10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2005,
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from           to

Commission file number: 000-31745

THIRD WAVE TECHNOLOGIES, INC.

(Exact name of Registrant as specified in its charter)

Delaware	39-1791034
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
502 S. Rosa Road, Madison, WI (Address of principal executive offices)	53719 (Zip Code)

(888) 898-2357

(Registrant’s telephone number, including area code)

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

None

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

Common stock, $.001 par value per share

preferred stock purchase rights

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o     No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o     No þ

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 þ     No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  Yes o     No þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

     Large accelerated filer o Accelerated filer þ Non-accelerated filer o     

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o     No þ

The aggregate market value of the registrant’s voting stock held by non-affiliates of the registrant (without admitting that any person whose shares are not included in such calculation is an affiliate), computed by reference to the last sale price of the common stock of the registrant on June 30, 2005, as reported by the Nasdaq Stock Market, was $153,941,523.

As of the close of business on March 1, 2006, the registrant had 41,516,877 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The following documents (or parts thereof) are incorporated by reference into the following parts of this Form 10-K: Certain information required in Part III of this Annual Report on Form 10-K is incorporated from the Registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held on June 13, 2006.

THIRD WAVE TECHNOLOGIES

FORM 10-K

FOR THE Year Ended December 31, 2005

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business		3
Item 1A.	Risk Factors		12
Item 1B.	Unresolved Staff Comments		22
Item 2.	Properties		23
Item 3.	Legal Proceedings		23
Item 4.	Submission of Matters to a Vote of Security Holders		24
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		24
Item 6.	Selected Financial Data		25
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		26
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk		32
Item 8.	Financial Statements and Supplementary Data		33
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		54
Item 9A.	Controls and Procedures		54
Item 9B.	Other Information		56
PART III
Item 10.	Directors and Executive Officers of the Registrant		56
Item 11.	Executive Compensation		56
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		56
Item 13.	Certain Relationships and Related Transactions		56
Item 14.	Principal Accountant Fees and Services		56
PART IV
Item 15.	Exhibits, Financial Statements and Schedules		56
Signatures			57
Amended and Restated Bylaws
Severance Agreement
Amended LTIP 2
Severance Agreement
LTIP 3
List of Subsidiaries
Consent of Independent Registered Public Accounting Firm
Consent of Independent Registered Public Accounting Firm
CEO's Certification Pursuant to Section 302
CFO's Certification Pursuant to Section 302
CEO's Certification Pursuant to 18 U.S.C. Section 1350
CFO's Certification Pursuant to 18 U.S.C. Section 1350

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FORWARD-LOOKING STATEMENTS

This Form 10-K contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. When used in this Form 10-K, the words “believe,” “anticipates,” “intends,” “plans,” “estimates,” and similar expressions are forward-looking statements. Such forward-looking statements contained in this Form 10-K are based on management’s current expectations. Forward-looking statements may address the following subjects: results of operations; customer growth and retention; development of technologies; losses or earnings; operating expenses, including, without limitation, marketing expense and technology and development expense; and revenue growth. We caution investors that there can be no assurance that actual results, outcomes or business conditions will not differ materially from those projected or suggested in such forward-looking statements as a result of various factors, including, among others, our limited operating history, unpredictability of future revenues and operating results, competitive pressures and also the potential risks and uncertainties set forth in the “Overview” section of Item 7 hereof and in the “Risk Factors” section of Item 1A hereof.

You should also carefully consider the factors set forth in other reports or documents that we file from time to time with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to update any forward-looking statements.

In this Form 10-K, we refer to information regarding our potential markets and other industry data. We believe that all such information has been obtained from reliable sources that are customarily relied upon by companies in our industry. However, we have not independently verified any such information.

In this Form 10-K, the terms “we,” “us,” “our,” “Company” and “Third Wave” each refer to Third Wave Technologies, Inc. and its subsidiaries, unless the context requires otherwise.

In the United States, our registered trademarks are Third Wave^®, Cleavase^®, Invader^®, InvaderCreator^®. Cleavase and Invader are registered in Japan, Germany, the UK and France. Trademark applications are pending in the United States for Invader^® Plus^tm, InPlex^tm, and Inrange^tm.

PART I

ITEM 1.   BUSINESS

OVERVIEW

Third Wave Technologies, Inc. develops and markets molecular diagnostics for a variety of DNA and RNA analysis applications, providing our clinical, research and agricultural customers with superior molecular solutions. Third Wave’s products are based on our proprietary Invader^® chemistry. It is a novel, molecular chemistry that we believe is easier to use, more accurate and cost-effective, and enables higher throughput compared to other methods of DNA and RNA analysis. Third Wave was incorporated in California in 1993 and reincorporated in Delaware in 2000.

We believe the market of greatest application and commercial opportunity for Third Wave’s Invader chemistry is clinical molecular diagnostics. We estimate that this market is approximately $1.4 billion worldwide today and will be growing to $2.4 billion worldwide by 2008. Within this market, there are a number of diverse segments for which the Company’s chemistry is well suited, including genetics and pharmacogenetics, women’s health, infectious disease and oncology. In addition to the molecular diagnostics market, the utility of the Invader chemistry extends to research, agricultural and other applications.

THIRD WAVE MISSION AND CORPORATE STRATEGY

Third Wave’s mission is to be a leading provider of superior molecular solutions. The Company seeks to achieve its mission by continuing to convert its proprietary Invader^® molecular chemistry into valuable molecular diagnostic products.

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We have implemented a strategy to:

•  Grow our U.S. clinical molecular diagnostic revenue through our expanding product menu by using our strong U.S. distribution and thought-leader networks.

•  Continue to expand our pipeline of molecular diagnostic products and enhance our product capabilities.

•  Partner when appropriate to optimize our opportunities in molecular diagnostics and in markets where the Invader chemistry can create unique competitive advantages.

TECHNOLOGY

Invader Chemistry

Invader chemistry is a simple and scalable DNA and RNA analysis solution designed to provide results more quickly, increase throughput, and lower costs. It is an isothermal, DNA-probe-based reaction that detects specific genomic sequences or variations.

The performance and flexibility of Invader chemistry can be coupled with the sensitivity of a rudimentary form of polymerase chain reaction whose patents have expired. The Company calls this combination Invader Plus and believes that it will bring the advantages of both chemistries to its customers, enabling them to perform molecular testing more easily and more rapidly.

Third Wave has developed, and will to continue to develop, a line of clinical molecular diagnostic products based on its Invader chemistry. Clinical applications of the Invader chemistry include detecting genetic variation associated with inherited conditions such as cystic fibrosis, hemostasis and cardiovascular risk factors, and those associated with drug efficacy and adverse drug reactions. They also include confirming diagnosis, quantifying viral load and genotyping for infectious diseases such as hepatitis B and C, and for detecting human papilloma virus (HPV) strains. We have received in vitro diagnostic device clearance from the U.S. Food and Drug Administration for our Invader UGT1A1 Molecular Assay. The Invader UGT1A1 molecular assay is cleared for use to identify patients who may be at increased risk of adverse reaction to the chemotherapy drug Camptosar^® (irinotecan) by detecting and identifying specific mutations in the UGT1A1 gene that have been associated with that risk. Camptosar, marketed in the United States by Pfizer, Inc., is used to treat colorectal cancer and was relabeled recently to include dosing recommendations based on a patient’s genetic profile.

In addition to the Company’s growing menu of clinical products, there are a number of other Invader chemistry applications, including research, agriculture, and other potential industrial applications, including food and water testing.

INDUSTRY BACKGROUND

Prior to the late 1990s, many diagnostic testing methods had limited accuracy and served primarily as guides to analysis. This is changing with the emergence of nucleic acid testing, also referred to as NAT or molecular diagnostic testing.

Nucleic acid testing is the direct analysis of DNA or RNA. It is accomplished through genotyping, determining whether a variation or series of variations are present in an individual, or gene expression analysis, determining the level of activity of a specific gene by quantitating the messenger RNA, or mRNA, it is producing. The advantage of this testing method is that it directly detects DNA or RNA rather than monitoring antigens or antibodies. NAT was initially used primarily for HIV and blood screening, but it is rapidly displacing conventional testing methods as the industry standard for a variety of applications. For example, the need to perform accurate and high-throughput blood screening and tests for infectious diseases/viral loads has resulted in NAT replacing immunotechnology (immunoassays) as the solution of choice among many clinical labs.

Ongoing scientific research has helped determine that a majority of human diseases have genetic components. The monumental mapping and sequencing of the entire human genome, through the Human Genome Project and subsequent research initiatives, are being translated into precise clinical applications to diagnose and treat disease. As a result, hundreds of molecular diagnostic tests based on NAT technology are now being used to identify

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variations in DNA sequence to detect disease or highlight genetic predispositions. Furthermore, researchers’ continuing progress in understanding disease and definitively linking particular diseases to an individual’s DNA and RNA have caused key medical thought leaders to introduce new screening guidelines that incorporate NAT.

The availability of the human genome sequence, combined with an ever-growing list of known variations in DNA sequence and advances in our understanding of the cause and progression of disease, will likely result in the emergence of additional NAT applications. As a result, we believe that a significant increase in demand for gene-based tests will occur in the coming years.

LIMITATIONS OF CONVENTIONAL METHODS VERSUS THE THIRD WAVE SOLUTION

A limited number of chemistry platforms are presently capable of performing NAT, including the following:

Name	Platform	Status
PCR	Target Amplification	Most commonly used technology
TMA/NASBA	Target Amplification	Market leader for blood screening
Hybrid Capture	Signal Amplification	Currently used primarily for HPV testing
Ligation	Signal Amplification	Primarily used in cystic fibrosis testing
INVADER®	Signal Amplification	Adoption across multiple applications
Invader Plustm	Target/Signal Amplification	New capability for numerous applications

Many of today’s methods for analyzing nucleic acids are based on hybridization in combination with polymerase chain reaction (“PCR”).

We believe the Invader and Invader Plus chemistries offer competitive advantages compared to the other forms of NAT, including:

•  Increased Accuracy — In the study submitted to the FDA as part of the Company’s application for clearance of its Invader UGT1A1 Molecular Assay, it was 100% accurate compared to DNA sequencing, the standard for genotype determination.

•  Ease of Use — Invader products are extremely easy to use for technicians of any skill level. Assay setup requires a simple addition of the reagents to the prepared sample and can be completed with minimal hands-on time. During the incubation at a single temperature, technicians are free to perform additional duties.

•  Flexibility/Scalability — The Invader chemistry is highly scalable, allowing any Clinical Laboratory Improvement Amendments (CLIA)-high complexity lab, regardless of size, to take advantage of its benefits.

•  Throughput — The Invader chemistry offers customers a higher throughput potential than other methods, providing cost and time-saving benefits.

PRODUCTS AND PRODUCT CANDIDATES

Third Wave has applied its proprietary Invader^® chemistry to a number of molecular diagnostic, research and other applications. The Company has a pipeline of new products under development, which it anticipates releasing during 2006 and beyond, and is assessing the technical feasibility and commercial viability of a number of other applications.

Molecular Diagnostics

PRODUCTS ON THE MARKET — UNITED STATES

InVitro Diagnostic (IVD) Devices

•  Invader UGT1A1 Molecular Assay

Analyte Specific Reagents (ASRs)

•  Hepatitis C virus (HCV)

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•  Cystic Fibrosis Transmembrane Conductance Regulator gene (CFTR)

•  Human Papilloma virus (HPV)

•  Connexin 26

•  Factor V (Leiden)

•  Factor II (prothrombin)

•  Methylenetetrahydrofolate reductase (MTHFR gene)

•  Apolipoprotein E (ApoE gene)

PRODUCTS ON THE MARKET — EUROPEAN ECONOMIC AREA (EEA)

InVitro Diagnostic Devices — CE Mark

•  Factor V Leiden (G1691A)

•  Factor II (FII G20210A)

•  Methylenetetrahydrofolate reductase (MTHFR) (C677T)

•  Methylenetetrahydrofolate reductase (MTHFR) (A1298C)

•  Apolipoprotein E (ApoE) (C112R)

•  Apolipoprotein E (ApoE) (R158C)

•  Plasminogen Activator Inhibitor-1 (PAI-1) (4G/5G)

•  Platelet Glycoprotein IIIa (PL A1/A2) (Leu 33 Pro, T1565C)

•  Connexin 26 (Gap Junction Beta 2 gene; 35delG)

•  Connexin 26 (Gap Junction Beta 2 gene 167delT)

PRODUCTS IN DEVELOPMENT OR BEING ASSESSED FOR TECHNICAL FEASIBILITY AND COMMERCIAL VIABILITY

•  HCV viral load

•  Additional HPV offerings

•  Additional CFTR offerings

•  Coumarin (drug metabolism markers)

•  Chlamydia

•  Gonorrhea

•  Hepatitis B virus

•  Various additional CYP450 products (identification of genes associated with drug response)

The Company also has developed a number of DNA and RNA analysis products for the research and agricultural biotechnology markets.

MANUFACTURING

We currently manufacture products at our facility in Madison, Wisconsin. We have scalable manufacturing systems, and we possess the expertise necessary to manufacture our current products. We currently have sufficient manufacturing capacity to meet our customer requirements. However, key components of our products may be sourced from a single supplier or a limited number of suppliers. Specifically, oligonucleotides for many of our

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research use only products are sourced from a single supplier. In addition, some of the components incorporated into our products may be proprietary and unavailable from secondary sources. See Part I, Item 1A — Risk Factors.

We have registered the facility used for manufacturing our clinical products with the U.S. Food and Drug Administration, or FDA, as a Device Manufacturer and we believe we are in substantial compliance with the FDA’s quality system requirements or QSRs. We have also achieved ISO 13485:2003 Certification, a stringent, globally-recognized standard of quality management for medical device manufacturers.

We also outsource the manufacture of select components for the microfluidics card format and components of certain assays intended for research applications. We work closely with the vendors of these components to optimize the manufacturing process, monitor quality control and ensure compliance with our product specifications.

MARKETING AND SALES

We currently market and sell our products in the United States through a combination of direct sales personnel who are focused primarily on the clinical market, and through collaborative relationships. Our clinical sales force is comprised of 33 direct sales representatives and technical support personnel. We plan to increase our sales force as market demand requires. The clinical sales force targets high-volume clinical and reference laboratories that meet the criteria for highly-complex CLIA laboratories.

We have more than 130 clinical testing customers in the United States and we serve most major clinical laboratories that perform molecular testing. During 2005, the majority of our product sales were to domestic clinical laboratories.

Our products for the research market are sold primarily through collaborative relationships with research institutions and pharmaceutical companies focused on the life sciences in humans, plants and animals. We also appear at industry trade shows in connection with our marketing efforts.

Third Wave has established a strong and direct presence in Japan. In 2002, we established a wholly-owned subsidiary for the purpose of working more directly with our customers, collaborators and distributors in the Japanese market. We have two employees based in Japan.

Our customer base is dominated by a small number of large clinical-testing laboratories (Quest Diagnostics, Inc., Specialty Laboratories, Inc., Mayo Medical Laboratories, Kaiser Permanente, and Berkeley Heart Laboratories,) and research customers (University of Tokyo/RIKEN and Pioneer Hi-Bred International, Inc.). If we are unable to maintain current pricing levels and/or volumes with these customers, our revenues and business may suffer materially. See Part I, Item 1A — Risk Factors.

We intend to continue to pursue domestic and international market opportunities through a combination of direct sales, distribution arrangements and collaborative relationships. In 2004, Third Wave entered into a limited-term distribution arrangement for a limited number of its products in the European market with Innogenetics, N.V.

For a description of our industry segment and our product revenues by geographic area, see Note 12 of the Notes to the Consolidated Financial Statements included under Item 8 of this Form 10-K. As described in this Note, in 2005 we derived approximately 27% of our product revenues from sales to international end-users. The majority of our international sales were to a major Japanese research institute for use by several end-users. Our international sales are subject to customary risks associated with international transactions. See Part I, Item 1A — Risk Factors.

Our business is generally not seasonal.

COLLABORATIVE RELATIONSHIPS

Our business involves collaborations with clinical laboratory companies, instrument companies, pharmaceutical companies and academic institutions. We have entered into a number of collaboration agreements and continue to assess additional relationships for the supply, distribution and development of our products. The following is a summary of our principal collaborative relationships.

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BML

In December 2000, Third Wave entered into a development and commercialization agreement with BML, Inc., (“BML”), one of the two largest clinical reference laboratories in Japan. Through this agreement, the companies are collaborating to develop and commercialize molecular diagnostics for infectious disease, genetic testing and pharmacogenomics. Under the agreement, Third Wave develops mutually agreed upon clinical assays, and BML reimburses development expenses and purchases final product. As provided by the terms of the agreement, Third Wave develops and supplies BML with clinical reagents at preferential prices. Third Wave has certain rights to commercialize the developed assays worldwide; however, such commercialization rights are limited in Japan depending on BML’s intellectual property surrounding the specific assay. Further, BML has the right to negotiate the terms and conditions under which BML would have the right to use the developed assays for providing clinical testing services in Japan. The term of the agreement is until December 31, 2009.

MONOGRAM BIOSCIENCES (formerly ACLARA BIOSCIENCES, INC.)

In October 2002, Third Wave entered into limited license and supply agreements with ACLARA BioSciences, Inc., which was acquired by Monogram Biosciences (formerly Virologics, Inc.) in December 2004. Under this agreement, Monogram has nonexclusive rights to incorporate our proprietary Invader^® chemistry and Cleavase^® enzyme with Monogram’s eTag^tm technology platform for multiplexed gene expression applications for the research market.

In exchange for the license, Monogram made up-front payments and will continue to make royalty payments based on sales of the Monogram product. The license, supply and Invader Creator software access agreements supercede the research, development and collaboration agreement between the parties that was announced and executed in October 2001.

UNIVERSITY OF TOKYO/RIKEN

In 2003, Third Wave entered into a collaboration with the University of Tokyo to support the genetic research efforts directed by Dr. Yusuke Nakamura, group director of the Research Group for Personalized Medicine at RIKEN and director of the Genome Center at the University of Tokyo. Dr. Nakamura is widely regarded as one of the world’s leading genetic researchers and he was the leader of the Japanese portion of the International Haplotype Map (HapMap) Project as well as other large-scale genotyping projects.

The HapMap Project, which concluded in early 2005, was a worldwide initiative to create a map of common patterns of single nucleotide polymorphisms, or SNPs. SNPs are single-base variations scattered throughout the human genome and are believed to be the cause of most genetic variations from hair color to disease susceptibility. Researchers believe that mapping SNPs will assist in the understanding and analysis of human disease and drug response. Third Wave concluded its ongoing support of HapMap-related research in Japan in 2005, but the Company will continue to support Dr. Nakamura for other research projects.

INTELLECTUAL PROPERTY

We have implemented a patent strategy designed to provide us with freedom to operate and facilitate commercialization of our current and future products. We currently own 38 issued U.S. patents, and hold exclusive licenses to two issued patents in the United States, own seven issued patents in Australia, two issued patents in Canada, one issued patent in Japan, and one issued European Cooperative patent. We have received notices of allowance for seven additional U.S. patent applications. We have 68 additional U.S. patent applications pending, including 61 non-provisional applications. In addition, we have licensed rights to patents and patent applications pending in the United States, Japan and other major industrialized nations, covering genetic variations associated with drug metabolism. We have licensed rights to patents and/or patent applications covering genetic variations associated with certain diseases for which we have designed clinical diagnostic products. In 2005, we obtained a nonexclusive license from the Mayo Foundation for a suite of patents related to detection of genetic polymorphisms in the human UGT1A1 gene. We also have licensed rights to patents and/or patent applications covering various nucleic acid amplification or detection platforms, detection methodologies, and the like. In 2005, we obtained a nonexclusive license from Abbott Molecular Diagnostics for a patent related to multiplex PCR amplification in

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diagnostic applications. Reflecting our international business strategy, we have foreign filings in major industrialized nations corresponding to each major technology area represented in our U.S. patent and application claims. Currently, we have 68 pending applications in foreign jurisdictions, and 5 international (PCT) applications for which foreign filing designations have not yet been made.

Our issued, allowed and pending patents distinguish us from competitors by claiming proprietary methods and compositions for analysis of DNA and RNA, either genomic or amplified, using structure-specific cleavage processes and compositions. Issued and pending claims are included for assay design methods and compositions, as well as for use of the technology in various read-out formats such as fluorescence resonance energy transfer, mass spectrometry or in conjunction with solid supports such as micro latex beads or chips. We also have issued and pending claims covering oligonucleotide design production systems and methods. These methods also allow multiplexing or analysis of more than one sample in a single reaction, enabling the system to be easily amenable to a wide range of automated and non-automated detection methods.

The Company’s issued U.S. patents will expire between 2012 and 2021. Our success depends, to a significant degree, on our ability to develop proprietary products and technologies. We intend to continue to file patent applications, and to license rights to patents and patent applications, as we develop new products, technologies and patentable enhancements. Prosecution practices have been implemented to avoid any applicant delays that could compromise the guaranteed minimum patent term. There can be no guarantee, however, that such procedures will prevent the loss of a potential patent term.

Complex legal and factual determinations and evolving laws make patent protection and freedom to operate uncertain. As a result, we cannot be certain that patents will be issued from any of our pending patent applications or from applications licensed to us or that any issued patents will have sufficient breadth to offer meaningful protection. In addition, our issued patents or patents licensed to us may be successfully challenged, invalidated, circumvented or found unenforceable so that our patent rights would not create an effective competitive barrier. Moreover, the laws of some foreign countries may not protect our proprietary rights to the same extent as U.S. patent laws.

In addition to patent protection, we rely on copyright and trade secret protection of our intellectual property. We attempt to protect our trade secrets by entering into confidentiality agreements with third parties, employees and consultants. Our employees and consultants are required to sign agreements to assign to us their interests in discoveries, inventions, patents and copyrights arising from their work for us. They are also required to maintain the confidentiality of our intellectual property, and refrain from unfair competition with us during their employment and for a period of time after their employment with us, including solicitation of our employees and customers. We cannot be certain that these agreements will not be breached or invalidated. In addition, we cannot assure you that third parties will not independently discover or invent competing technologies or reverse engineer our trade secrets or other technologies.

See Part I, Item 1A — Risk Factors.

COMPETITION

The markets for our technologies and products are very competitive, and we expect the intensity of competition to increase. We compete with organizations that develop and manufacture products and provide services for the analysis of genetic information for research and/or clinical applications. These organizations include (1) diagnostic, biotechnology, pharmaceutical, healthcare, chemical and other companies, (2) academic and scientific institutions, (3) governmental agencies, and (4) public and private research organizations. Many of our competitors have greater financial, operational, sales and marketing resources and more experience in research and development than we have. Moreover, competitors may have greater name recognition than we do and may offer discounts as a competitive tactic. These competitors and other companies may have developed or could in the future develop new technologies that compete with our products or render our products obsolete.

We compete with many companies in the United States and abroad engaged in the development, commercialization and distribution of similar products intended for clinical molecular diagnostic applications. These companies may have or develop products competitive with the products offered by us. Clinical laboratories also

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may offer testing services that are competitive with our products. Clinical laboratories may use reagents purchased from us or others to develop their own diagnostic tests. Such laboratory-developed tests may not be subject to the same requirements for clinical trials and FDA submission requirements that may apply to our products.

In the clinical market, we compete with several companies offering alternative technologies to the Invader^® chemistry. These companies include, among others: Abbott Laboratories; Bayer Corporation; Becton, Dickinson and Company; BioRad Laboratories, Inc.; Digene Corporation; Roche Diagnostics Corporation; Gen-Probe; Applera Corporation companies including Applied Biosystems and Celera; Innogenetics, Inc.; TM Bioscience Corporation; and Ventana Medical Systems Inc.

In the research market, we compete with several companies offering alternative; technologies to the Invader^® chemistry. These companies include, among others: Affymetrix, Inc.; Perlegen Sciences, Inc.; Illumina, Inc.; and Applied Biosystems.

We believe the primary competitive factors in our markets are performance and reliability, ease of use, standardization, cost, proprietary position, market share, access to distribution channels, regulatory approvals, clinical validation and availability of reimbursement.

See Part I, Item 1A — Risk Factors.

GOVERNMENT REGULATION

We are subject to regulation by the FDA under the Federal Food, Drug and Cosmetic Act and other laws. The Food, Drug and Cosmetic Act requires that medical devices introduced to the U.S. market, unless otherwise exempted, be the subject of either a premarket notification clearance, known as a 510(k), or a premarket approval, known as a PMA. Some of our clinical products may require a PMA, others may require a 510(k). Other products, like analyte specific reagents, or ASRs, may be exempt from regulatory clearance or approval, but still subject to restrictions by FDA.

With respect to products reviewed through the 510(k) process, we may not market a product until an order is issued by the FDA finding our product to be substantially equivalent to a legally marketed product known as a predicate device. A 510(k) submission may involve the presentation of a substantial volume of data, including clinical data, and may require a substantial review. The FDA may agree that the product is substantially equivalent to a predicate device and allow the product to be marketed in the United States. The FDA, however, may determine that the device is not substantially equivalent and require a PMA, or require further information, such as additional test data, including data from clinical studies, before it is able to make a determination regarding substantial equivalence. If, after reviewing the 510(k), the FDA determines there is no predicate device, we may request that the FDA use the process known as de novo classification and then clear the device through that means, rather than a PMA. De novo classification is intended to be used for lower-risk products. By requesting additional information, the FDA can further delay market introduction of our products.

If the FDA indicates that a PMA is required for any of our clinical products, the application will require extensive clinical studies, manufacturing information and likely review by a panel of experts outside the FDA. Clinical studies to support either a 510(k) submission or a PMA application would need to be conducted in accordance with FDA requirements. Failure to comply with FDA requirements could result in the FDA’s refusal to accept the data or the imposition of regulatory sanctions. There can be no assurance that we will be able to meet the FDA’s requirements or receive any necessary approval or clearance.

Once granted, a 510(k) clearance or PMA approval may place substantial restrictions on how our device is marketed or to whom it may be sold. Even in the case of devices like ASRs, most of which are exempt from 510(k) clearance or PMA approval requirements, the FDA imposes restrictions on marketing. Additionally, our ASR products may be sold only to clinical laboratories certified under CLIA to perform high complexity testing. The FDA is currently in the process of drafting guidelines for ASRs and these guidelines may result in FDA seeking to limit the types of products that can be sold as ASRs. In addition to requiring approval or clearance for new products, the FDA may require approval or clearance prior to marketing products that are modifications of existing products. We cannot be assured that any necessary 510(k) clearance or PMA approval will be granted on a timely basis, or at all. Delays in receipt of or failure to receive any necessary 510(k) clearance or PMA approval or the imposition of

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stringent restrictions on the labeling and sales of our products could have a material adverse effect on us. We do not anticipate that our products that will be labeled for research use only, or RUO, (i.e., products used in drug discovery or genomics research) will be subject to additional government regulation of significance. Our products labeled as ASRs or labeled for in-vitro diagnostic use will be regulated as medical devices by the FDA and in certain other countries. We believe most of our products currently marketed pursuant to FDA regulations as ASRs, as well as many products we intend to market in the future as ASRs, are exempt from the 510(k) premarket notification and premarket approval requirements. However, the FDA may require that we obtain, or we may choose to obtain, regulatory clearances or approvals for certain of our products or their applications, as was done for our Invader^® UGT1A1 Molecular Assay. We expect that we will apply for FDA clearances or approvals for some of our current and future products.

As a medical device manufacturer, we are also required to register our facility and list our products with the FDA. In addition, we are required to comply with the FDA’s quality systems regulations, or QSRs, which require that our devices be manufactured and records be maintained in a prescribed manner with respect to manufacturing, testing and control activities. Further, we are required to comply with FDA requirements for labeling and promotion. For example, the FDA prohibits cleared or approved devices from being promoted for uncleared or unapproved uses. In addition, the medical device reporting regulation requires that we provide information to the FDA whenever there is evidence to reasonably suggest that one of our devices may have caused or contributed to a death or serious injury or that there has occurred a malfunction that would be likely to cause or contribute to a death or serious injury if the malfunction were to recur. Under FDA regulatory requirements, we may not make claims about the performance, intended clinical use or efficacy of ASR products. There are also restrictions on the concurrent marketing of components that can be used to develop an assay.

Our manufacturing facility is subject to periodic and unannounced inspections by the FDA for compliance with quality system regulations. Additionally, the FDA often will conduct a preapproval inspection for PMA devices. Although we believe we are in compliance with the FDA’s quality system regulations, we have never been inspected by the FDA and cannot assure that we will be able to maintain compliance in the future. If the FDA believes that we are not in compliance with applicable laws or regulations, it can issue a warning letter, detain or seize our products, issue a recall notice or request that a recall be initiated, seek to enjoin future violations and assess civil and criminal penalties against us. In addition, approvals or clearances could be withdrawn under certain circumstances. Failure to comply with regulatory requirements or any adverse regulatory action could have a material adverse effect on us.

Any customers using our products for clinical use in the U.S. will be regulated under CLIA. CLIA is intended to ensure the quality and reliability of clinical laboratories in the United States by mandating specific standards in the areas of personnel qualifications, administration, participation in proficiency testing, patient test management, quality control, quality assurance and inspections. The regulations promulgated under CLIA establish three levels of diagnostic tests, namely, waived, moderately complex and highly complex, and the standards applicable to a clinical laboratory depend on the level of the tests it performs. We cannot assure you that the CLIA regulations and future administrative interpretations of CLIA will not have a material adverse impact on us by limiting the potential market for our products.

Medical device laws and regulations are also in effect in many of the countries in which we may do business outside the United States. These range from comprehensive device approval requirements for some or all of our medical device products, to requests for product data or certifications. The number and scope of these requirements are increasing. Medical device laws and regulations are also in effect in some states in which we do business. There can be no assurance that we will obtain regulatory approvals in such countries or that we will not incur significant costs in obtaining or maintaining foreign regulatory approvals. In addition, export of certain of our products that have not yet been cleared or approved for domestic commercial distribution may be subject to FDA export restrictions.

We are also subject to numerous environmental and safety laws and regulations, including those governing the use and disposal of hazardous materials. Any violation of and the cost of compliance with these regulations could have a material adverse effect on our business.

See Part I, Item 1A — Risk Factors.

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RESEARCH AND DEVELOPMENT

Research and development costs associated with our products and technologies, as well as facilities costs, personnel costs, marketing programs and overhead account for a substantial portion of our operating expenses. Research and development expenses for the years ended December 31, 2005, 2004, and 2003 were $8.4 million, $11.6 million, and $12.0 million, respectively.

EMPLOYEES

As of December 31, 2005, we employed 154 persons, of whom 29 hold doctorate degrees and 105 hold other advanced degrees. Approximately 37 employees are engaged in research and development, 53 in business development, sales and marketing, 27 in operations and manufacturing and 37 in intellectual property, finance and other administrative functions. Our success will depend in large part on our ability to attract and retain qualified employees. We face competition in this regard from other companies, research and academic institutions, government entities and other organizations. We believe that we maintain good relations with our employees.

AVAILABLE INFORMATION

The Company makes available financial information, news releases and other information on its web site at www.twt.com. The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, its Code of Business Conduct (which governs all officers, executives, directors and employees of the Company), and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge on its Web site as soon as reasonably practicable after the Company files such reports and amendments with, or furnishes them to, the Securities and Exchange Commission.

ITEM 1A.   RISK FACTORS

RISKS RELATED TO OUR BUSINESS

WE HAD AN ACCUMULATED DEFICIT OF $158.1 MILLION AT DECEMBER 31, 2005, AND EXPECT TO CONTINUE TO INCUR SUBSTANTIAL OPERATING LOSSES FOR THE FORESEEABLE FUTURE.

