declared or undeclared; embargoes; labor
disputes, including strikes, lockouts, job actions or boycotts; fires;
explosions; floods; shortages of material or energy; events caused by reason of
laws or regulations or orders by any government, governmental agency or
instrumentality or by any other supervening unforeseeable circumstances beyond
the reasonable control of the Party so affected. The Party so affected shall:
(a) give prompt written notice to the other Party of the nature and date of
commencement of the force majeure event and its expected duration; and (b) use
its reasonable best efforts to relieve the effect of such cause as rapidly as
possible.
ARTICLE 19. - IMPROVEMENTS, INNOVATIONS, DIGENE PRODUCTS;
DEVELOPMENT PROJECTS
19.1 First Right of Negotiation. Digene hereby grants to Abbott the first
right of negotiation with regard to any transaction contemplated by Digene
whereby Digene, directly or indirectly, would itself, or would license, sell,
transfer, convey, assign to a Third Party or otherwise encumber any right, title
or interest of Digene to, sell, market, promote or distribute [*****************
*****************************************************************************
***************]; provided, however, that neither Party shall be obligated by
the grant of such right to enter into any arrangement after completing the good
faith negotiations described in this Section 19.1. In the event Digene
determines to undertake the foregoing itself or to solicit a proposal for the
foregoing, Digene first shall promptly provide exclusively to Abbott written
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
notice thereof, the scope thereof and [********************************]
involved. In the event Digene receives an unsolicited Third Party proposal with
respect to such a transaction and Digene intends to pursue negotiations with the
Third Party submitting such proposal, Digene shall promptly provide exclusively
to Abbott written notice of the fact that it has received such a proposal, the
scope thereof and [********************************] involved. Abbott shall have
[**********************] from receipt of any of such notices to advise Digene in
writing (the "Negotiation Notice") of whether Abbott shall negotiate with Digene
regarding [*********************************], as the case may be. If Abbott
elects to negotiate with Digene regarding [*********************************],
as the case may be, Abbott and Digene shall negotiate exclusively in good faith,
for up to [***************] after Digene receives the Negotiation Notice, a
definitive agreement reflecting the material terms of the license, sale,
marketing, promotion or distribution of [*********************************];
provided, however, that neither Party shall be obligated to enter into such an
arrangement after completing such good faith negotiations. If Abbott and Digene
are unable in good faith to reach a definitive agreement within the [**********
***] period, Digene may enter into negotiations and conclude with a Third Party
a definitive agreement of substantially similar scope and with respect to [****
*****************************], as the case may be, on terms which, when
considered in their entirety, are not materially less favorable to Digene than
those finally offered by or to Abbott or undertake the foregoing itself. In the
event that Abbott does not so notify Digene that it elects to negotiate such a
definitive agreement, Digene may undertake the foregoing itself or enter into
negotiations and an agreement with a Third Party with respect to [****
****************************] without any further obligations
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
with respect thereto under this Section 19.1. Digene shall have no obligations
under this Section 19.1 with respect to [***********************************
*****************************************************************************
*************************************************].
19.2 Restriction of Right to Improvements, Innovations and Digene Products.
(a) Improvements and Innovations. Digene shall have no obligation to
provide Abbott with [*************************************************
************************************************************************
*************************************************************************
*************************************************************************
*******************************************************************].
(b) [********] Digene shall have no obligation to provide
Abbott with first rights of negotiation to any [*************], as more
fully described in Section 19.1, upon the earlier of [*********************
**************************************************************************
*************************************************************************
**************************************************************************
***********************************************************************
********************************************************************];
provided, however, that if Digene's obligations under this sentence have
been terminated by reason of [**************************************
***************************************************************************
**************************************************************************
***
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
**********************************************************************
**************], Digene's obligations under Section 19.1 shall be restored
with respect to [********************************************************
***********************************************************************
*************************************************************************
*************] until or unless Digene shall otherwise be, or have been,
relieved of its obligations in accordance with this sentence.
19.3 Third Party Licenses. During the Term, Digene shall not license or
sublicense to a Third Party rights to a Product in the Field in the Territory,
provided that Abbott has [***********************************************
********].
19.4 Determination of Improvements or Innovations. The Parties shall
determine whether an improvement, modification or adjustment of or to a Product
is to be deemed an Improvement or an Innovation to such Product or whether an
improvement, modification or adjustment of or to a Digene Product is to be
deemed an Improvement to such Digene Product. Factors the Parties shall consider
in determining whether an improvement, modification or adjustment is an
Improvement or an Innovation to such Product or an Improvement to such Digene
Product, include, but are not limited to the following:[************************
********************************************************************************
*****************************************************************************].
In the event the Parties are unable to determine whether an improvement,
modification or adjustment of or to a Product is to be deemed an Improvement or
Innovation to such Product, or whether an improvement, modification or
adjustment of or to a Digene Product is to be deemed
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
an Improvement to such Digene Product, either Party may elect to conduct an
independent review of the dispute by impaneling an independent review board
comprised of four (4) opinion leaders in the industry, with each Party selecting
two (2) members thereof. If a Party elects to impanel an independent review
board, it shall provide the other Party with written notice of such election and
the Parties shall then select their respective members of such board. A hearing
on whether the particular improvement, modification or adjustment of or to a
Product is to be deemed an Improvement or Innovation to such Product, or whether
an improvement, modification or adjustment of or to a Digene Product is to be
deemed an Improvement to such Digene Product, shall be conducted within sixty
(60) days after receipt of the initial notice. Such hearing shall be held in the
presence of both Parties at a location to be mutually agreed to by the Parties
and shall be conducted over a period of no longer than eight (8) hours, with
each Party entitled to present for no longer than four (4) hours. The cost of
the hearing and of the members of the independent review board shall be shared
equally by the Parties. Any conclusions or recommendations offered by the
independent review board shall be advisory only, shall not be binding on either
Party and shall not be admissible in an alternative dispute resolution
proceeding under Section 21.6. Further, any such conclusions or recommendations
shall not be provided in writing. If after conducting the hearing with the
independent review board, the Parties remain unable to agree whether the
improvement, modification or adjustment is an Improvement or an Innovation to
such Product, or an Improvement to such Digene Product, then either Party may
seek final resolution of the dispute through the alternative dispute resolution
procedure under Section 21.6.
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
19.5 [*********]. Within one hundred and twenty (120) days following the
Effective Date, Abbott shall provide written notice to Digene as to whether [**
********************************************************************************
******************************************************************************
*********************************]. In the event Abbott so notifies Digene of
[***************************************************************************
****************************************************************************
******************************************************************************
************************]. In the event the Parties, after [********************
***********************************************************************
**************************************************************************
*****************************************************************]. In the event
Abbott does not so notify Digene or notifies Digene that it [******************
****************************************************************************]
19.6 Development Projects. Abbott shall [******************************
***] of the following development projects, subject to agreed upon milestones
and timeframe. Abbott shall promptly after the Effective Date, meet with Digene
and discuss a collaboration between the Parties to pursue [******************
**************************************************************************
******************************************************************************
****************************].
(a)[******************************************************************
***************************************************************************
***************************************************************************
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REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
***************************************************************************
***************************************************************************
***************************************************************************
***************************************************************************
***************************************************************************
***************************************************************************
***************************************************************************
***************************************************************************
************************************************************************].
(b)[******************************************************************
***************************************************************************
************************************************************************].
(c) [*****************************************************************
***************************************************************************
***************************************************************************
************************************************************************].
Once the Parties select [***********************************], the Parties shall
mutually prepare a project plan and milestone setting forth in detail the
expectation of the Parties.
19.7 Testing Service Rights. Digene hereby expressly reserves the right,
for its and its Affiliates, to sell or distribute all Products and Digene
Products as a product or as a testing service intended only for use in
functional genomics, pharmaceutical screening, or drug
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
discovery and development, including but not limited to therapeutics and
vaccines. In addition, Digene retains the right to supply all Products and
Digene Products for internal use by Digene and its Affiliates. For purposes of
clarification, products and testing services described in this Section 19.7
shall not include human in vitro diagnostic applications.
19.8 R&D Expenses. Except as otherwise provided in Section 19.6 or as
otherwise agreed, Digene shall be responsible, at its sole cost and expense for
the funding of [****************************************************************
***********************].
19.9 Products Outside the Scope of the Agreement. Except as provided in
Section 19.5, any rights of Digene to any product or Analyte which, with respect
to Products, does not principally utilize Hybrid Capture Technology and, with
respect to Digene Products, does not principally utilize Hybrid Capture for
Digene Products are outside the scope of this Agreement and Digene shall have no
obligation to negotiate with Abbott with respect to such rights for any country
in the world.
ARTICLE 20. - TRANSFER, MODIFICATION OR
TERMINATION OF OBLIGATIONS UNDER THE MUREX AGREEMENTS
20.1 General. The obligations of the Murex Entities and Digene under the
Murex Agreements shall, after the Effective Date, be transferred to, modified
(as applicable) and performed in accordance with the terms and provisions of
this Agreement, as set forth in this Article 20. Any obligations of the Murex
Entities and/or Digene under any of the Murex
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Agreements, other than those described in this Article 20, shall be terminated
and of no further force and effect as of and after the Effective Date.
20.2 Distribution of HBV. Any distribution, marketing and/or manufacturing
activities of any of the Murex Entities under any of the Murex Agreements with
respect to HBV shall be transferred from such Murex Agreements and, after the
Effective Date, performed by Abbott and by Digene, as the case may be, in the
HBV Territory in accordance with the terms and provisions of this Agreement.
20.3 Distribution of HPV. Any distribution, marketing and/or manufacturing
activities of any of the Murex Entities under any of the Murex Agreements with
respect to HPV shall be transferred from such Murex Agreements and, after the
Effective Date, performed by Abbott and by Digene, as the case may be, in the
HPV Territory in accordance with the terms and provisions of this Agreement.
