U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------
FORM 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended August 31, 1997
or
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period from _________ to ________.
Commission File No. 0-21354
ENDOGEN, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Massachusetts 04-2789249
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
30 Commerce Way
Woburn, Massachusetts 01801-1059
(Address of Principal Executive Offices)
(781) 937-0890
(Issuer's Telephone Number, Including Area Code)
Checkwhether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 ___
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Title Shares Outstanding as of September 24, 1997
- ----------------------------- -------------------------------------------
Common Stock, $0.01 par value 3,420,319
Transitional Small Business Disclosure Format (check one):
Yes ___ No X
Exhibit index located on page 13
Page 1 of 13
<PAGE>
ENDOGEN, INC.
FORM 10-QSB
QUARTER ENDED AUGUST 31, 1997
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION Number
- ------------------------------ ------
Item 1 - Financial Statements (Unaudited)
Balance Sheet
August 31, 1997 and May 31, 1997.................................... 3
Income Statement
for the three months ended August 31, 1997 and August 31, 1996...... 4
Statement of Cash Flows
for the three months ended August 31, 1997 and August 31, 1996...... 5
Notes to Financial Statements........................................... 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations........................... 8
PART II - OTHER INFORMATION
- ---------------------------
Item 2 - Changes in Securities and Use of Proceeds.......................... 11
Item 5 - Other Information.................................................. 11
Item 6 - Exhibits and Reports on Form 8-K................................... 11
Signatures.................................................................. 12
Index To Exhibits........................................................... 13
Page 2 of 13
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ENDOGEN, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
August 31, May 31,
1997 1997
----------- ----------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 420,090 $ 334,050
Accounts receivable, net of allowance
for doubtful accounts and returns of
$50,000 at August 31, 1997 and May 31, 1997 1,443,821 1,612,908
Inventories 1,930,610 1,817,440
Prepaid expenses and other current assets 269,245 221,862
Deferred income taxes 188,000 188,000
---------- ----------
Total current assets 4,251,766 4,174,260
Fixed assets, net 2,263,359 2,327,550
Intangible assets, net 366,720 395,730
Deferred income taxes 280,000 280,000
Other assets 261,833 300,213
---------- ----------
$7,423,678 $7,477,753
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of note payable - bank $ 4,362 $ 7,633
Current portion of term note payable 133,333 133,333
Current portion of capital lease obligations 5,847 5,528
Accounts payable and accrued expenses 1,169,796 1,292,939
---------- ----------
Total current liabilities 1,313,338 1,439,433
---------- ----------
Term note payable - bank 166,667 200,000
Capital lease obligations and other note payable 13,189 14,776
---------- ----------
179,856 214,776
---------- ----------
Stockholders' equity:
Common stock, $.01 par value; 10,000,000
shares authorized; 3,420,319 and
3,416,319 shares issued and outstanding
at August 31, 1997 and May 31, 1997,
respectively 34,203 34,162
Additional paid-in capital 6,114,385 6,101,667
Accumulated deficit (218,104) (312,285)
---------- ----------
Total stockholders' equity 5,930,484 5,823,544
---------- ----------
$7,423,678 $7,477,753
========== ==========
</TABLE>
See notes to unaudited financial statements
Page 3 of 13
<PAGE>
ENDOGEN, INC.
INCOME STATEMENT
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
August 31, August 31,
1997 1996
---------- ----------
<S> <C> <C>
REVENUE:
Product sales $2,324,013 $2,226,481
COSTS AND EXPENSES:
Cost of sales 893,064 809,385
Selling, general and administrative 959,211 925,918
Research and development 333,338 297,146
---------- ----------
2,185,613 2,032,449
---------- ----------
Income from operations 138,400 194,032
Interest expense, net (3,219) (78,244)
---------- ----------
Net income before income taxes 135,181 115,788
Provision for income taxes 41,000 --
---------- ----------
Net income $ 94,181 $ 115,788
========== ==========
Net income per share $ 0.03 $ 0.04
========== ==========
Weighted average shares outstanding 3,584,625 3,245,245
========== ==========
</TABLE>
See notes to unaudited financial statements
Page 4 of 13
<PAGE>
ENDOGEN, INC.
STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
August 31, August 31,
1997 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 94,181 $ 115,788
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 200,394 192,699
Decrease (increase) in accounts receivable 169,087 (120,420)
Increase in inventories (113,170) (42,084)
Increase in prepaid expenses and other assets (17,322) (39,965)
Increase in intangible assets -- (5,500)
Decrease in accounts payable and accrued expenses (123,143) (35,706)
--------- ---------
Net cash provided by operating activities 210,027 64,812
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets (98,876) (92,973)
--------- ---------
Net cash used for investing activities (98,876) (92,973)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of capital lease obligations and notes payable (37,872) (22,505)
Proceeds from issuance of common stock 12,761 4,241
--------- ---------
Net cash used for financing activities (25,111) (18,264)
--------- ---------
Net increase (decrease) in cash and cash equivalents 86,040 (46,425)
Cash and cash equivalents, beginning of period 334,050 763,739
--------- ---------
Cash and cash equivalents, end of period $ 420,090 $ 717,314
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 8,799 $ 9,347
========= =========
Cash paid for income taxes $ 25,465 $ --
========= =========
</TABLE>
See notes to unaudited financial statements
Page 5 of 13
<PAGE>
ENDOGEN, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. Basis of Presentation
The unaudited financial statements of Endogen, Inc. (the "Company" or
"Endogen") include, in the opinion of management, all adjustments
(consisting of normal and recurring adjustments) necessary for a fair
presentation of the Company's financial position as of August 31, 1997 and
the results of operations for the three month periods ended August 31, 1997
and August 31, 1996. The results of operations are not necessarily
indicative of results for a full year.
These financial statements should be read in conjunction with the
financial statements contained in the Company's Form 10-KSB filed with the
Securities and Exchange Commission (the "SEC") on August 8, 1997 pursuant
to the Securities Exchange Act of 1934, as amended. Certain information and
footnote disclosures normally included in the financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the SEC rules and regulations.
2. Summary of Significant Accounting Policies
Net Income Per Share
Net income per share is determined by dividing net income by the
weighted average common shares and common share equivalents outstanding
during the period.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings
per Share" which replaces primary and fully diluted earnings per share with
basic and diluted earnings per share. SFAS 128 is effective for the Company
beginning in the third quarter of fiscal 1998 and requires restatement of
all previously reported interim and annual earnings per share data. Pro
forma net income per share data assuming application of SFAS 128 for each
of the respective periods follows:
<TABLE>
<CAPTION>
Three months ended August 31,
-----------------------------
1997 1996
- --------------------------------------------------------------------------
<S> <C> <C>
Basic............................... $0.03 $0.04
Diluted............................. $0.03 $0.04
</TABLE>
3. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
August 31, 1997 May 31, 1997
--------------- ------------
<S> <C> <C>
Raw materials and supplies $ 860,877 $ 797,104
Work in process 373,441 369,290
Finished goods 696,292 651,046
---------- ----------
$1,930,610 $1,817,440
========== ==========
</TABLE>
Page 6 of 13
<PAGE>
4. Fixed Assets
Fixed assets consist of the following:
<TABLE>
<CAPTION>
August 31, 1997 May 31, 1997
--------------- ------------
<S> <C> <C>
Laboratory equipment $ 995,877 $ 967,289
Computer and office equipment 886,380 847,518
Leasehold improvements 1,664,401 1,632,975
----------- -----------
3,546,658 3,447,782
Accumulated depreciation and amortization (1,283,299) (1,120,232)
----------- -----------
$ 2,263,359 $ 2,327,550
=========== ===========
</TABLE>
5. Intangible Assets
Intangible assets consist of the following:
<TABLE>
<CAPTION>
August 31, 1997 May 31, 1997
--------------- ------------
<S> <C> <C>
Acquired technology $ 305,290 $ 305,290
Patent costs 68,240 68,240
License costs 401,559 401,559
--------- ---------
775,089 775,089
Accumulated depreciation and amortization (408,369) (379,359)
--------- ---------
$ 366,720 $ 395,730
========= =========
</TABLE>
6. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
August 31, 1997 May 31, 1997
--------------- ------------
<S> <C> <C>
Accounts payable $ 505,179 $ 756,957
Accrued wages 275,036 221,608
Accrued royalties 241,054 241,751
Accrued professional fees 148,527 72,623
---------- ----------
$1,169,796 $1,292,939
========== ==========
</TABLE>
7. Commitments
On August 21, 1997, the Company entered into a Product Development and
Marketing Agreement (the "Agreement") with Third Wave Technologies, Inc.
("Third Wave") of Madison, Wisconsin. Under the terms of the Agreement,
Endogen will fund certain research and development activities at Third
Wave in exchange for certain exclusive, worldwide rights to sell and
distribute to the life science research market messenger RNA ("mRNA")
quantitation kits jointly developed by the two companies. Funding
payments, not to exceed $1,050,000 in total, will be made to Third Wave
quarterly by the Company over a three year period beginning December 1,
1997. In connection with the Agreement, the Company issued a warrant to
Third Wave for the purchase of up to 125,000 shares of Endogen common
stock at a price of $6.00 per share. The warrant vests ratably over three
years from August 31, 1997.
Page 7 of 13
<PAGE>
ENDOGEN, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion includes forward-looking statements, including, but
not limited to, statements with respect to the Company's future financial
performance, operating results, plans and objectives. Actual results may differ
materially from those currently anticipated depending upon a variety of factors.
Endogen is principally engaged in the development, manufacture and sale of
specialty reagents and immuno-assay test kits for pharmaceutical, biotechnology
and biomedical research. These products include over 260 specialty reagents and
57 immuno-assay test kits that measure immune system function in human, mouse,
rat, or porcine samples. Products marketed under Endogen's name are sold
directly in the United States and through distributors in over 40 foreign
countries. The Company also sells products on a private label basis to customers
who market these products under their own brand names.
Results of Operations
Three Month Period Ended August 31, 1997 As Compared
with the Three Month Period Ended August 31, 1996
----------------------------------------------------
As an aid to understanding Endogen's operating results, the following table
shows each item from the income statement expressed as a percentage of revenues.
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES Three months ended August 31,
-----------------------------
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Revenues....................................... 100.0% 100.0%
Costs and expenses:
Cost of sales................................ 38.4% 36.4%
Selling, general, and administrative......... 41.3% 41.6%
Research and development..................... 14.3% 13.3%
Income from operations......................... 6.0% 8.7%
Interest expense, net........................ 0.2% 3.5%
Net income before income taxes................. 5.8% 5.2%
Provision for income taxes................... 1.7% --
Net income..................................... 4.1% 5.2%
</TABLE>
Revenues
For the three months ended August 31, 1997, total revenues increased to
$2,324,013 from $2,226,481 in the same period last year, an increase of 4.4%.
Domestic and international sales of Endogen branded products increased to
$1,772,384 during the first quarter of fiscal 1998 from $1,487,875 in the same
quarter last year, an increase of 19%. This growth was due primarily to
increased sales volume from existing Endogen product lines, new product
introductions and an expansion of the international distribution network. This
increase was offset in part by a 43% decline in private label sales, which
decreased to $539,704 in the first quarter of fiscal 1998 from $703,669 during
the first quarter of fiscal 1997. This decline was attributable primarily to a
decrease in sales to one major private label customer. The Company believes that
this customer has undertaken to increase its inventory turnover which reduced
Endogen's first quarter private label sales. The Company's management believes
that sales to this customer will rebound during the second half of fiscal 1998.
Page 8 of 13
<PAGE>
ENDOGEN, INC.
Cost of Sales
Cost of sales was $893,064 for the three months ended August 31, 1997
compared with $809,385 for the same period last year, an increase of $83,679 or
10%. As a percentage of product revenues, cost of sales was 38% and 36% in the
three-month periods ended August 31, 1997 and 1996, respectively. The increase
in cost of sales as a percentage of product revenues during the first quarter of
fiscal 1998 was due in part to increases in full-time headcount as a result of
the Company's fiscal 1997 growth, higher fixed overhead costs and increased
royalty expenses associated with new product introductions.
Selling, General and Administrative Expenses
Selling, general and administrative expense was $959,211 for the three months
ended August 31, 1997 compared with $925,918 for the same period last year, an
increase of $33,293 or 4%. The increase was due primarily to increases in sales
and administrative staffing over the prior year period. As a percentage of
product revenues, selling, general and administrative expense decreased to 41%
of revenues for the three months ended August 31, 1997 compared with 42% for the
same period last year.
Research and Development Expenses
Research and development expense was $333,338 for the three months ended
August 31, 1997 versus $297,146 for the same period last year, an increase of
$36,192, or 12%. Research and development expense increased as a percentage of
revenues to 14% for the three months ended August 31, 1997 from 13% for the same
period last year. Endogen plans to continue to spend heavily on product
development for new products and to upgrade existing products. In August 1997,
the Company entered into a Product Development and Marketing Agreement with
Third Wave for the joint development of a new line of products which will
quantitatively measure levels of mRNA.
Interest Income and Interest Expense
Net interest expense was $3,219 for the three months ended August 31, 1997
compared with net interest expense of $78,244 for the same period last year.
Interest expense for the three-month period ended August 31, 1996, reflects
interest incurred on the convertible subordinated note (the "Note") in the
original principal amount of $2,002,978 issued by Endogen in connection with the
T Cell Diagnostics, Inc. acquisition in March 1996. The Note was converted into
shares of the Company's common stock in February 1997. In addition, during
fiscal 1997 and fiscal 1998, interest expense was incurred in connection with
borrowings under notes payable and capital lease obligations.
Income Taxes
The Company's effective tax rate was 30% for the three months ended August
31, 1997. The effective rate is a result of operating income during the quarter
ended August 31, 1997. The Company did not have a provision for income taxes in
the comparable fiscal 1997 period.
Liquidity and Capital Resources
The substantial growth of Endogen's business has led to increased liquidity
requirements to fund working capital needs and capital expenditures. This
includes financing inventories and accounts receivable to support the Company's
growing operations, as well as purchases of new laboratory equipment and
leasehold improvements to support new product development. In addition, in
connection with its Product Development and Marketing Agreement with Third Wave,
the Company is obligated to make funding payments not to exceed $1,050,000 in
total, to Third Wave in quarterly installments over a three year period
beginning December 1, 1997. Endogen has financed its liquidity needs primarily
through cash from operations, a working capital line of credit with a bank and a
term loan payable to a bank.
At August 31, 1997, Endogen's cash position was $420,090, an increase of
$86,040 from May 31, 1997. At August 31, 1997, the Company had $850,000
available under a working capital line of credit with a bank. The interest rate
on the line is 1.5% above the bank's prime rate.
Cash Flows from Operating Activities
Net cash provided by operations during the three-month period ended August
31, 1997 was $210,027 as compared to $64,812 in the same fiscal 1997 period. For
the first quarter of fiscal 1998, net cash provided by
Page 9 of 13
<PAGE>
ENDOGEN, INC.
operating activities consisted primarily of a decrease in accounts receivable of
$169,087, depreciation and amortization of $200,396 and net income of $94,181.
This was offset in part by an increase in inventories of $113,170, an increase
in prepaid expenses of $17,322 and a decrease in accounts payable of $123,144.
For the first quarter of fiscal 1997, net cash provided by operations consisted
primarily of net income of $115,788 and depreciation and amortization of
$192,699. This was partially offset by increased accounts receivable of
$120,420, increased inventories of $42,084 and increased prepaid expenses and
other assets of $45,465 and a decrease in accounts payable of $35,706.
Cash Flows from Investing Activities
Investments in capital equipment totaled $98,876 and $92,973 for the quarters
ended August 31, 1997 and 1996, respectively.
Cash Flows from Financing Activities
During the three-month period ended August 31, 1997 cash was used to decrease
borrowings by $37,872 and was offset in part by proceeds from the issuance of
common stock of $12,761. In the first quarter of fiscal 1997, cash was used to
decrease borrowings by $22,505, and was offset in part by proceeds from the
issuance of common stock of $4,241.
The Company expects to continue expanding operations through internal growth
and strategic acquisitions which offer products similar or complementary to
those offered by the Company. Although the Company has no material current
acquisition agreements or arrangements, there may be opportunities which require
additional external financing, and the Company may from time to time seek to
obtain additional funds from public or private issuance of equity or debt
securities. There can be no assurance that such financing will be available at
all or on terms acceptable to the Company.
Based on management's current projections, Endogen believes that its
financial resources and cash flows from operations, together with the bank
credit line and term loan currently available, will be sufficient to finance its
current and planned operations for at least the next twelve months. There can be
no assurance, however, that the Company will not require additional working
capital and, if it does require such capital, that such capital will be
available to the Company on acceptable terms, if at all.
Certain Factors That May Affect Future Results
The Company does not provide forecasts of the future financial performance of
the Company. However, from time to time, information provided by the Company or
statements made by its employees may contain "forward-looking" information that
involve risks and uncertainties. In particular, statements contained in this
Form 10-QSB that are not historical facts constitute forward-looking statements
and are made under the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. The Company's actual results of operations and
financial condition have varied and may in the future vary significantly from
those stated in any forward-looking statements. The Company's future operating
results are subject to risks and uncertainties and are dependent upon many
factors, including, without limitation, the Company's ability to (i) meet its
working capital and future liquidity needs, (ii) successfully implement its
strategic growth strategies, (iii) understand, anticipate and respond to rapidly
changing technologies, market trends and customer needs, (iv) develop,
manufacture and deliver high quality, technologically advanced products on a
timely basis to withstand competition from competitors which may have greater
financial, information gathering and marketing resources than the Company, (v)
obtain and protect licensing and intellectual property rights necessary for the
Company's technology and product development and on terms favorable to the
Company, and (vi) recruit and retain highly talented professionals in a
competitive job market. The Company's ability to market and sell its products
could also be adversely affected by the emergence of new competitors in the
market place and by changes resulting in increased government regulation of the
manufacture and sale of its products. In addition, a significant portion of the
Company's revenues are attributable to international customers, which may be
adversely affected by factors including fluctuations in exchange rates, adverse
political and economic conditions, tariff regulation, and difficulties in
obtaining export licenses. Each of these factors, and others, are discussed from
time to time in the filings made by the Company with the Securities and Exchange
Commission, including, but not limited to, the Company's Annual Report on Form
10-KSB filed on August 8, 1997.
Page 10 of 13
<PAGE>
ENDOGEN, INC.
PART II - OTHER INFORMATION
Item 2 - Changes in Securities and Use of Proceeds
On August 25, 1997, the Company issued to Third Wave Technologies, Inc. a
warrant to purchase 125,000 shares of the Company's Common Stock at a purchase
price per share of $6.00. The warrant was issued in connection with the Product
Development and Marketing Agreement by and among Third Wave Technologies, Inc.
and Endogen. The warrant becomes exercisable over a period of three years
commencing on August 31, 1997 in thirty-six approximately equal monthly
installments. The warrant expires on December 31, 2002. As the warrant was
issued in a private transaction not involving a public offering, the warrant was
not required to be registered under the Securities Act of 1933, as amended,
pursuant to Section 4 (2) thereof.
Item 5 - Other Information
On August 21, 1997, the Company entered into a Product Development and
Marketing Agreement (the "Agreement") with Third Wave Technologies, Inc. ("Third
Wave") of Madison, Wisconsin. Under the terms of the Agreement, Endogen will
fund certain research and development activities at Third Wave in exchange for
certain exclusive, worldwide rights to sell and distribute to the life science
research market messenger RNA ("mRNA") quantitation kits jointly developed by
the two companies. Funding payments, not to exceed $1,050,000 in total, will be
made to Third Wave quarterly by the Company over a three year period beginning
December 1, 1997. In connection with the Agreement, the Company issued a warrant
to Third Wave for the purchase of up to 125,000 shares of Endogen common stock
at a price of $6.00 per share. The warrant vests ratably over three years from
August 31, 1997.