We have had substantial operating losses since our inception in 1993, and we expect our operating losses to continue over the foreseeable future. We experienced net losses of $22.3 million in 2005, $1.9 million in 2004, and $8.1 million in 2003. In order to further develop our products and technologies, including development of new products for the clinical market, we will need to incur significant expenses in connection with our internal research and development and commercialization programs. As a result, we expect to incur annual operating losses for the foreseeable future. In addition, there is no assurance that we will ever become profitable or that we will sustain profitability if we do become profitable. Should we experience protracted or unforeseen operating losses, our capital requirements would increase and our stock price would likely decline.

FLUCTUATIONS IN OUR QUARTERLY REVENUES AND OPERATING RESULTS MAY NEGATIVELY IMPACT OUR STOCK PRICE.

Our revenues and results of operations have fluctuated significantly in the past and we expect significant fluctuations to continue in the future due to a variety of factors, many of which are outside of our control. These factors include:

•  the volume and timing of orders for our products;

•  changes in the mix of our products offered;

•  the timing of payments we receive under collaborative agreements, as well as our ability to recognize these payments as revenues;

•  the number, timing and significance of new products and technologies introduced by our competitors;

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•  third-party intellectual property, which may require significant investments in licensing or royalties, or which may materially impede our ability to sell products;

•  our ability to develop, obtain regulatory clearance, market and introduce new and enhanced products on a timely basis;

•  changes in the cost, quality and availability of equipment, reagents and components required to manufacture or use our products;

•  availability of commercial and government funding to researchers who use our products and services, including our single-largest research customer in Japan; and

•  availability of third-party reimbursement to users of our clinical products.

Research and development costs associated with our products and technologies, as well as facilities costs, personnel costs, marketing programs and overhead account for a substantial portion of our operating expenses. Research and development expenses for the years ended December 31, 2005, 2004, and 2003 were $8.4 million, $11.6 million, and $12.0 million, respectively. We cannot reduce these expenses quickly in the short term. If our revenues decline or do not grow as anticipated, we may not be able to reduce our operating expenses accordingly. Failure to achieve anticipated levels of revenues could significantly harm our operating results for one or more fiscal periods. Due to the possibility of fluctuations in our revenues and expenses, we believe that quarter-to-quarter comparisons of our operating results are not a good indication of our future performance. In addition, our operating results in a future fiscal quarter may not meet the expectations of stock market analysts and investors. In that case, our stock price would likely decline and investors would experience a decline in the value of their investment.

OUR TECHNOLOGIES AND COMMERCIAL PRODUCTS MAY NOT BE COMMERCIALLY VIABLE OR SUCCESSFUL, WHICH COULD ADVERSELY AFFECT OUR BUSINESS.

We are currently developing and commercializing a limited number of products based on our technologies. We plan to develop additional products. We cannot assure you that we will be able to complete development of our products that are currently under development or that we will be able to develop additional new products. In addition, for our genetic and pharmacogenetic products, some of the genetic variations for which we develop our products may not be useful or cost effective in assisting therapeutic selection, patient monitoring or diagnostic applications. In this event, our sales of products for these genetic variations would diminish significantly or cease, and we would not be able to recoup our investment in developing these products. Accordingly, if we fail to successfully develop our products and technologies or if our technologies are not useful in the development of commercially successful products, we may not achieve a competitive position in the market. If we fail to do so, our revenues will be seriously harmed and it is unlikely that we will ever achieve profitability. Market acceptance of our products will depend on widespread acceptance of such products by doctors and clinicians. The use of products to assess genetic variation, gene expression or identify infectious diseases is relatively new and remains uncertain. If clinicians and doctors do not adopt our products, our business, financial condition and results of operation could be adversely affected. In these events, our stock price would likely decline.

WE HAVE LIMITED MANUFACTURING EXPERIENCE AND MAY NEED TO MODIFY, EXPAND OR ESTABLISH NEW MANUFACTURING FACILITIES AS WE COMMERCIALIZE OUR PRODUCTS.

We have limited experience manufacturing our products and have limited experience manufacturing our products in the volumes that will be necessary for us to achieve significant commercial sales. We may need to establish new manufacturing processes or facilities, modify existing facilities and processes, or outsource product component manufacturing. Facilities expansion and development, process improvements, and outsourcing manufacturing can be delayed by unforeseen circumstances, including inability to obtain needed manufacturing equipment on a timely basis, difficulties with facility construction and completion of improvements and difficulties incorporating new processes and vendor supply issues associated with component outsourcing. If we fail to meet our manufacturing needs, we may not be able to provide our customers with the quantity of products they require, which would damage customer relations and result in reduced revenues. Additionally, some of our products must be

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manufactured in accordance with the FDA’s QSRs. We have limited experience in manufacturing our products in compliance with QSRs and cannot guarantee that our manufacturing and production systems are in compliance with the QSRs.

Key components of our products may be sourced from a single supplier or a limited number of suppliers. Specifically, oligonucleotides for many of our research use only products are sourced from a single supplier as are certain components of our InPlex microfluidic card format. In addition, some of the components incorporated into our products may be proprietary and unavailable from secondary sources. Finally, to comply with QSRs, we must verify that our suppliers of key components are in compliance with all applicable FDA regulations and meet our standards for quality. If we lose a source of supply due to any of the above reasons or otherwise we may not be able to arrange for alternative supply sources. If our suppliers are unable or unwilling to supply us on commercially acceptable terms with these components, we may be unable to satisfy demand for our product on reasonable terms, if at all, which may have an adverse effect on our business, financial condition and results of operations.

OUR LIMITED SALES AND MARKETING EXPERIENCE AND CAPACITY MAY ADVERSELY AFFECT OUR ABILITY TO GROW AND TO COMPETE SUCCESSFULLY IN COMMERCIALIZING OUR POTENTIAL PRODUCTS.

Our sales force consists of 18 individuals focused on direct sales and 15 individuals focused on service and support in the clinical market. We may need to increase the size of our sales force as we further commercialize our products, and we may not be able to recruit, hire and train a sufficient number of sales personnel in a short time frame. We may also market our products through collaborations and distribution agreements with diagnostic, biopharmaceutical and life science companies. We cannot guarantee that we will be able to establish a successful sales force or to establish collaboration or distribution arrangements to market our products. If we are unable to implement an effective marketing and sales strategy, we will be unable to grow our revenues and execute our business plan. This would have an adverse effect on our business, financial condition and results of operations.

We have limited experience with sales of our clinical molecular diagnostics products outside of the U.S. We cannot guarantee that we will successfully develop sales, distribution, product and customer support capabilities internationally that will enable us to generate significant revenue from sales outside the United States. In addition, sales made outside the U.S. are subject to foreign regulations typical to the sale and marketing of our products that may pose an additional risk for us. If we fail to increase our revenues from sales outside of the United States, this would have an adverse effect on our business, financial condition and results of operations.

Our customer base is dominated by a small number of large clinical testing laboratories (Quest Diagnostics, Inc., Specialty Laboratories, Inc., Mayo Medical Laboratories, Kaiser Permanente, and Berkeley Heart Laboratories) and research customers (University of Tokyo/RIKEN and Pioneer Hi-Bred International, Inc.). We regularly experience pricing and other competitive pressures in these accounts. Many of our contracts with key customers are short-term contracts and/or subject to early termination. Our customers are not obligated to renew contracts after they expire. If, for any reason, we are unable to maintain or renew our contracts, particularly our contracts with key customers, or if, for any reason, we are unable to maintain current pricing levels and/or volumes with our customers, our revenues and business may suffer materially.

THE EARLY TERMINATION OF ANY OF OUR STRATEGIC COLLABORATION OR CUSTOMER SUPPLY AGREEMENTS COULD SERIOUSLY HARM OUR BUSINESS AND FINANCIAL CONDITION.

Certain of our strategic, research collaboration, and customer supply agreements may be terminated with little or no notice. In particular, the supply of products to Japanese customers may be terminated upon specified notice at any time. These customers will likely account for a material portion of our revenues for 2006. Accordingly, early termination of these relationships and supply agreements would seriously harm our revenues, and in turn, our business, and financial condition.

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WE MAY REQUIRE ADDITIONAL FINANCING FOR OUR FUTURE OPERATING PLANS.
FINANCING MAY NOT BE AVAILABLE ON ACCEPTABLE TERMS, IF AT ALL.

We may need to raise additional capital in the future. We have expended significant resources and expect to continue to expend significant resources in our research and product development and commercialization activities and to improve production processes, litigate intellectual property disputes, and seek FDA clearance or approvals. The amount of additional capital we will need to raise will depend on many factors, including:

•  our progress with our research and development programs;

•  the needs we may have to pursue FDA clearances or approvals of our products;

•  our level of success in selling our products and technologies;

•  our ability to establish and maintain successful collaborations;

•  the costs we incur in securing intellectual property rights, whether through patents, licenses or otherwise;

•  the costs we incur in enforcing and defending our patent claims and other intellectual property rights;

•  the timing of purchases of additional capital;

•  the need to respond to competitive pressures; and

•  the possible acquisition of complementary products, businesses or technologies.

If we raise additional funds through the sale of equity, convertible debt or other equity-linked securities, our shareholders’ percentage ownership in the Company will be reduced. In addition, these transactions may dilute the value of our outstanding stock. We may issue securities that have rights, preferences and privileges senior to our common stock. If we raise additional funds through collaborations or licensing arrangements, we may relinquish rights to certain of our technologies or products, or grant licenses to third parties on terms that are unfavorable to us. If future financing is not available to us or is not available on terms acceptable to us, we may not be able to fund our future needs that would have an adverse effect on our business, financial condition and results of operations.

FAILURE TO MAINTAIN EFFECTIVE INTERNAL CONTROLS IN ACCORDANCE WITH SECTION 404 OF THE SARBANES-OXLEY ACT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND STOCK PRICE.

If we fail to maintain adequacy of our internal controls in accordance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Failure to achieve and maintain an effective internal control environment could have a material adverse effect on our stock price.

COMMERCIALIZATION OF OUR TECHNOLOGIES MAY DEPEND ON STRATEGIC PARTNERSHIPS AND COLLABORATIONS WITH OTHER COMPANIES, AND IF OUR CURRENT OR FUTURE PARTNERSHIPS AND COLLABORATIONS ARE NOT SUCCESSFUL, WE MAY EXPERIENCE DIFFICULTY COMMERCIALIZING OUR TECHNOLOGIES AND PRODUCTS.

In order to augment our internal sales and marketing efforts and to reach additional product and geographic markets, we have entered into or may enter into strategic partnerships and collaborations for the development, marketing, sales or distribution of our products. These agreements provide us, in some instances, with distribution of our products, access to products and technologies that are complementary to ours and funding for development of our products. We may also be dependent on collaborators for regulatory approvals and clearances, and manufacturing in particular geographic and product markets. If our strategic partnerships and collaborations are not successful, we may not be able to develop or successfully commercialize the products that are the subject of the collaborations on a timely basis, if at all, or effectively distribute our products. In addition, if we do not enter into additional partnership agreements, or if these agreements are not successful, our ability to develop, commercialize and distribute products will be negatively affected which will harm our future operating results.

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We have no control over the resources that any partner or collaborator may devote to our products. Any of our present or future partners or collaborators may not perform their obligations as expected. These partners or collaborators may breach or terminate their agreements with us or otherwise fail to meet their obligations or perform their collaborative activities successfully and in a timely manner. Further, any of our partners or collaborators may elect not to develop products arising out of our partnerships or collaborations or devote sufficient resources to the development, manufacture, commercialization or distribution of these products. If any of these events occur, we may not be able to develop our products and technologies and our ability to generate revenues will decrease.

WE ARE IN A HIGHLY COMPETITIVE INDUSTRY AND MARKETPLACE. COMPETITIVE DEVELOPMENTS, INCLUDING NEW TECHNOLOGIES THAT RENDER OURS LESS COMPETITIVE OR OBSOLETE, COULD SERIOUSLY HARM OUR BUSINESS.

The biotechnology and life sciences industries generally and the genetic analysis and molecular diagnostics markets specifically are highly competitive, and we expect the intensity of competition to increase. We compete with organizations in the United States and abroad that develop and manufacture products and provide services for the analysis of genetic information for research and/or clinical applications. These organizations include:

•  diagnostic, biotechnology, pharmaceutical, healthcare, chemical and other companies;

•  academic and scientific institutions;

•  governmental agencies;

•  public and private research organizations; and

•  clinical labs.

Many of our competitors have greater financial, technical, research, marketing, sales, distribution, service and other resources than we do. Moreover, our competitors may offer broader product lines and have greater name recognition than we do, and may offer discounts as a competitive tactic. In addition, several development stage companies are currently making or developing technologies, products or services that compete with or are being designed to compete with our technologies and products. Our competitors may develop or market technologies, products or services that are more effective or commercially attractive than our current or future products, or that may render our technologies or products less competitive or obsolete. Competitors may make rapid technological developments which may result in our technologies and products becoming obsolete before we recover the expenses incurred to develop them or before they generate significant revenue or market acceptance. Competitors may also obtain regulatory advances or approvals of their diagnostic products more rapidly than we do. Accordingly, if competitors introduce superior technologies or products or obtain regulatory approvals or clearances quicker than we do, and we cannot make enhancements to our technologies and products necessary for them to remain competitive, our competitive position, and in turn our business, revenues and financial condition, will be seriously harmed. This, in turn, would likely cause our stock price to decline.

Our existing and potential competitors may be in the process of seeking FDA or foreign regulatory approval for their respective products or may also enjoy substantial advantages over us in terms of research and development expertise, clinical trial expertise, experience in submission of products to regulatory authorities and the marketing or commercialization of FDA approved or cleared products. In addition, many of our competitors may have or will establish third-party reimbursement for their products. We may not be able to compete effectively against competitors that hold such an advantage which may have a material adverse effect on our business, financial condition and results of operations.

WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY METHODS AND TECHNOLOGIES AND MAY BE SUBJECT TO CLAIMS OF INFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS.

Our commercial success will depend, to a significant degree, on our ability to obtain patent protection on many aspects of our business, including the products, methods and services we develop. Patents issued to us may not

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provide us with substantial protection or be commercially beneficial to us. The issuance of a patent is not conclusive as to its validity or its enforceability. In addition, our patent applications or those we have licensed, may not result in issued patents. If our patent applications do not result in issued patents, our competitors may obtain rights to commercialize our discoveries which would harm our competitive position.

We also may apply for patent protection on novel genetic variations in known genes and their uses, as well as novel uses for previously identified genetic variations discovered by third parties. In the latter cases or in the area of new product development, we may need licenses from the holders of patents with respect to such genetic variations in order to make, use or sell any related products. We may not be able to acquire such licenses on terms acceptable to us, if at all.

Certain parties are attempting to rapidly identify and characterize genes and genetic variations through the use of sequencing and other technologies. To the extent any patents are issued to other parties on such partial or full-length genes or genetic variations or uses for such genes or genetic variations, the risk increases that the sale of products developed by us or our collaborators may give rise to claims of patent infringement against us. Others may have filed and, in the future, are likely to file patent applications covering many genetic variations and their uses. Others may file and, in the future, may file, patent applications covering improvements to our technologies. Any such patent application may have priority over our patent applications and could further restrict our ability to market our products. We cannot assure you that any license that we may require under any such patent will be made available to us on commercially acceptable terms, if at all.

While we believe our technology does not infringe any third party rights, we have in the past been party to and are currently party to litigation involving patents and intellectual property rights. See Part I, Item 3 — Legal Proceedings. We may in the future become party to other litigation involving claims of infringement of intellectual property rights. We could also become involved in disputes regarding the ownership of intellectual property rights that relate to our technologies. These disputes could arise out of collaboration relationships, strategic partnerships or other relationships. Any such litigation could be expensive, take significant time, and could divert management’s attention from other business concerns. If we do not prevail in any pending or future legal proceeding, we may be required to pay significant monetary damages. In addition, we could also be enjoined from use of certain processes or prevented from selling certain configurations of our products that were found to be within the scope of the patent claims. In the event we did not prevail in any pending or future proceeding, we would either have to obtain licenses from the other party, avoid certain product configurations or modify some of our products and processes to design around the patents. Licenses could be costly or unavailable on commercially reasonable terms. Designing around patents or focusing efforts on different configurations could be time consuming, and we could be forced to remove some of our products from the market while we were completing redesigns. Accordingly, if we are unable to settle pending or future intellectual property disputes through licensing or similar arrangements, or if any such pending or future disputes are determined adversely to us, our ability to market and sell our products could be seriously harmed. This would in turn harm our business, financial condition and results of operations.

In addition, in order to protect or enforce our patent rights or to protect our ability to operate our business, we may need to initiate other patent litigation against third parties. These lawsuits could be expensive, take significant time, and could divert management’s attention from other business concerns. These lawsuits could result in the invalidation or limitation in the scope of our patents or forfeiture of the rights associated with our patents. We cannot assure you that we would prevail in any such proceedings or that a court will not find damages or award other remedies in favor of our opposing party in any of these suits. During the course of any future proceedings, there may be public announcements of the results of hearings, motions and other interim proceedings or developments in the litigation. Securities analysts or investors may perceive these announcements to be negative, which could cause the market price of our stock to decline.

OTHER RIGHTS AND MEASURES THAT WE RELY UPON TO PROTECT OUR INTELLECTUAL PROPERTY MAY NOT BE ADEQUATE TO PROTECT OUR PRODUCTS AND COULD REDUCE OUR ABILITY TO COMPETE IN THE MARKET.

In addition to patents, we rely on a combination of trade secrets, copyright and trademark laws, nondisclosure agreements and other contractual provisions and technical measures to protect our intellectual property rights.

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While we require employees, collaborators, consultants and other third parties to enter into confidentiality and/or non-disclosure agreements where appropriate, any of the following could still occur:

•  the agreements may be breached;

•  we may have inadequate remedies for any breach;

•  the employees, collaborators, consultants and other third parties may apply for patents on improvements to our technologies without assigning ownership rights to us;

•  proprietary information could be disclosed to our competitors; or

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

If for any of the above reasons our intellectual property is disclosed, invalidated or misappropriated, it would harm our ability to protect our rights and our competitive position.

IF WE FAIL TO RETAIN OUR KEY PERSONNEL AND HIRE, TRAIN AND RETAIN QUALIFIED EMPLOYEES, WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY, WHICH COULD RESULT IN REDUCED REVENUES.

Our future success will depend on the continued services and on the performance of our senior management, scientific staff, and key employees.

If a competitor hired members of our senior management staff, scientific staff, or key employees, or if for any reason these employees would not continue to work for us, we would have difficulty hiring employees with equivalent skills.

In addition, our researchers, scientists and technicians have significant experience in research and development related to the analysis of genetic variations. If we were to lose these employees to our competitors, we could spend a significant amount of time and resources to replace them, which could impair our research and development efforts. Further, in order to scale up our commercialization activity and to further our research and development efforts, we will need to hire, train and retain additional sales, marketing, research, scientific, and technical personnel. If we are unable to hire, train and retain the personnel we need, we may experience delays in the research, development and commercialization of our technologies and products. This would result in reduced revenues and would harm our results of operations.

WE PLAN TO CONTINUE TO INTRODUCE PRODUCTS FOR THE CLINICAL MARKET, AND WE MAY NEED TO OBTAIN FDA CLEARANCES AND APPROVALS AND COMPLY WITH FDA
QUALITY SYSTEM REGULATIONS AND OTHER REGULATIONS RELATING TO THE MANUFACTURING, MARKETING AND SALE OF CLINICAL PRODUCTS.

We anticipate that the manufacturing, labeling, distribution and marketing of a number of our clinical diagnostic products will be subject to extensive regulation in the United States and in certain other countries.

The Food, Drug and Cosmetic Act requires that medical devices introduced to the U.S. market, unless otherwise exempted, be subject of either a premarket notification clearance, known as a 510(k), or a premarket approval, known as a PMA. In the United States, the FDA regulates, as medical devices, most diagnostic tests and in vitro diagnostic (IVD) reagents that are marketed as finished test kits. Some clinical laboratories, however, purchase products that are marketed under FDA regulations as analyte specific reagents (ASRs), and develop and prepare their own finished diagnostic tests. FDA also considers ASRs to be medical devices, however, most ASRs are exempt from 510(k) clearance or PMA approval requirements. The FDA restricts the sale of these products to clinical laboratories certified under CLIA to perform high complexity testing and also restricts the types of products that can be sold as ASRs. We currently market the majority of our diagnostic products as IVDs, ASRs, and General Purpose Reagents (GPRs). Consequently, these clinical products are regulated as medical devices. Should the FDA modify the ASR rules or its interpretation and enforcement of them in a fashion that makes it difficult or impossible for us to market some or all of our products, we may be required to terminate those ASR product sales, conduct

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clinical studies and make submissions of our products to the FDA for clearance or approval. The FDA is currently in the process of considering the issuance of new guidance that may restrict the products that the FDA believes can be marketed as ASRs. In that event, we could experience significant revenue loss, additional expenses and loss of our clinical customer base which would cause the market price of our stock to decline.

Unless otherwise exempt, medical devices require FDA approval or clearance prior to marketing in the United States. Although we believe the majority of our currently marketed products, as well as those ASRs we intend to market in the future, are exempt from 510(k) premarket notification and premarket approval requirements, the process of obtaining approvals and clearances necessary to market our proposed clinical products can be time-consuming, expensive and uncertain. To date, we have applied for one FDA clearance with respect to our clinical diagnostic products. This clearance was for our Invader^® UGT1A1 Molecular Assay and was obtained in August 2005. We plan to seek additional FDA approvals or clearances for certain products in 2006, however, we cannot predict the likelihood of obtaining those approvals or clearances. Also, clinical products that we may seek to introduce in the future may require FDA approvals or clearances prior to commercial sale in the United States. We may experience difficulties that could delay or prevent the successful development, introduction and marketing of new clinical products. In addition, we cannot assure that regulatory approval or clearance of any clinical products for which we seek such approvals will be granted by the FDA or foreign regulatory authorities on a timely basis, if at all. Furthermore, in the event that the ASR regulatory landscape is modified by the FDA to reduce the number of products qualifying as ASRs, we could experience significant revenue loss, additional expenses and loss of our clinical customer base which would cause the market price of our stock to decline.

If approval or clearance is obtained we will be subject to continuing FDA obligations. When manufacturing medical devices, including ASRs, we will be required to adhere to Quality System Regulations, which will require us to manufacture our products and maintain records in a prescribed manner. We have never been subject to an FDA Quality System inspection, and we cannot assure that we would pass an FDA audit or maintain compliance in the future. Further, the FDA may place substantial restrictions on the indications for which our products may be marketed or to whom they may be marketed. Additionally, there can be no assurance that FDA will not require us to conduct clinical studies as a condition of approval or clearance. Failure to comply with applicable FDA requirements can result in, among other things:

•  administrative or judicially imposed sanctions;

•  injunctions, civil penalties, recall or seizure of our products;

•  total or partial suspension of production;

•  failure of the government to grant premarket clearance or premarket approval for our products;

•  withdrawal of marketing clearances or approvals; and

•  criminal prosecution.

Any of our customers using our products for clinical use in the United States may be regulated under CLIA. CLIA is intended to ensure the quality and reliability of clinical laboratories in the United States by mandating specific standards in the areas of personnel qualification, administration, participation in proficiency testing, patient test management, quality control, quality assurance and inspections. The regulations promulgated under CLIA establish three levels of clinical tests and the standards applicable to a clinical laboratory depend on the level of the tests it performs. CLIA requirements may prevent some clinical laboratories, including those laboratories that do not comply with those requirements, from using some or all of our products. In addition, CLIA regulations and future administrative interpretations of CLIA could harm our business by limiting the potential market for some or all of our products.

OUR INTERNATIONAL SALES ARE SUBJECT TO CURRENCY, MARKET AND REGULATORY RISKS THAT ARE BEYOND OUR CONTROL.

In 2005 we derived approximately 27% of our product revenues from sales to international end-users and we expect that international sales will continue to account for a portion of our sales. Changes in the rate of exchange of foreign currencies into United States dollars have and will continue to impact our revenues and results of operations.

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The extent and complexity of medical products regulation are increasing worldwide, with regulation in some countries nearly as extensive as in the United States. Further, we must comply with import and export regulations when distributing our products to foreign nations. Each foreign country’s regulatory requirements for product approval and distribution are unique and may require the expenditure of substantial time, money and effort. As a result, we may not be able to successfully commercialize our products in foreign markets at or beyond the level of commercialization we have already achieved.

OUR FAILURE TO COMPLY WITH ANY APPLICABLE ENVIRONMENTAL, HEALTH, SAFETY AND RELATED GOVERNMENT REGULATIONS MAY AFFECT OUR ABILITY TO DEVELOP, PRODUCE OR MARKET OUR POTENTIAL PRODUCTS AND MAY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

Our research, development and manufacturing activities involve the use, transportation, storage and disposal of hazardous materials and are subject to related environmental and health and safety statutes and regulations. As we expand our operations, our increased use of hazardous substances will lead to additional and more stringent requirements. This may cause us to incur substantial costs to maintain compliance with applicable statutes and regulations. In addition, we are obligated to file a report to the U.S. Environmental Protection Agency, or EPA, regarding specified types of microorganisms we use in our operations. The EPA could, upon review of our use of these microorganisms, require us to discontinue its use. If this were to occur, we would have to substitute a different microorganism from the EPA’s approved list. We could experience delays or disruptions in production while we convert to the new microorganism. In addition, any failure to comply with laws and regulations and any costs associated with unexpected and unintended releases of hazardous substances by us into the environment, or at disposal sites used by us, could expose us to substantial liability in the form of fines, penalties, remediation costs or other damages and could require us to shut down our operations. Any of these events would seriously harm our business and operating results.

WE MAY BE HELD LIABLE FOR ANY INACCURACIES ASSOCIATED WITH NUCLEIC ACID TESTS PERFORMED USING OUR PRODUCTS, WHICH MAY REQUIRE US TO DEFEND OURSELVES IN COSTLY LITIGATION.

We may be subject to claims resulting from incorrect results of analysis of nucleic acid tests performed using our products. Litigating any such claims could be costly. We could expend significant funds during any litigation proceeding brought against us. Further, if a court were to require us to pay damages to a plaintiff, the amount of such damages could significantly harm our business, financial condition and results of operations.

IF OUR VENDORS FAIL TO SUPPLY US WITH COMPONENTS FOR WHICH AVAILABILITY IS LIMITED, WE MAY EXPERIENCE DELAYS IN OUR PRODUCT DEVELOPMENT AND COMMERCIALIZATION.

Certain key components of our manufacturing equipment and products are currently available only from a single source or a limited number of sources. We currently rely on outside vendors to manufacture certain components of our products and certain reagents we provide in our products. Some or all of these key components may not continue to be available in commercial quantities at acceptable costs. It could be time consuming and expensive for us to seek alternative sources of supply. Consequently, if any events cause delays or interruptions in the supply of our components, we may not be able to supply our customers with our products on a timely basis which would adversely affect our results of operations.

RELIANCE ON COMPUTER HARDWARE, SOFTWARE AND APPLICATIONS FOR OPERATIONS

We depend on the continuous, effective, reliable and secure operation of our computer hardware, software, networks, servers, related infrastructure and applications for the successful operations of our business. Should we encounter difficulties with such systems, our business, financial condition and results of operations could be negatively impacted.

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FUTURE ISSUANCE OF OUR PREFERRED STOCK MAY DILUTE THE RIGHTS OF OUR COMMON STOCKHOLDERS.

Our Board of Directors has the authority to issue up to 10,000,000 shares of preferred stock and to determine the price, privileges and other terms of these shares without any further approval of our stockholders. The rights of the holders of common stock may be adversely affected by the rights of our holders of our preferred stock that may be issued in the future.

WE HAVE VARIOUS MECHANISMS IN PLACE THAT A STOCKHOLDER MAY NOT CONSIDER FAVORABLE AND WHICH MAY DISCOURAGE UNSOLICITED TAKEOVER ATTEMPTS.

Certain provisions of our certificate of incorporation and bylaws, Section 203 of the Delaware General Corporation Law, and certain provisions in our executive compensation plans, long-term incentive plans and employment and similar agreements may discourage, delay or prevent changes in our board of directors, executive officers or other senior management. These provisions may also be used by incumbent management to delay a change of control or acquisition of our Company. These provisions include:

•  authorizing our Board of Directors to issue preferred stock and to determine the price, privileges and other terms of these shares without any further approval of our stockholders, which could increase the number of outstanding shares or thwart an unsolicited takeover attempt;

•  establishing a classified Board of Directors with staggered, three-year terms, which may lengthen the time required to gain control of our Board of Directors;

•  prohibiting cumulative voting in the election of directors, which would allow a majority of stockholders to control the election of all directors;

•  requiring super-majority voting to effect certain amendments to our certificate of incorporation and bylaws;

•  limiting who may call special meetings of stockholders;

•  prohibiting stockholder action by written consent, which requires all actions to be taken at a meeting of stockholders;

•  establishing advance notice requirements for nominations of candidates for election to the Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; and

•  payments due to executive officers and other employees under executive compensation plans, long-term incentive plans and employment and similar agreements that could be triggered certain change of control events.

A change of control could be beneficial to stockholders in a situation in which the acquisition price being paid by the party seeking to acquire us represented a substantial premium over the prevailing market price of our common stock. If our board of directors were not in favor of such a transaction, the provisions of our certificate of incorporation and bylaws described above could be used by our board of directors to delay or reduce the likelihood of completion of the acquisition.

OUR DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS WILL HAVE SUBSTANTIAL CONTROL OVER OUR AFFAIRS.

As of February 14, 2006, our directors and executive officers beneficially owned approximately 9% of our common stock. Stockholders that own 5% or more of our outstanding shares own, in the aggregate, approximately 32% of our common stock. These stockholders, acting together, will have the ability to exert substantial influence over all matters requiring approval by our stockholders. These matters include the election and removal of directors and any merger, consolidation or sale of all or substantially all of our assets. In addition, they may dictate the management of our business and affairs. This concentration of ownership could have the effect of delaying, deferring or preventing a change in control, or impeding a merger or consolidation, takeover or other business combination of which you might otherwise approve.

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RISKS RELATED TO THE BIOTECHNOLOGY INDUSTRY

PUBLIC OPINION REGARDING ETHICAL ISSUES SURROUNDING THE USE OF GENETIC INFORMATION MAY ADVERSELY AFFECT DEMAND FOR OUR PRODUCTS.

Public opinion regarding ethical issues related to the confidentiality and appropriate use of genetic testing results may influence governmental authorities to call for limits on, or regulation of the use of, genetic testing. In addition, such authorities could prohibit testing for genetic predisposition to certain conditions, particularly for those that have no known cure. Furthermore, adverse publicity or public opinion relating to genetic research and testing, even in the absence of any governmental regulation, could harm our business. Any of these scenarios could reduce the potential markets for our products, which could materially and adversely affect our revenues.

GOVERNMENT REGULATION OF GENETIC RESEARCH OR TESTING MAY ADVERSELY AFFECT THE DEMAND FOR OUR PRODUCTS AND IMPAIR OUR BUSINESS AND OPERATIONS.