20.4 Distribution of CMV. The Parties shall transfer all obligations with
respect to the distribution of Digene products for the diagnosis of
cytomegalovirus set forth on Schedule 20.4 ("CMV") from all of the applicable
Murex Agreements to this Agreement, with such obligations to be performed as
follows. Subject to, and in accordance with the other terms and conditions of
this Agreement, Digene hereby appoints Abbott and its Affiliates for the Term as
a non-exclusive distributor of CMV in the CMV Territory for use in the Field,
and Abbott hereby accepts such appointment. As part of such appointment under
this Section 20.4, Abbott shall have the right to appoint sub-distributors in
those countries or territories in the CMV Territory in which Abbott generally
uses sub-distributors to distribute Abbott diagnostic products. All CMV shall be
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
labeled identifying Digene only. Abbott shall not be required to meet any Net
Sales thresholds with respect to sales of CMV. Either Party shall be entitled to
terminate this non-exclusive distribution arrangement at any time by providing
to the other Party [******] written notice. The sales prices for the CMV shall
be determined as set forth in Section 2.7. During the Term, the transfer prices
of CMV shall be the price set forth on Schedule 20.4.
Notwithstanding the other provisions of this Section 20.4, the provisions
of Sections 2.4, 2.8, 2.9, 3.5, 3.8, 5.1(g), 5.4, 5.7 and 5.8 and Article 4
shall not apply to the marketing and distribution of CMV hereunder. In addition,
Digene and Abbott shall have no obligation under this Agreement or any of the
Murex Agreements for development activities with respect to products for the
diagnosis and/or treatment of CMV. Unless otherwise specified, however, all
other provisions of this Agreement shall apply to the marketing and distribution
of CMV.
20.5 Distribution of SHARP Signal System Products. The Parties shall
transfer all obligations with respect to the distribution of all Digene SHARP
Signal System products listed on Schedule 20.5 currently sold in the SHARP
Territory under the Murex Agreements ("SHARP") from all of the applicable Murex
Agreements to this Agreement, with such obligations to be performed as follows.
Subject to, and in accordance with the other terms and conditions of this
Agreement, Digene hereby appoints Abbott and its Affiliates for the Term as a
non-exclusive distributor of SHARP in the SHARP Territory for use in the Field,
and Abbott hereby accepts such appointment. As part of such appointment under
this Section 20.5, Abbott shall have the right to appoint sub-distributors in
those countries or territories in the SHARP
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Territory in which Abbott generally uses sub-distributors to distribute Abbott
diagnostic products. All SHARP shall be labeled identifying Digene only. Abbott
shall not be required to meet any Net Sales thresholds with respect to sales of
SHARP. Either Party shall be entitled to terminate this non-exclusive
distribution arrangement at any time by providing to the other Party [******]
written notice. The sales prices for the SHARP shall be determined as set forth
in Section 2.7. During the Term, the transfer prices of SHARP shall be the price
set forth on Schedule 20.5.
Notwithstanding the other provisions of this Section 20.5, the provisions
of Sections 2.4, 2.8, 2.9, 3.5, 3.8, 5.1(b), 5.1(c), 5.1(g), 5.4, 5.5, 5.6, 5.7,
5.8 and 5.10 and Article 4 shall not apply to the marketing and distribution of
SHARP hereunder. In addition, Digene and Abbott shall have no obligation under
this Agreement or any of the Murex Agreements for development activities with
respect to the applications for SHARP. Unless otherwise specified, however, all
other provisions of this Agreement shall apply to the marketing and distribution
of SHARP.
20.6 Murex-Only Labeled Products. Pursuant to the Development and License
Agreement, dated as of April 14, 1993, between Digene and International Murex
Technologies Corporation and the 1994 Development and License Agreement dated as
of May 31, 1994, between Digene and International Murex Technologies
Corporation, Murex had the right to require Digene to provide Murex with
products developed under such agreements with labels designed by Murex. Pursuant
to such rights, Digene has provided CMV to Murex with Murex-only trade marks and
trade dress. Abbott, on behalf of itself and all Murex Entities and
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Affiliates, shall remove the requirement to label any such products, including
CMV, with any Murex identifier in the label or trade dress, and hereby
terminates the obligation of Digene to provide such Murex-only labeled products
pursuant to either Development and License Agreement.
20.7 Continuing Obligations Under the Murex Agreements.
(a) Confidentiality Provisions. As of the Effective Date, all
Confidential Information (as such term is defined in each of the Murex
Agreements) of either Digene or the applicable Murex Entity that relates, in any
way, to CMV, CT/GC, HBV, HPV or SHARP or any of the Equipment marketed,
distributed, sold, developed or manufactured in accordance with the terms of
this Agreement shall be treated as "Confidential Information" as defined in, and
exchanged under, this Agreement. The Parties shall protect the confidentiality
of, and abide by their respective non-disclosure obligations with respect to,
all such Confidential Information in accordance with the terms of Article 17 of
this Agreement. All Confidential Information of Digene or the applicable Murex
Entity not transferred to this Agreement pursuant to the foregoing shall
continue to be treated as Confidential Information of Digene and the applicable
Murex Entity in accordance with, and subject to the provisions of the applicable
Murex Agreement, including, without limitation, the provisions requiring Digene
(on behalf of itself and its Affiliates) and Abbott (regarding itself and its
Affiliates, including the Murex Entities) to continue to comply with the
confidentiality and non-disclosure obligations under the applicable Murex
Agreement for the time period specified in the applicable Murex Agreement
following the termination of such Murex Agreement. Nothing contained in this
Agreement shall be, or shall be
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
deemed to be, a waiver by Digene or Abbott, or their respective Affiliates or
any of the Murex Entities of the confidentiality and non-disclosure obligations
set forth in each of the Murex Agreements.
(b) Indemnification Provisions. The indemnification provisions,
including the survival thereof, contained in the Murex Agreements shall continue
in full force and effect until terminated in accordance with the provisions of
each applicable Murex Agreement.
(c) Warranties. All warranties by Digene and/or its Affiliates in any
of the Murex Agreements shall apply to all products shipped by Digene or its
Affiliates to a Murex Entity or Abbott and/or its Affiliates prior to the
Effective Date.
20.8 Transition Period. For a period not to exceed one hundred eighty (180)
days from the Effective Date (the "Transition Period"), Digene and Abbott shall
Work With each other to transition the responsibilities and obligations under
the Murex Agreement to the responsibilities and obligations under this Agreement
in accordance with the following guidelines, which shall apply to all Products
and Other Products marketed, manufactured, sold and distributed hereunder:
(a) Marketing and Promotion. Abbott shall wind-down all marketing and
promotion efforts initiated under the Murex Agreements for products other than
the Products and Other Products and/or performed in areas of the world other
than the applicable Territory, the CMV Territory or the SHARP Territory within
the Transition Period. Thereafter, the provisions of Article 3 of this Agreement
shall supersede and replace all marketing and promotion obligations of the Murex
Entities set forth in any of the Murex Agreements.
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(b) Selling Activities. As of the Effective Date, the forecasts, Net
Sales thresholds and requirements provisions as set forth in this Agreement
shall supersede and replace all forecasts, Net Sales thresholds and requirements
provisions as set forth in any of the Murex Agreements.
(c) Transfer Prices and Costs and Expenses. As of the Effective Date,
for all Product, Other Product and Equipment purchase orders that are placed
beginning after the Effective Date, the transfer prices and all provisions
related to costs and expenses, including, without limitation, the payment of
Trade costs, the determination of the selling price in the applicable Territory,
CMV Territory or SHARP Territory, as the case may be, costs of shipping, testing
and Recall, and the price and terms provisions set forth in Article 6 and
Article 20 of this Agreement shall supercede and replace all similar provisions
of any of the Murex Agreements. Any purchase orders relating to Product, Other
Product and Equipment sales to end-users or distributors or Murex Affiliates
initiated prior to or on the Effective Date shall be completed in accordance
with the provisions of the applicable Murex Agreement; provided, however, that
any Product, Other Product or Equipment sale transactions that cannot be
completed within the Transition Period (excluding receipt of payment) shall be
completed as expeditiously as possible in accordance with the provisions of this
Agreement.
(d) Customer Billing and Collection. Abbott shall continue to perform
the customer billing, collection and Digene payment obligations of the Murex
Entities as set forth in any of the Murex Agreements for all Product, Other
Product and Equipment sales in the applicable Territory, CMV Territory or SHARP
Territory, as the case may be, initiated but not
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
completed prior to or on the Effective Date. After all such transactions have
been completed, the Parties shall cooperate with each other to terminate any
billing, collection and lock-box procedures established pursuant to the terms of
any of the Murex Agreements but not consistent with any similar terms of this
Agreement. Any purchase orders or sales performed in their entirety after the
Effective Date shall be handled in accordance with the provisions of this
Agreement.
(e) Wind-Down Activities. No wind-down provisions in any of the Murex
Agreements shall continue or be triggered.
(f) Equipment Buy-Out Provisions. The equipment buy-out obligations
under the Murex Agreements shall be handled in accordance with the provisions of
Section 6.1(b).
(g) Shipment and Delivery and Acceptance of Products and Other
Products. All shipments initiated prior to or on the Effective Date shall be
completed in accordance with the shipment, delivery and product acceptance terms
of the applicable Murex Agreement, but any shipments in the Territory, the CMV
Territory or the SHARP Territory after the Effective Date shall be performed in
accordance with the similar provisions of this Agreement.
(h) Consignment Inventory Storage Activities. The consignment
inventory holding obligations of the Murex Entities and Affiliates set forth in
Appendix A to the Agency and Sales Representation Agreement between Digene and
Murex Diagnostics Corporation shall continue until all consignment inventory of
Digene products has been depleted or discarded in accordance with the provisions
of such Murex Agreement.
(i) Financial Reconciliation.
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REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(i) As of the Effective Date the Parties shall reconcile all payments
owed under any of the Murex Agreements and shall settle all outstanding
obligations in accordance with Schedule 20.8(i).
(ii) The Parties shall Work With each other during the Transition
Period to transfer all financial reporting, payment and accounting obligations
with respect to the sales of Products and Other Products in the Territory, the
CMV Territory or the SHARP Territory, as applicable, from the various systems
established pursuant to the Murex Agreements to the procedures and reporting
systems developed to comply with the provisions of this Agreement.
