0001104659-02-003944.txt : 20020814 0001104659-02-003944.hdr.sgml : 20020814 20020814104041 ACCESSION NUMBER: 0001104659-02-003944 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXACT SCIENCES CORP CENTRAL INDEX KEY: 0001124140 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 204782291 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-32179 FILM NUMBER: 02732224 BUSINESS ADDRESS: STREET 1: 63 GREAT RD CITY: MAYNARD STATE: MD ZIP: 01754 BUSINESS PHONE: 9788972800 MAIL ADDRESS: STREET 1: 63 GREAT ROAD CITY: MAYNARD STATE: MA ZIP: 01754 FORMER COMPANY: FORMER CONFORMED NAME: EXACT CORP DATE OF NAME CHANGE: 20000919 10-Q 1 j4567_10q.htm 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
	EXCHANGE ACT OF 1934

	For the quarterly period ended June 30, 2002

	OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
	EXCHANGE ACT OF 1934

Commission File Number: 000-32179

EXACT SCIENCES CORPORATION

(Exact name of registrant as specified in its charter)

DELAWARE	02-0478229
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

63 Great Road, Maynard, Massachusetts	01754
(Address of principal executive offices)	(Zip Code)

(978) 897–2800

(Registrant’s telephone number, including area code)

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

As of August 12, 2002, the Registrant had 19,039,732 shares of Common Stock outstanding.

EXACT SCIENCES CORPORATION

INDEX

Part I - Financial Information

Item 1.		Condensed Consolidated Financial Statements

		Condensed Consolidated Balance Sheets as of December 31, 2001 and June 30, 2002 (Unaudited)

		Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2001 and 2002 and the Period from Inception (February 10, 1995) to June 30, 2002 (Unaudited)

		Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2001 and 2002 and the Period from Inception (February 10, 1995) to June 30, 2002 (Unaudited)

		Notes to Condensed Consolidated Financial Statements (Unaudited)

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.		Quantitative and Qualitative Disclosures about Market Risk


		Part II - Other Information

Item 2.		Changes in Securities and Use of Proceeds

Item 4.		Submission of Matters to a Vote of Security Holders

Item 5.		Other Information

Item 6.		Exhibits and Reports on Form 8-K

		Signatures

EXACT SCIENCES CORPORATION

(A Development Stage Company)

Condensed Consolidated Balance Sheets

(Unaudited)

	December			June
	31, 2001			30, 2002
Assets
Current Assets:
Cash and cash equivalents	$	56,842,722		$	57,959,942
Prepaid expenses	721,179			1,183,146
Total current assets	57,563,901			59,143,088
Property and Equipment, at cost:
Laboratory equipment	2,497,113			3,112,331
Office and computer equipment	1,178,153			1,223,329
Leasehold improvements	581,102			795,794
Furniture and fixtures	211,530			206,226
	4,467,898			5,337,680
Less—Accumulated depreciation and amortization	(1,883,783		)	(2,539,413		)
	2,584,115			2,798,267
Patent Costs, Net and Other Assets	2,952,221			2,831,098
	$	63,100,237		$	64,772,453
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	1,176,440		$	1,427,851
Accrued expenses	2,407,367			2,985,355
Deferred licensing fees, current portion	549,625			1,620,693
Total current liabilities	4,133,432			6,033,899

Deferred Licensing Fees, less current portion	—			7,303,370

Stockholders’ Equity:
Common stock, $0.01 par value	187,908			190,272
Additional paid-in capital	110,497,193			117,167,748
Treasury stock	(8,353		)	(12,290		)
Subscriptions receivable	(946,433		)	(751,704		)
Deferred compensation	(4,179,405		)	(3,114,075		)
Deficit accumulated during the development stage	(46,584,105		)	(62,044,767		)
Total stockholders’ equity	58,966,805			51,435,184
	$	63,100,237		$	64,772,453

The accompanying notes are an integral part of these condensed consolidated financial statements.

EXACT SCIENCES CORPORATION

(A Development Stage Company)

Condensed Consolidated Statements of Operations

(Unaudited)

																			Period from
																			Inception
																			(February 10,
																			1995) to
	Three Months Ended June 30,										Six Months Ended June 30,								June 30,
	2001					2002					2001					2002			2002

Revenue	$		—			$		39,956			$		—			$	79,222		$	130,092
Cost of revenues	—					1,905					—					2,277			2,277
Gross margin	—					38,051					—					76,945			127,815

Operating Expenses:
Research and development	2,849,562					5,065,822					5,392,377					10,108,602			36,900,789
Selling, general and administrative	2,606,416					2,534,409					5,189,481					4,823,838			22,716,094
Stock-based compensation (1)	1,054,731					544,052					2,106,667					1,111,853			8,100,931
	6,510,709					8,144,283					12,688,525					16,044,293			67,717,814

Loss from operations	(6,510,709				)	(8,106,232				)	(12,688,525				)	(15,967,348		)	(67,589,999		)

Interest Income	799,725					231,455					1,577,382					506,686			5,545,232
Net loss	$		(5,710,984		)	$		(7,874,777		)	$		(11,111,143		)	$	(15,460,662	)	$	(62,044,767	)

Net Loss Per Share:
Basic and diluted	$		(0.32		)	$		(0.43		)	$		(0.74		)	$	(0.85	)

Weighted Average Common Shares
Outstanding - Basic and diluted	17,817,844					18,376,369					15,003,548					18,270,694

(1) The following summarizes the departmental allocation of stock-based compensation:

Research and development		$		234,993			$		117,026			$		467,191		$	257,801		$	1,976,270
General and administrative		819,738					427,026					1,639,476				854,052			6,124,661
Total		$		1,054,731			$		544,052			$		2,106,667		$	1,111,853		$	8,100,931

The accompanying notes are an integral part of these condensed consolidated financial statements.

EXACT SCIENCES CORPORATION

(A Development Stage Company)

Condensed Consolidated Statements of Cash Flows

(Unaudited)

							Period from
							Inception
							(February 10,
							1995) to
	Six Months Ended June 30,						June 30,
	2001			2002			2002
Cash Flows from Operating Activities:
Net loss	$	(11,111,143	)	$	(15,460,662	)	$	(62,044,767	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities-
Depreciation and amortization expense	398,772			906,843			3,168,256
Non-cash stock-based compensation expense	2,106,667			1,111,853			7,751,787
Amortization of licensing fees	—			(75,562		)	(125,937		)
Non-cash expense associated with issuance of warrants	—			—			349,478
Changes in assets and liabilities:
Prepaid expenses	312,548			(461,967		)	(1,183,146		)
Accounts payable	(102,607		)	251,411			1,427,851
Deferred license fees	—			15,000,000			15,600,000
Accrued expenses	554,932			577,988			2,985,355
Net cash provided by (used in) operating activities	(7,840,831		)	1,849,904			(32,071,123		)

Cash Flows from Investing Activities:
Purchases of property and equipment	(1,641,784		)	(872,736		)	(5,323,683		)
Increase in patent costs and other assets	(323,903		)	(127,136		)	(3,268,726		)
Net cash used in investing activities	(1,965,687		)	(999,872		)	(8,592,409		)

Cash Flows from Financing Activities:
Payments on capital lease bligations	—			—			(16,951		)
Net proceeds from sale of common stock	50,565,634			—			50,638,077
Net proceeds from sale of preferred stock							47,157,703
Proceeds from exercise of common stock options and purchase plans	2,230			76,396			471,276
Purchase of treasury shares	(8,352		)	(3,937		)	(12,290		)
Repayment of stock subscription receivable	10,061			194,729			385,659
Net cash provided by financing activities	50,569,573			267,188			98,623,474
Net Increase in Cash and Cash Equivalents	40,763,055			1,117,220			57,959,942
Cash and Cash Equivalents, beginning of period	26,469,866			56,842,722			—
Cash and Cash Equivalents, end of period	$	67,232,921		$	57,959,942		$	57,959,942

Supplemental Disclosure of Non-cash Investing and Financing Activities:
Sale of restricted stock through issuance of notes receivable	$	49,931		$	—		$	1,120,179
Issuance of warrants to purchase common stock	$	—		$	6,550,000		$	6,738,261
Purchase of treasury shares through the forgiveness of notes	$	—		$	—		$	2,600
Equipment purchased through capital lease obligations	$	—		$	—		$	16,951

The accompanying notes are an integral part of these condensed consolidated financial statements.

EXACT SCIENCES CORPORATION

(A Development Stage Company)

Notes to Condensed Consolidated Financial Statements

June 30, 2002

(Unaudited)

(1) ORGANIZATION

EXACT Sciences Corporation (the “Company”) was incorporated on February 10, 1995. The Company is in the development stage and applies proprietary genomic technologies to the early detection of several types of common cancers. The Company has selected colorectal cancer as the first application of its technology platform.

The Company is devoting substantially all of its efforts toward product research and development, raising capital and marketing products under development. The Company has not generated substantive product licensing revenue to date and is subject to a number of risks similar to those of other development–stage companies, including dependence on key individuals and the need for the continued development of commercially usable products. On February 5, 2001, the Company completed an initial public offering of 4,000,000 shares of its common stock at $14.00 per share. The Company received net proceeds of approximately $50.6 million after deducting the underwriters’ commission and issuance costs. Upon consummation of the initial public offering, all shares of preferred stock outstanding automatically converted into 11,889,135 shares of common stock.

(2) LICENSE AGREEMENT

On June 26, 2002, the Company entered into a license agreement with Laboratory Corporation of America Holdingsâ, Inc. (“LapCorp”) for an exclusive, long-term strategic partnership between the parties to commercialize PreGen-Plusä, the Company’s proprietary, non-invasive technology for the early detection of colorectal cancer in the average-risk population. Pursuant to the license agreement, the Company agreed to license to LabCorp all U.S. and Canadian patent and patent applications owned by the Company relating to its PreGen-Plusä technology for the detection of colorectal cancer in an average-risk population. The license is exclusive for a five year period, followed by a non-exclusive license for the life of the patents. In return for the license, LapCorp has agreed to pay the Company certain upfront payments, milestone and performance-based payments, and a per test royalty rate. An initial payment of $15 million was made by LabCorp upon the signing of the agreement, and a second payment of $15 million is to be made upon the commericial launch of PreGen-Plus. In addition, milestone payments from LabCorp totaling $30 million will be based upon Company deliverables related to scientific acceptance, reimbursement approval and technology improvements and $15 million will be based upon the achievement of significant LabCorp revenue thresholds. In addition to these payments, the Company will receive a royalty fee for each PreGen-Plus test performed by LabCorp. In conjunction with the partnership, the Company has issued to LabCorp a warrant to purchase 1,000,000 shares of its common stock, exercisable over a three year period at an exercise price of $16.09 per share. The Company assigned a value to the warrant of $6,550,000 under the Black-Scholes option pricing model which has been recorded as a reduction in the initial upfront deferred license fee of $15 million.

The Company will amortize the first two payments of $30 million, net of the $6,550,000 value of the warrant, as license fee revenue over the remaining exclusive license period. The milestone and performance-based payments, along with the royalty fee on each test performed by LabCorp, will be recorded as revenue when earned and paid.

(3) BASIS OF PRESENTATION

The unaudited condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, the unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of interim period results. 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 such rules and regulations. The Company believes, however, that its disclosures are adequate to make the information presented not misleading. The results of operations for the three and six-months ended June 30, 2002 are not necessarily indicative of the results to be expected for the full fiscal year. The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s Form 10-K, which was filed with the Securities and Exchange Commission on March 26, 2002.

(4) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of the Company’s wholly owned subsidiary, EXACT Sciences Securities Corporation, a Massachusetts securities corporation. All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

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

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of 90 days or less at the time of acquisition to be cash equivalents. Cash equivalents consist primarily of money market funds at December 31, 2001 and June 30, 2002.

Net Loss Per Share

Basic and diluted net loss per share is presented in conformity with Statement of Financial Accounting Standards (SFAS) No. 128, Earnings per Share, for all periods presented. In accordance with SFAS No. 128, basic and diluted net loss per common share was determined by dividing net loss applicable to common stockholders by the weighted average common shares outstanding during the period, less shares subject to repurchase. Basic and diluted net loss per share are the same because all outstanding common stock equivalents have been excluded as they are anti-dilutive. Stock options to purchase a total of 2,252,963, and 2,892,954 common shares and 838,660 and 490,635 unvested restricted shares have therefore been excluded from the computations of diluted weighted average shares outstanding for the three months ended June 30, 2001 and 2002, respectively.

Pro Forma Net Loss

The Company’s historical capital structure is not indicative of its capital structure subsequent to its initial public offering due to the automatic conversion of all shares of preferred stock into 11,889,135 shares of common stock concurrent with the closing of the Company’s initial public offering on February 5, 2001. Accordingly, pro forma net loss per share is presented below for the three and six months ended June 30, 2001 and 2002, assuming the conversion of all outstanding shares of preferred stock into common stock upon the closing of the Company’s initial public offering using the if-converted method from the respective dates of issuance.

The following table reconciles the Company’s pro forma net loss, which excludes non-cash stock-based compensation, and the pro forma weighted average common shares outstanding used in the computation of pro forma basic and diluted net loss per share to the net loss and weighted average common shares outstanding:

	Three Months Ended June 30,						Six Months Ended June 30,
	2001			2002			2001			2002
Net loss	$	(5,710,984	)	$	(7,874,777	)	$	(11,111,143	)	$	(15,460,662	)
Stock-based compensation	1,054,731			544,052			2,106,667			1,111,853
Pro forma net loss	$	(4,656,253	)	$	(7,330,725	)	$	(9,004,476	)	$	(14,348,809	)

Weighted average shares outstanding	17,817,844			18,165,019			15,003,548			18,270,694
Weighted conversion of preferred stock to common stock	—			—			2,047,573			—

Pro forma weighted average shares outstanding	17,817,844			18,165,019			17,051,121			18,270,694

Pro forma basic and diluted net loss per share	$	(0.26	)	$	(0.40	)	$	(0.53	)	$	(0.79	)

Revenue Recognition

The Company’s revenue for the three and six months ended June 30, 2002 is primarily composed of amortization of up-front technology license fees associated with LabCorp which are being amortized on a straight-line basis over the license period. Fees for the licensing of product rights on initiation of strategic agreements are recorded as deferred revenue upon receipt and recognized as income on a straight-line basis over the license period. Revenue from milestone or other performance payments is recognized as earned in accordance with the terms of the related agreements. In addition, the Company recognizes revenues from performing testing upon delivery of the results to the prescribing physician provided there is persuasive evidence of an agreement, the fee is fixed or determinable and collection of the related receivable is probable.

Segment Information

The Company has adopted SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, which requires companies to report selected information about operating segments, as well as enterprise-wide disclosures about products, services, geographic areas and major customers. Operating segments are determined based on the way management organizes its business for making operating decisions and assessing performance. The Company’s chief decision–maker, as defined under SFAS No. 131, is a combination of the chairman, vice president and chief financial officer and president. The Company has determined that it conducts its operations in one business segment. The Company conducts its business in the United States. As a result, the financial information disclosed herein represents all of the material financial information related to the Company’s principal operating segment.

Recent Accounting Pronouncements

In October 2001, the FASB issued SFAS No. 144, Accounting for the impairment or Disposal of Long-lived Assets, which is effective for fiscal years beginning after December 15, 2001 and interim periods within those fiscal years. This SFAS develops one accounting model for long-lived assets that are to be disposed of by sale as well as addressing the principal implementation issues. This statement did not have an impact on the Company’s consolidated position or results of operations.

(5) SUBSCRIPTIONS RECEIVABLE

The Company has issued full recourse notes receivable to several employees and certain executives of the Company for the exercise of stock options and for the purchase of restricted stock over the last several years. These notes bear interest at a rate of 5% with various repayment schedules ranging from monthly to ten years.