Federal, state, local and foreign governments may adopt further regulations relating to the conduct of genetic research and genetic testing. These new regulations could limit or restrict genetic research activities as well as genetic testing for research or clinical purposes. In addition, if state and local regulations are adopted, these regulations may be inconsistent with, or in conflict with, regulations adopted by other state or local governments. Foreign regulations may be inconsistent with, or in conflict with United States regulations. Regulations relating to genetic research activities could adversely affect our ability to conduct our research and development activities. Regulations restricting genetic testing could adversely affect our ability to market and sell our products. Accordingly, any regulations of this nature could harm our business.

HEALTH CARE COST CONTAINMENT INITIATIVES COULD LIMIT THE ADOPTION OF GENETIC TESTING AS A CLINICAL TOOL, WHICH WOULD HARM OUR REVENUES AND PROSPECTS.

In recent years, health care payors as well as federal and state governments have focused on containing or reducing health care costs. We cannot predict the effect that any of these initiatives may have on our business, and it is possible that they will adversely affect our business. Health care cost containment initiatives focused on genetic testing could cause the growth in the clinical market for genetic testing to be curtailed or slowed. In addition, health care cost containment initiatives could also cause pharmaceutical companies to reduce research and development spending. In either case, our business and our operating results would be harmed. In addition, genetic testing in clinical settings is often billed to third-party payors, including private insurers and governmental organizations. If our current and future clinical products are not considered cost-effective by these payors, reimbursement may not be available to users of our products. In this event, potential customers would be much less likely to use our products, and our business and operating results would be seriously harmed.

REIMBURSEMENT FOR USE OF OUR PRODUCTS

Sales of our products will depend, in large part, on the availability of adequate reimbursement to users of those products from government insurance plans, managed care organizations and private insurance plans. Physicians’ recommendations to use our products are likely to be influenced by the availability of reimbursement by insurance companies and other third-party payors. There can be no assurance that insurance companies or third-party payors will provide or continue to provide coverage for our products or that reimbursement levels will be adequate for the reimbursement of the providers of our products. In addition, outside the United States, reimbursement systems vary from country to country and there can be no assurances that third-party reimbursement will be made available at an adequate level, if at all, for our products under any other reimbursement system. Lack of or inadequate reimbursement by government or other third-party payors for our products would have a material adverse effect on our business, financial condition and results of operations.

ITEM 1B.   UNRESOLVED STAFF COMMENTS.

None.

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ITEM 2.   PROPERTIES

Our facility consists of space for research and development, manufacturing, product support operations, marketing and corporate headquarters and administration. Our facility is located in Madison, Wisconsin. Our facility is leased and described by the following:

	Approx.
	Square
Type of Facility	Footage		Lease Expiration
Headquarters, research and development, manufacturing, selling, marketing, and administration		95,000	September 2011, with an option to extend for three 5-year periods.

Under the terms of the existing lease, we pay rent of approximately $177,000 per month. We believe that our current facility will be adequate to meet our near-term space requirements. We also believe that suitable additional space will be available to us, if needed, on commercially reasonable terms.

ITEM 3.   LEGAL PROCEEDINGS

In September 2004, we filed a suit against Stratagene Corporation in the United States District Court for the Western District of Wisconsin. The complaint alleged patent infringement of two of our patents concerning our proprietary Invader technology by Stratagene’s sale of its QPCR and QRTPCR Full Velocity products. The case was tried before a jury in August 2005, and the jury found that Stratagene willfully infringed our patents and that our patents were valid. The jury awarded us $5.29 million in damages. The Court subsequently entered a permanent injunction barring Stratagene from making, selling or offering to sell its FullVelocity QPCR and QRT-PCR products and any other products that practice our patented Invader methods. In December 2005, the Court tripled the damages award to $15.9 million and ruled that Stratagene must pay attorney fees of $4.2 million. Stratagene has appealed the verdict to the Court of Appeals for the Federal Circuit in Washington, D.C. In January 2006, the Court awarded additional interest on the damages award in the amount of $485,716, increasing the total damages amount to $16.4 million. Also in January 2006, Stratagene posted a $21 million civil bond to stay payment of the judgment while it conducts its appeal.

In May 2005, Stratagene Corporation filed suit against us in the United States District Court for the District of Delaware. The complaint alleges patent infringement of claims of two Stratagene patents relating to our Invader Plus chemistry. The complaint was served on us in September 2005. Discovery is expected to begin in the near future. A trial date of November 5, 2007 was set by the Court.

In September 2005, Innogenetics filed suit against us in the United States District Court for the Western District of Wisconsin. The complaint alleged that our HCVg ASRs infringe a patent owned by Innogenetics relating to the detection of the hepatitis C virus. In February 2006, we reached an agreement with Innogenetics that resolved the litigation. In connection with the agreement, Third Wave acquired a non-exclusive license to Innogenetics’ patent for the United States. The agreement includes certain opt-out rights for Third Wave, as well as an option to extend both the term and global reach of the license.

In October 2005, we filed a declaratory judgment suit in the United States District Court for the Western District of Wisconsin against Digene Corporation seeking a ruling that our HPV ASRs do not infringe any valid claims of Digene’s human papillomavirus related patents. In January 2006, we reached an agreement with Digene to dismiss the suit without prejudice. We also agreed that neither party would file a suit against the other relating to the Digene human papillomavirus patents for one year.

Also in October 2005, we filed a declaratory judgment suit in the United States District Court for the Western District of Wisconsin against Chiron Corporation and Bayer Corporation seeking a ruling that our HCVg ASRs do not infringe any valid claims of Chiron’s hepatitis C related patents. In February 2006, we reached an agreement with Chiron and Bayer to dismiss the suit without prejudice. No licenses were granted or taken under the agreement and no payment of any monies was made to any of the companies.

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While no assurance can be given regarding the outcome of the above matters, based on information currently available, the Company believes that the resolution of these matters will not have a material adverse effect on the financial position or results of future operations of the Company. However, because of the nature and inherent uncertainties of litigation, should the outcome of any of the actions be unfavorable, the Company’s business, financial condition, results of operations and cash flows could be materially adversely affected.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5.   MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is quoted on the NASDAQ National Market under the symbol “TWTI” and has been publicly traded since February 2001. The following table sets forth for each quarter in 2005 and 2004 the high and low sales prices per share, based on closing prices, for our common stock as reported on the NASDAQ National Market.

Fiscal Year Ended December 31, 2005	High		Low
First Quarter	$	8.45	$	4.56
Second Quarter	$	5.66	$	3.66
Third Quarter	$	5.78	$	3.96
Fourth Quarter	$	5.17	$	2.63

Fiscal Year Ended December 31, 2004	High		Low
First Quarter	$	4.82	$	3.37
Second Quarter	$	5.40	$	4.21
Third Quarter	$	6.88	$	3.19
Fourth Quarter	$	8.94	$	6.88

As of March 1, 2006, approximately 346 shareholders of record held our common stock.

We have never declared or paid any dividends on our capital stock. We currently expect to retain future earnings, if any, to support the development of our business and do not anticipate paying any cash dividends in the foreseeable future.

Use of Proceeds.

Pursuant to our Registration Statement on Form S-1, as amended, filed with the Securities and Exchange Commission and declared effective February 9, 2001, (Registration No. 333-42694), we commenced our initial public offering of 7,500,000 registered shares of common stock, $0.001 par value, on February 9, 2001, at a price of $11.00 per share (the “Offering”). The Offering was completed on February 14, 2001, and all of the 7,500,000 shares were sold, generating gross proceeds of approximately $82,500,000. The managing underwriters for the Offering were Lehman Brothers Inc., CIBC World Markets, Dain Rauscher Incorporated, Robert W. Baird & Co. Incorporated, and Fidelity Capital Markets.

In connection with the Offering, we incurred approximately $5.8 million in underwriting discounts and commissions, and approximately $1.9 million in other related expenses. The net offering proceeds to us, after deducting the foregoing expenses, were approximately $74.8 million.

From the time of receipt through December 31, 2005, we have invested the net proceeds from the Offering in investment-grade, interest-bearing securities. We used $4.0 million of the proceeds to satisfy a cancellation fee for

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the termination of a distribution agreement with Endogen Corporation. We used $31.3 million for general corporate purposes, including working capital and research and development activities.

ITEM 6.   SELECTED FINANCIAL DATA

The following table summarizes certain selected financial data that is derived from the Company’s audited financial statements. All the information should be read in conjunction with the Company’s audited financial statements and notes thereto and with Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are included elsewhere in this Form 10-K.

	For Year Ended December 31,
	2005			2004			2003			2002			2001
	(In thousands, except for per share amounts)
STATEMENT OF OPERATIONS DATA:
Revenues	$	23,906		$	46,493		$	36,320		$	32,355		$	34,092
Operating expenses:
Cost of goods sold		7,104			12,492			12,840			21,320			32,746
Research and development		8,389			11,637			12,035			13,934			16,179
Selling and marketing		12,772			10,803			8,859			9,578			9,200
General and administrative		11,788			12,913			9,642			11,666			14,521
Litigation		6,887			349			721			318			—
Restructuring and other charges		—			(98	)		—			11,087			—
Impairment of goodwill and other intangible assets		—			—			—			4,810			—
Impairment of equipment		203			795			—			—			—
Total operating expenses		47,143			48,891			44,097			72,713			72,646
Loss from operations		(23,237	)		(2,398	)		(7,777	)		(40,358	)		(38,554	)
Other income (expense), net		891			513			(339	)		(506	)		1,762
Loss before income taxes		(22,346	)		(1,885	)		(8,116	)		(40,864	)		(36,792	)
Provision for income taxes		—			57			—			—			—
Net loss	$	(22,346	)	$	(1,942	)	$	(8,116	)	$	(40,864	)	$	(36,792	)
Basic and diluted net loss per share	$	(0.54	)	$	(0.05	)	$	(0.20	)	$	(1.04	)	$	(1.03	)
Shares used in computing basic and diluted net loss per share		41,125			40,463			39,749			39,457			35,714
Pro forma basic and diluted net loss per share (a)													$	(0.98	)
Shares used in computing pro forma basic and diluted net loss per share														37,483

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	December 31,
	2005			2004			2003			2002			2001
	(In thousands)
BALANCE SHEET DATA:
Cash, cash equivalents, and short term investments	$	38,717		$	66,690		$	57,816		$	60,315		$	73,299
Working capital		32,997			52,901			42,655			43,518			64,834
Total assets		58,405			88,068			80,422			89,223			131,615
Long-term obligations, net of current portion		831			487			13			13			6,694
Accumulated deficit		(158,120	)		(135,774	)		(133,832	)		(125,715	)		(84,852	)
Total shareholders’ equity		40,074			62,735			59,288			65,287			104,753

(a) Pro forma basic and diluted net loss per common share for 2001 gives effect to common stock equivalent shares arising, assuming that the preferred stock and convertible note payable were converted to common stock upon issuance using the “if converted” method. This pro forma disclosure has been included because the preferred stock and convertible note payable automatically converted to common stock upon closing of our initial public offering in February 2001.

ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS  OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with “Selected Financial Data” and our financial statements, including the notes thereto, included elsewhere in this Form 10-K.

OVERVIEW

Third Wave Technologies, Inc. is a leading molecular diagnostics company. We believe our proprietary Invader^® chemistry, a novel, molecular chemistry, is easier to use, cost-effective, and enables higher testing throughput. These and other advantages conferred by our chemistry are enabling us to provide clinicians and researchers with superior molecular solutions.

More than 130 clinical laboratory customers are using Third Wave’s molecular diagnostic reagents. Other customers include pharmaceutical and biotechnology companies, academic research centers and major health care providers.

Third Wave has received clearance from the U.S. Food and Drug Administration for its Invader UGT1A1 Molecular Assay. The Invader UGT1A1 Molecular Assay is cleared for use to identify patients who may be at increased risk of adverse reaction to the chemotherapy drug Camptosar^® (irinotecan) by detecting and identifying specific mutations in the UGT1A1 gene that have been associated with that risk. Camptosar, marketed in the United States by Pfizer, Inc., is used to treat colorectal cancer and was relabeled recently to include dosing recommendations based on a patient’s genetic profile. The Company also markets a growing number of products, including analyte specific reagents (ASRs). These ASRs allow certified clinical reference laboratories to create assays to perform hepatitis C virus genotyping, inherited disorders testing (e.g., Factor V Leiden), and a host of other mutations associated with genetic predispositions and other diseases. The Company has developed or plans to develop a menu of molecular diagnostic products for clinical applications that include genetic testing, pharmacogenetics, and women’s health. The Company also has a number of other Invader products including those for research, agricultural and other applications.

Our financial results may vary significantly from quarter to quarter due to fluctuations in the demand for our products, timing of new product introductions and deliveries made during the quarter, the timing of research, development and grant revenues, and increases in spending, including expenses related to our product development submissions for FDA clearances or approvals and intellectual property litigation.

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CRITICAL ACCOUNTING POLICIES

Management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. We review the accounting policies we use in reporting our financial results on a regular basis. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to accounts receivable, inventories, equipment and leasehold improvements and intangible assets. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Results may differ from these estimates due to actual outcomes being different from those on which we based our assumptions. These estimates and judgments are reviewed by management on an ongoing basis, and by the Audit Committee at the end of each quarter prior to the public release of our financial results. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

REVENUE RECOGNITION

Revenue from product sales is recognized upon delivery which is generally when the title passes to the customer, provided that the Company has completed all performance obligations and the customer has accepted the products. Customers have no contractual rights of return or refunds associated with product sales. Consideration received in multiple element arrangements is allocated to the separate units based upon their relative fair values.

Grant and development revenues consist primarily of research grants from agencies of the federal government and revenue from companies with which the Company has established strategic alliances, the revenue from which is recognized as research is performed. Payments received which are related to future performance are deferred and recorded as revenue when earned. Grant payments designated to purchase specific assets to be used in the performance of a contract are recognized as revenue over the shorter of the useful life of the asset acquired or the contract.

License and royalty revenue includes amounts earned from third parties for licenses of the Company’s intellectual property and are recognized when earned under the terms of the related agreements. License revenues are generally recognized upon receipt unless the Company has continuing performance obligations, in which case the license revenue is recognized ratably over the period of expected performance.

RESTRUCTURING AND OTHER CHARGES

The restructuring and other charges resulting from the restructuring plan in the third quarter of 2002 was recorded in accordance with Emerging Issues Task Force (“EITF”) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring),” Staff Accounting Bulletin No. 100, “Restructuring and Impairment Charges,” and Financial Accounting Standards Board (“FASB”) Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” The restructuring charge was comprised primarily of costs to consolidate facilities, impairment charges for abandoned leasehold improvements and equipment to be sold or abandoned, prepayment penalties related mainly to capital lease obligations on equipment to be sold or abandoned, and other costs related to the restructuring. In calculating the cost to consolidate the facilities, we estimated the future lease and operating costs to be paid until the leases are terminated and the amount, if any, of sublease receipts for each location. This required us to estimate the timing and costs of each lease to be terminated, the amount of operating costs, and the timing and rate at which we might be able to sublease the site. To form our estimates for these costs, we performed an assessment of the affected facilities and considered the current market conditions for each site. Estimates were also used in our calculation of the estimated realizable value on equipment that was held for sale. These estimates were formed based on recent history of sales of similar equipment and market conditions. Our assumptions on the lease termination payments, operating costs until terminated, and the offsetting sublease receipts may turn out to be incorrect and our actual cost may be materially different from our estimates.

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LONG-LIVED ASSETS — IMPAIRMENT

Equipment, leasehold improvements and amortizable identifiable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. For assets held and used, if the sum of the expected undiscounted cash flows is less than the carrying value of the related asset or group of assets, a loss is recognized for the difference between the fair value and carrying value of the asset or group of assets. For assets removed from service and held for sale, we estimate the fair market value of such assets and record an adjustment if fair value less costs to sell is lower than carrying value.

Goodwill and intangible assets deemed to have indefinite lives are not amortized, but are subject to annual impairment tests under Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.” The annual impairment test was completed in the quarters ended September 30, 2005, 2004, and 2003.

DERIVATIVE INSTRUMENTS

We sell products in a number of countries throughout the world. During 2005, 2004 and 2003, we sold certain products with the resulting accounts receivable denominated in Japanese Yen. Prior to 2005, we purchased foreign currency forward contracts to manage the risk associated with collections of receivables denominated in foreign currencies in the normal course of business. These derivative instruments had maturities of less than one year and were intended to offset the effect of transaction gains and losses. There were no contracts outstanding at December 31, 2005 or December 31, 2004. Contracts outstanding at December 31, 2003 represented a combined U.S. dollar equivalent commitment of approximately $9.5 million. The changes in the fair value of the derivatives and the loss or gain on the hedged asset relating to the risk being hedged are recorded currently in earnings.

INVENTORIES — SLOW MOVING AND OBSOLESCENCE

Significant management judgment is required to determine the reserve for obsolete or excess inventory. Inventory on hand may exceed future demand either because of process improvements or technology advancements, the amount on hand is more than can be used to meet future need, or estimates of shelf lives may change. We currently consider all inventory that we expect will have no activity within one year as well as any additional specifically identified inventory to be subject to a provision for excess inventory. We also provide for the total value of inventories that we determine to be obsolete based on criteria such as changing manufacturing processes and technologies. At December 31, 2005, our inventory reserves were $675,000, or 23% of our $2.9 million total gross inventories.

STOCK-BASED COMPENSATION EXPENSE

We currently account for share-based payments to employees using APB Opinion No. 25’s intrinsic value method and, as such, generally recognize no compensation cost for employee stock options when granted. On January 1, 2006 we adopted SFAS No. 123(R) as a result of which in future periods we will recognize expense for all share-based payments to employees, including grants of employee stock options, based on their fair values. Accordingly, the adoption of SFAS No. 123(R)’s fair value method will have a significant impact on the Company’s results of operations, although it will have no impact on the Company’s overall cash position. The impact of adoption of SFAS No. 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future.

RESULTS OF OPERATIONS

Years Ended December 31, 2005 and 2004

Revenues.  Revenues for the year ended December 31, 2005 of $23.9 million represented a decrease of $22.6 million as compared to revenues of $46.5 million for the year ended December 31, 2004. Following is a discussion of changes in revenues:

Total clinical molecular diagnostic product revenue increased to $15.7 million in 2005 from $15.0 million in 2004. U.S. clinical molecular diagnostic revenue increased to $14.5 million in 2005 from $12.3 million in 2004. We expect our clinical molecular diagnostic revenue to continue to increase in 2006.

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Research product revenues decreased significantly to $7.5 million in the year ended December 31,2005 from $31.1 million in the year ended December 31, 2004. The decrease in research product sales during 2005 resulted from a significant decrease in genomic research product sales to a Japanese research institute for use by several end users compared to prior year. We do not expect our 2006 genomic research product sales to recover to pre-2005 levels due to the completion of the HapMap projects.

License and royalty revenue was $0.4 million in the year ended December 31, 2005 compared to $0.2 million in 2004. In the years ended December 31, 2005 and 2004, we received royalty revenue of $250,000 and $150,000 respectively, from Monogram Biosciences (formerly Aclara), per the license and supply agreement.

Significant Customer.  We generated $3.9 million, or 16% of our revenues, from sales to a major Japanese research institute for use by several end-users during the year ended December 31, 2005, compared to $27.6 million or 59% of our revenue in 2004. As of December 31, 2005, $0.2 million of our accounts receivable were attributable to this customer. This customer will continue to purchase our products in 2006; however, the timing and total of such purchases will be influenced by the funding process and amounts which are unpredictable and unknown to us.

Cost of Goods Sold.  Cost of goods sold consists of materials used in the manufacture of product, depreciation on manufacturing capital equipment, salaries and related expenses for management and personnel associated with our manufacturing and quality control departments and amortization of licenses and settlement fees. For the year ended December 31, 2005, cost of goods sold decreased to $7.1 million, compared to $12.5 million for the year ended December 31, 2004. The decrease was due to decreased sales volume related to Japan research products.

Research and Development Expenses.  Our research activities are focused on moving our technology into broader markets. Our development activities are focused on new products to expand our molecular diagnostics menu. Research and development expenses consist primarily of salaries and related personnel costs, material costs for assays and product development, fees paid to consultants, depreciation and facilities costs and other expenses related to the design, development, testing, including clinical trials to validate the performance of our products, and enhancement of our products and acquisition of technologies used or to be used in our products. Research and development costs are expensed as they are incurred. Research and development expenses for the year ended December 31, 2005 were $8.4 million, compared to $11.6 million for the year ended December 31, 2004. The decrease in research and development expenses was primarily attributable to decrease in headcount related expenses. We will continue to invest in research and development, and expenditures in this area may increase as we expand our product development efforts. In addition, as the Company moves towards consideration of FDA cleared or approved products, there will be increased expenses attributed to these activities.

Selling and Marketing Expenses.  Selling and marketing expenses consist primarily of salaries and related personnel costs for our sales and marketing management and field sales force, commissions, office support and related costs, and travel and entertainment. Selling and marketing expenses for the year ended December 31, 2005 were $12.8 million, an increase of $2.0 million, as compared to $10.8 million for the year ended December 31, 2004. The increase was attributable to an increase in personnel related expenses.

General and Administrative Expenses.  General and administrative expenses consist primarily of salaries and related expenses for executive, finance and other administrative personnel, legal and professional fees, office support and depreciation. General and administrative expenses decreased to $11.8 million for the year ended December 31, 2005, from $12.9 million for the year ended December 31, 2004. The decrease in general and administrative expenses was primarily due to a decrease in stock based compensation expense.

Litigation Expense.  Litigation expense consists of legal fees and other costs associated with patent infringement and other lawsuits. Litigation expense increased to $6.9 million in the year ended December 31, 2005 from $0.3 million in 2004. The increase was due to the successful patent infringement lawsuit against Stratagene to defend our core technology. See Item I, Part 3-Legal Proceedings.

Impairment Loss.  In the year ended December 31, 2005 an impairment charge of $0.2 million was recorded for the loss on equipment that was sold, compared to $0.8 million for the year ended December 31, 2004 for equipment written down to fair value.

29

Interest Income.  Interest income for the year ended December 31, 2005 was $1.7 million, compared to $0.8 million for the year ended December 31, 2004. This increase was primarily due to higher interest rates in 2005 compared to 2004.

Interest Expense.  Interest expense for the years ended December 31, 2005 was $0.5 million compared to $0.3 million in 2004.

Provision for Income Taxes.  Income tax expense for the year ended December 31, 2004 of $57,000 was due to alternative minimum tax. The Company was not subject to alternative minimum tax for the year ended December 31, 2005.

Years Ended December 31, 2004 and 2003

Revenues.  Revenues for the year ended December 31, 2004 of $46.5 million represented an increase of $10.2 million as compared to revenues of $36.3 million for the year ended December 31, 2003.

Total clinical molecular diagnostic product revenue increased to $15.0 million in 2004, compared to $8.5 million in 2003. U.S. clinical molecular diagnostic revenue increased to $12.3 million in 2004 from $6.8 million in 2003.

Research product revenues increased to $31.1 million in the year ended December 31,2004 from $26.6 million in the year ended December 31, 2003. The increase in research product sales during 2004 resulted from an increase product sales to a Japanese research institute for use by several end users compared to prior year.

There were no development revenues in the year ended December 31, 2004, compared to $0.9 million for the year ended December 31, 2003. The decrease was due to the transition from development revenue to product revenue in our development and commercialization agreement with BML, Inc. (BML).

License and royalty revenue was $0.2 million in the years ended December 31, 2004 and 2003. In the years ended December 31, 2004 and 2003, we received royalty revenue of $150,000 and $100,000 respectively, from Monogram (formerly Aclara), per the license and supply agreement.

Significant Customer.  We generated $27.6 million, or 59% of our revenues, from sales to a major Japanese research institute for use by several end-users during the year ended December 31, 2004. As of December 31, 2004, $2.1 million of our accounts receivable were attributable to this customer.

Cost of Goods Sold.  Cost of goods sold consists of materials used in the manufacture of product, depreciation on manufacturing capital equipment, salaries and related expenses for management and personnel associated with our manufacturing and quality control departments and amortization of licenses and settlement fees. For the year ended December 31, 2004, cost of goods sold decreased to $12.5 million, compared to $12.8 million for the year ended December 31, 2003. The decrease was due to improved efficiencies.

Research and Development Expenses.  Research and development expenses for the year ended December 31, 2004 were $11.6 million, compared to $12.0 million for the year ended December 31, 2003. The decrease in research and development expenses was primarily attributable to decreased material costs for assay and product development and a decrease in personnel related expenses.

Selling and Marketing Expenses.  Selling and marketing expenses for the year ended December 31, 2004 were $10.8 million, an increase of $1.9 million, as compared to $8.9 million for the year ended December 31, 2003. The increase was attributable to an increase in personnel related expenses.

General and Administrative Expenses.  General and administrative expenses increased to $12.9 million for the year ended December 31, 2004, from $9.6 million for the year ended December 31, 2003. The increase was due to an increase in personnel related expenses and professional and consulting fees in 2004 compared to 2003.

Litigation Expense.  Litigation expense decreased to $0.3 million in the year ended December 31, 2004 from $0.7 million in the year ended December 31, 2003. The decrease was due to the settlement of lawsuits.

Impairment Loss.  In the year ended December 31, 2004, an impairment charge of $0.8 million was recorded for equipment written down to fair value.

30

Restructuring.  In the year ended December 31, 2004, a $98,000 reduction to the restructuring reserve was recorded due to a change in assumptions. The estimate of the amount of sublease income expected was reduced. In addition, the estimated lease and operating expenses were also reduced, based on a portion of the office space being utilized.

Interest Income.  Interest income for the year ended December 31, 2004 was $0.8 million, compared to $0.6 million for the year ended December 31, 2003. This increase was primarily due to higher interest rates and higher average cash balances in 2004 compared to 2003.

Interest Expense.  Interest expense for the years ended December 31, 2004 and 2003 was approximately $0.3 million.

Provision for Income Taxes.  Income tax expense for the year ended December 31, 2004 of $57,000 was due to alternative minimum tax.

LIQUIDITY AND CAPITAL RESOURCES

Since our inception, we have financed our operations primarily through private placements of equity securities, research grants from federal and state government agencies, payments from strategic collaborators, equipment loans, capital leases, sale of products, a convertible note and our initial public offering. As of December 31, 2005, we had cash, cash equivalents and short-term investments of $38.7 million.

Net cash used in operations for the year ended December 31, 2005 was $17.8 million, compared with net cash provided of $6.6 million in 2004 and net cash used of $3.2 million in 2003. The change was primarily due to the decline in revenue from Japan and increased legal expenses related to litigation.

Net cash used in investing activities for the year ended December 31, 2005 was $1.2 million, compared to $0.8 million in 2004 and cash provided of $0.2 million in 2003. Capital expenditures were $0.4 million in the year ended December 31, 2005, compared to $0.6 million in 2004 and $0.2 million in 2003. Investing activities included proceeds from the sale of equipment of $0.2 million in the year ended December 31, 2005, less than $0.1 million in year ended December 31, 2004 and $0.3 million in 2003. In the year ended December 31, 2005, the net cash provided from the purchases and maturities of short-term investments was $35,000, compared to net cash used of $0.3 million in 2004 and cash provided of $0.2 million in 2003. In 2005, 2004 and 2003, we purchased certificates of deposit to collateralize our term loan with the bank. Additionally, in 2005, $0.8 million was transferred to a bank account to collateralize our note with the bank.

Net cash used in financing activities was $9.0 million in the year ended December 31, 2005, compared to net cash provided by financing activities of $2.8 million in the year ended December 31, 2004 and $0.7 million in 2003. Cash used in financing activities in the year ended December 31, 2005 consisted of $9.7 million to repay debt, compared to $34,000 in 2004 and $15,000 in 2003. Additionally, in 2005 and 2004, $0.1 million and $12,000 was used for capital lease obligation payments, respectively. In 2005 and 2004, cash provided by financing activities included proceeds from long-term debt of $0.8 million and $0.5 million, respectively. During 2002, we entered into a term loan agreement due on July 31, 2003 to pay off the then existing debt and capital lease obligations. Upon expiration in 2003, 2004 and 2005 we renewed the term loan for an additional year. The Company paid the term loan in full in December 2005. Proceeds from the issuance of common stock through stock option exercises and employee stock purchase plan were $0.9 million in 2005, compared to $2.4 million in 2004 and $0.7 million in 2003. Additionally, in 2005, $0.9 million was used to repurchase 218,000 shares of common stock.

In 2005, we won a $5.29 million judgment against Stratagene Corporation in connection with a patent infringement suit. The Court subsequently tripled that judgment and awarded us interest and attorneys fees. The total judgment is currently $16.4 million plus $4.2 million in attorneys fees. Stratagene has filed an appeal, and posted a $21 million civil bond to stay payment of the judgment while it conducts its appeal. We expect the appeal process to last approximately eighteen months. If we prevail on appeal, payment by Stratagene of all or part of the judgment would result in a significant capital infusion for us. See Part I, Item 3 — Legal Proceedings.

As of December 31, 2005 and 2004, a valuation allowance equal to 100% of our net deferred tax assets had been recognized since future realization is not assured. At December 31, 2005, we had federal and state net operating loss carryforwards of approximately $134 million. The net operating loss carryforwards will expire at various dates beginning in 2008, if not utilized. Utilization of the net operating losses to offset future taxable income

31

may be subject to an annual limitation due to the change of ownership provisions of federal tax laws and similar state provisions as a result of our initial public offering in February 2001.

We cannot assure you that our business or operations will not change in a manner that would consume available resources more rapidly than anticipated. We also cannot assure you that we will not require substantial additional funding before we can achieve profitable operations. Our capital requirements depend on numerous factors, including the following:

•  our progress with our research and development programs;

•  the needs we may have to pursue FDA clearances or approvals of our products;

•  our level of success in selling our products and technologies;

•  our ability to establish and maintain successful collaborative relationships;

•  the costs we incur in securing intellectual property rights, whether through patents, licenses or otherwise;

•  the costs we incur in enforcing and defending our patent claims and other intellectual property rights;

•  the need to respond to competitive pressures;

•  the possible acquisition of complementary products, businesses or technologies; and

•  the timing of capital expenditures.

CONTRACTUAL OBLIGATIONS

The following summarizes our contractual obligations at December 31, 2005 and the effect those obligations are expected to have on our liquidity and cash flow in future periods (in thousands):

			Less Than		Years		Years		Over
	Total		1 Year		2 – 3		4 – 5		5 Years
CONTRACTUAL OBLIGATIONS
Non-cancelable operating lease obligation	$	11,890	$	1,879	$	3,986	$	4,311	$	1,714
Capital lease obligations		307		115		147		45		—
License arrangements		1,772		341		786		645		—
Long-term debt		1,018		378		590		50		—
Total obligations	$	14,987	$	2,713	$	5,509	$	5,051	$	1,714

We also have an available and unused $1.3 million letter of credit.

OFF-BALANCE SHEET ARRANGEMENTS

There were no off-balance sheet arrangements as of December 31, 2005.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to market risk is currently confined to changes in foreign exchange and interest rates. The securities in our investment portfolio are not leveraged and, due to their short-term nature, are subject to minimal interest rate risk. We currently do not hedge interest rate exposure. Due to the short-term maturities of our investments, we do not believe that an increase in market rates would have any negative impact on the realized value of our investment portfolio.

To reduce foreign exchange risk, we selectively use financial instruments. Our earnings are affected by fluctuations in the value of the U.S. Dollar against foreign currencies as a result of the sales of our products in foreign markets. From time to time we may purchase forward foreign exchange contracts to hedge against the effects of such fluctuations. At December 31, 2005, we did not hold any forward foreign exchange contracts. Our policy prohibits the trading of financial instruments for profit. A discussion of our accounting policies for derivative financial instruments is included in the notes to the financial statements.

