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HIV Barrel License, Marketing and Distribution Agreement

Execution Version
 

 

 

 

 

 

 

 

 
HIV Barrel License, Marketing and Distribution Agreement
 
Dated As Of
 
September 29, 2006
 
Among
 
Inverness Medical Innovations, Inc.
 
And
 
Chembio Diagnostic Systems, Inc.
 
And
 
StatSure Diagnostic Systems, Inc.
 

 

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Table of Contents

1.  Definitions. 
  2
1.1.  Certain Definitions                 
  2
1.2.  Additional Definitions                    
  7
2.  HIV Barrel Product: Exclusive Licenses and Manufacturing and Distribution
Arrangements.  
  8
2.1.  Exclusive Right to Manufacture                
  8
2.2.  Exclusive Right to Purchase and Exploit     
  8
2.3.  Exclusive License to SDS Patents     
10
2.4.  Exclusivity an Essential Term     
10
2.5.  Patent Marking       
10
2.6.  Treatment of New HIV Barrel Product    
10
2.7.  Inverness Licenses  
11
2.8.  Termination of Licenses Upon Challenge of Validity  
11
3.  Non-Competition; Termination of Exclusivity.    
11
4.  Limits to Scope of Inverness Licenses     
13
5.  Royalties and Payments.       
13
5.1.  Exclusive Payment Arrangements     
13
5.2.  Pricing of HIV Products       
13
5.3.  Inverness Sale of HIV Barrel Products - Division of Net Sales  
14
5.4.  Payment of Cost of HIV Products                      
14
5.5.  Payment by Inverness for Samples         
14
5.6.  Royalties Payable by Chembio on Inverness Lateral Flow Patents     
15
5.7.  Reporting and Calculation of Payments.     
15
6.  Regulatory and License Matters.      
17
6.1.  Facility Registration/Inspections      
17
6.2.  Regulatory Filings        
18
6.3.  Authorization for Sales in European Union    
18
6.4.  Bio-Rad Laboratories, Inc       
18
7.  Manufacture and Sale.       
19
7.1 Chembio Efforts        
19
7.2 Forecasts         
19
7.3 Purchase Orders        
19
7.4 Shipment Terms        
19
7.5 Acceptance         
20
7.6 Sales Effort         
20
7.7 Inverness Responsibilities; Rights      
20
7.8 Marketing Plans and Budgets      
20
8.  Trademarks         
20
8.1.  Trademark License        
20
8.2.  Compliance with Law; Registration     
21
8.3.  Termination         
21
8.4.  Labeling         
21
9.  Prosecution and Enforcement of Licensed Intellectual Property. 
21
9.1.  Prosecution         
21
9.2.  Enforcement of Licensed Patents      
21
10.  Confidentiality.        
22
10.1.  Limited Disclosure and Use      
22
10.2.  Exceptions         
22
10.3.  Use of Name; Disclosure of Terms of the Agreement   
22
10.4.  Effect of Termination       
23
10.5.  Survival         
23
11.  Representations; Warranties.      
23
11.1.  Corporate Power        
23
11.2.  No Default or Violation       
23
11.3.  Licensed Intellectual Property      
23
11.4.  Regulatory Matters        
23
11.5.  Product Quality        
24
11.6.  Exclusion of Other Representations and Warranties   
24
12.  Indemnification        
24
12.1.  By Manufacturers        
24
12.2.  By Sellers         
25
12.3.  Notice of Claims        
25
12.4.  Disputes         
26
13.  Term and Termination.       
26
13.1.  Term of Agreement        
26
13.2.  Material Breach.        
26
13.3.  Section 365(n); Agreement to Deliver Embodiments   
27
13.4.  Effect of Termination for Breach by Inverness    
28
13.5.  Effect of Termination for Breach by Chembio    
28
13.6.  Sole Remedy        
28
13.7.  Survival         
28
14.  Limitation of Liability.       
29
14.1.  Exclusion of Liability for Certain Damages    
29
14.2.  Limitation on Liability for Direct Damages    
29
15.  General.         
29
15.1.  Waivers and Amendments.      
29
15.2.  Entire Agreement        
30
15.3.  Severability         
30
15.4.  Relationship of the Parties       
30
15.5.  No Election of Remedies       
30
15.6.  Notices         
30
15.7.  Governing Law        
31
15.8.  Dispute Resolution        
31
15.9.  Waiver of Jury Trial        
31
15.10. Counterparts         
31
15.11. Assignment         
32
15.12. Force Majeure        
32
15.13. Further Assurances        
32

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HIV Barrel License, Marketing and Distribution Agreement
 
PREAMBLE
 
This HIV Barrel License, Manufacturing and Distribution Agreement (the
“Agreement”) is made as of September 29, 2006 (“Effective Date”), between and
among Chembio Diagnostic Systems, Inc., a Delaware corporation having its
principal place of business at 3661 Horseblock Road, Medford, New York 11763,
(“Chembio”), StatSure Diagnostic Systems, Inc., a Delaware corporation having
its principal place of business at One Clarks Hill, Framingham, MA 01702
(“SDS”), and Inverness Medical Innovations, Inc., a Delaware corporation having
its principal place of business at 51 Sawyer Road, Waltham, MA 02453
(“Inverness”).
 
RECITALS
 
Certain capitalized terms used in these Recitals but not defined in the Preamble
or upon first use are defined in Section 1.1.
 
Inverness, among other activities, is in the business of developing, marketing
and selling products used to diagnose various diseases, including HIV, and owns
or has the right to grant licenses to a number of patents pertaining to HIV
diagnosis, including the Inverness Lateral Flow Patents. Inverness asserts that
the HIV Barrel Product is within the scope of the claims of the Inverness
Lateral Flow Patents.
 
Chembio, among other things, is in the business of developing, marketing and
selling products used to diagnose various diseases, including HIV, and has
designed, developed or is in the process of developing the HIV Products (as
herein defined) and has received approval of its pre-market application to the
FDA for the HIV Barrel Product for manufacture by Chembio at its facility in
Medford, New York and for Chembio to market to clinical laboratories and
hospitals in the United States.
 
SDS, among other activities, is in the business of developing, manufacturing and
marketing medical diagnostic products and owns the SDS Patents.
 
During the Term, Inverness wishes to be the exclusive worldwide marketer and
distributor of the HIV Barrel Product and license the Inverness Lateral Flow
Patents to Chembio for the purpose of manufacturing the HIV Barrel Product for
sale by Inverness, and Chembio wishes to obtain such licenses to the extent such
licenses are necessary.
 
During the Term, Chembio also wishes to grant Inverness an exclusive worldwide
license to market and sell the HIV Products, to the extent such license is
required and, except as provided herein, to covenant not to manufacture the HIV
Products for or sell the HIV Products to any Person other than Inverness in the
applicable territory and Inverness wishes to obtain such license subject to such
covenant.
 
During the Term, SDS wishes to license the SDS Patents to Inverness on an
exclusive basis for the sole purpose of allowing it to market and sell, to the
extent such license is required, the HIV Barrel Product manufactured by Chembio
exclusively for sale to Inverness and, except as otherwise provided herein, to
covenant not to manufacture or sell products that compete with the HIV Barrel
Product for diagnosis or detection of HIV infection for or to any Person and
Inverness wishes to obtain such license subject to such covenant.
 
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The Parties also intend to enter into such other ancillary agreements, licenses
and covenants as may be appropriate to permit the parties to fulfill the
business objectives of this Agreement, including, but not limited to, a Joint
Exploitation Agreement between SDS and Chembio pursuant to which SDS will grant
a license to Chembio to manufacture HIV Barrel Products.
 
NOW, THEREFORE, in consideration of the premises and the mutual promises,
covenants and conditions hereinafter set forth, the receipt and adequacy of
which are hereby acknowledged, Chembio, SDS and Inverness hereby agree as
follows:
 
1. Definitions.
 
1.1. Certain Definitions
 
. For purposes of this Agreement, in addition to the terms that are defined on
first use herein, the following terms shall have the following meanings:
 
(a) The “Act” shall mean the Federal Food, Drug and Cosmetic Act, as amended,
and all relevant federal regulations pertaining thereto.
 
(b) “Affiliate” shall mean any Person that controls, is controlled by, or is
under common control with a Party hereto. For purposes of this definition,
“control” shall mean (i) in the case of corporate entities, direct or indirect
ownership of a majority of the stock or shares having the right to vote for the
election of directors, and (ii) in the case of non-corporate entities, direct or
indirect ownership of a majority of the equity interest with the power to direct
the management and policies of such non-corporate entities.
 
(c) “Audit” shall mean examination of each and every document relating to the
licenses and rights granted herein, including but not limited to books, records,
agreements, communications, shipping records, purchase orders, invoices, credit
memos and record of payments received or made, such audit to be conducted by a
nationally recognized public accounting firm.
 
(d) “Barrel Field” means diagnostic testing for the presence of HIV antibodies
utilizing an integrated in-vitro diagnostic testing device that (i) is a single
use disposable device (ii) collects a physiologic sample from a patient directly
into the device and delivers that sample into a system contained in the device,
where the reaction reagent medium (for example, a reagent strip) is enclosed in
a barrel or other container with a transparent portion which allows the results
of the reaction to be visible, designed to protect the user from contact with
its contents, (iii) produces a visually readable result in less than 20 minutes,
and (iv) is primarily designed to be used in a Point of Care environment or for
self-testing by consumers.
 
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(e) “Challenge” means, with respect to Patent Rights, to challenge the validity
or enforceability of any Patent Rights, including without limitation by (i)
filing a declaratory judgment action in which Patent Rights are alleged to be
invalid or unenforceable; (ii) citing prior art pursuant to 35 U.S.C. Sec. 301,
making a request for re-examination of Patent Rights pursuant to 35 U.S.C. Sec.
302 and/or 311, or provoking or becoming party to an interference with an
application for Patent Rights pursuant to 35 U.S.C. Sec. 135; or (iii) filing or
commencing any opposition, cancellation, nullity or similar proceedings against
Patent Rights in any country.
 
(f) “Chembio IP” shall mean all proprietary rights and Intellectual Property
Rights, including but not limited to Patent Rights, owned or Controlled by
Chembio, which are necessary or useful for, or would be infringed by, the use,
sale, distribution, import or export of the HIV Products, whether now in
existence or in the future, including but not limited to those as listed on
Schedule A.
 
(g) “Chembio Listed Patents” shall mean the patents and patent applications
listed on Schedule A.
 