(6) WARRANTS

In conjunction with the creation of an exclusive, long-term strategic partnership with LabCorp to commercialize PreGen-Plus, the Company issued a warrant to purchase 1,000,000 shares of common stock, exercisable over the next three years at an exercise price of $16.09 per share. The Company assigned a value to the warrant of $6,550,000 under the Black-Scholes model which has been recorded as a reduction in the initial upfront deferred license fee of $15 million received upon signing the agreement and will amortize this amount over the exclusive license period.

During the second quarter of 2002, three warrants to purchase an aggregate 88,125 shares of common stock at an average exercise price of $9.28 per share were exercised utilizing the net settlement (cashless) election per the warrant agreements which resulted in the Company issuing 31,215 shares of common stock.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion of the financial condition and results of operations of EXACT Sciences Corporation should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this Form 10-Q and the audited financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2001, which has been filed with the Securities and Exchange Commission. Except for the historical information contained herein, the following discussion contains forward-looking statements that involve risks and uncertainties, certain of which are beyond our control. Actual results could differ materially from these forward-looking statements as a result of a number of factors including, but not limited to, those factors described in “Factors That May Affect Future Results” in this Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2001.

Overview

We apply proprietary genomic technologies to the early detection of common cancers. We have selected colorectal cancer screening as the first application of our technology platform. Since our inception on February 10, 1995, our principal activities have included:

• researching and developing our technologies for colorectal cancer screening;

• conducting clinical studies to validate our colorectal cancer screening tests;

• negotiating licenses for intellectual property of others incorporated into our technologies;

• developing relationships with opinion leaders in the scientific and medical communities;

• conducting market studies and analyzing potential approaches for commercializing our technologies;

• hiring research and clinical personnel;

• hiring management and other support personnel; and

• raising capital.

We intend to license our proprietary technologies to leading clinical reference laboratories to enable them to develop tests. We intend to also package our technologies and seek approval for diagnostic test kits with which any clinical laboratory could conduct our tests.

We have generated no material operating revenues since our inception, and do not expect any material product licensing revenues until the second half of 2003. As of June 30, 2002, we had an accumulated deficit of approximately $62.0 million. Our losses have resulted principally from costs incurred in conjunction with our research and development initiatives.

Research and development expenses include costs related to scientific and laboratory personnel, clinical studies and reagents and supplies used in the development of our technologies. We expect that the cost of our research and development activities will increase from historical 2001 levels as we continue activities relating to the development of our colorectal cancer screening tests and the extension of our technologies to several other forms of common cancers and pre-cancerous lesions. We are currently conducting a clinical trial that will include an estimated 5,000 average-risk patients from over 60 academic and community–based practices, the costs of which will be borne by us, together with other smaller clinical studies.

Selling, general and administrative expenses consist primarily of non-research personnel salaries, office expenses and professional fees. We expect general and administrative expenses to increase as we hire additional personnel and build our infrastructure to support future growth.

Stock–based compensation expense, a non-cash expense, represents the difference between the exercise price and fair value of common stock on the date of grant. The stock compensation is being amortized over the vesting period of the applicable options, which is generally 60 months. Currently, we expect to recognize stock-based compensation expense related to employee, consultant and director options of approximately $2.1 million, $1.3 million, $600,000 and $200,000 during the years ended December 31, 2002, 2003, 2004 and 2005, respectively.

Significant Accounting Policies

Financial Reporting Release No. 60, which was recently issued by the Securities and Exchange Commission (“SEC”), requires all registrants to discuss critical accounting policies or methods used in the preparation of the financial statements. The notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2001, which has been filed with the Securities and Exchange Commission, includes a summary of the significant accounting policies and methods used in the preparation of our consolidated financial statements.

Further, we have made a number of estimates and assumptions that affect reported amounts of assets, liabilities, revenues and expenses, and actual results may differ from those estimates. As we are a development stage company, the areas that require the greatest degree of management judgment are the assessment of the recoverability of long lived assets, primarily intellectual property, and the realization, if any, of our net deferred tax assets.

Patent costs, which historically consisted of related legal fees, are capitalized as incurred and are amortized beginning when patents are approved over an estimated useful life of five years. In November 2001, however, the Company purchased certain intellectual property of MT Technologies (formerly known as Mosaic Technologies, Inc.) relating to its Hybrigel technology which consisted of 4 issued patents and 40 pending patent applications. The purchase price for the assets consisted of $1.3 million in cash and warrants to purchase 40,000 shares of common stock immediately, exercisable over a three-year period, at an exercise price of $7.33 per share which the Company valued at $188,261 in accordance with Emerging Issues Task Force 96-18, Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling Goods or Services, using the Black-Scholes option pricing model. Capitalized patent costs related to patents which are not issued or are no longer pursued by the Company are expensed upon disapproval or upon a decision by us to no longer pursue the patent.

A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before we are able to realize their benefit, or that future deductibility is uncertain. In general, companies that have a history of operating losses are faced with a difficult burden of proof on their ability to generate sufficient future income within the next two years in order to realize the benefit of the deferred tax assets. We have recorded a valuation against our deferred tax assets based on our history of losses. The deferred tax assets are still available for us to use in the future to offset taxable income, which would result in the recognition of tax benefit and a reduction to our effective tax rate.

We believe that full consideration has been given to all relevant circumstances that we may be subject to, and the financial statements accurately reflect our best estimate of the results of operations, financial position and cash flows for the periods presented.

Results of Operations

Revenue. Revenue was $40,000 and $79,000 for the three and six months ended June 30, 2002, respectively. This revenue is primarily composed of amortization of up-front technology license fees associated with an agreement signed in July 2001 with LabCorp that is being amortized on a straight-line basis over the license period.

Cost of revenues. Cost of services for the three and six months ended June 30, 2002 of $2,000 represents the estimated cost of performing PreGen colorectal screening tests at our facility.

Research and development expenses. Research and development expenses, excluding departmental allocations of stock-based compensation, increased to $5.1 million for the three months ended June 30, 2002 from $2.8 million for the three months ended June 30, 2001. The increase for the three month period was primarily attributable to the initiation of our blinded multi-center clinical trial and included increases of $279,000 in personnel-related expenses, $355,000 in laboratory expenses, $1.4 million in clinical study expenses and $356,000 related to the leasing of additional laboratory space partially offset by a decrease of $225,000 in professional fees and expenses. Research and development expenses, excluding departmental allocations of stock-based compensation, increased to $10.1 million for the six months ended June 30, 2002 from $5.4 million for the six months ended June 30, 2001. The increase for the six month period was primarily attributable to the initiation of our blinded multi-center clinical trial and included increases of $701,000 in personnel-related expenses, $640,000 in laboratory expenses, $3.0 million in clinical study expenses and $745,000 related to the leasing of additional laboratory space partially offset by a decrease of $498,000 in professional fees and expenses.

Selling, general and administrative expenses. Selling, general and administrative expenses, excluding departmental allocations of stock-based compensation, decreased to $2.5 million for the three months ended June 30, 2002 from $2.6 million for the three months ended June 30, 2001. The decrease for the three month period was attributable primarily to a decrease of $157,000 in professional fees and expenses which is due to the completion of certain marketing initiatives and programs in early 2001. Selling, general and administrative expenses, excluding departmental allocations of stock-based compensation, decreased to $4.8 million for

the six months ended June 30, 2002 from $5.2 million for the six months ended June 30, 2001. The decrease for the six month period was attributable primarily to decreases of $180,000 in personnel-related expenses and $91,000 in office related expenses.

Stock-based compensation. Stock-based compensation decreased to $544,000 for the three months ended June 30, 2002 form $1.1 million for the three months ended June 30, 2001. Stock-based compensation decreased to $1.1 million for the six months ended June 30, 2002 from $2.1 million for the six months ended June 30, 2001. The primary reason for this decrease is the accelerated method of amortization we are using to expense this cost.

Interest income. Interest income decreased to $231,000 for the three months ended June 30, 2002 from $800,000 for the three months ended June 30, 2001. This decrease was primarily due to lower interest rates on our investments. Interest income decreased to $507,000 for the six months ended June 30, 2002 from $1.6 million for the six months ended June 30, 2001. This decrease was primarily due to lower interest rates on our investments and overall decrease in our average cash and cash equivalents balances.

Liquidity and Capital Resources

We have financed our operations since inception primarily through private sales of preferred stock, as well as the completion of an initial public offering of our common stock in February 2001. As of June 30, 2002, we had approximately $58.0 million in cash and cash equivalents.

Net cash provided by operating activities was $1.8 million for the six months ended June 30, 2002 while net cash used in operating activities was $7.8 million for the six months ended June 30, 2001. Excluding the impact of the upfront deferred licensing fee of $15 million from LabCorp, net cash used in operating activities would have been $13.2 million for the six months ended June 30, 2002. This increase was primarily due to the increase in our operating losses due to the increase in research and development expenses.

Net cash used in investing activities was $1.0 million for the six months ended June 30, 2002 and $2.0 million for the six months ended June 30, 2001. For each of these periods, cash used in investing activities primarily reflected increased investment in our intellectual property portfolio and the expansion of our laboratory and office space. The higher investment in property and equipment for the six months ended June 30, 2001 reflects the expansion of our laboratory and office space as we began to prepare for the initiation of our blinded multi-center clinical trial and expanded our infrastructure to support future growth.

Net cash provided by financing activities was $267,000 for the six months ended June 30, 2002 and $50.6 million for the six months ended June 30, 2001. For the six months ended June 30, 2002, this was primarily due to the repayment of $195,000 in stock subscription receivables and the exercise of stock options which resulted in proceeds of $76,000. For the six months ended June 30, 2001, this was primarily due to the completion of our initial public offering in February.

We expect that cash on hand at June 30, 2002, together with the additional milestone payments expected from LabCorp will be sufficient to fund our operations for the foreseeable future. Our future capital requirements include, but are not limited to, continuing our research and development programs, supporting our clinical study efforts, and launching our marketing efforts. Our future capital requirements will depend on many factors, including the following:

• the success of our clinical studies;

• the scope of and progress made in our research and development activities; and

• the successful commercialization of colorectal cancer screening tests based on our technologies.

Recent Accounting Pronouncements

In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-lived Assets, which is effective for fiscal years beginning after December 15, 2001 and interim periods within those fiscal years. This SFAS develops one accounting model for long-lived assets that are to be disposed of by sale as well as addressing the principal implementation issues. This statement did not have an impact on the Company’s consolidated position or results of operations.

Factors That May Affect Future Results

We operate in a rapidly changing environment that involves a number of risks, some of which are beyond our control. This discussion highlights some of the risks which may affect future operating results.

We are a development stage company and may never successfully commercialize any of our products or services or earn a profit.

We are a development stage company and have incurred losses since we were formed. From our date of inception on February 10, 1995 through June 30, 2002, we have accumulated a total deficit of approximately $62.0 million. Since our colorectal cancer screening tests are still in development, we do not expect to have any material revenue from the sale of our products and services until the second half of 2003. Even after we begin selling our products and services, we expect that our losses will continue and increase as a result of continuing high research and development expenses, as well as increased sales and marketing expenses. We cannot assure you that the revenue from any of our products or services will be sufficient to make us profitable.

Dependence on collaborative relationships

We have a strategic partnership agreement with Laboratory Corporation of America Holdings (LabCorp) whereby we license certain technologies to LabCorp that are key to the commercialization of PreGen Plus^TM, the Company’s proprietary, non-invasive technology for the early detection of colorectal cancer in the average-risk population. The license to LabCorp is exclusive for a five-year term followed by a non-exclusive license for the life of the underlying patents. LabCorp has the ability to terminate this agreement for, among other things, a material breach by us. If LabCorp were to terminate the agreement, we would incur significant delays and expense in the commercialization of PreGen Plus and we cannot guarantee that we would be able to enter into a similar agreement to effectively commercialize this technology. Further, if we do not achieve certain milestones, or LabCorp does not achieve certain revenue thresholds, within the time periods prescribed in the agreement, we may not fully realize the expected benefits of the agreement to us.

In addition, if LabCorp or any other party with which the Company has established collaborative agreements were unable to satisfy its contractual obligations to the Company, there can be no assurance that the Company would be able to negotiate substantially similar collaborative agreements with other third parties on acceptable terms, if at all, or that any such new collaborative agreements would be successful. While the Company believes its collaborators will succeed in performing their contractual responsibilities, the amount of resources to be devoted to these activities will not be within the Company’s control. Consequently, there can be no assurance that any of the Company’s current collaborative arrangements will be continued or not terminated early or that the Company will be able to enter into future collaborations. The failure to do so could have a material adverse effect on he Company’s business, results of operations and financial condition.

If our clinical studies do not prove the superiority of our technologies, we may never sell our products and services.

In the third quarter of 2001, we initiated a blinded multi–center clinical study that will include approximately 5,000 patients with average-risk profiles. In October 2001, we also signed a Clinical Trial Agreement with the Mayo Clinic in which our genomics-based colorectal cancer technology will be the subject of an independent study by Mayo Clinic for which Mayo Clinic received a $4.9 million grant from the National Cancer Institute of the National Institutes of Health. This three-year study will involve approximately 4,000 patients at average risk for developing colorectal cancer, and compare the results of our non-invasive, genomics-based screening technology with those of the fecal occult blood test, a common first-line colorectal cancer screening option. The results of these clinical studies may not show that tests using our technologies are superior to existing screening methods. In that event, we will have to devote significant financial and other resources to further research and development. In addition, we may experience delays in the commercialization of tests using our technologies or commercialization may never occur. Our earlier clinical studies were small and included samples from high–risk patients. The results from these earlier studies may not be representative of the results we obtain from any future studies, including our planned clinical study, which will include substantially more samples and average–risk patients.

We may be unable to recruit a sufficient number of patients for our planned average–risk clinical study.

We initiated a blinded multi–center clinical study of approximately 5,000 average–risk patients in the third quarter of 2001. If we are unable to enroll a sufficient number of average risk patients, we will be unable to validate the superiority of our technologies, which would make it difficult to sell our products and services. Despite the availability of colorectal cancer screening methods today, most Americans who are recommended for colorectal cancer screening do not get screened. Participants in our clinical study will only have an average risk of developing colorectal cancer, yet will have to undergo a colonoscopy. This procedure requires sedation and causes patient discomfort. We cannot guarantee that we will be able to recruit patients on a timely basis, if at all.

If Medicare and other third–party payors, including managed care organizations, do not provide adequate reimbursement for our products and services, most clinical reference laboratories will not use our products or license our technologies to perform cancer screening tests.

Most clinical reference laboratories will not perform colorectal cancer screening tests using our products and licensing our technologies unless they are adequately reimbursed by third–party payors such as Medicare and managed care organizations. There is significant uncertainty concerning third–party reimbursement for the use of any test incorporating new technology. Reimbursement by a third–party payor may depend on a number of factors, including a payor’s determination that tests using our products and technologies are sensitive for colorectal cancer, not experimental or investigational, medically necessary, appropriate for the specific patient and cost–effective. To date, we have not secured any reimbursement approval for tests using our products and technologies from any third–party payor, nor do we expect any such approvals in the near future.

Reimbursement by Medicare will require approval by the Secretary of Health and Human Services, or HHS. The Federal Balanced Budget Act of 1997 provides for reimbursement of new technologies such as ours, but only with action of the Secretary of HHS. We cannot guarantee that the Secretary of HHS will act to approve tests based on our technologies on a timely basis, or at all. In addition, the assignment of a current procedural terminology code facilitates Medicare reimbursement. The process to obtain this code is lengthy and we cannot guarantee that we will receive a current procedural terminology code on a timely basis, or at all.

Since reimbursement approval is required from each payor individually, seeking such approvals is a time–consuming and costly process. If we are unable to obtain adequate reimbursement by Medicare and managed care organizations, our ability to generate revenue and earnings from the sale of our products or licenses to our technologies will be limited.