(j) Further Assurances. During the Transition Period, the Parties
shall Work With each other to amend this Agreement, in accordance with Section
21.10, to finalize Schedules 6.1(b) and 20.8(i) to update the information set
forth therein as of the Effective Date.
20.9 Termination of the Murex Agreements. Subject to the foregoing
provisions of this Article 20, each of Digene, on behalf of itself and its
Affiliates, and Abbott on behalf of itself, each Murex Entity and each Affiliate
of either Abbott or Murex hereby agrees that, as of the Effective Date, each of
the Murex Agreements shall be terminated and, except as set forth
herein, shall have no further force and effect. Without limiting the generality
of the foregoing sentence, Abbott and Digene shall have no further obligations
to each other under the Murex Agreements with respect to any: (a) marketing,
distribution or manufacture of any products and/or equipment as contemplated by
the Murex Agreements, other than as specifically set forth
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REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
in this Agreement, including, without limitation, in any areas of the world
other than the Territory, the CMV Territory and the SHARP Territory; (b) product
or equipment development activities set forth in, or contemplated by, any of the
Murex Agreements; (c) indemnification obligations thereunder to the other Party
beyond the time periods described in this Article 20; and (d) payment and
related obligations other than those related to the transition activities
described in Section 20.8. All obligations of the parties thereto set forth in
the Murex Agreements for which similar provisions are set forth in this
Agreement, but not specifically mentioned in this Article 20 shall be governed,
with respect to the Products and Other Products and the Territory the CMV
Territory or the SHARP Territory, as applicable, to the extent applicable, by
such provisions of this Agreement (i.e., Recall, regulatory compliance, patent
and trademark protection, termination rights and consequences, new product
development efforts and miscellaneous provisions). Any provisions of the Murex
Agreements not covered by or contemplated by this Agreement shall be of no
further force and effect as of and after the Effective Date.
ARTICLE 21. - MISCELLANEOUS
21.1 Relationship of the Parties. The relationship of the Parties under
this Agreement is that of independent contractors. Nothing contained in this
Agreement shall be construed so as to constitute the Parties as partners, joint
venturers or agents of the other. Neither Party or its Affiliates has any
express or implied right or authority under this Agreement to assume or create
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REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
any obligations or make any representations or warranties on behalf of or in the
name of the other Party or its Affiliates.
21.2 Successors and Assignment. Neither Party may assign its rights or
obligations under this Agreement without the prior written consent of the other
Party, which consent shall not be unreasonably withheld; provided, however, that
either Party may, without such consent, (a) assign this Agreement, in whole or
in part, to an Affiliate of such Party; (ii) designate one (1) or more of its
Affiliates to perform its obligations hereunder (in which case the designating
Party shall remain responsible for the performance of all of its obligations
hereunder); and (iii) assign any or all of its rights, interests or obligations
hereunder to any successor to the assignor in a merger or consolidation or any
other purchase of substantially all of the assets of the assignor. Any permitted
assignee shall assume all obligations of the its assignor under this Agreement.
No assignment shall relieve any Party of responsibility for the performance of
any obligation which such Party may have or incur hereunder.
21.3 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of Abbott and those of its Affiliates which are acting or have acted as
a distributor hereunder and Digene and their respective successors and permitted
assigns. Abbott hereby guarantees the performance of all obligations hereunder
by all of its Affiliates which are acting or have acted as a distributor
hereunder.
21.4 Entire Agreement. This Agreement, including the Schedules, which are
incorporated herein by reference, set forth the entire understanding of the
Parties concerning the
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REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
subject matter hereof and supersedes all written or oral prior agreements or
understandings with respect thereto.
21.5 Governing Law. This Agreement and the legal relations between
the Parties hereunder shall be construed, interpreted and governed by the laws
of the State of Illinois, without regard to its conflict of laws principles.
21.6 Dispute Resolution. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be resolved through the
alternative dispute resolution procedure described on Schedule 21.6; provided,
however, that this shall not prevent a Party from seeking and obtaining
injunctive relief in a court of competent jurisdiction.
21.7 Notices. All notices hereunder shall be in writing and shall
be: (a) delivered personally; (b) mailed by registered or certified mail;
postage prepaid; (c) sent by overnight courier; or (d) sent by facsimile or
express mail to the following addresses of the respective Parties:
If to Abbott: Abbott Laboratories
Director, Acquisitions and Technology Assessment
D-9RK, Building AP6C
100 Abbott Park Road
Abbott Park, Illinois 60064-6094
Facsimile Number: (847) 937-6951
with copy to: Divisional Vice President
Domestic Legal Operations
D-322, Building AP6D
100 Abbott Park Road
Abbott Park, Illinois 60064-6049
Facsimile Number: (847) 938-1206
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REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
If to Digene: Digene Corporation
Chief Executive Officer
9000 Virginia Manor Road
Beltsville, Maryland 20705
Facsimile Number: (301) 470-2880
with copy to: Morris Cheston, Jr.
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103-7599
Facsimile Number: (215) 864-8999
Notice shall be effective: (i) upon receipt if personally delivered; (ii) on the
third Business Day following the date of mailing if sent by registered or
certified mail; (iii) on the second Business Day following the date of delivery
to the express mail service if sent by express mail; and (iv) on the first
Business Day following the date of transmission or delivery to the overnight
courier if sent by facsimile or overnight courier. A Party may change its
address listed above by sending notice to the other Party.
21.8 Severability. If any provision of this Agreement for any reason shall
be held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other term or provision
hereof, and this Agreement shall be interpreted and construed as if such term or
provision, to the extent the same shall have been held to be invalid, illegal or
unenforceable, had never been contained herein.
21.9 Interpretation. When a reference is made in this Agreement to Sections
or Schedules, such references shall be to a Section of or Schedule to this
Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The table of contents and
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REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
headings contained in this Agreement have been inserted for convenience or
reference only and shall not be relied upon in construing this Agreement. Use of
any gender herein to refer to any person shall be deemed to comprehend
masculine, feminine, and neuter unless the context clearly requires otherwise.
21.10 Amendments. This Agreement may be amended at any time by a written
instrument executed by authorized representatives of both Parties. Any amendment
effective pursuant to this Section 21.10 shall be binding upon Abbott and those
of its Affiliates which are acting or have acted as a distributor hereunder and
Digene and their respective successors and permitted assigns.
21.11 Waiver. No waiver of any of the terms of this Agreement shall be
valid unless in writing and signed by authorized representatives of both
Parties. Failure by either Party to enforce any of its rights under this
Agreement shall not be construed as a waiver of such rights nor shall a waiver
by either Party in one or more instances be construed as constituting a
continuing waiver or as waiver in other instances.
21.12 Survival. Expiration or early termination of this Agreement shall not
relieve either Party of its obligations incurred prior to such expiration or
early termination. The following provisions shall survive expiration or early
termination of this Agreement: Article 1, the last sentence of Section 4.1(b),
the next to last sentence of Sections 4.2(b) and 4.3(b), Sections 4.5 and 6.4,
Article 10, Article 11, Article 13 (except Section 13.3) and Sections 14.1,
14.2, 14.3, 15.7, 16.1, 16.2, 16.3, 17.1, 17.2, 20.7, 21.5 and 21.6.
95
<PAGE> 104
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
21.13 Headings. The captions to the Articles and Sections in this Agreement
are inserted for convenience only and are not a part hereof.
21.14 Counterparts. This Agreement may be executed in two (2) original
counterparts, each of which shall be deemed an original, but both of which
together shall constitute one and the same instrument.
21.15 Mutual Drafting. This Agreement has been jointly drafted by Abbott
and Digene, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of the Parties and their respective
legal counsel and advisers and any rule of construction that a document shall be
interpreted or construed against the drafting party shall not be applicable.
96
<PAGE> 105
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
IN WITNESS WHEREOF, each Party has caused this Marketing and Distribution
Agreement to be executed on its behalf by its duly authorized officer as of the
Effective Date.