(h) “Confidential Information” shall mean all Technology and ideas and
information of any kind, whether in written, oral, graphical, machine-readable
or other form, whether or not marked or identified as confidential or
proprietary, which are transferred, disclosed or made available by any Party
hereto to any other.
 
(i) “Control” or “Controlled by” shall mean, in the context of Patent Rights or
other Intellectual Property Rights, possession of the ability on the part of a
Party to grant access to or a license or sublicense as provided for herein
without violating the terms of any agreement or other arrangement with any Third
Party (other than an Affiliate) existing at the time such Party would be
required hereunder to grant another Party such access or license or sublicense.
 
(j) “Costs” shall mean Chembio’s costs, calculated in accordance with GAAP and
attributed on a per-unit-of-HIV Product basis, of manufacturing and shipping the
HIV Products provided to Inverness hereunder, obtaining and maintaining
regulatory approvals for the HIV Products to the extent set forth in Section
6.2, and obtaining and maintaining licenses from any Third Parties to
manufacture, market, distribute or sell the HIV Products and the amortization
over the period during which HIV Products are sold to Inverness of the cost in
procuring such licenses. The term “Costs” shall also include costs associated
with (1) compliance, (2) complaint handling and (3) quality control. Such costs
shall be restricted to costs incurred by Chembio after the Effective Date,
except that license fees paid for those licenses listed in Schedule C obtained
prior to the Effective Date will be amortized as set forth in Schedule C over
the period during which HIV Products are sold to Inverness. 
 
(k) “Developing Countries” shall mean those countries listed on Schedule O.
 
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(l) “Distributor” shall mean any Third Party, other than an Affiliate of
Inverness, to which Inverness grants a limited sublicense under the rights
granted Inverness under Section 2.2 and 2.3 for the purpose of reselling or
distributing HIV Products.
 
(m) “Dual Path Platform” shall mean Chembio’s technology as described in
Schedule D.
 
(n) “Exploit” or “Exploitation” shall mean to sell, offer for sale, import,
export, transport, register, distribute, promote and market, together with other
activities typically associated with maximizing the market penetration, profit
margins and commercialization of a diagnostic medical product that is marketed
to hospitals and clinical laboratories for professional use and to doctors’
offices, insurance companies, military facilities, and other Point of Care
clinics, as well as to the public for self testing.
 
(o) “FDA” means the U.S. Food and Drug Administration.
 
(p) “First Commercial Sale” shall mean, with respect to a product, the first
sale to any non-Affiliate.
 
(q) “GAAP” means United States Generally Accepted Accounting Principles, as
applicable to the Party in question.
 
(r) “GMP” means current Good Manufacturing Practices as promulgated by the FDA.
 
(s) “HIV Barrel Product” means the product for HIV testing known as SURE
CHECK(R) HIV 1/2 as described in Chembio’s PMA on file with the FDA and further
described in the SURE CHECK(R) HIV 1/2 package insert, Catalog #HIV202, attached
hereto as Schedule E, together with any improvements thereto.
 
(t) “HIV Cassette Product” means the Chembio product currently known as HIV 1/2
STAT PAK(TM) as described in Chembio’s PMA on file with the FDA and further
described in the HIV 1/2 STAT PAK(TM) package insert, Catalog #HIV 102, which is
the subject of a Related Document.
 
(u) “HIV Products” means only any or all of the HIV Barrel Product and New HIV
Barrel Product(s).
 
(v) “Intellectual Property Rights” shall mean (i)  Patent Rights; (ii) rights
associated with works of authorship including copyrights, copyright applications
and copyright registrations; and (iii) rights relating to the protection of
trade secrets, know-how and Confidential Information, but shall not include any
rights to trade marks, trade names, or other distinctive brand names or logos.
 
(w) “Inverness Lateral Flow Patents” shall mean any Patent Rights in the patents
and patent applications identified on Schedule F.
 
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(x) “Inverness Trademarks” shall mean the trademarks listed on Schedule G.
 
(y) Net Sales.
 
(i) “Net Sales” shall mean, with respect to any HIV Product, the gross amount
received by the seller or its Affiliates or Sublicensees on bona fide sales of
such HIV Product to Third Parties, less the following items (to the extent the
gross amount received by them otherwise reflects such items): (i) credits and
allowances for price adjustment, rejection, recall or return of the HIV Product;
(ii) amounts for transportation, insurance, handling or shipping charges;
(iii) taxes, duties and other governmental charges levied on or measured by the
sale of the HIV Product, but not franchise or income taxes of any kind
whatsoever; (iv) quantity and other trade discounts, credits or allowances
actually allowed and taken; (v) charge back payments and/or rebates for the HIV
Product provided to managed health care organizations, international
organizations, or federal, state, local or other governments, including, in the
United States, Medicare and Medicaid; or (vi) license fees, royalties or similar
amounts paid to Third Parties to allow the seller or its Affiliates or
Sublicensees to Exploit the relevant Licensed Product without infringement of
Third Party (other than an Affiliate of the seller) Intellectual Property
Rights. Net Sales shall not include any consideration received for
demonstrations, test marketing, clinical trial purposes or compassionate or
similar use. All of the amounts specified in the definition of Net Sales shall
be determined from the books and records of seller of the HIV Product, its
Affiliates and Sublicensees, maintained in accordance with GAAP, consistently
applied.
 
(ii) Bundling. In the event that any particular HIV Product is sold as part of a
bundle or kit with products other than the HIV Product, the Net Sales allocated
to such HIV Product shall be determined by multiplying the net selling price
(that is, the gross selling price less such applicable deductions as are
permitted in the calculation of Net Sales) of the bundle or kit by the fraction
A ÷ (A + B) where A is the average selling price during the period in question
in the country in question in quantities similar to the sale in question for the
HIV Product sold separately and B is the average selling price during the period
in question in the country in question in quantities similar to the sale in
question for the remaining products in the bundle or kit, when such products are
sold separately from the HIV Product (in each case as the average selling price
is documented by Inverness or its Affiliates or Sublicensees’ records). In the
event that any products contained in the bundle or kit are not sold separately,
the Net Sales from sales of such bundle or kit allocated to HIV Products shall
be determined in a fair and equitable manner by mutual agreement of the parties.
 
(iii) Sales to Distributors. It is understood and agreed that all sales of HIV
Product by Inverness, its Affiliates and Sub-licensees to any Distributor shall
be treated as Net Sales hereunder, and that subsequent sale of HIV Product by
any such Distributor shall not be treated as Net Sales hereunder.
 
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(z) “New HIV Barrel Product” means the patent pending HIV Barrel Product
designed and developed by Chembio which contains absorbent material in the
sample collection area and which is further described in Schedule H or any other
new product in the Barrel Field for the diagnosis or detection of HIV
antibodies.
 
(aa) “New Chembio HIV Product” shall mean any antibody detection assays designed
or developed by Chembio that tests for HIV I or HIV II antibodies, including
without limitation any HIV test incorporating the Dual Path Platform, but
excluding any New HIV Barrel Product.
 
(bb) “Party” or “Parties” shall mean each of Inverness, SDS and Chembio (but not
their Affiliates).
 
(cc) “Patent Costs” shall mean the costs and expenses paid to outside legal
counsel and other Third Parties, allocated in-house costs of legal counsel, and
filing and maintenance expenses, incurred in connection with preparing, filing,
prosecuting, obtaining and maintaining Patent Rights, including costs and
expenses of patent interference, re-examination, reissue, opposition or similar
proceedings.
 
(dd) “Patent Prosecution Action” shall mean any and all actions that may be
taken in connection with preparing, filing, prosecuting, obtaining and
maintaining throughout the world patent protection for Patent Rights licensed
hereunder, including patent applications and other related material submissions
and correspondence with any patent authorities.
 
(ee) “Patent Rights” shall mean all patents, patent applications and inventions
on which patent applications are filed and all patents issuing therefrom
worldwide, all disclosures of inventions, together with any extensions,
registrations, confirmations, reissues, continuations, divisionals,
continuations, continuations-in-part, reexamination certificates, substitutions
or renewals, supplemental protection certificates, term extensions (under
applicable patent law or other law), provisional rights and certificates of
inventions.
 
(ff) “Person” shall mean an individual, corporation, partnership, limited
partnership, limited liability company, unincorporated association, trust, joint
venture or other organization or entity, including a governmental authority.
 
(gg) “POC” or “Point of Care” shall mean an environment where sampling and
testing is performed in the presence or near-presence of the patient.
 
(hh) “QSRs” means current Quality Systems Regulations as promulgated by the FDA.
 
(ii) “Related Documents” shall mean the Settlement Agreement and the HIV Barrel
Product Commercialization Agreement between SDS and Chembio, the License and
Distribution Agreement between SDS and Inverness, the Non-Exclusive License,
Marketing and Distribution Agreement between Chembio and Inverness, and the HIV
Cassette License, Marketing and Distribution Agreement between Chembio and
Inverness.
 
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(jj) “Rest of the World” means worldwide, excluding the United States.
 
(kk) “SDS Patents” shall mean all Patent Rights owned or Controlled by SDS that
would be infringed, or that SDS asserts would be infringed, by the manufacture,
use, sale or import of the HIV Barrel Products, whether in existence now or in
the future, including but not limited to those listed in Schedule I.
 
(ll) “SDS HIV Cassette Products” shall mean any Point of Care diagnostic test
for HIV antibodies that is outside the Barrel Field and is designed (i) to be
read by the naked eye and (ii) primarily to be used in a Point of Care
environment.
 
(mm) “Specifications” shall mean the information contained in Schedule E
regarding the HIV Barrel Product, together with any and all other related
documentation or procedures in possession of Chembio that substantiate or
support the information contained within Schedule E.
 
(nn) “Sublicensee” shall mean any sublicensee of any of the rights granted to
Inverness under Section 2, other than an Affiliate or a Distributor.
 
(oo) “Technology” shall mean all techniques, inventions, practices, procedures,
knowledge, improvements, designs, processes, protocols, compositions, products,
methods, works of authorship, know-how, data, clinical data, preclinical data,
research and creations (whether or not subject to protection by any Intellectual
Property Rights).
 
(pp) “Third Party” shall mean any Person other than Inverness, SDS or Chembio.
 
(qq) “United States” means the United States of America and its territories and
possessions, including without limitation Puerto Rico and the U.S. Virgin
Islands.
 