We will not be able to commercialize our technologies if we are not able to lower costs through automating and simplifying key operational processes.

Currently, colorectal cancer screening tests using our technologies are very expensive because they are labor–intensive and use highly complex and expensive reagents. In order to generate significant profits and make our technologies more attractive to potential partners, we will need to reduce substantially the costs of tests using our technologies through significant automation of key operational processes and other cost savings procedures. If we fail to sufficiently reduce costs, tests using our technologies either may not be commercially viable or may generate little, if any, profitability.

Our failure to convince medical practitioners to order tests using our technologies will limit our revenue and profitability.

If we fail to convince medical practitioners to order tests using our technologies, we will not be able to sell our products or license our technologies in sufficient volume for us to become profitable. We will need to make leading gastroenterologists aware of the benefits of tests using our technologies through published papers, presentations at scientific conferences and favorable results from our clinical studies. Our failure to be successful in these efforts would make it difficult for us to convince medical practitioners to order colorectal cancer screening tests using our technologies for their patients.

If we lose the support of our key scientific collaborators, it may be difficult to establish tests using our technologies as a standard of care for colorectal cancer screening, which may limit our revenue growth and profitability.

We have established relationships with leading scientists, including members of our scientific advisory board, and research institutions, such as the Mayo Clinic, that we believe are key to establishing tests using our technologies as a standard of care for colorectal cancer screening. We have consulting agreements with all but one member of our scientific advisory board, each of which may be terminated by us or the scientific advisory board member with 30 or 60 days notice. Our existing collaboration agreement with the Mayo Clinic expired on December 31, 2001. If any of our collaborators determine that colorectal cancer screening tests using our technologies are not superior to available colorectal cancer screening tests or that alternative technologies would be more effective in the early detection of colorectal cancer, we would encounter difficulty establishing tests using our technologies as a standard of care for colorectal cancer screening, which would limit our revenue growth and profitability.

We may experience limits on our revenue and profitability if only an insignificant number of people decide to be screened for colorectal cancer.

Even if our technologies are superior to alternative colorectal cancer screening technologies, adequate third–party reimbursement is obtained and medical practitioners order tests using our technologies, an insignificant number of people may decide to be screened for colorectal cancer. Despite the availability of current colorectal cancer screening methods as well as the recommendations of the American Cancer Society and the National Cancer Institute that all Americans age 50 and above be screened for colorectal cancer, most of these individuals decide not to complete a colorectal cancer screening test. If only an insignificant portion of the population decides to complete colorectal cancer screening tests, we may experience limits on our revenue and profitability.

Our inability to apply our proprietary technologies successfully to detect other common cancers may limit our revenue growth and profitability.

While to date, we have focused substantially all of our research and development efforts on colorectal cancer, we have used our technologies to detect cancers of the lung, pancreas, esophagus, stomach and gall bladder. As a result, we intend to devote significant personnel and financial resources in the future to extending our technology platform to the development of screening tests for these common cancers and pre–cancerous lesions. To do so, we may need to overcome technological challenges to develop reliable screening tests for these cancers. We may never realize any benefits from these research and development activities.

If we fail to obtain the approval of the U.S. Food and Drug Administration, or FDA, or comply with other FDA requirements, we may not be able to market our products and services and may be subject to stringent penalties.

The FDA does not actively regulate laboratory tests that have been developed and used by the laboratory to conduct in-house testing. The FDA does regulate specific reagents, such as ours, that react with a biological substance including those designed to identify a specific DNA sequence or protein. Its regulations provide that most such reagents, which the FDA refers to as analyte specific reagents, are exempt from the FDA’s pre-market review requirements. If the FDA were to decide to regulate in–house developed laboratory tests or decide to require pre-market approval or clearance of any analyte specific reagents, the commercialization of our products and services could be delayed, halted or prevented. If the FDA were to view any of our actions as non-compliant it could result in regulatory warning, an imposition penalties or other enforcement actions. Similarly, if the FDA were to determine that our specimen container requires pre-market approval or clearance, the sale of our products and services could be delayed, halted or prevented and the FDA could impose penalties on us or seek other enforcement action. Finally, our analyte specific reagents will be subject to a number of FDA requirements, including a requirement to comply with the FDA’s quality system regulation which establishes extensive regulations for quality control and manufacturing procedures. Failure to comply with these regulations could subject us to enforcement action. Adverse FDA action in any of these areas could significantly increase our expenses and limit our revenue and profitability.

If we fail to comply with regulations relating to clinical laboratories, we may be prohibited from processing our own tests in–house, be required to incur significant expense to correct non–compliance, or be subject to other requirements or penalties.

We are subject to U.S. and state laws and regulations regarding the operation of clinical laboratories. For example, the federal Clinical Laboratory Improvement Amendments impose certification requirements for clinical laboratories, and establishes standards for quality assurance and quality control, among other things. Clinical laboratories are subject to inspection by regulators, and the possible sanctions for failing to comply with applicable requirements include prohibiting a laboratory from running tests, requiring a laboratory to implement a corrective plan, and imposing civil money or criminal penalties. In May 2000, we received a clinical laboratory certificate of compliance. However, if we fail to meet the requirements of the Clinical Laboratory Improvement Amendments in the future, we could be required to halt providing services and incur significant expense, thereby limiting our revenue and profitability.

Other companies may develop and market methods for detecting colorectal cancer, which may make our technologies less competitive, or even obsolete.

The market for colorectal cancer screening is large, approximating 80 million Americans age 50 and above, and has attracted competitors, some of which have significantly greater resources than we have. Currently, we face competition from alternative procedures–based detection technologies such as flexible sigmoidoscopy and colonoscopy, as well as traditional screening tests such as the fecal occult blood test. Other entities are developing new colorectal screening methods such as virtual colonoscopy, an experimental procedure being developed at research institutions in which a radiologist views the inside of the colon through a scanner. In addition, competitors, including Bayer Corporation, diaDexus, Inc., Matritech, Inc. and Millennium Predictive Medicine, Inc., are developing serum–based tests, or screening tests based on the detection of proteins or nucleic acids produced by colon cancer. These and other companies may also be working on additional methods of detecting colon cancer that have not yet been announced. We may be unable to compete effectively against these competitors either because their test is superior or because they may have more expertise, experience, financial resources and business relationships.

The loss of key members of our senior management team could adversely affect our business.

Our success depends largely on the skills, experience and performance of key members of our senior management team, including Don M. Hardison, our President and Chief Executive Officer, John A. McCarthy, Jr., our Executive Vice President, Chief Operating Officer, Chief Financial Officer and Treasurer, and Anthony P. Shuber, our Senior Vice President and Chief Technology Officer. Anthony P. Shuber, together with Stanley N. Lapidus, our Chairman, have been critical to the development of our technologies and business. Mr. Hardison, who joined us in May 2000, and Mr. McCarthy, who joined us in October 2000, are key additions to our management team and will be critical to directing and managing our growth and development in the future. We have no employment agreements with any of Messrs. Lapidus, Hardison, McCarthy or Shuber, however, each has signed a non–disclosure and assignment of intellectual property agreement and non–compete agreement. We also have a severance agreement with each of Messrs. Hardison,

McCarthy and Shuber that provides for twelve months severance under certain circumstances. The efforts of each of these persons will be critical to us as we continue to develop our technologies and our testing process and as we attempt to transition from a development company to a company with commercialized products and services. If we were to lose one or more of these key employees, we may experience difficulties in competing effectively, developing our technologies and implementing our business strategies.

If we are unable to protect our intellectual property effectively, we may be unable to prevent third parties from using our technologies, which would impair our competitive advantage.

We rely on patent protection as well as a combination of trademark, copyright and trade secret protection, and other contractual restrictions to protect our proprietary technologies, all of which provide limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage. If we fail to protect our intellectual property, we will be unable to prevent third parties from using our technologies and they will be able to compete more effectively against us.

Currently, we have 22 issued patents and 32 pending patent applications in the United States. We also have 6 issued foreign patents and 111 pending foreign patent applications. We cannot assure you that any of our currently pending or future patent applications will result in issued patents, and we cannot predict how long it will take for such patents to be issued. Further, we cannot assure you that other parties will not challenge any patents issued to us, or that courts or regulatory agencies will hold our patents to be valid or enforceable.

A third–party institution has asserted co–inventorship rights with respect to one of our issued patents relating to pooling patient samples in connection with our loss of heterozygosity detection method. We cannot guarantee you that we will be successful in defending this or other challenges made in connection with our patents and patent applications. Any successful third–party challenge to our patents could result in co–ownership of such patents with a third party or the unenforceability or invalidity of such patents. In addition, we and a third–party institution have filed a joint patent application that is co–owned by us and that third–party institution relating to the use of various DNA markers, including one of our detection methods, to detect cancers of the lung, pancreas, esophagus, stomach, small intestine, bile duct, naso–pharyngeal, liver and gall bladder in stool under the Patent Cooperation Treaty. This patent application designates the United States, Japan, Europe and Canada. Co–ownership of a patent allows the co–owner to exercise all rights of ownership, including the right to use, transfer and license the rights protected by the applicable patent.

In addition to our patents, we rely on contractual restrictions to protect our proprietary technology. We require our employees and third parties to sign confidentiality agreements and employees to also sign agreements assigning to us all intellectual property arising from their work for us. Nevertheless, we cannot guarantee that these measures will be effective in protecting our intellectual property rights.

We cannot guarantee that the patents issued to us will be broad enough to provide any meaningful protection nor can we assure you that one of our competitors may not develop more effective technologies, designs or methods to test for colorectal cancer or any other common cancer without infringing our intellectual property rights or that one of our competitors might not design around our proprietary technologies.

We may incur substantial costs to protect and enforce our patents.

We have pursued an aggressive patent strategy designed to maximize our patent protection against third parties in the U.S. and in foreign countries. We have filed patent applications that cover the methods we have designed to detect colorectal cancer and other cancers, as well as patent applications that cover our testing process. In order to protect or enforce our patent rights, we may initiate actions against third parties. Any actions regarding patents could be costly and time–consuming, and divert our management and key personnel from our business. Additionally, such actions could result in challenges to the validity or applicability of our patents.

We may be subject to substantial costs and liability or be prevented from selling our screening tests for cancer as a result of litigation or other proceedings relating to patent rights.

Third parties may assert infringement or other intellectual property claims against our licensors or us. We pursue an aggressive patent strategy that we believe provides us with a competitive advantage in the early detection of colorectal cancer and other common cancers. We currently have 22 issued U.S. patents and 32 pending patent applications in the United States. Because the U.S. Patent & Trademark Office maintains patent applications in secrecy until a patent application publishes or the patent is issued, others may have filed patent applications for technology covered by our pending applications. There may be third–party patents, patent applications and other intellectual property relevant to our potential products that may block or compete with our products or processes. Even if third–party claims are without merit, defending a lawsuit may result in substantial expense to us and may divert the attention of management and key personnel. In addition, we cannot assure you that we would prevail in any of these suits or that the damages or other remedies if any, awarded against us would not be substantial. Claims of intellectual property infringement may require us to enter into royalty or license agreements with third parties that may not be available on acceptable terms,

if at all. These claims may also result in injunctions against the further development and use of our technology, which would have a material adverse effect on our business, financial condition and results of operations.

Also, patents and applications owned by us may become the subject of interference proceedings in the United States Patent and Trademark Office to determine priority of invention, which could result in substantial cost to us, as well as a possible adverse decision as to the priority of invention of the patent or patent application involved. An adverse decision in an interference proceeding may result in the loss or rights under a patent or patent application subject to such a proceeding.

Our business would suffer if certain licenses were terminated.

We license certain technologies from Roche Molecular Systems, Inc. and Genzyme Corporation that are key to our technologies. The Roche license for the polymerase chain reaction (PCR) technology, which relates to a gene amplification process used in almost all genetic testing, is a non–exclusive license through 2004, the date on which the patent that we utilize expires. Roche may terminate the license upon notice if we fail to pay royalties, submit certain reports or breach any other material term of the license agreement. The Genzyme license is a non–exclusive license to use the Apc and p53 genes and methodologies relating to the genes in connection with our products and services through 2013, the date on which the term of the patent that we utilize expires. Genzyme may terminate the license upon notice if we fail to pay milestone payments and royalties, achieve a certain level of sales, or submit certain reports. In addition, if we fail to use reasonable efforts to make products and services based on these patents available to the public or fail to request FDA clearance for a diagnostic test kit as required by the agreement, Genzyme may terminate the license. If either Roche or Genzyme were to terminate the licenses, we would incur significant delays and expense to change a portion of our testing methods and we cannot guarantee that we would be able to change our testing methods without affecting the sensitivity of our tests.

Changes in healthcare policy could subject us to additional regulatory requirements that may delay the commercialization of our tests and increase our costs.

Healthcare policy has been a subject of discussion in the executive and legislative branches of the federal and many state governments. We developed a staged commercialization strategy for our colorectal cancer screening tests based on existing healthcare policies. Changes in healthcare policy, if implemented, could substantially delay the use of our tests, increase costs, and divert management’s attention. We cannot predict what changes, if any, will be proposed or adopted or the effect that such proposals or adoption may have on our business, financial condition and results of operations.

Our inability to raise additional capital on acceptable terms in the future may limit our growth

Although we believe that the Company will not need to raise additional funds from the capital markets, if our capital resources are insufficient to meet future requirements, we will have to raise additional funds to continue the development and commercialization of our technologies. Our inability to raise capital would seriously harm our business and development efforts. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operations. These funds may not be available on favorable terms, or at all. If adequate funds are not available on attractive terms, we may have to restrict our operations significantly or obtain funds by entering into agreements on unattractive terms. Further, to the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities could result in dilution to our stockholders.

Our executive officers, directors and principal stockholders own a significant percentage of our Company and could exert significant influence over matters requiring stockholder approval.

As of June 30, 2002, our executive officers, directors and principal stockholders and their affiliates together control approximately 26.7% of our outstanding common stock, without giving effect to the exercise of outstanding options under our stock plans. As a result, these stockholders, if they act together, will have significant influence over matters requiring stockholder approval, such as the election of directors and approval of significant corporate transactions. This concentration of ownership may have the effect of delaying, preventing or deterring a change in control, could deprive you of the opportunity to receive a premium for your common stock as part of a sale and could adversely affect the market price of our common stock.

Certain provisions of our charter, by–laws and Delaware law may make it difficult for you to change our management and may also make a takeover difficult.

Our corporate documents and Delaware law contain provisions that limit the ability of stockholders to change our management and may also enable our management to resist a takeover. These provisions include a staggered board of directors, limitations on persons authorized to call a special meeting of stockholders and advance notice procedures required for stockholders to make nominations of candidates for election as directors or to bring matters before an annual meeting of stockholders. These

provisions might discourage, delay or prevent a change of control or in our management. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors and cause us to take other corporate actions. In addition, the existence of these provisions, together with Delaware law, might hinder or delay an attempted takeover other than through negotiations with our board of directors.

Our stock price may be volatile.

The market price of our stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including:

• technological innovations or new products and services by us or our competitors;

• clinical trial results relating to our tests or those of our competitors;

• reimbursement decisions by Medicare and other managed care organizations;

• FDA regulation of our products and services;

• the establishment of partnerships with clinical reference laboratories;

• health care legislation;

• intellectual property disputes;

• additions or departures of key personnel; and

• sales of our common stock.

Because we are a development stage company with no material revenue expected until the second half of 2003, you may consider one of these factors to be material. Our stock price may fluctuate widely as a result of any of the above.

In addition, the Nasdaq National Market and the market for applied genomics companies in particular, has experienced significant price and volume fluctuations that have often been unrelated or disproportionate to the performance of those companies.

Future sales by our existing stockholders could depress the market price of our common stock.