32

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

of Third Wave Technologies, Inc.

We have audited the accompanying consolidated balance sheet of Third Wave Technologies, Inc. (a Delaware corporation) and subsidiaries as of December 31, 2005, and the related consolidated statements of operations, shareholders’ equity and cash flows for the year ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Third Wave Technologies, Inc. and subsidiaries as of December 31, 2005, and the results of their operations and their cash flows for the year ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

Our audit was conducted for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. Schedule II is presented for purposes of additional analysis and is not a required part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic consolidated financial statements taken as a whole.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 20, 2006 expressed an unqualified opinion.

GRANT THORNTON LLP

Madison, Wisconsin

February 20, 2006

33

Report of Independent Registered Public Accounting Firm

To the Board of Directors

Third Wave Technologies, Inc.

We have audited the accompanying consolidated balance sheet of Third Wave Technologies, Inc. (the Company) as of December 31, 2004, and the related consolidated statements of operations, shareholders’ equity and cash flows for the years ended December 31, 2004 and 2003. Our audits also included the financial statement schedule listed in the index at Item 15(a) for the years ended December 31, 2004 and 2003. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Third Wave Technologies, Inc. at December 31, 2004, and the consolidated results of its operations and its cash flows for the years ended December 31, 2004 and 2003, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule for the years ended December 31, 2004 and 2003, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

Ernst & Young LLP

Milwaukee, Wisconsin

March 4, 2005

34

THIRD WAVE TECHNOLOGIES, INC.

Consolidated Balance Sheets

	December 31, 2005			December 31, 2004
ASSETS
Current assets:
Cash and cash equivalents	$	27,681,704		$	55,619,981
Short-term investments		11,035,000			11,070,000
Accounts receivables, net of allowance for doubtful accounts of $200,000 and $300,000 at December 31, 2005 and December 31, 2004, respectively		3,764,519			5,784,679
Inventories		2,248,183			1,236,392
Prepaid expenses and other		235,794			260,316
Total current assets		44,965,200			73,971,368
Equipment and leasehold improvements:
Machinery and equipment		15,563,119			15,832,489
Leasehold improvements		2,346,938			2,277,604
		17,910,057			18,110,093
Less accumulated depreciation		13,192,617			12,139,423
		4,717,440			5,970,670
Assets held for sale		—			269,000
Restricted Cash		805,184			—
Intangible assets, net of accumulated amortization		2,641,620			4,146,372
Indefinite-lived intangible assets		1,007,411			1,007,411
Goodwill		489,873			489,873
Other assets		3,778,000			2,212,935
Total assets	$	58,404,728		$	88,067,629
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	6,850,207		$	6,519,005
Accrued payroll and related liabilities		2,158,870			2,873,506
Other accrued liabilities		2,344,835			1,867,361
Deferred revenue		121,497			129,530
Capital lease obligations due within one year		114,693			66,867
Long-term debt due within one year		378,551			9,614,127
Total current liabilities		11,968,653			21,070,396
Long-term debt		639,564			335,069
Deferred revenue — long-term		145,382			254,434
Capital lease obligations — long-term		191,924			151,885
Other liabilities		5,384,904			3,520,948
Shareholders’ equity:
Participating preferred stock, Series A, $.001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding		—			—
Common stock, $.001 par value, 100,000,000 shares authorized, 41,461,377 shares issued, 41,243,377 shares outstanding at December 31, 2005 and 41,102,764 shares issued and outstanding at December 31, 2004		41,461			41,103
Additional paid-in capital		199,097,187			198,990,162
Unearned stock compensation		(114,892	)		(554,293	)
Treasury stock — 218,000 shares acquired at an average price of $4.02 per share		(877,159	)		—
Foreign currency translation adjustment		47,442			31,949
Accumulated deficit		(158,119,738	)		(135,774,024	)
Total shareholders’ equity		40,074,301			62,734,897
Total liabilities and shareholders’ equity	$	58,404,728		$	88,067,629

See accompanying notes to the consolidated financial statements

35

THIRD WAVE TECHNOLOGIES, INC.

Consolidated Statements of Operations

	Year Ended December 31,
	2005			2004			2003
Revenues:
Clinical product sales	$	15,665,519		$	14,950,815		$	8,530,809
Research product sales		7,505,286			31,065,312			26,617,488
Development revenue		—			—			916,664
License and royalty revenue		362,372			234,841			193,792
Grant revenue		372,483			242,032			61,098
Total revenues		23,905,660			46,493,000			36,319,851
Operating expenses:
Cost of goods sold (including amortization of capitalized legal settlement costs of $1,504,752 in 2005, 2004, and 2003)		7,103,834			12,491,783			12,839,502
Research and development		8,389,316			11,636,620			12,035,375
Selling and marketing		12,772,439			10,803,381			8,858,678
General and administrative		11,787,976			12,913,848			9,642,434
Litigation		6,886,928			348,525			720,705
Impairment of equipment		202,707			794,716			—
Restructuring and other charges		—			(98,000	)		—
Total operating expense		47,143,200			48,890,873			44,096,694
Loss from operations		(23,237,540	)		(2,397,873	)		(7,776,843	)
Other income (expense):
Interest income		1,714,346			776,295			571,282
Interest expense		(457,004	)		(283,240	)		(298,182	)
Other		(365,516	)		19,753			(612,493	)
Total other income (expense)		891,826			512,808			(339,393	)
Loss before income taxes		(22,345,714	)		(1,885,065	)		(8,116,236	)
Provision for income taxes		—			57,341			—
Net loss	$	(22,345,714	)	$	(1,942,406	)	$	(8,116,236	)
Net loss per share — basic and diluted	$	(0.54	)	$	(0.05	)	$	(0.20	)

See accompanying notes to the consolidated financial statements

36

Third Wave Technologies, Inc

Consolidated Statement of Shareholders’ Equity

	Common Stock											Foreign
			Additional			Unearned Stock			Treasury			Currency			Accummulated
	Par		Paid in Capital			Compensation			Stock			Translation			Deficit			Total
Balance at December 31, 2002	$	39,560	$	191,581,136		$	(618,246	)	$	—		$	—		$	(125,715,382	)	$	65,287,068
Common stock issued for stock options and stock purchase plan — 461,670 shares		461		721,568			—			—			—			—			722,029
Unearned stock compensation		—		1,162,477			(1,162,477	)		—			—			—			—
Amortization of unearned stock compensation		—		—			1,374,377			—			—			—			1,374,377
Reversal of unearned stock compensation related to terminated employees		—		(109,060	)		96,350			—			—			—			(12,710	)
Net loss		—		—			—			—			—			(8,116,236	)		(8,116,236	)
Foreign currency translation adjustment		—		—			—			—			33,307			—			33,307
Comprehensive loss		—		—			—			—			—			—			(8,082,929	)
Balance at December 31, 2003		40,021		193,356,121			(309,996	)		—			33,307			(133,831,618	)		59,287,835
Common stock issued for stock options and stock purchase plan — 1,081,520 shares		1,082		2,363,289			—			—			—			—			2,364,371
Unearned stock compensation		—		3,270,752			(3,270,752	)		—			—			—			—
Amortization of unearned stock compensation		—		—			3,026,455			—			—			—			3,026,455
Net loss		—		—			—			—			—			(1,942,406	)		(1,942,406	)
Foreign currency translation adjustment		—		—			—			—			(1,358	)		—			(1,358	)
Comprehensive loss		—		—			—			—			—			—			(1,943,764	)
Balance at December 31, 2004		41,103		198,990,162			(554,293	)		—			31,949			(135,774,024	)		62,734,897
Common stock issued for stock options and stock purchase plan — 358,613 shares		358		915,403			—			—			—			—			915,761
Unearned stock compensation		—		(808,378	)		808,378			—			—			—			—
Amortization of unearned stock compensation		—		—			(368,977	)		—			—			—			(368,977	)
Common stock repurchased for treasury — 218,000 shares		—		—			—			(877,159	)		—			—			(877,159	)
Net loss		—		—			—			—			—			(22,345,714	)		(22,345,714	)
Foreign currency translation adjustment		—		—			—			—			15,493			—			15,493
Comprehensive loss		—		—			—			—			—			—			(22,330,221	)
Balance at December 31, 2005	$	41,461	$	199,097,187		$	(114,892	)	$	(877,159	)	$	47,442		$	(158,119,738	)	$	40,074,301

See accompanying notes to the consolidated financial statements

37

THIRD WAVE TECHNOLOGIES, INC.

Consolidated Statements of Cash Flows

	Year Ended December 31,
	2005			2004			2003
OPERATING ACTIVITIES:
Net loss	$	(22,345,714	)	$	(1,942,406	)	$	(8,116,236	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		1,705,252			2,107,466			2,607,096
Amortization of intangible assets		1,504,752			1,504,752			1,504,752
Amortization of licensed technology		398,132			623,956			480,633
Noncash stock compensation		(368,977	)		3,026,455			1,361,667
Impairment charge and (gain) loss on disposal of equipment		208,681			888,817			(410	)
Changes in operating assets and liabilities:
Receivables		1,937,853			(3,724,983	)		697,109
Inventories		(1,011,791	)		157,654			266,298
Prepaid expenses and other assets		131,298			390,645			809,031
Accounts payable		(10,029	)		1,563,571			(2,133,528	)
Accrued expenses and other liabilities		195,852			1,664,244			224,512
Deferred revenue		(117,085	)		316,204			(877,904	)
Net cash provided by (used in) operating activities		(17,771,776	)		6,576,375			(3,176,980	)
INVESTING ACTIVITIES:
Purchases of equipment and leasehold improvements		(404,934	)		(578,472	)		(249,916	)
Proceeds on sale of equipment		197,683			88,320			321,264
Purchases of licensed technology		(200,000	)		—			(100,000	)
Change in restricted cash balance		(805,184	)		—			—
Purchases of short-term investments		(11,835,000	)		(11,070,000	)		(10,800,000	)
Maturities of short-term investments		11,870,000			10,800,000			11,013,000
Net cash provided by (used in) investing activities		(1,177,435	)		(760,152	)		184,348
FINANCING ACTIVITIES:
Proceeds from long-term debt		800,000			470,000			—
Payments on long-term debt		(9,731,081	)		(34,137	)		(15,152	)
Payments on capital lease obligations		(96,587	)		(12,222	)		—
Proceeds from issuance of common stock, net		915,761			2,364,371			722,029
Repurchase of common stock for treasury		(877,159	)		—			—
Net cash provided by (used in) financing activities		(8,989,066	)		2,788,012			706,877
Net increase (decrease) in cash and cash equivalents		(27,938,277	)		8,604,235			(2,285,755	)
Cash and cash equivalents at beginning of period		55,619,981			47,015,746			49,301,501
Cash and cash equivalents at end of period	$	27,681,704		$	55,619,981		$	47,015,746
Supplemental disclosure of cash flows information — Cash paid for interest	$	468,520		$	277,226		$	301,817
Supplemental disclosure of cash flows information — Income taxes paid	$	52,754		$	—		$	—

Noncash investing and financing activities:

During the years ended December 31, 2005 and 2004, the Company entered into capital lease obligations of $184,452 and $230,974, respectively.

During the year ended December 31, 2005 the Company entered into a license agreement in which the Company will pay $2,000,000 over time through 2010. The estimated present value of the license obtained was $1,772,172.

See accompanying notes to the consolidated financial statements

38

Third Wave Technologies, Inc.

Notes to Consolidated Financial Statements

December 31, 2005

1.   NATURE OF OPERATIONS AND PRINCIPLES OF CONSOLIDATION

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of Third Wave Technologies, Inc. (the Company) and its wholly-owned subsidiaries, Third Wave-Japan KK and Third Wave Agbio, Inc. (Agbio). All significant intercompany balances and transactions are eliminated in the consolidation.

NATURE OF OPERATIONS

The Company is a leading molecular diagnostics company. The Company believes its proprietary Invader^® technology platform is easier to use, more accurate and cost-effective, and enables higher testing throughput than conventional methods. These and other advantages conferred by the Company’s technology platform are enabling the Company to provide physicians and researchers with superior molecular solutions for the analysis and treatment of disease.

The Company currently markets products domestically and internationally to clinical and research markets using an internal sales force as well as collaborative relationships with pharmaceutical companies and research institutions. Revenues to a major Japanese research institute for use by several end users during 2005, 2004 and 2003 were 16%, 59% and 69% of total revenues, respectively. The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral. The Company evaluates the collectibility of its accounts receivable based on a combination of factors. For accounts greater than 60 days past due, an allowance for doubtful accounts is recorded based on a customer’s ability and likelihood to pay based on management’s review of the facts. For all other accounts, the Company recognizes an allowance based on the length of time the receivable is past due and the anticipated future write offs based on historical experience.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies consistently applied in the preparation of the accompanying financial statements follows.

CASH EQUIVALENTS, SHORT-TERM INVESTMENTS, AND RESTRICTED CASH

The Company considers highly liquid money market investments and short-term investments with maturities of 90 days or less from the date of purchase to be cash equivalents.

Short-term investments consist of certificates of deposit with original maturities less than one year. The cost of these securities, which are considered “available-for-sale” for financial reporting purposes, approximates fair value at December 31, 2005 and 2004.

The Company has cash in a bank account that is used as collateral for notes payable. The amount used as collateral is classified as restricted cash.

39

Third Wave Technologies, Inc.

Notes to Consolidated Financial Statements — (Continued)

INVENTORIES

Inventories are carried at the lower of cost or market using the first-in, first-out method for determining cost and consist of the following:

	December 31
	2005			2004
Raw materials	$	1,486,166		$	1,318,771
Finished goods and work in process		1,437,017			567,621
Reserve for excess and obsolete inventory		(675,000	)		(650,000	)
Total inventories	$	2,248,183		$	1,236,392

ADVERTISING COSTS

Advertising costs are expensed as incurred. Advertising costs were $75,814, $85,069, and $165,854 in 2005, 2004 and 2003, respectively.

FOREIGN CURRENCY TRANSLATION

The Company’s Japanese subsidiary uses the local currency as its functional currency. Accordingly, assets and liabilities are translated into U.S. dollars at year-end exchange rates, and revenues and expenses are translated at weighted-average exchange rates. The resulting translation adjustment is recorded as a separate component of shareholders’ equity and will be included in the determination of net income (loss) only upon sale or liquidation of the subsidiary.

EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Equipment and leasehold improvements are recorded at cost less accumulated depreciation. Depreciation of purchased equipment is computed by the straight-line method over the estimated useful lives of the assets which are generally three to ten years. Depreciation of leasehold improvements and leased equipment is computed by the straight-line method over the shorter of the estimated useful lives of the assets or the remaining lease term.

PATENTS

Patent-related development costs are expensed in the period incurred and are included in general and administrative expenses in the statements of operations. These costs were $1,000,990, $844,110, and $780,959 in 2005, 2004 and 2003, respectively.

GOODWILL AND OTHER INTANGIBLE ASSETS

Under Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets” goodwill and intangible assets deemed to have indefinite lives are not amortized, but are subject to annual impairment tests. Remaining intangible assets at December 31, 2005, 2004 and 2003 consist primarily of costs of settling patent litigation, which are amortized over their estimated useful life of seven years.

The Company completed its annual impairment tests in the third quarter of 2003, 2004 and 2005. In addition, an interim impairment test was performed in the second quarter of 2004 due to a change in the Company’s forecast. For goodwill, this analysis is based on the comparison of the fair value of its reporting units to the carrying value of the net assets of the respective reporting units. The fair value of the reporting units was determined using a combination of discounted cash flows method and other common valuation methodologies. For intangible assets with indefinite lives, the fair values of these assets determined using the discounted cash flow approach were compared to their carrying values.

40

Third Wave Technologies, Inc.

Notes to Consolidated Financial Statements — (Continued)

The Company concluded that no impairment existed at the time of the annual impairment test in 2003, 2004 and 2005 or at the time of the additional impairment test in the second quarter of 2004.

Identifiable intangible assets with indefinite lives consist of the following at December 31, 2005 and 2004:

Technology license	$	915,828
Trademark		91,583
	$	1,007,411

Amortizable intangible assets consist of the following:

	December 31, 2005				December 31, 2004
	Carrying		Accumulated		Carrying		Accumulated
	Amount		Amortization		Amount		Amortization
Costs of settling patent litigation	$	10,533,248	$	7,891,628	$	10,533,248	$	6,386,876
Reacquired marketing and distribution rights		2,211,111		2,211,111		2,211,111		2,211,111
Customer agreements		38,000		38,000		38,000		38,000
	$	12,782,359	$	10,140,739	$	12,782,359	$	8,635,987

The estimated future amortization expense related to intangible assets for the years subsequent to December 31, 2005 is as follows:

2006	$	1,504,752
2007	$	1,136,868

IMPAIRMENT OF LONG-LIVED ASSETS

Equipment, leasehold improvements and amortizable identifiable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of the expected undiscounted cash flows is less than the carrying value of the related asset or group of assets, a loss is recognized for the difference between the fair value and carrying value of the asset or group of assets. Such analyses involve significant judgment. The Company recorded an impairment loss of $203,000 and $795,000 in 2005 and 2004, respectively, related to a write-down of certain equipment to its fair value.

PREPAID LICENSE FEES

Other assets at December 31, 2005 and 2004 include $2,797,046 and $1,223,005, respectively, of prepaid license fees (which is net of $2,470,164 and $2,072,033, respectively, of accumulated amortization) paid to third parties for the use of patented technology. The assets are being amortized to expense over the shorter of the term of the license or the estimated useful lives of the assets (generally three to ten years).

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company sells its products in a number of countries throughout the world. During 2005, 2004 and 2003, the Company sold certain products with the resulting accounts receivable denominated in Japanese Yen. The Company may from time to time purchase foreign currency forward contracts to manage the risk associated with collections of receivables denominated in foreign currencies in the normal course of business. These derivative instruments have maturities of less than one year and are intended to offset the effect of currency gains and losses on the underlying Yen receivables. There were no contracts outstanding at December 31, 2005 and 2004. Forward contracts outstanding at December 31, 2003, represented a U.S. dollar equivalent commitment of approximately $9,500,000. The changes in the fair value of the Company’s derivatives and the loss or gain on the hedged asset

41

Third Wave Technologies, Inc.

Notes to Consolidated Financial Statements — (Continued)

relating to the risk being hedged both are recorded currently in operations. Aggregate losses (gains) from foreign currency transactions are included in other income (expense) and were approximately $451,000, ($71,000), and $708,000 in 2005, 2004 and 2003, respectively.

REVENUE RECOGNITION

Revenue from product sales is recognized upon delivery which is generally when the title passes to the customer, provided that the Company has completed all performance obligations and the customer has accepted the products. Customers have no contractual rights of return or refunds associated with product sales. Consideration received in multiple element arrangements is allocated to the separate units based upon their relative fair values determined at the time the contract is initiated.

Grant and development revenues consist primarily of research grants from agencies of the federal government and revenue from companies with which the Company has established strategic alliances, the revenue from which is recognized as research is performed. Payments received which are related to future performance are deferred and recorded as revenue when earned. Grant payments designated to purchase specific assets to be used in the performance of a contract are recognized as revenue over the shorter of the useful life of the asset acquired or the contract.

License and royalty revenue includes amounts earned from third parties for licenses of the Company’s intellectual property and are recognized when earned under the terms of the related agreements. License revenues are generally recognized upon receipt unless the Company has continuing performance obligations, in which case the license revenue is recognized ratably over the period of expected performance. Royalty revenues are recognized under the terms of the related agreements, generally upon manufacture or shipment of a product by a licensee.

RESEARCH AND DEVELOPMENT

All costs for research and development activities are expensed in the period incurred.

SHIPPING AND HANDLING COSTS

Shipping and handling costs incurred are classified as cost of goods sold in the accompanying statements of operations.

INCOME TAXES

Deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the current tax payable for the period plus or minus the change during the period in deferred tax assets and liabilities. Prior to 2004, no current or deferred income taxes have been provided because of the net operating losses incurred by the Company since its inception (see Note 6).

STOCK-BASED COMPENSATION

The Company has stock-based employee compensation plans (see Note 5). For 2005 and prior years, SFAS No. 123, “Accounting for Stock-Based Compensation,” encouraged, but did not require companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue using the intrinsic value method prescribed in Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations, in accounting for its stock option plans through December 31, 2005.

42

Third Wave Technologies, Inc.

Notes to Consolidated Financial Statements — (Continued)

Had compensation cost been determined based upon the fair value method prescribed by SFAS No. 123 at the grant date for awards under the plans, the Company’s SFAS No. 123 pro forma net loss and net loss per share would have been as follows:

	Year Ended December 31,
	2005			2004			2003
Net loss:
As reported	$	(22,345,714	)	$	(1,942,406	)	$	(8,116,236	)
Add: Stock-based compensation, as recognized		(368,977	)		3,026,455			1,361,667
Add: Stock-based compensation expense related to stock options determined under SFAS No. 123		(10,050,950	)		(4,347,817	)		(4,216,913	)
Add: Stock-based compensation related to the employee stock purchase plan under SFAS No. 123		(207,989	)		(283,898	)		(172,571	)
SFAS No. 123 Pro forma	$	(32,973,630	)	$	(3,547,666	)	$	(11,144,053	)
Net loss per share:
As reported, basic and diluted	$	(0.54	)	$	(0.05	)	$	(0.20	)
SFAS No. 123 pro forma, basic and diluted	$	(0.80	)	$	(0.09	)	$	(0.28	)

Stock compensation expense for options granted to nonemployees has been determined in accordance with SFAS No. 123 and Emerging Issues Task Force (EITF) Issue No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services,” and represents the fair value of the consideration received or the fair value of the equity instruments issued, whichever may be more reliably measured. For options that vest over future periods, the fair value of options granted to nonemployees is periodically remeasured as the underlying options vest.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of the Company’s financial instruments, which include cash and cash equivalents, short-term investments, accounts receivable, accounts payable and long-term debt are considered to approximate their respective fair values.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

NET LOSS PER SHARE

Basic and diluted net loss per share has been computed using the weighted-average number of shares of common stock outstanding during the respective periods. The effect of stock options is antidilutive for all periods presented due to the existence of net losses.

43

Third Wave Technologies, Inc.

Notes to Consolidated Financial Statements — (Continued)

The following table presents the calculation of basic and diluted net loss per share.

	Year Ended December 31
	2005			2004			2003
Net loss	$	(22,345,714	)	$	(1,942,406	)	$	(8,116,236	)
Weighted-average shares of common stock outstanding — basic and diluted		41,125,000			40,463,000			39,749,000
Basic and diluted net loss per share	$	(0.54	)	$	(0.05	)	$	(0.20	)
Weighted-average shares from options that could potentially dilute basic earnings per share in the future that are not included in the computation of diluted loss per share as their impact is antidilutive (computed under the treasury stock method)		1,591,000			2,091,000			1,213,000

NEW ACCOUNTING PRONOUNCEMENTS

On December 16, 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004), “Share-Based Payment,” which is a revision of SFAS No. 123. SFAS No. 123(R) supersedes APB Opinion No. 25 and amends SFAS No. 95, “Statement of Cash Flows.” Generally, the approach in SFAS No. 123(R) is similar to the approach described in SFAS No. 123. However, SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative.

SFAS No. 123(R) must be adopted no later than January 1, 2006. The Company will adopt SFAS No. 123(R) on January 1, 2006. SFAS No. 123(R) permits public companies to adopt its requirements using one of two methods: (1) a “modified prospective” method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS No. 123(R) for all-share based payments granted after the effective date and (b) based on the requirements of SFAS No. 123 for all awards granted to employees prior to the effective date of SFAS No. 123(R) that remain unvested on the effective date; or (2) a “modified retrospective” method which includes the requirements of the modified prospective method described above, but also permits entities to restate based on the amounts previously recognized under SFAS No. 123 for purposes of pro forma disclosures either (a) all prior periods presented or (b) prior interim periods of the year of adoption. The Company has determined that it will adopt the modified prospective approach.

As permitted by SFAS No. 123, the Company currently accounts for share-based payments to employees using APB Opinion No. 25’s intrinsic value method and, as such, generally recognizes no compensation cost for employee stock options when granted as the number of shares is fixed and the exercise price of the stock options equals the market price of the underlying stock on the date of grant. Accordingly, the adoption of SFAS No. 123(R)’s fair value method will have a significant impact on the Company’s results of operations, although it will have no impact on the Company’s overall cash position. The impact of adoption of SFAS No. 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. SFAS No. 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current pronouncement.

RECLASSIFICATION

Certain reclassifications have been made to the 2004 and 2003 financial statements to conform to the 2005 presentation.

44

Third Wave Technologies, Inc.

Notes to Consolidated Financial Statements — (Continued)

3.   CHANGE IN ACCOUNTING ESTIMATE

The Company has Long-Term Incentive Plans in place which compensate certain employees if performance targets are met over the three-year performance period. The amount of compensation is determined by the level of achievement against the performance targets.

During the fourth quarter of 2005, the Company revised its estimate for the liability related to its Long-term Incentive Plans. Based on revised forecasts and other available information, the Company determined that the likelihood of achieving the performance target levels previously used to calculate the accrual was diminished. As a result of this change, the Company recognized a $921,000 decrease to the Long-term Incentive Plans during the fourth quarter of 2005.

4.   LONG-TERM DEBT

Long-term debt is as follows:

	December 31
	2005		2004
Notes payable	$	1,018,115	$	9,935,863
Other		—		13,333
		1,018,115		9,949,196
Less current portion		378,551		9,614,127
	$	639,564	$	335,069

Future long-term debt payments, as of December 31, 2005, by year are as follows:

2006	$	378,551
2007		368,298
2008		221,490
2009		49,776

The Company had a $9,500,000 note payable with a bank due on August 14, 2005, bearing annual interest at 3.36%. The Company renewed the note payable upon expiration in 2005 for an additional one year term, bearing annual interest at 5.17%, and subsequently paid the note in full in December 2005. The Company has three additional notes payable in the original amounts of $200,000, $270,000, and $800,000. These additional notes have respective final maturity dates of July 1, 2007, October 1, 2009, and July 1, 2008, bear annual interest at 4.25%, 4.93%, and 5.2%, respectively, and require monthly principal and interest payments. The Company has an available and unused $1,300,000 letter of credit with the same bank that expires on September 1, 2006 (see Note 7). The letter of credit and borrowings under the notes payable are secured by short-term investments consisting of certificates of deposit in the aggregate amount of $1,535,000 and balances in a specified bank account.

5.   SHAREHOLDERS’ EQUITY

The Board of Directors has authorized a program for the repurchase by the Company of up to 5% of its outstanding common stock. As of December 31, 2005, 218,000 shares of common stock have been repurchased at an average price of $4.02 per share. The program expired on December 31, 2005.

STOCK PURCHASE PLAN

The Company has an Employee Stock Purchase Plan (Purchase Plan) under which an aggregate of 1,256,800 common shares may be issued. The Purchase Plan also provides for annual increases in the number of shares available for issuance, beginning in 2001, equal to the lesser of 1% of the outstanding shares of common stock on

45

Third Wave Technologies, Inc.

Notes to Consolidated Financial Statements — (Continued)

the first day of the fiscal year, 428,400 shares or an amount determined by the Board of Directors. In 2005, there were no additional shares authorized for issuance under the plan. During 2004, 400,000 additional shares were authorized for issuance under the plan. During 2005, 2004 and 2003, 114,562, 306,211, and 254,421 shares, respectively, were issued. Employees are eligible to participate in the Purchase Plan if they work at least 20 hours per week and more than five months in any calendar year. Eligible employees may make contributions through payroll deductions of up to 10% of their compensation. The price of common stock purchased under the Purchase Plan is 85% of the lower of the fair market value of the common stock at the beginning or end of the offering period. The Plan is considered noncompensatory under APB Opinion No. 25 and, therefore, no expense is recorded for the 15% discount.

STOCK OPTION PLANS

The Company has Incentive Stock Option Plans for its employees and Nonqualified Stock Option Plans (the Plans) for employees and non-employees under which an aggregate of 13,213,183 options may be granted. Annual increases in the number of shares available for issuance are allowed beginning in 2001, limited to the lesser of 4.5% of the outstanding shares of common stock on the first day of the fiscal year, 2,571,600 shares or an amount determined by the Board of Directors. During 2005 and 2004, 1,800,000 and 1,500,000 additional shares, respectively, were authorized for grant. There were no additional shares authorized for grant in 2003. Options under the Plans have a maximum life of ten years. Options vest at various intervals, as determined by the Board of Directors at the date of grant.

The rollforward of shares available for grant through December 31, 2005, is as follows:

Shares available for grant at December 31, 2002	3,198,587
Options granted	(2,813,300	)
Options forfeited	1,093,405
Shares available for grant at December 31, 2003	1,478,692
Options granted	(2,127,255	)
Options forfeited	1,161,928
Increase in options available for grant	1,500,000
Shares available for grant at December 31, 2004	2,013,365
Options granted	(2,521,790	)
Options forfeited	622,964
Increase in options available for grant	1,800,000
Shares available for grant at December 31, 2005	1,914,539

46

Third Wave Technologies, Inc.

Notes to Consolidated Financial Statements — (Continued)

The Company’s option activity is as follows:

				Weighted Average
	Number of Shares			Exercise Price
Outstanding at December 31, 2002		5,743,859		$	5.29
Granted		2,813,300			3.42
Exercised		(207,249	)		1.75
Forfeited		(1,093,405	)		7.32
Outstanding at December 31, 2003		7,256,505			4.37
Granted		2,127,255			4.97
Exercised		(775,309	)		2.42
Forfeited		(1,161,928	)		5.57
Outstanding at December 31, 2004		7,446,523			4.55
Granted		2,521,790			4.20
Exercised		(244,051	)		2.22
Forfeited		(622,964	)		7.20
Outstanding at December 31, 2005		9,101,298		$	4.34
Options Exercisable at December 31, 2005		5,429,131		$	4.81

							Number of
	Shares						Shares		Wtd
	Outstanding at		Wtd Average		Remaining		Exercisable at		Average
	December 31,		Exercise		Contractual		December 31,		Exercise
	2005		Price		Life		2005		Price
Options granted between $0.27 and $1.11		108,200	$	1.00		0.2		108,200	$	1.00
Options granted between $1.11 and $2.21		891,450	$	1.90		6.1		704,337	$	1.90
Options granted between $2.21 and $3.32		1,962,762	$	2.77		7.0		991,137	$	2.73
Options granted between $3.32 and $4.42		3,494,447	$	3.92		7.6		1,430,011	$	3.87
Options granted between $4.42 and $5.53		579,750	$	4.69		8.3		130,870	$	4.80
Options granted between $5.53 and $6.64		580,714	$	6.35		5.8		580,601	$	6.35
Options granted between $6.64 and $7.74		549,125	$	6.89		8.3		549,125	$	6.89
Options granted between $7.74 and $8.85		837,850	$	8.70		4.6		837,850	$	8.70
Options granted between $8.85 and $9.96		10,800	$	9.69		3.0		10,800	$	9.69
Options granted between $9.96 and $11.06		86,200	$	10.91		2.0		86,200	$	10.91
		9,101,298	$	4.34		6.9		5,429,131	$	4.81

Prior to February 9, 2001, the Company granted certain options to employees having exercise prices below what was considered the fair value of the underlying stock. The Company amortized to expense $80,791 in 2004 and

47

Third Wave Technologies, Inc.