Item 6 - Exhibits and Reports on Form 8-K
(a) - Exhibits
The following exhibits, required by Item 601 of Regulation S-B, are filed
as a part of this Quarterly Report on Form 10-QSB. Exhibit numbers, where
applicable, correspond to those of Item 601 of Regulation S-B.
3.1 By-laws, as amended on September 5, 1997
10.1* Product Development and Marketing Agreement dated August 21, 1997
by and among Endogen, Inc. and Third Wave Technologies, Inc.
11.1 Statement Re: Computation of Per Share Earnings
27.1 Financial Data Schedule
* Confidential treatment has been requested as to omitted portions pursuant
to Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended.
(b) - Reports On Form 8-K
No reports on Form 8-K have been filed during the quarter for which this
report is filed.
Page 11 of 13
<PAGE>
ENDOGEN, INC.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ENDOGEN, INC.
BY:
Date: October 9, 1997 /s/ Owen A. Dempsey
--------------------------------
Owen A. Dempsey
Director, President and
Chief Executive Officer
Date: October 9, 1997 /s/ Avery W. Catlin
--------------------------------
Avery W. Catlin
Vice President, Finance, Treasurer
and Chief Financial Officer
(Principal Financial and
Chief Accounting Officer)
Page 12 of 13
<PAGE>
ENDOGEN, INC.
INDEX TO EXHIBITS
Exhibit Number Description
- -------------- -----------
3.1 By-laws, as amended on September 5, 1997.
10.1* Product Development and Marketing Agreement dated August 21,
1997 by and among Endogen, Inc. and Third Wave Technologies, Inc.
11.1 Statement Re: Computation of Earnings per Share.
27.1 Financial Data Schedule.
* Confidential treatment has been requested as to omitted portions pursuant
to Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended.
Page 13 of 13
Exhibit 3.1
-----------
ENDOGEN, INC.
****************
BY-LAWS
****************
ARTICLE I
---------
Stockholders
------------
1. Annual Meeting. The annual meeting of stockholders shall be held on the
first Thursday of November in each year (or if that be a legal holiday in the
place where the meeting is to be held, on the next succeeding full business day)
at 10:00 A.M., or at such other date and time as shall be designated from time
to time by the Board of Directors or President. The purposes for which the
annual meeting is to be held, in addition to those prescribed by law, by the
Articles of Organization or by these By-laws, may be specified by the Directors
or the President. In the event an annual meeting has not been held on the date
fixed in these By-laws, a special meeting in lieu of the annual meeting may be
held with all the force and effect of an annual meeting.
2. Special Meetings. Special meetings of stockholders may be called by the
President or by the Directors. Upon written application of one or more
stockholders who hold at least 10% of the capital stock entitled to vote at a
meeting, a special meeting shall be called by the Clerk, or in case of the
death, absence, incapacity or refusal of the Clerk, by any other officer.
3. Place of Meetings. All meetings of stockholders shall be held at the
principal office of the corporation unless a different place (within or without
Massachusetts, but within the United States) is fixed by the Directors or the
President and stated in the notice of the meeting.
4. Notice of Meetings. A written notice of the place, date and hour of all
meetings of stockholders stating the purpose of the meeting shall be given by
the Clerk or an Assistant Clerk
<PAGE>
-2-
or by the person calling the meeting at least seven days before the meeting or
such longer period as is required by law to each stockholder entitled to vote
thereat and to each stockholder who under the law, under the Articles of
Organization or under these By-laws, is entitled to such notice, by leaving such
notice with him or at his residence or usual place of business, or by mailing
it, postage prepaid, and addressed to such stockholder at his address as it
appears in the records of the corporation. Whenever notice of a meeting is
required to be given a stockholder under any provision of the Massachusetts
Business Corporation Law or of the Articles of Organization or these By-laws, a
written waiver thereof, executed before or after the meeting by such stockholder
or his attorney thereunto authorized and filed with the records of the meeting,
shall be deemed equivalent to such notice.
5. Quorum. The holders of a majority in interest of all stock issued,
outstanding and entitled to vote at a meeting shall constitute a quorum, but a
lesser number may adjourn any meeting from time to time without further notice;
except that, if two or more classes of stock are outstanding and entitled to
vote as separate classes, then in the case of each such class, a quorum shall
consist of the holders of a majority in interest of the stock of that class
issued, outstanding and entitled to vote.
6. Voting and Proxies. Each stockholder shall have one vote for each share
of stock entitled to vote owned by him and a proportionate vote for a fractional
share, unless otherwise provided by the Articles of Organization in the case
that the corporation has two or more classes or series of stock. Capital stock
shall not be voted if any installment of the subscription therefor has been duly
demanded in accordance with the law of the Commonwealth of Massachusetts and is
overdue and unpaid. Stockholders may vote either in person or by written proxy.
Proxies shall be filed with the clerk of the meeting, or of any adjournment
thereof, before being voted. No proxy dated more than six months before the date
named therein shall be valid and no proxy shall be valid after the final
adjournment of such meeting. Notwithstanding the provisions of the preceding
sentence, a proxy coupled with an interest sufficient in law to support an
irrevocable power, including, without limitation, an interest in shares or in
the corporation generally, may be
<PAGE>
-3-
made irrevocable if it so provides, need not specify the meeting to which it
relates, and shall be valid and enforceable until the interest terminates, or
for such shorter period as may be specified in the proxy. Except as otherwise
limited therein, proxies shall entitle the persons named therein to vote at any
adjournment of such meeting but shall not be valid after final adjournment of
such meeting. A proxy with respect to stock held in the name of two or more
persons shall be valid if executed by any one of them unless at or prior to
exercise of the proxy the corporation receives a specific written notice to the
contrary from any one of them. A proxy purporting to be executed by or on behalf
of a stockholder shall be deemed valid unless challenged at or prior to its
exercise and the burden of proving invalidity shall rest on the challenger.
7. Action at Meeting. When a quorum is present, the holders of a majority
of the stock present or represented and voting on a matter (or if there are two
or more classes of stock entitled to vote as separate classes, then in the case
of each such class, the holders of a majority of the stock of that class present
or represented and voting on a matter), except where a larger vote is required
by law, the Articles of Organization or these By-laws, shall decide any matter
to be voted on by the stockholders. Any election of directors or officers by the
stockholders shall be determined by a plurality of the votes cast by
stockholders entitled to vote at the election. Any such elections shall be by
ballot if so requested by any stockholder entitled to vote thereon. The
corporation shall not directly or indirectly vote any share of its own stock.
8. Action without Meeting. Any action required or permitted to be taken at
any meeting of the stockholders may be taken without a meeting if all
stockholders entitled to vote on the matter consent to the action in writing and
the written consents are filed with the records of the meetings of stockholders.
Such consent shall be treated for all purposes as a vote at a meeting.
<PAGE>
-4-
ARTICLE II
----------
Directors
---------
1. Powers. The business of the corporation shall be managed by a Board of
Directors who may exercise all the powers of the corporation except as otherwise
provided by law, by the Articles of Organization or by these By-laws. In the
event of vacancy in the Board of Directors, the remaining Directors, except as
otherwise provided by law, may exercise the powers of the full Board until the
vacancy is filled.
2. Election. A Board of Directors shall be elected by the stockholders at
the annual meeting. The number of directors shall be fixed by the stockholders
(except as that number may be enlarged by the Board of Directors acting pursuant
to Section 4 of this Article), but shall be not less than three, except that
whenever there shall be only two stockholders the number of directors shall be
not less than two and whenever there shall be only one stockholder or prior to
the issuance of any stock, there shall be at least one director, and shall be
not more than nine. Unless changed by the stockholders or directors in
accordance with this Article, the number of directors that constitutes the
entire Board of Directors shall be seven.
3. Vacancies. Any vacancy in the Board of Directors, however occurring,
including a vacancy resulting from the enlargement of the Board, may be filled
by the stockholders or, in the absence of stockholder action, by the Directors.
4. Enlargement of the Board. The Board of Directors may be enlarged by the
stockholders at any meeting or by vote of a majority of the Directors then in
office.
5. Tenure. Except as otherwise provided by law, by the Articles of
Organization or by these By-laws, Directors shall hold office until the next
annual meeting of stockholders and until their successors are chosen and
qualified. Any Director may resign by delivering his written resignation to the
corporation at its principal office or to the President, Clerk or Secretary.
Such resignation shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some other event.
<PAGE>
-5-
6. Removal. A Director may be removed from office (a) with or without cause
by the vote of the holders of a majority of the shares entitled to vote in the
election of Directors, provided that the Directors of a class elected by a
particular class of stockholders may be removed only by the vote of the holders
of a majority of the shares of the particular class of stockholders entitled to
vote for the election of such Directors; or (b) for cause by vote of a majority
of the Directors then in office. A Director may be removed for cause only after
a reasonable notice and opportunity to be heard before the body proposing to
remove him.
7. Meetings. The directors shall meet at least once during each fiscal
quarter of the corporation. Regular meetings of the Directors may be held
without call or notice at such places and at such times as the Directors may
from time to time determine, provided that any Director who is absent when such
determination is made shall be given notice of the determination. A regular
meeting of the Directors may be held without a call or notice at the same place
as the annual meeting of stockholders.
Special meetings of the Directors may be held at any time and place
designated in a call by the President, by two or more Directors, or by the
holder or holders of at least 25% of the outstanding shares of Series A
Convertible Preferred Stock.
8. Telephone Conference Meetings. Members of the Board of Directors may
participate in a meeting of the board by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other at the same time and participation by such means
shall constitute presence in person at a meeting.
9. Notice of Meetings. Notice of all special meetings of the Directors
shall be given to each Director by the Secretary, or Assistant Secretary, or if
there be no Secretary or Assistant Secretary, by the Clerk, or Assistant Clerk,
or in case of the death, absence, incapacity or refusal of such persons, by the
officer or one of the Directors calling the meeting. Notice shall be given to
each Director in person or by telephone, by facsimile transmission or by
telegram sent to his business or home address at least twenty-four hours in
advance of the meeting, or (with respect to
<PAGE>
-6-
Directors whose principal residence is within the continental United States
only) by written notice mailed to his business or home address at least
forty-eight hours in advance of the meeting. Notice of a meeting need not be
given to any Director if a written waiver of notice, executed by him before or
after the meeting, is filed with the records of the meeting, or to any Director
who attends the meeting without protesting prior thereto or at its commencement
the lack of notice to him. A notice or waiver of notice of a Directors' meeting
need not specify the purposes of the meeting.
10. Quorum. At any meeting of the Directors, a majority of the Directors
then in office shall constitute a quorum. Less than a quorum may adjourn any
meeting from time to time without further notice.
11. Action at Meeting. At any meeting of the Directors at which a quorum is
present, a majority of the Directors present may take any action on behalf of
the Board except to the extent that a larger number is required by law or the
Articles of Organization or these By-laws.
12. Action by Consent. Any action required or permitted to be taken at any
meeting of the Directors may be taken without a meeting, if all the Directors
consent to the action in writing and the written consents are filed with the
records of the meetings of Directors. Such consents shall be treated for all
purposes as a vote at a meeting.
13. Committees. The Directors may, by vote of a majority of the Directors
then in office, elect from their number an executive or other committees and may
by like vote delegate thereto some or all of their powers except those which by
law, the Articles of Organization or these By-laws they are prohibited from
delegating to such committee. Except as the Directors may otherwise determine,
any such committee may make rules for the conduct of its business, but unless
otherwise provided by the Directors or in such rules, its business shall be
conducted as nearly as may be in the same manner as is provided by these By-laws
for the Directors.
<PAGE>
-7-
ARTICLE III
-----------
Officers
--------
1. Enumeration. The officers of the corporation shall consist of a
President, a Treasurer, a Clerk, and such other officers, including a Chairman
of the Board of Directors, one or more Vice-Presidents, Assistant Treasurers,
Assistant Clerks, Secretary and Assistant Secretaries as the Directors may
determine.
2. Election. The President, Treasurer and Clerk shall be elected annually
by the Directors at their first meeting following the annual meeting of
stockholders. Other officers may be chosen by the Directors at such meeting or
at any other meeting.
3. Qualification. The President may, but need not be, a Director. No
officer need be a stockholder. Any two or more offices may be held by the same
person, provided that the President and Clerk shall not be the same person. The
Clerk shall be a resident of Massachusetts unless the corporation has a resident
agent appointed for the purpose of service of process. Any officer may be
required by the Directors to give bond for the faithful performance of his
duties to the corporation in such amount and with such sureties as the Directors
may determine.
4. Tenure. Except as otherwise provided by law, by the Articles of
Organization or by these By-laws, the President, Treasurer and Clerk shall hold
office until the first meeting of the Directors following the next annual
meeting of stockholders and until their successors are chosen and qualified; and
all other officers shall hold office until the first meeting of the Directors
following the next annual meeting of stockholders and until their successors are
chosen and qualified, unless a shorter term is specified in the vote choosing or
appointing them. Any officer may resign by delivering his written resignation to
the corporation at its principal office or to the President, Clerk or Secretary,
and such resignation shall be effective upon receipt unless it is specified to
be effective at some other time or upon the happening of some other event.
<PAGE>
-8-
5. Removal. The Directors may remove any officer with or without cause by
vote of a majority of the Directors then in office; provided, that an officer
may be removed for cause only after a reasonable notice and opportunity to be
heard before the Board of Directors.
6. President, Chairman of the Board, and Vice-President. The President
shall, unless otherwise provided by the Directors, be the chief executive
officer of the corporation and shall, subject to the direction of the Directors,
have general supervision and control of its business. Unless otherwise provided
by the Directors he shall preside, when present, at all meetings of stockholders
and, unless a Chairman of the Board has been elected and is present, of the
Directors.
If a Chairman of the Board of Directors is elected he shall preside at all
meetings of the Board of Directors at which he is present. The Chairman shall
have such other powers as the Directors may from time to time designate.
Any Vice-President shall have such powers as the Directors may from time to
time designate.
7. Treasurer and Assistant Treasurer. The Treasurer shall, subject to the
direction of the Directors, have general charge of the financial affairs of the
corporation and shall cause accurate books of account to be kept. He shall have
custody of all funds, securities, and valuable documents of the corporation,
except as the Directors may otherwise provide.
Any Assistant Treasurer shall have such powers as the Directors may from
time to time designate.
8. Clerk and Assistant Clerks. The Clerk shall record all proceedings of
the stockholders in a book to be kept therefor. Unless a transfer agent is
appointed, the Clerk shall keep or cause to be kept in Massachusetts, at the
principal office of the corporation or at his office, the stock and transfer
records of the corporation, in which are contained the names of all stockholders
and the record address and the amount of stock held by each.
In case a Secretary is not elected, the Clerk shall record all proceedings
of the Directors in a book to be kept therefor.
<PAGE>
-9-
In the absence of the Clerk from any meeting of the stockholders, an
Assistant Clerk, if one be elected, otherwise a Temporary Clerk designated by
the person presiding at the meeting, shall perform the duties of the Clerk. Any
Assistant Clerk shall have such additional powers as the Directors may from time
to time designate.
9. Secretary and Assistant Secretaries. If a Secretary is elected, he shall
keep a record of the meetings of the Directors and in his absence, an Assistant
Secretary, if one be elected, otherwise a Temporary Secretary designated by the
person presiding at the meeting, shall keep a record of the meetings of the
Directors.
Any Assistant Secretary shall have such additional powers as the Directors
may from time to time designate.
10. Other Powers and Duties. Each officer shall, subject to these By-laws,
have in addition to the duties and powers specifically set forth in these
By-laws, such duties and powers as are customarily incident to his office, and
such duties and powers as the Directors may from time to time designate.
ARTICLE IV
----------
Capital Stock
-------------
1. Certificates of Stock. Subject to the provisions of Section 2 below,
each stockholder shall be entitled to a certificate of the capital stock of the
corporation in such form as may be prescribed from time to time by the
Directors. The certificate shall be signed by the President or a Vice-President,
and by the Treasurer or an Assistant Treasurer; provided, however, such
signatures may be facsimiles if the certificate is signed by a transfer agent,
or by a registrar, other than a Director, officer or employee of the
corporation. In case any officer who has signed or whose facsimile signature has
been placed on such certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer at the time of its issue.
<PAGE>
-10-
Every certificate issued for shares of stock at a time when such shares are
subject to any restriction on transfer pursuant to the Articles of Organization,
these By-laws or any agreement to which the corporation is a party shall have
the restriction noted conspicuously on the certificate and shall also set forth
on the face or back of the certificate either the full text of the restriction
or a statement of the existence of such restriction and a statement that the
corporation will furnish a copy thereof to the holder of such certificate upon
written request and without charge. Every stock certificate issued by the
corporation at a time when it is authorized to issue more than one class or
series of stock shall set forth upon the face or back of the certificate either
the full text of the preferences, voting powers, qualifications and special and
relative rights of the shares of each class and series, if any, authorized to be
issued, as set forth in the Articles of Organization, or a statement of the
existence of such preferences, powers, qualifications, and rights, and a
statement that the corporation will furnish a copy thereof to the holder of such
certificate upon written request and without charge.
2. Stockholder Open Accounts. The corporation may maintain or caused to be
maintained stockholder open accounts in which may be recorded all stockholders'
ownership of stock and all changes therein. Certificates need not be issued for
shares so recorded in a stockholder open account unless requested by the
stockholder.
3. Transfers. Subject to the restrictions, if any, stated or noted on the
stock certificates, shares of stock may be transferred in the records of the
corporation by the surrender to the corporation or its transfer agent of the
certificate therefor, properly endorsed or accompanied by a written assignment
and power of attorney properly executed, with necessary transfer stamps affixed,
and with such proof of the authenticity of signature as the corporation or its
transfer agent may reasonably require. When such stock certificates are thus
properly surrendered to the corporation or its transfer agent, the corporation
or transfer agent shall cause the records of the corporation to reflect the
transfer of the shares of stock. Except as may be otherwise required by law, by
the Articles of Organization or by these By-laws, the corporation shall be
entitled to treat the record holder of stock as shown in its records as the
owner of such
<PAGE>
-11-
stock for all purposes, including the payment of dividends and the right to vote
with respect thereof, regardless of any transfer, pledge or other disposition of
such stock, until the shares have been transferred on the books of the
corporation in accordance with the requirements of these By-laws.
It shall be the duty of each stockholder to notify the corporation of his
post office address.
4. Record Date. The Directors may fix in advance a time which shall be not
more than sixty (60) days before the date of any meeting of stockholders or the
date for the payment of any dividend or the making of any distribution to
stockholders or the last day on which the consent or dissent of stockholders may
be effectively expressed for any purpose, as the record date for determining the
stockholders having the right to notice of and to vote at such meeting and any
adjournment thereof or the right to receive such dividend or distribution or the
right to give such consent or dissent. In such case only stockholders of record
on such record date shall have such right, notwithstanding any transfer of stock
on the books of the corporation after the record date. Without fixing such
record date the Directors may for any of such purposes close the transfer books
for all or any part of such period.
If no record date is fixed and the transfer books are not closed, the
record date for determining stockholders having the right 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, and 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 acts with respect thereto.
5. Replacement of Certificates. In case of the alleged loss, mutilation or
destruction of a certificate of stock, a duplicate certificate may be issued in
place thereof, upon such terms and conditions as the Directors may prescribe.