ABBOTT LABORATORIES DIGENE CORPORATION
By: /s/ James J. Koziarz By: /s/ Evan Jones
-------------------------- --------------------------
Name: James J. Koziarz Name: Evan Jones
Title: Corporate Vice President Title: President and Chief Executive
Diagnostic Products Officer
Research and Development
Date: May 7, 1999 Date: May 7, 1999
97
<PAGE> 106
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
LIST OF SCHEDULES
<TABLE>
<S> <C>
SCHEDULE 1.2 AFRICA
SCHEDULE 1.6 BASE SALES
SCHEDULE 1.18 CT/GC NON-U.S. AUP
SCHEDULE 1.19 CT/GC PRODUCTS
SCHEDULE 1.20 CT/GC U.S. AUP
SCHEDULE 1.21 CT/GC SPECIFICATIONS
SCHEDULE 1.25 DIGENE EQUIPMENT
SCHEDULE 1.27 DIGENE TRADEMARKS
SCHEDULE 1.28 DISTRIBUTORS
SCHEDULE 1.29 DISTRIBUTOR TERRITORIES
SCHEDULE 1.30 DISTRIBUTION AGREEMENTS
SCHEDULE 1.33 EUROPE
SCHEDULE 1.38 HBV AUP
SCHEDULE 1.39 HBV PRODUCTS
SCHEDULE 1.40 HBV SPECIFICATIONS
SCHEDULE 1.43 HPV AUP
SCHEDULE 1.44 HPV PRODUCTS
SCHEDULE 1.45 HPV SPECIFICATIONS
SCHEDULE 1.53 MIDDLE EAST
SCHEDULE 1.54 MINIMUM TRANSFER PRICE
SCHEDULE 1.58 NON-PROPRIETARY EQUIPMENT
SCHEDULE 1.60 OTHER PRODUCT SPECIFICATIONS
SCHEDULE 1.62 PATENTS
SCHEDULE 1.64 PRODUCT ACCESSORIES
SCHEDULE 3.6 VALIDATION PROTOCOLS
SCHEDULE 4.1 CT/GC AUTOMATION SPECIFICATIONS
SCHEDULE 6.1(a) PURCHASE PRICE FOR DIGENE EQUIPMENT
SCHEDULE 6.1(b) PURCHASE PRICE FOR EXISTING FIELD EQUIPMENT
SCHEDULE 6.1(c) PURCHASE PRICE FOR NON-PROPRIETARY EQUIPMENT
SCHEDULE 13.2 PRODUCT, OTHER PRODUCT AND EQUIPMENT REPLACEMENT OR
REPAIR
SCHEDULE 20.4 CMV
SCHEDULE 20.5 SHARP
SCHEDULE 20.8(i) FINANCIAL RECONCILIATION
SCHEDULE 21.6 ALTERNATIVE DISPUTE RESOLUTION
</TABLE>
<PAGE> 107
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
SCHEDULE 1.2
AFRICA
All countries in the continent of Africa, excluding Algeria, Egypt, Morocco, The
Sudan and Tunisia
(which are to be included in Schedule 1.53)
<PAGE> 108
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 1.6
Base Sales
<TABLE>
<CAPTION>
TERRITORY CATEGORY SALES ($)
- --------------------------------------------------------------------------------
<S> <C> <C>
EUROPE CT/GC [***]
- --------------------------------------------------------------------------------
EUROPE HBV [***]
- --------------------------------------------------------------------------------
EUROPE HPV [***]
- --------------------------------------------------------------------------------
USA CT/GC [***]
- --------------------------------------------------------------------------------
TOTAL [***]
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 109
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
SCHEDULE 1.18
CT/GC Non-U.S. AUP
<TABLE>
<CAPTION>
DIGENE
ABBOTT CATALOG # CATALOG # DESCRIPTION QUANTITY AUP ($)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2F72.01 5100-1400IVT Digene Sample Conversion Kit 100 ml [***]
- ----------------------------------------------------------------------------------------------------------------------------------
2F73.01 5100-1500IVT Digene Sample Conversion Kit 1 L [***]
- ----------------------------------------------------------------------------------------------------------------------------------
2F78.01 5130-1015IVT Digene Urine Prep Kit 96 Tests [***]
- ----------------------------------------------------------------------------------------------------------------------------------
2F79.01 5130-1096IVT Digene CT/GC Test 96 Tests [***]
- ----------------------------------------------------------------------------------------------------------------------------------
2F80.01 5130-1116IVT Digene CT/GC Test Panel 6 Samples [***]
- ----------------------------------------------------------------------------------------------------------------------------------
2F81.01 5135-1050IVT Digene CT-ID Test 96 Tests [***]
- ----------------------------------------------------------------------------------------------------------------------------------
2F82.01 5140-1000IVT Digene GC-ID Test 96 Tests [***]
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 110
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 1.19
CT/GC Products
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
ABBOTT DIGENE
CATALOG # CATALOG # DESCRIPTION QUANTITY
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2F72.01 5100-1400IVT Digene Sample Conversion Kit 100 ml
- -------------------------------------------------------------------------------------------------------------------------------
2F73.01 5100-1500IVT Digene Sample Conversion Kit 1 L
- -------------------------------------------------------------------------------------------------------------------------------
2F78.01 5130-1015IVT Digene Urine Prep Kit 96 Tests
- -------------------------------------------------------------------------------------------------------------------------------
2F79.01 5130-1096IVT Digene CT/GC Test 96 Tests
- -------------------------------------------------------------------------------------------------------------------------------
2F80.01 5130-1116IVT Digene CT/GC Test Panel 6 Samples
- -------------------------------------------------------------------------------------------------------------------------------
2F81.01 5135-1050IVT Digene CT-ID Test 96 Tests
- -------------------------------------------------------------------------------------------------------------------------------
2F82.01 5140-1000IVT Digene GC-ID Test 96 Tests
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 111
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 1.20
CT/GC U.S. AUP
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
AUP- ($) AUP- ($)
ABBOTT DIGENE AMPLIFIED NON-AMPLIFIED
CATALOG # CATALOG # DESCRIPTION QUANTITY REIMBURSEMENT. REIMBURSEMENT.
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2F72.01 5100-1400IVT Digene Sample Conversion Kit 100 ml [***] [***]
- ---------------------------------------------------------------------------------------------------------------------------------
2F73.01 5100-1500IVT Digene Sample Conversion Kit 1 L [***] [***]
- ---------------------------------------------------------------------------------------------------------------------------------
2F78.01 5130-1015IVT Digene Urine Prep Kit 96 Tests [***] [***]
- ---------------------------------------------------------------------------------------------------------------------------------
2F79.01 5130-1096IVT Digene CT/GC Test 96 Tests [***] [***]
- ---------------------------------------------------------------------------------------------------------------------------------
2F80.01 5130-1116IVT Digene CT/GC Test Panel 6 Samples [***] [***]
- ---------------------------------------------------------------------------------------------------------------------------------
2F81.01 5135-1050IVT Digene CT-ID Test 96 Tests [***] [***]
- ---------------------------------------------------------------------------------------------------------------------------------
2F82.01 5140-1000IVT Digene GC-ID Test 96 Tests [***] [***]
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 112
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 1.21
CT/GC Specifications
General product description, intended use statement, general performance
characteristics and description of kit components as stated in the relevant
sections of the current, applicable product Package Inserts and Certificates of
Analysis as listed below:
<TABLE>
<CAPTION>
Assay Digene Package Insert Certificate of Analysis
- ----------------------------------------------------------------------
<S> <C> <C>
CT/GC DNA Test L0990 06/97 L1350 12/98
(5130-1096 IVT)
- ----------------------------------------------------------------------
CT-ID DNA Test L0991 06/97 L1352 12/98
(5135-1050 IVT)
- ----------------------------------------------------------------------
GC-ID DNA Test L0992 06/97 L1351 12/98
(5140-1000 IVT)
- ----------------------------------------------------------------------
</TABLE>
<PAGE> 113
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 1.25
Digene Equipment
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
ABBOTT DIGENE DESCRIPTION QUANTITY
CATALOG # CATALOG #
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
3F62.01 4300-1010 CE DCR-1 Luminometer, 240 Volt (adaptable to 120 Volt) 1 Each
- -----------------------------------------------------------------------------------------------------------
3F70.02 5000-1010 DML 2000 Luminometer 120 Volt 1 Each
- -----------------------------------------------------------------------------------------------------------
3F70.03 5000-1020 DML 2000 Luminometer 240 Volt 1 Each
- -----------------------------------------------------------------------------------------------------------
3F63.01 4300-1020 Rotary Shaker Assembly, 120 Volt 1 Each
- -----------------------------------------------------------------------------------------------------------
3F63.02 4300-1025 Rotary Shaker Assembly, 240 Volt 1 Each
- -----------------------------------------------------------------------------------------------------------
4F93.02 6000-2110 Rotary Shaker I, 120 Volt 1 Each
- -----------------------------------------------------------------------------------------------------------
4F93.01 6000-2240 Rotary Shaker I, 240 Volt 1 Each
- -----------------------------------------------------------------------------------------------------------
3F64.01 4300-1030 Rack Holder Shaker (Must be ordered with 4300-1020/1025) 1 Each
- -----------------------------------------------------------------------------------------------------------
4F82.02 6000-1110 Microplate Heater I, 120 Volt 1 Each
- -----------------------------------------------------------------------------------------------------------
4F82.01 6000-1240 Microplate Heater I, 220 Volt 1 Each
- -----------------------------------------------------------------------------------------------------------
TBA 5050-xxxx HPV, CT/GC
- -----------------------------------------------------------------------------------------------------------
HIV & HBV Software and Manuals ** 1 Each
- -----------------------------------------------------------------------------------------------------------
TBA 5050-1024EN PC System American English* 1 Each
- -----------------------------------------------------------------------------------------------------------
4F88.04 5050-1024FR PC System French * 1 Each
- -----------------------------------------------------------------------------------------------------------
4F88.05 5050-1024GR PC System German * 1 Each
- -----------------------------------------------------------------------------------------------------------
4F88.01 5050-1024IT PC System Italian * 1 Each
- -----------------------------------------------------------------------------------------------------------
4F88.02 5050-1024SP PC System Spanish * 1 Each
- -----------------------------------------------------------------------------------------------------------
4F88.03 5050-1024UK PC System English UK * 1 Each
- -----------------------------------------------------------------------------------------------------------
</TABLE>
*Includes: HP Brio CPU, Mouse, Language Specific Keyboard, Preloaded Software
(Language Specific Windows 95/Excel 97)
**Includes: HPV and CT/GC Software and Manuals (product part number 5050-1036
IVT) and HIV and HBV Software and Manuals (product part number 5050-1039 RUO).
