Exhibit 10.5

***Text Omitted and Filed Separately with

The Securities and Exchange Commission.

Confidential Treatment Requested Under

17 C.F.R. Sections 200.80(b)(4) and 240.24b-2.

 

CONFIDENTIAL

Statement of Work No. One

THIS STATEMENT OF WORK NO. ONE (this “SOW”) is made and entered into as of
June 14, 2017 (the “SOW Effective Date”) by and between HTG Molecular
Diagnostics, Inc. (“HTG”) and QIAGEN Manchester Limited (“QIAGEN”).  This SOW is
made a part of, and shall be governed by, the terms and conditions of the Master
Assay Development, Commercialization and Manufacturing Agreement (the “MSA”)
executed between the Parties dated as of November 16, 2016.  In the event of a
conflict between the terms and conditions of this SOW and those of the MSA, the
MSA shall govern unless otherwise expressly provided herein.  Capitalized terms
shall be defined as in the MSA, unless otherwise defined herein.

1.

Term

 

1.1.

The term of this SOW shall commence as of the SOW Effective Date and shall
expire once all activities, milestones, and deliverables outlined herein have
been completed by the respective responsible Party and all payments from QIAGEN
to HTG, including any required profit share, has been delivered, unless this
earlier terminated in accordance with the MSA, as it may be amended from time to
time.

2.

Scope of Work

 

2.1.

This SOW covers the performance by each Party of its respective Development
activities in support of development of the PDP Assay that is the subject of the
Sponsor Project Agreement, identified as the Companion Diagnostic Initial
Research Agreement, dated May 23, 2017, between QIAGEN and the pharmaceutical
company referenced therein. (“PHARMA”). The Parties expect and intend
Development activities for the relevant PDP Assay to be the subject of more than
one work plan under the Sponsor Project Agreement and a corresponding number of
statements of work under the MSA. Statements of work related to the PDP Assay
other than this SOW are referred to, individually, as a “Subsequent SOW.” This
SOW represents the activities required by both Parties to enable the
retrospective testing in [***] of PHARMA’s phase III clinical samples from the
clinical trial identified in the Sponsor Project Agreement. The actual
retrospective testing of PHARMA’s clinical samples shall be covered in a
separate statement of work under the MSA.

 

2.2.

This SOW shall have two phases with the following objectives:

 

2.2.1.

Phase 1a: Release of [***] Assay CE/IVD (the “CE/IVD Assay”) as an IUO (defined
below) assay (referred to as the “IUO Assay”) for future use (pursuant to a
Subsequent SOW) in retrospective testing of PHARMA’s phase III clinical samples
in [***].

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2.2.2.

Phase 1b: Establishment of a clinical testing site in [***] for the
retrospective testing of PHARMA’s phase III clinical samples.

 

2.3.

Development Activities. In furtherance of the foregoing Development objectives,
the Parties agree that the Steering Committee shall mutually determine
Development activities, including milestones, deliverables and estimated
milestone completion dates, for each respective Party, after which such
Development activities may not be modified except with written approval of the
affected Party. Pursuant to timelines mutually determined by the Steering
Committee, each Party shall use commercially reasonable efforts to complete its
respective Development obligations in a time- and cost-efficient manner and
otherwise in conformance with this SOW and Section 3 of the MSA.

 

2.3.1.

As provided in Section 3.7 of the MSA, each Party’s Project Lead shall keep the
other Party, and (if applicable) PHARMA, updated and consult with such other
Party on a reasonably regular basis with respect to all the Development work
being conducted by such Party. Without limiting the generality of the foregoing,
the responsible Party shall, to the extent reasonably feasible:

 

2.3.1.1.

Invite a reasonable number of representatives of the other Party to attend any
formal design reviews (“FDR”) that occur as part of the responsible Party’s
Development activities under this SOW.

 

2.3.1.2.

Make final or near-final “Deliverables” (as determined by the Steering Committee
as provided in Section 3.3.1) available to the other Party for review; provided
that such other Party’s review shall not delay the corresponding Development
milestone or other obligation of the responsible Party related to such
Deliverable.

 

2.3.1.3.

Subject to the responsible Party’s independent professional judgment in
accordance with the applicable provisions of this SOW (as provided in Section
3.4 of the MSA), the responsible Party agrees to consider, in good faith,
comments or requests timely received from the non‑responsible Party regarding
Deliverables or FDR-related topics.