6. Issue of Capital Stock. The whole or any part of the then authorized but
unissued shares of each class of stock may be issued at any time or from time to
time by the Board of Directors without action by the stockholders.
<PAGE>
-12-
7. Reacquisition of Stock. Shares of stock previously issued which have
been reacquired by the corporation, may be restored to the status of authorized
but unissued shares by vote of the Board of Directors, without amendment of the
Articles of Organization.
ARTICLE V
---------
Provisions Relative to Directors,
Officers, Stockholders and Employees
------------------------------------
1. Certain Contracts and Transactions. In the absence of fraud or bad
faith, no contract or transaction by this corporation shall be void, voidable or
in any way affected by reason of the fact that the contract or transaction is
(a) with one or more of its officers, Directors, stockholders or employees, (b)
with a person who is in any way interested in this corporation or (c) with a
corporation, organization or other concern in which an officer, Director,
stockholder or employee of this corporation is an officer, director,
stockholder, employee or in any way interested. The provisions of this section
shall apply notwithstanding the fact that the presence of a Director or
stockholder, with whom a contract or transaction is made or entered into or who
is an officer, director, stockholder or employee of a corporation, organization
or other concern with which a contract or transaction is made or entered into or
who is in any way interested in such contract or transaction, was necessary to
constitute a quorum at the meeting of the Directors (or any authorized committee
thereof) or stockholders at which such contract or transaction was authorized
and/or that the vote of such Director or stockholder was necessary for the
adoption of such contract or transaction, provided that if said interest was
material, it shall have been known or disclosed to the Directors or stockholders
voting at said meeting on said contract or transaction. A general notice to any
person voting on said contract or transaction that an officer, Director,
stockholder or employee has a material interest in any corporation, organization
or other concern shall be sufficient disclosure as to such officer, Director,
stockholder or employee with
<PAGE>
-13-
respect to all contracts and transactions with such corporation, organization or
other concern. This section shall be subject to amendment or repeal only by
action of the stockholders.
2. Indemnification. Each Director and officer of the corporation, and any
person who, at the request of the corporation, serves as a director or officer
of another organization shall be indemnified by the corporation against any
cost, expense (including attorneys' fees), judgment, liability and/or amount
paid in settlement reasonably incurred by or imposed upon him in connection with
any action, suit or proceeding (including any proceeding before any
administrative or legislative body or agency), to which he may be made a party
or otherwise involved or with which he shall be threatened, by reason of his
being, or related to his status as, a Director or officer of the corporation or
of any other organization, which other organization he serves or has served as
director or officer at the request of the corporation (whether or not he
continues to be an officer or Director of the corporation or such other
organization at the time such action, suit or proceeding is brought or
threatened), unless such indemnification is prohibited by the Business
Corporation Law of the Commonwealth of Massachusetts. The foregoing right of
indemnification shall be in addition to any rights to which any such person may
otherwise be entitled and shall inure to the benefit of the executors or
administrators of each such person. The corporation may pay the expenses
incurred by any such person in defending a civil or criminal action, suit or
proceeding in advance of the final disposition of such action, suit, or
proceeding, upon receipt of an undertaking by such person to repay such payment
if it is determined that such person is not entitled to indemnification
hereunder. This section shall not affect any rights to indemnification to which
corporate personnel other than Directors and officers may be entitled by
contract or otherwise under law. This section shall be subject to amendment or
repeal only by action of the stockholders.
<PAGE>
-14-
ARTICLE VI
----------
Miscellaneous Provisions
------------------------
1. Fiscal Year. Except as from time to time otherwise determined by the
Directors, the fiscal year of the corporation shall be the twelve (12) months
ending the last day of May. Following any change in the fiscal year previously
adopted, a certificate of such change, signed under the penalties of perjury by
the Clerk or an Assistant Clerk, shall be filed forthwith with the state
secretary.
2. Seal. The seal of this corporation shall, subject to alteration by the
Directors, bear its name, the word "Massachusetts", and the year of its
incorporation.
3. Execution of Instruments. All deeds, leases, transfers, contracts,
bonds, notes and other obligations authorized to be executed by an officer of
the corporation in its behalf shall be signed by the President or the Treasurer
except as the Directors may generally or in particular cases otherwise
determine.
4. Voting of Securities. Except as the Directors may otherwise designate,
the President or Treasurer may waive notice of, and appoint any person or
persons to act as proxy or attorney in fact for this corporation (with or
without power of substitution) at any meeting of stockholders or shareholders of
any other corporation or organization, the securities of which may be held by
the corporation.
5. Corporate Records. The original, or attested copies, of the Articles of
Organization, By-laws and records of all meetings of incorporators and
stockholders, and the stock and transfer records, which shall contain the names
of all stockholders and the record address and the amount of stock held by each,
shall be kept in Massachusetts at the principal office of the corporation or at
an office of its transfer agent or of the Clerk or of its resident agent. Said
copies and records need not all be kept in the same office. They shall be
available at all reasonable times to the inspection of any stockholder for any
proper purpose but not to secure a list of stockholders or other information for
the purpose of selling said list or information or
<PAGE>
-15-
copies thereof or of using the same for a purpose other than in the interest of
the applicant, as a stockholder, relative to the affairs of the corporation.
6. Articles of Organization. All references in these By-laws to the
Articles of Organization shall be deemed to refer to the Articles of
Organization of the corporation, as amended and in effect from time to time.
7. Amendments. These By-laws, to the extent provided in these By-laws, may
be amended or repealed, in whole or in part, and new By-laws adopted either (a)
by the stockholders at any meeting of the stockholders by the affirmative vote
of the holders of at least a majority in interest of the capital stock present
and entitled to vote, provided that notice of the proposed amendment or repeal
or of the proposed making of new By-laws shall have been given in the notice of
such meeting, or (b) if so authorized by the Articles of Organization, by the
Board of Directors at any meeting of the Board by the affirmative vote of a
majority of the Directors then in office, but no amendment or repeal of a By-law
shall be voted by the Board of Directors and no new By-law shall be made by the
Board of Directors which alters the provisions of these By-laws with respect to
removal of Directors, or the election of committees by Directors and the
delegation of powers thereto, nor shall the Board of Directors make, amend or
repeal any provision of the By-laws which by law, the Articles of Organization
or the By-laws requires action by the stockholders. Not later than the time of
giving notice of the meeting of stockholders next following the making,
amending, or repealing by the Directors of any By-law, notice thereof stating
the substance of such change shall be given to all stockholders entitled to vote
on amending the By-laws. Any By-law or amendment of a By-law made the Board of
Directors may be amended or repealed by the stockholders by affirmative vote as
above provided in this Section 7.
Exhibit 10.1
------------
PRODUCT DEVELOPMENT AND MARKETING AGREEMENT
BETWEEN
ENDOGEN, INC.
AND
THIRD WAVE TECHNOLOGIES, INC.
<PAGE>
THIS PRODUCT DEVELOPMENT AND MARKETING AGREEMENT (the "Agreement") dated as
of August 21, 1997 (the "Effective Date") is made between ENDOGEN, INC., a
Massachusetts corporation having its principal place of business at 30 Commerce
Way, Woburn, Massachusetts 01801 U.S.A. ("Endogen") and THIRD WAVE TECHNOLOGIES,
INC., a Wisconsin corporation having its principal place of business at 2800 S.
Fish Hatchery Road, Madison, Wisconsin 53711 U.S.A. ("Third Wave"). Endogen and
Third Wave are also referred to herein individually as a "Party," and
collectively, as the "Parties."
RECITALS
WHEREAS, Third Wave has developed certain Invader(TM) Technologies (as
defined below) and possesses know-how, expertise and rights to United States
patents and patent applications and corresponding foreign patent applications
pertaining to the Invader Technologies;
WHEREAS, Endogen is engaged in the development, manufacture and sale of
assay detection kits, reagents and related products worldwide;
WHEREAS, Endogen desires to obtain exclusive rights from Third Wave,
subject to certain manufacturing rights of Third Wave with respect to Third Wave
Deliverables and Cleavase Enzymes (as defined below), to use Invader
Technologies to develop, manufacture and/or commercialize Products in the Life
Science Research Market (each as defined below);
WHEREAS, Third Wave desires to obtain nonexclusive rights from Endogen to
use Endogen Technology (as defined below) to manufacture the Third Wave
Deliverables and Cleavase Enzymes for Endogen; and
WHEREAS, Third Wave and Endogen each desires to grant to the other the
above-referenced rights to its respective technologies all as set forth herein.
NOW, THEREFORE, for and in consideration of the premises and of the
covenants herein contained, the Parties, intending to be legally bound hereby,
agree as follows:
1 DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set
forth below:
1.1 "AAA" shall mean the Chicago office of the American Arbitration
Association.
1.2 "Actions" shall have the meaning set forth in Section 6.5.2 hereof.
1.3 "Affiliate" shall mean any corporation or other entity which controls,
is controlled by, or is under common control with a Party of this Agreement. A
<PAGE>
corporation or entity shall be regarded as in control of another corporation or
entity if it owns or directly or indirectly controls more than fifty percent
(50%) of the voting stock or other ownership interest of the other corporation
or entity, or if it possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the corporation or other
entity or the power to elect or appoint fifty percent (50%) or more of the
members of the governing body of the corporation or other entity.
1.4 "Animal Assays" shall mean Products with application in detecting
and/or quantifying [CONFIDENTIAL TREATMENT REQUESTED]*.
1.5 "Animal Probe Panel" shall mean a Product consisting of a panel of one
or more [CONFIDENTIAL TREATMENT REQUESTED]* of specific sequence and design
which will function in the [CONFIDENTIAL TREATMENT REQUESTED]* or as standard
controls. Such panels may also include [CONFIDENTIAL TREATMENT REQUESTED]* which
may be used as standard controls or for other purposes in said non-human animal
probe panels.
1.6 "Annual Minimum Purchase Requirements" shall have the meaning set forth
in Section 4.3 hereof.
1.7 "Bundled Product" shall have the meaning set forth in Section 5.4.1.2
hereof.
1.8 "Chairman" shall have the meaning set forth in Section 11.2.2 hereof.
1.9 "Cleavase(R) Enzymes" shall mean those nucleases listed on Schedule 1.8
attached hereto and derivatives thereof or improvements thereto and other
nucleases commonly known as "Cleavase enzymes."
1.10 "Confidential Information" shall have the meaning set forth in Section
7.1 hereof.
1.11 "Contract Manufacturer" shall have the meaning set forth in Section
2.5 hereof.
1.12 "Development Enzyme" shall have the meaning set forth in Section
5.1.2.2 hereof.
1.13 "Development Expenditures" shall mean the sum of direct salaries,
benefits and payroll taxes for all full time equivalent ("FTE") personnel
working on the Development Program, costs of direct materials and services
incurred on the Development Program and other costs, including supplies,
equipment and reasonable overhead costs, applied to the Development Program all
as determined in accordance with generally accepted accounting principles.
1.14 "Development Program" shall mean the program described in Section 3
hereof pursuant to which Products designated by Endogen and/or Third Wave are
further developed and prepared for commercialization.
1.15 "Development Year" shall mean the periods during the term of the
Development Program as follows: (i) the first Development Year shall commence on
December 1, 1997 and end on December 31, 1998, (ii) the second Development Year
shall commence on January 1,
- --------------------
*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
-2-
<PAGE>
1999 and end on December 31, 1999, and (iii) the third Development Year shall
commence on January 1, 2000 and end on November 30, 2000.
1.16 "Dispute Resolution Committee" shall have the meaning set forth in
Section 11.1 hereof.
1.17 "Distributor" shall have the meaning set forth in Section 2.5 hereof.
1.18 "Effective Date" shall mean the date first set forth in the preamble
above.
1.19 "Endogen Improvements" shall mean any Endogen Inventions made to the
Invader Technologies.
1.20 "Endogen Indemnitees" shall have the meaning set forth in Section 9.2
hereof.
1.21 "Endogen Intellectual Property" shall mean all present and future
patents and patent applications, trade secrets, copyrights, and all other forms
of intellectual property in and to the Endogen Technology"
1.22 "Endogen Inventions" shall have the meaning set forth in Section 6.1.1
hereof.
1.23 "Endogen Patent Rights" shall mean all United States and foreign
patents or patent applications, including any divisionals, reexaminations,
reissues, extensions, continuations, and continuations in part thereof
containing claims covering the Endogen Technology.
1.24 "Endogen Royalty Products" shall have the meaning set forth in Section
5.4.1.1 hereof.
1.25 "Endogen Technology" shall mean any and all present and future
technology that is owned by Endogen or licensed by Endogen with a right to
sublicense that is useful for the discovery, development, manufacture or sale of
Products.
1.26 "Field" shall mean research, development and commercialization
activities with respect to the [CONFIDENTIAL TREATMENT REQUESTED]* listed
on Schedule 1.26 attached hereto or as amended in writing by the Parties from
time to time, in each case for purposes of the Invader Reaction.
1.27 "Follow-On Period" shall have the meaning set forth in Section
10.4.2.1 hereof.
1.28 "Generic Assay" shall mean a Product consisting of an assay or assay
components which when used with one or more customer designed probes (including
oligonucleotides and/or chemically modified oligonucleotides of specific design
or sequence) will permit the customer to detect the [CONFIDENTIAL TREATMENT
REQUESTED]* of interest or which will allow the detection of a [CONFIDENTIAL
TREATMENT REQUESTED]*
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AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
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UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
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[CONFIDENTIAL TREATMENT REQUESTED]*. Each Generic Assay will incorporate
oligonucleotides with the sequence of the housekeeping gene that may be used as
standard controls in the Product, the appropriate [CONFIDENTIAL TREATMENT
REQUESTED]* and such substrates needed for the detection of [CONFIDENTIAL
TREATMENT REQUESTED]* products, detection plates of appropriate design, buffers
and reagents needed for the performance of the assay, and guidelines to help the
customer select appropriate sequences for the construction of customer supplied
probes.
1.29 "Human Assays" shall mean Products with application in detecting
and/or quantifying [CONFIDENTIAL TREATMENT REQUESTED]*.
1.30 "Human Probe Panel" shall mean a Product consisting of a panel of one
or more [CONFIDENTIAL TREATMENT REQUESTED]* of specific sequence and design
which will function in the detection of [CONFIDENTIAL TREATMENT REQUESTED]* or
as standard controls in assays for human molecules. Such panels may include
[CONFIDENTIAL TREATMENT REQUESTED]* which may be used as standard controls or
for other purposes in said human probe panels.
1.31 "Indemnitee" shall have the meaning set forth in Section 9.3 hereof.
1.32 "Indemnitor" shall have the meaning set forth in Section 9.3 hereof.
1.33 "Infringement" shall have the meaning set forth in Section 6.4.1
hereof.
1.34 "Invader Intellectual Property" shall mean all present and future
patents and patent applications, trade secrets, copyrights, the trademarks
"Cleavase(R)" or "Invader(TM)," and all other forms of intellectual property in
and to the Invader Technologies, including, without limitation, the Third Wave
Patent Rights.
1.35 "Invader Reaction" shall mean an assay for the detection of a specific
sequence within a target nucleic acid, [CONFIDENTIAL TREATMENT REQUESTED]*
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UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
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[CONFIDENTIAL TREATMENT REQUESTED]*
1.36 "Invader Technologies" shall mean any and all present and future
technology that is owned by Third Wave or licensed by Third Wave with a right to
sublicense that is useful for the discovery, development, manufacture or sale of
Products, including, without limitation all proprietary biological materials,
compounds, and reagents, methods, techniques and related know-how.
1.37 "Inventions" shall have the meaning set forth in Section 6.1.1 hereof.
1.38 "Joint Inventions" shall have the meaning set forth in Section 6.1.1.
hereof.
1.39 "Joint Patent Rights" shall mean all United States and foreign patents
or patent applications, including any divisionals, reexaminations, reissues,
extensions, continuations, and continuations in part thereof to the extent the
same claim a Joint Invention.
1.40 "Life Science Research Market" shall mean that market for the
measurement of gene expression in preclinical research, drug discovery, drug
development and toxicology screening. The Life Science Research Market shall
exclude forensic, agricultural, veterinary, environmental and industrial
applications as well as any applications in reference or other laboratories
where patient results are used for clinical diagnostic evaluation, assessment or
therapeutic monitoring, and shall exclude all in vitro diagnostic products.
1.41 "Net Sales" shall mean the total amount charged upon the sale of a
product, less the following reasonable and customary deductions to the extent
applicable to such allowed to the buyer against such charged amounts: (i) trade,
quantity and cash discounts; (ii) rebates and chargebacks to the buyer; (iii)
reasonable amounts for actual uncollectible accounts determined in accordance
with generally acceptable accounting practices (GAAP) consistently applied to
all products of the selling party; (iv) sales and value-added taxes imposed upon
the in-country sale of a Product; and (v) transportation charges, including
shipping insurance. The amounts described in (iv) and (v) above shall be
deducted only to the extent they are stated separately on the invoice and paid
by the buyer. For the removal of doubt, with respect to royalties due under
Section 5.4.1 on Endogen Royalty Products, Net Sales shall not include sales by
Endogen to its Affiliates or Distributors for resale, provided that if Endogen
sells an Endogen Royalty Product to an Affiliate or Distributor for resale, Net
Sales shall include the amounts invoiced by such Affiliate or Distributor to a
third party on the resale of such Endogen Royalty Product Likewise, with respect
to royalties due under Section 5.4.1.3 on Other Royalty Products or under
Section 5.5 on Third Wave Royalty Products, Net Sales shall not include sales by
a Party to its Affiliates for resale, provided that if a Party transfers a
product to an Affiliate for resale, Net Sales shall include the amounts invoiced
by such Affiliate to a third party on resale of such product.
1.42 "Other Royalty Products" shall have the meaning set forth in Section
5.4.1.3 hereof.
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1.43 "Party" shall mean Endogen or Third Wave.
1.44 "Product" shall mean any product incorporating the Invader Reaction
developed pursuant to this Agreement in any country of the world, including,
without limitation, Animal Probe Panels, Human Probe Panels, Generic Assays,
Animal Assays, Human Assays and Quantitation Kits for the detection or
quantitation of gene expression in humans or in non-human animals.
1.45 "Quantitation Kit" shall mean a Product consisting of assay components
which, in combination with the Human Probe Panels or Animal Probe Panels, will
detect [CONFIDENTIAL TREATMENT REQUESTED]* in the Field. The assay components of
a Quantitation Kit at a minimum shall include the appropriate [CONFIDENTIAL
TREATMENT REQUESTED]*, other enzymes and such substrates needed for detection of
[CONFIDENTIAL TREATMENT REQUESTED]* products, detection plates of appropriate
design and buffers and other reagents needed for the performance of the assay.
1.46 "Repurchase Price" shall have the meaning specified in Section
10.4.4.1 hereof.
1.47 "Specifications" shall have the meaning specified in Section 4.1.1
hereof.
1.48 "Sublicensee" shall mean any non-Affiliate third party to whom Endogen
or Third Wave has granted the right to manufacture and sell products under its
license under the Third Wave Improvements or Endogen Improvements (i.e.,
Sections 2.7 or 4.7 hereof), respectively, with respect to products made and
sold by such third party.
1.49 "Third Party Licenses" shall have the meaning set forth in Section
8.4.1 hereof.
1.50 "Third Wave Deliverables" shall have the meaning set forth in Section
4.1.1 hereof.
1.51 "Third Wave Improvements" shall mean any Third Wave Inventions to
Endogen Technology.