<PAGE> 114
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 1.27
Digene Trademarks
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MARK REGISTRATION NUMBER REGISTRATION DATE
- --------------------------------------------------------------------------------
<S> <C> <C>
SHARP SIGNAL 1,929,468 1/24/95
- --------------------------------------------------------------------------------
DIGENE 1,958,407 2/27/96
- --------------------------------------------------------------------------------
Digene Design Logo 1,958,406 2/27/96
- --------------------------------------------------------------------------------
HYBRID CAPTURE 2,029,476 1/14/97
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 115
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 1.28
Distributors
[*****************]
<PAGE> 116
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 1.29
Distributor Territories
[*****]
<PAGE> 117
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 1.30
Distribution Agreements
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Company Name Contract Date Territory Product Comments
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[***] [***] [***] [***] [***]
- -----------------------------------------------------------------------------------
</TABLE>
<PAGE> 118
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 1.33
Europe
Albania
Andora
Austria
Baltic Republics: Estonia, Latvia, Lithuania
Belgium
Belarus
Bosnia
Bulgaria
Commonwealth of Independent States
Croatia
Cyprus
Czech Republic
Denmark
Finland
France
Germany
Greece
Greenland
Hungary
Iceland
Ireland
Italy
Liechtenstein
Luxembourg
<PAGE> 119
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 1.33 (cont'd)
Europe
Macedonia
Malta
Moldova
Monaco
Netherlands
Norway
Poland
Portugal
Romania
Russia
San Marino
Serbia
Slovenia
Slovakia
Spain
Sweden
Switzerland
Ukraine
United Kingdom
USSR - all former countries
Vatican City
Yugoslavia
<PAGE> 120
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 1.38
HBV AUP
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
ABBOTT CATALOG # DIGENE CATALOG # DESCRIPTION QUANTITY AUP ($)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TBA 6110-1000 RUO Digene HBV Serum Training Panel 12 Samples [***]
- ------------------------------------------------------------------------------------------------------------
4F41.01 6110-1096 RUO Digene HBV DNA Test (Includes Kit and 96 Tests [***]
Positive Controls)
- ------------------------------------------------------------------------------------------------------------
4F39.01 6110-1097 RUO Digene HBV DNA Ultra Sensitive Kit 96 Tests [***]
(Includes Positive Controls & Ultra
Sensitive Controls)
- ------------------------------------------------------------------------------------------------------------
TBA 4402-0477 HBV Detection Reagent (Sent with Each [***]
4402-1060M)
- ------------------------------------------------------------------------------------------------------------
2F94.01 4402-1006M HBV DNA Test Panel 1 Set [***]
- ------------------------------------------------------------------------------------------------------------
8E16.01 4402-1060M HBV DNA Assay 60 Tests [***]
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 121
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 1.39
HBV Products
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
ABBOTT CATALOG # DIGENE CATALOG # DESCRIPTION QUANTITY
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TBA 6110-1000 RUO Digene HBV Serum Training Panel 12 Samples
- ----------------------------------------------------------------------------------------------
4F41.01 6110-1096 RUO Digene HBV DNA Test (Includes Kit and 96 Tests
Positive Controls)
- ----------------------------------------------------------------------------------------------
4F39.01 6110-1097 RUO Digene HBV DNA Ultra Sensitive Kit 96 Tests
(Includes Positive Controls & Ultra
Sensitive Controls)
- ----------------------------------------------------------------------------------------------
TBA 4402-0477 HBV Detection Reagent (Sent with Each
4402-1060M)
- ----------------------------------------------------------------------------------------------
2F94.01 4402-1006M HBV DNA Test Panel 1 Set
- ----------------------------------------------------------------------------------------------
8E16.01 4402-1060M HBV DNA Assay 60 Tests
- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 122
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 1.40
HBV Specifications
General product description, intended use statement, general performance
characteristics and description of kit components as stated in the relevant
sections of the current, applicable product Package Inserts and Certificates of
Analysis as listed below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Assay Digene Package Insert Certificate of Analysis
- --------------------------------------------------------------------------------
<S> <C> <C>
HBV DNA Assay L0796 10/97 No reference number
4402-1060M
- --------------------------------------------------------------------------------
HBV DNA Test L1183 10/98 L1339 03/99
(6110-1096RUO &
6110-1097RUO)
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 123
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 1.43
HPV AUP
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
ABBOTT CATALOG# DIGENE CATALOG # DESCRIPTION QUANTITY AUP ($)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2F32.01 4401-1024 HPV DNA Test Panel 1 Set [***]
- -----------------------------------------------------------------------------------------------------------
8E17.01 4401-1030UP HPV DNA Assay 60 Tests [***]
- -----------------------------------------------------------------------------------------------------------
2F74.01 5101-1024IVT Digene HPV Validation Panel 6 Samples [***]
- -----------------------------------------------------------------------------------------------------------
2F75.01 5101-1042IVT HPV Validation Panel 36 Samples [***]
- -----------------------------------------------------------------------------------------------------------
2F76.01 5101-1096IVT Digene HPV Test 96 Tests [***]
- -----------------------------------------------------------------------------------------------------------
2F33.01 4401-1016 HPV Type 16 60 Tests [***]
- -----------------------------------------------------------------------------------------------------------
2F34.01 4401-1018 HPV Type 18 60 Tests [***]
- -----------------------------------------------------------------------------------------------------------
2F35.01 4401-1031 HPV Type 31 60 Tests [***]
- -----------------------------------------------------------------------------------------------------------
2F36.01 4401-1033 HPV Type 33 60 Tests [***]
- -----------------------------------------------------------------------------------------------------------
2F37.01 4401-1035 HPV Type 35 60 Tests [***]
- -----------------------------------------------------------------------------------------------------------
2F38.01 4401-1042 HPV Type 42 60 Tests [***]
- -----------------------------------------------------------------------------------------------------------
2F39.01 4401-1043 HPV Type 43 60 Tests [***]
- -----------------------------------------------------------------------------------------------------------
2F40.01 4401-1044 HPV Type 44 60 Tests [***]
- -----------------------------------------------------------------------------------------------------------
2F41.01 4401-1045 HPV Type 45 60 Tests [***]
- -----------------------------------------------------------------------------------------------------------
2F42.01 4401-1051 HPV Type 51 60 Tests [***]
- -----------------------------------------------------------------------------------------------------------
2F43.01 4401-1052 HPV Type 52 60 Tests [***]
- -----------------------------------------------------------------------------------------------------------
2F44.01 4401-1056 HPV Type 56 60 Tests [***]
- -----------------------------------------------------------------------------------------------------------
2F45.01 4401-1611 HPV Type 6/11 60 Tests [***]
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 124
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 1.44
HPV Products
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
ABBOTT CATALOG# DIGENE CATALOG # DESCRIPTION QUANTITY
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
2F32.01 4401-1024 HPV DNA Test Panel 1 Set
- -----------------------------------------------------------------------------------------
8E17.01 4401-1030UP HPV DNA Assay 60 Tests
- -----------------------------------------------------------------------------------------
2F74.01 5101-1024IVT Digene HPV Validation Panel 6 Samples
- -----------------------------------------------------------------------------------------
2F75.01 5101-1042IVT HPV Validation Panel 36 Samples
- -----------------------------------------------------------------------------------------
2F76.01 5101-1096IVT Digene HPV Test 96 Tests
- -----------------------------------------------------------------------------------------
2F33.01 4401-1016 HPV Type 16 60 Tests
- -----------------------------------------------------------------------------------------
2F34.01 4401-1018 HPV Type 18 60 Tests
- -----------------------------------------------------------------------------------------
2F35.01 4401-1031 HPV Type 31 60 Tests
- -----------------------------------------------------------------------------------------
2F36.01 4401-1033 HPV Type 33 60 Tests
- -----------------------------------------------------------------------------------------
2F37.01 4401-1035 HPV Type 35 60 Tests
- -----------------------------------------------------------------------------------------
2F38.01 4401-1042 HPV Type 42 60 Tests
- -----------------------------------------------------------------------------------------
2F39.01 4401-1043 HPV Type 43 60 Tests
- -----------------------------------------------------------------------------------------
2F40.01 4401-1044 HPV Type 44 60 Tests
- -----------------------------------------------------------------------------------------
2F41.01 4401-1045 HPV Type 45 60 Tests
- -----------------------------------------------------------------------------------------
2F42.01 4401-1051 HPV Type 51 60 Tests
- -----------------------------------------------------------------------------------------
2F43.01 4401-1052 HPV Type 52 60 Tests
- -----------------------------------------------------------------------------------------
2F44.01 4401-1056 HPV Type 56 60 Tests
- -----------------------------------------------------------------------------------------
2F45.01 4401-1611 HPV Type 6/11 60 Tests
- -----------------------------------------------------------------------------------------
</TABLE>
<PAGE> 125
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 1.45
HPV Specifications
General product description, intended use statement, general performance
characteristics and description of kit components as stated in the relevant
sections of the current, applicable product Package Inserts and Certificates of
Analysis as listed below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Assay Digene Package Insert Certificate of Analysis
- --------------------------------------------------------------------------------
<S> <C> <C>
HPV DNA Assay L0890 09/97 L1775
4401-1030
- --------------------------------------------------------------------------------
HPV DNA Test L0893 06/97 L1460 12/98
(5101-1096)
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 126
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 1.53
Middle East
Afghanistan
Algeria
Egypt
Iran
Iraq
Israel
Jordon
Kuwait
Lebanon
Morocco
Oman
Qatar
Saudi Arabia
Syria
The Sudan
Tunisa
Turkey/Kurdistan
United Arab Emirates (UAE)
<PAGE> 127
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 1.54
Minimum Transfer Price
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Product Type Minimum Transfer Price
- --------------------------------------------------------------------------
<S> <C>
CT/GC [***]
[***]
[***]
- --------------------------------------------------------------------------
HBV [***]
[***]
[***]
- --------------------------------------------------------------------------
HPV [***]
[***]
[***]
- --------------------------------------------------------------------------
</TABLE>
*[************************************************************************
*****************************************************************************].
**Notwithstanding the calculation of the Minimum Transfer Price [*******
********] in no event shall the Minimum Transfer Price for any such Product be
greater than [********] of the actual transfer price of such Product at the
time of its first sale to Abbott hereunder adjusted for changes in the PPI for
in vitro diagnostic substances-clinical chemistry products-standards and
controls (Code 2835-115), as quoted by the U.S. Department of Labor, Bureau of
Labor Statistics (or any successor agency or index), from the PPI published
most recently prior to such first sale to the PPI published most recently prior
to the date of the sale of such Product to which the Minimum Transfer Price is
applicable.