(rr) “Visual-Read HIV Test” shall mean a rapid, non-digital diagnostic test for
antibodies to HIV designed primarily to be read by the naked eye and to be used
in a Point of Care environment. A “Visual-Read HIV Test” expressly excludes
digital tests that include a reading device or integrated digital technology to
aid in the interpretation or indication of the result.
 
1.2. Additional Definitions
 
. Certain additional capitalized terms are defined below in the body of this
Agreement.
 
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2. HIV Barrel Product: Exclusive Licenses and Manufacturing and Distribution
Arrangements. 
 
2.1. Exclusive Right to Manufacture
 
. Inverness, on and subject to the terms and conditions contained herein, hereby
grants to Chembio and Chembio hereby accepts from Inverness an exclusive
worldwide license during the Term under the Inverness Lateral Flow Patents to
manufacture the HIV Barrel Product solely for sale to Inverness. Chembio shall
manufacture the HIV Barrel Product itself or may subcontract the manufacture of
the HIV Barrel Product to the extent permitted by applicable law, but may not
sublicense such manufacturing right. If Chembio subcontracts the manufacture of
the HIV Barrel Product, Chembio shall enter into a written agreement with such
manufacturer consistent with the terms of this Agreement and shall remain
primarily liable for breach of this Agreement by the manufacturer.
 
2.2. Exclusive Right to Purchase and Exploit
 
. Chembio, on and subject to the terms and conditions contained herein,
including, without limitation, Section 3(d) hereof, hereby grants to Inverness
and Inverness hereby accepts from Chembio the exclusive right to purchase from
Chembio and the exclusive right and license under any and all of the Chembio IP
to Exploit, throughout the entire world, during the Term, the HIV Barrel Product
and may do so utilizing Inverness Trademarks. This right shall be deemed to
include a grant to Inverness of the right and license to sell through any
Affiliate of Inverness and through Distributors of Inverness or of any Affiliate
of Inverness.
 
(a) Except as provided in Section 2.2(b), 2.2(c), 2.2(d), and 2.2(e), for so
long as the right set forth in Section 2.2 above remains exclusive, (i) each of
Chembio and SDS shall not, by itself or with one or more Third Parties,
manufacture, have manufactured or Exploit any consumable or other device, kit,
composition or method that competes with the HIV Barrel Product; and (ii)
Chembio shall not, by itself or with one or more Third Parties, manufacture,
have manufactured or Exploit any consumable or other device, kit, composition or
method that competes with any New Chembio HIV Product for which Inverness is
granted the right of Exploitation pursuant to Section 2.2(c). This provision
shall not be applicable to the HIV Cassette Product or the SDS HIV Cassette
Product, both of which are the subject of a Related Document, nor does this
provision restrict either Party in its product development activities. 
 
(b) Inverness agrees that Chembio may engage in research and development efforts
pertaining to a New HIV Barrel Product. In the event that Chembio wishes to
otherwise Exploit a New HIV Barrel Product, Chembio shall offer to manufacture
such New HIV Barrel Product for exclusive sale to Inverness and Inverness may,
in its sole discretion, agree to include such New HIV Barrel Product as an HIV
Barrel Product subject to this Agreement, in which event such New HIV Barrel
Product will be treated as an HIV Barrel Product for all purposes of this
Agreement. Chembio understands and agrees that should Inverness reject such
inclusion of the New HIV Barrel Product, Chembio shall not Exploit the New HIV
Barrel Product during the Term.
 
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(c) In the event that Chembio wishes to Exploit a New Chembio HIV Product,
Chembio shall provide Inverness with the first right of refusal on the right to
market and distribute the New Chembio HIV Product worldwide. As such, Chembio
shall not Exploit any New Chembio HIV Product unless Chembio has first provided
Inverness with written notice of its desire to Exploit such Product. Such notice
shall be accompanied by information relating to the New Chembio HIV Product
reasonably necessary for Inverness to evaluate whether it wishes to market and
distribute such product, including a product specification, performance data,
and details of the cost and estimated availability for the New Chembio HIV
Product. Within thirty (30) days after receipt of such notice, Inverness shall
provide Chembio with written notice as to whether it wishes to negotiate
marketing and distribution rights for the New Chembio HIV Product; if Inverness
fails to provide such notice, Inverness’ right of first refusal shall lapse. If
Inverness gives such notice, Chembio and Inverness shall negotiate in good faith
for a period of at least 90 days (or such longer period as may be agreed in
writing) and shall each use reasonable efforts to reach agreement as to the
terms on which Inverness may market and distribute such New Chembio HIV Product.
In the event that Inverness and Chembio fail to reach agreement by the end of
such 90 day period, Chembio may Exploit the New Chembio HIV Product itself, or
may enter discussions with any Third Party for the purpose of allowing such
Third Party to Exploit such New Chembio HIV Product, provided that Chembio shall
not conclude any agreement with a Third Party for the Exploitation of a New
Chembio HIV Product on terms that are materially more favorable than the terms
offered to Inverness. If Chembio wishes to conclude such an agreement with a
Third Party on materially more favorable terms, Chembio shall provide a written
copy of such more favorable terms to Inverness. If, within 14 days after receipt
of such more favorable terms Inverness provides written acceptance of such terms
to Chembio, Chembio shall enter an agreement to Exploit the New Chembio HIV
Product with Inverness on the more favorable terms. For the avoidance of doubt,
Chembio’s right to Exploit the New Chembio HIV Product itself or with a Third
Party pursuant to this paragraph (either because Inverness has allowed its first
right of refusal to lapse or because the parties have failed to reach agreement
on terms) shall not be construed, in the event that the New Chembio HIV Product
infringes the Inverness Lateral Flow Patents, as a license to the Inverness
Lateral Flow Patents.
 
(d) Chembio represents and warrants that: (i) Chembio has previously granted
licenses under the Chembio IP to, and/or entered into agreements regarding the
HIV Barrel Product with, those companies and for those territories listed in
Schedule K (the “Existing Chembio Agreements”); and (ii) complete and accurate
copies of the Existing Chembio Agreements are set forth on Schedule K; and (iii)
the Existing Chembio Agreements set forth the only licenses or rights Chembio
has granted to any Third Party under the Chembio IP or related to the HIV Barrel
Product. Subject to the truth of the foregoing representation and warranty, SDS
and Inverness acknowledge the existence of the Existing Chembio Agreements.
Chembio will use commercially reasonable efforts to terminate the Existing
Chembio Agreements at the earliest time permitted thereunder without breach by
Chembio.
 
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(e) Inverness agrees that, for a period of up to one (1) year from the Effective
Date, Chembio may manufacture the HIV Barrel Product and sell such HIV Barrel
Product to Bio-Rad Laboratories, Inc. (“Bio-Rad”) for Exploitation of such
product by Bio-Rad in Mexico, and only Mexico, and accordingly, Inverness hereby
grants to Chembio a non-exclusive, royalty-bearing, license, under the Inverness
Lateral Flow Patents, solely for the foregoing purpose, for a period of one (1)
year from the Effective Date. Such license shall be subject to the payment of
royalties by Chembio pursuant to Section 5.6.
 
2.3. Exclusive License to SDS Patents
 
. SDS, on and subject to the terms and conditions contained herein, including,
without limitation, Sections 2.3(a) and 3(d) hereof, hereby grants to Inverness
and Inverness hereby accepts a worldwide, exclusive (even with respect to SDS),
royalty-bearing license, under any and all SDS Patents, to Exploit the HIV
Barrel Products manufactured by Chembio hereunder. For clarity, no license is
granted by SDS to Inverness to Exploit in any way any product other than the HIV
Barrel Product manufactured by Chembio hereunder.
 
(a) SDS represents and warrants that (i) SDS has previously granted licenses
under the SDS Patents to those companies and for those territories listed in
Schedule J (the “Existing SDS Agreements”); (ii) complete and accurate copies of
the Existing SDS Agreements are set forth on Schedule J; and (iii) the Existing
SDS Agreements are the only valid and existing licenses or rights SDS has
granted to any Third Party under the SDS Patents that could be used for
detection of HIV antibodies. Subject to the truth of the foregoing
representation and warranty, Chembio and Inverness acknowledge the existence of
the Existing SDS Agreements. SDS will use commercially reasonable efforts to
terminate the Existing SDS Agreements at the earliest time permitted thereunder
without breach by SDS.
 
2.4. Exclusivity an Essential Term
 
. Subject to Sections 2.2(d) and 2.3(a) hereof, the foregoing rights and
licenses are exclusive to Inverness in connection with marketing, distributing
and selling, and exclusive to Chembio in connection with manufacturing, and
neither SDS nor Chembio shall utilize or practice, or grant any rights to any
Third Party under the SDS Patents (in the case of SDS) or the Chembio IP (in the
case of Chembio) in the Barrel Field. Chembio and SDS acknowledge and agree that
such exclusivity is of critical importance to Inverness, and that without such
exclusivity, Inverness would not have entered into this Agreement.
 
2.5. Patent Marking
 
. Inverness will include the patent numbers of the SDS Patents and indicate
SDS’s ownership of such patents on the packaging for all HIV Barrel Products, as
set forth in Section 8.4.
 
2.6. Treatment of New HIV Barrel Product
 
. In the event that Inverness agrees to market a New HIV Barrel Product as an
HIV Barrel Product as set forth in Section 2.2(b), SDS shall share in the
revenues from such New HIV Barrel Product in accordance with Section 5.3 on the
same basis as the sharing of revenues from the HIV Barrel Product, provided that
SDS either (i) acknowledges that the New HIV Barrel Product does not constitute
an infringement of the SDS Patents, or (ii) agrees to include such New Barrel
Product within the license granted to Inverness in Section 2.3 and the license
granted to Chembio in the Joint Exploitation Agreement.
 
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2.7.  Inverness Licenses
 
. The parties acknowledge that contemporaneously herewith, Inverness is granting
to each of SDS and Chembio, pursuant to separate agreements, a license with
respect to the exploitation of the Inverness Lateral Flow Patents for certain
uses other than HIV Barrel Products. It is understood that SDS and Chembio shall
be entitled to receive copies of the agreements entered into by Inverness with
the other Party and any amendments as if and when effected.
 