3.

Compensation Provisions (including Transfer Price calculation)

 

3.1.

Development Services

 

3.1.1.

QIAGEN shall pay HTG for the Development work performed by HTG and its
subcontractors on a monthly basis as follows:

 

3.1.1.1.

Direct Employee Costs

 

3.1.1.1.1.

Direct employee costs will be tracked on a daily basis by project.  The average
wage used for each employee will be based on a resource classification

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based on their skills used in the project, as opposed to actual rates specific
to every individual who performs these functions.

 

3.1.1.1.2.

The total wage rate will include the direct wage costs discussed above, plus a
payroll burden rate. The payroll burden rate will include the expense for
payroll taxes, vacation, accrued bonus, group insurance (representing workers’
compensation insurance, health insurance and life and disability insurance),
stock compensation and payroll service fees.  The payroll burden rate will be
calculated as HTG’s average, excluding the executive management team.  

 

3.1.1.1.3.

Rates will be recalculated every six months in June and December (with the first
recalculation to occur in December 2017) and utilized for the following
six-month period. HTG shall promptly communicate and provide evidence of any
rate changes in writing to QIAGEN.

 

3.1.1.1.4.

HTG shall provide QIAGEN with reasonable documentary substantiation in support
of its rate calculations upon request.

 

3.1.1.2.

Material and Other Direct Expenses

 

3.1.1.2.1.

Material and other direct costs include all directly incurred expenses
associated with the Development. These expenses are expected to include
materials used internally or provided by HTG to subcontractors (both HTG product
inventory and supplies purchased from third parties), direct travel required for
the Development, and any other mutually approved direct expenses.

 

3.1.2.

Administrative Service Rate

 

3.1.2.1.1.

Direct employee costs (as provided in Section 3.1.1.1), material, and other
direct expenses (as provided in Section 3.1.1.2), capital purchases (as provided
in Section 3.1.3), and subcontractor expenses (as provided in Section 3.1.4)
will be increased by [***] to reflect administrative services associated with
the management and administration of the program.  

 

3.1.3.

Capital Purchases

 

3.1.3.1.

Capital purchases required, and to be used exclusively for, this Development
must be approved by QIAGEN in writing, and such expense will be included in
HTG’s invoices to QIAGEN as a separate line item; [***]. This does not include
any capital purchases made prior to the start of the Development. At the end of
the Development, any remaining value attributable to capital equipment purchased
for the Development shall be credited back to the Net Profit share, [***].

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3.1.4.

Subcontractors

 

3.1.4.1.

Any subcontractor expenses must be approved by QIAGEN to the extent such expense
exceeds the estimated Project Cost amounts.  Materials provided to a third-party
subcontractor, such as HTG assay kits or technology, for their consumption in
the Development will be billed as provided to the subcontractor at cost, subject
to Section 3.1.2.

 

3.2.

Monthly Development Service Invoicing Process

 

3.2.1.

Invoices for all Development costs outlined above will be submitted by HTG to
QIAGEN on a monthly basis containing the purchase order number provided by
QIAGEN, and will be due within [***] days from the date of receipt of invoice by
QIAGEN. Payment of these invoices will occur regardless of whether QIAGEN has
collected payments from or invoiced PHARMA. In no event will QIAGEN make any
pre-payments for services or deliverables.

 

3.3.

Profit Sharing

 

3.3.1.

Each Party acknowledges that it has received and approved the estimated Project
Costs of the other Party. Such approved estimated Project Costs shall not be
modified unless the Parties confer in good faith to determine the desirability
of such modification, and no modification, change or amendment to approved
estimated Project Costs will be effective until revised estimated Project Costs
are received and approved by both Parties.

 

3.3.2.

In the event that actual Development costs are expected to exceed the estimated
Project Costs by [***], the Party expecting to incur cost overages will
communicate that as soon as possible (in HTG’s case, prior to invoicing QIAGEN),
and, where possible, prior to incurring the overages, to allow for discussion
among Steering Committee members. Where overages are identified, the Parties
shall work in good faith to agree to a reasonable reimbursement solution based
upon the facts and circumstances that have led to the overage, and agreement
should be made in writing within one month of the overage being identified. No
amounts in excess of [***] of the estimated Project Costs determined pursuant to
Section 3.3.1 should be included in Development Net Profit calculations without
agreement by both Parties.