1.52 "Third Wave Indemnitees" shall have the meaning set forth in Section
9.1 hereof.
1.53 "Third Wave Inventions" shall have the meaning set forth in Section
6.1.1 hereof.
1.54 "Third Wave Patent Rights" shall mean all United States and foreign
patents or patent applications, including any divisionals, reexaminations,
reissues, extensions, continuations, and continuations in part thereof
containing claims covering the Invader Technologies. Third Wave Patent Rights as
of the Effective Date, and all licenses related to such Third Wave Patent Rights
are listed in Schedule 1.54 attached hereto. Third Wave agrees to provide
Endogen with updates to Schedule 1.54 at least semi-annually.
1.55 "Third Wave Royalty Products" shall have the meaning set forth in
Section 5.5.1 hereof.
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1.56 "Transfer Price" shall have the meaning set forth in Section 5.1
hereof.
1.57 "Unit" shall mean, with respect to the Cleavase Enzymes supplied to
Endogen pursuant to Section 5.1.2.1 hereof, the amount of the applicable enzyme
necessary to perform a single Invader Reaction.
1.58 "Warrant" shall have the meaning set forth in Section 5.2 hereof.
2 ENDOGEN'S DEVELOPMENT AND MARKETING RIGHTS
2.1 General. Subject to the terms and conditions of this Agreement, Third
Wave hereby grants to Endogen (including its Affiliates), under any and all
Invader Intellectual Property (exclusive of the trademarks "Cleavase(R)" and
"Invader(TM)"), an exclusive, worldwide right and license (subject to Third
Wave's obligation and right to manufacture Third Wave Deliverables and Cleavase
Enzymes as set forth in Section 4.1 hereof), to develop, make, have made,
import, use, sell, and offer for sale Products (other than Generic Assays)
solely for use in the Life Science Research Market (directly or indirectly
through OEM's, resellers, or other third parties with whom Endogen has a
contractual relationship, including, without limitation, [CONFIDENTIAL TREATMENT
REQUESTED]*). Third Wave further hereby grants to Endogen (including its
Affiliates) a nonexclusive worldwide right and license to use the trademarks
"Cleavase(R)" and "Invader(TM)" solely in connection with Endogen's promotion,
marketing, sale or other distribution of the Products (including Generic Assays)
in accordance with Section 4.4 hereof. Such trademark license may be sublicensed
by Endogen to its Contract Manufacturers, Distributors and Sublicensees in
connection with the promotion, marketing, sale or other distribution of the
Products (including Generic Assays) in accordance with Section 4.4 hereof,
provided that such Contract Manufacturer, Distributor and Sublicensee agree to
the terms of such Section 4.4.
2.2 Generic Assay. [CONFIDENTIAL TREATMENT REQUESTED]* and subject to the
terms and conditions of this Agreement, Third Wave hereby grants to Endogen
(including its Affiliates), under any and all Invader Intellectual Property, a
nonexclusive, worldwide right and license to develop, make, have made, import,
use, sell, and offer for sale any Generic Assay in the Life Science Research
Market (directly or indirectly through OEM's, resellers, or other third parties
with whom Endogen has a contractual relationship, including, without limitation,
[CONFIDENTIAL TREATMENT REQUESTED]*).
2.3 Exclusivity. During the term of this Agreement or any extension made
pursuant to Section 10.1 hereof, Third Wave shall not itself exercise, and shall
not license or otherwise grant to any third party rights to exercise any of the
exclusive rights granted to Endogen in this Agreement. Third Wave hereby
represents and warrants that it has not granted rights to, or entered into an
agreement with, any third party inconsistent with the exclusive rights granted
to Endogen in this Agreement. Nothing herein shall be construed as granting to
Endogen, by implication, estoppel or otherwise, any license or other right to
any intellectual property of Third Wave except for the rights and licenses
expressly granted to Endogen herein, and Third Wave retains all rights not so
granted. Without limiting the foregoing, no provision of this Agreement
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shall be deemed to restrict Third Wave's right to exploit the Invader
Intellectual Property or Products outside the Life Science Research Market or
outside the Field.
2.4 Collaborative Alliance. Without limiting the generality of the
foregoing, Endogen and Third Wave wish to establish a collaborative alliance to
develop Products for use by Endogen, to sell or otherwise distribute or exploit,
directly or indirectly, within the Life Science Research Market and use by Third
Wave, to sell or otherwise distribute or exploit, directly or indirectly,
outside the Life Science Research Market. As part of the Development Program,
Endogen shall make funding payments to Third Wave to support such product
development as set forth in Section 5.3 hereof. During the course of this
collaboration, Endogen and Third Wave shall communicate regularly and shall
assume responsibilities for development of the Products during the Development
Program, all as described more specifically herein.
2.5 Endogen's Right to Have Made and Have Sold Products. Endogen (including
its Affiliates for all references to Endogen in this Section 2.5) agrees not to
market, promote or distribute any Product for sale outside the Life Science
Research Market. Endogen may sublicense to Contract Manufacturers its right and
license to make any Product in accordance with the terms and conditions of this
Agreement, provided that such Contract Manufacturers agree to comply with the
provisions of this Agreement relating to the manufacture of such Products. For
purposes of the foregoing, "Contract Manufacturer" shall mean, with respect to a
particular Product, any third party who has obtained through Endogen, directly
or indirectly, the right to make any Product. In addition, Endogen may
sublicense to Distributors its right to sell and offer for sale any Product in
accordance with the terms and conditions of this Agreement, provided that such
Distributors agree to comply with the provisions of this Agreement relating to
the sale and promotion of such Products. Without limiting the foregoing, each
Distributor shall agree not to market, promote or distribute any Product for use
outside the Life Science Research Market and, to the extent Endogen becomes
aware that a Distributor is marketing, promoting or distributing any Product for
use outside the Life Science Research Market, Endogen agrees to use reasonable
efforts to enforce such limitations. For purposes of this Agreement,
"Distributor" shall mean, with respect to a particular Product, any third party,
including, without limitation, OEMs and resellers, with whom Endogen has a
contractual relationship regarding the distribution or sale of Products.
2.6 Cleavase Enzymes. Notwithstanding anything herein to the contrary, it
is understood and agreed that except as expressly provided in Section 4.1.5
hereof, Endogen (including its Affiliates) shall not have the right to
manufacture or have manufactured any Cleavase Enzymes. Without limiting the
foregoing, Endogen shall only use Cleavase Enzymes supplied by Third Wave
hereunder in accordance with the terms and conditions of this Agreement.
2.7 License to Third Wave Improvements. Subject to the terms and conditions
of this Agreement, Third Wave hereby grants to Endogen (including its
Affiliates), under any and all intellectual property of Third Wave with respect
to the Third Wave Improvements, a non-exclusive, irrevocable, worldwide right
and license (with the right to grant and authorize sublicenses) to develop,
make, have made, import, use, sell, and offer for sale products solely
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within the Life Science Research Market during the term of this Agreement and
thereafter for all purposes.
3 THE DEVELOPMENT PROGRAM
3.1 Scope of Development Program. The Parties hereby agree to establish and
conduct a collaborative development program for the Products as described below
(the "Development Program"). The initial plan for conducting the Development
Program is attached hereto as Schedule 3.1. The Development Program will have an
[CONFIDENTIAL TREATMENT REQUESTED]* unless terminated earlier pursuant to
Section 10 hereof. The Parties shall use reasonable commercial efforts under the
Development Program to collaborate in identifying and developing products which
detect and/or quantitate gene expression in humans and other animal species. As
part of such collaboration, the Parties expect to [CONFIDENTIAL TREATMENT
REQUESTED]*
3.2 Technical Coordinators. As part of the Development Program, each Party
shall designate a technical coordinator. The initial technical coordinator for
Endogen shall be Dr. Mark Moody, Director of Protein Expression. The initial
technical coordinator for Third Wave shall be Dr. Bruce Neri, Senior Vice
President, Research and Development. Each Party may change its technical
coordinator from time to time during the term of this Agreement by notifying the
technical coordinator of the other Party in writing. The technical coordinators
shall be responsible for: (1) representing the Parties in all matters relating
to the Development Program, (2) submission and acceptance of materials and/or
other deliverables required to be delivered under this Agreement, (3) arranging
such meetings, visits, and consultations between the Parties associated with the
Development Program as may be deemed necessary or desirable for successful
accomplishment of such work, (4) handling the disclosure and receipt of
Confidential Information, (5) periodically discussing appropriate practices and
procedures to assure the security of the items generated and/or delivered under
this Agreement, and (6) preparing minutes of quarterly development review
meetings held pursuant to Section 3.4 hereof. Modifications or changes to the
terms and conditions of this Agreement are not within the authority of the
technical coordinators.
3.3 Sales and Marketing Coordinators. Each Party shall designate a sales
and marketing coordinator. The initial sales and marketing coordinator for
Endogen shall be Mr. Alan Kotik, Director of Marketing. The initial sales and
marketing coordinator for Third Wave shall be Mr. Sheldon Clark, Director of
Marketing. Each Party may change its sales and marketing coordinator from time
to time during the term of this Agreement by notifying the sales and marketing
coordinator of the other Party in writing. The sales and marketing coordinators
shall be responsible for: (1) representing the Parties in all matters relating
to the market launch of any Product, (2) developing product inserts and other
technical documentation required for the
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market launch of any Product, (3) coordinating the product testing of any
Product by prominent customers, (4) arranging such meetings, visits, and
consultations between the Parties associated with the marketing and promotion to
be performed for any market launch of a Product as may be deemed necessary or
desirable for successful accomplishment of such marketing and promotion, (5)
preparing minutes of quarterly sales and marketing review meetings held pursuant
to Section 3.4 hereof. Modifications or changes to the terms and conditions of
this Agreement are not within the authority of the sales and marketing
coordinators.
3.4 Quarterly Meetings. Within ten business days after the end of each
calendar quarter, quarterly review meetings between Endogen and Third Wave shall
be conducted in-person with respect to the first six quarters ending following
the Effective Date at facilities to be agreed to between Endogen and Third Wave
and thereafter by telephonic conference or face-to-face meeting as mutually
agreed (followed by minutes thereof). The technical quarterly review meetings
shall be chaired on alternating (meeting-by-meeting basis) by the lead
representative from each Party, with Third Wave's lead representative chairing
the first such meeting. The sales and marketing quarterly review meetings shall
be chaired by the lead representative from Endogen. The chairperson shall be
responsible for preparing the meeting agendas and minutes. Such minutes shall be
deemed accepted and effective unless an authorized representative of the other
Party shall have objected to the same within thirty (30) days of such Party's
receipt of such minutes. The location may be varied or dates changed by mutual
agreement of the technical coordinators of the Parties. The purpose of these
meetings is to encourage periodic exchanges of views between personnel of
Endogen and Third Wave having an interest in, and/or responsibility for, the
progress of work to be performed under this Agreement. Each respective Party is
to pay for its personnel's expenses incurred in connection with such meetings.
3.5 Initial Product Development Focus. As part of the Development Program,
the Parties shall use reasonable commercial efforts to jointly develop an
initial Product, a [CONFIDENTIAL TREATMENT REQUESTED]*, consisting of the
following analytes, [CONFIDENTIAL TREATMENT REQUESTED]*. Subsequently, the
Parties shall use reasonable commercial efforts to jointly develop an additional
[CONFIDENTIAL TREATMENT REQUESTED]* by mutual agreement over the term of the
Agreement so long as it is commercially viable to do so. During the term of the
Agreement, Endogen shall also pursue the development of an estimated
[CONFIDENTIAL TREATMENT REQUESTED]* over the term of the Agreement so long as it
is commercially viable to do so.
3.6 Third Wave Technical Assistance and Training. During the term of this
Agreement, Third Wave shall provide Endogen with reasonable technical assistance
relating to the use of Invader Technologies and the practice of the Third Wave
Patent Rights and Generic Assays, solely to the extent necessary to enable
Endogen to exercise its rights under this Agreement. During the initial phase of
the Development Program to assist Endogen in the transfer of the Invader
Technologies, Third Wave shall provide, at its expense, up to fifteen (15) days
of training related to the use and application of the Invader Technologies to
four (4) Endogen personnel at Third Wave's facilities, and thereafter Third Wave
shall provide additional training to Endogen personnel at Third Wave's
facilities as reasonably necessary; provided that
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Third Wave shall not be required to provide more than a single one-week program
of additional training to four (4) Endogen personnel annually. Notwithstanding
the foregoing, all expenses incurred by Endogen personnel in attending training
programs provided by Third Wave hereunder, including without limitation, all
travel and lodging expenses, shall be the responsibility of Endogen.
3.7 Endogen Technical Assistance. During the term of the Agreement, Endogen
will provide Third Wave with reasonable technical assistance relating to the use
of such Endogen Technology in the Field, solely to the extent to enable Third
Wave to fulfill its obligations during the Development Program.
4 THIRD WAVE'S MANUFACTURING AND MARKETING RIGHTS
4.1 Manufacturing Rights.
4.1.1 Third Wave's Right to Manufacture. Subject to the terms and
conditions of this Agreement, including, without limitation, Sections 4.1.2 and
4.1.5 hereof, Third Wave shall, during the term of this Agreement, be
responsible for and have the [CONFIDENTIAL TREATMENT REQUESTED]* right to
manufacture (i) all [CONFIDENTIAL TREATMENT REQUESTED]* used in combination with
[CONFIDENTIAL TREATMENT REQUESTED]*, (ii) certain [CONFIDENTIAL TREATMENT
REQUESTED]* used in combination with [CONFIDENTIAL TREATMENT REQUESTED]* as
determined by Endogen, and (iii) all [CONFIDENTIAL TREATMENT REQUESTED]*
((i)-(iii) collectively, the "Third Wave Deliverables") sufficient to meet
Endogen's forecasts for Products and the Annual Minimum Purchase Requirements
(each, as defined below). The Third Wave Deliverables shall be manufactured by
Third Wave in accordance with specifications mutually agreed to between the
Parties (the "Specifications"). The Parties shall use reasonable commercial
efforts to agree upon such Specifications. In the event that the Parties are
unable to agree upon such Specifications, either Party may initiate arbitration
to establish such Specifications in accordance with Sections 11.1 and 11.2
hereof. Notwithstanding anything contained herein to the contrary, in the event
either that Party initiates arbitration in accordance with Section 11.2 hereof
with respect to establishing the Specifications for any Third Wave Deliverable,
(i) the sole issue before the arbitrator(s) shall be establishing such
Specifications, and (ii) the Parties shall use their best efforts to complete
such arbitration within sixty (60) days of choosing the arbitration panel.
4.1.2 Endogen's Right to Manufacture Third Wave Deliverables. Prior to
[CONFIDENTIAL TREATMENT REQUESTED]*, Third Wave and Endogen agree to negotiate
in good faith such modification of Third Wave's [CONFIDENTIAL TREATMENT
REQUESTED]* rights to manufacture Third Wave Deliverables pursuant to Section
4.1.1 hereof so as to permit Endogen to manufacture or have manufactured Third
Wave Deliverables for sale or other distribution in the Life Science Research
Market, subject to Third Wave's [CONFIDENTIAL TREATMENT REQUESTED]* right to
manufacture and supply Cleavase Enzymes as provided herein.
4.1.3 Supply of Cleavase Enzymes. Subject to the terms and conditions
of this Agreement, including, without limitation, Section 4.1.5 hereof, Third
Wave shall during the term of this Agreement have the exclusive right to
manufacture and supply Endogen with Endogen's commercial requirements of
Cleavase Enzymes for the purpose of developing and manufacturing Animal Assays,
Human Assays, Generic Assays and such other Products as the Parties may
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agree for sale or other distribution in the Life Science Research Market during
the term of this Agreement. The "Specifications" for the Cleavase Enzymes shall
be established by mutual agreement of the Parties. Notwithstanding anything
herein to the contrary, all Cleavase Enzymes supplied by Third Wave to Endogen
hereunder shall be for the sole purpose of development of, or incorporation of
such Cleavase Enzymes into, Animal Assays, Human Assays, Generic Assays, Animal
Probe Panels, Human Probe Panels and such other Products as the Parties may
agree for sale in the Life Science Research Market and shall not be used for any
other purpose unless otherwise mutually agreed by the Parties hereto.
4.1.4 Allocation Among Parties Upon Failure to Supply. In the event
that Third Wave is unable to supply either worldwide requirements of Third Wave
Deliverables or Cleavase Enzymes as provided herein due to force majeure or
otherwise, Third Wave shall allocate to Endogen such quantities of Third Wave
Deliverables or Cleavase Enzymes that Third Wave has in inventory and/or Third
Wave is able to produce, so that Endogen receives at least its proportional
share of available supplies (as determined based on reasonable forecasts taking
into consideration past sales and sales performance against forecasts) vis a vis
Endogen, Third Wave and Third Wave's other distributors.
4.1.5 Endogen's Right to Manufacture Upon Failure to Supply. In the
event Third Wave fails for any reason (other than as a direct result of any
intentional act or omission of Endogen) to adequately supply Endogen's
requirements of Third Wave Deliverables and/or Cleavase Enzymes for any
consecutive three-month period, then Endogen shall have the right to manufacture
and/or sublicense the manufacture of the Third Wave Deliverables and/or Cleavase
Enzymes, as applicable; provided, however, such right shall be limited to the
manufacture of the quantity of Third Wave Deliverables and/or Cleavase Enzymes,
as applicable, for sale in the Life Science Research Market that Third Wave
fails to so supply and shall continue only until such time as Third Wave
demonstrates to Endogen's satisfaction, which shall not be unreasonably
withheld, that it is able to adequately supply Endogen's reasonable requirements
of Third Wave Deliverables and/or Cleavase Enzymes for sale in the Life Science
Research Market. In such event, Third Wave agrees to (i) reimburse Endogen for
up to [CONFIDENTIAL TREATMENT REQUESTED]* of out-of-pocket start-up expenses
incurred by Endogen directly related to the preparation for such manufacture as
determined in accordance with generally acceptable accounting practices (GAAP)
and (ii) provide to Endogen copies of all documentation within Third Wave's
control that is reasonably necessary for Endogen to manufacture (or have
manufactured) Third Wave Deliverable(s) or Cleavase Enzyme(s), as applicable,
and shall reasonably cooperate with Endogen to establish alternative supply,
including sources of materials. For purposes of this Section 4.1.5, a failure to
"adequately supply Endogen's requirements" shall mean a failure to supply
Endogen at least 75% of the quantities of Third Wave Deliverables and/or
Cleavase Enzymes, as applicable, ordered in accordance with this Agreement in
any consecutive three-month period. THE ABOVE PROVISION OF THIS SECTION 4.1.5
SHALL BE ENDOGEN'S SOLE AND EXCLUSIVE REMEDY WITH RESPECT TO ANY OUT-OF-POCKET
START-UP EXPENSES INCURRED BY ENDOGEN DIRECTLY RELATED TO THE PREPARATION FOR
MANUFACTURE OF THIRD WAVE DELIVERABLES AND/OR CLEAVASE ENZYMES DUE TO THE
FAILURE BY THIRD WAVE TO SUPPLY THE
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*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
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SAME, BUT SHALL NOT LIMIT ANY OTHER RIGHT OF ENDOGEN WITH RESPECT TO
OTHER DAMAGES ARISING OUT OF SUCH FAILURE.