If our existing stockholders sell a large number of shares of our common stock, the market price of our common stock could decline significantly. Moreover, the perception in the public market that our existing stockholders might sell shares of common stock could adversely affect the market price of our common stock.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We have no derivative financial instruments in our cash and cash equivalents. We invest our cash and cash equivalents in securities of the U.S. governments and its agencies and in investment–grade, highly liquid investments consisting of commercial paper, bank certificates of deposit and corporate bonds.

Part II - Other Information

Item 2. Changes in Securities and Use of Proceeds

In June 2002, we issued a warrant to purchase an aggregate of 1,000,000 shares of common stock at an exercise price of $16.09 per share to one investor. The warrant was issued in connection with the strategic partnership with LabCorp.

No underwriters were involved in the foregoing sales of securities. Such sales were made in reliance upon an exemption from the registration provisions of the Act set forth in Section 4(2) thereof relative to sales by an issuer not involving any public offering or the rules and regulations thereunder. All of the foregoing securities are deemed restricted securities for the purposes of the Securities Act.

Item 4. Submission of Matters to a Vote of Security Holders

On June 13 2002, at our annual meeting of stockholders, the stockholders elected as Class II directors, each to serve for a three-year term, the following individuals: Richard W. Barker (16,146,285 shares for; 31,429 shares withheld) and Lance Willsey (16,146,285 shares for; 31,429 shares withheld).

Item 5. Other Information

Our policy governing transactions in our securities by directors, officers and employees permits our officers, directors and certain other persons to enter into trading plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. We anticipate that, as permitted by Rule 10b5-1 and our policy governing transactions in our securities, some or all of our officers, directors and employees may establish trading plans in the future. We intend to disclose the names of executive officers and directors who establish a trading plan in compliance with Rule 10b5-1 and the requirements of our policy governing transactions in our securities in our future quarterly and annual reports on Form 10-Q and 10-K filed with the Securities and Exchange Commission. However, we undertake no obligation to update or revise the information provided herein, including for revision or termination of an established trading plan, other than in such quarterly and annual reports.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

4.1	Warrant between the Registrant and Laboratory Corporation of America Holdings, Inc. dated June 26, 2002.
10.1*	Agreement between the Registrant and Laboratory Corporation of America Holdings, Inc. dated June 26, 2002.
99.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Confidential Treatment requested for certain portions of this Agreement which have been omitted and filed separately with the Securities and Exchange Commission.

(b) Reports on Form 8-K.

(1) A current report on Form 8-K filed on April 18, 2002, announced a conference call to discuss our first quarter of 2002 financial results.

(2) A current report on Form 8-K filed on May 14, 2002, announced the dismissal of our independent auditors, Arthur Andersen, LLP and the engagement of Ernst & Young, LLP as our independent auditors.

(3) A current report on Form 8-K filed on June 27, 2002, announced that we entered into a strategic alliance and related common stock warrant with LabCorp.

We filed no other reports on Form 8-K during the quarter ended June 30, 2002.

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	EXACT SCIENCES CORPORATION

	By:	/s/ John A. McCarthy, Jr.
Date: August 12, 2002		John A. McCarthy, Jr.
		Executive Vice President, Chief Operating Officer, Chief Financial Officer and Treasurer
		(Duly Authorized Officer and Principal Financial Officer)

EX-4.1 3 j4567_ex4d1.htm EX-4.1

Exhibit 4.1

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS OR SOME OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS IS AVAILABLE WITH RESPECT THERETO.

COMMON STOCK PURCHASE WARRANT

Warrant No. 4

Number of Shares 1,000,000

EXACT Sciences Corporation

Void after June 26, 2005

1. Issuance. This Warrant is issued to Laboratory Corporation of America Holdings by EXACT Sciences Corporation, a Delaware corporation (hereinafter with its successors called the “Company”).

2. Purchase Price: Number of Shares. Subject to the terms and conditions hereinafter set forth, the registered holder of this Warrant (the “Holder”), commencing on the date hereof, is entitled upon surrender of this Warrant with the subscription form annexed hereto duly executed, at the office of the Company, 63 Great Road, Maynard, Massachusetts 01754, or such other office as the Company shall notify the Holder of in writing, to purchase from the Company at a price per share (the “Purchase Price”) of $16.09, ONE MILLION (1,000,000) fully paid and nonassessable shares of Common Stock, $0.01 par value, of the Company (the “Common Stock”). Until such time as this Warrant is exercised in full or expires, the Purchase Price and the securities issuable upon exercise of this Warrant are subject to adjustment as hereinafter provided.

3. Payment of Purchase Price. The Purchase Price may be paid (i) in cash or by check, (ii) by the surrender by the Holder to the Company of any promissory notes or other obligations issued by the Company, with all such notes and obligations so surrendered being credited against the Purchase Price in an amount equal to the principal amount thereof plus accrued interest to the date of surrender, or (iii) by any combination of the foregoing.

4. Partial Exercise. This Warrant may be exercised in part, and the Holder shall be entitled to receive a new warrant, which shall be dated as of the date of this Warrant and containing the same terms as this Warrant, covering the number of shares in respect of which this Warrant shall not have been exercised.

5. Issuance Date. The person or persons in whose name or names any certificate representing shares of Common Stock is issued hereunder shall be deemed to have become the holder of record of the shares represented thereby as at the close of business on the date this

Warrant is exercised with respect to such shares, whether or not the transfer books of the Company shall be closed.

6. Expiration Date. This Warrant shall expire at the close of business on June , 2005 and shall be void thereafter.

7. Reserved Shares: Valid Issuance. The Company covenants that it will at all times from and after the date hereof reserve and keep available such number of its authorized shares of Common Stock, free from all preemptive or similar rights therein, as will be sufficient to permit the exercise of this Warrant in full. The Company further covenants that such shares as may be issued pursuant to the exercise of this Warrant will, upon issuance, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issuance thereof.

8. Dividends. If after the Original Issue Date (as defined in Section 13 hereof) the Company shall subdivide the Common Stock, by split-up or otherwise, or combine the Common Stock, or issue additional shares of Common Stock in payment of a stock dividend on the Common Stock, the number of shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination, and the Purchase Price shall forthwith be proportionately decreased in the case of a subdivision or stock dividend, or proportionately increased in the case of a combination.

9. Sale of Assets and Mergers. Upon the sale by the Company of all or substantially all of its assets, or the merger or consolidation of the Company with or into another entity in a transaction where the shares of the Company’s capital stock outstanding immediately prior to the closing of such merger or consolidation represent or are converted into or exchanged for shares that represent less than a majority of the shares of capital stock of the resulting or surviving entity outstanding immediately after the closing of such merger or consolidation (each, a “Business Event”), this Warrant shall expire and thereafter be void. The Company shall give the Holder of this Warrant thirty (30) days (the “Merger Exercise Period”) prior written notice of a Business Event. Holder may exercise this Warrant, in full or in part, during the Merger Exercise Period. Upon the expiration of the ?Merger Exercise Period, this Warrant shall expire and thereafter be void.

10. Fractional Shares. In no event shall any fractional share of Common Stock be issued upon any exercise of this Warrant. If, upon exercise of this Warrant as an entirety, the Holder would, except as provided in this Section 10, be entitled to receive a fractional share of Common Stock, then the Company shall issue the next higher number of full shares of Common Stock, issuing a full share with respect to such fractional share.

11. Certificate of Adjustment. Whenever the Purchase Price is adjusted, as herein provided, the Company shall promptly deliver to the Holder a certificate setting forth the Purchase Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

12. Notices of Record Date. Etc. In the event of

(a) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right,

(b) any reclassification of the capital stock of the Company, capital reorganization of the Company, consolidation or merger involving the Company, or sale or conveyance of all or substantially all of its assets, or

then and in each such event the Company will mail or cause to be mailed to the Holder a notice specifying (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (ii) the date on which any such reclassification, reorganization, consolidation, merger, sale or conveyance, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record in respect of such event are to be determined. Such notice shall be mailed at least 20 days prior to the date specified in such notice on which any such action is to be taken.

13. Issue Date. This Warrant is being issued by the Company on June 26, 2002 (the “Original Issue Date”) in connection with that certain Agreement, dated as of June 26, 2002, between the Company and Laboratory Corporation of America Holdings.

14. Amendment. The terms of this Warrant may be amended, modified or waived only with the written consent of the Company and the Holder of this Warrant.

15. Compliance with the Securities Act.

(a) Compliance with Securities Act. The Holder of this Warrant, by acceptance hereof, agrees that this Warrant, and the shares of Common Stock to be issued upon exercise hereof are being acquired for investment and that such Holder will not offer,, sell or otherwise dispose of this Warrant, or any shares of Common Stock to be issued upon exercise hereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended (the “Securities Act”) or any applicable state securities laws. Upon exercise of this Warrant, unless the Common Stock being acquired is registered under the Securities Act and any applicable state securities laws or an exemption from such registration is available, the holder hereof shall confirm in writing that the shares of Common Stock so purchased (and any shares issued upon conversion thereof) are being acquired for investment and not with a view toward distribution or resale in violation of the Securities Act and shall confirm such other matters related thereto as may be reasonably requested by the Company. This Warrant and all shares of Common Stock issued upon exercise of this Warrant (unless registered under the

Securities Act and any applicable state securities laws) shall be stamped or imprinted with a legend in substantially the following form:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS.

Said legend shall be removed by the Company, upon the request of a holder, at such time as the restrictions on the transfer of the applicable security shall have terminated.

(b) In addition, in connection with the issuance of this Warrant, the Holder specifically represents to the Company by acceptance of this Warrant as follows:

(i) The Holder is aware of the Company’s business affairs and financial condition, and has acquired information about the Company sufficient to reach an informed and knowledgeable decision to acquire this Warrant. The Holder is acquiring this Warrant for its own account for investment purposes only and not with a view to, or for the resale in connection with, any “distribution” thereof in violation of the Securities Act or applicable state securities laws.

(ii) The Holder understands that this Warrant has not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holder’s investment intent as expressed herein.

(iii) The Holder further understands that this Warrant must be held indefinitely unless subsequently registered under the Securities Act and qualified under any applicable state securities laws, or unless exemptions from registration and qualification are otherwise available. The holder is aware of the provisions of Rule 144, promulgated under the Securities Act.

16. Warrant Register; Transfers, Etc.

(a) Subject to the provisions of Section 15 hereto, this Warrant and all rights hereunder are transferable (but only with all related obligations) with the prior written consent of the Company, and upon surrender of the Warrant with a properly executed assignment (in the form attached hereto) at the principal office of the Company, or at such other office or agency as the Company may designate.

(b) Each holder of this Warrant acknowledges that this Warrant and the Common Stock of the Company issuable upon exercise hereof have not been registered under the

Securities Act, and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Common Stock issued upon its exercise in the absence of (i) an effective registration statement under the Securities Act as to this Warrant or such Common Stock and registration or qualification of this Warrant or such Common Stock under any applicable blue sky or state securities law then in effect, or (ii) an opinion of counsel, reasonably satisfactory to the Company, that such registration and qualification are not required.

(c) Until any transfer of this Warrant is made in the warrant register, the Company may treat the Holder of this Warrant as the absolute owner hereof for all purposes; provided, however, that if and when this Warrant is properly assigned in accordance with this Section 16, the Company may (but shall not be required to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto, as may be appropriate.

(d) The Company will maintain a register containing the names and addresses of the registered holders of this Warrant. Any registered holder may change such registered holder’s address as shown on the warrant register by written notice to the Company requesting such change.

17. No Impairment. The Company will not, by amendment of its Certificate of Incorporation or through any reclassification, capital reorganization, consolidation, merger, sale or conveyance of assets, dissolution, liquidation, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder.

18. Registration Rights.

(a) Whenever the Company proposes to file a registration statement with the Securities and Exchange Commission for a public offering and sale of securities of the Company (other than a registration statement on Form S8 or Form S4, or their successors, or any other form for a limited purpose, or any registration statement covering only securities proposed to be issued in exchange for securities or assets of another corporation) (a “Registration Statement”), it will, prior to such filing, give written notice to the Holder of its intention to do so and, upon the written request of the Holder given within 30 days after the Company provides such notice, the Company shall use commercially reasonable efforts to register under the Securities Act pursuant to the Registration Statement all shares of Common Stock issued or issuable upon conversion of the Warrant (“Registrable Shares”) for which the Holder has requested registration; provided that the Company shall have the right to postpone or withdraw any registration effected pursuant to this Section 18 without obligation to the Holder; and provided further that the Company shall have no obligation to register Registrable Shares which have already been registered under the Securities Act pursuant to an effective registration statement or are owned by a Holder who could immediately sell all of such Registrable Shares publicly pursuant to Rule 144 under the Securities Act.

(b) In connection with any offering under Section 18(a) involving an underwriting, the Company shall include in such offering all the Registrable Shares specified in a written request or requests, mailed by the Holder within 30 days of receipt of such written notice from the Company, provided that the Company may limit, to the extent so advised by the underwriters as a result of market conditions, the amount of Registrable Shares to be included in the registration by the Holder to an amount not less than one third of the total number of securities included in the offering. If the number of Registrable Shares to be included in the underwriting in accordance with the foregoing is less than the total number of Registrable Shares which the Holder has requested to be included, then the Company may include all securities proposed to be registered by the Company to be sold for its own account and the Holder shall participate in the underwriting pro rata based upon its total ownership of shares of Common Stock of the Company, together with any additional holders of shares of the Company’s capital stock who has requested registration of any or all of such holder’s shares pursuant to and in accordance with a grant of registration rights by the Company (a “Selling Securityholder”). If any Selling Securityholder would thus be entitled to include more shares than such Selling Securityholder requested to be registered, the excess shall be allocated among other requesting Selling Securityholders pro rata based upon their total ownership of shares.

(c) If at any time (i) the Holder requests that the, Company file a Registration Statement on Form S3 or any successor thereto for a public offering of all or any portion of the Registrable Shares with an aggregate proposed offering price of at least $500,000, and (ii) the Company is a registrant entitled to use Form S3 or any successor thereto to register such shares, then the Company shall use its reasonable best efforts at its own expense to file a Registration Statement on Form S3 or any successor thereto, for public sale in accordance with the method of disposition specified in such notice, the number of Registrable Shares specified in such notice; provided, however, that the Company shall have no obligation to register Registrable Shares which have already been registered under the Securities Act pursuant to an effective registration statement or are owned by a Holder who could immediately sell all of such Registrable Shares publicly pursuant to Rule 144 under the Securities Act. The Company shall be entitled to include in any Registration Statement referred to in this Section 18(c) shares of Common Stock to be sold by the Company for its own account or for the account of a Selling Securityholder, except as and to the extent that, in the opinion of the managing underwriter, if any, such inclusion would adversely affect the marketing of the Registrable Shares to be sold. Notwithstanding anything to the contrary in this Section 18(c), the Company shall not be required to effect more than one registration pursuant to this Section 18(c) in any 12 month period.

(d) A Holder proposing to distribute its securities in an offering under this Section 18 involving an underwriting shall (together with the Company and other shareholders of securities distributing their shares through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for the underwriting.

(e) The Company shall not be obligated to register, pursuant to this Section 18, the Registrable Shares of any Holder who fails to provide promptly to the Company such information as the Company may reasonable request at any time to enable the Company to

comply with any applicable law or regulation or to facilitate preparation of the Registration Statement.

(f) In connection with any public offering of equity securities of the Company, the Holder agrees not to sell, pledge, hypothecate, hedge, transfer or otherwise dispose of, or grant any option or purchase right with respect to, any shares of capital stock of the Company then owned by the Holder and not otherwise offered in the public offering, or engage in any short sale, hedging transaction or other derivative security transaction involving the Registrable Shares or other shares of Common Stock of the Company held by the Holder, for such period of time commencing ten (10) days prior to the proposed effective date of such public offering and until 180 days following the effective date of such public offering.