2.8. Termination of Licenses Upon Challenge of Validity
 
. In all jurisdictions where such agreement is permitted by law, and to the
maximum extent so permitted: (a) SDS and Chembio each agrees not to Challenge
any Patent Rights of Inverness or its Affiliates in the Inverness Lateral Flow
Patents listed on Schedule F; (b) Inverness and Chembio each agrees not to
Challenge the Patent Rights in the SDS Patents licensed hereunder, and (c)
Inverness and SDS each agrees not to Challenge the Patent Rights in the Chembio
Listed Patents. In addition to the foregoing, and whether or not the foregoing
prohibition is permissible or otherwise enforceable, in the event that Inverness
Challenges any Patent Rights in the SDS Patents licensed hereunder or any Patent
Rights in the Chembio Listed Patents, or in the event that either SDS or Chembio
Challenge any Patent Right of Inverness or its Affiliates in the Inverness
Lateral Flow Patents listed on Schedule F, or SDS Challenges any Patent Rights
in the Chembio Listed Patents or Chembio Challenges any Patent Rights in the SDS
Patents licensed hereunder, the Party whose right is Challenged shall have the
right, in its sole discretion and immediately on written notice to terminate
this Agreement for cause. In the event that such termination arises: (a) due to
Challenge by Inverness, Section 13.4 shall apply; (b) due to Challenge by
Chembio, Section 13.5 shall apply; and (c) due to Challenge by SDS, the license
set forth in Section 2.3 shall automatically become perpetual, irrevocable,
fully paid-up and royalty free, and SDS shall no longer be entitled to any share
of Net Sales of HIV Products pursuant to Section 5.3, which share of Net Sales
shall be split equally between Chembio and Inverness. Each Party shall cause its
Affiliates to refrain from any Challenge that the Party agrees not to make and
the consequences of a Challenge by a Party’s Affiliate shall be the same as a
Challenge by the Party itself.
 
3. Non-Competition; Termination of Exclusivity.
 
(a) Subject to Section 3(c), during the Term, Inverness and its Affiliates shall
not Exploit any Visual-Read HIV Test that detects antibodies to HIV I and/or HIV
II in the Barrel Field. Inverness acknowledges and agrees that the exclusivity
resulting from this Section is of critical importance to SDS and Chembio and
that without such agreement not to compete, SDS and Chembio would not have
entered into this Agreement.
 
(b) The Inverness covenant not to compete set forth in Section 33 shall not
prevent Inverness from licensing any Inverness Lateral Flow Patent to any Third
Party for any purpose, nor from manufacturing any diagnostic device outside the
Barrel Field on behalf of itself or any Third Party.
 
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(c) The Inverness covenant not to compete set forth in Section 33 shall not
prevent Inverness or its Affiliates from competing with any HIV Product by
Exploiting any product that is not a Visual-Read HIV Test in the Barrel Field (a
“Permitted Competing Product”). Without limitation of the foregoing, any
Visual-Read HIV Test that does not fall within the Barrel Field, whether or not
Exploitation of such Visual-Read HIV Test by a Third Party would infringe the
Inverness Lateral Flow Patents, is a Permitted Competing Product. Inverness
shall give SDS and Chembio written notice of its intention to Exploit a
Permitted Competing Product. Such notice shall be given by Inverness by the
later of: (i) 60 days before such Permitted Competing Product is first shipped
by Inverness to a US customer or distributor, and (ii) the time that Inverness
is first able to give such notice without violation of applicable law,
regulation, agreement, or the rules of any securities exchange on which its
securities are listed, taking into account that such notice would be
Confidential Information of Inverness hereunder. SDS and Chembio specifically
acknowledge that nothing in this Agreement shall be construed as limiting
Inverness’ right to acquire, develop, import, sell and/or manufacture Permitted
Competing Products.
 
(d) At any time after receipt of notice from Inverness pursuant to Section 3(c)
or after First Commercial Sale of a Permitted Competing Product, Chembio and SDS
may by joint written Non-Exclusivity Notice to Inverness (a “Non-Exclusivity
Notice”), convert Inverness’s exclusive right to distribute the HIV Product into
a non-exclusive right. In the event that Chembio and SDS validly exercise their
right to issue a Non-Exclusivity Notice, with effect from the giving of such
notice Inverness shall grant and agrees to grant to Chembio and SDS a perpetual,
non-exclusive, royalty-bearing, worldwide license, under the Inverness Lateral
Flow Patents, to manufacture or have manufactured, and Exploit the HIV Product,
with royalties of eight and one-half percent (8.5%) of Net Sales in the United
States and five percent (5%) of Net Sales in the Rest of the World. This license
may not be sublicensed or delegated, but shall be deemed to include a grant to
SDS and Chembio of the right and license to sell through any Affiliate of
Chembio and/or SDS and through Distributors of Chembio and/or SDS.
 
(e) Notwithstanding anything in this Section 3 to the contrary, Inverness’s
continued sales outside the United States of products outside the Barrel Field
for which a First Commercial Sale has been made as of the Effective Date of this
Agreement, and improvements to such products, that compete with the HIV Products
(whether or not they constitute Visual-Read HIV Tests and/or are within the
scope of the claims of any of the Inverness Lateral Flow Patents) shall not
trigger Inverness’s loss of exclusivity hereunder.
 
(f) For the avoidance of doubt, Inverness may right to acquire, develop, import,
sell and/or manufacture any competing product (whether or not a Permitted
Competing Product) without loss of its exclusivity pursuant to Section 3(d) if
Chembio breaches its obligation to supply Inverness’ requirements for HIV
Products hereunder, but only during the period that such breach remains uncured.
 
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4. Limits to Scope of Inverness Licenses
 
(a) The parties acknowledge that: (a) the HIV Products may be divided into the
“Existing Products”, meaning the HIV Barrel Product as it exists on the
Effective Date, and the “Future Products”, meaning the New HIV Barrel Product
and any modifications to, or future versions of, the HIV Barrel Product or New
HIV Barrel Product made after the Effective Date; and (b) the Inverness Lateral
Flow Patents may be divided into “Current Lateral Flow Patents” and “Future
Lateral Flow Patents”. The “Current Lateral Flow Patents” are: (i) the patents
and patent applications on Schedule F; (ii) any continuations and divisionals of
the patents and patent applications on Schedule F; (iii) any
continuations-in-part of the patents and patent applications on Schedule F to
the extent the claims thereof are directed to subject matter specifically
described in (i) and (ii) above; and (iv) any foreign counterparts of the
patents and patent applications described in (i), (ii) and (iii) above. The
“Future Lateral Flow Patents” means any continuation-in-part of the Current
Lateral Flow Patents not described in (iii) above, and any foreign counterpart
of such continuation-in-part. All licenses granted by Inverness in this
Agreement grant licenses to the Current Lateral Flow Patents with respect to
both Existing Products and Future Products. The licenses granted by Inverness in
this Agreement grant licenses to Future Lateral Flow Patents: (a) for Existing
Products; and (b) for Future Products, but only with respect to claims in the
Future Lateral Flow Patents that are infringed by the making, using, selling or
importing of any Existing Product. Otherwise, Inverness grants no right or
license to any Future Lateral Flow Patents under this Agreement, including
without limitation any license to any Future Lateral Flow Patent except as
described in the foregoing sentence.
 
(b) The Parties acknowledge that any licenses to the Inverness Lateral Flow
Patents are subject to the limitation that the Charlton Lateral Flow Patents (as
described on Schedule F) are not licensed for the Over-The-Counter market; such
Charlton Lateral Flow Patents are licensed only with respect to products for
sale through any channels for use by licensed professional health-care providers
(including hospitals, physicians acting as such and licensed professional
health-care centers).
 
5. Royalties and Payments.
 
5.1. Exclusive Payment Arrangements
 
. This Article 5 describes the manner in which the Parties will share revenues
derived from the sale of HIV Barrel Products. Except as otherwise set forth in
Section 13.4, no other fees, payments or royalties are due from any Party to any
other Party with respect to the licenses and rights set forth in this Agreement.
 
5.2. Pricing of HIV Products
 
. Subject to the limitations set forth in this Article 5, each Party that sells
any HIV Products hereunder may set the prices at which it sells such HIV
Products in its sole and absolute discretion. 
 
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5.3. Inverness Sale of HIV Barrel Products - Division of Net Sales
 
(a) The Parties shall share Net Sales of HIV Barrel Products in accordance with
the formula set forth on Schedule M.
 
(b) Notwithstanding Schedule M, in no event shall Chembio be required to supply
HIV Products where the total return to Chembio and SDS (Costs and profit share)
would be less than 115% of Costs, unless all three Parties agree.
 
(c) Shares of Net Sales will be separately calculated and reported on a
quarterly basis, and not on an order-by-order basis.
 
5.4. Payments for HIV Products
 
. Inverness shall pay Chembio and SDS in accordance with the following
procedure:
 
(a) From the Effective Date until the end of the second full calendar quarter
after the Effective Date, the parties agree that the estimated per-unit amount
representing Chembio’s Costs for HIV Products to be supplied by Chembio to
Inverness (“Deemed Cost”) shall be the amount set forth on Schedule N, and the
estimated per-unit amount representing Inverness’ Net Sales for HIV Products
sold by Inverness (“Deemed Price”) shall be the amount set forth on Schedule N.
For the remainder of the Term, the Deemed Cost and Deemed Price shall be
adjusted each quarter based on the actual per-unit Cost of HIV Products, and the
actual per-unit Net Sales for HIV Products, in the latest quarter for which
actual Costs and Net Sales have been reported pursuant to Section 5.7.
 
(b) Each shipment of HIV Products by Chembio shall be accompanied by an invoice,
in a form reasonably satisfactory to Inverness, for the HIV Products in the
shipment at the then-current Deemed Cost (as hereinafter defined). Within thirty
(30) days of receipt of a duly issued invoice for HIV Barrel Product shipped by
Chembio in accordance with this Agreement, Inverness shall pay, for such HIV
Barrel Products: (i) to Chembio the Deemed Cost of such HIV Barrel Products, and
any additional amount due to Chembio pursuant to Schedule M, based on the
then-current Deemed Cost and Deemed Price; and (ii) to SDS, any amount due to
SDS pursuant to Schedule M, based on the then-current Deemed Cost and Deemed
Price.
 
(c) Any adjustments to actual Costs for overpayments or underpayments made by
Inverness shall be made pursuant to the quarterly accountings set forth in
Section 5.7. For purposes of these calculations, Cost of HIV Product will be
matched to sales on a FIFO basis.
 
5.5. Payment by Inverness for Samples
 
. Provided that actual Costs do not differ unreasonably from the Deemed Cost set
forth herein, Inverness shall pay Chembio 110% of the Costs associated with the
manufacture by Chembio of HIV Products that are used by Inverness for
demonstrations, testing, clinical trials, sample and compassionate or similar
use.
 