4.2 Supply
4.2.1 Orders. During the term of this Agreement and any extension
thereof, Endogen will supply forecasts and place orders with Third Wave for
Third Wave Deliverables and Cleavase Enzymes, and Third Wave undertakes to
supply Endogen with Third Wave Deliverables and Cleavase Enzymes specified in
such orders, in accordance with the guidelines set forth on Schedule 4.2.1
attached hereto and made a part hereof. NOTWITHSTANDING ANYTHING TO THE CONTRARY
IN THIS AGREEMENT, NO ADDITIONAL OR INCONSISTENT TERMS OR CONDITIONS OF ANY
PURCHASE ORDER OR ACKNOWLEDGMENT GIVEN OR RECEIVED PURSUANT TO THIS AGREEMENT
SHALL IN ANY WAY MODIFY OR ADD TO THE TERMS AND CONDITIONS OF THIS AGREEMENT.
4.2.2 Delivery, Risk and Title. All Third Wave Deliverables and
Cleavase Enzymes will be delivered ex works (Incoterms 1990) the United States
shipping point designated by Third Wave. All Third Wave Deliverables and
Cleavase Enzyme supplied pursuant to the terms of this Agreement shall be
suitably packed for shipment by Third Wave, marked for shipment to the
destination point indicated in Endogen's purchase order. The carrier shall be
selected by agreement between Third Wave and Endogen, provided that in the event
no such agreement is reached Endogen shall select the carrier. All shipping and
insurance costs, as well as any special packaging expenses, shall be paid by
Endogen. With respect to exact shipping dates, Third Wave shall use its
reasonable best efforts to ship forecasted quantities of Third Wave Deliverables
and Cleavase Enzymes in accordance with orders submitted and accepted in
accordance with Section 4.2.1 hereof. Otherwise, Third Wave Deliverables shall
be shipped in accordance with Endogen's instructions.
4.2.3 Product Acceptance. All shipments and all shipping and other
charges shall be deemed correct unless Third Wave receives from Endogen, no
later than fifteen (15) days after Endogen's receipt of a given shipment, a
written notice specifying the shipment, the purchase order number, and the exact
nature of the discrepancy between the order and the shipment or the exact nature
of the discrepancy in the shipping or other charges, as applicable. Without
limiting the foregoing, if Endogen discovers that any Third Wave Deliverable or
Cleavase Enzymes supplied hereunder fails to conform to the applicable
Specifications, Endogen shall notify Third Wave no later than fifteen (15) days
after its discovery of the nonconformity and Endogen shall present reasonable
evidence to Third Wave of such nonconformity and Third Wave, at Endogen's
option, shall use its best efforts at its expense to either replace such
nonconforming Third Wave Deliverables or Cleavase Enzymes, at no cost, or refund
amounts paid (including shipping) by Endogen with respect thereto. Third Wave
may analyze any Third Wave Deliverable or Cleavase Enzyme rejected by Endogen
for nonconformity and if it is objectively established that the Product was
conforming, then Endogen shall be responsible for payment of the Transfer Price
and shipping charges for such Third Wave Deliverable or Cleavase Enzyme.
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4.2.4 Quality. Except as provided in Section 4.1 hereof, to ensure the
quality and authenticity of Third Wave Deliverables and Cleavase Enzymes
supplied hereunder, Endogen shall exclusively purchase all such commercial
requirements for such Third Wave Deliverables and Cleavase Enzymes from Third
Wave and Endogen shall not obtain Third Wave Deliverables or Cleavase Enzymes
from any other source without the prior written approval of Third Wave. Third
Wave warrants (1) that all Third Wave Deliverables and Cleavase Enzymes
manufactured and supplied under this Agreement shall be of good marketable
quality and will conform to the Specifications, and (2) that prior to delivery
all tests and quality control procedures mutually agreed to between the Parties
in writing will have been carried out in relation to each manufacturing lot of
the Third Wave Deliverables and Cleavase Enzymes with satisfactory results a
copy of which will be made available to Endogen on delivery of the Third Wave
Deliverables or Cleavase Enzymes, as applicable.
4.2.5 Notification. Without prejudice to Endogen's rights hereunder,
Third Wave shall immediately notify Endogen's Director of Quality Systems by
rapid means of communication (e.g., facsimile, telephone) in the event of any
circumstance coming to its knowledge which would be reasonably expected to lead
to a claim being made against Endogen, its Affiliates, customers, distributors,
agents, and their respective employees relating to the Third Wave Deliverables
or Cleavase Enzymes, including, but not limited to, any failure of the same to
conform to applicable specifications.
4.2.6 Quality Control Tests. Third Wave shall disclose to Endogen
particulars of the results of Third Wave's quality control tests carried out on
the Third Wave Deliverables and Cleavase Enzymes provided hereunder if these
particulars are requested by Endogen and will at the request of Endogen permit a
duly authorized representative of Endogen to visit and review the quality
control and quality assurance procedures of Third Wave with respect to the Third
Wave Deliverables and Cleavase Enzymes provided hereunder.
4.3 Annual Minimum Purchase Requirements. Schedule 4.3 attached hereto,
sets forth initial annual minimum purchase requirements (the "Annual Minimum
Purchase Requirements") by Endogen of any and all Quantitation Kits manufactured
by Third Wave in the calendar years indicated. Annual Minimum Purchase
Requirements for any and all Quantitation Kits for any extension period(s) to
this Agreement will be mutually agreed upon by the Parties at least six (6)
months prior to the start of the extension period(s), if any, in accordance with
Section 10 hereof. Notwithstanding anything contained herein to the contrary,
Endogen shall have no liability for failing to meet an Annual Minimum Purchase
Requirement as a result of (i) Third Wave's failure to perform its obligations
under this Agreement, or (ii) the Parties' failure to reach agreement on
applicable Specifications after the utilization of reasonable commercial efforts
to do so.
4.4 Product Packaging and Labeling. The trade dress, style of packaging and
the like with respect to Third Wave Deliverables shall be determined mutually by
Third Wave and Endogen so as to be consistent with Third Wave's standard trade
dress and style; provided, however, that Third Wave reserves the right to
package the Third Wave Deliverables in a manner in order to differentiate them
from the Products sold, directly or indirectly, by Third Wave
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outside the Life Science Research Market. Third Wave shall be responsible for
packaging and labeling the Third Wave Deliverables supplied hereunder in
accordance with all applicable regulatory requirements. Endogen shall not
repackage or relabel Third Wave Deliverables supplied to Endogen by Third Wave
hereunder without the prior written consent of Third Wave. Without limiting the
foregoing, Products manufactured, directly or indirectly, by or for Endogen as
provided hereunder shall be sold under the Endogen name to the Life Science
Research Market; provided, however, that the trademarks "Invader(TM)" and
"Cleavase(R)" are prominently featured on product packaging, instruction manuals
and advertising (or such other brand names as are mutually agreed to by the
Parties). Furthermore, to the extent commercially reasonable, all technology,
intellectual property rights or patents of Third Wave shall be prominently
referenced and acknowledged in all literature, product packaging, instruction
manuals and advertising. Endogen agrees that the nature and quality of all
Products promoted, offered for sale or sold by Endogen under Third Wave's
trademarks "Invader(TM)" or "Cleavase(R)" and Endogen's use of any such
trademarks shall conform to commercially reasonable standards and practices
regarding trademark use as established from time to time by Third Wave, after
good faith consultation with Endogen. Furthermore, Endogen agrees to cooperate
with Third Wave in facilitating control over the nature and quality of the
Products, to permit reasonable inspection (upon reasonable notice) of Endogen's
operation, and to supply Third Wave with specimens of all uses of such
trademarks upon Third Wave's request. Except as expressly set forth herein,
nothing herein shall grant to Endogen any right, title or interest in the
"Cleavase(R)" or "Invader(TM)" trademarks whether or not specifically recognized
or perfected under applicable laws. All uses of Third Wave's trademarks by
Endogen shall inure to the benefit of and be on behalf of Third Wave. At no time
during or after the term of this Agreement shall Endogen challenge or assist
others to challenge Third Wave's trademarks or the registration thereof or
attempt to register any trademarks, marks or trade names confusingly similar to
such Third Wave trademarks.
4.5 Technical Information and Know-How. Third Wave shall supply Endogen
throughout the term of this Agreement reasonably sufficient information,
know-how and documentation reasonably necessary to assist Endogen in selling the
Products in a proper manner. In addition, Third Wave shall, at Endogen's
request, provide all reasonable telephone support and telephone consulting
services necessary to Endogen's customers regarding quality, handling, or
technical matters relating to the Products, subject to Third Wave's standard
terms and conditions for customer support. At Endogen's reasonable request, a
qualified employee of Third Wave shall meet with Endogen representatives to
discuss these matters.
4.6 License to Endogen Intellectual Property. Subject to the terms and
conditions of this Agreement, Endogen hereby grants to Third Wave, under any and
all Endogen Intellectual Property, a non-exclusive, royalty-free, worldwide
right and license solely to the extent necessary or useful (i) to develop
Products pursuant to the Development Program in the Field, and (ii) to
manufacture the Third Wave Deliverables and Cleavase Enzymes for Endogen in
connection with Endogen's sale of Products in the Life Science Research Market
as provided in this Agreement.
4.7 License to Endogen Improvements. Subject to the terms and conditions of
this Agreement, Endogen hereby grants to Third Wave, under any and all
intellectual property of
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Endogen with respect to the Endogen Improvements, a non-exclusive, irrevocable,
worldwide right and license (with the right to grant and authorize sublicenses)
to develop, make, have made, import, use, sell, and offer for sale products
solely outside the Life Science Research Market during the term of this
Agreement and thereafter for all purposes.
5 CONSIDERATION; PAYMENTS
5.1 Transfer Prices. The transfer prices to Endogen for the Third Wave
Deliverables and Cleavase Enzymes supplied hereunder shall be as follows (the
"Transfer Prices"):
5.1.1 Transfer Pricing. The parties shall establish the Transfer Price
for each Third Wave Deliverable hereunder prior to its transfer to Endogen
hereunder taking into consideration previous pricing for other Third Wave
Deliverables, Third Wave's production costs and Endogen's market conditions and
other similar factors relating to such Third Wave Deliverable. Without limiting
the foregoing, as of the Effective Date, the Parties anticipate that the
Transfer Price for Third Wave Deliverables will be established at approximately
[CONFIDENTIAL TREATMENT REQUESTED]* to end users for such Third Wave
Deliverables. The established Transfer Prices shall be subject to annual review
and adjustment by mutual consent of the Parties at least ninety (90) days prior
to each anniversary of the Effective Date based on changes to Third Wave's
production costs and Endogen's market conditions and other similar factors
relating to such Third Wave Deliverables. Notwithstanding the foregoing, the
Transfer Prices for the [CONFIDENTIAL TREATMENT REQUESTED]* from the Effective
Date for Third Wave Deliverables existing on the Effective Date shall be set
forth on Schedule 5.1.1 attached hereto. In the event that the Parties are
unable to establish a Transfer Price for a particular Third Wave Deliverable
either Party may initiate the dispute resolution mechanism set forth in Section
11 hereof; provided that if it is necessary to escalate such dispute to
arbitration as provided in Section 11.2 hereof (i) the sole issue before the
arbitrator(s) shall be the establishment of such Transfer Price and (ii) the
Parties shall use their best efforts to complete such arbitration within sixty
(60) days of choosing the arbitration panel.
5.1.2 Cleavase Enzyme.
5.1.2.1 Commercial Animal Assays/Generic Assays. The Transfer Price to
be paid by Endogen to Third Wave with respect to quantities of Cleavase Enzymes
shall be [CONFIDENTIAL TREATMENT REQUESTED]* per Unit delivered separately and
apart from a Third Wave Deliverable for the [CONFIDENTIAL TREATMENT REQUESTED]*
following the Effective Date of this Agreement. The Parties shall review and
adjust by mutual consent Transfer Prices for Cleavase Enzymes ninety (90) days
prior to each anniversary of the Effective Date for each following twelve-month
period, such adjustments to be based on Third Wave's production costs and
Endogen's market conditions and other similar factors relating to such Cleavase
Enzymes.
5.1.2.2 Development. There shall be no Transfer Price payable
by Endogen to Third Wave with respect to quantities of Cleavase Enzymes intended
for use in Endogen's product development in accordance with the Development
Program (collectively,
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*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
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"Development Enzyme") and Third Wave shall supply such Development Enzyme free
of charge, subject to Endogen's obligation to pay shipping and insurance costs
pursuant to Section 4.2.2 hereof. The quantities of Development Enzyme to be
provided by Third Wave hereunder shall be determined by mutual agreement of the
Parties.
5.1.3 Payments. With respect to amounts due to Third Wave for Third
Wave Deliverables or Cleavase Enzymes supplied by Third Wave to Endogen
hereunder, Endogen shall pay such amounts within thirty (30) days of Endogen's
receipt of such Third Wave Deliverables or Cleavase Enzymes, or the invoice
therefor, whichever is later.
5.2 Warrants. Following the Effective Date, the parties agree to exercise
their best efforts to agree upon the issuance to Third Wave of a warrant to
purchase 125,000 shares of Endogen's Common Stock (the "Warrants") at an
exercise price of six dollars ($6.00) per share pursuant to the terms and
conditions of a Warrant Agreement mutually acceptable to the parties. Third Wave
hereby represents and warrants to Endogen that: (i) it is an "accredited
investor" within the meaning of Rule 501 under the Securities Act and was not
organized for the specific purpose of acquiring the Warrants; (ii) it has
sufficient knowledge and experience in investing in companies similar to Endogen
in terms of its stage of development so as to be able to evaluate the risks and
merits of its investment in Endogen and it is able financially to bear the risks
thereof; (iii) it has had an opportunity to discuss Endogen's business,
management and financial affairs with Endogen's management; (iv) the Warrants
being purchased by it are being acquired for its own account for the purpose of
investment and not with a view to or for sale in connection with any
distribution thereof; and (v) it understands that the Warrants and shares of
Endogen's Common Stock issuable upon exercise of the Warrants have not been
registered under the Securities Act by reason of their issuance in a transaction
exempt from the registration requirements of the Securities Act pursuant to
Section 4(2) thereof or Rule 505 or 506 promulgated under the Securities Act,
that upon exercise of the Warrants, the shares of Endogen's Common Stock
issuable upon exercise of the Warrants must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration, that the Warrants and shares of Endogen's Common
Stock issuable upon exercise of the Warrants will bear a legend to such effect,
and that Endogen will make a notation on its transfer books to such effect.
5.3 Funding of the Development Program. In consideration of Third Wave's
performance of its obligations under the Development Program, Endogen will fund
Third Wave's development of the Quantitation Kits and Human Probe Panels to a
maximum of $1,050,000 over the thirty-six month period from December 1, 1997
based upon the schedule of headcount estimates and workload sharing between the
Parties attached hereto as Schedule 5.3.A. The amounts payable to Third Wave
shall be equal to the lesser of (i) [CONFIDENTIAL TREATMENT REQUESTED]* and (ii)
the amounts set forth on Schedule 5.3.B attached hereto. As set forth in
Schedule 5.3.B, for each Development Year, Endogen shall make four equal
payments of a maximum of [CONFIDENTIAL TREATMENT REQUESTED]*, to be paid
quarterly in advance by the twentieth (20th) business day of the calendar month
of each calendar quarter (e.g., January 20th, April 20th, July 20th, and October
20th), pro rated as necessary for the first and last quarters. Such quarterly
payments shall be
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*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
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based on Third Wave's good faith estimates of its Development Expenditures for
the current Development Year (which estimates shall be provided to Endogen at
least ninety (90) days prior to the commencement of a Development Year,
provided, however, that with respect to the first Development Year, (i)
Endogen's first quarterly payment shall be pro rated to [CONFIDENTIAL TREATMENT
REQUESTED]* and shall be payable on or before December 1, 1997, and (ii) Third
Wave's good faith estimates of its Development Expenditures for the first
Development Year shall be provided to Endogen on or before September 30, 1997.
Any amounts paid by Endogen and not used in accordance with this Section 5.3
shall be credited against the following quarterly payment, any underpayment of a
quarterly payment by Endogen based upon Third Wave's actual Development
Expenditures shall be paid with the next quarterly payment upon invoices by
Third Wave. In the event that during any quarter of a Development Year the
amount due by Endogen to Third Wave pursuant to this Section is less than the
amount proscribed on Schedule 5.3.B, the difference may be carried forward to
future quarters within that Development Year to increase the maximum amount
payable by Endogen during any future quarter of that Development Year by the
amount of that difference. Without limiting the foregoing, Endogen and Third
Wave shall agree from time to time on reasonable development milestones to be
completed by Third Wave and establish a time for completion of such development
milestones. Third Wave shall notify Endogen of the completion of such
development milestones within ten (10) days thereof and provide Endogen with
written documentation thereof as reasonably necessary to enable Endogen to
verify such completion. If Third Wave fails to meet any such development
milestones by the established time, Endogen shall have the right to terminate
all further payment obligations under this Section 5.3 upon sixty (60) days'
prior written notice to Third Wave, provided Third Wave fails to cure such
failure within such sixty (60)-day period. Without limiting the foregoing, but
subject to Third Wave's obligation to manufacture and supply the Third Wave
Deliverables pursuant to Section 4 hereof, in the event that Endogen's payment
obligations terminate as set forth in this Section 5.3, Third Wave shall have no
further obligation to perform the Development Program from and after the date of
such termination.
5.4 Endogen and Distributor Royalty Payments.
5.4.1 Endogen Royalty Payments.
5.4.1.1 With respect to the sales of Products manufactured,
directly or indirectly, by Endogen or its Affiliates pursuant to the license
granted to Endogen under Sections 2.1, 2.2 or 4.1.5 hereof (collectively,
"Endogen Royalty Products"), Endogen agrees to pay to Third Wave a royalty of
[CONFIDENTIAL TREATMENT REQUESTED]*.
5.4.1.2 For purposes of calculating the royalty due to Third
Wave pursuant to Section 5.4.1.1 hereof, in the event that an Endogen Royalty
Product is sold in combination with another product (including, without
limitation, Third Wave Deliverables manufactured by Third Wave) for which no
royalty would be due hereunder if sold separately (a "Bundled Product"), Net
Sales from such Bundled Product shall be reduced to an amount equal to the
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*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
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dollar value of such Net Sales (prior to the reduction) multiplied by a fraction
A/B, where A equals the aggregate value of all Endogen Royalty Products
contained in such Bundled Product (as determined with reference to the average
gross selling price of each such Endogen Royalty Product during the previous
calendar quarter) and B equals the aggregate value of all products (including
the Endogen Royalty Products) contained in such Bundled Product (as determined
with reference to the average gross selling price of each such product during
the previous calendar quarter). In the event that a substantial number of such
separate sales were not made during the previous calendar quarter, then the Net
Sales shall be as reasonably allocated by Endogen and Third Wave based on the
relative importance and proprietary position of the Endogen Royalty Products and
other products. If the Parties are unable to agree on such allocation, either
Party may initiate the dispute mechanism as set forth in Section 11 hereof,
provided that if it is necessary to escalate such dispute to arbitration as
provided in Section 11.2 hereof (i) the sole issue before the arbitrator(s)
shall be the establishment of such allocation and (ii) the Parties shall use
their best efforts to complete such arbitration within sixty (60) days of
choosing the arbitration panel.
5.4.1.3 With respect to the sales of products the manufacture,
sale or use of which would but for the license granted in Section 2.7 hereof
infringe a claim of an issued patent within the Third Wave Improvements
(collectively, "Other Royalty Products"), Endogen agrees to pay to Third Wave a
royalty of [CONFIDENTIAL TREATMENT REQUESTED]*.
5.4.1.4 For purposes of calculating the royalty due to Third
Wave pursuant to Section 5.4.1.3 hereof, in the event that Endogen sells a
product that consists of a combination of Other Royalty Products and other
products for which no royalty is due to Third Wave, the terms and conditions of
Section 5.4.1.2 hereof shall apply mutatis mutandis to this Section 5.4.1.4.