(g) All expenses incurred by the Company in complying with this Section 18, including, all registration and filing fees, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, fees and expenses incurred in connection with complying with state securities or “blue sky” laws, fees of the National Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents and registrars and costs of insurance, but excluding any Selling Expenses, are called “Registration Expenses”. All underwriting discounts and selling commissions applicable to the sale of Restricted Stock and fees and disbursements of counsel for the sellers of the Registrable Shares are called “Selling Expenses”. The Company will pay all Registration Expenses in connection with each registration statement under this Section 18. All Selling Expenses in connection with each registration statement under this Section 18 shall be borne by the participating sellers in proportion to the number of shares sold by each, or by such participating sellers other than the Company (except to the extent the Company shall be a seller) as they may agree.

19. Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Securities and Exchange Commission which may at any time permit the sale of the Registrable Shares to the public without registration, the Company agrees to:

(a) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act;

(b) use commercially reasonable efforts to file with the Securities and Exchange Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act of 1934, as amended (the “Exchange Act”); and

(c) furnish to each holder of Registrable Shares forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of such Rule 144 and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed by the Company as such holder may reasonably request in availing itself of any rule or regulation of the Securities and Exchange Commission allowing such holder to sell any Registrable Shares without registration.

20. Governing Law. The provisions and terms of this Warrant shall be governed by and construed in accordance with the internal laws of the Commonwealth of Massachusetts.

21. Successors and Assign. This Warrant shall be binding upon the Company’s successors and assigns and shall inure to the benefit of the Holder’s successors, legal representatives and permitted assigns.

22. Business Days. If the last or appointed day for the taking of any action required or the expiration of any right granted herein shall be a Saturday or Sunday or a legal holiday in the Commonwealth of Massachusetts, then such action may be taken or right may be exercised on the next succeeding day which is not a Saturday or Sunday or such a legal holiday.

23. Shareholder Rite. Except as set forth herein, no holder of this Warrant, as such, shall be entitled to vote upon any matter submitted to shareholders at any meeting thereof, or to receive notice of meetings, or be deemed the holder of Common Stock until this Warrant shall have been exercised and the Shares purchasable upon such exercise shall have become deliverable, as provided herein.

[Remainder of Page Intentionally Left Blank]

Dated: June 26, 2002	EXACT SCIENCES CORPORATION



(Corporate Seal)	By:	/s/ Don M. Hardison
		Name:
		Title:

Attest:

/s/ John A. McCarthy, Jr.

Subscription

To:

Date:

The undersigned hereby subscribes for the shares of Common Stock covered by this Warrant. The certificates) for such shares shall be issued in the name of the undersigned or as otherwise indicated below:

Signature

Name for Registration

Mailing Address

Assignment

	For value received		hereby sells,

assigns and transfers unto



Please print or typewrite name and address of Assignee



the within Warrant, and does hereby irrevocably constitute and appoint

		its attorney to transfer the within Warrant on the books of the

within named Company with full power of substitution on the premises.

Dated:





In the Presence of:

EX-10.1 4 j4567_ex10d1.htm EX-10.1

WHENEVER CONFIDENTIAL INFORMATION IS OMITTED HEREIN (SUCH OMISSIONS ARE DENOTED BY AN ASTERISK), SUCH CONFIDENTIAL INFORMATION HAS BEEN SUBMITTED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.

AGREEMENT

THIS AGREEMENT (the “Agreement”), effective this 26th day of June, 2002 (the “Effective Date”), is entered into by and between Laboratory Corporation of America Holdings (“LABCORP”), a Delaware corporation having its principal place of business at 430 South Spring Street, Burlington, NC 27215; and EXACT Sciences Corporation (“EXACT”), a Delaware corporation having its principal place of business at 63 Great Road, Maynard, MA 01754.

EXACT owns certain proprietary technology directed to cancer detection and is producing improvements, enhancements, and inventions related to that technology.

LABCORP has equipment, facilities, knowledge, and know-how that are useful in connection with the performance of commercial and clinical testing relating to EXACT’s proprietary technology.

EXACT and LABCORP (the “Parties”), therefore, in consideration of the mutual covenants and conditions contained herein, agree as follows:

Article 1: Definitions

1.1 “Affiliate” shall mean, with respect to either Party or any third party, any Person controlling, controlled by or under the common control of that Party or third party, as the case may be at any time during the Term of this Agreement. For the purpose of this definition, “control” shall mean direct or indirect ownership of fifty percent (50%) or more of the shares entitled to vote for the election of directors.

1.2 “Approved Kit” shall mean an in vitro diagnostic kit for the performance of Assays.

1.3 “ACP”, which is an acronym for ‘Average Compensated Price’, shall mean, for any specified month, the average dollar amount received (as such average is calculated in the manner set forth on Schedule 3) for each Assay performed by LABCORP and its Affiliates and sub-licensees under this Agreement

1.4 “Analytical Process Improvement” shall mean EXACT’s protocols and associated Technology which: 1) reduces the [CONFIDENTIAL TREATMENT REQUESTED]/*/ , or reduces the [CONFIDENTIAL TREATMENT REQUESTED]/*/, 2) [CONFIDENTIAL TREATMENT REQUESTED]/*/, 3) results in [CONFIDENTIAL TREATMENT REQUESTED]/*/ using EXACT’s cost model as of the Effective Date, and 4) is [CONFIDENTIAL TREATMENT REQUESTED]/*/ (as specified in Section 3.5).

1.5 “Assay” shall mean a test for the detection of colorectal cancer on a patient sample using the Technology in the Field.

1.6 “Capture Process Improvement” shall mean EXACT’s protocol and associated Technology that will reduce the [CONFIDENTIAL TREATMENT REQUESTED]/*/, and that will [CONFIDENTIAL TREATMENT REQUESTED]/*/, using EXACT’s cost model as of the Effective Date. If there are [CONFIDENTIAL TREATMENT REQUESTED]/*/ in order to implement the Capture Process Improvement for an annual run rate of [CONFIDENTIAL TREATMENT REQUESTED]/*/, then EXACT shall promptly reimburse LABCORP for the amount greater than [CONFIDENTIAL TREATMENT REQUESTED]/*/. EXACT shall deliver to LABCORP the Capture Process Improvement on or before [CONFIDENTIAL TREATMENT REQUESTED]/*/. The [CONFIDENTIAL TREATMENT REQUESTED]/*/ shall be reduced by [CONFIDENTIAL TREATMENT REQUESTED]/*/ after [CONFIDENTIAL TREATMENT REQUESTED]/*/ that the delivery of the Capture Process Improvement is delayed.

1.7 “Commercial Launch Date” shall mean the later to occur of (i) completion of the Initial EXACT Obligations, or (ii) [CONFIDENTIAL TREATMENT REQUESTED]/*/.

1.8 “Exclusive Period” shall mean the period beginning on April 1, 2003 and ending on April 1, 2008, unless sooner terminated in accordance with Section 8.1, 11.2, or 11.6.

1.9 “Field” shall mean a screening assay (regardless of other uses to which such assay is put) for colorectal cancer in patient samples, excluding tests solely for staging and/or monitoring of colorectal cancer which do not obsolete or adversely impact such screening assay.

1.10 “First Trigger Date” means the first of: (i) the date on which LABCORP, its Affiliates and sublicensees net collected revenue from performance of Assays (excluding Research Assays) exceeds [CONFIDENTIAL TREATMENT REQUESTED]/*/, or (ii) the date on which LABCORP, its Affiliates and sublicensees have processed and billed for [CONFIDENTIAL TREATMENT REQUESTED]/*/ Assays (excluding Research Assays) regardless of whether the Assays have been reimbursed.

1.11 “Initial EXACT Obligations” shall mean EXACT providing LABCORP with the protocols, SOPs, reagents, and other information and materials reasonably required by LABCORP in order for LABCORP to validate the Assays at EXACT’s facilities.

1.12 “Invention” shall mean any (i) ideas, designs, concepts, techniques, discoveries, inventions (whether or not patentable), improvements, modifications, know-how, methods, technology, developments, SOPs, protocols, proprietary information, data, and works of authorship; and (ii) patents, copyrights (including without limitation reproducing and preparing derivative works), trademarks, service marks, trade secret, trade dress, or other intellectual property rights associated with the foregoing.

1.13 “Joint Invention” shall mean any Invention conceived and/or reduced to practice jointly by one or more employees or agents of EXACT and one or more employees or agents of LABCORP or its Affiliates in the course of performing any activities under this Agreement.

1.14 “Locus” or “Loci” shall mean point mutation(s), insertion(s) and/or deletion(s) in (i) genes, such as, but not limited to, [CONFIDENTIAL TREATMENT REQUESTED]/*/, or (ii) microsatellites, such as, but not limited to, [CONFIDENTIAL TREATMENT REQUESTED]/*/, for use with the Technology.

1.15 “Marketing Plan” shall mean a plan to be separately agreed upon by the Parties in writing and which shall specify a joint marketing and sales plan including but not limited to plans for the development and execution of a comprehensive direct and indirect sales plan, medical education programming, advocacy work toward guideline inclusion, in-office and other consumer programming, and managed care activities.

1.16 “Minimum Performance Standards” shall mean the processing by LABCORP (including all of its Affiliates and sub-licensees) and the entities listed on Schedule 2 (including their Affiliates) of at least [CONFIDENTIAL TREATMENT REQUESTED]/*/ Assays (in the aggregate), excluding Research Assays, on or prior to [CONFIDENTIAL TREATMENT REQUESTED]/*/ .

1.17 “Negative Article” shall mean a [CONFIDENTIAL TREATMENT REQUESTED]/*/.

1.18 “Operations Plan” shall mean a plan to be separately agreed upon by the Parties in writing and which shall specify procedures for sample collection, sample distribution, capacity planning, and Assay performance.

1.19 “Person” shall mean an individual, corporation, partnership, joint venture, trust, or unincorporated organization, or a government or any agency or political subdivision thereof.

1.20 “Records” shall mean all written records, accounts, and data regarding the activities performed by LABCORP or its Affiliates under this Agreement.

1.21 “Research Assays” shall mean Assays performed by LABCORP or its Affiliates or sub-licensees for research purposes (including without limitation clinical trials) without payment from a third party.

1.22 “Research Purposes” shall mean non-commercial research purposes to support the development of in vitro diagnostic products and assays to be developed by or for EXACT (including clinical trials where testing is not paid for by a third party, but excluding clinical trials where testing is paid for by a third party).

1.23 “Second Trigger Date” means the date on which (whichever comes first): (i) LABCORP’s, its Affiliates’ and sublicensees’ net collected revenue from performance of Assays (excluding Research Assays) exceeds [CONFIDENTIAL TREATMENT REQUESTED]/*/, or (ii) LABCORP, its Affiliates and sublicensees have processed and billed for [CONFIDENTIAL TREATMENT REQUESTED]/*/ Assays (excluding Research Assays) regardless of whether the Assays have been reimbursed.

1.24 “Specified Compensated Assays” shall mean, with respect to any specified month for determination of any payment due by LABCORP to EXACT under Section 6.2 of this Agreement, the total number of Assays that meet each of the following criteria: (a) such Assays were performed by LABCORP or any of its Affiliates or sub-licensees at any time during the twelve (12) month period ending on the last day of the specified month, and (b) LABCORP or any of its Affiliates or sub-licensees received itemized fee-for-services payments for such Assays during the specified month.

1.25 “Standard of Care” shall mean inclusion in publicly reported guidelines of [CONFIDENTIAL TREATMENT REQUESTED]/*/ for screening for colorectal cancer.

1.26 “Technology” shall mean individually or collectively the United States and Canadian patents and United States and Canadian patent applications of EXACT listed in the attached Schedule 1 (including all United States and Canadian patents issued from such applications, continuations, continuations-in-part used in the Field, and divisional applications based upon such applications, and reissues, re-examinations of such patents) and any additional Inventions as set forth in Section 2.3 below. For the avoidance of doubt, Technology shall not include continuations-in-part used solely outside the Field.

1.27 “Territory” shall mean the United States and Canada and their respective territories and possessions, except that it shall mean worldwide with respect to clinical trials.

1.28 “Term” shall have the meaning given to it in Section 11.1 of this Agreement.

Article 2: Licenses

2.1 License. EXACT hereby grants to LABCORP and each of its Affiliates a non-transferable license to make, use, import, offer for sale, sell, and perform services, based on the Technology in the Field in the Territory for the Term. The license granted under this Section 2.1 shall be sub-licensable by LABCORP to commercial reference laboratories only in the Field, subject to the prior approval of EXACT, with such approval not to be unreasonably withheld by EXACT. The license granted under this Section 2.1 shall be exclusive during the Exclusive Period and otherwise non-exclusive. As used in this Section 2.1, “exclusive” shall mean that the rights granted hereunder shall be exclusive to LABCORP and each of its Affiliates and sub-licensees in the Field except for the right of EXACT and each of its Affiliates (i) to use the Technology for any commercial purpose prior to the Commercial Launch Date and thereafter subject to the prior written approval of LABCORP (which approval may be granted or denied at LABCORP’s sole discretion); (ii) to license the Technology to other commercial and research organizations for Research Purposes; (iii) to grant a non-transferable, non-sublicensable license to the Technology to the entities and their Affiliates listed on Schedule 2 for commercial or Research Purposes (including clinical trials), provided such license is [CONFIDENTIAL TREATMENT REQUESTED]/*/; (iv) subject to the prior written approval of LABCORP, which approval may be granted or denied at LABCORP’s sole discretion, to license the Technology to other commercial and research organizations for commercial purposes; and (v) to perform and have performed research and clinical studies for EXACT’s Research Purposes, including working with a Person for the development and testing of an Approved Kit.

2.2 Additional Locus. If at any time during the term of the Agreement, either Party becomes aware of a genetic Locus that would enhance detection of colorectal cancer in an Assay using the Technology, such Party shall inform the other Party of such Locus and provide any supporting documentation known to such Party, and if such Locus is not currently on Schedule 5, then such Locus shall automatically be incorporated in the attached Schedule 5. Incorporation of a locus in Schedule 5 pursuant to this Section 2.2 shall not constitute a representation or warranty by EXACT that such locus can be used by LABCORP free of patent infringement unless EXACT owns patent rights to such locus.

2.3 Additional Technology. Any Invention that is [CONFIDENTIAL TREATMENT REQUESTED]/*/ at any time on or before [CONFIDENTIAL TREATMENT REQUESTED]/*/, shall automatically be included within the definition of “Technology” for purposes of this Agreement (and any patents or patent applications relating to such Inventions shall automatically be added to Schedule 1). EXACT shall promptly notify LABCORP in writing of all such Inventions. In addition, EXACT shall provide notice to LABCORP of any Invention that is [CONFIDENTIAL TREATMENT REQUESTED]/*/ at any time after [CONFIDENTIAL TREATMENT REQUESTED]/*/ during the Term of this Agreement but prior to [CONFIDENTIAL TREATMENT REQUESTED]/*/ (an “Applicable EXACT Invention”). Upon delivery of such notice and for a period of [CONFIDENTIAL TREATMENT REQUESTED]/*/ days thereafter, EXACT agrees to [CONFIDENTIAL TREATMENT REQUESTED]/*/. Notwithstanding the foregoing, EXACT reserves the right to [CONFIDENTIAL TREATMENT REQUESTED]/*/, in its sole discretion. However, in the event that[CONFIDENTIAL TREATMENT REQUESTED]/*/, and EXACT [CONFIDENTIAL TREATMENT REQUESTED]/*/, then in each such case EXACT shall [CONFIDENTIAL TREATMENT REQUESTED]/*/.

Article 3: Assays

3.1 Performance. LABCORP agrees that each Assay conducted by LABCORP and its Affiliates and sub-licensees under this Agreement shall be performed in accordance with applicable laws and regulations. Following the Effective Date, the Parties shall use good faith efforts to agree on an Operations Plan.