Notes to Consolidated Financial Statements — (Continued)

$387,709 in 2003 using an accelerated vesting method whereby each of the years’ vesting components is amortized over its own vesting period. During 2005, 2004 and 2003, in connection with employee terminations, the Company extended the exercise period and accelerated vesting for certain option grants. Accordingly, the options had a new measurement date and were expensed based upon their new intrinsic value. In December 2005, the Company accelerated vesting for all outstanding options with an exercise price per share of $5.00 or above. The options also had a new measurement date and were expensed based upon their new intrinsic value. Also, options granted to non-employee consultants are accounted for in accordance with SFAS No. 123 and EITF No. 96-18, and therefore are measured based upon their fair value as calculated using the Black-Scholes option pricing model. The fair value of options granted to non-employees is periodically remeasured as the underlying options vest. Option expense related to such terminations, modifications and consulting arrangements in 2005, 2004 and 2003 was ($368,977), $2,945,664, and $973,958, respectively.

Included in operating expenses are the following stock compensation charges, net of reversals related to terminated employees:

	Year Ended December 31
	2005			2004		2003
Cost of goods sold	$	24,251		$	155,275	$	86,793
Research and development		(501,754	)		1,133,617		504,477
Selling and marketing		(5,256	)		144,519		215,935
General and administrative		113,782			1,593,044		554,462
	$	(368,977	)	$	3,026,455	$	1,361,667

The weighted-average fair value of options granted in 2005, 2004, and 2003 was $2.82, $3.49, and $2.50, respectively, using the Black-Scholes option-pricing model. The calculations were made assuming a dividend yield of 0%, a weighted-average expected option life of five years and a weighted-average risk-free interest rate of 4.3%, 4.1%, and 4.0% in 2005, 2004 and 2003, respectively. The volatility factor used in the Black-Scholes method for 2005, 2004 and 2003 was 81%, 84%, and 89%, respectively.

6.   INCOME TAXES

At December 31, 2005, the Company had net operating loss carryforwards of approximately $134 million for U.S. federal and state income tax purposes, which expire beginning in 2008. In the event of a change in ownership greater than 50% in a three-year period, utilization of the net operating losses may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986 and similar state provisions.

There was no provision for income taxes in 2005 due to the net operating loss. The 2004 provision represents the amount computed under the alternative minimum tax (AMT) requirements.

48

Third Wave Technologies, Inc.

Notes to Consolidated Financial Statements — (Continued)

The types of temporary differences between tax bases of assets and liabilities and their financial reporting amounts that give rise to the deferred tax asset (liability) and their approximate tax effects are as follows:

	December 31
	2005			2004
Deferred tax assets:
Patent expense	$	1,930,000		$	1,563,000
Stock compensation expense		203,000			609,000
Deferred revenue		104,000			154,000
Inventory obsolescence		270,000			260,000
Accrued liabilities		1,891,000			1,945,000
Other		227,000			168,000
AMT credit carryforward		39,000			57,000
Net operating loss carryforwards		53,440,000			45,321,000
Total deferred tax assets		58,104,000			50,077,000
Valuation allowance		(56,934,000	)		(48,369,000	)
Net deferred tax assets		1,170,000			1,708,000
Deferred tax liabilities:
Equipment and leasehold improvements		(113,000	)		(49,000	)
Intangibles		(1,057,000	)		(1,659,000	)
Deferred tax liabilities		(1,170,000	)		(1,708,000	)
Net deferred tax assets / (liabilities)	$	—		$	—

The Company’s provision for income taxes differs from the expected tax benefit amount computed by applying the federal income tax rate to loss before taxes as a result of the following:

	2005			2004			2003
Federal statutory rate		(34.0	)%		(34.0	)%		(34.0	)%
State taxes		(5.9	)%		(5.1	)%		(5.7	)%
Foreign taxes		0.0	%		2.1	%		0.0	%
Meals and entertainment		0.2	%		1.7	%		0.4	%
Other permanent differences		0.0	%		1.0	%		1.1	%
Valuation allowance		39.7	%		37.3	%		38.2	%
		0.0	%		3.0	%		0.0	%

At December 31, 2005, the Company had $39,000 of AMT credits which do not expire. The valuation allowance at December 31, 2005 and 2004 was provided because of the Company’s history of net losses and uncertainty as to the realization of the deferred tax assets. As a result, the Company believes it is more likely than not that the deferred tax assets will not be realized. Through December 31, 2005, the Company’s foreign subsidiary has operated at a loss, and accordingly, no provision for U.S. deferred taxes has been provided. Any earnings of the foreign subsidiary would be considered to be permanently invested.

7.   LEASE OBLIGATIONS

The Company leases its corporate facility under an operating lease effective through September 2011. The Company has the option to extend the lease for three additional five-year periods. The lease agreement required a

49

Third Wave Technologies, Inc.

Notes to Consolidated Financial Statements — (Continued)

$1,000,000 upfront payment and requires the Company to provide the landlord an irrevocable standby letter of credit of $1,300,000, which is collateralized by a certificate of deposit included in short-term investments. Ongoing rent payments increase during the lease term. Rent expense is being recorded by the Company on a straight-line basis over the amended lease term. At December 31, 2005 and 2004, long-term other assets includes approximately $798,000 and $938,000, respectively, of prepaid rent. In addition, at December 31, 2005 and 2004, other long-term liabilities includes approximately $1,159,000 and $1,099,000, respectively, of deferred rent.

In 2005 and 2004, the Company entered into multiple capital leases for computer equipment, office equipment and furniture, totaling approximately $184,000 and $230,000, respectively.

Future minimum lease payments as of December 31, 2005 by year are as follows:

	Capital		Operating
	Leases		Leases
2006	$	138,100	$	1,879,000
2007		116,417		1,954,000
2008		53,463		2,032,000
2009		36,531		2,113,000
2010		12,176		2,198,000
2011		0		1,714,000
Total minimum lease obligations		356,687	$	11,890,000
Less amounts representing interest		50,070
Present value of minimum lease payments		306,617
Less current portion of long-term lease obligations		114,693
	$	191,924

Rent expense was approximately $2,167,000, $2,165,000, and $2,149,000 in 2005, 2004 and 2003, respectively.

8.   RESTRUCTURING AND OTHER CHARGES

During the third quarter of 2002, we announced a restructuring plan designed to simplify product development and manufacturing operations and reduce operating expenses. The restructuring charges recorded were determined based upon plans submitted by the Company’s management and approved by the Board of Directors using information available at the time. The restructuring charge included $2.5 million for the consolidation of facilities, $500,000 for prepayment penalties mainly under capital lease arrangements, an impairment charge of $7.2 million for abandoned leasehold improvements and equipment to be sold and $900,000 of other costs related to the restructuring. The Company also recorded a $1.1 million charge within cost of goods sold related to inventory that was considered obsolete based upon the restructuring plan.

The facilities charge contained estimates based on the Company’s potential to sublease a portion of its corporate office. The Company has offered the corporate office space for sublease, but has been unable to sublease the space. Accordingly, the Company decreased its estimate of the amount of sublease income it expects to receive. The estimated lease and operating expenses were also reduced, based on a portion of the office space being utilized.

The following table shows the changes in the restructuring accrual through December 31, 2005. The remaining restructuring balance of $1.0 million is for rent payments on a non-cancelable lease, net of estimated sublease income, which will continue to be paid over the lease term through 2011. The current portion of the accrual of

50

Third Wave Technologies, Inc.

Notes to Consolidated Financial Statements — (Continued)

$182,389 is included in other accrued liabilities on the balance sheets and the remainder is included in other long-term liabilities.

				Equipment and
				Leasehold
				Improvements			Prepayment
	Facilities			Disposals			Penalties			Other			Total
Charge in 2002	$	2,470,438		$	7,175,995		$	494,930		$	945,870		$	11,087,233
Payments made		(312,400	)		—			(469,300	)		—			(781,700	)
Non-cash charges		—			(7,175,995	)		(25,630	)		(140,290	)		(7,341,915	)
Accrued restructuring balance at December 31, 2002		2,158,038			—			—			805,580			2,963,618
Payments made		(674,809	)		—			—			(874,765	)		(1,549,574	)
Revision to estimate		(69,185	)		—			—			69,185			—
Accrued restructuring balance at December 31, 2003		1,414,044			—			—			—			1,414,044
Payments made		(199,196	)		—			—			—			(199,196	)
Revision to estimate		(98,000	)		—			—			—			(98,000	)
Accrued restructuring balance at December 31, 2004		1,116,848			—			—			—			1,116,848
Payments made		(159,285	)											(159,285	)
Accrued restructuring balance at December 31, 2005	$	957,563		$	—		$	—		$	—		$	957,563

9.   LICENSE AGREEMENTS

The Company entered into an exclusive license agreement (research license) in March 1994 to make, use and sell products utilizing the licensed patents in the research market. Under the research license, the Company is required to pay a royalty at a rate not to exceed a certain percentage of the selling price on licensed component sales. There have been no sales of licensed components through December 31, 2005. The research license will continue until the licensed patents expire or until the agreement is terminated by either party, whichever is earlier, as defined in the agreement. The Company also entered into an equity agreement with the licensor in March 1994 whereby it issued 115,200 shares of common stock in exchange for the research license and diagnostic market option, which is an exclusive license agreement to make, use and sell products utilizing the licensed patents in the diagnostic market. In October 1998, the Company issued 103,200 shares to the licensor to exercise the diagnostic market option. The shares issued in 1994 and 1998 were valued at amounts considered to approximate the fair value of common stock at the time of each issuance.

Under this agreement, the Company granted the licensor a put option to sell a specified number of shares back to the Company anytime after March 1, 1998. The total number of shares that can be put to the Company cannot exceed the number of shares necessary to achieve a purchase price of $200,000. At December 31, 2005, the price per share to be paid if the put option is exercised is $11.00. Accordingly, the Company has classified $200,000 of additional paid-in capital outside of shareholders’ equity in other liabilities in the accompanying balance sheets.

In October 2001, the Company entered into a development, license and supply agreement with RIKEN, Inc. (RIKEN). The Company licensed certain patent rights relating to polymorphism in genes that encode drug metabolizing enzymes from RIKEN for a nonrefundable fee which is being amortized over its estimated useful life (7.5 years). In 2003, the Company and RIKEN entered into an additional license for similar content. The Company also pays royalties based upon net sales of licensed products in exclusive and nonexclusive territories.

51

Third Wave Technologies, Inc.

Notes to Consolidated Financial Statements — (Continued)

In December 2005, the Company entered into a nonexclusive sublicense agreement for certain patent rights involving multiplex polymerase chain reaction (PCR) technology for a nonrefundable fee of $2,000,000. This technology permits the Company to develop and market multiplex Invader Plus products. The estimated present value of the fee of $1.8 million will be amortized over its estimated useful life (8 years). The future payments under this license arrangement are as follows:

2006	$	425,000
2007		450,000
2008		450,000
2009		450,000
2010		225,000
Total payments		2,000,000
Less amount representing interest		227,828
Present value of payments	$	1,772,172

In addition, the Company licensed rights to patents and/or patent applications covering genetic variations associated with certain diseases for which the Company has designed clinical diagnostic products.

10.   COLLABORATIVE AGREEMENTS

In December 2000, the Company entered into a development and commercialization agreement with BML, Inc. (BML). Under this agreement, the Company developed assays in accordance with a mutually agreed development program for use in clinical applications by BML. In 2000, BML paid the Company a nonrefundable fee of $3 million, which was recognized as revenue on a straight-line basis over the expected term of development services being performed by the Company. The Company recorded revenue related to the upfront fee from BML of $917,000 in 2003. Additionally, in 2005, 2004 and 2003, BML paid the Company $575,000, $1,915,000, and $1,500,000, respectively, for product and specified services performed in these respective years, which was recognized as revenue as the product was shipped and services were performed.

On October 16, 2002, the Company entered into a license and supply agreement with Aclara Biosciences, Inc., which was acquired by Monogram Biosciences (formerly Virologics, Inc.) in December 2004. Under this agreement, Monogram has the non-exclusive right to incorporate the Company’s Invader^tm technology and Cleavase^® enzyme with Monograms’s eTag^tm technology to offer the eTag Assay System for multiplexed gene expression applications for the research market. In exchange, Monogram made certain upfront payments and will make royalty payments to the Company on sales of eTag-Invader gene expression assays. The Company has also provided Monogram with certain manufacturing materials for use in manufacturing Invader products. The Company received royalty revenue of $250,000, $150,000, and $100,000 in 2005, 2004, and 2003 respectively.

11.  401(k) PLAN

The Company has a 401(k) savings plan (the Plan) which covers substantially all employees. The Plan provides for Company contributions of 50% of employee contributions up to 6% of their compensation. Company contributions to the plan were approximately $377,000, $329,000, and $311,000 in 2005, 2004 and 2003, respectively.

12.   SEGMENT DISCLOSURE

The Company operates in one industry segment. Product revenues to international end-users accounted for 27%, 70% and 78% of product revenues in 2005, 2004 and 2003, respectively. At December 31, 2005 and 2004,

52

approximately $783,000 and $2,681,000, respectively, of receivables are denominated in Yen. Product revenues by geographic area in 2005, 2004 and 2003, were as follows:

	2005		2004		2003
United States	$	17,027,952	$	13,759,367	$	7,668,573
Japan		5,107,455		31,361,485		26,983,342
Other		1,035,398		895,275		496,382
	$	23,170,805	$	46,016,127	$	35,148,297

13.   QUARTERLY FINANCIAL DATA (UNAUDITED)

The following sets forth selected quarterly financial and stock price information for the years ended December 31, 2005 and 2004 (in thousands, except per share data). The operating results are not necessarily indicative of results for any future period.

	Quarter Ended
	March 31			June 30			September 30			December 31
2005:
Net revenues	$	7,126		$	5,772		$	5,222		$	5,786
Gross margin		5,126			3,960			3,646			4,070
Net loss		(4,421	)		(5,514	)		(7,380	)		(5,031	)
Basic and diluted net loss per share	$	(0.11	)	$	(0.13	)	$	( 0.18	)	$	(0.12	)
2004:
Net revenues	$	15,276		$	12,632		$	10,479		$	8,106
Gross margin		11,105			8,939			8,144			5,813
Net income (loss)		2,848			(106	)		24			(4,708	)
Basic and diluted net income (loss) per share	$	0.07		$	(0.00	)	$	0.00		$	(0.12	)

53

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On May 31, 2005, the Company dismissed Ernst &Young LLP as its independent registered public accounting firm and engaged Grant Thornton LLP to serve as the Company’s independent registered public accounting firm for 2005. Information regarding the change in the Company’s principal accountants was provided in the Company’s Current Report on Form 8-K, filed June 6, 2005. The letter from Ernst & Young LLP stating the firm’s agreement with the information provided in the Current Report on Form 8-K was filed as an exhibit thereto.

ITEM 9A.   CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, conducted an evaluation as of the end of the period covered by this report, of the effectiveness of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report. There have been no significant changes during the period covered by this report in the Company’s internal control over financial reporting or in other factors that could significantly affect internal control over financial reporting.

EVALUATION OF INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Third Wave Technologies is responsible for establishing and maintaining adequate internal control over financial reporting. Third Wave’s internal control system was designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Third Wave’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on management’s assessment, management believes that, as of December 31, 2005, the Company’s internal control over financial reporting is effective.

Third Wave’s independent auditors have issued an audit report on management assessment of the Company’s internal control over financial reporting, which is included herein.

54

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To The Board of Directors and Shareholders

of Third Wave Technologies, Inc.

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that Third Wave Technologies, Inc. (a Delaware corporation) and subsidiaries maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Third Wave Technologies, Inc. and subsidiaries maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Third Wave Technologies, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Third Wave Technologies, Inc. and subsidiaries as of December 31, 2005, and the related consolidated statements of operations, shareholders’ equity and cash flows for the year ended December 31, 2005, and our report dated February 20, 2006 expressed an unqualified opinion on those financial statements.

GRANT THORNTON LLP

Madison, Wisconsin

February 20, 2006

55

ITEM 9B.   OTHER INFORMATION

None.

PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Company incorporates by reference the information required by this Item from the Company’s definitive proxy statement for its annual meeting of shareholders scheduled to be held on June 13, 2006 (the “Proxy Statement”), which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the Company’s fiscal year.

ITEM 11.   EXECUTIVE COMPENSATION

The Company incorporates by reference the information required by this Item from the Proxy Statement.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND  RELATED STOCKHOLDER MATTERS

The Company incorporates by reference the information required by this Item from the Proxy Statement.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company incorporates by reference the information required by this Item from the Proxy Statement.

ITEM 14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES

The Company incorporates by reference the information required by this Item from the Proxy Statement.

PART IV

ITEM 15.   EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES

(a) Documents Filed as a Part of this Report.

1. Financial Statements. The financial statements required to be filed as part of this Report are listed on page 32.

2. Financial Statement Schedules. The following financial statement schedule required to be filed as part of this Report is included on page 61.

Schedule II — Valuation and Qualifying Accounts.  Schedules not included have been omitted because they are not applicable.

3. Exhibits. The exhibits required to be filed as a part of this Report are listed in the Exhibit Index.

56

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 9, 2006.

THIRD WAVE TECHNOLOGIES, INC.

By:  /s/  Kevin T. Conroy

Kevin T. Conroy

Chief Executive Officer

POWER OF ATTORNEY

We, the undersigned directors and executive officers of Third Wave Technologies, Inc., hereby severally constitute and appoint of Rodman Hise our true and lawful attorney and agent, with full power to him to sign for us, and in our names in the capacities indicated below, any and all amendments to the Annual Report on Form 10-K of Third Wave Technologies, Inc. filed with the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorney to any and all amendments to said Annual Report on Form 10-K.

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

	Signature	Title	Date
/s/  David A. Thompson David A. Thompson		Chairman of the Board Chief Executive Officer President, and Director	March 10, 2006
/s/  Kevin T. Conroy Kevin T. Conroy		(Principal Executive Officer)	March 9, 2006
/s/  James J. Herrmann James J. Herrmann		Vice President of Finance (Principal Financial Officer)	March 10, 2006
/s/  James Connelly James Connelly		Director	March 8, 2006
/s/  Gordon F. Brunner Gordon F. Brunner		Director	March 10, 2006
/s/  Lawrence Murphy Lawrence Murphy		Director	March 8, 2006
/s/  John Neis John Neis		Director	March 10, 2006
/s/  Lionel Sterling Lionel Sterling		Director	March 8, 2006

57

EXHIBIT INDEX

Exhibit
No.			Description	Incorporated by Reference to
	3	.1	Amended and Restated Certificate of Incorporation of the Registrant, dated as of August 16, 2000	Exhibit 3.1(b) to the Registrant’s Registration Statement on Form S-1, Registration No. 333-42694, filed on July 31, 2000, as amended
	3	.2	Amended and Restated Bylaws of the Registrant, dated as of July 25, 2005
	4	.1	Investors’ Rights Agreement, dated as of July 24, 2000	Exhibit 4.2 to the Registrant’s Registration Statement on Form S-1, Registration No. 333-42694, filed on July 31, 2000, as amended
	4	.2	Rights Agreement between the Registrant and EquiServe Trust Company N.A., dated as of October 24, 2001	Exhibit 4.9 to the Registrant’s Registration Statement on Form 8-A, File No. 000-31745, filed on November 30, 2001
	4	.3	Amendment No. 1 to the Rights Agreement between the Registrant and EquiServe Trust Company N.A., dated February 18, 2003	Exhibit 4.2 to the Registrant’s Registration Statement on Form 8-A/A, File No. 000-31745, filed on February 19, 2003
	10	.1*	Incentive Stock Option Plan	Exhibit 10.1 to the Registrant’s Registration Statement on Form S-1, Registration No. 333-42694, filed on July 31, 2000, as amended
	10	.2*	1997 Incentive Stock Option Plan	Exhibit 10.2 to the Registrant’s Registration Statement on Form S-1, Registration No. 333-42694, filed on July 31, 2000, as amended
	10	.3*	1997 Nonqualified Stock Option Plan	Exhibit 10.3 to the Registrant’s Registration Statement on Form S-1, Registration No. 333-42694, filed on July 31, 2000, as amended
	10	.4*	1998 Incentive Stock Option Plan	Exhibit 10.4 to the Registrant’s Registration Statement on Form S-1, Registration No. 333-42694, filed on July 31, 2000, as amended
	10	.5*	1999 Incentive Stock Option Plan	Exhibit 10.5 to the Registrant’s Registration Statement on Form S-1, Registration No. 333-42694, filed on July 31, 2000, as amended
	10	.6*	1999 Nonqualified Stock Option Plan	Exhibit 10.6 to the Registrant’s Registration Statement on Form S-1, Registration No. 333-42694, filed on July 31, 2000, as amended
	10	.7*	2000 Stock Plan	Exhibit 10.7 to the Registrant’s Registration Statement on Form S-1, Registration No. 333-42694, filed on July 31, 2000, as amended

58

Exhibit
No.			Description	Incorporated by Reference to
	10	.8*	2000 Employee Stock Purchase Plan	Exhibit 10.8 to the Registrant’s Registration Statement on Form S-1, Registration No. 333-42694, filed on July 31, 2000, as amended
	10	.9*	Form of Director and Executive Officer Indemnification Agreement	Exhibit 10.9 to the Registrant’s Registration Statement on Form S-1, Registration No. 333-42694, filed on July 31, 2000, as amended
	10	.10	Lease Agreement, dated as of April 1, 1997, between the Registrant and University Research Park Facilities Corp. and amendment, dated as of September 1, 2001	Exhibit 10.18 to the Registrant’s Registration Statement on Form S-1, Registration No. 333-42694, filed on July 31, 2000, as amended
	10	.11	Amendment to Lease between Registrant and University Research Park Facilities Corp. dated as of September 1, 2002	Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002
	10	.12	Development and Commercialization Agreement, dated as of December 29, 2000, between the Registrant and BML, Inc.	Exhibit 10.26 to the Registrant’s Registration Statement on Form S-1, Registration No. 333-42694, filed on July 31, 2000, as amended
	10	.13	License Agreement dated as of October 15, 2002 between Registrant and Aclara Biosciences, Inc.	Exhibit 10.14 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002
	10	.14*	Employment Agreement between Lance Fors and Third Wave Technologies, Inc. dated October 16, 2003	Exhibit 10.16 to Registrant’s Annual Report on From 10-K for the fiscal year ended on December 31, 2003
	10	.15*	Employment Agreement between John Puisis and Third Wave Technologies, Inc. dated September 19, 2001 and Amendment dated July 17, 2003	Exhibit 10.17 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003
	10	.16*	Amendment No. 2 to Employment Agreement between John Puisis and Third Wave Technologies, Inc. effective June 14, 2004	Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004
	10	.17*	Severance Agreement between John Puisis and Third Wave Technologies, Inc. effective December 20, 2005
	10	.18*	Third Wave Technologies, Inc. Amended LTIP 1	Exhibit 10.17 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004
	10	.19*	Third Wave Technologies, Inc. Amended LTIP 2
	10	.20*	Employment Agreement between Maneesh Arora and Third Wave Technologies, Inc. dated May 10, 2005	Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005
	10	.21*	Employment Agreement between Lander Brown and Third Wave Technologies, Inc. dated May 10, 2005	Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005
	10	.22*	Employment Agreement between Vecheslav Elagin and Third Wave Technologies, Inc. dated May 10, 2005	Exhibit 10.3 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005

59

Exhibit
No.			Description	Incorporated by Reference to
	10	.23*	Employment Agreement between Jacob Orville and Third Wave Technologies, Inc. dated May 10, 2005	Exhibit 10.4 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005
	10	.24*	Amended and Restated Employment Agreement between Kevin T. Conroy and Third Wave Technologies, Inc. dated December 23, 2005	Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed December 30, 2005
	10	.25*	Employment Agreement between James J. Herrmann and Third Wave Technologies, Inc. dated March 14, 2005	Exhibit 10.23 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004
	10	.26*	Severance Agreement between James J. Herrmann and Third Wave Technologies, Inc. dated January 31, 2006
	10	.27*	Amendment No. 1 to Employment Agreement between Lance Fors and Third Wave Technologies, Inc. dated June 14, 2004	Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004
	10	.28*	Amendment No. 2 to Employment Agreement between Lance Fors and Third Wave Technologies, Inc. dated July 25, 2005	Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed July 28, 2005
	10	.29*	Third Wave Technologies, Inc. LTIP 3 dated February 14, 2006
	21		List of Subsidiaries
	23	.1	Consent of Independent Registered Public Accounting Firm — Grant Thornton LLP
	23	.2	Consent of Independent Registered Public Accounting Firm — Ernst & Young LLP
	24		Powers of Attorney (contained in the signature page hereto)
	31	.1	CEO’s Certification Pursuant to Section 302 of the Sarbanes Oxley Act of 2002
	31	.2	Principal Financial Officer Certification pursuant to Section 302 of the Sarbanes Oxley Act of 2002
	32	.1	CEO’s Certification pursuant to 18 U.S.C. Section 1350, of Chapter 63 of Title 18 of the United States Code
	32	.2	Principal Financial Officer’s Certification pursuant to 18 U.S.C Section 1350, of Chapter 63 of Title 18 of the United States Code

* Indicated a management contract or compensatory plan or arrangement.

60

SCHEDULE II: VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 2005, 2004, AND 2003

	Balance At		Additions
	Beginning		Charged		(1)		Balance At
Description	of Year		to Expense		Deductions		End of Year
	(Dollars in thousands)
Allowance for doubtful accounts receivable:
2003	$	465	$	402	$	727	$	140
2004	$	140	$	177	$	17	$	300
2005	$	300	$	107	$	207	$	200
Allowance for excess and obsolete inventory:
2003	$	3,050	$	1,308	$	3,608	$	750
2004	$	750	$	805	$	905	$	650
2005	$	650	$	968	$	943	$	675

(1) Represents amounts written off or disposed, net of recoveries.

61

EX-3.2

EXHIBIT 3.2

AMENDED AND RESTATED BYLAWS

OF

THIRD WAVE TECHNOLOGIES, INC.

TABLE OF CONTENTS

			Page
ARTICLE I CORPORATE OFFICES				1
	1.1	REGISTERED OFFICE		1
	1.2	OTHER OFFICES		1
ARTICLE II MEETINGS OF STOCKHOLDERS				1
	2.1	PLACE OF MEETINGS		1
	2.2	ANNUAL MEETING		1
	2.3	SPECIAL MEETING		2
	2.4	NOTICE OF STOCKHOLDERS' MEETINGS		2
	2.5	ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS		2
	2.6	MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE		3
	2.7	QUORUM		3
	2.8	ADJOURNED MEETING; NOTICE		4
	2.9	CONDUCT OF BUSINESS		4
	2.10	VOTING		4
	2.11	WAIVER OF NOTICE		5
	2.12	STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING		5
	2.13	RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS		5
	2.14	PROXIES		6
	2.15	LIST OF STOCKHOLDERS ENTITLED TO VOTE		6
ARTICLE III DIRECTORS				7
	3.1	POWERS		7
	3.2	NUMBER OF DIRECTORS		7
	3.3	ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS		7
	3.4	RESIGNATION AND VACANCIES		7
	3.5	PLACE OF MEETINGS; MEETINGS BY TELEPHONE		8
	3.6	REGULAR MEETINGS		9
	3.7	SPECIAL MEETINGS; NOTICE		9
	3.8	QUORUM		9
	3.9	WAIVER OF NOTICE		9
	3.10	BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING		10
	3.11	FEES AND COMPENSATION OF DIRECTORS		10
	3.12	PROHIBITION OF LOANS TO DIRECTORS OR OFFICERS		10
	3.13	REMOVAL OF DIRECTORS		10
ARTICLE IV COMMITTEES				10
	4.1	COMMITTEES OF DIRECTORS		10
	4.2	COMMITTEE MINUTES		11
	4.3	MEETINGS AND ACTION OF COMMITTEES		11

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			Page
ARTICLE V OFFICERS				12
	5.1	OFFICERS		12
	5.2	APPOINTMENT OF OFFICERS		12
	5.3	SUBORDINATE OFFICERS		12
	5.4	REMOVAL AND RESIGNATION OF OFFICERS; FILLING VACANCIES		12
	5.5	CHAIRMAN OF THE BOARD		13
	5.6	CHIEF EXECUTIVE OFFICER		13
	5.7	PRESIDENT		13
	5.8	VICE PRESIDENTS		13
	5.9	SECRETARY		13
	5.10	CHIEF FINANCIAL OFFICER		14
	5.11	ASSISTANT SECRETARY		14
	5.12	ASSISTANT TREASURER		14
	5.13	REPRESENTATION OF SHARES OF OTHER CORPORATIONS		15
	5.14	AUTHORITY AND DUTIES OF OFFICERS		15
ARTICLE VI INDEMNITY				15
	6.1	THIRD PARTY ACTIONS		15
	6.2	ACTIONS BY OR IN THE RIGHT OF THE CORPORATION		16
	6.3	SUCCESSFUL DEFENSE		16
	6.4	DETERMINATION OF CONDUCT		16
	6.5	PAYMENT OF EXPENSES IN ADVANCE		17
	6.6	INDEMNITY NOT EXCLUSIVE		17
	6.7	INSURANCE INDEMNIFICATION		17
	6.8	THE CORPORATION		17
	6.9	EMPLOYEE BENEFIT PLANS		17
	6.10	CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES		18
ARTICLE VII RECORDS AND REPORTS				18
	7.1	MAINTENANCE AND INSPECTION OF RECORDS		18
	7.2	INSPECTION BY DIRECTORS		19
	7.3	ANNUAL STATEMENT TO STOCKHOLDERS		19
ARTICLE VIII GENERAL MATTERS				19
	8.1	CHECKS		19
	8.2	EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS		19
	8.3	STOCK CERTIFICATES; PARTLY PAID SHARES		19
	8.4	SPECIAL DESIGNATION ON CERTIFICATES		20
	8.5	LOST CERTIFICATES		20
	8.6	CONSTRUCTION; DEFINITIONS		21
	8.7	DIVIDENDS		21
	8.8	FISCAL YEAR		21
	8.9	SEAL		21
	8.10	TRANSFER OF STOCK		21
	8.11	STOCK TRANSFER AGREEMENTS		22
	8.12	REGISTERED STOCKHOLDERS		22
ARTICLE IX AMENDMENTS				22

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AMENDED AND RESTATED BYLAWS

OF

THIRD WAVE TECHNOLOGIES, INC.

ARTICLE I

CORPORATE OFFICES

     1.1       REGISTERED OFFICE

     The registered office of the corporation shall be in the City of Wilmington, County of New Castle, State of Delaware. The name of the registered agent of the corporation at such location is The Corporation Trust Company.

     1.2       OTHER OFFICES

     The board of directors may at any time establish other offices at any place or places where the corporation is qualified to do business.

ARTICLE II

MEETINGS OF STOCKHOLDERS

     2.1       PLACE OF MEETINGS

     Meetings of stockholders shall be held at any place, either within or without the State of Delaware, as may be designated by the board of directors or in the manner provided in these bylaws. In the absence of any such designation, stockholders’ meetings shall be held at the registered office of the corporation in the State of Delaware.

     2.2       ANNUAL MEETING

     The annual meeting of stockholders shall be held each year on a date and at a time designated by the board of directors. In the absence of such designation, the annual meeting of stockholders shall be held on the second Tuesday of June of each year at 10:00 a.m. However, if such day falls on a legal holiday, then the meeting shall be held at the same time and place on the next succeeding business day. At the meeting, directors shall be elected and any other proper business may be transacted.

     2.3       SPECIAL MEETING

     A special meeting of the stockholders may be called at any time by the board of directors, or by the chairman of the board, or by the chief executive officer, or by the president.