5.4.1.5 In the event that Endogen sells a product that
consists of a combination of Endogen Royalty Products, Other Royalty Products
and/or products for which no royalty is due to Third Wave, the royalty due to
Third Wave for such product shall be adjusted on a pro rata basis to take into
account the different royalties due for Endogen Royalty Products and Other
Royalty Products and the fact that no royalty is due for any other products. The
pro rata adjustment shall be based on the allocation principles set forth in
Section 5.4.1.2 hereof and such section shall apply to this Section 5.4.1.5
mutatis mutandis, as applicable. In no event shall Endogen be required to pay to
Third Wave more than one royalty in connection with the sale of any allocated
product.
5.4.1.6. With respect to sales of Products by Endogen and its
Affiliates, all royalties due pursuant this Section will be paid to Third Wave
within sixty days (60) days after the end of each calendar quarter with respect
to sales in such quarter. With respect to sales of Products by Distributors and
Sublicensees, all royalties due pursuant to this Section shall be
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*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
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paid to Third Wave within ninety (90) days after the end of each calendar
quarter with respect to sales in such quarter.
5.4.2 Reports.
5.4.2.1 Endogen Reports. With respect to Net Sales of an Endogen
Royalty Product or Other Royalty Products, as applicable, Endogen shall provide
to Third Wave a quarterly royalty report as follows: within sixty (60) days
after the end of each calendar quarter, Endogen shall deliver to Third Wave a
true and accurate report, giving such particulars of the business conducted by
Endogen and its Affiliates, if any, during such calendar quarter as are
pertinent to account for royalties due under this Section 5.4. Such report shall
include at least (i) the total of Net Sales of Endogen Royalty Products during
such quarter, (ii) the calculation of royalties, and (iii) the total royalties
so calculated and due Third Wave. Simultaneously with the delivery of each such
report, Endogen shall pay to Third Wave the total royalties, if any, due to
Third Wave for the period of such report.
5.4.2.2 Distributor/Sublicensee Reports. Endogen shall use
reasonable commercial efforts to obtain from the Distributors and Sublicensees,
as the case may be, and provide to Third Wave within ninety (90) days after the
end of each calendar quarter, reports on the same basis and substantially
similar to those to be provided by Endogen to Third Wave pursuant to Section
5.4.2.1.
5.5 Third Wave Royalty Payments.
5.5.1 Royalty Rate. With respect to sales of products the manufacture,
sale or use of which would but for the license granted in Section 4.7 hereof
infringe a claim of an issued patent within the Endogen Improvements
(collectively, "Third Wave Royalty Products"), Third Wave agrees to pay Endogen
a royalty of [CONFIDENTIAL TREATMENT REQUESTED]*.
5.5.2 For purposes of calculating the royalty due to Endogen pursuant
to Section 5.5.1 hereof, in the event that Third Wave sells a product that
consists of a combination of Third Wave Royalty Products and other products for
which no royalty is due to Endogen, the terms and conditions of Section 5.4.1.2
hereof shall apply mutatis mutandis to this Section 5.5.2
5.5.3 With respect to sales of products by Third Wave and its
Affiliates, all 0royalties due pursuant this Section will be paid to Endogen
within sixty days (60) days after the end of each calendar quarter with respect
to sales in such quarter. With respect to sales of products by Third Wave's
Sublicensees, all royalties due pursuant to this Section shall be paid to
Endogen within ninety (90) days after the end of each calendar quarter with
respect to sales in such quarter.
5.5.4 Third Wave Reports. With respect to Net Sales of a Third Wave
Royalty Product, Third Wave shall provide to Endogen a quarterly royalty report
as follows: within sixty
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AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
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(60) days after the end of each calendar quarter, Third Wave shall deliver to
Endogen a true and accurate report, giving such particulars of the business
conducted by Third Wave, and its Affiliates, if any, during such calendar
quarter as are pertinent to account for royalties due under this Section 5.5.
Such report shall include at least (i) the total of Net Sales of Third Wave
Royalty Products during such quarter, (ii) the calculation of royalties, and
(iii) the total royalties so calculated and due Endogen. Simultaneously with the
delivery of each such report, Third Wave shall pay to Endogen the total
royalties, if any, due to Endogen for the period of such report.
5.5.5 Sublicensee Reports. Third Wave shall use reasonable commercial
efforts to obtain from Third Wave's Sublicensees and provide to Endogen reports
within ninety (90) days of the end of each calendar quarter on the same basis
and substantially similar to those to be provided by Third Wave to Endogen
pursuant to Section 5.5.4 hereof.
5.6 Payment Terms. All payments under this Agreement shall be in U.S.
Dollars, and at the payor's option, by check drawn on a U.S. bank or by wire
transfer in immediately available funds to a bank designated by the payee.
5.7 Taxes. All payments specified hereunder are expressed as net amounts
and shall be made free and clear of, and without reduction for, any withholding
taxes. Any such taxes which are otherwise imposed on payments to the payee,
other than the payee's income taxes, shall be the sole responsibility of the
payor. The payor shall provide the payee with official receipts issued by the
appropriate taxing authority or such other evidence as is reasonably requested
by the payee to establish that such taxes have been paid. If the payee uses a
foreign tax credit received by the payee as a result of the payment of
withholding taxes by the payor and thereby reduces the amount of income tax that
the payee otherwise would have paid, the payee shall refund to the payor the
amount of such reduction with respect to such foreign tax credit. Likewise, if
the payee has the legal obligation to collect and/or pay any sales, use, excise
or value added taxes, the appropriate amount shall be added to the payor's
invoice and paid by the payor, unless the payor provides the payee with a valid
tax exemption certificate authorized by the appropriate taxing authority.
5.8 Currency Conversion. If any currency conversion shall be required in
connection with the calculation of amounts payable under this Agreement, such
conversion shall be made using the buying exchange rate for conversion of the
foreign currency into U.S. Dollars, quoted for current transactions reported by
the Wall Street Journal for the last business day of the calendar quarter to
which such payment pertains.
5.9 Records; Inspection. Each Party shall keep, and require its Affiliates
to keep, complete, true and accurate books of account and records for the
purpose of determining the amounts payable under this Section 5. Such books and
records shall be kept at a place of business in the United States for at least
three (3) years following the end of the calendar quarter to which they pertain.
Such records will be open for inspection during such three (3)-year period by a
certified public accountant or other agent of the other Party for the purpose of
verifying the amounts payable under this Section 5. Such inspections may be made
no more than once each
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calendar year, at reasonable times and on reasonable notice. Inspections
conducted under this Section 5.9 shall be at the expense of the Party requesting
such inspection, unless a variation or error producing an underpayment in
amounts payable exceeding five percent (5%) of the amount paid for any period
covered by the inspection is established in the course of any such inspection,
whereupon all reasonable costs relating to the inspection for such period and
any unpaid amounts that are discovered will be paid by the other Party, together
with interest on such unpaid amounts equal to the lesser of one and one-half
percent (1 1/2%) per month or the maximum rate permitted by applicable law,
calculated on the number of days overdue. The Parties will endeavor to minimize
disruption of each other's normal business activities to the extent reasonably
practicable.
5.10 Third Party Royalties. If after the Effective Date and during the term
of this Agreement Third Wave enters into a royalty-bearing license or agreement
or a license or agreement requiring payment of license fees or other similar
payments for the license or other acquisition of rights to new technologies
useful to the manufacture, sale or use of Products pursuant to the rights
granted to Endogen hereunder and would otherwise be included within the Invader
Technologies, the Parties agree to negotiate in good faith (i) an agreement
regarding the payment of all or a portion of such amounts, and (ii) an amendment
to this Agreement, if necessary, to reflect any such agreed upon terms.
Notwithstanding the foregoing, in the event that the parties are unable to agree
on such additional terms and conditions, Third Wave at its option may exclude
from this Agreement the subject matter covered by such license or agreement, and
in such event the same shall not be Invader Intellectual Property for the
purposes of this Agreement. The provisions of this Section 5.10 shall not limit
the obligations of the Parties under Section 6.4 hereof.
6 INTELLECTUAL PROPERTY RIGHTS
6.1 Ownership
6.1.1 Ownership of Inventions. Inventorship with respect to inventions
made pursuant to this Agreement shall be determined in accordance with United
States rules of inventorship. All right, title and interest in and to all
writings, inventions, discoveries, improvements and other technology whether or
not patentable or copyrightable, and any patent applications, patents or
copyrights based thereon (collectively the "Inventions") that are conceived
and/or reduced to practice solely by employees of Third Wave or others acting on
behalf of Third Wave ("Third Wave Inventions") shall be owned by Third Wave. All
right, title and interest in and to all Inventions that are conceived and/or
reduced to practice solely by employees of Endogen or others acting on behalf of
Endogen ("Endogen Inventions") shall be owned by Endogen. All right, title and
interest in all Inventions that are conceived and/or reduced to practice jointly
by employees of Third Wave and Endogen or by others acting on behalf of Third
Wave and Endogen (the "Joint Inventions") shall be jointly owned by Third Wave
and Endogen.
6.1.2 Cooperation of Employees. Each Party represents and agrees
that all employees or others acting on its behalf in performing its obligations
under this Agreement shall
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be obligated under a binding written agreement to assign to such Party, or as
such Party shall direct, all Inventions made or conceived by such employee or
other person, or in the case of non-employees working for other companies or
institutions on behalf of Third Wave or Endogen.
6.2 Provisions Concerning the Filing, Prosecution and Maintenance of
Technology, Patent Rights and Joint Inventions.
6.2.1 Sole Inventions. Third Wave shall, at its own expense, control
preparing, filing, prosecuting and maintaining patent applications and patents
with respect to Third Wave Inventions worldwide, in such countries as it deems
appropriate, and conducting any interferences, re-examinations, reissues,
oppositions or requests for patent term extensions relating to such Third Wave
Inventions using counsel of its choice. Endogen shall, at its own expense,
control preparing, filing, prosecuting and maintaining patent applications and
patents with respect to Endogen Inventions worldwide, in such countries as it
deems appropriate, and conducting any interferences, re-examinations, reissues,
oppositions or requests for patent term extensions relating to such Endogen
Inventions using counsel of its choice.
6.2.2 Joint Inventions. Third Wave and Endogen shall be jointly
responsible for prosecution and maintenance of patent applications covering all
Joint Inventions and Joint Patent Rights in both Parties names. Unless otherwise
agreed by the Parties, Third Wave's counsel shall prepare, file, prosecute and
maintain patent applications and patents worldwide on such Joint Inventions,
with all expenses related thereto to be shared equally. Without limiting the
foregoing, Third Wave agrees to first consult with Endogen as to the
preparation, filing, prosecution and maintenance of such patents and patent
applications and shall furnish to Endogen copies of documents relevant to any
such preparation, filing, prosecution and maintenance and Third Wave further
agrees to incorporate all of Endogen's reasonable comments with respect thereto.
In the event that Endogen elects not to pay any expenses with respect to a
particular patent or patent application covering a Joint Invention or within the
Joint Patent Rights then Endogen shall give Third Wave at least thirty (30) days
prior written notice thereof and shall assign to Third Wave all of its right,
title and interest therein. Likewise, in the event that Third Wave elects not to
prepare, file, prosecute or maintain a particular patent or patent application
covering a Joint Invention or within the Joint Patent Rights, then Third Wave
shall give Endogen at least thirty (30) days prior written notice thereof and
shall assign to Endogen all of its right, title and interest therein.
6.2.3 Prosecution by the Other Party. In the event that Third Wave
declines to further prosecute and maintain any patent applications or patents
owned by Third Wave in accordance with Section 6.2.1 hereof, or conduct any
interferences
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or oppositions, or request any re-examinations, reissues or extensions of patent
term with respect to Third Wave Inventions, Endogen shall have the right to
file, prosecute and maintain such patent applications or patents or conduct such
interferences or oppositions or request re-examinations, reissues or patent term
extensions, at its own expense, in the name of Third Wave in any country, in
which event Third Wave shall provide, at Endogen's request and expense, all
reasonable assistance. Likewise, in the event that Endogen declines to further
prosecute and maintain any patent applications or patents owned by Endogen in
accordance with Section 6.2.1 hereof, or conduct any interferences or
oppositions, or request any re-examinations, reissues or extensions of patent
term with respect to Endogen Inventions, Third Wave shall have the right to
file, prosecute and maintain such patent applications or patents or conduct such
interferences or oppositions or request re-examinations, reissues or patent term
extensions, at its own expense, in the name of Endogen in any country, in which
event Endogen shall provide, at Third Wave's request and expense, all reasonable
assistance. If one Party declines or fails to further prosecute and maintain any
patent applications or patents it owns, it shall notify the other Party at least
sixty (60) days prior to the date the next action or filing is due to be taken
with respect to the subject patent application or patent.
6.2.4 Cooperation. Each of Third Wave and Endogen shall keep the other
reasonably informed as to the status of such patent matters, including, without
limitation, by providing the other the opportunity to review and comment on any
documents which will be filed in any Patent Office, and providing the other
copies of any documents that such Party receives from such Patent Offices,
including notice of all office actions, appeals, continuations or divisionals,
interferences, re-examinations, oppositions or requests for patent term
extensions. Third Wave and Endogen shall each cooperate with and assist the
other in connection with such activities, at the others' request and expense.
6.2.5 Third Party Rights. The foregoing provisions of this Section 6.2
shall be subject to and limited by any agreements pursuant to which Third Wave
and Endogen, as the case may be, acquired any particular Invader Technologies or
Endogen Technology. It is understood that such agreements may require, for
example, that the licensor party from whom Third Wave or Endogen acquired a
license to such technology control the prosecution of particular patents and
patent applications and does not permit access or an opportunity to comment on
the any documents filed in patent offices.
6.3 No Other Technology Rights. Except as otherwise expressly provided in
this Agreement, under no circumstances shall a Party hereto, as a result of this
Agreement, obtain any ownership interest in or other right to any technology,
know-how, patents, pending patent applications, products, or biological
materials of the other Party, including items owned, controlled or developed by
the other Party, or transferred by the other Party to said Party at any time
pursuant to this Agreement. It is understood and agreed that this Agreement does
not grant Third Wave any license or other right in the Endogen Patent Rights,
Endogen Technology or Endogen Inventions, Endogen Improvements, or Endogen's
interest in Joint Inventions and Joint Patent Rights, except as expressly set
forth herein. It is understood and agreed that this Agreement does not grant
Endogen any license or other right in or to the Third Wave Patent Rights,
Invader Technologies, Third Wave Inventions, Third Wave Improvements or Third
Wave's interest in Joint Inventions and Joint Patent Rights, except as expressly
set forth herein.
6.4 Enforcement of Intellectual Property Rights. Third Wave and Endogen
shall each promptly notify the other in writing of any alleged or threatened
infringement of Invader Intellectual Property Rights or Endogen Intellectual
Property Rights and shall cooperate fully in the investigation of such activity.
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6.4.1 Solely Owned Technology. Subject to Section 6.4.2 hereof, in the
event that any Invader Technologies or Invader Intellectual Property necessary
for the manufacture, sale or use of a Product is allegedly infringed or
misappropriated by a third party or is subject to a declaratory judgment action
arising from such alleged infringement or misappropriation, in each case with
respect to the manufacture, sale or use of a product within the Life Sciences
Research Market that competes directly with a Product hereunder (an
"Infringement"), Third Wave or Endogen (respectively) shall promptly notify the
other Party hereto. Third Wave shall have the initial right (but not the
obligation) to initiate legal action against such third party or defend such
declaratory judgment, as applicable, with respect to the Infringement, at its
expense. In the event that Third Wave fails to take such action within ninety
(90) days of a request by Endogen to do so, Endogen may take such action in the
name of Third Wave against such third party, at the expense of Endogen. The
Party involved in any such claim, suit or proceeding, shall keep the other Party
hereto reasonably informed of the progress of any such claim, suit or
proceeding. [CONFIDENTIAL TREATMENT REQUESTED]*
6.4.2 Jointly Owned Technology. Notwithstanding Section 6.4.1 above,
in the event that any Joint Invention is infringed or misappropriated by a third
party, Third Wave and Endogen shall mutually agree upon whether, and, if so,
how, to enforce such Joint Invention or defend such Joint Invention in a
declaratory judgment or similar proceeding.
6.5 Infringement of Third Party Intellectual Property Rights.
6.5.1 Joint Strategy. In the event that the manufacture, use or sale
of a Product becomes the subject of a claim by a third party of infringement of
a patent, copyright or other intellectual property right anywhere in the world,
and without regard to which Party is charged with said infringement, and the
venue of such claim, the Parties shall promptly confer to discuss the claim.
6.5.2 Defense of Third Party Claims. If the sale or use of any
Product pursuant to this Agreement results in a claim, suit or proceeding
brought by a third party against Endogen or Third Wave alleging infringement of
such third party's intellectual property rights (collectively, "Actions"), such
Party shall promptly notify the other Party hereto in writing. The Party subject
to such Action shall have the exclusive right to defend and control the defense
of any such Action using counsel of its own choice, and the Action shall be at
such Party's own expense; provided, however, that the other Party may
participate in the defense and/or settlement thereof at its own expense with
counsel of its choice. The Party subject to the Action agrees to keep the other
Party hereto reasonably informed of all material developments in connection with
any such Action. In the event that both parties are subject to the Action, the
Parties shall mutually agree upon who should continue the defense of such
action.
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*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
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6.5.3 Remedies. [CONFIDENTIAL TREATMENT REQUESTED]*.
7 CONFIDENTIALITY
7.1 Confidential Information. As used in this Agreement, "Confidential
Information" shall mean any information disclosed by one party to the other
pursuant to this Agreement which is in written, graphic, machine readable, or
other tangible form and is marked "Confidential," "Proprietary," or in some
other manner to indicate its confidential nature. Confidential Information may
also include oral information disclosed by one party to the other pursuant to
this Agreement, provided that such information is designated as confidential at
the time of disclosure and is reduced to writing by the disclosing party within
a reasonable time (not to exceed thirty (30) days) after its initial oral
disclosure, and such writing is marked in a manner to indicate its confidential
nature and delivered to the receiving party.
7.2 Nondisclosure Obligations. Except as otherwise provided in this Section
7, both Parties shall maintain in confidence and use only for purposes
specifically authorized under this Agreement Confidential Information and data
received from the other Party during the Program.
To the extent it is reasonably necessary or appropriate to fulfill its
obligations or exercise its rights under this Agreement, a Party may disclose
Confidential Information it is otherwise obligated under this Section 7 not to
disclose to its Affiliates, sublicensees consultants, outside contractors and
clinical investigators, on a need-to-know basis on condition that such entities
or persons agree to keep the Confidential Information confidential for the same
time periods and to the same extent as such Party is required to keep the
Confidential Information confidential; and a Party may disclose such
Confidential Information to government or other regulatory authorities to the
extent that such disclosure is reasonably necessary to obtain patents or
authorizations to conduct clinical trials with and to commercially market any
Product. The obligation not to disclose Confidential Information shall not apply
to any part of such information that (i) is or becomes patented, published or
otherwise part of the public domain other than by acts of the Party obligated
not to disclose such Confidential Information or its Affiliates or sublicensees
in contravention of this Agreement; (ii) is disclosed to the receiving Party or
its Affiliates or sublicensees by a Third Party, provided such Confidential
Information was not obtained by such Third Party directly or indirectly from the
other Party under this Agreement; (iii) prior to
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*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
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disclosure under this Agreement, was already in the possession of the receiving
Party or its Affiliates or sublicensees, provided such Information was not
obtained directly or indirectly from the other Party under this Agreement; (iv)
can be shown by written documents to have been independently developed by the
receiving Party or its Affiliates or sublicensees without use of the other
party's Confidential Information, or (v) is disclosed pursuant to the order or
requirement of a court, administrative agency, or other governmental body,
provided, however, that the receiver shall provide prompt notice thereof to
enable the discloser to seek a protective order or otherwise prevent such
disclosure.