3.2 Supply and Pricing of Assay Kits. In the event that, during the Term of this Agreement, (i) LABCORP is [CONFIDENTIAL TREATMENT REQUESTED]/*/, and (ii) EXACT is [CONFIDENTIAL TREATMENT REQUESTED]/*/, then EXACT shall [CONFIDENTIAL TREATMENT REQUESTED]/*/. EXACT shall have the unqualified right to enter into agreements with third-parties for the development or commercialization of in vitro diagnostic kits, provided, however, that such agreements do not [CONFIDENTIAL TREATMENT REQUESTED]/*/, and any such agreements shall [CONFIDENTIAL TREATMENT REQUESTED]/*/. For the avoidance of doubt, EXACT shall not [CONFIDENTIAL TREATMENT REQUESTED]/*/. In addition, during any period of time during the Term of this Agreement in which LABCORP is [CONFIDENTIAL TREATMENT REQUESTED]/*/, EXACT shall not [CONFIDENTIAL TREATMENT REQUESTED]/*/.

3.3 Reporting Requirements.

3.3.1 Assays Performed. Within fifteen (15) days following the end of each calendar month LABCORP will notify EXACT in writing of the total number of Assays performed during the prior month by LABCORP and its Affiliates and sub-licensees, including Research Assays (separately reported).

3.3.2 Specified Compensated Assays and ACP. Within thirty (30) days following the end of each calendar month, LABCORP will notify EXACT in writing of (i) the total number of Assays performed by LABCORP and its Affiliates and sub-licensees for which LABCORP or any of its Affiliates or sub-licensees received an itemized fee-for-service, including the number of Specified Compensated Assays and (ii) the ACP, in each case, with respect to the prior month.

3.3.3 Assays for Capitated Payments. Within thirty (30) days following the end of each calendar quarter, LABCORP will notify EXACT in writing of the total number of Assays performed during the prior quarter by LABCORP or its Affiliates or sub-licensees (excluding Research Assays) for which LABCORP or any of its Affiliates or sub-licensees did not receive an itemized fee-for-service (for example a capitated payment, such as Assays conducted pursuant to a managed care plan which pays LABCORP or any of its Affiliates or sub-licensees for a fee per patient regardless of the number of Assays performed).

3.3.4 Interim Reporting; Records. LABCORP shall make its personnel available, and otherwise use its reasonable efforts, to provide EXACT with such interim reporting information with respect to this Section 3.3 as may be reasonably requested by EXACT. LABCORP shall maintain, and cause its Affiliates to maintain, accurate records relating to the number of Assays performed under this Agreement (including Research Assays, which shall be separately reported) and such books of account shall be subject to the inspection rights of EXACT set forth in Section 6.4 hereof.

3.4 Marketing Support. The Parties shall use good faith efforts to agree on a Marketing Plan within six (6) months following the Effective Date.

3.5 API Committee. Each party shall appoint two (2) scientists to a committee for the purpose of monitoring the progress of development of the Analytical Process Improvements (the “API Committee”). The Analytical Process Improvement milestone payment (i.e., event 3 specified on Schedule 4) shall not be payable under Section 6.1.3 (or otherwise) until all scientists on the API Committee have accepted and approved the Analytical Process Improvements, in each scientist’s sole discretion.

Article 4: Ownership and Rights

4.1 Pre-Existing Technology. All Inventions, of any type, owned by LABCORP or EXACT as of the Effective Date shall remain the property of the respective Party.

4.2 Inventions.

4.2.1 As between the Parties, EXACT shall own any Invention conceived and/or reduced to practice solely by employees or authorized agents of EXACT or any of its Affiliates (“EXACT Invention”) and LABCORP shall own any Invention conceived and/or reduced to practice solely by employees or authorized agents of LABCORP or any of its Affiliates (“LABCORP Invention”).

4.2.2 If EXACT obtains a patent at any time during the Term that (i) would dominate a patent licensed under this Agreement, or (ii) would be infringed by LABCORP as a result of the performance of Assays by LABCORP at the time of issuance of such patent, then, in each case, such patent shall automatically be included in the relevant license(s) granted to LABCORP and its Affiliates under this Agreement. EXACT hereby grants LABCORP an immunity from suit during the Term for any patent obtained by EXACT at any time during the Term that is infringed by LABCORP as a result of its performance of Assays.

4.2.3 Any Joint Invention shall be jointly owned by EXACT and LABCORP, and each Party may use Joint Inventions internally within its organization in any manner and for any reason in its sole discretion, without the approval of the other Party and without any obligation to pay the other Party for any profits earned or other benefits acquired as a result of such internal use. However, neither Party shall sell, license or otherwise provide rights to Joint Inventions to third parties without the prior written approval of the other Party (except as set forth in Section 4.6.2 below).

4.3 No Implied License. Nothing in this Agreement shall be construed as granting any Person any right or license under any intellectual property rights of any other Person by implication, estoppel or otherwise, except as expressly set forth in this Agreement.

4.4 No Attempt to Obtain Rights. Except as set forth in this Agreement, neither Party shall attempt to obtain, during the Term or thereafter, any right, title or interest in or to any Invention of the other Party.

4.5 [CONFIDENTIAL TREATMENT REQUESTED]/*/. During the Term of this Agreement prior to [CONFIDENTIAL TREATMENT REQUESTED]/*/, LABCORP shall provide EXACT notice of any LABCORP Invention that is [CONFIDENTIAL TREATMENT REQUESTED]/*/ (an “Applicable LABCORP Invention”). Upon delivery of such notice and for a period of [CONFIDENTIAL TREATMENT REQUESTED]/*/ days thereafter [CONFIDENTIAL TREATMENT REQUESTED]/*/ LABCORP agrees to [CONFIDENTIAL TREATMENT REQUESTED]/*/. Notwithstanding the foregoing, LABCORP reserves the right to [CONFIDENTIAL TREATMENT REQUESTED]/*/, in its sole discretion. However, in the event that [CONFIDENTIAL TREATMENT REQUESTED]/*/, and LABCORP [CONFIDENTIAL TREATMENT REQUESTED]/*/, then in each such case LABCORP shall [CONFIDENTIAL TREATMENT REQUESTED]/*/.

4.6 Patent Prosecution.

4.6.1 Inventions. Each Party shall be expressly permitted to file and prosecute any patent application covering such Party’s own Inventions.

4.6.2 Joint Inventions. The Parties shall jointly agree upon any decisions relating to the preparation, filing, prosecution, maintenance and defense of any patent application on a Joint Invention or any patent issuing therefrom, and the Parties shall share equally in all expenses in connection therewith, including, without limitation, all attorneys’ fees incurred in connection therewith. Notwithstanding the prior sentence, in the event of a disagreement regarding the filing of a patent application with respect to a Joint Invention, the Party seeking to file a patent application may file such patent application at its own expense, and the other Party agrees to assign all right, title, and interest in and to such application and any patents issuing therefrom to the Party filing such patent application subject to the retention of a perpetual, royalty-free, non-sublicensable, license to use the subject matter of the patent. Each Party shall provide the other Party with copies of all official correspondence between such Party and U.S. or foreign patent offices in patent applications that the Parties pursue for Joint Inventions.

4.7 Litigation. Each Party shall notify the other Party immediately if it becomes aware of (i) any infringement by a third party of any patent licensed under this Agreement during the Term or (ii) any infringement of any patent of a third party pursuant to the activities contemplated by this Agreement. EXACT shall use [CONFIDENTIAL TREATMENT REQUESTED]/*/, at its own expense, to enforce (including without limitation instituting legal action when necessary) its patent rights and with respect to any infringement by a third party of any patents owned by EXACT and covered by the Technology in the Field. Without limiting the foregoing, and without limiting any other rights or remedies of LABCORP, in the event EXACT does not file suit during the Exclusive Period to enforce its patent rights against a third party infringing on any patent licensed under this Agreement, EXACT shall [CONFIDENTIAL TREATMENT REQUESTED]/*/ in connection with such suit. After the Exclusive Period, LABCORP shall not have the right to [CONFIDENTIAL TREATMENT REQUESTED]/*/, except with the prior written consent of EXACT, which consent may be granted or denied in EXACT’s sole discretion.

Article 5: Confidential Information

5.1 Confidential Information. “Confidential Information” shall mean any information, in whatever form, designated by the disclosing Party (the “Disclosing Party”) in writing as confidential, proprietary or marked with words of like import when provided to the receiving Party (the “Receiving Party”), and information orally conveyed if the Disclosing Party states at the time of oral conveyance or promptly thereafter that such information is confidential, and provides specific written confirmation thereof within thirty (30) business days of the oral conveyance, or such extended period as the Parties may agree in writing. Notwithstanding the foregoing designation requirement (i) all EXACT Inventions, and all information and technology provided by EXACT to LABCORP to enable LABCORP to perform activities hereunder shall be considered Confidential Information of EXACT under this Agreement, (ii) all LABCORP Inventions shall be considered Confidential Information of LABCORP under this Agreement, and (iii) all Joint Inventions shall be considered Confidential Information for both LABCORP and EXACT.

5.2 Exclusions to Confidential Information. Confidential Information will not include information which (a) was in the Receiving Party’s possession without a confidentiality restriction prior to the disclosure by the Disclosing Party hereunder, as shown by the Receiving Party with contemporaneous written records; (b) at or after the time of disclosure by the Disclosing Party becomes generally available to the public through no act or omission on the Receiving Party’s part; (c) is developed by the Receiving Party independently of and without reference or access to any Confidential Information it receives from the Disclosing Party, as shown by the Receiving Party with contemporaneous written records; (d) has come into the possession of the Receiving Party without a confidentiality restriction from a third party and such third party is under no obligation to the Disclosing Party to maintain the confidentiality of such information; (e) the Disclosing Party has given written permission to the Receiving Party to disclose, or (f) any patent application filed pursuant to Article 4 above.

5.3 Treatment of Confidential Information. The Receiving Party acknowledges the confidential and proprietary nature of the Disclosing Party’s Confidential Information and agrees (i) to hold the Disclosing Party’s Confidential Information in confidence and to take all reasonable precautions to protect such Confidential Information (including, without limitation, all precautions the Receiving Party employs with respect to its own confidential materials); (ii) not to divulge any such Confidential Information to any third person; and (iii) not to make any use whatsoever of such Confidential Information except as expressly authorized in this Agreement. The Receiving Party shall limit disclosure of Confidential Information received from the Disclosing Party to those employees or agents of the Receiving Party whose use of or access to the Confidential Information is necessary to carry out such Party’s obligations under this Agreement, and shall secure from all employees, agents or contractors having access to the Confidential Information agreements, at least as protective of the Confidential Information as the provisions of this Article 5, to maintain such information in confidence.

5.4 Notwithstanding the provisions of Section 5.3 above, LABCORP shall be permitted to disclose the Technology (including without limitation EXACT Inventions and all information and technology provided by EXACT to LABCORP to enable LABCORP to perform activities hereunder) to its Affiliates and sublicensees who, in each case, have agreed to confidentiality restrictions at least as strict as those contained in this Article5.

5.5 Disclosure Required by Judicial or Governmental Request, Requirement or Order. In the event that the Receiving Party is ordered or required to disclose the Disclosing Party’s Confidential Information pursuant to a judicial or government request, requirement or order, the Receiving Party shall promptly notify the Disclosing Party and take reasonable steps to assist the Disclosing Party in contesting such request, requirement or order or in otherwise protecting the Disclosing Party’s rights prior to disclosure.

5.6 Reproduction of Confidential Information. The Receiving Party agrees not to reproduce or copy by any means Confidential Information, except as reasonably required to accomplish the purposes of this Agreement. Upon termination of this Agreement, except for the rights of each Party to the Records as set forth elsewhere in this Agreement, the Receiving Party’s right to use Confidential Information shall immediately terminate. In addition, upon such termination, or upon expiration of this Agreement or demand by the Disclosing Party at any time, Receiving Party shall return promptly to the Disclosing Party or destroy, at the Disclosing Party’s option, all tangible materials that disclose or embody Confidential Information, subject to any records required to be retained by either Party in accordance with laws, regulations, rules or orders.

5.7 Relief. The Parties acknowledge and agree that because the violation, breach, or threatened breach of Article 5 of this Agreement would result in immediate and irreparable injury, each Party shall be entitled, without limitation of remedy, to (i) temporary and permanent injunctive and other equitable relief restraining the other Party from activities constituting a violation, breach or threatened breach of Article 5 of this Agreement to the fullest extent allowed by law, and (ii) all such other remedies available at law or in equity, including without limitation the recovery of damages.

Article 6: Payments

6.1 License Fees LABCORP shall pay to EXACT fees in accordance with Sections 6.1.1, 6.1.2, 6.1.3 and 6.1.4.

6.1.1 Effective Date License Fee. LABCORP shall pay EXACT a non-refundable license fee of $15,000,000 one (1) day after the Effective Date of this Agreement (the “Effective Date License Fee”). Payment of the Effective Date License Fee shall be made by LABCORP concurrent with the execution of this Agreement.

6.1.2 Commercial Launch License Fee. LABCORP shall pay EXACT a license fee of $15,000,000 upon the Commercial Launch Date (the “Commercial Launch License Fee”); provided, however, that [CONFIDENTIAL TREATMENT REQUESTED]/*/ in the event [CONFIDENTIAL TREATMENT REQUESTED]/*/ prior to the Commercial Launch Date. EXACT shall invoice LABCORP for the Commercial Launch License Fee upon the Commercial Launch Date (unless [CONFIDENTIAL TREATMENT REQUESTED]/*/ prior to such date), with payment of the invoiced fees due within fifteen (15) days after invoicing.

6.1.3 Milestone License Fees. LABCORP shall pay EXACT each of the license fees set forth on the attached Schedule 4 upon the occurrence of the events set forth next to each such license fee on the attached Schedule 4 (the “Milestone License Fees”); provided, however, that in the event [CONFIDENTIAL TREATMENT REQUESTED]/*/ prior to the Commercial Launch Date, [CONFIDENTIAL TREATMENT REQUESTED]/*/. EXACT shall invoice LABCORP for each Milestone License Fee upon the occurrence of the applicable milestone event (unless [CONFIDENTIAL TREATMENT REQUESTED]/*/ prior to the Commercial Launch Date and the Milestone License Fee relates to [CONFIDENTIAL TREATMENT REQUESTED]/*/), with payment of the invoiced fees due within fifteen (15) days after invoicing.

6.1.4 Performance-Based License Fees. If (and only if) the First Trigger Date occurs on or before [CONFIDENTIAL TREATMENT REQUESTED]/*/, then LABCORP shall pay EXACT a non-refundable license fee of [CONFIDENTIAL TREATMENT REQUESTED]/*/ to be paid within 30 days of the First Trigger Date. If (and only if) the Second Trigger Date occurs on or before [CONFIDENTIAL TREATMENT REQUESTED]/*/, then LABCORP shall pay EXACT a non-refundable license fee of [CONFIDENTIAL TREATMENT REQUESTED]/*/ within 30 days of the Second Trigger Date.

6.2 Assay Payments.

6.2.1 Pricing Schedule. Within forty-five (45) days of the end of each month during the Term, LABCORP shall pay to EXACT a fee determined by multiplying the Specified Compensated Assays in such month by a per Assay fee as provided in Schedule 3; provided, however, that the Specified Compensated Assay fee shall in no event (except as provided in Section 6.2.2 (b)), be less than [CONFIDENTIAL TREATMENT REQUESTED]/*/ (the “Specified Compensated Assay Fee Minimum”) The Specified Compensated Assay fee shall be determined by calculating the ACP as provided in Section 1.3 of this Agreement, and using the formula in Schedule 3 to determine the per Assay fee based on the ACP. An example of the calculation of the fee under this Section 6.2.1 is provided in Schedule 3. LABCORP shall use efforts consistent with its internal policies and procedures for similar types of assays to obtain compensation for all Assays performed by LABCORP and its Affiliates and sub-licensees hereunder. Notwithstanding any termination of this Agreement, EXACT shall be entitled to payments under this Section 6.2 for all Specified Compensated Assays performed by LABCORP and its Affiliates and sub-licensees prior to such termination.