<PAGE> 128
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 1.58
Non-proprietary Equipment
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
ABBOTT CATALOG # DIGENE CATALOG # DESCRIPTION QUANTITY
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TBA 5050-1015 PC Monitor 1 Each
- --------------------------------------------------------------------------------------------------
TBA 5050-1028A Inkjet Printer (Epson Stylus 640) 1 Each
- --------------------------------------------------------------------------------------------------
TBA 5050-1019 Printer Cable 1 Each
- --------------------------------------------------------------------------------------------------
TBA 4300-1013 DCR-1 Well Liner Assembly 1 Each
- --------------------------------------------------------------------------------------------------
TBA 4301-1002 Decanting Racks 2/Pack
- --------------------------------------------------------------------------------------------------
TBA 4301-1003 Specimen Tube Rack 1 Rack
- --------------------------------------------------------------------------------------------------
TBA 4301-1012 DCR-1 Printer Paper 5 Rolls
- --------------------------------------------------------------------------------------------------
TBA 4301-1500 Disposable Transfer Pipettes 500/Pack
- --------------------------------------------------------------------------------------------------
2F84.01 4400-0296 Wash Buffer Pack 1 Pack
- --------------------------------------------------------------------------------------------------
2F30.01 4400-1000 Luminometer Validation Reagents 1 Set
- --------------------------------------------------------------------------------------------------
2F85.01 4500-1005 Sample Digestion Reagent 4 ml
- --------------------------------------------------------------------------------------------------
3F73.01 5030-1010 Wash Apparatus 1 Unit
- --------------------------------------------------------------------------------------------------
3F93.01 P0076 Hybridization Tube Caps, Green 1000/Bag
- --------------------------------------------------------------------------------------------------
3F94.01 P0077 Hybridization Tube Caps, Red 1000/Bag
- --------------------------------------------------------------------------------------------------
3F71.01 5015-1010 Specimen Collection Tube Rack 1 Each
- --------------------------------------------------------------------------------------------------
3F72.01 5025-1010 EXPAND-4 Pipettor (includes Power Supply) 1 Each
- --------------------------------------------------------------------------------------------------
3F72.02 5025-1015 EXPAND-4 Pipettor Stand 1 Each
- --------------------------------------------------------------------------------------------------
3F72.04 5025-1021 Power Supply (Included with 5025-1010) 1 Each
- --------------------------------------------------------------------------------------------------
3F75.01 5060-1001 MicroTubes 960/Pack
- --------------------------------------------------------------------------------------------------
3F75.02 5065-1010 MicroTube Rack 1 Each
- --------------------------------------------------------------------------------------------------
4F81.01 5070-1010 Plate Sealers 100/Pack
- --------------------------------------------------------------------------------------------------
4F61.01 5075-1011 Extra Long Pipette Tips 720/Case
- --------------------------------------------------------------------------------------------------
4F89.01 5080-1000 Screw Caps 1000/Bag
- --------------------------------------------------------------------------------------------------
4F85.01 5090-1010 Disposable Reagent Reservoirs 100/Case
- --------------------------------------------------------------------------------------------------
TBA 5100-0393 Wash Buffer (30x) 100 ml
- --------------------------------------------------------------------------------------------------
4F87.01 5061-1001 1.5 ml Specimen Preparation Tubes with O-Ring 1000/Case
Screw Caps
- --------------------------------------------------------------------------------------------------
4F86.01 5076-1011 Thin Tip Transfer Pipettes 2000/Case
- --------------------------------------------------------------------------------------------------
4F81.02 6000-0319 HBV Plate Sealers 100/Box
- --------------------------------------------------------------------------------------------------
4F79.01 6000-0904 HBV Absorbent Blotting Pad 3000/Case
- --------------------------------------------------------------------------------------------------
4F80.01 6000-1203 HBV Hybridization Microplates 100/Box
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 129
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 1.60
Other Product Specifications
CMV
General product description, intended use statement, general performance
characteristics and description of kit components as stated in the relevant
sections of the current, applicable product Package Inserts and Certificates of
Analysis as listed below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Assay Digene Package Insert Certificate of Analysis
- --------------------------------------------------------------------------------
<S> <C> <C>
CMV DNA Assay L0863 09/98 No reference number
(4403-2005, Murex
DP35)
- --------------------------------------------------------------------------------
</TABLE>
SHARP Specifications
SHARP Signal Assay (Digene Catalog No. 4600-1192 and Package Insert L0575
04/98)
Digene Internal QC Criteria:
When tested with a master Positive Control and RNA Probe, the absorbance at 450
nm should be greater than or equal to 0.60 after one hour substrate incubation.
Customer Criteria:
When tested with the Postive Control and RNA Probe from any Probe/Primer Kit,
the absorbance at 450 nm should be greater than or equal to 0.40 after one hour
substrate incubation.
SHARP Probe/Primer Kits
Digene Internal QC Criteria:
When the Postive Control and RNA Probe are tested with the SHARP Signal
Detection Kit, the absorbance at 450 nm should be greater than or equal to 0.60
after one hour substrate incubation.
Customer Criteria:
When the Positive Control and RNA Probe are tested with the SHARP Signal
Detection Kit, the absorbance at 450 nm should be greater than or equal to 0.40
after one hour substrate incubation.
<PAGE> 130
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 1.62
Patents
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Application Filed Patent Issued Title Country
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
[***] [***] [***] [****] [***] [***]
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 131
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 1.64
Product Accessories
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
ABBOTT CATALOG # DIGENE CATALOG # DESCRIPTION QUANTITY COST ($)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2F71.01 5100-1050IVT Digene Cervical Sampler 50/Box [***]
- --------------------------------------------------------------------------------------------------------------
8E33.01 4203-0020 Specimen Collection Kit 20 Kits, 1 Box [***]
- --------------------------------------------------------------------------------------------------------------
2F29.01 4203-1030 STM 30 ml [***]
- --------------------------------------------------------------------------------------------------------------
TBA 4203-1030S STM 1L [***]
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 132
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 3.6
Validation Protocols
Validation protocols will be as described in each Product, Other Product and
Equipment package insert.
<PAGE> 133
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 4.1
CT/GC Automation Specifications
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Specification System Requirement
- ---------------------------------------------------------------------
<S> <C>
[***] [***]
- ---------------------------------------------------------------------
</TABLE>
<PAGE> 134
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 4.1 (cont'd)
CT/GC Automation Specifications
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Specification System Requirement [***]
- ---------------------------------------------------------------------
<S> <C>
- ---------------------------------------------------------------------
</TABLE>
<PAGE> 135
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
SCHEDULE 6.1(a)
PURCHASE PRICE FOR DIGENE EQUIPMENT
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
ABBOTT CATALOG # DIGENE CATALOG # DESCRIPTION QUANTITY COST ($)*
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
3F62.01 4300-1010 CE DCR-1 LUMINOMETER, 240 VOLT (ADAPTABLE TO 1 EACH [***]
120 VOLT)
- ----------------------------------------------------------------------------------------------------------------------
3F70.02 5000-1010 DML 2000 Luminometer 120 Volt 1 Each [***]
- ----------------------------------------------------------------------------------------------------------------------
3F70.03 5000-1020 DML 2000 Luminometer 240 Volt 1 Each [***]
- ----------------------------------------------------------------------------------------------------------------------
3F63.01 4300-1020 Rotary Shaker Assembly, 120 Volt *** 1 Each [***]
- ----------------------------------------------------------------------------------------------------------------------
3F63.02 4300-1025 Rotary Shaker Assembly, 240 Volt *** 1 Each [***]
- ----------------------------------------------------------------------------------------------------------------------
4F93.02 6000-2110 Rotary Shaker I, 120 Volt *** 1 Each [***]
- ----------------------------------------------------------------------------------------------------------------------
4F93.02 6000-2110 Rotary Shaker I, 120 Volt *** 1 Each [***]
- ----------------------------------------------------------------------------------------------------------------------
4F93.01 6000-2240 Rotary Shaker I, 240 Volt *** 1 Each [***]
- ----------------------------------------------------------------------------------------------------------------------
TBA 4300-1030 Rack Holder Rotary Shaker (Must be ordered 1 Each [***]
with 4300-1020/1025)
- ----------------------------------------------------------------------------------------------------------------------
4F82.02 6000-1110 Microplate Heater I, 120 Volt *** 1 Each [***]
- ----------------------------------------------------------------------------------------------------------------------
4F82.01 6000-1240 Microplate Heater I, 220 Volt *** 1 Each [***]
- ----------------------------------------------------------------------------------------------------------------------
TBA 5050-xxxx HPV, CT/GC, HIV & HBV Software and Manuals 1 Each [***]
****
- ----------------------------------------------------------------------------------------------------------------------
TBA 5050-1024EN PC System American English** 1 Each [***]
- ----------------------------------------------------------------------------------------------------------------------
4F88.04 5050-1024FR PC System French ** 1 Each [***]
- ----------------------------------------------------------------------------------------------------------------------
4F88.05 5050-1024GR PC System German ** 1 Each [***]
- ----------------------------------------------------------------------------------------------------------------------
4F88.01 5050-1024IT PC System Italian ** 1 Each [***]
- ----------------------------------------------------------------------------------------------------------------------
4F88.02 5050-1024SP PC System Spanish ** 1 Each [***]
- ----------------------------------------------------------------------------------------------------------------------
4F88.03 5050-1024UK PC System English UK ** 1 Each [***]
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* All prices set forth in this column represent [***] Effective Date. All
purchases of Digene Equipment shall be either at [***], or with respect
to the items identified with ***, at [********]
**Includes: HP Brio CPU, Mouse, Language Specific Keyboard, Preloaded Software
(Language Specific Windows 95/Excel 97)
*** Price is [*******]
**** 5050-xxxx includes HPV and CT/GC Software and Manuals (product part number
5050-1036 IVT) and HIV and HBV Software and Manuals (product part number
5050-1039 RUO).