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5.6. Royalties Payable by Chembio on Inverness Lateral Flow Patents
 
. With respect to sales made by Chembio and its Affiliates pursuant to Sections
2.2(e), 3(d), and 13.4, Chembio shall pay Inverness a royalty of five percent
(5%) of Net Sales of HIV Products sold by Chembio and its Affiliates in
Developing Countries, and eight and one-half percent (8.5%) of Net Sales of HIV
Products sold by Chembio and its Affiliates in the Rest of the World excluding
Developing Countries. For the purposes of this paragraph, HIV Products are
“sold” in a particular region, such as a Developing Country, when a sale is made
to a Distributor that is located in such region; provided, however that
Inverness reserves the right to charge the higher royalty rate if it can
reasonably show that a Distributor located in a Developing Country is selling
HIV Products to a purchaser located in a non-Developing Country and Inverness
shall charge the lower royalty rate if Chembio can reasonably demonstrate that
its Distributor or purchaser located in a non-Developing Country has purchased
goods for sale or distribution in a Developing Country.
 
(a) No royalties shall be payable unless the HIV Product infringes a Valid Claim
of the Inverness Lateral Flow Patents in the country in which the HIV Product is
manufactured or the country in which the HIV Product is sold. 
 
(b) Only one royalty shall be due Inverness for any HIV Product regardless of
the number of Valid Claims of the Inverness Later al Flow Patents that would be
infringed.
 
(c) The obligation to pay royalties on Net Sales of HIV Product shall be imposed
only once with respect to each HIV Product, even if such HIV Product is sold
more than once in the course of its transfer to the ultimate end-user.
 
(d) The above royalties on HIV Products are not payable by Chembio with respect
to HIV Products distributed by Inverness, for which the revenue sharing
arrangements set forth in Section 5.3 are the sole and exclusive payment
arrangements between the parties.
 
5.7. Reporting and Calculation of Payments.
 
(a) For any calendar quarter for which payments under Section 5.3 are due to
Chembio and SDS, Inverness shall deliver to Chembio and SDS, within sixty (60)
days after the end of such calendar quarter, reasonably detailed written
accountings of Net Sales of the HIV Products during such calendar quarter. Such
report shall indicate Net Sales on a country-by-country and HIV Product-by-HIV
Product basis (and not on an order-by-order basis).
 
(b) Within seventy-five (75) days of the end of each calendar quarter during the
Term, Chembio shall deliver to Inverness and SDS a complete and accurate
accounting of all Costs and a determination of the cost per unit for all HIV
Products sold to Inverness pursuant to this Agreement. The Costs reflected shall
be the basis for adjustments to payments of Cost to Chembio pursuant to Section
5.4 and the payment of profit shares to Chembio and SDS by Inverness pursuant to
Schedule M. The per-unit allocation of Costs to products sold shall be
determined on a FIFO basis. Cost so determined shall remain in effect until the
next such accounting.
 
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(c) Within ninety (90) days after the end of any calendar quarter for which
reports have been delivered pursuant to sub-paragraphs (a) and (b) above,
Inverness shall deliver Chembio and SDS a report showing the calculation of the
amounts due to Chembio and SDS pursuant to Schedule M, and any payments to be
made hereunder. Such payments may be payable from either Inverness, SDS or
Chembio, depending on whether Chembio and SDS have been underpaid or overpaid
pursuant to the procedure set forth in Section 5.4. The Party due to make such
payments shall make them no later than seven days after delivery of such report.
With respect to Net Sales invoiced in a currency other than United States
Dollars, Net Sales and royalties payable shall be expressed in their United
States dollar equivalent, calculated using an average exchange rate for buying
United States dollars published by The Wall Street Journal during the calendar
quarter. All payments due to any Party hereunder shall be made from the United
States in United States dollars by transfer to such bank account as such Party
may designate. 
 
(d) For any calendar quarter for which payments are due under Section 13.4(c) to
Inverness, the Party owing such payment (the “Payer”) shall deliver to Inverness
(the “Payee”), within forty-five (45) days after the end of such calendar
quarter, reasonably detailed written accountings of Net Sales of the applicable
products during such calendar quarter. Such report shall indicate Net Sales on a
country-by-country and HIV Product-by-HIV Product basis, and the calculation of
the amounts due to Chembio and SDS pursuant to Schedule M or royalty due to
Inverness (if applicable) and payments to be made hereunder, with the amounts
due to Chembio pursuant to Schedule M to be reduced by the amounts already paid
to Chembio as Deemed Costs of HIV Products pursuant to Section 5.4. When the
Payer delivers such accountings, it shall also deliver all payments due under
this Agreement to the Payee or Payees for such calendar quarter. With respect to
Net Sales invoiced in a currency other than United States Dollars, Net Sales and
royalties payable shall be expressed in their United States dollar equivalent,
calculated using an average exchange rate for buying United States dollars
published by The Wall Street Journal during the calendar quarter. All payments
due any Payee hereunder shall be made from the United States in United States
dollars by transfer to such bank account as the Payee (as applicable) may
designate.
 
(e) Chembio shall keep complete and accurate records of the latest two (2) years
of Costs of HIV Products sold to Inverness hereunder. For the sole purpose of
verifying Costs to be reimbursed to Chembio, Inverness and SDS shall have the
right once per calendar year to retain an independent certified public
accountant, selected by Inverness and SDS and reasonably acceptable to Chembio,
to conduct an Audit in the location(s) where such records are maintained upon
twenty (20) days prior written notice and during regular business hours, with
all information disclosed being deemed Confidential Information hereunder. The
cost of the Audit shall be paid by the Party requesting the Audit. Such Audit
shall be completed within thirty (30) business days, subject to extension by the
auditor if the auditor reasonably determines in good faith that data or
information it requires is not available and identifies the data or information
required. Results of such review shall be made available to Chembio, SDS and
Inverness. Inverness shall recalculate the payments made to the Parties and any
Party overpaid shall promptly reimburse any underpaid Party. If a recalculation
of Costs is equal to or greater than five (5%) percent of the
correctly-calculated Costs, the Party requesting the Audit shall be entitled to
have Chembio pay the reasonable out-of-pocket costs incurred by SDS and/or
Inverness to retain such independent certified public accountant to conduct such
review.
 
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(f) Each Payer shall keep complete and accurate records of the latest two (2)
years of sales of HIV Products to which royalties or shares of Net Sales attach
hereunder. For the sole purpose of verifying payments due to a Payee, said Payee
shall have the right, once per calendar year, to retain an independent certified
public accountant, selected by said Payee and reasonably acceptable to the
Payer, to conduct an Audit in the location(s) where such records are maintained
upon twenty (20) days prior written notice and during regular business hours,
with all information disclosed being deemed Confidential Information of the
Payer. Such Audit shall be completed within thirty (30) business days, subject
to extension by the auditor if the auditor reasonably determines in good faith
that data or information it requires is not available and identifies the data or
information required. Whichever Party requests the Audit shall bear the costs
thereof. Results of such review shall be made available to the Payer and the
relevant Payees. If the Audit reflects an underpayment of amounts due, such
underpayment shall be promptly remitted to the appropriate Payee by the Payer.
If the underpayment is equal to or greater than five (5%) percent of the amount
that was otherwise due, the Payee shall be entitled to have the Payer pay the
reasonable out-of-pocket costs incurred by the Payee to retain such independent
certified public accountant to conduct such review.
 
(g) Whenever reports upon which payments are based are to be made by any Party,
they shall be certified as correct by the Chief Financial Officer of the Party.
In addition, to the extent required of a Party by the provisions of the
Sarbanes-Oxley Act, each of the Parties shall make available information as may
be required for proper certification in accordance with Section 404 and any
rules promulgated thereunder.
 
5.8. Reimbursable Costs
 
. During the term the Parties acknowledge that certain expenses may be incurred
for which another Party has expressly assumed responsibility in this Agreement.
In such circumstances, the responsible Party shall reimburse the Party that
incurs the expenses within thirty (30) days after receipt of an invoice
reflecting the amount of the expense incurred. The Parties will use their best
efforts to quantify reimbursable expenses before they are incurred.
 
6. Regulatory and License Matters.
 
6.1. Facility Registration/Inspections
 
. Chembio shall, if it has not done so prior to the Effective Date, register, at
its expense, with FDA, in accordance with the Act, each establishment in which
it intends to manufacture any HIV Product and maintain, at its expense, all such
establishment registrations during the term of this Agreement. Chembio shall
permit FDA and Inverness to inspect each such establishment for purposes of
verifying Chembio’s compliance with the Act, including GMPs and QSRs, and for
purposes of verifying that all items being manufactured by Chembio for sale to
Inverness hereunder are being manufactured in accordance with the applicable
Specifications; Inverness’ participation in such inspections shall be at
Inverness’ cost. Any such inspection by Inverness shall be conducted upon
reasonable advance notice to Chembio during the normal business hours of the
facility to be inspected. Chembio acknowledges and agrees that no inspection by
Inverness pursuant to this Section 6.1 shall relieve or diminish any of
Chembio’s obligations hereunder.
 
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6.2. Regulatory Filings
 
. The parties agree to share responsibility for (1) obtaining and maintaining,
and (2) paying for the obtaining and maintaining of, regulatory approvals
required for the lawful distribution and sale of HIV Products in the applicable
territories, as follows:
 
(a) Chembio shall pay for all regulatory approvals in effect as at the Effective
Date, including the costs of the CLIA waiver;
 
(b) Chembio shall use commercially reasonable efforts to obtain, and shall pay
for the costs of obtaining and maintaining, ISO 13.485 certification and CE
marking for the HIV Products, provided that such costs of CE marking are
commercially reasonable;
 
(c) Inverness shall be responsible for obtaining and maintaining regulatory
approvals (to the extent that such approvals have not already been obtained as
at the Effective Date) for all countries other than the United States, provided
that Chembio and SDS shall cooperate and provide supporting materials for such
regulatory approvals as reasonably requested by Inverness, and Chembio and SDS
shall bear their own costs of so doing;
 
(d) the parties specifically acknowledge that they have not reached an agreement
herein as to who shall be responsible for OTC regulatory costs, but do agree
that they shall negotiate in good faith on the issue of which parties shall be
responsible for obtaining and maintaining, and paying for the costs of obtaining
and maintaining, regulatory approval for sale of HIV Products in the U.S.
over-the-counter market.
 