     If a special meeting is called by any person or persons other than the board of directors, the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the chairman of the board, the president or the secretary of the corporation. No business may be transacted at such special meeting otherwise than specified in such notice. The officer receiving the request shall cause notice to be promptly given to the stockholders entitled to vote, in accordance with the provisions of Sections 2.4 and 2.5 of this Article II, that a meeting will be held at the time requested by the person or persons calling the meeting, not less than ten (10) nor more than sixty (60) days after the receipt of the request. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the board of directors may be held.

     2.4       NOTICE OF STOCKHOLDERS’ MEETINGS

     All notices of meetings with stockholders shall be in writing and shall be sent or otherwise given in accordance with Section 2.6 of these bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, date, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called.

     2.5       ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS

     Subject to the rights of holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation,

(i)	nominations for the election of directors, and
(ii)	business proposed to be brought before any stockholder meeting

may be made by the board of directors or proxy committee appointed by the board of directors or by any stockholder entitled to vote in the election of directors generally if such nomination or business proposed is otherwise proper business before such meeting. However, any such stockholder may nominate one or more persons for election as directors at a meeting or propose business to be brought before a meeting, or both, only if such stockholder has given timely notice in proper written form of their intent to make such nomination or nominations or to propose such business. To be timely, such stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the corporation not less than one hundred twenty (120) calendar days in advance of the first anniversary date of mailing of the corporation’s proxy statement released to stockholders in connection with the previous year’s annual meeting of stockholders; provided, however, that in the

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event that no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than thirty (30) days from the date contemplated at the time of the previous year’s proxy statement, notice by the stockholder to be timely must be so received a reasonable time before the solicitation is made. To be in proper form, a stockholder’s notice to the secretary shall set forth:

               (a)       the name and address of the stockholder who intends to make the nominations or propose the business and, as the case may be, of the person or persons to be nominated or of the business to be proposed;

               (b)       a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting and, if applicable, intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice;

               (c)       if applicable, a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder;

               (d)       such other information regarding each nominee or each matter of business to be proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had the nominee been nominated, or intended to be nominated, or the matter been proposed, or intended to be proposed by the board of directors; and

               (e)       if applicable, the consent of each nominee to serve as director of the corporation if so elected.

     The chairman of the meeting shall refuse to acknowledge the nomination of any person or the proposal of any business not made in compliance with the foregoing procedure.

     2.6       MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE

     Written notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the corporation. An affidavit of the secretary or an assistant secretary or of the transfer agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

     2.7       QUORUM

     The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum is not present or represented at any meeting

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of the stockholders, then either (i) the Chairman of the meeting or (ii) the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed.

     2.8       ADJOURNED MEETING; NOTICE

     When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

     2.9       CONDUCT OF BUSINESS

     The chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of business.

     2.10       VOTING

     The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.13 of these bylaws, subject to the provisions of Sections 217 and 218 of the Delaware General Corporation Law (relating to voting rights of fiduciaries, pledgors and joint owners of stock and to voting trusts and other voting agreements).

     Except as may be otherwise provided in the certificate of incorporation, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder.

     Notwithstanding the foregoing, if the stockholders of the corporation are entitled, pursuant to Sections 2115 and 301.5 of the California Corporations Code, to cumulate their votes in the election of directors, each such stockholder shall be entitled to cumulate votes (i.e., cast for any candidate a number of votes greater than the number of votes that such stockholder normally is entitled to cast) only if the candidates’ names have been properly placed in nomination (in accordance with these restated Bylaws) prior to commencement of the voting, and the stockholder requesting cumulative voting has given notice prior to commencement of the voting of the stockholder’s intention to cumulate votes. If cumulative voting is properly requested, each holder of stock, or of any class or classes or of a series or series thereof, who elects to cumulate votes shall be entitled to as many votes as equals the number of votes that (absent this provision as to cumulative voting) he or she would be entitled to cast for the election of directors with respect to his or her shares of stock multiplied by the number of directors to be elected by him, and he or she may cast all of such votes for single director

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or may distribute them among the number to be voted for, or for any two or more of them, as he or she may see fit.

     2.11       WAIVER OF NOTICE

     Whenever notice is required to be given under any provision of the Delaware General Corporation Law or of the certificate of incorporation or these bylaws, a written waiver, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice unless so required by the certificate of incorporation or these bylaws.

     2.12       STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING

     Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of a corporation, or any action that may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.

     Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. If the action which is consented to is such as would have required the filing of a certificate under any section of the Delaware General Corporation Law if such action had been voted on by stockholders at a meeting thereof, then the certificate filed under such section shall state, in lieu of any statement required by such section concerning any vote of stockholders, that written notice and written consent have been given as provided in Section 228 of the Delaware General Corporation Law.

     2.13       RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS

     In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action.

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     If the board of directors does not so fix a record date:

               (i)       The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.

               (ii)       The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the board of directors is necessary, shall be the first date on which a signed written consent is delivered to the corporation.

               (iii)       The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto.

     A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting.

     2.14       PROXIES

     Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by a written proxy, signed by such stockholder and filed with the secretary of the corporation, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A proxy shall be deemed signed if such stockholder’s name is placed on the proxy by any reasonable means including, but not limited to, by facsimile signature, manual signature, typewriting, telegraphic transmission or otherwise, by such stockholder or such stockholder’s attorney-in-fact. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(e) of the Delaware General Corporation Law.

     2.15       LIST OF STOCKHOLDERS ENTITLED TO VOTE

     The officer who has charge of the stock ledger of a corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Such list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them.

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ARTICLE III

DIRECTORS

     3.1       POWERS

     Subject to the provisions of the Delaware General Corporation Law and any limitations in the certificate of incorporation or these bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors.

     3.2       NUMBER OF DIRECTORS

     The board of directors shall consist of nine (9) members. The number of directors may be changed by an amendment to this bylaw, duly adopted by the board of directors or by the stockholders, or by a duly adopted amendment to the certificate of incorporation. Upon the closing of the first sale of the corporation’s common stock pursuant to a firmly underwritten registered public offering (the “IPO”), the directors shall be divided into three classes, with the term of office of the first class, which class shall initially consist of three directors, to expire at the first annual meeting of stockholders held after the IPO; the term of office of the second class, which shall initially consist of three directors, to expire at the second annual meeting of stockholders held after the IPO; the term of office of the third class, which class shall initially consist of four directors, to expire at the third annual meeting of stockholders held after the IPO; and thereafter for each such term to expire at each third succeeding annual meeting of stockholders held after such election.

     No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.

     3.3       ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS

     Except as provided in Section 3.4 of these bylaws, directors shall be elected at each annual meeting of stockholders to hold office until the next annual meeting. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws, wherein other qualifications for directors may be prescribed. Each director, including a director elected to fill a vacancy, shall hold office until his successor is elected and qualified or until his earlier resignation or removal.

     Elections of directors need not be by written ballot.

     3.4       RESIGNATION AND VACANCIES

     Any director may resign at any time upon written notice to the attention of the Secretary of the corporation. When one or more directors shall resign from the board of directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall

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have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in this section in the filling of other vacancies.

     Unless otherwise provided in the certificate of incorporation or these bylaws:

               (i)       Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.

               (ii)       Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected.

     If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the certificate of incorporation or these bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the Delaware General Corporation Law.

     If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole board (as constituted immediately prior to any such increase), then the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten (10) percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the Delaware General Corporation Law as far as applicable.

     3.5       PLACE OF MEETINGS; MEETINGS BY TELEPHONE

     The board of directors of the corporation may hold meetings, both regular and special, either within or outside the State of Delaware.

     Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of such board of directors, or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting pursuant to this section shall constitute presence in person at the meeting.

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     3.6       REGULAR MEETINGS

     Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board.

     3.7       SPECIAL MEETINGS; NOTICE

     Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairman of the board, the president, any vice president, the secretary or any two (2) directors.

     Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at that director’s address as it is shown on the records of the corporation. If the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. If the notice is delivered personally or by telephone or by telegram, it shall be delivered personally or by telephone or to the telegraph company at least forty-eight (48) hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose or the place of the meeting, if the meeting is to be held at the principal executive office of the corporation.

     3.8       QUORUM

     At all meetings of the board of directors, a majority of the authorized number of directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute, the certificate of incorporation, or these bylaws. If a quorum is not present at any meeting of the board of directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.

     A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.

     3.9       WAIVER OF NOTICE

     Whenever notice is required to be given under any provision of the Delaware General Corporation Law, the certificate of incorporation, or these bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when such person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully

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called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or members of a committee of directors, need be specified in any written waiver of notice unless so required by the certificate of incorporation or these bylaws.

     3.10       BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING

     Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the board or committee.

     3.11       FEES AND COMPENSATION OF DIRECTORS

     Unless otherwise restricted by the certificate of incorporation or these bylaws, the board of directors shall have the authority to fix the compensation of directors.

     3.12       PROHIBITION OF LOANS TO DIRECTORS OR OFFICERS

     The corporation shall not, directly or indirectly, including through any subsidiary, extend or maintain credit, arrange for the extension of credit, or renew an extension of credit, in the form of a personal loan to or for any director or executive officer (or equivalent thereof) of the corporation.

     3.13       REMOVAL OF DIRECTORS

     Unless otherwise restricted by statute, by the certificate of incorporation or by these bylaws, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors; provided, however, that, so long as stockholders of the corporation are entitled to cumulative voting, if less than the entire board is to be removed, no director may be removed without cause if the votes cast against his removal would be sufficient to elect such director if then cumulatively voted at an election of the entire board of directors or, if there be classes of directors, at an election of the class of directors of which such director is a part.

     No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director’s term of office.

ARTICLE IV

COMMITTEES

     4.1       COMMITTEES OF DIRECTORS

     The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, with each committee to consist of one or more of the directors of the

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corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the board of directors, or in the bylaws of the corporation, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority (i) approving or adopting or recommending to the stockholders, any action or matter expressly required by the Delaware General Corporation Law to be submitted to stockholders for approval or (ii) adopting, amending, or repealing any bylaws of the corporation; and, unless the board resolution establishing the committee, the bylaws or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the Delaware General Corporation Law.

     4.2       COMMITTEE MINUTES

     Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required.

     4.3       MEETINGS AND ACTION OF COMMITTEES

     Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these bylaws, Section 3.5 (place of meetings and meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), and Section 3.10 (action without a meeting), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members; provided, however, that the time of regular meetings of committees may be determined either by resolution of the board of directors or by resolution of the committee, that special meetings of committees may also be called by resolution of the board of directors and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws.

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ARTICLE V

OFFICERS

     5.1       OFFICERS

     The officers of the corporation shall be a president, a secretary, and a chief financial officer. The corporation may also have, at the discretion of the board of directors, a chairman of the board, one or more vice presidents, one or more assistant vice presidents, one or more assistant secretaries, one or more assistant treasurers, and any such other officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws. Any number of offices may be held by the same person.

     5.2       APPOINTMENT OF OFFICERS

     The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall be appointed by the board of directors, subject to the rights, if any, of an officer under any contract of employment.

     5.3       SUBORDINATE OFFICERS

     The board of directors may appoint, or empower the president to appoint, such other officers and agents as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the board of directors may from time to time determine.

     5.4       REMOVAL AND RESIGNATION OF OFFICERS; FILLING VACANCIES

     Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the board of directors at any regular or special meeting of the board or, except in the case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors.

     Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.

     Any vacancy occurring in any office of the corporation shall be filled by the board of directors.

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     5.5       CHAIRMAN OF THE BOARD

     The chairman of the board, if such an officer be elected, shall, if present, preside at meetings of the board of directors and exercise and perform such other powers and duties as may from time to time be assigned to the chairman of the board by the board of directors or as may be prescribed by these bylaws. If there is no president and no one has been appointed chief executive officer, then the chairman of the board shall also be the chief executive officer of the corporation and shall have the powers and duties prescribed in Section 5.6 of these bylaws.

     5.6       CHIEF EXECUTIVE OFFICER

     The board of directors shall select a chief executive officer of the corporation who shall be subject to the control of the board of directors and have general supervision, direction and control of the business and the officers of the corporation. The chief executive officer shall preside at all meetings of the stockholders and, in the absence or nonexistence of a chairman of the board, at all meetings of the board of directors.

     5.7       PRESIDENT

     The president shall have the general powers and duties of management usually vested in the office of president of a corporation and shall have such other powers and duties as may be prescribed by the board of directors or these bylaws. In addition and subject to such supervisory powers, if any, as may be given by the board of directors to the chairman of the board, if no one has been appointed chief executive officer, the president shall be the chief executive officer of the corporation and shall, subject to the control of the board of directors, have the powers and duties described in Section 5.6.

     5.8       VICE PRESIDENTS

     In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors, these bylaws, the president or the chairman of the board.

     5.9       SECRETARY

     The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the board of directors may direct, a book of minutes of all meetings and actions of directors, committees of directors, and stockholders. The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the names of those present at directors’ meetings or committee meetings, the number of shares present or represented at stockholders’ meetings, and the proceedings thereof.

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     The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporation’s transfer agent or registrar, as determined by resolution of the board of directors, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation.

     The secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the board of directors required to be given by law or by these bylaws. The secretary shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by these bylaws.

     5.10       CHIEF FINANCIAL OFFICER

     The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director.

     The chief financial officer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositories as may be designated by the board of directors. The chief financial officer shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the president and directors, whenever they request it, an account of all his transactions as chief financial officer and of the financial condition of the corporation, and shall have other powers and perform such other duties as may be prescribed by the board of directors or these bylaws.

     The chief financial officer shall be the treasurer of the corporation.

     5.11       ASSISTANT SECRETARY

     The assistant secretary, or, if there is more than one, the assistant secretaries in the order determined by the stockholders or board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as may be prescribed by the board of directors or these bylaws.

     5.12       ASSISTANT TREASURER

     The assistant treasurer, or, if there is more than one, the assistant treasurers, in the order determined by the stockholders or board of directors (or if there be no such determination, then in the order of their election), shall, in the absence of the chief financial officer or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the chief financial officer

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and shall perform such other duties and have such other powers as may be prescribed by the board of directors or these bylaws.

     5.13       REPRESENTATION OF SHARES OF OTHER CORPORATIONS

     The chairman of the board, the president, any vice president, the chief financial officer, the secretary or assistant secretary of this corporation, or any other person authorized by the board of directors or the president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.

     5.14       AUTHORITY AND DUTIES OF OFFICERS

     In addition to the foregoing authority and duties, all officers of the corporation shall respectively have such authority and perform such duties in the management of the business of the corporation as may be designated from time to time by the board of directors or the stockholders.

ARTICLE VI

INDEMNITY

     6.1       THIRD PARTY ACTIONS

     The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement (if such settlement is approved in advance by the corporation, which approval shall not be unreasonably withheld) actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interest of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the person’s conduct was unlawful.

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     6.2       ACTIONS BY OR IN THE RIGHT OF THE CORPORATION

     The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) and amounts paid in settlement (if such settlement is approved in advance by the corporation, which approval shall not be unreasonably withheld) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in manner such person reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper. Notwithstanding any other provision of this Article VI, no person shall be indemnified hereunder for any expenses or amounts paid in settlement with respect to any action to recover short-swing profits under Section 16(b) of the Securities Exchange Act of 1934, as amended.

     6.3       SUCCESSFUL DEFENSE

     To the extent that a director, officer, employee or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 6.1 and 6.2, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith.

     6.4       DETERMINATION OF CONDUCT

     Any indemnification under Sections 6.1 and 6.2 (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that the indemnification of the director, officer, employee or agent is proper in the circumstances because such person has met the applicable standard of conduct set forth in Sections 6.1 and 6.2. Such determination shall be made (1) by the Board of Directors or the Executive Committee by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding or (2) or if such quorum is not obtainable or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders. Notwithstanding the foregoing, a director, officer, employee or agent of the Corporation shall be entitled to contest any determination that the director, officer, employee or agent has not met the applicable standard of conduct set forth in Sections 6.1 and 6.2 by petitioning a court of competent jurisdiction.

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     6.5       PAYMENT OF EXPENSES IN ADVANCE

     Expenses incurred in defending a civil or criminal action, suit or proceeding, by an individual who may be entitled to indemnification pursuant to Section 6.1 or 6.2, shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized in this Article VI.

     6.6       INDEMNITY NOT EXCLUSIVE

     The indemnification and advancement of expenses provided by or granted pursuant to the other sections of this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office.

     6.7       INSURANCE INDEMNIFICATION

     The corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity or arising out of such person’s status as such, whether or not the corporation would have the power to indemnify such person against such liability under the provisions of this Article VI.

     6.8       THE CORPORATION

     For purposes of this Article VI, references to “the corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under and subject to the provisions of this Article VI (including, without limitation the provisions of Section 6.4) with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued.

     6.9       EMPLOYEE BENEFIT PLANS

     For purposes of this Article VI, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the corporation” shall

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include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the corporation” as referred to in this Article VI.

     6.10       CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES

     The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VI shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

ARTICLE VII

RECORDS AND REPORTS

     7.1       MAINTENANCE AND INSPECTION OF RECORDS

     The corporation shall, either at its principal executive officer or at such place or places as designated by the board of directors, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these bylaws as amended to date, accounting books, and other records.

     Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation’s stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person’s interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent so to act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal place of business.

     The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at

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the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

     7.2       INSPECTION BY DIRECTORS

     Any director shall have the right to examine the corporation’s stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related to his position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper.

     7.3       ANNUAL STATEMENT TO STOCKHOLDERS

     The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation.

ARTICLE VIII

GENERAL MATTERS

     8.1       CHECKS

     From time to time, the board of directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments.

     8.2       EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS

     The board of directors, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

     8.3       STOCK CERTIFICATES; PARTLY PAID SHARES

     The shares of the corporation shall be represented by certificates, provided that the board of directors of the corporation may provide by resolution or resolutions that some or all of any or all

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classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Notwithstanding the adoption of such a resolution by the board of directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the corporation by the chairman or vice-chairman of the board of directors, or the president or vice-president, and by the chief financial officer or an assistant treasurer, or the secretary or an assistant secretary of such corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue.

     The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, upon the books and records of the corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.

     8.4       SPECIAL DESIGNATION ON CERTIFICATES

     If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock a statement that the corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

     8.5       LOST CERTIFICATES

     Except as provided in this Section 8.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and canceled at the same time. The corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may

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be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

     8.6       CONSTRUCTION; DEFINITIONS

     Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Delaware General Corporation Law shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.

     8.7       DIVIDENDS

     The directors of the corporation, subject to any restrictions contained in (i) the Delaware General Corporation Law or (ii) the certificate of incorporation, may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property, or in shares of the corporation’s capital stock.

     The directors of the corporation may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the corporation, and meeting contingencies.

     8.8       FISCAL YEAR

     The fiscal year of the corporation shall be fixed by resolution of the board of directors and may be changed by the board of directors.

     8.9       SEAL

     The corporation may adopt a corporate seal, which shall be adopted and which may be altered by the board of directors, and may use the same by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

     8.10       TRANSFER OF STOCK

     Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction in its books.

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     8.11       STOCK TRANSFER AGREEMENTS

     The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the Delaware General Corporation Law.

     8.12       REGISTERED STOCKHOLDERS

     The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

ARTICLE IX

AMENDMENTS

     The bylaws of the corporation may be adopted, amended or repealed by the stockholders entitled to vote; provided, however, that the corporation may, in its certificate of incorporation, confer the power to adopt, amend or repeal bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal bylaws.

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CERTIFICATE OF ADOPTION OF

AMENDED AND RESTATED BYLAWS

OF

THIRD WAVE TECHNOLOGIES, INC.

Certificate by Secretary

     The undersigned hereby certifies that he is the duly elected, qualified, and acting Secretary of Third Wave Technologies, Inc. and that the foregoing Amended and Restated Bylaws, comprising twenty-two (22) pages, were adopted as the Amended and Restated Bylaws of the corporation on July 25, 2005 by the board of directors of the corporation.

     IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed the corporate seal this 25^th day of July, 2005.

/s/ Kevin Conroy  

Kevin Conroy, Secretary 

EX-10.17

Exhibit 10.17

December 14, 2005

VIA HAND DELIVERY

Mr. John J. Puisis
811 Lenox
Glenview, IL 60025

     RE:       Severance Agreement and Release

Dear John:

     This will confirm our proposal concerning the termination of your employment with Third Wave Technologies, Inc. (“Company”) on December 14, 2005 (“Separation Date”). In connection with the separation, the Company offers you the following benefits:

     (1)       The Company shall provide you with the following:

          (A)       The Company will pay you your regular wages through the Separation Date;

          (B)       The Company will pay you for any accrued vacation that you have not used as of the Separation Date;

          (C)       If you participated, you will retain all your vested rights in the Company’s 401(k) plan;

          (D)       You will receive a severance payment equal to 24 months of your then current Base Salary, 6/24^th of which shall be paid in a lump sum within 3 business days of the Revocation Date, with the balance to be paid in 18 equal monthly installments (the first installment due on the first day of the calendar month following the month in which termination occurs).

          (E)       All stock options granted to you shall immediately be accelerated and shall be considered fully vested. Notwithstanding anything contained in the Option Grant Agreements to the contrary, your vested Non-Qualified Stock Options shall be open for exercise until the latest date on which those options would expire or are eligible to be exercised under the Option Grant Agreements, determine without regard to such termination or resignation; provided, however, that in the event of a conflict between any Option Grant Agreement this Agreement shall control. You and the Company acknowledge and agree that such extended exercise period shall not apply to any Incentive Stock Options the exercise periods for which shall continue to be governed by the terms of the Option Grant Agreements. You understand and agree that any extended exercise period granted to Incentive Stock Options issued to Executive on or prior to July 17, 2003 converted those Incentive Stock Options into Non-Qualified Stock Options.

December 14, 2005
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          (F)       The Company will provide you and your eligible dependents, with the right to participate, at your own expense, in the plan in accordance with the mandates of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”). Unless you and, if applicable, your eligible dependents exercise these rights in a timely manner, coverage under the Company’s group health insurance plan will cease as of the last day of the month in which the Separation Date occurred. In addition, you will receive an amount equal to 1/12^th of 7.6% of your Base Salary payable each month (the first installment due on the first day of the calendar month following the month in which termination occurs) in twelve (12) monthly installments, or a monthly amount equal to 1/12^th of such greater percentage as may be in effect for senior employees of the Company immediately prior to your termination; which amount is intended, but not required, to be used by you to acquire such medical, dental, hospitalization, accident, disability, life insurance and any other benefits as you may determine. As of the Separation Date, you will cease to participate in all other Company benefit plans.

          (G)       You will receive an outplacement consulting package up to a maximum value of $15,000 that shall be selected at your discretion.

          (H)       The Company agrees not to contest any claim for unemployment filed after the Separation Date.

All payments described above, will be subject to normal deductions for income and employment taxes and will be made to you no later than the time required by applicable law.

     (2)       Your Undertakings. In exchange for the benefits provided to you under Paragraph 2, above, you agree as follows:

          (A)       You agree, on behalf of yourself, your heirs, successors and assigns, to release the Company, its affiliates and subsidiaries and their respective past and present officers, directors, stockholders, partners, members, agents and employees (collectively “Released Parties”) from any claims arising on or before the date you sign this agreement. This includes, but is not limited to, giving up: (i) any claims under the Age Discrimination in Employment Act (ADEA) of 1967, the Older Worker Benefit Protection Act, the Americans with Disabilities Act, the Employee Retirement Income Security Act, the Civil Rights Act of 1964, as amended, or claims under any other federal, state or local employment discrimination or employee benefit laws, (ii) any defamation, privacy, wrongful discharge or other tort or breach of contract claims under state law, (iii) any retaliation claims, (iv) any claims for compensatory, consequential or punitive damages, back pay, front pay, costs, attorneys fees, interest or other expenses, and (v) any other legal obligation or responsibility arising from or in respect to your employment or termination of employment except for a claim to enforce this Agreement. This release of claims includes any claims, whether they are presently known or unknown, or anticipated or unanticipated by you. You should not construe references to specific claims as in any way limiting the general and comprehensive nature of the release of claims provided under this Paragraph 2(A). You agree to waive and give up any benefit conferred on you by any order or judgment issued in connection with any proceeding filed against the Released Parties regarding

December 14, 2005
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 any claim released in this agreement. This release does not apply to claims for benefits under any applicable workers’ compensation law;

          (B)       You agree that, as of the Separation Date, you have or will expeditiously return to the Company all of its property and all of the property of its present and former officers, directors, stockholders, partners, members, agents, employees and customers which you possess or over which you have direct or indirect control, including, but not limited to, all monies, documents, electronic or otherwise, records and files, credit cards, office keys, Company vehicles, cellular telephones, and electronically encoded information such as computer disks, etc. (and all copies of such Company property);

          (C)       You agree not to engage at any time in any form of conduct or make any statements or representations, or direct any other person or entity to engage in any conduct or make any statements or representations, that disparage, criticize or otherwise impair the reputation of the Company or any of the Released Parties (defined above). Nothing contained in this Paragraph 2(C) shall preclude you from providing truthful testimony required pursuant to subpoena or other legal process;

          (D)       You agree to actively cooperate with the Company, including giving depositions and as a witness, in connection with the legal proceedings or matters in which the Company is or may become involved;

          (E)       You agree that all post-employment obligation set forth in that certain Employment Agreement, date September 19, 2001, between you and the Company, as amended on July 17, 2003 and June 14, 2004 (the “Employment Agreement”), shall remain in full force and effect according to the terms of such agreement; and

          (F)       You understand that the Company has no obligation to rehire you, and you agree not to seek employment or re-employment from the Company.

     (3)       Acceptance and Revocation Procedures. The Company wishes to ensure that you voluntarily agree to the terms contained in this agreement and do so only after you fully understand them. Accordingly, the following procedures shall apply:

          (A)       You agree and acknowledge that you have read this agreement, understand its contents, and may agree to the terms of this agreement by signing and dating it and returning the signed and dated document, via mail, hand delivery, or overnight delivery, so that it is received by Peter L. Coffey, c/o Michael Best & Friedrich, LLP, 100 East Wisconsin Avenue, Suite 3300, Milwaukee, Wisconsin 53202-4108 on or before 5:00 p.m. Central Time on the twenty-first (21st) calendar day after you receive it.

          (B)       You agree and acknowledge that you have been advised by the Company to consult with an attorney prior to signing this agreement;

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          (C)       You understand that this agreement, at Paragraph 2(A), above, includes a final general release, including a release of all claims under the Age Discrimination in Employment Act;

          (D)       You understand that you have seven (7) calendar days after signing this agreement within which to revoke your acceptance of it (“Revocation Period”). Such revocation will not be effective unless written notice of the revocation is, via mail, hand delivery, or overnight delivery, directed to and received by Peter L. Coffey, c/o Michael Best & Friedrich, LLP, 100 East Wisconsin Avenue, Suite 3300, Milwaukee, Wisconsin 53202-4108 on or before 5:00 p.m. Central Time.

          (E)       This agreement will not be binding or enforceable unless you have signed and delivered it as provided in Paragraph 3(A), above, and have chosen not to exercise your revocation rights, as described in Paragraph 3(D), above. If you give timely notice of your intention to revoke your acceptance of the terms set forth in this agreement, this agreement shall become null and void, and all rights and claims of the parties which would have existed, but for the acceptance of this agreement’s terms, shall be restored; and

          (F)       You represent and warrant to the Company that, in the event, you choose to accept the terms of this agreement by signing it, the date and time appearing above your name on the last page of this agreement shall be the actual date and time on which you have signed the agreement.

     (4)       Miscellaneous. Should you accept the terms of this agreement, its terms will be governed by the following:

          (A)       This agreement constitutes the complete understanding between you and the Company concerning all matters affecting your employment with the Company and the termination thereof. If you accept this agreement, this agreement supersedes all prior agreements, understandings and practices concerning such matters, including, but not limited to, any Company personnel documents, handbooks, policies, incentive or bonus plans or programs, and any prior customs or practices of the Company; provided, however, that this Paragraph 4(A) does not apply to any prior confidentiality, non-competition or other restrictive covenant obligations that you owe to the Company (including, but not limited to, such obligations set forth in Section 12 [Confidentiality], 13 [Non-Compete; Non-Solicit] and 15 [Intellectual Property]) which shall survive and remain in full force and effect following the Separation Date;

          (B)       This agreement and its interpretation shall be governed and construed in accordance with the laws of the State of Wisconsin and shall be binding upon the parties hereto and their respective successors and assigns;

          (C)       In the event that you breach any provision of this agreement, you agree that the Company may suspend all additional payments under this agreement, recover any damages suffered as a result of such breach and recover from you any reasonable attorneys’ fees or costs it

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  incurs as a result of your breach. In addition, you agree that the Company may seek injunctive or other equitable relief as a result of a breach by you of any provisions of this agreement.

     This agreement is intended to resolve all outstanding issues between you and the Company in a comprehensive manner.

     Should you have any questions, please feel free to contact me.

Very truly yours, THIRD WAVE TECHNOLOGIES, INC.
By:	/s/ Kevin T. Conroy
	Kevin T. Conroy

I agree with and accept the terms contained in
this agreement and agree to be bound by them.
Dated this 20th day of December, 2005.

/s/ John J. Puisis  

John J. Puisus 

EX-10.19

Exhibit 10.19

Third Wave Technologies, Inc. Long Term Incentive Plan No. 2

1. Plan Objective

     The Third Wave Technologies, Inc. Long Term Incentive Plan (referred to as the “Plan”) is designed to encourage results-oriented actions on the part of members of the executive management team and other key employees of Third Wave Technologies, Inc. (the “Company”). The Plan is intended to align closely financial rewards for the employees with the achievement of specific performance objectives by the Company. The Plan, as amended and restated effective as of January 1, 2006, provides as follows:

2. Eligibility

     Members of the executive management team of the Company (“Tier 1 Employees”) and other key employees of the Company (“Tier 2 Employees”) are eligible to participate in the Plan. The Administrator (as defined in Section 3 below) shall select the Tier 1 Employees and Tier 2 Employees who may participate in the Plan (a “Participant”).

3. Administration

     (a) The Plan shall be administered by the Compensation Committee of the Company’s Board of Directors (the “Administrator”). The Administrator may delegate its authority to administer the Plan to an individual or committee. The term “Administrator” shall mean the Compensation Committee or such individual or committee to which authority has been delegated.

     (b) The Administrator shall have full power and authority to establish the rules and regulations relating to the Plan, to interpret the Plan and those rules and regulations, to select each Participant for the Plan, to determine the Participant’s target award, performance goals and final award, to make all factual and other determinations in connection with the Plan, and to take all other actions necessary or appropriate for the proper administration of the Plan, including the delegation of such authority or power, where appropriate. The Administrator may adjust the performance goals to take into account corporate transactions that take into account new revenue associated with mergers and/or acquisitions or other corporate transactions in an equitable manner that does not make it more difficult for the Company to achieve the original performance goals.

     (c) All powers of the Administrator shall be executed in its sole discretion, in the best interest of the Company, not as a fiduciary, and in keeping with the objectives of the Plan and need not be uniform as to similarly situated individuals. The Administrator’s administration of the Plan, including all such rules and regulations, interpretations, selections, determinations, approvals, decisions, delegations, amendments, terminations, and other actions, shall be final and binding upon the Company and all employees of the Company, including each Participant and his or her respective beneficiary(ies).