7.3 Efforts. Each Party shall use all reasonable efforts, including, but
not limited to, the execution of proprietary non-disclosure agreements with
employees and consultants, and legal action, to enforce compliance with the
provisions of this Section 7 by its directors, officers, employees, and any
third party having access to the other Party's Confidential Information.
7.4 Terms of this Agreement. Each Party hereto agrees not to disclose any
terms or conditions of this Agreement to any third party without the prior
consent of the other Party, except as required by applicable law or to persons
with whom Third Wave or Endogen has entered into or proposes to enter into a
business relationship provided that such persons are subject to confidentiality
agreements substantially similar to the provisions of this Section 7.
Notwithstanding the foregoing, prior to execution of this Agreement, Third Wave
and Endogen shall agree upon the substance of information that can be used to
describe the terms of this transaction, and Third Wave and Endogen may disclose
such information, as modified by mutual agreement from time to time, without the
other Party's consent.
8 REPRESENTATIONS AND WARRANTIES
8.1 Authorization. Each Party represents and warrants to the other that it
has the legal right and power to enter into this Agreement, to extend the rights
granted or to be granted to the other in this Agreement, and to fully perform
its obligations hereunder, and that it has not made or will it make any
commitments to others in conflict with or in derogation of such rights or this
Agreement. Except as otherwise disclosed, each Party further represents to the
other that, as of the Effective Date, and to its actual knowledge, it is not
aware of any legal obstacles, including, patent rights of others, which could
prevent it from carrying out its obligations under this Agreement.
8.2 Litigation. Each Party represents and warrants that as of the Effective
Date there is no pending, or to its knowledge threatened, litigation that would
or might materially adversely affect its right and ability to perform its
obligations under this Agreement.
8.3 Third Wave Intellectual Property Representations and Warranties.
8.3.1 Invader Intellectual Property. Third Wave represents and
warrants that it is the sole and exclusive owner or exclusive licensee of the
entire right, title and interest and to the Invader Intellectual Property and
the Invader Technologies and that it has the right to exclusively license the
same to Endogen in accordance with this Agreement. Third Wave
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represents and warrants that, as of the Effective Date, the Invader Intellectual
Property and the Invader Technologies are free of any encumbrances, including,
without limitation, liens, licenses, judgments and/or security interests and
that all patents and patent applications included in the Invader Intellectual
Property are in full force and effect as of the Effective Date, and that none of
the Third Wave Patent Rights are the current subject of any reexamination,
interference or opposition proceeding.
8.3.2 Validity and Infringement. Third Wave represents and warrants,
that as of the Effective Date and to the best of its knowledge, the patents
which are included in the Third Wave Patent Rights are valid, and that the
manufacture, use or sale of Products or the practice of any processes or methods
covered by the Third Wave Patent Rights by Third Wave, its Affiliates or
licensees do not infringe any third party patents. Third Wave also represents
and warrants that as of the date hereof: (i) it is unaware of any publications
or activities including, without limitation, patents, articles and public uses
or sales, by it or others, which would or might invalidate any claim(s) of any
patent or patent application included in the Third Wave Patent Rights; (ii) it
has not conducted, or has not commissioned the conducting of, any formal
infringement or validity studies regarding any patent included in the Third Wave
Patent Rights that it has not fully disclosed in writing to Endogen prior to the
Effective Date; (iii) it has disclosed to Endogen any third party patent(s) of
which it is aware that might be infringed by the manufacture, use or sale of any
compounds or products or the practice of any methods or processes covered by the
Third Wave Patent Rights by Endogen, or its Affiliates, or sublicensees; (iv) it
does not have any outstanding or unresolved claim or accusation that any
compounds or products manufactured, used or sold by Third Wave or any methods or
processes practiced by Third Wave which are included in the rights granted to
Endogen in this Agreement or will be used by Third Wave in carrying out its
obligations under this Agreement infringes any third party patent(s); and (v) it
does not own or license any patents or patent applications not included in the
Third Wave Patent Rights which would be infringed by the manufacture, use or
sale of any Products in accordance with this Agreement.
8.4 Third Wave License Representations and Warranties.
8.4.1 License Agreements. Third Wave represents and warrants that as
of the Effective Date all licenses from third parties to Invader Intellectual
Property or Invader Technologies are set forth on Schedule 8.4.1 ("Third Party
Licenses"), and that copies of such Third Party Licenses have been provided to
Endogen.
8.4.2 Effectiveness, Maintenance. As of the Effective Date, all such
Third Party Licenses are in full force and effect and neither Third Wave, or to
Third Wave's knowledge, the other party, is in breach thereof. Third Wave shall
use reasonable commercial efforts to maintain all such Third Party Licenses in
full force and effect during the term of this Agreement as is necessary to
provide Endogen the rights initially granted and to be granted hereunder.
8.5 Disclaimer. EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT AND TO
THE EXTENT PERMITTED UNDER APPLICABLE LAW, (I) NEITHER PARTY HERETO MAKES ANY
EXPRESS OR IMPLIED WARRANTIES
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WHATSOEVER, AND (II) DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTIES OF TITLE,
NONINFRINGEMENT, MERCHANTABILITY, AND FITNESS FOR A PARTICULAR PURPOSE.
9 INDEMNITY
9.1 Indemnification of Third Wave. Endogen shall indemnify each of Third
Wave and its directors, officers, and employees and the successors and assigns
of any of the foregoing (the "Third Wave Indemnitees"), and hold each Third Wave
Indemnitee harmless from and against any and all liabilities, damages,
settlements, claims, actions, suits, penalties, fines, costs or expenses
(including, without limitation, reasonable attorneys' fees and other expenses of
litigation) incurred and payable by any Third Wave Indemnitee, arising from or
occurring as a result of third party claims related to (a) actual or asserted
violations or any applicable law or regulation by Endogen; (b) the gross
negligent, willful or tortious acts or omissions of Endogen; (c) any breach by
Endogen of its representations and warranties herein; (d) any and all product
liability and other claims with respect to Products manufactured by Endogen
hereunder which fail to meet the manufacturing specifications for such Products
as agreed to by the Parties (not including any Third Wave Deliverables or
Cleavase Enzymes manufactured by Endogen pursuant to Section 4.1.5 hereof); or
(e) any representation made by Endogen, and its (i) Distributors, (ii)
Affiliates, and (iii) sales and technical support representatives in connection
with the marketing sales, training or support of the Products.
9.2 Indemnification of Endogen. Third Wave shall indemnify each of Endogen
and its directors, officers, and employees and the successors and assigns of any
of the foregoing (the "Endogen Indemnitees"), and hold each Endogen Indemnitee
harmless from and against any and all liabilities, damages, settlements, claims,
actions, suits, penalties, fines, costs or expenses (including, without
limitation, reasonable attorneys' fees and other expenses of litigation)
incurred and payable by any Endogen Indemnitee, arising from or occurring as a
result of third party claims related to (a) any and all product liability and
other claims with respect to Products manufactured and supplied by Third Wave to
Endogen hereunder which fail to meet the manufacturing specifications for such
Products as agreed to by the Parties; (b); actual or asserted violations of any
applicable law or regulation by Third Wave; (c) the gross negligent, willful or
tortious acts or omissions of Third Wave; or (d) any breach by Third Wave of its
representations and warranties herein.
9.3 Procedure. A Party or any of its Affiliates or their respective
employees or agents (the "Indemnitee") that intends to claim indemnification
under this Section 9 shall promptly notify the other Party (the "Indemnitor") of
any loss, claim, damage, liability or action in respect of which the Indemnitee
intends to claim such indemnification, and the Indemnitor shall assume the
defense thereof with counsel mutually satisfactory to the Parties; provided,
however, that an Indemnitee shall have the right to retain its own counsel, with
the fees and expenses to be paid by the Indemnitor, if representation of such
Indemnitee by the counsel retained by the Indemnitor would be inappropriate due
to actual or potential conflicting interests between such Indemnitee and any
other Party represented by such counsel in such proceedings. The indemnity
agreement
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in this Section 9 shall not apply to amounts paid in settlement of any
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Indemnitor, which consent shall not be unreasonably withheld.
The failure to deliver notice to the Indemnitor within a reasonable time after
the commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such Indemnitor of any liability to the
Indemnitee under this Section 9, but the omission so to deliver notice to the
Indemnitor will not relieve it of any liability that it may have to any
Indemnitee otherwise than under this Section 9. The Indemnitee under this
Section 9, its employees and agents, shall cooperate fully with the Indemnitor
and its legal representatives in the investigation of any action, claim or
liability covered by this indemnification. In the event that either Party claims
indemnity from the other and one Party is finally held liable to indemnify the
other, the Indemnitor shall additionally be liable to pay the reasonable legal
costs and attorneys' fees incurred by the Indemnitee in establishing its claim
for indemnity.
9.4 Insurance. Each Indemnitor, at its expense, shall provide and maintain
insurance protecting the Indemnitees from all insurable liabilities, losses,
damages, and expenses in connection with the matters referred to in Sections 9.1
and 9.2. Such insurance shall name the Indemnitees as an additional insured
party and shall be in an amount at least equal to the current minimum of One
Million Dollars ($1,000,000) per claim and Two Million Dollars ($2,000,000) in
the aggregate. Said insurance coverage shall commence, and each Party shall
submit to the other Party evidence of such insurance, prior to or as of the
Effective Date of this Agreement. The policy shall provide that it may not be
canceled without thirty (30) days' prior written notice to the other Party and
each Party shall submit to the other Party evidence of any renewals of such
insurance coverage. Any amount payable by an Indemnitor under Sections 9.1 or
9.2 above shall be reduced by any amounts received by any Indemnitee under any
such insurance policies.
10 TERM AND TERMINATION
10.1 Expiration of This Agreement. Unless terminated earlier pursuant to
Section 10.2 or 10.3 hereof or extended pursuant to this Section, this Agreement
shall expire on [CONFIDENTIAL TREATMENT REQUESTED]*. The term of this Agreement
may be extended for additional [CONFIDENTIAL TREATMENT REQUESTED]* by the mutual
written consent of Endogen and Third Wave at least six months prior to the end
of the initial term or any extension thereof; provided, however, that neither
Endogen nor Third Wave shall be obligated to approve any such extension and
shall have no liability whatsoever by reason of any failure to agree on any such
extension.
10.2 Termination of This Agreement. This Agreement may be terminated by one
Party upon written notice by reason of a material breach by the other Party that
the breaching Party fails to remedy within thirty (30) days after written notice
thereof by the non-breaching Party.
10.3 Bankruptcy Proceedings. Either Party hereto may terminate this
Agreement by notice to the other Party, if (i) such other Party shall make an
assignment of substantially all of its assets for the benefit of creditors, file
a petition in bankruptcy, petitions or applies to any tribunal for the
appointment of a custodian, receiver or any trustee for such Party or
substantially
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*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
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all of such Party's assets, or shall commence any proceeding under any
dissolution or liquidation law or statute of any jurisdiction (provided no
entity succeeds to the business of such Party following such dissolution or
liquidation) whether now or hereafter in effect which is not dismissed within
sixty (60) days; or (ii) there shall have been filed any such petition or
application against such other Party, or any such proceeding shall have been
commenced against such Party, in which an order for relief is entered or which
remains undismissed for a period of ninety (90) days or more; or (iii) such
other Party by an act or knowing failure to act shall indicate such Party's
consent to, approval of or acquiescence in, any such petition, application or
proceeding or order for relief or appointment of a custodian, receiver or any
trustee for such Party, or any substantial part of any such Party's properties ,
or shall suffer any such custodianship, receivership or trusteeship to continue
undischarged for a period of ninety (90) days or more. Notwithstanding the
foregoing, if any bankruptcy proceedings are initiated pursuant to Chapter 11 of
the United States Bankruptcy Code, to the extent that the Party filing for
bankruptcy is not in material breach of this Agreement (which breach is not
cured pursuant to Section 10.2 hereof), this Agreement may not be terminated by
a Party.
10.4 Effect of Expiration or Termination of This Agreement Generally.
10.4.1 Rights and Obligations. All rights and obligations of the
Parties shall terminate and be of no further force and effect upon the
expiration or termination of this Agreement unless otherwise specifically
provided herein; provided, however, such expiration or termination shall not
relieve the Parties of any obligation or claim that has accrued prior to such
expiration or termination.
10.4.2 Survival of Terms and Conditions Upon Expiration of this
Agreement.
10.4.2.1 Follow-On Period. Upon expiration of the initial term
of this Agreement or any extension made thereto pursuant to Section 10.1, all of
the terms and conditions of this Agreement shall survive and continue (subject
to applicable royalty obligations provided herein and relating thereto) for a
period of ten (10) years from the end of the term of the Development Program or
any extension thereof (the "Follow-On Period"); provided however, that Third
Wave shall have the right to covert Endogen's exclusive rights under Section 2.1
hereof to nonexclusive rights on sixty (60) days prior written notice to
Endogen.
10.4.3 Survival of Terms and Conditions Upon Expiration or
Termination of this Agreement. Upon (A) expiration of the later of (i) any
extension made to this Agreement pursuant to Section 10.1 hereof, or (ii) the
Follow-On Period, or (B) termination of this Agreement Sections 1, 2.7, 4.7,
5.4, 5.5, 5.6, 5.7, 5.8, 5.9, 6.1, 6.2 (except for 6.2.3), 6.3, 6.4.2, 6.5, 7, 9
, 10, 11 and 12 shall survive any such expiration or termination of this
Agreement.
10.4.4 Inventory. As soon as reasonably practicable but no later than
thirty (30) days after the effective date of termination of this Agreement, or
the expiration of the later of (i) any extension made to this Agreement pursuant
to Section 10.1 hereof, or (ii) the Follow-On Period, as the case may be,
Endogen shall provide Third Wave a complete inventory of Products in Endogen's
possession, or in transit to Endogen from Third Wave or otherwise in Endogen's
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control. At such time, Third Wave may inspect Endogen's inventory of Products
and audit Endogen's records in the manner provided hereinabove.
10.4.4.1 Repurchase Upon Expiration or Termination by Third Wave.
Upon (A) expiration of the later of (i) any extension made to this Agreement
pursuant to Section 10.1 hereof, or (ii) the Follow-On Period, or (B)
termination of this Agreement by Third Wave pursuant to Section 10.2 hereof for
Endogen's breach or Section 10.3 hereof, Third Wave, in its sole discretion, may
elect within thirty (30) days of such expiration or termination to repurchase
any or all of the Products purchased from Third Wave hereunder in Endogen's
inventory and that are in good and resalable condition in their original
packaging and Endogen shall sell at the Repurchase Price and return such
Products to Third Wave at Third Wave's expense, to a location specified by Third
Wave. Furthermore, in the event of termination for Endogen's breach, Endogen
shall destroy all Product in its inventory not so repurchased by Third Wave and
provide Third Wave with written certification of such destruction. For purposes
of this Section 10.4.4, "Repurchase Price" shall mean the net price actually
paid by Endogen (i.e., net of any prior Endogen price adjustments, credits or
allowances) plus any shipping insurance, customs duties, or taxes (other than
taxes paid with respect to Endogen's net income) actually paid by Endogen with
respect to such repurchased Products.
10.4.4.2 Repurchase Upon Termination by Endogen. Upon
termination of this Agreement by Endogen pursuant to Section 10.2 hereof for
Third Wave's breach or Section 10.3 hereof, Endogen may elect within thirty (30)
days of such termination that Third Wave purchase any or all of the Products
purchased from Third Wave hereunder in Endogen's inventory and that are in good
and resalable condition in their original packaging and Third Wave shall
purchase such Product at the Repurchase Price and Endogen shall sell and return
such Products to Third Wave at Third Wave's expense, to a location specified by
Third Wave.
10.4.4.3 Wind-Down Period. Endogen and its Distributors may
continue to sell Products (not repurchased by Third Wave) in their inventories
for a period of six (6) months after (A) expiration of the later of (i) any
extension made to this Agreement pursuant to Section 10.1 hereof, or (ii) the
Follow-On Period, or (B) termination of the Agreement for Third Wave's breach,
all subject to payment of amounts due to Third Wave, if any, for such sales.
10.4.5 Return of Materials. All Confidential Information shall remain
the sole property of the disclosing Party. Within thirty (30) days after the
effective date of termination of this Agreement or expiration of the Follow-On
Period, as the case may be, each Party shall destroy all Confidential
Information of other Party, in its possession or control and provide written
certification of such destruction, or prepare such Confidential Information for
shipment to such other Party, as the other Party may direct, at the other
Party's expense. Neither Party shall make or retain any copies of any
Confidential Information of other Party which may have been entrusted to it.
Effective upon the termination of this Agreement or the expiration of the later
of (i) any extension made to this Agreement pursuant to Section 10.1 hereof or,
(ii) the Follow-On Period, Endogen shall cease to use all trademarks and trade
names of Third Wave.
-32-
<PAGE>
10.4.6 No Renewal, Extension or Waiver. Acceptance of any order from, or
sale or license of, any Product to Endogen after the effective date of
termination or expiration of this Agreement shall not be construed as a renewal
or extension hereof, or as a waiver of termination of this Agreement.
11 DISPUTE RESOLUTION
11.1 Dispute Resolution. Each Party shall resolve any and all disputes
relating, resulting from or arising out of this Agreement and any transactions
relating thereto or contemplated hereby in accordance with Sections 11.1 and
11.2 hereof. In the event of such dispute, each Party shall appoint two members
from their managerial staffs to serve on a joint committee (the "Dispute
Resolution Committee"). The Dispute Resolution Committee shall, within 10 days
of receiving written notice from either Party of a dispute arising under or
relating to this Agreement, meet at either Endogen's offices or Third Wave's
offices, whichever is more appropriate in light of the issue to be discussed, or
conduct a meeting by telephone conference at such time as either Party may
reasonably request in writing, in an effort to resolve such dispute. If the
Dispute Resolution Committee is unable to resolve any dispute submitted to it by
either Party hereto within thirty (30) days after such submission, the Dispute
Resolution Committee shall refer the issue to the Chief Executive Officers of
Endogen and Third Wave for resolution. If such officers are unable to resolve
such dispute within fifteen (15) days after referral, such dispute (other than a
dispute arising under this Agreement regarding, or in connection with, the
ownership of intellectual property or proprietary rights of either Party) shall
be referred to binding arbitration as provided for in Section 11.2 hereof.
Except as provided in Section 11.2.5, no such dispute shall be the subject of
arbitration, judicial proceeding or other formal proceeding between the Parties
before being considered by the Dispute Resolution Committee and the Chief
Executive Officers of Endogen and Third Wave.
11.2 Binding Arbitration.
11.2.1 Any controversy, dispute or claim (whether lying in contract
or tort) between or among the Parties arising out of or related to this
Agreement or the Ancillary Agreements shall, after the dispute resolution
process set forth in Section 11.1 has been completed (other than a dispute
arising under this Agreement regarding, or in connection with, the ownership of
intellectual property rights), be submitted to the AAA for binding arbitration
in accordance with this Section 11.2 hereof.