6.3. Authorization for Sales in European Union
 
. Inverness, at its expense, with assistance of Chembio, shall use commercially
reasonable efforts to prepare and submit an application for regulatory approval
to distribute and sell the HIV Barrel Product in the European Union countries.
Inverness shall seek similar authorization in the Rest of the World, to the
extent Inverness deems such authorization appropriate in its reasonable
commercial judgment, for the right to distribute and sell the HIV Barrel
Product.
 
6.4. Bio-Rad Laboratories, Inc.
 
Inverness shall use reasonable commercial efforts to obtain and maintain
licenses for any and all intellectual property necessary from Bio-Rad
Laboratories Inc. to permit Inverness to Exploit the HIV Products, provided any
license fees or royalties payable may be deducted from gross sales pursuant to
sub-paragraph (vi) of the definition of “Net Sales” as set forth herein.
Inverness is aware of the royalties requested by Bio-Rad Laboratories, Inc. and
agrees that it will pay appropriate royalties if a license can be obtained.
 
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7. Manufacture and Sale. 
 
7.1 Chembio Efforts
 
. Chembio shall use commercially reasonable efforts to manufacture the HIV
Product and to supply all of Inverness’ requirements for such product, in
accordance with the published specifications for each such HIV Product (the
“Specifications”) and the supply requirements and limitations set forth in this
Section 7.
 
7.2  Forecasts
 
. During the Term, Inverness shall provide Chembio, on a quarterly basis, with
forecasts of Inverness’s anticipated orders for the HIV Barrel Product during
the succeeding three (3) quarters. The initial forecast shall be produced and
delivered by Inverness to Chembio by the later of 60 days after the Effective
Date or 60 days after the CLIA waiver is obtained. Chembio hereby acknowledges
and agrees that Inverness shall have the right to revise any quarterly forecast
issued pursuant to this Section at any time upon notice given to Chembio not
less than three months before the forecast delivery date for any products; any
forecasts for delivery less than three months from the forecast date shall be
binding on both parties. Inverness shall issue purchase orders and accept
delivery of not less than ninety (90%) percent of the forecast quantity. Chembio
shall not be required to timely deliver more than one hundred and twenty-five
(125%) percent of the forecast quantity, but shall deliver not less than 100% of
the quantity required by Inverness’ binding forecasts. Chembio shall forward to
SDS a copy of all forecasts received from Inverness within five (5) business
days of receipt thereof.
 
7.3 Purchase Orders
 
. All sales and purchases of the HIV Barrel Product, if any, hereunder shall be
initiated pursuant to Inverness’s purchase order for the same placed with
Chembio. Such purchase orders shall include relevant details of the order such
as quantity, the current Costs of each HIV Barrel Product, destination, billing
and shipping information, and requested delivery date(s) (a “Purchase Order”).
Chembio shall accept Purchase Orders by written notice to Inverness within five
(5) days of receipt. In the event that Chembio cannot comply with a delivery
date requested by Inverness in any Purchase Order, Chembio may request an
alternative delivery date, which shall be not more than forty-five (45) days
after the date requested by Inverness. Any terms and conditions contained in any
Purchase Order or written acceptance of a Purchase Order, invoice or other
writing delivered by Chembio to Inverness or by Inverness to Chembio that are
inconsistent with the terms and conditions of this Agreement shall be null and
void and of no effect unless agreed to in a writing executed by an authorized
representative of Inverness and Chembio. At any time up to ten (10) days prior
to the delivery date set forth in any Purchase Order, Inverness may issue an
alteration to a Purchase Order in order to (i) change a location for delivery,
(ii) correct typographical or clerical errors, or (iii) reschedule a delivery.
In such event, Inverness shall reimburse Chembio for all reasonable resulting
costs incurred by Chembio and notified by Chembio to Inverness within seven (7)
days after alteration of the purchase order. Chembio shall forward to SDS a copy
of all Purchase Orders or alternatives thereof within five (5) business days of
receipt thereof.
 
7.4 Shipment Terms
 
. HIV Barrel Product ordered by Inverness shall be shipped FOB, point of
manufacture, with the carrier and to the destination specified in the Purchase
Order.
 
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7.5 Acceptance
 
. Within twenty (20) days after receipt of the HIV Barrel Product, Inverness
shall inspect and, in its discretion, test the HIV Barrel Product to determine
whether they conform in all material respects to the Specifications. In the
event an HIV Product does not so conform, Inverness may within such twenty (20)
day period (i) continue to test the HIV Barrel Product, or (ii) return the
non-conforming HIV Product and Documentation to Chembio, at Chembio’s expense,
and any amounts paid by Inverness for the HIV Barrel Product returned shall be
refunded by Chembio to Inverness. If Inverness does not return a non-conforming
HIV Product within such twenty (20) day period, it is deemed accepted.
 
7.6 Sales Effort
 
. Inverness shall use commercially reasonable efforts to launch, promote,
develop a demand for the HIV Barrel Product, and to Exploit the HIV Barrel
Products to the markets for which regulatory approvals have been obtained
throughout the applicable territory and perform such responsibilities
diligently, with the objective of maximizing the sales potential of those
products and promoting the benefits thereof in the most commercially beneficial
manner.
 
7.7 Inverness Responsibilities; Rights
 
. In connection with its responsibilities for distribution, marketing and sales
of the HIV Products (as permitted in this Agreement), Inverness shall provide
all sales force (including, without limitation, sales administration and
training), order entry, customer service, reimbursement management, medical
affairs, medical information, marketing (including all advertising and
promotional expenditures), warehousing, physical distribution, invoicing, credit
and collections, production forecasting and other related facilities and
services as it deems necessary or desirable for such distribution, marketing and
sales.
 
7.8 Marketing Plans and Budgets
 
. Inverness shall prepare proposed marketing and promotional plans for each of
the HIV Products (as permitted in this Agreement), which shall include plans
related to the prelaunch, launch, promotion and sales of the HIV Products and
which shall include but not be limited to pricing strategy, sales targets,
forecasts for the number of sales representatives, copies of promotional
materials and a reasonably descriptive overview of the marketing and advertising
campaigns proposed to be conducted (the "Marketing Plans"). Inverness shall
review the proposed Marketing Plans with Chembio and SDS as soon as practicable
after preparation and as frequently as may be required based upon Inverness’
usual marketing campaign cycles, but in no case less that once each calendar
year during the Term. Inverness shall consider comments from Chembio and SDS on
the Marketing Plans in good faith, but Chembio and SDS shall have no right of
approval with respect to such Marketing Plans. Inverness shall meet with Chembio
and SDS at their request but no more than on a quarterly basis to discuss sales
activity and results in each market segment.
 
8. Trademarks
 
8.1. Trademark License
 
. Inverness hereby grants Chembio a non-exclusive, non-transferable license to
use the Inverness Trademarks, but only for the purpose of labeling and packaging
the HIV Products for sale to Inverness. All such use of the Inverness Trademarks
shall inure to the benefit of Inverness. Chembio shall not use or alter such
marks in a manner which may jeopardize or diminish Inverness’s rights to use
them, and all notices of rights therein and all notices of any patent and/or
patent pending rights to the HIV Products shall be clearly designated in all
written materials in which such marks are used.
 
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8.2. Compliance with Law; Registration
 
. Chembio, in using Inverness’s trademarks, shall use such marks and/or names
only in such manner as will comply with the provisions of applicable trademark
laws. Any and all trademark applications which are filed in any jurisdiction for
a Party’s trademarks shall be filed by that Party and that Party shall bear all
costs incurred in connection with such trademark applications and registrations.
No trademark costs incurred by Chembio shall be included in Costs.
 
8.3. Termination
 
. The license granted under Section 8.1 shall terminate upon any termination of
this Agreement, and thereafter neither Party shall use the other Party’s trade
names, service marks, or trademarks except in connection with sale by Inverness
of HIV Products purchased prior to the termination of this Agreement.
 
8.4. Labeling
 
. Inverness shall develop, produce and provide all labeling for the HIV
Products, subject to Chembio’s and SDS’ approval. All materials referring or
relating to the HIV Products shall include the following in legible font:
“Manufactured by Chembio Diagnostic Systems, Inc., Medford, NY for Inverness
Medical Innovations under [patents no.s of SDS Patents] owned by StatSure
Diagnostic Systems, Inc. [address] and, if applicable, [patent no.s of Inverness
Lateral Flow Patents] owned or licensed by Inverness Medical Innovations, Inc.”
 
9. Prosecution and Enforcement of Licensed Intellectual Property.
 
9.1. Prosecution
 
. The owner of Intellectual Property Rights (the “Patent Owner”) (for example,
Inverness in the case of the Inverness Lateral Flow Patents, Chembio in the case
of the Chembio IP and SDS in the case of the SDS Patents) shall have the sole
right to prepare, file, prosecute, obtain and maintain throughout the world, and
otherwise take all Patent Prosecution Actions with respect to its Intellectual
Property Rights as such Patent Owner shall deem to be appropriate in its
discretion. Each Patent Owner shall pay all Patent Costs incurred by it in
connection with the foregoing activities and such Patent Costs shall not be
deemed Costs hereunder. If it becomes necessary or desirable, the other Parties
shall fully cooperate with the Patent Owner, at the Patent Owner’s request and
expense, in connection with all Patent Prosecution Actions; provided that no
Party shall be obligated to provide such cooperation if, in its reasonable
business judgment, such cooperation would be adverse to its interests outside
this Agreement.
 
9.2. Enforcement of Licensed Patents
 
. The Patent Owner shall have the sole right to enforce and defend any of its
Intellectual Property Rights licensed hereunder, at its own expense.
Notwithstanding the foregoing, each of the Parties shall inform the other
Parties promptly in writing of any alleged infringement, misuse or
misappropriation by any Person of any Intellectual Property Rights licensed
hereunder that affects the Exploitation of HIV Products or other products
licensed hereunder, and the Parties shall reasonably consult with each other
with respect to the strategy to resolve the alleged infringement, misuse or
misappropriation. In the event that a Patent Owner shall initiate an
infringement action or defend an action in accordance with this Section, the
other Parties shall fully cooperate and supply such assistance as reasonably
requested by the Patent Owner; provided that no Party shall be obligated to
provide such cooperation if, in its reasonable business judgment, such
cooperation would be adverse to its interests outside this Agreement.
 
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10. Confidentiality.
 