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4. Target Awards and Performance Goals

     (a) The Administrator shall establish for each Participant who completes and returns an enrollment agreement, in a form designated by the Administrator, a target award that shall be payable if and to the extent the Company attains the performance goals set by the Administrator for a specified performance period. The executed enrollment agreement shall constitute a Participant’s consent to be subject to the terms of the Plan and to be bound by the authority of the Administrator as set forth in Section 3.

(i) Unless the Administrator determines otherwise, the target award for a Participant who is a Tier 1 Employee shall be an amount equal to four times the highest annual incentive target amount established for the Participant during the performance period under the Company’s annual incentive plan applicable to the Participant.

(ii) Unless the Administrator determines otherwise, the target award for a Participant who is a Tier 2 Employee shall be an amount equal to three times the highest annual incentive target amount established for the Participant during the performance period under the Company’s annual incentive plan applicable to the Participant.

     (b) The Administrator shall establish the performance goals and related calculation matrices for each performance period and shall promptly provide this information to each Participant who is eligible for an award for that performance period. The performance goals are attached as Exhibit A and are hereby fully incorporated into and shall be considered as part of this Plan. Unless the Administrator determines otherwise, the performance goals shall be based upon (i) the Company’s total shareholder return ranking as compared to its peer group, (ii) the Company’s stock price growth, and (iii) the growth in the Company’s Clinical Molecular Diagnostics revenue. The Administrator may adjust the performance goals as it deems appropriate to take into account corporate transactions or other extraordinary events that occur during the performance period.

     (c) For the purposes of subsection (b), the Administrator shall have the discretion to determine which companies are included in the peer group. The Administrator may adjust the peer group from time to time as it deems appropriate, including by adding, deleting, or replacing companies, to take into account mergers and other changes in the companies comprising the peer group.

     (d) Unless the Administrator determines otherwise, the performance period shall be the three-year period beginning on January 1, 2005 and ending on December 31, 2007.

5. Calculation of Incentive Awards

     (a) At the end of the performance period, the Administrator shall determine for each participant whether and to what extent the performance goals have been met and the percentage of the target award that is earned. The Administrator shall rely upon the audited financial statements of the Company and its subsidiaries to determine whether and to what extent the performance goals are met.

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     (b) The Administrator shall compute each Participant’s award for the performance period based upon the Company’s achievement of the performance goals and the matrices set forth on Exhibit A. On or around March 15 of the year following the end of the applicable performance period, the Company shall credit each Participant’s award to a book account established for the Participant. All amounts credited to a Participant’s book account shall be administered according to the vesting provisions of Section 6 below.

     (c) Participants must be employed on the last day of the applicable performance period to be eligible for an incentive award under the Plan, except as described below or except as the Administrator may otherwise determine.

          (i) The beneficiary(ies) of a Participant who dies during the performance period shall receive a prorated award based upon the Company’s performance at the end of such performance period. The prorated award shall be calculated from the commencement of the performance period, or, if applicable, such later date on which the Participant became eligible to participate for the performance period as established by the Administrator, to the date of the Participant’s death. The Company shall pay the prorated award to the beneficiary(ies) after end of the performance period pursuant to Section 8 below.

          (ii) Participants who retire on or after their normal retirement age (as defined below) during the performance period shall receive a prorated award based upon the Company’s performance at the end of such performance period. The prorated award shall be calculated from the commencement of the performance period, or, if applicable, such later date on which the Participant became eligible to participate for the performance period as established by the Administrator, to the date of the Participant’s normal retirement. The Company shall pay the prorated award to the Participant after the end of the performance period pursuant to Section 8 below. For purposes of this Plan, “normal retirement age” is age 65, or, if the Participant has at least five years of service, age 55.

          (iii) Participants who become disabled (as defined below) during the performance period shall receive a prorated award based upon the Company’s performance at the end of such performance period. The prorated award shall be calculated from the commencement of the performance period, or, if applicable, such later date on which the Participant became eligible to participate for the performance period as established by the Administrator, to the date the Participant is disabled. The Company shall pay the prorated award to the Participant after the end of the performance period pursuant to Section 8 below. For purposes of this Plan, “disabled” means eligible for long-term disability benefits as determined under a Company-sponsored disability plan.

          (iv) Upon a Change in Control (as defined below) of the Company during the performance period, all performance goals pertaining to awards during such performance period shall be deemed to have been met 100 percent as of the effective date of the Change in Control and the maximum award for such performance period shall be deemed immediately earned, and such maximum award shall vest and be paid as described in Section 6(d); provided, however, that if the Change of Control is an acquisition or merger and such transaction occurs for less than $200 million in total value, the Company shall not have been deemed to have met 100 percent of the performance goals, rather the performance goals shall be measured by the Matrix in Exhibit

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A as reconfigured to take into account a shortened period within which to achieve such targets by reducing the TWT Stock Price Column and 2007 Clinical Revenue Targets on a straight-line method based on the percentage of the performance period that has occurred. For example, if ¹/2 of the performance period has expired, then the Stock Price and Clinical Revenue targets shall be revised based on ¹/2 of the expected growth. The Company shall credit the maximum award to a book account established for the Participant as soon as practicable after the Change of Control.

For purposes of the Plan, the term “Change in Control” shall mean, and shall be deemed to have occurred if, (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) or group acting in concert, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company acting in such capacity or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more than 50 percent of the total voting power represented by the Company’s then outstanding voting securities; (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company’s stockholders was approved by a vote of at least two thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; (iii) consummation of a merger or consolidation of the Company with any other corporation other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 80 percent of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; (iv) the stockholders of the Company approve a plan of complete liquidation of the Company; or (v) the Company consummates a sale or disposition of (in one transaction or a series of related transactions) all or substantially all of its assets.

     (d) In the event this Plan is terminated or suspended before the last day of the performance period, Participants who are employed by the Company on the day of such termination shall receive an award based upon the Company’s performance through the end of such performance period as if no such termination had occurred. The award shall be calculated from the commencement of the performance period, or, if applicable, such later date on which the Participant became eligible to participate for the performance period as established by the Administrator, to the end of the performance period. The Company shall credit the award to a book account established for the Participant as soon as practicable after the end of the performance period. Awards made pursuant to this subsection shall vest and be paid in accordance with the terms of the Plan as though the Plan had not been terminated or suspended.

     (e) The Administrator may establish appropriate terms and conditions to accommodate newly hired and transferred employees. For example, upon a Participant’s being designated to participate in the Plan, the Administrator may establish, in its discretion, the effective commencement date for such Participant for the performance period that has commenced but not then ended, and if such effective commencement date is established as a date later than the

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commencement of the performance period, any award for the performance period may be prorated based on such later effective commencement date. Absent any action to the contrary, new employees that become Participants shall be entitled to a commencement date effective as of the beginning of the performance period.

6. Vesting of Incentive Awards

     (a) If a Participant earns an award as described in Section 5 for the performance period, except as provided below in this Section 6, 25 percent of the award shall vest on the last day of the performance period, 50 percent of the award shall vest on the last day of the year following the end of such performance period, and the remaining 25 percent of the award shall vest on the last day of the second year following the end of such performance period, provided the Participant continues to be employed by the Company or an affiliate through such applicable vesting date.

     (b) If a Participant retires at or after his or her normal retirement age, becomes disabled, or dies while employed by the Company, the Participant’s award shall be fully vested at the end of the performance period or at the time such event occurs, whichever is later.

     (c) Unless otherwise specified elsewhere in this Plan or any valid employment or other agreement between the Participant and the Company, if a Participant’s employment with the Company and its affiliates terminates for any reason, any unvested award shall be forfeited to the Company as of his or her termination date.

     (d) In the event of a Change in Control during the performance period, Participants who are employed by the Company on the effective date of the Change in Control shall be eligible to receive, and shall be deemed vested in, the maximum award payout for the performance period as follows: (A) 50 percent of the maximum award payout shall be deemed vested and shall be paid upon the effective date of the Change in Control, and (B) 50 percent of the maximum award payout shall be deemed vested and shall be paid on the earlier of (x) six months after the effective date of the Change in Control or (y) the date on which such portion of the award would have vested in the absence of a Change in Control pursuant to Section 6(a) or (b) above.

     Notwithstanding (B) above, distribution to a Participant who is (I) a Key Employee and (II) incurs a separation from service (within the meaning of section 409A of the Internal Revenue Code of 1986, as amended (the “Code”)) on account of termination by the Company without Cause or resignation by the Participant for Good Reason prior to the applicable date under (x) or (y) above, shall be postponed to a date that is not less than 6 months following the Participant’s separation date. A Participant who is not a Key Employee who incurs a separation from service (within the meaning of section 409A of the Code) on account of termination by the Company without Cause or resignation by the Participant for Good Reason prior to the applicable date under (x) or (y) above, shall be deemed vested and paid on the earlier of the dates described in (x) and (y) without regard to the Participant’s separation from service. If any Participant incurs a separation from service within the meaning of section 409A of the Code) for any reason other than termination by the Company without Cause or resignation by the Participant for Good Reason prior to the applicable date under (x) or (y) above, any unvested award shall be forfeited to the Company as of the Participant’s separation date.

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For purposes of the Plan, the term “Cause” shall mean any of the following grounds for termination of the Participant’s employment:

          (i) any willful refusal to perform essential job duties which continues for more than ten (10) days after notice from the Company;

          (ii) any intentional act of fraud or embezzlement by the Employee in connection with the Employee’s duties or committed in the course of Employee’s employment;

          (iii) any gross negligence or willful misconduct of the Employee with regard to the Company or any of its subsidiaries resulting in a material economic loss to the Company;

          (iv) the Participant is convicted of a felony;

          (v) the Participant is convicted of a misdemeanor the circumstances of which involve fraud, dishonesty or moral turpitude and which is substantially related to the circumstances of Participant’s job with the Company;

          (vii) any willful and material violation by the Employee of any statutory or common law duty of loyalty to the Company or any of its subsidiaries resulting in a material economic loss; or

          (vii) any material breach by the Employee of his or her employment or non-compete agreements, if any exist.

For purposes of the Plan, the term “Good Reason” shall mean, and shall be deemed to have the meaning set forth in any valid employment agreement being Participant and Company.

For purposes of the Plan, the term “Key Employee” shall mean (i) officers of the Company having annual compensation greater than $130,000 (adjusted for inflation and limited to 50 employees), (ii) five percent owners, and (iii) one percent owners having annual compensation greater than $150,000, all as determined by the Committee in a manner consistent with the regulations issues under 409A of the Code.

     (e) Notwithstanding (a) above, if a Participant earns an award as described in Section 5 for the performance period, and thereafter there is a Change in Control, Participants who are employed by the Company on the effective date of the Change in Control shall be eligible to receive, and shall be deemed vested in, the unvested portion of the award as of the effective date of the Change in Control as follows: (A) 50 percent of such unvested portion of the award shall be deemed immediately vested and shall be paid on the effective date of the Change in Control, and (B) 50 percent of the award payout shall be deemed vested and shall be paid on the earlier of (x) six months after the effective date of the Change in Control, or (y) the date on which such portion of the award would have vested in the absence of a Change in Control pursuant to Section 6(a) or (b) above.

Notwithstanding (B) above, distribution to a Participant who is (I) a Key Employee and (II) incurs a separation from service (within the meaning of section 409A of the Code) on account of termination by the Company without Cause or resignation by the Participant for Good Reason

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prior to the applicable date under (x) or (y) above, shall be postponed to a date that is not less than 6 months following the Participant’s separation date. A Participant who is not a Key Employee who incurs a separation from service (within the meaning of section 409A of the Code) on account of termination by the Company without Cause or resignation by the Participant for Good Reason prior to the applicable date under (x) or (y) above, shall be deemed vested and paid on the earlier of the dates described in (x) and (y) without regard to the Participant’s separation from service. If any Participant incurs a separation from service within the meaning of section 409A of the Code) for any reason other than termination by the Company without Cause or resignation by the Participant for Good Reason prior to the applicable date under (x) or (y) above, any unvested award shall be forfeited to the Company as of the Participant’s separation date.

     (f) A transfer of employment between the Company and an affiliate shall not be considered a termination of employment for purposes of the Plan.

     (g) The Administrator reserves the right to accelerate vesting whenever the Administrator deems such action appropriate.

     (h) Prior to a Change in Control, the Company shall deposit in a separate bank account sufficient funds to cover both the vested and unvested cumulative award amounts so that funding of vested awards can take place upon the Change in Control closing.

     (i) In the event of a Change in Control whereby the Company’s Compensation Committee of the Board of Directors no longer exists, the Administrator shall be deemed to be the individual who at the time of the Change of Control are the Company’s General Counsel and principal financial officer.

7. Changes to Performance Goals and Target Awards

     At any time prior to the final determination of awards pursuant to Section 5, the Administrator may adjust the performance goals and target awards to reflect a change in corporate capitalization (such as a stock split or stock dividend), or a corporate transaction (such as a merger, consolidation, separation, reorganization, or partial or complete liquidation), or to reflect equitably the occurrence of any extraordinary event, any change in applicable accounting rules or principles, any change in the Company’s method of accounting, any change in applicable law, any change due to any merger, consolidation, acquisition, reorganization, stock split, stock dividend, combination of shares, or other changes in the Company’s corporate structure or shares, or any other change of a similar nature.

8. Payment of Awards

     (a) Unless determined otherwise by the Administrator, a Participant may elect, in the manner specified by the Administrator, to receive payment of his or her award in (i) cash, (ii) shares of the Company’s common stock valued as of the day that is five business days before the date of distribution, or (iii) a combination. Except as provided in subsection (b), payment shall be made as soon as administratively possible following the vesting of an award. Participants who elect to take a distribution of their award in the form of the Company’s stock, rather than in

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cash, shall receive a 10 percent increase in the number of shares of the Company’s stock otherwise to be distributed. The distribution of the Company’s stock shall be made in accordance with the Third Wave Technologies, Inc. 2000 Stock Plan, pursuant to Section 11 of such plan, or the comparable provisions of any successor stock plan adopted by the Company.

     (b) Unless the Administrator determines otherwise, a Participant who is eligible to participate in the Company’s deferred compensation program, if one exists, may make an irrevocable written election to defer all or any part of the payment of such award pursuant to a separate deferred compensation arrangement sponsored by the Company.

     (c) Subject to applicable state law and the notification to, or consent of, a Participant’s spouse, as required, each Participant may designate a beneficiary or beneficiaries (which beneficiary may be an entity other than a natural person) to receive any payments which are to be made following the Participant’s death. Such designation may be changed or canceled at any time without the consent of any such beneficiary but again subject to applicable state law and the notification to, or consent of, a Participant’s spouse, as required. Any such designation, change, or cancellation must be made on a form approved by the Administrator and shall not be effective until received by the Administrator or its designee. If no beneficiary has been named, or the designated beneficiary or beneficiaries shall have predeceased the Participant, the beneficiary shall be the Participant’s surviving spouse or, if none, the Participant’s estate. If a Participant designates more than one beneficiary, the interests of such beneficiaries shall be paid in equal shares, unless the Participant has specifically designated otherwise.

9. Amendments and Termination

     The Company may at any time amend, suspend, or terminate the Plan or any portion thereof; provided that no amendment that would adversely affect the rights of a Participant may take effect without such Participant’s prior written consent. Notwithstanding the foregoing, the Company shall have the right to modify the terms of the Plan as may be necessary or desirable to comply with applicable laws.

10. Miscellaneous Provisions

     (a) Neither the establishment of this Plan, nor any action taken hereunder, shall be construed as giving any Participant any right to be retained in the employ of the Company or any of its subsidiaries. Nothing in the Plan, and no action taken pursuant to the Plan, shall affect the right of the Company or a subsidiary to terminate a Participant’s employment at any time and for any or no reason. The Company is under no obligation to continue the Plan. Notwithstanding the foregoing, the Company acknowledges that certain Participants may have separate employment or other agreements with the Company and those agreements may include terms and conditions affecting the terms and conditions of awards that may be made under this Plan.

     (b) A Participant’s right and interest under the Plan may not be assigned or transferred, except as provided in Section 5(c)(i) of the Plan upon death, and any attempted assignment or transfer shall be null and void and shall extinguish, in the Company’s sole discretion, the Company’s obligation under the Plan to pay award(s) with respect to the Participant. The Company’s obligations under the Plan may be assigned to any corporation which acquires all or

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substantially all of the Company’s assets or any corporation into which the Company may be merged or consolidated.

     (c) The Plan shall be unfunded. The Company shall not be required to establish any special or separate fund, or to make any other segregation of assets, to assure payment of awards. The Company’s obligations hereunder shall constitute a general, unsecured obligation of the Company, and awards shall be paid solely from the Company’s general assets. No Participant shall have any right to any specific assets of the Company.

     (d) The Company shall have the right to deduct from awards any and all federal, state, and local taxes or other amounts required by law to be withheld.

     (e) The Company’s obligation to pay compensation as herein provided is subject to any applicable orders, rules, or regulations of any government agency or office having authority to regulate the payment of wages, salaries, and other forms of compensation.

     (f) The validity, construction, interpretation, and effect of the Plan shall exclusively be governed by and determined in accordance with the laws of the State of Wisconsin.

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Exhibit A

Third Wave Long Term Incentive Matrix — 2 (1/1/05 — 12/31/07)

Payout as a Percent of Target (Target = 4x target bonus for Tier 1; 3x target bonus for Tier 2)

TWT Stock Price
		>=$9	25	%		35	%		40	%		45	%		50	%		62.5	%		75	%		87.5	%		100	%
	$	7-8.99	12.5	%		20	%		25	%		32.5	%		40	%		50	%		62.5	%		75	%		87.5	%
	$	5-6.99	0	%		5	%		10	%		17.5	%		25	%		37.5	%		50	%		62.5	%		75	%
	$	3-4.99	0	%		0	%		5	%		10	%		17.5	%		25	%		35	%		45	%		55	%
2007 Clinical Revenue ($M)			<$19		$	21		$	23		$	25		$	27		$	29		$	31		$	33		$	35
CAGR			<8.2	%		11.9	%		15.3	%		18.6	%		21.6	%		24.6	%		27.4	%		30.1	%		32.6	%

3 Year Compounded Annual Growth Rate (CAGR)
For Clinical Molecular Diagnostics Revenue

Third Wave Long Term Incentive Matrix — 2 (1/1/05 — 12/31/07)

Payout as a Percent of Target (Target = 4x target bonus for Tier 1; 3x target bonus for Tier 2)

3 Year Quartile Ranking Total Shareholder Return vs. Peer Group
	1st	25	%		35	%		40	%		45	%		50	%		62.5	%		75	%		87.5	%		100	%
	Quartile
	2nd	12.5	%		20	%		25	%		32.5	%		40	%		50	%		62.5	%		75	%		87.5	%
	Quartile
	3rd	0	%		5	%		10	%		17.5	%		25	%		37.5	%		50	%		62.5	%		75	%
	Quartile
	4th	0	%		0	%		5	%		10	%		17.5	%		25	%		35	%		45	%		55	%
	Quartile
2007 Clinical Revenue ($M)		<$19		$	21		$	23		$	25		$	27		$	29		$	31		$	33		$	35
CAGR		<8.2	%		11.9	%		15.3	%		18.6	%		21.6	%		24.6	%		27.4	%		30.1	%		32.6	%

3 Year Compounded Annual Growth Rate (CAGR)
For Clinical Molecular Diagnostics Revenue

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§	CAGR for three-year period calculated on 2004 clinical revenue of $15M.
§	Peer group is targeted at 8 companies which would include GenProbe, Digene, Celera, Ventana, BioRad, Abbott, Roche, Bayer

Total payout equals the combined total of the two matrix charts above. Maximum payout after properly combining the two matrix charts equals 200% of target award.

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EX-10.26

Exhibit 10.26

January 31, 2006

James J. Herrmann
428 Hillside Avenue
Elmhurst, IL 60126

Dear Jim:

Third Wave Technologies, Inc. (TWT) and you have mutually agreed to terminate your employment effective March 16, 2006. Between now and March 16, 2006, you will remain available to assist TWT with its February earnings call, its 10-K filing and as otherwise needed. In consideration for your agreement to the terms of the attached Agreement, TWT will pay you severance pay at your current salary level through December 31, 2006. In addition, you will receive a supplemental transition payment and an amended stock option grant. Details regarding these items are fully set forth in the attached Agreement. If you agree to its terms after you have read and considered the Agreement that follows, please sign it in the space provided at the end of the Agreement and return it to TWT. Please note that Section 13 of the Agreement requires you to represent that, between the time you receive this Agreement and up until the time you sign this Agreement and as part of this Agreement, you have not and agree that you will not (1) violate your confidentiality obligations described in Section 9 of this Agreement, (2) made or make disparaging comments or remarks about TWT or about any of the Releasees as described in Section 10 of the Agreement, or (3) discussed or disclosed the existence or terms of this Agreement with any person except for your immediate family members, personal attorney, or financial advisor consulted in connection with a review of the Agreement, as described in Section 11. Also, the Agreement will be null and void if any handwritten changes are made to it. If you have any questions about this or any other provision, please call me at 608-273-8933.

James J. Herrmann
January 31, 2006
Page 2 of  8

AGREEMENT

     1.       Termination Date. During the week of January 30, 2006, TWT plans to announce that you will be leaving the Company. Your employment with TWT will be terminated effective March 16, 2006 (“termination date”). You agree that you will continue serving as TWT’s principal financial officer through the end of business March 16, 2006 (the “Transition Period”), and that, without limiting the foregoing, you will participate in TWT’s earnings call tentatively scheduled for February 24, 2006 and if completed, sign required lawful and appropriate SEC filings up through and including TWT’s 2005 financial results by March 15, 2006. Effective March 16, 2006, you will cease serving as TWT’s principal financial officer. You will be available during the Transition Period to assist in preparation for the February earnings call and SEC filings. You will be available in your office or on the phone on an as-needed basis. You will receive your regular salary during the Transition Period.

     2.       Severance Pay and Transition Pay. If you agree to the terms described in this letter (the “Agreement”), and if you have satisfied all of your obligations hereunder, TWT will pay you severance pay at your current salary level through December 31, 2006. Subject to Section 8 below, severance payments will be made on TWT’s regular payroll dates. The period during which you continue to receive severance payments is the “Payment Period.” Each severance payment will be subject to deductions for income and payroll taxes. In addition, on March 16, 2006, TWT will pay you 50% of your total remaining PTO balance.

     On the condition that you give continued assistance and cooperation, in TWT’s sole discretion, throughout the Transition Period and continued cooperation during the Payment Period, TWT will also pay you a supplemental transition payment of $25,000, less applicable taxes, and it will be payable on January 15, 2007.

     3.       Indemnification. To the fullest extent permitted by applicable law and as provided for in the Company’s articles of incorporation and bylaws in effect as of the date of this Agreement, the Company will, during and after termination of employment, indemnify Employee (including providing advancement of expenses) for any judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys’ fees, incurred by Employee in connection with the defense of any lawsuit or other claim or investigation to which Employee is made, or threatened to be made, a party or witness by reason of being or having been an officer, director or employee of the Company or any of its subsidiaries or affiliates as defined under the Securities and Exchange Act of 1934 (“Affiliates”) or a fiduciary of any of their benefit plans, provided, however, that the foregoing does not apply to any claim made in connection with the enforcement or breach of this Agreement.

     4.       Liability Insurance. Both during and after termination (for any reason) of Employee’s employment, the Company shall cause Employee to be covered under a directors and officers’ liability insurance policy for his acts (or non-acts) as an officer or director of the Company or any of its Affiliates. Such policy shall be maintained by the Company, at its expense, in an amount and on terms (including the time period of

James J. Herrmann
January 31, 2006
Page 3 of  8

coverage after the Employee’s employment terminates) at least as favorable to the Employee as policies covering the Company’s Board of Directors.

     5.       Stock Options. If you agree to the terms described in this Agreement, and if you have satisfied all of your obligations hereunder on March 17, 2006, TWT will amend your current stock option grant. Specifically, you will return your initial vested grant of 175,000 stock options. Your unvested stock options will return to the stock option pool on the Termination Date. TWT will then issue you 43,750 stock options, which will be priced as of the termination date, and this grant will vest immediately. You agree not to trade in TWT stock for 90 days after March 16, 2006. You will have two years from your termination date to exercise the 43,750 stock options.

     6.       Letter of Reference. At your request, TWT will provide you with a positive letter of reference. Individuals who identify themselves as your prospective employers will be directed to Kevin Conroy, President and Chief Executive Officer of TWT, or Lander Brown, Human Resources. TWT acknowledges that you are free to pursue alternate employment following the announcement date, as long as obligations to TWT are fully met during the transition period.

     7.       Health and Dental Insurance/Death Benefit. Your COBRA continuation rights with respect to health and dental insurance will begin on March 16, 2006. TWT will pay the premiums for your health and dental insurance coverage from March 16, 2006 through December 31, 2006. You are responsible for paying the premiums for any health and dental insurance coverage after December 31, 2006, whether through TWT’s group health and dental policy pursuant to COBRA continuation rights or through any other employer or individual plan. In the event you secure alternative employment that provides health and dental insurance coverage, you will notify TWT, and TWT’s obligations under this Section 7 will cease. TWT will not be responsible for any lapse in COBRA coverage. In the event of your death, TWT will pay any remaining severance and supplemental transition payments during the period covered by this agreement.

     8.       Release of Claims. In exchange for the payments and other consideration described in this Agreement, you agree—for yourself, your heirs, your beneficiaries and all other representatives—to waive and release and, with this Agreement, you do waive and release all past or present claims of any nature against TWT arising on or before the time that you sign this Agreement. This means, for example, that you are giving up any claims related in any way to your employment by TWT, the decision to terminate and the termination of your employment, and your compensation and benefits. Further, you agree not to institute or cause to be instituted in any state or federal court any such action or claim. This waiver and release of claims applies to any claims against TWT or anyone associated with or representing TWT—including, but not limited to, its officers, directors, partners, employees, attorneys, or agents (the “Releasees”).

              a.       Claims Released. The claims you are waiving in exchange for the Payment and other consideration described in this Agreement include, but are not limited to, claims under federal, state or local law including but not limited to, the Civil Rights Act of 1964, as amended; the Americans with Disabilities Act; the Wisconsin Fair Employment Practices Act and if applicable, the Age Discrimination in Employment Act,

James J. Herrmann
January 31, 2006
Page 4 of  8

for discrimination of any kind, tort, breach of contract, wrongful discharge, lost wages, compensatory damages, punitive damages, attorneys’ fees, and all other claims of any type or nature, whether known or unknown, anticipated or unanticipated matured or unmatured, direct or indirect. Other claims you are waiving are those that relate to ownership of any intellectual property or trade secrets developed during the term of your employment. You acknowledge your lab books and those of individuals who have worked for or with you are complete and you acknowledge that all intellectual property and trade secrets conceived or developed by you during the term of your employment are solely the property of TWT. This Release does not apply to a claim for benefits under any applicable workers’ compensation law.

              b.       Your Representation and Waiver. You represent that you have not filed and will not file any such action or claim in any court or before any state, federal or other governmental agency. You forever waive any right to recover money damages or any other form of relief for any and all claims waived under this Agreement. You further agree to waive your rights to and not accept any benefits which might be conferred upon you in any administrative court or other legal proceeding concerning any claim released by this Section 8. You understand and agree that this release forever bars you from suing, arbitrating or otherwise asserting a claim against TWT on any released claim.

              c.       ADEA Release and Waiver. In exchange for the amounts paid to you under this Agreement, you specifically waive any claims you may have under the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, or any similar law. You are not waiving any rights or claims that may arise after the date of this Agreement. You further acknowledge that you have been advised by this writing (i) to consult with an attorney prior to executing this Agreement; (ii) that you have up to twenty-one (21) days to review this Agreement and to decide whether to accept it; (iii) that you have seven (7) days after signing it to cancel and revoke this Agreement; and (iv) that this Agreement will not become effective until the seven-day time period has passed. If you give notice of revocation before the end of the seven (7) day period, this Agreement will become null and void. TWT is not required to provide any portion of the Payment described in the Agreement before the seven-day time period has passed.

              d.       Consideration for the Release of Claims. You acknowledge that the Payment and any other consideration TWT has agreed to give under this Agreement are benefits to which you would not have been entitled if you did not sign this Agreement and that TWT has agreed to provide the consideration only if you sign this Agreement and give up the claims described in it.

     9.       Your Continuing Obligations.

              a.       Your Employee Agreement with Respect to Confidential Information, Invention Assignment and Arbitration (“Confidential Information Agreement”) with TWT dated October 18, 2004 is hereby incorporated by reference and any provision of the Confidential Information Agreement not superceded by a specific provision of this Separation Agreement shall remain in effect and be binding on you. A copy is included with this letter Agreement.

James J. Herrmann
January 31, 2006
Page 5 of  8

              b.       Confidentiality: You acknowledge and agree that while employed at TWT you have been privy to substantial confidential business and technology information relating to TWT and its business as well as current and potential business partners and third parties in both commercial as well as academic organizations, some of which is extremely sensitive and proprietary. You expressly covenant as follows:

             (i)       You agree that you have not and will not disclose to others or use any Trade Secret owned or possessed by TWT or any other Releasee, or that any Trade Secret that was created by you or anyone related to TWT, or was disclosed to you, whether you have such Trade Secret in your memory or embodied in writing or other physical form, for as long as the information remains a Trade Secret. “Trade Secret” means all information which derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means, by other persons who can obtain economic or personal value from its disclosure or use and is subject to TWT’s or any other Releasee’s efforts to maintain its secrecy that are reasonable under the circumstances.

             (ii)       In addition to the foregoing, you agree not disclose or use for (2) years following your termination date any Confidential Information which is possessed by or developed for TWT which relates to TWT’s or its customers’ existing or potential business or technology, and either was created by you or was disclosed to you. Confidential Information is information or technology, product development plans or strategies, market adoption plans and business plans that are generally not known to the public and which information or technology TWT seeks to protect from disclosure to its existing or potential competitors or others, including, without limitation, for example: non-public business plans, strategies, existing or proposed bids, costs, technical and engineering developments, existing or proposed research or development projects, financial or business projections, marketing plans, investments, negotiation strategies, and information received by TWT from others which TWT has an obligation to treat as confidential.

                          You understand your obligations under this Section apply to, and are intended to prevent, the direct or indirect disclosure of Confidential Information to others where such disclosure of Confidential Information would reasonably be considered to be useful to TWT’s competitors or to a third party to become a competitor based in whole or in part on such disclosure of Confidential Information.

             (iii )       You acknowledge that in the event that you violate paragraphs (i) and/or (ii) above, it will be difficult if not impossible to determine the damages caused by such violation(s). You further agree that damages for any such violation(s) will be inadequate and will not give full sufficient relief to TWT, and that a breach of this Section will constitute irreparable harm to TWT. Therefore, you agree that in the event of any violation of any covenant contained in this Section, TWT shall be entitled to injunctive relief against the continued violation thereof in any court (federal or state) located in Dane County, Wisconsin.

James J. Herrmann
January 31, 2006
Page 6 of  8

        Such remedy, however, shall be cumulative and nonexclusive and shall be in addition to any other remedy to which TWT may be entitled.

     10.       Non-Disparagement. You agree that after March 16, 2006, you will cease contact with TWT customers and you will not contact TWT personnel regarding TWT business, unless at the request of TWT. You also agree that you will refrain from making disparaging comments or remarks about TWT or about or to any of the Releasees, except that you may provide truthful information about TWT or the Releasees to the extent required by law. TWT likewise agrees that it will refrain from making disparaging comments or remarks about you, except that it may provide truthful information about you to the extent required by law.