11.2.2 Each such controversy, dispute or claim submitted by a Party to
arbitration shall be heard by a single arbitrator appointed in accordance with
the Commercial Arbitration Rules of the AAA unless either Party requests an
arbitration panel composed of three arbitrators, which shall be appointed in
accordance with the following provisions. Endogen and Third Wave shall each
appoint one arbitrator within fifteen (15) days after the matter has been
submitted to arbitration. If either Party fails to appoint its arbitrator within
such fifteen-day period, the opposing Party may apply to the AAA to appoint an
arbitrator on behalf of the Party that has failed to appoint its arbitrator. The
two arbitrators appointed by, or on behalf of, the Parties shall
-33-
<PAGE>
jointly appoint a third arbitrator, who shall chair the arbitration panel (the
"Chairman"). If the arbitrators appointed by, or on behalf of, the Parties do
not succeed in appointing a Chairman within fifteen (15) days after the latter
of the two arbitrators appointed by, or on behalf of, the Parties has been
appointed, the Chairman shall, at the request of either Party, be appointed by
the AAA. If for any reason an arbitrator is unable to perform his or her
function, he or she shall be replaced and a substitute shall be appointed in the
same manner as the arbitrator replaced.
11.2.3 Except as otherwise stated herein, arbitration proceedings
shall be conducted in accordance with the Commercial Arbitration Rules of the
AAA. In any arbitration proceeding hereunder: (i) proceedings shall be held in
Chicago, Illinois; (ii) the arbitration panel shall be bound by all statutes of
limitation which would otherwise be applicable in a judicial action brought by a
Party; (iii) the arbitrators shall have full power to make such regulations and
to give such orders and directions in all respects, including with respect to
limited and appropriate discovery, as they shall deem expedient, as well in
respect to the matters and differences referred to them and the mode and times
of executing and performing any of the acts, deeds, matters, and things which
may be awarded or directed to be done; (iv) the arbitration panel shall have the
power to award monetary damages and to issue injunctive or other equitable
relief but shall not have the power to award punitive damages; and (v) the
decision of a majority of the arbitrators (or the Chairman if there is no such
majority) shall be final and binding on the Parties to this Agreement and shall
be enforceable in any court of competent jurisdiction. The Parties hereby waive
an rights to appeal or to review of such decision by any court or tribunal and
also waive any objections to such enforcement, except for appeals, reviews or
objections for fraud, perjury, evident partiality or misconduct by an arbitrator
prejudicing the rights of either Party or to correct manifest clerical errors.
THE PARTIES HEREBY AGREE TO WAIVE ALL RIGHTS TO TRIAL BY JURY WITH RESPECT TO
ANY CONTROVERSY, DISPUTE OR CLAIM SUBMITTED TO ARBITRATION UNDER THIS AGREEMENT.
11.2.4 Notice preliminary to, in conjunction with, or incident to any
arbitration proceeding may be sent to the Parties by registered or certified
mail (return receipt requested) at the address set forth at the beginning of
this Agreement and personal service is hereby waived. Each Party shall bear its
own costs and fees incurred in connection with the arbitration and the
proceedings of each disputed matter, and the obtaining of any judgment related
thereto (including attorney's fees). Arbitrator's fees and expenses and court
costs with respect to each disputed matter shall be shared equally by the
Parties.
11.2.5 No provision of this Section 11.2 shall limit the right of
either Party to this Agreement to exercise self-help remedies, such as set-off,
or to obtain provisional, equitable or ancillary remedies from a court of
competent jurisdiction before, after or during the pendency of any arbitration
or other proceeding. The exercise of a remedy does not waive the right of either
Party to resort to arbitration.
-34-
<PAGE>
12 MISCELLANEOUS
12.1 Limitation of Liability. TO THE EXTENT PERMITTED UNDER APPLICABLE LAW,
EXCEPT FOR BREACHES OF SECTION 7 HEREOF OR AMOUNTS PAYABLE PURSUANT TO SECTIONS
6.5.3 OR 9 HEREOF, NEITHER PARTY HERETO SHALL BE LIABLE FOR ANY INDIRECT,
SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT LIMITATION,
LOST PROFITS ARISING OUT OF THIS AGREEMENT. THE FOREGOING LIMITATION OF
LIABILITY SHALL APPLY REGARDLESS OF THE CAUSE OF ACTION UNDER WHICH SUCH DAMAGES
ARE SOUGHT, INCLUDING, WITHOUT LIMITATION, BREACH OF CONTRACT, NEGLIGENCE, OR
OTHER TORT. THESE LIMITATIONS SHALL APPLY WHETHER OR NOT A PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND NOTWITHSTANDING ANY FAILURES OF
ESSENTIAL PURPOSE OF ANY LIMITED REMEDY PROVIDED HEREIN.
12.2 Compliance. Each party shall comply with all applicable laws and
regulations of governmental bodies or agencies in its performance under this
Agreement.
12.3 Force Majeure. Except for payment obligations, neither Party shall be
in default if failure to perform hereunder is caused solely by supervening
conditions beyond such Party's reasonable control, including civil commotions,
strikes, labor disputes, and governmental demands or requirements.
12.4 Assignment. Third Wave represents that it is acting on its own behalf
and is not acting as an agent for or on behalf of any third party, and further
agrees that it may not assign its rights or obligations under this Agreement
without the prior written consent of Endogen. In addition, Third Wave agrees
that it shall not assign any of its intellectual property rights pertaining to
the Invader Technologies unless the assignee agrees in writing to be bound by
all of the terms and conditions of this Agreement. Notwithstanding anything to
the contrary herein, either Party shall be entitled to assign (in whole or in
part) its rights and obligations under this Agreement to any successor of its
assets, whether by sale, merger or otherwise; provided that the assignee agrees
in writing to be bound by the terms and conditions of this Agreement.
12.5 Severability. If any provision of this Agreement shall be illegal,
unenforceable, or in conflict with any law of a federal, state, or local
government having jurisdiction over this Agreement, the validity of the
remaining portions or provisions hereof shall not be affected thereby. The
parties hereto agree to replace such illegal, unenforceable, or conflicting
provision with a new provision that has the most nearly similar permissible,
economic, or other effect.
12.6 Notices. All notices or reports permitted or required under this
Agreement shall be in writing and shall be delivered in person, mailed by first
class mail, postage prepaid (registered or certified, to the extent available,
and airmail, if overseas), overnight courier, or sent by telecopy to the party
to receive the notice at the address set forth at the beginning of this
Agreement or such other address as either party may specify in writing. All such
notices shall be effective upon receipt.
-35-
<PAGE>
12.7 Applicable Law. This Agreement and any disputes or matters arising
under, in connection with, or relating to this Agreement shall be governed by
and construed in accordance with the substantive laws of the Commonwealth of
Massachusetts, without regard to its principles regarding conflicts of laws. The
state and federal courts in the Commonwealth of Massachusetts shall have
exclusive venue and jurisdiction in such courts. The parties hereto waive any
statute, law or regulation that might provide an alternative law or forum. The
parties hereto exclude the United Nations Convention on Contracts for the
International Sale of Goods from this Agreement and any transaction between them
that may be implemented in connection with this Agreement.
12.8 Entire Agreement. This Agreement represents and constitutes the entire
agreement between the parties, may only be amended in writing by authorized
representatives of both parties, and supersedes all prior agreements and
understandings (written or oral) with respect to matters covered by this
Agreement. The parties acknowledge that they have not relied upon any
representations other than the representations set forth herein.
12.9 Headings. The division of the terms of this Agreement into separate
sections and/or subsections and the headings herein are for convenience of
reference only and shall have no bearing on the construction or interpretation
thereof.
12.10 Independent Contractors. Each party is an independent contractor
under this Agreement. Neither party hereto shall have authority to enter into
agreements of any kind on behalf of the other party or to otherwise bind or
obligate the other party in any manner to any third party.
12.11 Agreement Not to Solicit Employees. During the term of this Agreement
and for one (1) year after any expiration or termination of this Agreement,
neither party shall solicit the employment of the other party's personnel
without its prior written consent, provided that general solicitations not
specifically directed to the other party's employee's (including, without
limitation, newspaper help wanted advertisements) shall be permitted without
prior written consent or notification.
12.12 Waiver. Neither party shall, by mere lapse of time without giving
notice or taking other action hereunder, be deemed to have waived any breach by
the other party of any provision of this Agreement. Furthermore, the waiver by
either party of a particular breach of this Agreement by the other party shall
not be construed as, or constitute, a continuing waiver of such breach, or of
other breaches of the same or other provisions of this Agreement.
12.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-36-
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
Effective Date.
ENDOGEN, INC. THIRD WAVE TECHNOLOGIES, INC.
By: /s/ Owen A. Dempsey By: /s/ Lance Fors
--------------------------- -------------------------
Owen A. Dempsey Lance Fors
Title: President and Chief Title: President and Chief
Executive Officer Executive Officer
-37-
<PAGE>
Schedule 1.8
The Cleavase(R) Enzymes include:
1. Structure-specific nucleases derived from the native [CONFIDENTIAL
TREATMENT REQUESTED]*
2. Structure-specific nucleases derived from the [CONFIDENTIAL TREATMENT
REQUESTED]*, including deletions, insertions, chimerical constructs, and
mutant forms that retain a structure-specific cleavage activity.
3. Any structure-specific nuclease, natural or altered, used in a manner which
would infringe any of the Third Wave Patent Rights recited in Schedule
1.50.
- --------------------
*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
<PAGE>
Schedule 1.26 Definition of the Field
- --------------------------------------------------------------------------------
The field, for purposes of this agreement, includes [CONFIDENTIAL TREATMENT
REQUESTED]* that are currently listed below or may be added in writing by the
Parties from time to time.
This list of [CONFIDENTIAL TREATMENT REQUESTED]* applies to human, mouse, rat
and pig species, as well as any additional species that are mutually agreed
upon.
[CONFIDENTIAL TREATMENT REQUESTED]*
- --------------------
*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
<PAGE>
Schedule 1.26 Definition of the Field (continued)
- --------------------------------------------------------------------------------
[CONFIDENTIAL TREATMENT REQUESTED]*
- --------------------
*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
<PAGE>
Schedule 1.54
U.S. Patents and Applications
Enzymes:
1. Synthesis-Deficient Thermostable DNA Polymerase
2. 5' Nucleases Derived from Thermostable DNA Polymerase
3. [CONFIDENTIAL TREATMENT REQUESTED]*
4. [CONFIDENTIAL TREATMENT REQUESTED]*
5. [CONFIDENTIAL TREATMENT REQUESTED]*
Detection Methods:
6. [CONFIDENTIAL TREATMENT REQUESTED]*
7. [CONFIDENTIAL TREATMENT REQUESTED]*
8. [CONFIDENTIAL TREATMENT REQUESTED]*
9. [CONFIDENTIAL TREATMENT REQUESTED]*
10. [CONFIDENTIAL TREATMENT REQUESTED]*
11. [CONFIDENTIAL TREATMENT REQUESTED]*
12. [CONFIDENTIAL TREATMENT REQUESTED]*
PCT applications
1. 5' Nucleases Derived from Thermostable DNA Polymerase
2. Invasive Cleavage of Nucleic Acids
- --------------------
*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
<PAGE>
Schedule 3.1
------------
Initial Plan for Conducting Development Program
-----------------------------------------------
[CONFIDENTIAL TREATMENT REQUESTED]*
- --------------------
*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
<PAGE>
Schedule 4.2.1
--------------
Guidelines Regarding Orders
---------------------------
The following are intended only to be guidelines for facilitating the
Party's respective obligations regarding the supply and purchase of Third Wave
Deliverables and Cleavase Enzymes pursuant to the terms and conditions of the
Agreement and any noncompliance with or variance from these guidelines shall not
give rise to a Party's right to terminate the Agreement.
Forecasts. During the term of this Agreement, at least thirty (30) days
prior to the start of any calendar month ("M1," and "M1" through "M12,"
respectively, shall refer to the twelve calendar months within a calendar year),
Endogen shall provide Third Wave with a rolling written forecast of the
quantities of Third Wave Deliverables and Cleavase Enzymes estimated to be
required on a month-by-month basis for the next six (6) consecutive months ("M1"
to "M6", respectively) (the "Forecasts"). Each Forecast shall indicate the
estimated quantities of Third Wave Deliverables and Cleavase Enzyme identified
by the SKU number (if applicable) designated by Third Wave. In addition with
respect to Cleavase Enzyme quantities forecasted shall be categorized by whether
it is intended for sale to the trade or is Development Enzyme. Each forecast
prior to the launch of the Third Wave Deliverable or Animal Kit to incorporate
Cleavase Enzyme to be supplied hereunder shall also identify an anticipated
launch date, when available. Endogen will provide such Forecasts as a means of
production planning only and shall not constitute a binding obligation upon
Third Wave or Endogen.
Orders. Together with each Forecast as provided above (the "Current
Forecast"), Endogen shall place its firm order with Third Wave for delivery in
M1 to M3 of that quantity of Third Wave Deliverables and Cleavase Enzymes equal
to the quantity thereof reflected for M1 to M3 in the Current Forecast. For
ordering purposes, the forecast for M3, once set, will be fixed for that
calendar month, as it rolls to M2 and then M1. Third Wave shall accept such
orders from Endogen, subject to the remaining terms and conditions of this
Agreement, provided that Third Wave shall not be obligated to accept orders for
M1 to the extent the quantity ordered exceeds 120% of the quantity forecasted
for M2 in the preceding monthly Forecast, but shall use good faith efforts to
fill orders for such excess quantities from available supplies. Minimum quantity
orders for Third Wave Deliverables and Cleavase Enzymes shall be mutually agreed
upon by the parties.
Form of Order. Endogen's orders shall be made pursuant to a written
purchase order which is in a form mutually acceptable to the parties, and shall
provide for shipment in accordance with reasonable delivery schedules as may be
agreed upon from time to time by Third Wave and Endogen. If Third Wave believes
it will be unable to meet Endogen's order requirements within a reasonable
period of time, Third Wave shall immediately notify Endogen and give alternative
proposals which shall be as close to Endogen's order requirements as
practicable, and Endogen shall then be able to accept or reject such alternative
proposal.
<PAGE>
Schedule 4.3 Annual Minimum Purchase Requirements
- --------------------------------------------------------------------------------
Quantitation Kit Purchases per Year: TOTALS
- ------------------------------------ ------
[CONFIDENTIAL TREATMENT REQUESTED]* [CONFIDENTIAL TREATMENT REQUESTED]*
[CONFIDENTIAL TREATMENT REQUESTED]* [CONFIDENTIAL TREATMENT REQUESTED]*
[CONFIDENTIAL TREATMENT REQUESTED]* [CONFIDENTIAL TREATMENT REQUESTED]*
[CONFIDENTIAL TREATMENT REQUESTED]* [CONFIDENTIAL TREATMENT REQUESTED]*
[CONFIDENTIAL TREATMENT REQUESTED]* [CONFIDENTIAL TREATMENT REQUESTED]*
TBD - To be determined by mutual agreement between the Parties at
least six (6) months prior to the start of such calendar year.
- --------------------
*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
<PAGE>
Schedule 5.1.1 Transfer Prices for Third Wave Deliverables
- --------------------------------------------------------------------------------
[CONFIDENTIAL TREATMENT REQUESTED]* [CONFIDENTIAL TREATMENT REQUESTED]*
[CONFIDENTIAL TREATMENT REQUESTED]* [CONFIDENTIAL TREATMENT REQUESTED]*
[CONFIDENTIAL TREATMENT REQUESTED]* [CONFIDENTIAL TREATMENT REQUESTED]*
- --------------------
*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
<PAGE>
Schedule 5.3A Schedule of Estimates and Workload Sharing
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year 1 Year 2 Year 3 TOTALS
------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Fully loaded annual cost per FTE (000s) [CONFIDENTIAL TREATMENT REQUESTED]*
------- ------- -------
Total FTEs [CONFIDENTIAL TREATMENT REQUESTED]*
------- ------- -------
Total R&D effort
- Third Wave Technologies [CONFIDENTIAL TREATMENT REQUESTED]*
- Endogen [CONFIDENTIAL TREATMENT REQUESTED]*
------- ------- ------- -------
100.0% 100.0% 100.0%
Expected expenditures (000s) [CONFIDENTIAL TREATMENT REQUESTED]*
- Third Wave Technologies [CONFIDENTIAL TREATMENT REQUESTED]*
- Endogen [CONFIDENTIAL TREATMENT REQUESTED]*
------- ------- ------- -------
[CONFIDENTIAL TREATMENT REQUESTED]*
% funded by ENDOGEN [CONFIDENTIAL TREATMENT REQUESTED]*
- - Funding to Third Wave Technologies [CONFIDENTIAL TREATMENT REQUESTED]* 1,050
======= ======= ======= =======
</TABLE>
- --------------------
*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
<PAGE>
Schedule 5.3.B
--------------
Development Funding Obligation
by 12/1/97 [CONFIDENTIAL TREATMENT REQUESTED]*
by 1/20/98 [CONFIDENTIAL TREATMENT REQUESTED]*
by 4/20/98 [CONFIDENTIAL TREATMENT REQUESTED]*
by 7/20/98 [CONFIDENTIAL TREATMENT REQUESTED]*
by 10/20/98 [CONFIDENTIAL TREATMENT REQUESTED]*
by 1/20/99 [CONFIDENTIAL TREATMENT REQUESTED]*
by 4/20/99 [CONFIDENTIAL TREATMENT REQUESTED]*
by 7/20/99 [CONFIDENTIAL TREATMENT REQUESTED]*
by 10/20/99 [CONFIDENTIAL TREATMENT REQUESTED]*
by 1/20/00 [CONFIDENTIAL TREATMENT REQUESTED]*
by 4/20/00 [CONFIDENTIAL TREATMENT REQUESTED]*
by 7/20/00 [CONFIDENTIAL TREATMENT REQUESTED]*
by 10/20/00 [CONFIDENTIAL TREATMENT REQUESTED]*
-------
Total $1,050,000
- --------------------
*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
<PAGE>
Schedule 8.4.1
No such third party licenses exist.
EXHIBIT 11.1
Computation of Earnings Per Share
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
August 31, August 31,
1997 1996
----------- -----------
<S> <C> <C>
Weighted average number of shares outstanding 3,420,036 2,952,477
Shares deemed outstanding from the assumed
exercise of stock options and warrants 164,589 292,768
----------- -----------
Total 3,584,625 3,245,245
=========== ===========
Earnings applicable to common shares $ 94,181 $ 115,788
=========== ===========
Earnings per share of common stock $ 0.03 $ 0.04
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements included in the Form 10-QSB of Endogen, Inc. to which this
exhibit is a part and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000894020
<NAME> Endogen, Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> May-31-1998
<PERIOD-START> Jun-01-1997
<PERIOD-END> Aug-31-1997
<EXCHANGE-RATE> 1.00
<CASH> 420
<SECURITIES> 0
<RECEIVABLES> 1,494
<ALLOWANCES> 50
<INVENTORY> 1,931
<CURRENT-ASSETS> 4,252
<PP&E> 3,546
<DEPRECIATION> 1,283
<TOTAL-ASSETS> 7,424
<CURRENT-LIABILITIES> 1,313
<BONDS> 0
0
0
<COMMON> 34
<OTHER-SE> 5,896
<TOTAL-LIABILITY-AND-EQUITY> 7,424
<SALES> 2,324
<TOTAL-REVENUES> 2,324
<CGS> 893
<TOTAL-COSTS> 2,186
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3
<INCOME-PRETAX> 135
<INCOME-TAX> 41
<INCOME-CONTINUING> 94
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 94
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