10.1. Limited Disclosure and Use
 
. Each of Inverness, Chembio and SDS shall hold in confidence any Confidential
Information disclosed by any other Party or otherwise obtained by such Party
from any other as a result of this Agreement, and each of Inverness, SDS and
Chembio shall protect the confidentiality thereof with the same degree of care
that it exercises with respect to its own information of a like nature, but in
no event less than reasonable care. Without the prior written consent of the
disclosing Party, a receiving Party shall not use, disclose, or distribute any
Confidential Information, in whole or in part, except as required to perform
such Party’s obligations or exercise such Party’s rights hereunder. Access to
the disclosing Party’s Confidential Information shall be restricted to the
receiving Party’s employees and agents, who, in each case, need to have access
to carry out a permitted use and are bound in writing to maintain the
confidentiality of such Confidential Information.
 
10.2. Exceptions
 
. The obligations set forth in Section 10.1 shall not apply to any portion of
the Confidential Information that the receiving Party can demonstrate by legally
sufficient evidence: (i) now or hereafter, through no act or failure to act on
the part of the receiving Party, is or becomes generally available; (ii) is
known to the receiving Party at the time of receiving such Confidential
Information and not subject to an obligation of confidentiality to a Third
Party; (iii) is hereafter furnished to the receiving Party by a Third Party as a
matter of right (and without violating any agreement with the disclosing Party)
without restriction on use or disclosure; or (iv) is independently developed by
the receiving Party without use of any Confidential Information received from
the other Party. In addition, each receiving Party may disclose Confidential
Information to the extent such disclosure is reasonably necessary to protect
Intellectual Property Rights to which such Party has a license hereunder, to
prosecute or defend litigation, to comply with applicable law or regulation, to
obtain necessary or desirable regulatory approvals, to respond to a valid order
of a court or other governmental body or any political subdivision thereof, or
to conduct preclinical or clinical trials, provided that, other than with
respect to disclosure for protecting Intellectual Property Rights, the receiving
Party shall use reasonable efforts to secure confidential treatment of such
Confidential Information required to be disclosed.
 
10.3. Use of Name; Disclosure of Terms of the Agreement
 
. Except as authorized in Section 8 hereof or otherwise required by applicable
law, regulation or the rules of any securities exchange on which such Party’s
securities are listed, no Party shall use the names of the other Parties in any
publicity or advertising without the prior written approval of the other
Parties, except that any Party may disclose that they have entered into this
Agreement. Except as may be required by applicable law, regulation or the rules
of any securities exchange on which such Party’s securities are listed, no Party
shall disclose any terms or conditions of this Agreement without the prior
written consent of the other Parties, provided that a Party may disclose such
terms and conditions to any Third Party with whom such Party has entered into or
proposes to enter into a business relationship (including any transaction that
would result in a permitted assignment in accordance with the terms and
conditions of Section 15.11), provided any such Third Party is informed of the
confidentiality restrictions herein with respect to such terms and conditions
and agrees to abide by such restrictions.
 
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10.4. Effect of Termination
 
. Each Party shall, upon termination of this Agreement, immediately discontinue
use of the other’s Confidential Information. Within a reasonable time after
termination of this Agreement, but in no event later than thirty (30) days
thereafter, all materials containing such Confidential Information shall be
returned by the receiving Party or (with the disclosing Party’s prior written
consent) destroyed, provided, however, that each Party may retain copies of
Confidential Information in which the Party has a licensed interest that
survives termination (e.g., as provided in Section 13.4 through 13.7).
 
10.5. Survival
 
. The confidentiality obligations set forth in this Section 10 shall survive any
termination or expiration of this Agreement in perpetuity .
 
11. Representations; Warranties.
 
11.1. Corporate Power
 
. Each Party represents to the other Parties that it has full corporate power
and authority to enter into this Agreement and to carry out the provisions
hereof. Each Party represents to the other that this Agreement constitutes a
valid and binding agreement, enforceable against it in accordance with its
terms.
 
11.2. No Default or Violation
 
. Each Party represents and warrants to the other Parties that the execution,
delivery and performance of this Agreement does not (i) violate or require any
registration, qualification, consent, approval, or filing under, (1) any law,
statute, ordinance, rule or regulation, or (2) any judgment, injunction, order,
writ or decree of any court, arbitrator, or governmental entity by which such
Party or any of its assets or properties may be bound or (ii) except in the case
of the Existing SDS Agreements and the Existing Chembio Agreements, conflict
with, require any consent, approval, or filing under, result in the breach or
termination of any provision of, constitute a default under, result in the
acceleration of the performance of any obligations under, result in the vesting
or enhancement of any other Person’s rights under, or result in the creation of
any lien upon any of such Party’s properties, assets, or businesses pursuant to
(x) its organizing documents or By-Laws or (y) any material indenture, mortgage,
deed of trust, license, permit, approval, consent, franchise, lease, contract,
or other instrument or agreement to which such Party is a Party or by which such
Party or any of such Party’s properties or assets is bound.
 
11.3. Licensed Intellectual Property
 
. Each Party licensing any Intellectual Property Rights (a “Licensor”) to any
other Party hereunder (a “Licensee”) represents and warrants to each such
Licensee that: (a) it has the full right, title and authority to grant to
Licensee the licenses granted hereunder; and (b) to the best of the Licensor’s
knowledge and except as otherwise disclosed to the Licensee, all such licensed
Patent Rights existing as of the Effective Date are valid and enforceable, and
all patents, if any, issuing on any of the pending patent applications of the
Patent Rights existing as of the Effective Date will be valid and enforceable. 
 
11.4. Regulatory Matters
 
. Chembio represents and warrants to Inverness that, at the time when HIV
Products are delivered, it will have obtained regulatory approval under the Act
which is required to permit Chembio to manufacture the HIV Products and sell the
HIV Products to qualified customers in the United States professional market for
use by such customers in accordance with and subject to the limitations
contained within the information contained within Schedule E hereof and
information related to the HIV Products that is listed by the FDA. Chembio
represents and warrants that, with respect to the manufacture of the HIV
Products, Chembio will comply with the requirements of the Act, and to the best
of its knowledge, all other applicable federal and state laws.
 
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11.5. Product Quality
 
. Chembio represents and warrants that:
 
(a) Each unit of HIV Product sold to Inverness hereunder shall be manufactured
in accordance with and shall comply, at the time of delivery to Inverness, in
all material respects with the applicable Specifications therefor, shall perform
as intended in all material respects, and shall otherwise be free from defects
in material and workmanship; and each unit of HIV Product sold to Inverness
hereunder will not, at the time of delivery, be adulterated or misbranded within
the meaning of the Act or within the meaning of any jurisdiction in which the
definitions of misbranding and adulteration are substantially the same as in the
Act, nor will any such unit of HIV Product, at the time of delivery to
Inverness, be an article which may not, under the Act, be introduced into
interstate commerce. 
 
(b) In the event any unit(s) of HIV Product does not conform with a warranty set
forth in Section 11.5(a) applicable thereto, Inverness or an Affiliate of
Inverness may return such unit(s) of HIV Product within twenty (20 days of its
receipt to Chembio and, in the event Inverness or an Affiliate of Inverness does
so, Chembio, within thirty (30) days of its receipt of the return, shall either;
(a) refund or credit Inverness’s account in an amount equal to the purchase
price paid by Inverness for such unit(s) of non-conforming HIV Product, as the
case may be, plus freight and insurance charges incurred by Inverness and/or its
Affiliate incident to the original and return shipment, as documented by
Inverness, or (b) replace, without charge, the non-conforming unit(s) of HIV
Product, as the case may be, with an equivalent number of like unit(s) HIV
Product, as the case may be, conforming with the applicable warranties set forth
in Section 11.5(a) and refund or credit Inverness’s account in an amount equal
to said original and return freight and insurance charges incurred as documented
by Inverness. The cost of returned units and freight and insurance charges
hereunder shall not be included in Costs.
 
11.6. Exclusion of Other Representations and Warranties
 
. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NO PARTY MAKES ANY
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION
ANY REPRESENTATIONS OR WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE OR NON-INFRINGEMENT. NO PARTY WARRANTS THAT THE OTHER PARTIES WILL
RECEIVE ANY PARTICULAR AMOUNT, OR ANY, REVENUES OR PROFITS AS A RESULT OF
ENTERING INTO THE BUSINESS ARRANGEMENTS DESCRIBED IN THIS AGREEMENT.
 
12. Indemnification
 
12.1. By Manufacturers
 
. Each Party that manufactures, either directly or through a contract
manufacturer, any HIV Product hereunder (a “Manufacturer”) hereby agrees to
indemnify, defend (using counsel selected by the Manufacturer which is
reasonably acceptable to the other Parties) and hold harmless the other Parties,
their Affiliates and their respective Distributors and customers, from and
against any and all liabilities, losses, (exclusive of lost profits) damages,
costs and expenses (including, without limitation, reasonable attorneys’ fees,
court costs, and out-of pocket expenses) suffered or incurred which arise or
result from: (i) the material breach of any warranty or representation of the
Manufacturer contained in this Agreement; (ii) any Third Party claim of personal
injury (including death) or property damage arising in connection with any HIV
Product manufactured by or for the Manufacturer; (iii) any material failure by
the Manufacturer to perform any of the covenants, agreements or obligations of
the Manufacturer contained in this Agreement; or (iv) any Third Party claim
alleging that the manufacture, use, sale, offer for sale, import or export of
the HIV Products manufactured by or for the Manufacturer infringes the
proprietary rights of the Third Party claimant.
 
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12.2.  By Sellers
 
. Each seller of any HIV Product hereunder (a “Seller”) hereby agrees to
indemnify, defend (using counsel selected by the Seller which is reasonably
acceptable to the other Parties) and hold harmless the other Parties from and
against any and all liabilities, losses (exclusive of lost profits), damages,
costs, and expenses (including, without limitation, reasonable attorneys’ fees,
court costs, and out-of pocket expenses) suffered or incurred by the other
Parties which arise or result from: (i) the material breach of any warranty or
any representation of the Seller contained in this Agreement; (ii) any material
failure by the Seller to perform any of its covenants, agreements, or
obligations contained in this Agreement; or (iii) the promotion and sale by the
Seller or any Affiliate or Distributor of the Seller of any HIV Product, except
to the extent covered by the Manufacturer’s defense and indemnification
obligations under Section 12.1.
 