6.2.2 Alternative Pricing.

a. [CONFIDENTIAL TREATMENT REQUESTED]/*/. Notwithstanding the foregoing, during and after the termination of [CONFIDENTIAL TREATMENT REQUESTED]/*/, in the event that LABCORP (including its Affiliates) [CONFIDENTIAL TREATMENT REQUESTED]/*/. In addition, during any period of time during the Term of this Agreement in which LABCORP [CONFIDENTIAL TREATMENT REQUESTED]/*/ on a future date.

b. Competing Assay. With the exception of the entities listed in Schedule 2, in the event that, during the Term of this Agreement, a third party sells commercially an assay in the Field that satisfies [CONFIDENTIAL TREATMENT REQUESTED]/*/ on Schedule 4 as applied to the third party, the Specified Compensated Assay Fee Minimum provided in Section 6.2.1 shall no longer apply.

c. Royalties On Existing Technology or Markers. If LABCORP is required to pay any third party, other than [CONFIDENTIAL TREATMENT REQUESTED]/*/, a royalty to use any of the protocols transferred by EXACT pursuant to this Agreement (as such protocols are configured at the time of transfer by EXACT to LabCorp), or any of the loci in Schedule 5 (as Schedule 5 existed as of the Effective Date), then the royalty due such third party shall be deducted from the Assay payments due under this Article 6.

d. New Invention or Loci For Which A Third Party Royalty is Due. If either party becomes aware of an Invention or a locus that is useful in performing Assays hereunder and for which a royalty must be paid to a third party, the Parties shall discuss whether such Invention or locus should be used in an Assay. If the parties agree that such an Invention or locus should be used in an Assay, then the parties shall negotiate in good faith an equitable adjustment to the terms of this Agreement, if any. The prior sentence shall not be construed as limiting LABCORP’s right to use the Technology in the Field in conjunction with other Inventions or loci, but merely requiring the parties to negotiate in good faith on an equitable adjustment (if any) to the terms of this Agreement if LABCORP and EXACT agree that such new Inventions or loci should be used in performing Assays.

6.2.3 Capitated Payments. For each calendar quarter during the Term in which the number of Assays performed by LABCORP and its Affiliates and sublicensees under this Agreement (excluding Research Assays) for which LABCORP or its Affiliates or sublicensees did not receive an itemized fee-for-service payment (for example, a capitated payment, such as Assays conducted pursuant to a managed care plan which pays LABCORP or its Affiliates or sublicensees a fee per patient regardless of the number of Assays performed) exceeds the Specified Capitated Percentage (defined below) of the total number of Assays performed by LABCORP and its Affiliates and sublicensees under this Agreement (excluding Research Assays), LABCORP shall pay EXACT a fee for such calendar quarter equal to an amount as is determined by multiplying (i) [CONFIDENTIAL TREATMENT REQUESTED]/*/, by (ii) [CONFIDENTIAL TREATMENT REQUESTED]/*/. The “Specified Capitated Percentage” shall mean [CONFIDENTIAL TREATMENT REQUESTED]/*/. EXACT shall invoice LABCORP for such fees on a quarterly basis, with payment of the invoiced fees due within 30 days after invoicing.

6.3 Late Payments. Each Party may impose interest compounded at the rate of one and one-half percent (1½%) above the prime rate published in The Wall Street Journal, Eastern Edition, under the heading “Money Rates,” on the first business day of each calendar quarter in which such payments are overdue, per annum on any overdue amount (or such lesser percentage permitted by law) owed by the other Party hereunder until such other Party is current in payment. In the event that LABCORP is overdue on its payment obligations under (i) Section 6.1.2 and 6.1.3 hereof for more than fifteen (15) days and (ii) under Section 6.2 hereof for more than thirty (30) days, EXACT may provide written notice to LABCORP of such overdue payment obligations and, if such overdue obligations are not paid within thirty (30) days after LABCORP’s receipt of such notice, then EXACT may, at EXACT’s option and without liability, suspend the license granted to LABCORP under this Agreement until LABCORP’s account is current. All applicable federal, state, or local taxes assessed in connection with this Agreement (excluding taxes imposed on the income of EXACT) will be paid by LABCORP.

6.4 Inspection Rights.

a. LABCORP shall retain its Records for a period of three (3) years after the expiration of the Term of this Agreement. LABCORP shall make its Records and books of account relating to EXACT’s entitlement to payment hereunder for Assays performed available to EXACT (and its representatives and consultants) for inspection and review at any reasonable time upon thirty (30) days prior written request by EXACT. Any discrepancies in accounting discovered through such review shall be resolved by mutual agreement of the Parties. In the absence of an agreement between the Parties within thirty (30) days of such audit, the Parties agree that the dispute shall be immediately referred to one executive officer of each Party, chosen at the sole discretion of that Party, who shall negotiate in good faith with each other to resolve the dispute during the period ending 30 days after the date of such referral. If the designated officers of the Parties are unable to resolve the dispute within such 30 day period, the dispute shall be referred to arbitration pursuant to Section 12.2 of this Agreement. In the event that it is determined that, as a result of a EXACT inspection or review, EXACT is entitled to additional payments under this Agreement exceeding five percent (5%) of amounts actually paid to EXACT (over the applicable period of review), the reasonable out-of-pocket expenses of EXACT in connection with such inspection and review shall be borne by LABCORP. In the event that it is determined that, as a result of a EXACT inspection or review, EXACT is not entitled to additional payments under this Agreement exceeding five percent (5%) of amounts actually paid to EXACT (over the applicable period of review), the reasonable out-of-pocket expenses of LABCORP in connection with such inspection and review shall be borne by EXACT.

b. EXACT shall retain its records regarding the terms of licenses it has granted within the Field, and regarding the terms of diagnostic kits it has sold for the performance of Assays, for a period of three (3) years after the expiration of the Term of this Agreement. EXACT shall make such records relating to [CONFIDENTIAL TREATMENT REQUESTED]/*/ hereunder available to LABCORP (and its representatives and consultants) for inspection and review at any reasonable time upon thirty (30) days prior written request by LABCORP.

6.5 [CONFIDENTIAL TREATMENT REQUESTED]/*/ for Involvement of a Designated Company. In the event a Designated Company (defined below) [CONFIDENTIAL TREATMENT REQUESTED]/*/, then (a) EXACT shall [CONFIDENTIAL TREATMENT REQUESTED]/*/, as indicated on Schedule 6, and (b) [CONFIDENTIAL TREATMENT REQUESTED]/*/ during the Exclusive Period. In the event any of the events described in the prior sentence occur with respect to the entities or an Affiliate of the entities listed on Schedule 2 (instead of EXACT), then [CONFIDENTIAL TREATMENT REQUESTED]/*/ during the Exclusive Period. A “Designated Company” refers to [CONFIDENTIAL TREATMENT REQUESTED]/*/. Notwithstanding anything to the contrary contained herein, LABCORP shall not be entitled to [CONFIDENTIAL TREATMENT REQUESTED]/*/ as a result of any agreement between EXACT and a third party for the development or commercialization of an Approved Kit.

Article 7: Promotion; Use of Name

7.1 Promotion by LABCORP. LABCORP shall, subject to EXACT’s written prior approval, make reasonable efforts to reference “EXACT Sciences” and “PreGen-Plus” in an appropriate manner in the Field in marketing and promotional materials, test directories, and websites; provided, however, that EXACT shall have the right to review and comment on any proposed LABCORP marketing and promotional materials, test directories, and websites (other than materials, test directories and websites that have been previously approved by EXACT and which make no new use of “EXACT Sciences” or “PreGen-Plus”) that make reference to “EXACT Sciences” and/or “PreGen-Plus” for a period of fourteen (14) days after receipt thereof.

7.2 Promotion by EXACT. EXACT shall, subject to LABCORP’s written prior approval, make reasonable efforts to reference LABCORP’s name in an appropriate manner in the Field in marketing and promotional materials, test directories, and websites; provided, however, that LABCORP shall have the right to review and comment on any proposed EXACT marketing and promotional materials, test directories, and websites (other than materials, test directories and websites that have been previously approved by LABCORP and which make no new use of LABCORP) that make reference to LABCORP for a period of fourteen (14) days after receipt thereof.

7.3 Expenses. Each Party shall be responsible for their own sales and marketing expenses.

7.4 Publicity. Except as specifically set forth in this Agreement, no Party shall use any trademark, trade name, or any contraction, abbreviation, simulation, or adaptation thereof of any other Party, or the name of any of another Party’s employees in any news, publicity release, policy recommendation, advertising or any commercial communication without the express written approval of the other Party; provided, however, that no Party shall unreasonably withhold its approval to any use of its name which accurately describes the relationship of the Parties under this Agreement and such Party’s participation in the activities provided for in this Agreement.

7.5 Trademark Usage. LABCORP shall use the trademarks of EXACT only in connection with the display, advertising, promotion and marketing of Technology and only in accordance with the terms and conditions of this Agreement. LABCORP shall not alter or modify the trademarks of EXACT in any way, and LABCORP shall use reasonable efforts not to use the trademarks of EXACT in a manner so as to cause dilution. LABCORP shall identify each EXACT trademark as a trademark of EXACT and shall place a trademark notice, where appropriate, on each piece of advertising or promotional material containing EXACT trademarks.

Article 8: Technology Exclusivity

8.1 Exclusivity. EXACT may terminate this Agreement immediately upon written notice to LABCORP in the event that LABCORP ceases to use EXACT as its sole licensor of DNA-based molecular diagnostics technology for the detection of colon and rectal cancer in stool at any time during the Exclusive Period; provided, however, that the Term of this Agreement shall continue beyond the date of such notice, but in no event later than twelve (12) months following the date of such notice, solely to the extent necessary for LABCORP to complete services it obligated itself to perform for third parties using the Technology prior to the date of such notice. The Parties acknowledge that such right of termination shall not exist as a result of (i) any procurement, purchasing, marketing, sale or distribution by LABCORP of any commercially available diagnostic product approved by the FDA, or (ii) LABCORP’s purchase of any components from any source for use in connection with performance of Assays.

Article 9: Limitation of Liability and Indemnification

9.1 LIMITATION OF LIABILITY. EXCEPT TO THE EXTENT ARISING FROM INDEMNIFICATION FOR THIRD PARTY CLAIMS UNDER SECTION 9.2 BELOW, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR SPECIAL, INDIRECT, CONSEQUENTIAL, OR INCIDENTAL DAMAGES EXCEPT FOR PATENT INFRINGEMENT DAMAGES, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

9.2 Indemnification.

9.2.1 EXACT agrees to defend and/or handle at its own expense, any third party claim, suit or action against LABCORP and each of its Affiliates and sub-licensees based upon [CONFIDENTIAL TREATMENT REQUESTED]/*/ under this Agreement. EXACT further agrees to indemnify and hold LABCORP and each of its Affiliates and sub-licensees harmless from and against any and all liabilities, losses, costs, obligations, judgments, damages and expenses (including costs of investigation and reasonable attorneys’ fees) associated with any such claim, suit or action.

9.2.2 LABCORP agrees to defend and/or handle at its own expense, any third party claim, suit or action against EXACT and each of its Affiliates for [CONFIDENTIAL TREATMENT REQUESTED]/*/. LABCORP further agrees to indemnify and hold EXACT and each of its Affiliates harmless from and against any and all liabilities, losses, costs, obligations, judgments, damages and expenses (including costs of investigation and reasonable attorneys’ fees) associated with any such claim, suit or action.

Article 10: Representations and Warranties

10.1 LABCORP Representations and Warranties. LABCORP represents, warrants and covenants to EXACT that:

10.1.1 This Agreement does not contravene or constitute a default under or violation of any provision of applicable law binding upon LABCORP or any agreement, commitment, instrument or other arrangement to which LABCORP is a party;

10.1.2 All necessary consents, approvals and authorizations of all governmental authorities or other third parties required to be obtained in connection with entry into this Agreement have been obtained; and

10.1.3 All consultants of LABCORP who participate in research and development or laboratory or analytical procedures relating to the Technology will execute appropriate instruments of assignment in favor of LABCORP as assignee that convey to LABCORP ownership of all right, title and interest in and to all intellectual property rights or any Invention that may arise from such participation.

10.2 EXACT Representations and Warranties. EXACT represents and warrants to LABCORP that:

10.2.1 EXACT is a corporation duly organized and validly existing under the laws of the State of Delaware, and has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder;

10.2.2 This Agreement does not contravene or constitute a default or violation of any provision of applicable law binding upon EXACT or any agreement, commitment, or instrument to which EXACT is a party;

10.2.3 EXACT has sufficient title and ownership rights to license the Technology as specified in this Agreement;

10.2.4 LABCORP and its Affiliates and sub-licensees shall be entitled to use and enjoy the benefit of the Technology in the Field to the extent of the license granted hereunder, and, except as otherwise provided in this Agreement, LABCORP’s and its Affiliate’s and sub-licensee’s use thereof shall not be adversely affected, interrupted or disturbed by EXACT or any Person asserting a claim under, through, or on behalf of EXACT;

10.2.5 As of the Effective Date, EXACT is not aware of any material unauthorized use, infringement or misappropriation of the Technology, or any other intellectual property rights of EXACT licensed hereunder;

10.2.6 As of the Effective Date, EXACT is not aware of any pending or threatened litigation which alleges 1) that the Technology infringes on any of the intellectual property rights of any third party or was misappropriated, or 2) that by using the Technology LABCORP and its Affiliates and sub-licensees would be infringing or misappropriating any of the intellectual property rights of any Person;

10.2.7 As of the Effective Date, EXACT is not aware of a patent issued to a third party that would be infringed by LABCORP or its Affiliates’ or sub-licensees’ performance and commercialization of the Assays using the protocols transferred by EXACT under this Agreement;

10.2.8 Prior to the Effective Date, EXACT has not granted any licenses or covenants-not-to-sue to any third parties with respect to the Technology;

10.2.9 As of the Effective Date, EXACT is not aware of any reason that the patents listed in Schedule 1 are not valid and enforceable patents, and during the Term, EXACT shall submit all filings, make all payments, and take all other actions necessary to maintain such patents as valid, in force and in good standing for the longest possible duration with the U.S. Patent and Trademark Office and corresponding foreign patent authorities (at its own expense) to avoid premature expiration or termination of its patents;

10.2.10 As of the Effective Date, the Technology licensed to LABCORP and its Affiliates and sub-licensees under this Agreement constitutes all of the technology, information and intellectual property necessary for LABCORP and its Affiliates and sub-licensees to perform the Assays as of the Effective Date, except for [CONFIDENTIAL TREATMENT REQUESTED]/*/;

10.2.11 The current assay protocol EXACT uses to prepare stool sample and to extract DNA therefrom results in a population of human DNA that is representative of human DNA in exfoliated colonic epithelial cells; and

10.2.12 The protocol for Assays in use by EXACT as of the Effective Date, and any other protocols to be provided by EXACT to LABCORP at any time (including without limitation the Analytical Process Improvement, Capture Process Improvement, and any Inventions provided by EXACT pursuant to Section 2.3), correctly function to screen patient samples for colorectal cancer for commercial purposes.

10.3 DISCLAIMER. EXCEPT AS EXPRESSLY PROVIDED HEREIN, NEITHER LABCORP NOR EXACT MAKES ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING ITS PERFORMANCE UNDER THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO, THE MARKETABILITY, USE, OR FITNESS FOR ANY PARTICULAR PURPOSE OF THE RESULTS OF ANY ASSAY PERFORMED HEREUNDER.

Article 11: Termination

11.1 Term. This Agreement shall continue from the Effective Date until the expiration of the last to expire of the patents and patent applications included now or hereafter on Schedule 1 hereto, unless this Agreement is terminated earlier in accordance with this Article 13 or Section 8.1 (the “Term”).