<PAGE> 136
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 6.1(b)
Purchase Price for Existing Field Equipment
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Description Data Grand Total
- -------------------------------------------------------------------------
<S> <C> <C>
CABLE Price Ea [***]
---------------------------------------------------------
Quantity [***]
---------------------------------------------------------
Ext Price [***]
---------------------------------------------------------
Depreciation [***]
---------------------------------------------------------
Net Price [***]
- -------------------------------------------------------------------------
DCR-1 Price Ea [***]
---------------------------------------------------------
Quantity [***]
---------------------------------------------------------
Ext Price [***]
---------------------------------------------------------
Depreciation [***]
---------------------------------------------------------
Net Price [***]
- -------------------------------------------------------------------------
DML Price Ea [***]
---------------------------------------------------------
Quantity [***]
---------------------------------------------------------
Ext Price [***]
---------------------------------------------------------
Depreciation [***]
---------------------------------------------------------
Net Price [***]
- -------------------------------------------------------------------------
MONITOR Price Ea [***]
---------------------------------------------------------
Quantity [***]
---------------------------------------------------------
Ext Price [***]
---------------------------------------------------------
Depreciation [***]
---------------------------------------------------------
Net Price [***]
- -------------------------------------------------------------------------
PC Price Ea [***]
---------------------------------------------------------
Quantity [***]
---------------------------------------------------------
Ext Price [***]
---------------------------------------------------------
Depreciation [***]
---------------------------------------------------------
Net Price [***]
- -------------------------------------------------------------------------
PIPETTOR Price Ea [***]
---------------------------------------------------------
Quantity [***]
---------------------------------------------------------
Ext Price [***]
---------------------------------------------------------
Depreciation [***]
---------------------------------------------------------
Net Price [***]
- -------------------------------------------------------------------------
PRINTER Price Ea [***]
---------------------------------------------------------
Quantity [***]
---------------------------------------------------------
Ext Price [***]
---------------------------------------------------------
Depreciation [***]
---------------------------------------------------------
Net Price [***]
- -------------------------------------------------------------------------
</TABLE>
<PAGE> 137
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 6.1(b) (con't)
Purchase Price for Existing Field Equipment
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------
SHAKER Price Ea [***]
-----------------------------------------------------------
Quantity [***]
-----------------------------------------------------------
Ext Price [***]
-----------------------------------------------------------
Depreciation [***]
-----------------------------------------------------------
Net Price [***]
- -----------------------------------------------------------------------------------
SOFTWARE Price Ea [***]
-----------------------------------------------------------
Quantity [***]
-----------------------------------------------------------
Ext Price [***]
-----------------------------------------------------------
Depreciation [***]
-----------------------------------------------------------
Net Price [***]
- -----------------------------------------------------------------------------------
Total Ext Price [***]
- -----------------------------------------------------------------------------------
Total Depreciation [***]
- -----------------------------------------------------------------------------------
Total Net Price [***]
- -----------------------------------------------------------------------------------
</TABLE>
<PAGE> 138
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 6.1(c)
Purchase Price for Non-proprietary Equipment
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
ABBOTT CATALOG # DIGENE CATALOG # DESCRIPTION QUANTITY COST ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TBA 5050-1015 PC Monitor 1 Each [***]
- -----------------------------------------------------------------------------------------------------------------
TBA 5050-1028A Inkjet Printer (Epson Stylus 640) 1 Each [***]
- -----------------------------------------------------------------------------------------------------------------
TBA 5050-1019 Printer Cable 1 Each [***]
- -----------------------------------------------------------------------------------------------------------------
TBA 4300-1013 DCR-1 Well Liner Assembly 1 Each [***]
- -----------------------------------------------------------------------------------------------------------------
TBA 4301-1002 Decanting Racks 2/Pack [***]
- -----------------------------------------------------------------------------------------------------------------
TBA 4301-1003 Specimen Tube Rack 1 Rack [***]
- -----------------------------------------------------------------------------------------------------------------
TBA 4301-1012 DCR-1 Printer Paper 5 Rolls [***]
- -----------------------------------------------------------------------------------------------------------------
TBA 4301-1500 Disposable Transfer Pipettes 500/Pack [***]
- -----------------------------------------------------------------------------------------------------------------
2F84.01 4400-0296 Wash Buffer Pack 1 Pack [***]
- -----------------------------------------------------------------------------------------------------------------
2F30.01 4400-1000 Luminometer Validation Reagents 1 Set [***]
- -----------------------------------------------------------------------------------------------------------------
2F85.01 4500-1005 Sample Digestion Reagent 4 ml [***]
- -----------------------------------------------------------------------------------------------------------------
3F73.01 5030-1010 Wash Apparatus 1 Unit [***]
- -----------------------------------------------------------------------------------------------------------------
3F93.01 P0076 Hybridization Tube Caps, Green 1000/Bag [***]
- -----------------------------------------------------------------------------------------------------------------
3F94.01 P0077 Hybridization Tube Caps, Red 1000/Bag [***]
- -----------------------------------------------------------------------------------------------------------------
3F71.01 5015-1010 Specimen Collection Tube Rack 1 Each [***]
- -----------------------------------------------------------------------------------------------------------------
3F72.01 5025-1010 EXPAND-4 Pipettor (includes Power Supply) 1 Each [***]
- -----------------------------------------------------------------------------------------------------------------
3F72.02 5025-1015 EXPAND-4 Pipettor Stand 1 Each [***]
- -----------------------------------------------------------------------------------------------------------------
3F72.04 5025-1021 Power Supply (Included with 5025-1010) 1 Each [***]
- -----------------------------------------------------------------------------------------------------------------
3F75.01 5060-1001 MicroTubes 960/Pack [***]
- -----------------------------------------------------------------------------------------------------------------
3F75.02 5065-1010 MicroTube Rack 1 Each [***]
- -----------------------------------------------------------------------------------------------------------------
4F81.01 5070-1010 Plate Sealers 100/Pack [***]
- -----------------------------------------------------------------------------------------------------------------
4F61.01 5075-1011 Extra Long Pipette Tips 720/Case [***]
- -----------------------------------------------------------------------------------------------------------------
4F89.01 5080-1000 Screw Caps 1000/Bag [***]
- -----------------------------------------------------------------------------------------------------------------
4F85.01 5090-1010 Disposable Reagent Reservoirs 100/Case [***]
- -----------------------------------------------------------------------------------------------------------------
TBA 5100-0393 Wash Buffer (30x) 100 ml [***]
- -----------------------------------------------------------------------------------------------------------------
4F87.01 5061-1001 1.5 ml Specimen Preparation Tubes with O-Ring 1000/Case [***]
Screw Caps
- -----------------------------------------------------------------------------------------------------------------
4F86.01 5076-1011 Thin Tip Transfer Pipettes 2000/Case [***]
- -----------------------------------------------------------------------------------------------------------------
4F81.02 6000-0319 HBV Plate Sealers 100/Box [***]
- -----------------------------------------------------------------------------------------------------------------
4F79.01 6000-0904 HBV Absorbent Blotting Pad 3000/Case [***]
- -----------------------------------------------------------------------------------------------------------------
4F80.01 6000-1203 HBV Hybridization Microplates 100/Box [***]
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Schedule 13.2
PRODUCT, OTHER PRODUCT AND EQUIPMENT REPLACEMENT OR REPAIR
If Abbott believes that a Product, Other Product or Equipment is a
Defective Product it shall so notify Digene in writing within sixty (60) days
of discovering the existence of such defect. Abbott shall use commercially
reasonable efforts to provide to Digene a written report detailing the area(s)
of non-conformance within forty-five (45) days after providing Digene with the
initial notification. The Parties shall mutually determine if such Product,
Other Product or Equipment is a Defective Product and, if so, shall mutually
determine a time frame in which the Defective
<PAGE> 139
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Product shall be either disposed of appropriately or packaged in accordance
with the appropriate international, national, state and local regulations for
return to Digene. Digene shall arrange for a shipping agent to collect, handle
and ship the Defective Product to a destination of Digene's choice and at
Digene's sole expense. Such collection shall occur during Abbott's normal
business hours.
<PAGE> 140
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 20.4
CMV
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
ABBOTT CATALOG # DIGENE CATALOG # DESCRIPTION QUANTITY COST ($)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2F93.01 4400-0333 CMV Lysis Buffer 100 ml [***]
- ---------------------------------------------------------------------------------------------------------
8E19.01 4403-2005 CMV DNA Assay (Murex label) 60 Tests [***]
- ---------------------------------------------------------------------------------------------------------
2F92.01 4403-2006 CMV DNA Test Panel 1 Set [***]
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 141
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 20.5
SHARP
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
ABBOTT CATALOG # DIGENE CATALOG # DESCRIPTION QUANTITY COST ($)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8E18.01 4600-1192 Sharp Signal System Assay 192 Tests [***]
- ----------------------------------------------------------------------------------------------------------------
2F46.01 4600-1511 HBV Positive Control DNA 100 Microliters [***]
- ----------------------------------------------------------------------------------------------------------------
[***]
- ----------------------------------------------------------------------------------------------------------------
2F49.01 4600-1514 HIV Positive Control DNA 100 Microliters [***]
- ----------------------------------------------------------------------------------------------------------------
2F50.01 4600-1515 CMV Positive Control DNA 100 Microliters [***]
- ----------------------------------------------------------------------------------------------------------------
2F51.01 4600-1516 Mtb Positive Control DNA 100 Microliters [***]
- ----------------------------------------------------------------------------------------------------------------
2F86.01 4601-1100 HBV Probe Primer Set 100 Tests [***]
- ----------------------------------------------------------------------------------------------------------------
2F54.01 4603-1100 HPV Probe Primer Set 100 Tests [***]
- ----------------------------------------------------------------------------------------------------------------
2F88.01 4604-1145 HIV SK145/150 Probe Primer Set 100 Tests [***]
- ----------------------------------------------------------------------------------------------------------------
2F87.01 4604-1380 HIV SK38/39 Probe Primer Set 100 Tests [***]
- ----------------------------------------------------------------------------------------------------------------
2F89.01 4605-1100 CMV Probe Primer Set 100 Tests [***]
- ----------------------------------------------------------------------------------------------------------------
2F56.01 4605-1101 Cytomegalovirus (CMV) 100 Tests [***]
- ----------------------------------------------------------------------------------------------------------------
2F58.01 4606-1100 Mycobacterium TB 100 Tests [***]
- ----------------------------------------------------------------------------------------------------------------
2F59.01 4607-1100 Herpes Simplex Virus 100 Tests [***]
- ----------------------------------------------------------------------------------------------------------------
2F60.01 4608-1100 Varicella Zoster Virus 100 Tests [***]
- ----------------------------------------------------------------------------------------------------------------
2F61.01 4609-1100 Human Herpes Virus 6 100 Tests [***]
- ----------------------------------------------------------------------------------------------------------------
2F62.01 4610-1100 Epstein Barr Virus 100 Tests [***]
- ----------------------------------------------------------------------------------------------------------------
2F63.01 4611-1100 Parvovirus B19 100 Tests [***]
- ----------------------------------------------------------------------------------------------------------------
2F64.01 4620-1100 Borrelia burgdorderi, flagellin 100 Tests [***]
- ----------------------------------------------------------------------------------------------------------------
2F65.01 4620-1101 Borrelia burgdorderi, OspA 100 Tests [***]
- ----------------------------------------------------------------------------------------------------------------
2F66.01 4621-1100 Chlamydia Trachomatis 100 Tests [***]
- ----------------------------------------------------------------------------------------------------------------
2F67.01 4630-1000 Toxoplasma gondii 100 Tests [***]
- ----------------------------------------------------------------------------------------------------------------
2F67.01 4631-1100 Plasmodium flaciparum 100 Tests [***]
- ----------------------------------------------------------------------------------------------------------------
2F69.01 4632-1100 Plasmodium vivax 210 100 Tests [***]
- ----------------------------------------------------------------------------------------------------------------
2F70.01 4632-1101 Plasmodium vivax 247 100 Tests [***]
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 142
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 20.8(i)
Financial Reconciliation
Amounts due to (from) Digene as of March 31, 1999
<TABLE>
<CAPTION>
Billed to Amount (USD)
- --------- --------------
<S> <C>
[******] $ [***]
Adjustments
- -----------
Note offsets (9/30/98 & [***]
12/31/98)
Price adjustment on open equipment invoices [***]
----------------
Net amount due to Digene $ [***]
================
</TABLE>
<PAGE> 143
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Schedule 21.6
Alternative Dispute Resolution
The Parties recognize that a bona fide dispute as to certain matters may
arise from time to time during the term of this Agreement which relates to
either Party's rights and/or obligations. The terms of this Schedule 21.6 set
forth the procedures to be used in the alternative dispute resolution ("ADR")
process for resolving disputes between the Parties.