     11.       Non-Disclosure. You agree not to disclose, directly or indirectly, the existence or terms of this Agreement to any person except for your immediate family members, attorney, or financial advisor consulted in connection with review of this Agreement. You assure us that no family member, attorney, or financial advisor will disclose the terms of this Agreement to any other person except as required by law.

     12.       Solicitation of Employees and Third Parties. You acknowledge and agree to continue complying with provision six (6) of your Confidential Information Agreement, dated October 18, 2004, regarding non-solicitation of employees. In addition, you shall not, prior to the expiration of one year following December 31, 2006, solicit, encourage or otherwise aid any employee of TWT to leave TWT for the purpose of becoming associated in any manner whatsoever with any business with which you intend to be or are then associated in any manner whatsoever. You further agree you shall not, prior to the expiration of one (1) year following December 31, 2006, solicit, encourage or otherwise induce any suppliers, collaborators, customers or third parties in the United States, with whom you have established a relationship during your employment with TWT, to discontinue their relationship(s) with TWT.

     13.       Representations and Warranties. You represent and warrant that: (i) up until the time you sign this Agreement, you have not violated your legal obligations relating to TWT or the confidentiality obligations described above, made disparaging comments or remarks about TWT or about any of the Releasees as described above, or discussed or disclosed the existence or terms of this Agreement as described above; (ii) you are not aware of any actual, alleged or suspected accounting issues, violations, or improprieties relating to TWT that could have a material adverse effect on TWT other than as disclosed in writing to TWT as of the date of this Agreement; and (iii) you are not aware of any actual, alleged or suspected (x) violation of any law, rule or regulation (including without limitation securities laws, rules or regulations, the Sarbanes-Oxley Act, or any regulation promulgated thereunder), (y) violation of any applicable securities exchange listing requirement, or (z) violation of any TWT rule, regulation, policy or code (including without limitation the TWT Code of Business Conduct), by TWT or any of its directors, officers, employees or representatives that could have a material adverse effect on TWT. Any exceptions to this representation must be disclosed by you in writing to TWT on or before the final execution of this Agreement with sufficient detail to allow TWT to fully understand such action. In addition, you agree that if you become aware

James J. Herrmann
January 31, 2006
Page 7 of  8

during the Transition Period or the Payment Period of any matter described this Section, you will immediately report such matter to an executive officer of TWT.

     In the event that TWT finds that the any representation or warranty set forth in the previous paragraph is inaccurate or untrue, or if you materially violate the provisions of this Agreement or your Confidential Information Agreement, you agree that TWT will be entitled to immediately stop paying the severance and insurance premium payments and revoke any other benefits received under this Agreement or to which you are otherwise entitled under this Agreement, and TWT will have no further obligation to continue any payments. In addition, should TWT determine that a material violation of this Agreement or your Confidential Information Agreement has occurred, TWT will be entitled to a complete recovery of all severance and insurance previously made during the Payment Period. If TWT suspects a violation based on the representations and warranties set forth in the previous paragraph or if you materially violate the provisions of your Agreement or Confidential Information Agreement, TWT will notify you and the termination of severance and other benefits associated with your transition will occur on the 5th business day after notification. Finally, at any time, TWT may pursue whatever other legal remedies are available to it including, but not limited to, the right to seek temporary and permanent injunctions, which you agree are appropriate additional remedies to prevent irreparable harm to the Company in the event of a breach of this Agreement or your Confidential Information Agreement.

     14.       Acceptance Procedures. TWT wishes to ensure that you voluntarily agree to the terms contained in this document and do so only after you fully understand them. Accordingly, the following procedures will apply:

              a.       You may accept this document’s terms by signing and dating it and returning the signed and dated document so that it is postmarked or faxed to TWT on or before the twenty first (21st) day following your receipt of this document. The signed and dated document must be directed to Katie Zingg, Director of Human Resources, in an envelope marked “Personal and Confidential” at Third Wave Technologies, Inc., 502 South Rosa Road, Madison, WI 53719.

              b.       You will have seven (7) calendar days from the date you sign this Agreement in which to withdraw or revoke your acceptance (the “Revocation Period”). If you choose to revoke your acceptance, you must do so in writing, and the written notice must be received before the end of the first regular business day following the Revocation Period by Katie Zingg, Director of Human Resources, in an envelope marked “Personal and Confidential” at Third Wave Technologies, Inc., 502 South Rosa Road, Madison, WI 53719. In the event you take any steps to revoke your acceptance during the revocation period, this Agreement shall be null and void.

              c.       TWT encourages you to review this document with an attorney prior to signing it.

James J. Herrmann
January 31, 2006
Page 8 of  8

     15.       Miscellaneous. Should you accept this Agreement, its terms will be governed by the following:

              a.       This document constitutes the complete understanding between you and TWT concerning all matters affecting your employment with TWT and the termination of that employment. If you accept this Agreement, it supersedes all prior agreements, understandings and practices concerning such matters, including, but not limited to, your Employment Agreement, any TWT personnel documents, handbooks, or policies and any prior customs or practices of TWT.

              b.       Nothing in the releases contained in this Agreement should be construed as an admission of wrongdoing or liability on the part of either TWT or you. Both of us deny any liability to the other.

              c.       Any action to enforce this agreement must be brought in a court (federal or state) located in Dane County, Wisconsin. This Agreement and its interpretation will be governed and construed in accordance with the laws of Wisconsin and will be binding upon the parties to the Agreement and their respective successors and assigns.

              d.       Each provision of this Agreement is severable and intended to be construed independently. The unenforceability of any provision shall not affect the validity or enforceability of any other provision.

              e.       You represent and warrant that you have read and understand all terms of this Agreement, executed knowingly and voluntarily with full knowledge of its significance and with the intent to be bound by it. You represent and warrant that you have been or have the opportunity to be represented by legal counsel of your choice in connection with this agreement who has explained it and advised that it is a legally binding contract. This Agreement contains the entire Agreement between TWT and you and the terms of the Agreement cannot be modified except in writing signed by both TWT and you.

Very truly yours, THIRD WAVE TECHNOLOGIES
By:	/s/ Kevin T. Conroy
	Kevin T. Conroy
	President & Chief Executive Officer

I agree with and accept the terms contained in this document and agree to be bound by them.

Dated this 31st day of January, 2006.	/s/ James Herrmann
	James Herrmann

EX-10.29

Exhibit 10.29

Third Wave Technologies, Inc. Long Term Incentive Plan No. 3

1.    Plan Objective

       The Third Wave Technologies, Inc. Long Term Incentive Plan (referred to as the “Plan”) is designed to encourage results-oriented actions on the part of members of the executive management team and other key employees of Third Wave Technologies, Inc. (the “Company”). The Plan is intended to align closely financial rewards for the employees with the achievement of specific performance objectives by the Company. The Plan, as amended and restated effective as of January 1, 2006, provides as follows:

2.    Eligibility

       Members of the executive management team of the Company (“Tier 1 Employees”) and other key employees of the Company (“Tier 2 Employees”) are eligible to participate in the Plan. The Administrator (as defined in Section 3 below) shall select the Tier 1 Employees and Tier 2 Employees who may participate in the Plan (a “Participant”).

3.    Administration

       (a)    The Plan shall be administered by the Compensation Committee of the Company’s Board of Directors (the “Administrator”). The Administrator may delegate its authority to administer the Plan to an individual or committee. The term “Administrator” shall mean the Compensation Committee or such individual or committee to which authority has been delegated.

       (b)    The Administrator shall have full power and authority to establish the rules and regulations relating to the Plan, to interpret the Plan and those rules and regulations, to select each Participant for the Plan, to determine the Participant’s target award, performance goals and final award, to make all factual and other determinations in connection with the Plan, and to take all other actions necessary or appropriate for the proper administration of the Plan, including the delegation of such authority or power, where appropriate. The Administrator may adjust the performance goals to take into account corporate transactions that take into account new revenue associated with mergers and/or acquisitions or other corporate transactions in an equitable manner that does not make it more difficult for the Company to achieve the original performance goals.

       (c)    All powers of the Administrator shall be executed in its sole discretion, in the best interest of the Company, not as a fiduciary, and in keeping with the objectives of the Plan and need not be uniform as to similarly situated individuals. The Administrator’s administration of the Plan, including all such rules and regulations, interpretations, selections, determinations, approvals, decisions, delegations, amendments, terminations, and other actions, shall be final and binding upon the Company and all employees of the Company, including each Participant and his or her respective beneficiary(ies).

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4.    Target Awards and Performance Goals

       (a)    The Administrator shall establish for each Participant who completes and returns an enrollment agreement, in a form designated by the Administrator, a target award that shall be payable if and to the extent the Company attains the performance goals set by the Administrator for a specified performance period. The executed enrollment agreement shall constitute a Participant’s consent to be subject to the terms of the Plan and to be bound by the authority of the Administrator as set forth in Section 3.

             (i)    Unless the Administrator determines otherwise, the target award for a Participant who is a Tier 1 Employee shall be an amount equal to four times the highest annual incentive target amount established for the Participant during the performance period under the Company’s annual incentive plan applicable to the Participant.

             (ii)    Unless the Administrator determines otherwise, the target award for a Participant who is a Tier 2 Employee shall be an amount equal to three times the highest annual incentive target amount established for the Participant during the performance period under the Company’s annual incentive plan applicable to the Participant.

       (b)    The Administrator shall establish the performance goals and related calculation matrices for each performance period and shall promptly provide this information to each Participant who is eligible for an award for that performance period. The performance goals are attached as Exhibit A and are hereby fully incorporated into and shall be considered as part of this Plan. Unless the Administrator determines otherwise, the performance goals shall be based upon (i) the Company’s total shareholder return ranking as compared to its peer group, (ii) the Company’s stock price growth, and (iii) the growth in the Company’s Clinical Molecular Diagnostics revenue. The Administrator may adjust the performance goals as it deems appropriate to take into account corporate transactions or other extraordinary events that occur during the performance period.

       (c)    For the purposes of subsection (b), the Administrator shall have the discretion to determine which companies are included in the peer group. The Administrator may adjust the peer group from time to time as it deems appropriate, including by adding, deleting, or replacing companies, to take into account mergers and other changes in the companies comprising the peer group.

       (d)    Unless the Administrator determines otherwise, the performance period shall be the three-year period beginning on January 1, 2006 and ending on December 31, 2008.

5.    Calculation of Incentive Awards

       (a)    At the end of the performance period, the Administrator shall determine for each participant whether and to what extent the performance goals have been met and the percentage of the target award that is earned. The Administrator shall rely upon the audited financial statements of the Company and its subsidiaries to determine whether and to what extent the performance goals are met.

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       (b)    The Administrator shall compute each Participant’s award for the performance period based upon the Company’s achievement of the performance goals and the matrices set forth on Exhibit A. On or around March 15 of the year following the end of the applicable performance period, the Company shall credit each Participant’s award to a book account established for the Participant. All amounts credited to a Participant’s book account shall be administered according to the vesting provisions of Section 6 below.

       (c)    Participants must be employed on the last day of the applicable performance period to be eligible for an incentive award under the Plan, except as described below or except as the Administrator may otherwise determine.

             (i)    The beneficiary(ies) of a Participant who dies during the performance period shall receive a prorated award based upon the Company’s performance at the end of such performance period. The prorated award shall be calculated from the commencement of the performance period, or, if applicable, such later date on which the Participant became eligible to participate for the performance period as established by the Administrator, to the date of the Participant’s death. The Company shall pay the prorated award to the beneficiary(ies) after end of the performance period pursuant to Section 8 below.

             (ii)    Participants who retire on or after their normal retirement age (as defined below) during the performance period shall receive a prorated award based upon the Company’s performance at the end of such performance period. The prorated award shall be calculated from the commencement of the performance period, or, if applicable, such later date on which the Participant became eligible to participate for the performance period as established by the Administrator, to the date of the Participant’s normal retirement. The Company shall pay the prorated award to the Participant after the end of the performance period pursuant to Section 8 below. For purposes of this Plan, “normal retirement age” is age 65, or, if the Participant has at least five years of service, age 55.

             (iii)    Participants who become disabled (as defined below) during the performance period shall receive a prorated award based upon the Company’s performance at the end of such performance period. The prorated award shall be calculated from the commencement of the performance period, or, if applicable, such later date on which the Participant became eligible to participate for the performance period as established by the Administrator, to the date the Participant is disabled. The Company shall pay the prorated award to the Participant after the end of the performance period pursuant to Section 8 below. For purposes of this Plan, “disabled” means eligible for long-term disability benefits as determined under a Company-sponsored disability plan.

             (iv)    Upon a Change in Control (as defined below) of the Company during the performance period, (A) all performance goals pertaining to awards during such performance period shall be deemed to have been met 100 percent as of the effective date of the Change in Control, (B) Tier 1 Participants shall be deemed to have immediately earned 100% of the maximum award for such performance period (such that the amount payable under the Plan pursuant to this Section 5(c)(iv) to a Tier 1 Participant is 200% of his or her target award or eight times the highest annual incentive target amount established for the Participant during the performance period under the Company’s annual incentive plan applicable to the Participant),

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(C) Tier 2 Participants shall be deemed to have immediately earned 50 percent of the maximum award for such performance period (such that the amount payable under the Plan pursuant to this Section 5(c)(iv) to a Tier 2 Participant is 100% of his or her target award or three times the highest annual incentive target amount established for the Participant during the performance period under the Company’s annual incentive plan applicable to the Participant), and (D) a Participant’s award under this Section 5(c)(iv) shall vest and be paid as described in Section 6(d); provided, however, that if the Change of Control is an acquisition or merger and such transaction occurs for less than $200 million in total value, the Company shall not have been deemed to have met 100 percent of the performance goals, rather the performance goals shall be measured by the Matrix in Exhibit A as reconfigured to take into account a shortened period within which to achieve such targets by reducing the TWT Stock Price Column and 2008 Clinical Revenue Targets on a straight-line method based on the percentage of the performance period that has occurred. For example, if ¹/2 of the performance period has expired, then the Stock Price and Clinical Revenue targets shall be revised based on ¹/2 of the expected growth. The Company shall credit a Participant’s award under this Section 5(c)(iv) to a book account established for the Participant as soon as practicable after the Change of Control.

For purposes of the Plan, the term “Change in Control” shall mean, and shall be deemed to have occurred if, (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) or group acting in concert, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company acting in such capacity or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more than 50 percent of the total voting power represented by the Company’s then outstanding voting securities; (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company’s stockholders was approved by a vote of at least two thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; (iii) consummation of a merger or consolidation of the Company with any other corporation other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 80 percent of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; (iv) the stockholders of the Company approve a plan of complete liquidation of the Company; or (v) the Company consummates a sale or disposition of (in one transaction or a series of related transactions) all or substantially all of its assets.

       (d)    In the event this Plan is terminated or suspended before the last day of the performance period, Participants who are employed by the Company on the day of such termination shall receive an award based upon the Company’s performance through the end of such performance period as if no such termination had occurred. The award shall be calculated from the commencement of the performance period, or, if applicable, such later date on which the Participant became eligible to participate for the performance period as established by the

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Administrator, to the end of the performance period. The Company shall credit the award to a book account established for the Participant as soon as practicable after the end of the performance period. Awards made pursuant to this subsection shall vest and be paid in accordance with the terms of the Plan as though the Plan had not been terminated or suspended.

       (e)    The Administrator may establish appropriate terms and conditions to accommodate newly hired and transferred employees. For example, upon a Participant’s being designated to participate in the Plan, the Administrator may establish, in its discretion, the effective commencement date for such Participant for the performance period that has commenced but not then ended, and if such effective commencement date is established as a date later than the commencement of the performance period, any award for the performance period may be prorated based on such later effective commencement date. Absent any action to the contrary, new employees that become Participants shall be entitled to a commencement date effective as of the beginning of the performance period.

6.    Vesting of Incentive Awards

       (a)    If a Participant earns an award as described in Section 5 for the performance period, except as provided below in this Section 6, 25 percent of the award shall vest on the last day of the performance period, 50 percent of the award shall vest on the last day of the year following the end of such performance period, and the remaining 25 percent of the award shall vest on the last day of the second year following the end of such performance period, provided the Participant continues to be employed by the Company or an affiliate through such applicable vesting date.

       (b)    If a Participant retires at or after his or her normal retirement age, becomes disabled, or dies while employed by the Company, the Participant’s award shall be fully vested at the end of the performance period or at the time such event occurs, whichever is later.

       (c)    Unless otherwise specified elsewhere in this Plan or any valid employment or other agreement between the Participant and the Company, if a Participant’s employment with the Company and its affiliates terminates for any reason, any unvested award shall be forfeited to the Company as of his or her termination date.

       (d)    In the event of a Change in Control during the performance period, Participants who are employed by the Company on the effective date of the Change in Control shall be eligible to receive, and shall be deemed vested in, the award payout determined under Section 5(c)(iv) for the performance period, as follows: (A) 50 percent of the award payout shall be deemed vested and shall be paid upon the effective date of the Change in Control, and (B) 50 percent of the award payout shall be deemed vested and shall be paid on the earlier of (x) six months after the effective date of the Change in Control, or (y) the date on which such portion of the award would have vested in the absence of a Change in Control pursuant to Section 6(a) or (b) above.

Notwithstanding (B) above, distribution to a Participant who is (I) a Key Employee and (II) incurs a separation from service (within the meaning of section 409A of the Internal Revenue Code of 1986, as amended (the “Code”)) on account of termination by the Company without Cause or resignation by the Participant for Good Reason prior to the applicable date under (x) or

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(y) above, shall be postponed to a date that is not less than 6 months following the Participant’s separation date. A Participant who is not a Key Employee who incurs a separation from service (within the meaning of section 409A of the Code) on account of termination by the Company without Cause or resignation by the Participant for Good Reason prior to the applicable date under (x) or (y) above, shall be deemed vested and paid on the earlier of the dates described in (x) and (y) without regard to the Participant’s separation from service. If any Participant incurs a separation from service within the meaning of section 409A of the Code) for any reason other than termination by the Company without Cause or resignation by the Participant for Good Reason prior to the applicable date under (x) or (y) above, any unvested award shall be forfeited to the Company as of the Participant’s separation date.

For purposes of the Plan, the term “Cause” shall mean any of the following grounds for termination of the Participant’s employment:

             (i)     any willful refusal to perform essential job duties which continues for more than ten (10) days after notice from the Company;

             (ii)    any intentional act of fraud or embezzlement by the Employee in connection with the Employee’s duties or committed in the course of Employee’s employment;

             (iii)    any gross negligence or willful misconduct of the Employee with regard to the Company or any of its subsidiaries resulting in a material economic loss to the Company;

             (iv)     the Participant is convicted of a felony;

             (v)      the Participant is convicted of a misdemeanor the circumstances of which involve fraud, dishonesty or moral turpitude and which is substantially related to the circumstances of Participant’s job with the Company;

             (vii)    any willful and material violation by the Employee of any statutory or common law duty of loyalty to the Company or any of its subsidiaries resulting in a material economic loss; or

             (vii)    any material breach by the Employee of his or her employment or non-compete agreements, if any exist.

For purposes of the Plan, the term “Good Reason” shall mean, and shall be deemed to have the meaning set forth in any valid employment agreement being Participant and Company.

For purposes of the Plan, the term “Key Employee” shall mean (i) officers of the Company having annual compensation greater than $130,000 (adjusted for inflation and limited to 50 employees), (ii) five percent owners, and (iii) one percent owners having annual compensation greater than $150,000, all as determined by the Committee in a manner consistent with the regulations issues under section 409A of the Code.

       (e)    Notwithstanding (a) above, if a Participant earns an award as described in Section 5 for the performance period, and thereafter there is a Change in Control, Participants who are employed by the Company on the effective date of the Change in Control shall be eligible to

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receive, and shall be deemed vested in, the unvested portion of the award as of the effective date of the Change in Control as follows: (A) 50 percent of such unvested portion of the award shall be deemed immediately vested and shall be paid on the effective date of the Change in Control, and (B) 50 percent of the award payout shall be deemed vested and shall be paid on the earlier of (x) six months after the effective date of the Change in Control, or (y) the date on which such portion of the award would have vested in the absence of a Change in Control pursuant to Section 6(a) or (b) above.

     Notwithstanding (B) above, distribution to a Participant who is (I) a Key Employee and (II) incurs a separation from service (within the meaning of section 409A of the Code) on account of termination by the Company without Cause or resignation by the Participant for Good Reason prior to the applicable date under (x) or (y) above, shall be postponed to a date that is not less than 6 months following the Participant’s separation date. A Participant who is not a Key Employee who incurs a separation from service (within the meaning of section 409A of the Code) on account of termination by the Company without Cause or resignation by the Participant for Good Reason prior to the applicable date under (x) or (y) above, shall be deemed vested and paid on the earlier of the dates described in (x) and (y) without regard to the Participant’s separation from service. If any Participant incurs a separation from service within the meaning of section 409A of the Code) for any reason other than termination by the Company without Cause or resignation by the Participant for Good Reason prior to the applicable date under (x) or (y) above, any unvested award shall be forfeited to the Company as of the Participant’s separation date.

       (f)    A transfer of employment between the Company and an affiliate shall not be considered a termination of employment for purposes of the Plan.

       (g)    The Administrator reserves the right to accelerate vesting whenever the Administrator deems such action appropriate.

       (h)    Prior to a Change in Control, the Company shall deposit in a separate bank account sufficient funds to cover both the vested and unvested cumulative award amounts so that funding of vested awards can take place upon the Change in Control closing.

       (i)    In the event of a Change in Control whereby the Company’s Compensation Committee of the Board of Directors no longer exists, the Administrator shall be deemed to be the individual who at the time of the Change of Control are the Company’s General Counsel and principal financial officer.

7.    Changes to Performance Goals and Target Awards

     At any time prior to the final determination of awards pursuant to Section 5, the Administrator may adjust the performance goals and target awards to reflect a change in corporate capitalization (such as a stock split or stock dividend), or a corporate transaction (such as a merger, consolidation, separation, reorganization, or partial or complete liquidation), or to reflect equitably the occurrence of any extraordinary event, any change in applicable accounting rules or principles, any change in the Company’s method of accounting, any change in applicable law, any change due to any merger, consolidation, acquisition, reorganization, stock split, stock

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dividend, combination of shares, or other changes in the Company’s corporate structure or shares, or any other change of a similar nature.

8.    Payment of Awards

       (a)    Unless determined otherwise by the Administrator, a Participant may elect, in the manner specified by the Administrator, to receive payment of his or her award in (i) cash, (ii) shares of the Company’s common stock valued as of the day that is five business days before the date of distribution, or (iii) a combination. Except as provided in subsection (b), payment shall be made as soon as administratively possible following the vesting of an award. Participants who elect to take a distribution of their award in the form of the Company’s stock, rather than in cash, shall receive a 10 percent increase in the number of shares of the Company’s stock otherwise to be distributed. The distribution of the Company’s stock shall be made in accordance with the Third Wave Technologies, Inc. 2000 Stock Plan, pursuant to Section 11 of such plan, or the comparable provisions of any successor stock plan adopted by the Company.

       (b)    Unless the Administrator determines otherwise, a Participant who is eligible to participate in the Company’s deferred compensation program, if one exists, may make an irrevocable written election to defer all or any part of the payment of such award pursuant to a separate deferred compensation arrangement sponsored by the Company.

       (c)    Subject to applicable state law and the notification to, or consent of, a Participant’s spouse, as required, each Participant may designate a beneficiary or beneficiaries (which beneficiary may be an entity other than a natural person) to receive any payments which are to be made following the Participant’s death. Such designation may be changed or canceled at any time without the consent of any such beneficiary but again subject to applicable state law and the notification to, or consent of, a Participant’s spouse, as required. Any such designation, change, or cancellation must be made on a form approved by the Administrator and shall not be effective until received by the Administrator or its designee. If no beneficiary has been named, or the designated beneficiary or beneficiaries shall have predeceased the Participant, the beneficiary shall be the Participant’s surviving spouse or, if none, the Participant’s estate. If a Participant designates more than one beneficiary, the interests of such beneficiaries shall be paid in equal shares, unless the Participant has specifically designated otherwise.

9.    Amendments and Termination

     The Company may at any time amend, suspend, or terminate the Plan or any portion thereof; provided that no amendment that would adversely affect the rights of a Participant may take effect without such Participant’s prior written consent. Notwithstanding the foregoing, the Company shall have the right to modify the terms of the Plan as may be necessary or desirable to comply with applicable laws.

10.    Miscellaneous Provisions

       (a)    Neither the establishment of this Plan, nor any action taken hereunder, shall be construed as giving any Participant any right to be retained in the employ of the Company or any of its subsidiaries. Nothing in the Plan, and no action taken pursuant to the Plan, shall affect the

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right of the Company or a subsidiary to terminate a Participant’s employment at any time and for any or no reason. The Company is under no obligation to continue the Plan. Notwithstanding the foregoing, the Company acknowledges that certain Participants may have separate employment or other agreements with the Company and those agreements may include terms and conditions affecting the terms and conditions of awards that may be made under this Plan.

       (b)    A Participant’s right and interest under the Plan may not be assigned or transferred, except as provided in Section 5(c)(i) of the Plan upon death, and any attempted assignment or transfer shall be null and void and shall extinguish, in the Company’s sole discretion, the Company’s obligation under the Plan to pay award(s) with respect to the Participant. The Company’s obligations under the Plan may be assigned to any corporation which acquires all or substantially all of the Company’s assets or any corporation into which the Company may be merged or consolidated.

       (c)    The Plan shall be unfunded. The Company shall not be required to establish any special or separate fund, or to make any other segregation of assets, to assure payment of awards. The Company’s obligations hereunder shall constitute a general, unsecured obligation of the Company, and awards shall be paid solely from the Company’s general assets. No Participant shall have any right to any specific assets of the Company.

       (d)    The Company shall have the right to deduct from awards any and all federal, state, and local taxes or other amounts required by law to be withheld.

       (e)    The Company’s obligation to pay compensation as herein provided is subject to any applicable orders, rules, or regulations of any government agency or office having authority to regulate the payment of wages, salaries, and other forms of compensation.

       (f)    The validity, construction, interpretation, and effect of the Plan shall exclusively be governed by and determined in accordance with the laws of the State of Wisconsin.

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Exhibit A

Third Wave Long Term Incentive Matrix — 3 (1/1/06 — 12/31/08)

Payout as a Percent of Target (Target = 4x target bonus for Tier 1; 3x target bonus for Tier 2)

TWT Stock Price		>=$9	25	%		35	%		40	%		45	%		50	%		62.5	%		75	%		87.5	%		100	%
	$	7-8.99	12.5	%		20	%		25	%		32.5	%		40	%		50	%		62.5	%		75	%		87.5	%
	$	5-6.99	0	%		5	%		10	%		17.5	%		25	%		32.5	%		40	%		50	%		62.5	%
	$	3-4.99	0	%		0	%		0	%		5	%		10	%		17.5	%		25	%		35	%		45	%
2008 Clinical Revenue ($M)			<$34		$	36.5		$	39		$	41.5		$	44		$	46.5		$	49		$	51.5		$	54
CAGR			<12.5	%		15.2	%		17.7	%		20.2	%		22.6	%		24.8	%		27.0	%		29.2	%		31.2	%

3 Year Compounded Annual Growth Rate (CAGR)
For Clinical Molecular Diagnostics Revenue

Third Wave Long Term Incentive Matrix — 3 (1/1/06 — 12/31/08)

Payout as a Percent of Target (Target = 4x target bonus for Tier 1; 3x target bonus for Tier 2)

3 Year Quartile Ranking Total Shareholder Return vs. Peer Group	1st Quartile	25	%		35	%		40	%		45	%		50	%		62.5	%		75	%		87.5	%		100	%
	2nd Quartile	12.5	%		20	%		25	%		32.5	%		40	%		50	%		62.5	%		75	%		87.5	%
	3rd Quartile	0	%		5	%		10	%		17.5	%		25	%		32.5	%		40	%		50	%		62.5	%
	4th Quartile	0	%		0	%		0	%		5	%		10	%		17.5	%		25	%		35	%		45	%
2008 Clinical Revenue ($M)		<$34		$	36.5		$	39		$	41.5		$	44		$	46.5		$	49		$	51.5		$	54
CAGR		<12.5	%		15.2	%		17.7	%		20.2	%		22.6	%		24.8	%		27.0	%		29.2	%		31.2	%

3 Year Compounded Annual Growth Rate (CAGR)
For Clinical Molecular Diagnostics Revenue

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• CAGR for three-year period calculated on 2005 clinical revenue of $23.9M.

• Peer group is targeted at 8 companies which would include GenProbe, Digene, Celera, Ventana, BioRad, Abbott, Roche, Bayer

Total payout equals the combined total of the two matrix charts above. Maximum payout after properly combining the two matrix charts equals 200% of target award.

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EX-21

Exhibit 21

List of Subsidiaries:

Third Wave Agbio, Inc.

Third Wave-Japan KK

EX-23

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our reports dated February 20, 2006, accompanying the consolidated financial statements and schedule and management’s assessment of the effectiveness of internal control over financial reporting included in the Annual Report of Third Wave Technologies, Inc. and subsidiaries on Form 10-K for the year ended December 31, 2005. We hereby consent to the incorporation by reference of said reports in the Registration Statements of Third Wave Technologies, Inc. on Forms S-8 (File Nos. 333-57664, effective March 27, 2001 and 333-120169, effective November 2, 2004).

GRANT THORNTON LLP
Madison, Wisconsin
March 10, 2006

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 333-57664 and 333-120169) of Third Wave Technologies, Inc. pertaining to the 1995 Incentive Stock Option Plan, 1997 Incentive Stock Option Plan, 1997 Nonqualified Stock Option Plan, 1998 Incentive Stock Option Plan, 1999 Incentive Stock Option Plan, 1999 Nonqualified Stock Option Plan, 2000 Stock Plan and 2000 Employee Stock Purchase Plan and in the related prospectuses of our report dated March 4, 2005, with respect to the consolidated financial statements and schedule of Third Wave Technologies, Inc., as of December 31, 2004 and for the years ended December 31, 2004 and 2003, included in this Annual Report (Form 10-K) for the year ended December 31, 2005.
 
 

Milwaukee, Wisconsin
March 10, 2006 ERNST & YOUNG LLP

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Kevin T. Conroy, President and Chief Executive Officer of Third Wave Technologies, Inc. (the “registrant”), certify that:

1. I have reviewed this Annual Report on Form 10-K of the registrant;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting [as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and,

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/   Kevin T. Conroy

Kevin T. Conroy

Date: March 9, 2006

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, James J. Herrmann, principal financial officer of Third Wave Technologies, Inc. (the “registrant”), certify that:

1. I have reviewed this Annual Report on Form 10-K of the registrant;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting [as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and,

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/  James J. Herrmann

James J. Herrmann

Date: March 10, 2006

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
OF CHAPTER 63 OF TITLE 18
OF THE UNITED STATES CODE

I, Kevin T. Conroy, President and Chief Executive Officer of Third Wave Technologies, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that on the date of this Certification:

1. the Annual Report on Form 10-K of the Company for the annual period ended December 31, 2005, (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 results of operations of the Company.

/s/   Kevin T. Conroy

Kevin T. Conroy

Date: March 9, 2006

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
OF CHAPTER 63 OF TITLE 18
OF THE UNITED STATES CODE

I, James J. Herrmann principal financial officer of Third Wave Technologies, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that on the date of this Certification:

1. the Annual Report on Form 10-K of the Company for the annual period ended December 31, 2005, (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 results of operations of the Company.

/s/  James J. Herrmann

James J. Herrmann

Date: March 10, 2006