11.2 Termination. Either Party may terminate this Agreement:

11.2.1 If the other Party materially breaches any representation or warranty or fails to perform any material obligation hereunder, and such breach is not remedied within thirty (30) business days after written notice thereof to the Party in default; or

11.2.2 At any time if the other Party becomes insolvent, or makes an assignment for the benefit of creditors, or a receiver or similar officer is appointed to take charge of all or part of such Party’s assets and, as a result thereof, such Party is unable or unwilling to perform its obligations under this Agreement.

11.3 Survival. Articles 1, 4, 5 (except Section 5.4), 9, 10 and 12 and Sections 6.1.1, 6.2, 6.3, 6.4, 11.3, 11.5 and shall survive the termination of this Agreement.

11.4 Effective Date of Termination. Termination of this Agreement shall take effect: (a) as to breaches which have cure periods as set forth in Section 11.2 hereof, immediately upon expiration of the cure period if the breach is not cured within the applicable cure period, and (b) as to other termination provisions, immediately upon the date of any termination notice.

11.5 Effect of Termination. Upon the expiration or termination of this Agreement, each Party shall (i) discontinue performance of all activities hereunder; (ii) deliver to the other Party all Confidential Information, intellectual property and other materials that belong to such Party or are otherwise required to be delivered to such Party in accordance with the terms of this Agreement, and (iii) certify to the other Party in writing, within fifteen (15) days from the date of termination, compliance with this Section 11.5; provided that nothing contained in this Article 11 shall preclude any Party’s right to payment under Article 6 hereof for activities conducted prior to termination.

11.6 Termination of Exclusive Period by EXACT.

11.6.1 Inability to Handle Volumes. If, during the last three years of the Exclusive Period, EXACT has already met each of the milestone events set forth on Schedule 4 and the average daily volume of specimens received by LABCORP for the Technology in the Field exceeds [CONFIDENTIAL TREATMENT REQUESTED]/*/ specimens per day during any [CONFIDENTIAL TREATMENT REQUESTED]/*/ day period, LABCORP shall, at EXACT’s written request (which request may be made no more than twice a year) and within fourteen (14) days of receipt of such written request, provide EXACT with monthly volume projections for the next twelve (12) months and evidence of LABCORP’s ability to process at least [CONFIDENTIAL TREATMENT REQUESTED]/*/ of such specimens within [CONFIDENTIAL TREATMENT REQUESTED]/*/ days of their receipt by LABCORP. If, after fourteen (14) days, LABCORP (i) is unable to provide reasonable evidence of its ability to handle the volume projections or (ii) does not provide volume projections and evidence of its ability to handle the volume, the Exclusive Period will automatically terminate; provided, however, that if the Parties do not agree on whether evidence provided by LABCORP is sufficient to indicate its ability to handle volume projections, then the Exclusive Period shall not terminate until such dispute is settled by arbitration in accordance with Section 12.2.

11.6.2 Minimum Performance Standards. If LABCORP fails to meet the Minimum Performance Standards then EXACT shall have the right, upon written notice to LABCORP, to terminate the Exclusive Period and convert the license granted under Section 2.1 to a non-exclusive license for the remainder of Term. Notwithstanding the foregoing, EXACT shall not be permitted to exercise its rights under this Section 11.6.2 if EXACT has not achieved all of the milestones set forth on Schedule 4 hereto by [CONFIDENTIAL TREATMENT REQUESTED]/*/.

11.6.3 Cessation of Offering Assays. In the event that LABCORP on its own accord ceases to offer and promote Assays hereunder after the Commercial Launch Date, then EXACT shall have the right, upon written notice to LABCORP, to terminate the Exclusive Period and convert the license granted under Section 2.1 to a non-exclusive license for the remainder of Term. In the event EXACT exercises its right under this Section 11.6.3 to terminate the Exclusive Period, then [CONFIDENTIAL TREATMENT REQUESTED]/*/.

Article 12: Miscellaneous

12.1 Headings. All headings used in this Agreement and its attachments are intended for convenience of reference only and shall not affect the construction or interpretation of the Agreement.

12.2 Dispute Resolution. If a dispute arises between the Parties relating to (i) the interpretation or performance of the Agreement; or (ii) the grounds for the termination of the Agreement, the Parties agree to convene a Dispute Resolution Committee (the “Committee”), consisting of two EXACT representatives with decision-making authority and two LABCORP representatives with decision-making authority to attempt in good faith to negotiate a resolution of the dispute prior to pursuing other available remedies. Either Party may request the convening of a Committee by written notice to the other Party. A Committee shall convene for an initial meeting within forty-five (45) days of such written notice. If the Parties have not succeeded in negotiating a resolution of the dispute, within thirty (30) days after the initial meeting of the Committee, the dispute shall be submitted for binding arbitration under the then current Commercial Rules of the American Arbitration Association (“AAA”). Such arbitration shall be held in Dover, Delaware. The Parties shall select three (3) arbitrators from a list of seven (7) arbitrators provided by the AAA. The Parties shall bear the costs of the arbitration equally unless the arbitrators, pursuant to their right, but not their obligation, require the non-prevailing Party to bear all or any unequal portion of the prevailing Party’s costs. The arbitrators shall make decisions in accordance with applicable Federal and Delaware law and the factual evidence presented. The decision of the arbitrators shall be final and may be sued on or enforced by the Party in whose favor it runs in any court of competent jurisdiction at the option of the successful Party. The arbitrators will be instructed to prepare and deliver a written, reasoned opinion conferring their decision. The rights and obligations of the Parties to arbitrate any dispute relating to the interpretation or performance of this Agreement or the grounds for the termination thereof shall survive the expiration or termination of this Agreement for any reason. Nothing in this Agreement prevents either Party from seeking equitable relief at any time to prevent irreparable harm or for specific enforcement of the terms of this Agreement, except that no equitable relief shall be sought to prevent or avoid arbitration under the terms of this Agreement.

12.3 No Agency; Independent Contractors. The Parties agree that, in the performance of this Agreement, they are and shall be independent contractors. Nothing herein (including without limitation the provisions of Article 4 hereof) shall be construed to constitute a partnership or joint venture between the Parties nor shall any Party be construed as the agent of any other Party for any purpose whatsoever, and no Party shall bind or attempt to bind any other Party to any contract or the performance of any obligation, or represent to any third party that it has any right to enter into any binding obligation on the other Party’s behalf.

12.4 Amendments in Writing. No waiver, alteration or modification of any of the provisions of this Agreement shall be binding unless made in writing and signed by both of the Parties hereto.

12.5 Failure to Enforce. If either Party fails to enforce any term of this Agreement or fails to exercise any remedy, such failure to enforce or exercise on that occasion shall not prevent enforcement or exercise on any other occasion.

12.6 Exercise of Rights and Remedies. All rights and remedies, whether conferred by this Agreement or by any other instrument or by law shall be cumulative, and may be exercised singularly or concurrently.

12.7 Choice of Law; Venue, Jurisdiction. This Agreement shall be construed and enforced in accordance with the laws of the State of Delaware, without giving effect to principles of conflict of laws. Venue for any dispute arising under or resulting from this Agreement shall be in Delaware and each of the Parties hereby irrevocably submits to the jurisdiction of the United States Federal Court for the District of Delaware (or, if such court does not have subject matter jurisdiction, a state court sitting in Delaware) in any action, suit or proceeding brought against it by the other Party arising under, resulting from, or related to this Agreement.

12.8 Severability. If any provision of this Agreement is held invalid by any law, rule, order, or regulation of any government or by the final determination of any court of competent jurisdiction, such invalidity shall not affect the enforceability of any other provisions and such provisions shall be interpreted so as to best accomplish the objectives of such invalid provisions within the limits of applicable law or applicable court decision.

12.9 Inability to Perform. Neither Party shall be liable for its failure to perform any of its obligations under this Agreement during any period in which such performance is delayed by circumstances outside such Party’s reasonable control, including without limitation fire, flood, earthquake, other natural disaster, war, embargo, riot or the intervention of any government authority, provided that the Party that is unable to perform immediately notifies the other Party of such inability.

12.10 Notice. Notices to be given under this Agreement shall be in writing, and sent by prepaid registered or certified mail, return receipt requested, or by prepaid overnight courier service, or by facsimile, to the addresses set forth on the signature page to this Agreement, or to such other address as a Party may, from time to time, specify to the other Party by written notice.

12.11 Entire Agreement. This Agreement (including all Schedules, attachments and appendices to this Agreement, which are incorporated herein by reference) constitutes the complete and exclusive statement of the agreement between the Parties, and supersedes all prior agreements, proposals, negotiations and communications between the Parties, both oral and written, regarding the subject matter hereof. Without limiting the foregoing, the Agreement between the parties dated July 10, 2001 (the “Prior Agreement”), is hereby superseded by this Agreement, provided that any Confidential Information exchanged under the Prior Agreement shall continue to be treated as Confidential Information under this Agreement, and any liabilities or obligations of either Party arising from any representations, warranties, or indemnities under the Prior Agreement shall survive with respect to any claims arising from or relating to activities performed under the Prior Agreement.

12.12 Counterparts. This Agreement may be executed in one or more counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same Agreement.

12.13 No Assignment. Neither Party may assign this Agreement or its rights and obligations hereunder without the prior written consent of the other Party; provided, however, that any merger, reorganization, transfer of substantially all assets of a Party, or other change in control or ownership of such Party shall not be considered an assignment for the purposes of this Agreement.

12.13 Steering Committee. A steering committee consisting of at least two employees of EXACT, one of whom shall be a senior executive and two employees of LABCORP, one of whom shall be a senior executive, shall meet periodically, as mutually agreed upon by the parties, in order to monitor and implement this Agreement.

[SIGNATURES APPEAR ON FOLLOWING PAGE]

Laboratory Corporation of America Holdings		EXACT Sciences Corporation


By	/s/ Thomas P. MacMahon	By	/s/ Don M. Hardison

Title		Title		President and CEO

Date		Date		6/26/02

Laboratory Corporation of America Holdings		EXACT Sciences Corporation
430 South Spring Street		63 Great Road
Burlington, North Carolina 27215		Maynard, Massachusetts 01754
Attn: Bradford T. Smith, Esq.		Attn: Don Hardison
Executive Vice President		President and CEO
Fax: 336-226-3835		Fax: 978-897-3481

With a copy also sent to:		With a copy also sent to:

Parker Poe Adams & Bernstein, LLP		Testa, Hurwitz & Thibeault, LLP
P.O. Box 389		125 High Street
150 Fayetteville Street Mall, Suite 1400		Boston, MA 02110
Raleigh, North Carolina 27602-0389		Attn: Thomas C. Meyers
Attn: John R. Erwin, Esq.		Fax: 617.790.0189
Fax: 919-834-4564

SCHEDULE 1

Technology

United States Patents and Patent Applications	Canadian Patents and Patent Applications
[CONFIDENTIAL TREATMENT REQUESTED]/*/	[CONFIDENTIAL TREATMENT REQUESTED]/*/

SCHEDULE 2

Authorized Licensees

[CONFIDENTIAL TREATMENT REQUESTED]/*/

SCHEDULE 3

Per Assay Fee

[CONFIDENTIAL TREATMENT REQUESTED]/*/ of the ACP; provided, however, that the per Assay fee shall in no event be less than [CONFIDENTIAL TREATMENT REQUESTED]/*/ (regardless of ACP).

EXAMPLE: During January of 2003, LABCORP and its Affiliates and sub-licensees collect a total of $800,000 in itemized fee-for-service payments for 2,500 Assays that (i) were performed under this Agreement by LABCORP and its Affiliates and sub-licensees between January 1, 2003 and January 31, 2004 and (ii) for which LABCORP and its Affiliates and sub-licensees were not previously compensated. Additionally 300 Assays were performed in January pursuant to a capitated payment plan for which LABCORP did not receive an itemized fee-for-service payment. The Specified Compensated Assays [CONFIDENTIAL TREATMENT REQUESTED]/*/, and the ACP is equal to [CONFIDENTIAL TREATMENT REQUESTED]/*/. As such, the per-Assay fee is [CONFIDENTIAL TREATMENT REQUESTED]/*/, and the fees due for January 2003 under Section 6.2.1 of this Agreement are [CONFIDENTIAL TREATMENT REQUESTED]/*/.

During February and March of 2003, LABCORP and its Affiliates and sub-licensees performs the same number of Assays including 300 Assays in each of February and March pursuant to a capitated payment plan for which no fee-for-service payment was received and collects the same aggregate itemized fee-for-service payments as in January of 2003. Therefore, in addition to [CONFIDENTIAL TREATMENT REQUESTED]/*/ received in January of 2003 as described above, LABCORP would also owe EXACT fees of for each of February and March. Additionally, EXACT will be entitled to a quarterly fee equal to [CONFIDENTIAL TREATMENT REQUESTED]/*/. This additional quarterly fee is calculated as follows: [CONFIDENTIAL TREATMENT REQUESTED]/*/. That number is [CONFIDENTIAL TREATMENT REQUESTED]/*/. Given that this number is [CONFIDENTIAL TREATMENT REQUESTED]/*/, EXACT would be paid [CONFIDENTIAL TREATMENT REQUESTED]/*/ which equals [CONFIDENTIAL TREATMENT REQUESTED]/*/ payable under Section 6.2.3 of this Agreement.

ACP

For purposes of determining the ACP in accordance with Section 1.3 of the Agreement, the average dollar amount received for each Assay performed by LABCORP and its Affiliates and sub-licensees will be calculated by [CONFIDENTIAL TREATMENT REQUESTED]/*/, as follows: ACP for any month shall be calculated as [CONFIDENTIAL TREATMENT REQUESTED]/*/. The calculation of ACP shall expressly exclude [CONFIDENTIAL TREATMENT REQUESTED]/*/, and shall also expressly exclude [CONFIDENTIAL TREATMENT REQUESTED]/*/. As of the Effective Date, the [CONFIDENTIAL TREATMENT REQUESTED]/*/, and therefore the Parties acknowledge that the payments accounted through [CONFIDENTIAL TREATMENT REQUESTED]/*/ will serve as an acceptable basis for determining the average dollar amount received for each applicable Assay under the Agreement. However, if for any month during the Term of this Agreement [CONFIDENTIAL TREATMENT REQUESTED]/*/, then the Parties will use their best efforts to promptly determine a new system or manner in which to determine the average dollar amount received for each Assay performed by LABCORP and its Affiliates that is acceptable to both Parties.

SCHEDULE 4

License Fee Milestone Payments

Milestone

Payment

[CONFIDENTIAL TREATMENT REQUESTED]/*/

SCHEDULE 5

Loci

Gene Codon

[CONFIDENTIAL TREATMENT REQUESTED]/*/

Gene Microsatellite

[CONFIDENTIAL TREATMENT REQUESTED]/*/

Additional Loci will automatically be added to this Schedule as applicable after the Effective Date pursuant to Section 2.2.

SCHEDULE 6

[CONFIDENTIAL TREATMENT REQUESTED]/*/

Commercial Launch License Fee

[CONFIDENTIAL TREATMENT REQUESTED]/*/

Milestone License Fees

[CONFIDENTIAL TREATMENT REQUESTED]/*/

EX-99.1 5 j4567_ex99d1.htm EX-99.1

Exhibit 99.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of EXACT Sciences Corporation (the "Company") on Form 10-Q for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Don M. Hardison, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that,

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Don M. Hardison

Don M. Hardison

Chief Executive Officer

August 12, 2002

EX-99.2 6 j4567_ex99d2.htm EX-99.2

Exhibit 99.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of EXACT Sciences Corporation (the "Company") on Form 10-Q for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John A. McCarthy, Jr., Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that,

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ John A. McCarthy, Jr.

John A. McCarthy, Jr.

Chief Executive Officer

August 12, 2002