A Party initiating the ADR must first send written notice of the dispute to
the other Party for attempted resolution by good faith negotiation between their
respective presidents (or their equivalents) of the affected subsidiaries,
divisions, or business units within twenty-eight (28) days after such notice is
received (all references to "days" in this ADR provision are to calendar days).
If the matter is not resolved within such twenty-eight (28) day period, or
if the Parties fail to meet within such twenty-eight (28) day period, either
Party may initiate an ADR proceeding as provided herein. The Parties shall have
the right to be represented by counsel in such a proceeding.
22. To begin the ADR proceeding, a Party shall provide written notice (the
"ADR Notice") to the other Party of the issues to be resolved by ADR.
Within fourteen (14) days after its receipt of the ADR Notice, the other
Party may, by written notice to the Party providing the ADR Notice, add
additional issues to be resolved within the same ADR proceeding.
23. Within twenty-one (21) days following receipt of the ADR Notice, the
Parties shall select a mutually acceptable neutral individual to preside in
the resolution of any disputes in the ADR proceeding. If the Parties are
unable to agree on a mutually acceptable neutral within such period, either
Party may request the President of the CPR Institute for Dispute Resolution
("CPR"), 366 Madison Avenue, 14th Floor, New York, New York 10017, to
select a neutral pursuant to the following procedures:
(a) The CPR shall submit to the Parties a list of not less than five
(5) candidates within fourteen (14) days after receipt of the request,
along with a Curriculum Vitae for each candidate. Each candidate shall
be independent and shall not be an employee, director or holder of one
percent (1%) or more of the outstanding equity securities of either
Party or any of their subsidiaries or affiliates or of any entity with
which either Party has a contractual or business relationship.
(b) Such list shall include a statement of disclosure by each
candidate of any circumstances likely to affect his or her
impartiality.
(c) Each Party shall number the candidates in order of preference
(with the number one (1) signifying the greatest preference and shall
deliver the list to the CPR within seven (7) days following receipt of
the list of candidates. If a Party believes a conflict of interest
exists regarding any of the candidates, that Party shall provide a
written explanation of the conflict to the CPR along with its list
showing its order of preference for the candidates. Any Party failing
to return a list of preferences on time shall be deemed to have no
order of preference.
(d) If the Parties collectively have identified fewer than three (3)
candidates deemed to have conflicts, the CPR immediately shall
designate as the neutral the candidate for whom the Parties
collectively have indicated the greatest preference. If a tie should
result between two candidates, the CPR may designate either candidate.
If the Parties collectively have identified three (3) or more
candidates deemed to have conflicts, the CPR shall review the
explanations regarding the conflicts and, it its sole discretion, may
either (i) immediately designate as the neutral the candidate for whom
the Parties collectively have indicated the greatest preference, or
(ii) issue a new list of not less than five (5) candidates, in which
case the procedures set forth in subparagraphs 2(a)-2(d) shall be
repeated until the neutral is selected.
24. No earlier than twenty-eight (28) days or later than fifty-six (56)
days after selection, the neutral shall hold a hearing to resolve each of
the issues identified by the Parties. The ADR proceeding shall take place
at a location agreed upon by the Parties. If the Parties cannot agree, the
neutral shall designate a location other than the principal place of
business of either Party or any of their subsidiaries or affiliates.
25. At least seven (7) days prior to the hearing, each Party shall submit,
in written form, the following to the other Party and the neutral:
(a) a copy of all exhibits on which such Party intends to rely in any
oral or written presentation to the neutral;
<PAGE> 144
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(b) a list of any witnesses such Party intends to call at the
hearing, and a short summary of the anticipated testimony of each
witness;
(c) a proposed ruling on each issue to be resolved, together with a
request for a specific damage award or other remedy for each issue.
The proposed rulings and remedies shall not contain any recitation of
the facts or any legal arguments and shall not exceed one (1) page per
issue.
(d) a brief in support of such Party's proposed rulings and remedies,
provided that the brief shall not exceed twenty (20) pages. This page
limitation shall apply regardless of the number of issues raised in
the ADR proceeding.
Except as expressly set forth in subparagraphs 4(a) - 4(d), no discovery
shall be required or permitted by any means, including depositions,
interrogatories, requests for admissions, or production of documents.
26. The hearing shall be conducted on two (2) consecutive days and shall
be governed by the following rules:
(a) The hearing may be attended by one representative of each Party,
each Party's expert witnesses, if any, counsel and the neutral.
(b) Video conferencing shall be permissible at the discretion of the
neutral.
(c) Each Party shall be entitled to five (5) hours of hearing time to
present its case. The neutral shall determine whether each Party has
had the five (5) hours to which it is entitled.
(d) Each Party shall be entitled, but not required, to make an
opening statement, to present regular and rebuttal testimony,
documents or other evidence, to cross-examine witnesses, and to make a
closing argument. Cross-examination of witnesses shall occur
immediately after their direct testimony, and cross-examination time
shall be charged against the Party conducting the cross-examination.
(e) The Party initiating the ADR shall begin the hearing and, if it
chooses to make an opening statement, shall address not only issues it
raised but also any issues raised by the responding Party. The
responding Party, if it chooses to make an opening statement, also
shall address all issues raised in the ADR. Thereafter, the
presentation of regular and rebuttal testimony and documents, other
evidence, and closing arguments shall proceed in the same sequence.
(f) Except when testifying, witnesses, other than the Party
representatives and any expert witnesses, shall be excluded from the
hearing until closing arguments.
(g) Settlement negotiations, including any statements made therein,
shall not be admissible under any circumstances. Affidavits prepared
for purposes of the ADR hearing shall be admissible at the discretion
of the neutral, provided the affiant is available for purposes of
cross-examination. As to all other matters, the neutral shall have
sole discretion regarding the admissibility of any evidence.
27. Within seven (7) days following completion of the hearing, each Party
may submit to the other Party and the neutral a post-hearing brief in
support of its proposed rulings and remedies, provided that such brief
shall not contain or discuss any new evidence and shall not exceed ten (10)
pages. This page limitation shall apply regardless of the number of issues
raised in the ADR proceeding.
28. The neutral shall rule on each disputed issue within fourteen (14)
days following completion of the hearing. Such ruling shall adopt in its
entirety the proposed ruling and remedy of one of the parties on each
disputed issue but may adopt one party's proposed rulings and remedies on
some issues and the other party's proposed rulings and remedies on other
issues. The neutral shall not issue any written opinion or otherwise
explain the basis of the ruling.
29. The neutral shall be paid a reasonable fee plus expenses. These fees
and expenses, along with the reasonable legal fees and expenses of the
prevailing Party (including all expert witness fees and expenses), the fees
and expenses of a court reporter, and any expenses for a hearing room,
shall be paid as follows:
(a) If the neutral rules in favor of one Party on all disputed issues
in the ADR, the losing Party shall pay 100% of such fees and expenses.
(b) If the neutral rules in favor of one Party on some issues and in
favor of the other Party on other issues, the neutral shall issue with
the rulings a written determination as to how such fees and expenses
shall be allocated between the Parties. The neutral shall allocate
fees and expenses in a way that bears a reasonable relationship to the
outcome
<PAGE> 145
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND BRACKETS AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
of the ADR, with the Party prevailing on more issues, or on issues of
greater value or gravity, recovering a relatively larger share of its
legal fees and expenses.
30. The rulings of the neutral and the allocation of fees and expenses
shall be binding, non-reviewable, and non-appealable, and may be entered as
a final judgment in any court having jurisdiction.
31. Except as provided in paragraph 9 or as required by law, the existence
of the dispute, any settlement negotiations, the ADR hearing, any
submissions (including exhibits, testimony, proposed rulings, and briefs),
and the rulings shall be deemed Confidential Information, although the
rulings may be introduced in any subsequent ADR hearing relating to this
Agreement. The neutral shall have the authority to impose sanctions for
unauthorized disclosure of Confidential Information.
<PAGE> 1
EXHIBIT 21
Subsidiaries of the Registrant
Digene do Brasil LTDA
Digene Europe
Digene B.V.
Viropath B.V.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 333-14933 and Form S-8 No. 333-40899) pertaining to the Digene
Diagnostics, Inc. 1990 Stock Option Plan, the Digene Diagnostics, Inc. 1991-A
Stock Option Plan, the Digene Diagnostics, Inc. 1991-B Stock Option Plan, the
Digene Corporation Omnibus Plan, the Digene Corporation Directors' Stock Option
Plan, and the Digene Corporation 1997 Stock Option Plan of our reports dated
August 20, 1999, with respect to the consolidated financial statements and
schedule of Digene Corporation included in its Annual Report on Form 10-K for
the year ended June 30, 1999, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Washington, DC
September 27, 1999
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