 

3.3.3.

Project profit sharing calculations under this SOW will be completed within 30
days of the end of this SOW.  Upon receipt of the final monthly R&D Service
Invoice from HTG for this SOW, QIAGEN will prepare an initial calculation of the
profit sharing for which HTG and QIAGEN will [***] of Net Profits resulting from
successful completion

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of each milestone throughout the term of this statement of work. The support for
this calculation will include documentary evidence of the costs
incurred/included by both QIAGEN and HTG, including copies of invoices received
from third parties and subcontractors; timesheets and support for wage rate
calculations. The calculation will be prepared and completed within 15 days of
approval of the final milestone of this SOW to allow the parties to meet and
review applicable books of account, where appropriate, to take into account any
adjustments from the review of the documentary evidence and agree the net
profits and net revenues for any development milestones completed through the
end of the SOW by the 20th day after SOW end. Upon agreement by both parties on
the profit sharing amount, HTG will issue an invoice to QIAGEN containing the
relevant purchase order number provided by QIAGEN for HTG’s portion of the
profit sharing amount. QIAGEN shall distribute the invoiced amount within 30
days of invoice receipt.

 

3.3.4.

In the event that HTG fails to meet the deadlines set forth in this SOW or if
PHARMA rejects any deliverable based upon quality issues attributed to HTG’s
work under this SOW,  QIAGEN shall be entitled to withhold future profit sharing
payments until any Project Delay or quality issues have been resolved.

 

3.4.

All payments made to HTG under this statement of work will be invoiced and paid
in US Dollars.

4.

Clinical Supply Manufacturing Provisions

 

4.1.

The terms and conditions related to the manufacturing and commercialization of
the PDP Assay shall be negotiated by the parties in good faith as part of a
second and related SOW.

5.

Intellectual Property and Licenses; Technology Transfer

 

5.1.

HTG hereby grants to QIAGEN an irrevocable, fully paid-up, royalty-free,
perpetual, non-exclusive, world-wide license to all data, methods, compositions,
and articles that are generated, conceived of, or conceived of and reduced to
practice by HTG pursuant to this SOW solely to permit QIAGEN to sublicense such
rights, pursuant to the Sponsor Project Agreement, to PHARMA, PHARMA’s
Affiliates, PHARMA’s Collaboration Partner (as defined in the Sponsor Project
Agreement), and Affiliates of PHARMA’s Collaboration Partner, such sublicense
being for the sole purpose of research and development of BIOTECH Agents.
“BIOTECH Agents” means small or large molecules that are developed or sold by
PHARMA, its Affiliates, the Collaboration Partner, or the Collaboration
Partner’s Affiliates.

 

5.2.

In the event that HTG and QIAGEN are unable to resolve a delay in the
Development caused by HTG, HTG shall fully cooperate with QIAGEN upon request to
execute a technology transfer and transition to a third party designated by
QIAGEN to the extent necessary for QIAGEN or its designee to complete HTG’s
Development obligations under this SOW. Such technology transfer shall include a
limited, fully paid-up, royalty-free, non-exclusive, world-wide, sub-licensable
license to all HTG IP solely for the purpose and

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only to the extent necessary for QIAGEN to complete HTG’s Development
obligations under this SOW. The license granted pursuant to this Section 5.2
shall expire upon expiration or earlier termination by QIAGEN of this SOW.

6.

Project Suspension and Termination

 

6.1.

This SOW may be terminated as specified in the MSA, as it may be amended from
time to time.

 

IN WITNESS WHEREOF, HTG and QIAGEN have executed this SOW by their respective
officers hereunto duly authorized as of the SOW Effective Date.

 

HTG MOLECULAR DIAGNOSTICS

 

QIAGEN MANCHESTER LIMITED

 

 

 

 

 

 

 

 

 

 

By:

/s/ Timothy B. Johnson

 

By:

/s/ Douglas Liu

 

 

 

 

 

Name:

Timothy B. Johnson

 

Name:

Douglas Liu

 

 

 

 

 

Title:

President, Chief Executive Officer

 

Title:

SVP Global Operations

 

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