12.3.  Notice of Claims
 
. Within thirty (30) days after a Person seeking indemnification hereunder
(hereinafter the “Indemnified Party”) has received notice of or has acquired
knowledge of any claim by any Person not a Party to this Agreement of the
commencement or threatened commencement of any action or proceeding by any
Person not a Party to this Agreement (“third party claim”) or has acquired
knowledge of any other claim hereunder against another Party hereto (“first
party claim”) the Indemnified Party shall, if such claim is indemnifiable by the
other Party pursuant hereto (hereinafter the “Indemnifying Party”), give the
Indemnifying Party written notice of such claim and the commencement or
threatened commencement of such action or proceeding, if any. Such notice shall
state the nature and basis of such claim, and, if ascertainable, the amount
thereof. Notwithstanding the foregoing, the failure of the Indemnified Party to
give such notice shall not excuse the Indemnifying Party’s obligation to
indemnify and, in the case of a third party claim, defend the Indemnified Party,
except to the extent the Indemnifying Party has suffered damage or prejudice by
reason of the Indemnified Party’s failure to give or delay in giving such
notice. Within ten (10) business days of receipt of any notice issued by the
Indemnified Party pursuant to this Section 12.3, the Indemnifying Party shall
notify the Indemnified Party whether the Indemnifying Party acknowledges its
indemnification obligation and, in the case of a third party claim, its defense
obligation with respect to the claim which was the subject of the Indemnified
Party’s notice or whether it disclaims such obligations. In the event the
Indemnifying Party disclaims or fails to timely acknowledge its obligations with
respect to any claim by the Indemnified Party relating to any third party claim,
the Indemnified Party shall have the right to defend such claim, with counsel of
its own selection, and compromise such claim without prejudice to its right to
indemnification hereunder. In the event the Indemnifying Party timely
acknowledges its obligations hereunder with respect to any third party claim,
the Indemnifying Party shall defend the same with counsel in accordance with
this Section. Where the Indemnifying Party shall have acknowledged in writing
its obligations hereunder with respect to any third party claim, the Indemnified
Party may, at its expense, participate in the defense of such third party claim
and no such third party claim shall be settled by the Indemnified Party without
the prior written consent of the Indemnifying Party which consent shall not be
unreasonably withheld or delayed. At any time after the Indemnifying Party
acknowledges its obligations hereunder with respect to any third party claim,
the Indemnifying Party may request the Indemnified Party to agree in writing to
the payment or compromise of such third party claim (provided such payment or
compromise has been previously approved in writing by the third party claimant),
and, in the event the Indemnifying Party does so, the Indemnified Party shall
promptly agree in writing to such settlement, unless such settlement would
involve a remedy or remedies, other than the payment of money damages by the
Indemnifying Party, to which the Indemnified Party reasonably objects.
 
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12.4. Disputes
 
. In the event any Party to this Agreement makes a claim against another Party
under this Section 12 or in any way relating to or arising under this Agreement
and further in the event the Party receiving notice of such claim fails to
timely acknowledge its obligations hereunder with respect to such claim or
disclaims such obligations, the relevant Parties, within forty (40) days of the
date of issuance of notice by the Party making such claim, shall meet and
attempt to resolve in good faith the dispute between or among the Parties with
respect to such claim. If the Parties fail to resolve such dispute within
seventy-five (75) days of the date of issuance of notice by the Party making
such claim, the Party making such claim may thereafter commence to arbitrate the
claim in accordance with the provisions set forth in Section 15.8. Upon
resolution of any claim referred to in this Section 12, whether by agreement
between the Parties to this Agreement or the rendering of a final arbitration
award, the appropriate Party under such agreement or the Party against which the
arbitration award is rendered shall, within ten (10) days of such resolution,
pay over and deliver to the other Party funds in the amount of any claim as
resolved.
 
13. Term and Termination.
 
13.1. Term of Agreement
 
. Unless otherwise terminated as expressly provided herein, with respect to each
HIV Product, the licenses granted and appointments made hereunder shall commence
on the Effective Date and continue until May 31, 2016 (the “Term”), provided
that any perpetual licenses granted herein shall continue for the duration of
the Intellectual Property Rights in respect of which such licenses are granted.
 
13.2. Material Breach.
 
(a) If a Party:
 
(i) materially breaches this Agreement in a manner which cannot be cured;
 
(ii) materially breaches this Agreement in a manner that can be cured and such
Party has failed to take steps to begin to cure within ninety (90) days
following written notice of breach by the Party or Parties affected by the
breach or is not diligently pursuing a cure thereafter; or
 
(iii) is subject to a petition for relief under any bankruptcy legislation, or
makes an assignment for the benefit of creditors, or is subject to the
appointment of a receiver for all or a substantial part of the Party’s assets,
and such petition, assignment or appointment, if involuntary, is not dismissed
or vacated within ninety (90) days (each an “Insolvency Event”),
 
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then, on each such occasion, the non-breaching Party shall have the right to
exercise one or more of the following remedies: (x) upon written notice by the
non-breaching Party to the breaching Party within thirty (30) days of the end of
the applicable cure period (if any) (assuming that the non-breaching Party has
not already given such a notice upon the occurrence of a prior material, uncured
breach by the breaching Party), the non-breaching Party shall have the right to
seek monetary damages for such material breach within the limitations set forth
in Section 14 hereof and/or equitable relief to prevent such material breach
from continuing or occurring again in the future; and, at its option, the
non-breaching Party shall have the right to terminate the rights of the
breaching Party hereunder upon written notice to breaching Party; provided,
however, that in the event the alleged breaching Party in good faith challenges
the allegation of breach, then the matter shall be resolved in accordance with
Section 15.8, and the cure period set forth in Section 13.2(a)(ii), which shall
be reduced to 30 days, shall only commence upon a decision pursuant to Section
15.8 that such breach has occurred. Notwithstanding the foregoing, if Chembio
shall be enjoined from supplying HIV Products to Inverness because of a lawsuit
regarding Intellectual Property Rights of a Third Party, or Inverness shall be
enjoined from selling HIV Products because of a lawsuit regarding Intellectual
Property Rights of a Third Party, and such injunction shall in either case cause
a material breach of this Agreement, the non-breaching Party shall not have the
right to seek monetary damages for such material breach. Notwithstanding the
foregoing, the obligations of the breaching Party, including the licenses
granted and appointments made hereunder to the non-breaching Parties shall
continue unless both non-breaching Parties agree that such licenses and
appointments shall terminate.
 
(b) In the event of a material breach by Chembio, SDS shall have the right to
cure such breach, and Chembio will fully cooperate with SDS, at its own cost, in
such cure.
 
13.3. Section 365(n); Agreement to Deliver Embodiments
 
. All rights and licenses granted under or pursuant to this Agreement are, and
shall otherwise be deemed to be, for purposes of Section 365(n) of Title 11,
U.S. Code (the “Bankruptcy Code”), licenses of rights to “intellectual property”
as defined in the Bankruptcy Code. The Parties agree that the licensee of such
rights shall retain and may fully exercise all of its rights and elections under
the Bankruptcy Code. Chembio agrees during the term of this Agreement to create
and maintain current copies or, if not amenable to copying, detailed
descriptions or other appropriate embodiments, of all intellectual property and
Technology used in the manufacture of the HIV Products (“Escrow Materials”).
Chembio hereby grants to Inverness, with effect from the Effective Date, a
non-exclusive, royalty-free, perpetual license under the Chembio IP to use the
Escrow Materials to Exploit the HIV Products, and, if Chembio fails to supply
HIV Products to Inverness as required by this Agreement, to manufacture and have
manufactured the HIV Products; provided however that Inverness shall not
exercise such license unless Chembio suffers an Insolvency Event. In the event
that Inverness obtains the right to manufacture the HIV Products in accordance
with this Agreement, Inverness shall be entitled to copies of all Escrow
Materials. All rights, powers and remedies of the Inverness provided under this
Section 13.3 are in addition to and not in substitution for any and all other
rights, powers and remedies now or hereafter existing at law or in equity in the
event of any such commencement of a bankruptcy proceeding by or against the
Chembio. 
 
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13.4.  Effect of Termination for Breach by Inverness
 
. Upon any termination made in accordance with Section 13.2(a)(i) or (ii) by SDS
or Chembio for breach by Inverness, including without limitation for breach of
the non-competition obligation set forth in Section 3:
 
(a) The license grants contained in Sections 2.2 and 2.3, and the non-compete
obligations in Section 2.2(a) and 3, shall terminate;
 
(b) Inverness may sell any inventory of HIV Products in its possession or
control at the effective date of termination, but shall have no further right to
Exploit the HIV Products; and
 
(c) SDS and Chembio shall have a joint perpetual, irrevocable, non-transferable,
non-exclusive, worldwide, license under the Inverness Lateral Flow Patents to
Exploit the HIV Barrel Product themselves or through agreements with Third
Parties, at a royalty of 8.5% of Net Sales in the United States and 5% of Net
Sales in the Rest of the World, subject to the royalty payment limitations set
forth in Section 5.6(a), 5.6(b), and 5.6(c). 
 
13.5. Effect of Termination for Breach by Chembio
 
. Upon any termination made in accordance with Section 13.2(a)(i) and (ii) by
Inverness for breach by Chembio:
 
(a) The license grants contained in Sections 2.2 shall automatically be expanded
to permit Inverness to manufacture or have manufactured the HIV Product; such
licenses in Section 2.2 (as expanded as set forth in this Section 13.5(a)) shall
continue after termination and shall be perpetual and irrevocable, subject
always to payment to SDS of its profit share in an amount equivalent to that set
forth in Schedule M ((with “Cost” redefined to be Inverness’ costs as otherwise
set forth in Section 1.1(j), and retention of such Cost by Inverness instead of
payment of Cost to Chembio), and to payment to Chembio of royalties on HIV
Products at a royalty of 8.5% of Net Sales in the United States and 5% of Net
Sales in the Rest of the World; and
 
(b) Chembio shall, at the written request of Inverness and at no cost to
Inverness, provide copies of the Escrow Materials and all other technical
information, including all Technology in the Chembio IP, reasonably necessary
for Inverness to manufacture, have manufactured and Exploit the HIV Products.
 
13.6. Sole Remedy
 
. The parties acknowledge that the remedies set forth in Section 13.4 shall be
Inverness’ sole and exclusive liability, and Chembio’s and SDS’ sole and
exclusive remedy, for any breach of Section 3 by Inverness.
 
13.7. Survival
 
. No expiration or termination of this Agreement shall affect any rights or
liabilities of the Parties which may have accrued prior to the date of
expiration or termination. Notwithstanding anything herein to the contrary, upon
any expiration or termination of this Agreement, in addition to any provisions
that by their terms survive, the provisions of Sections 2.8, 3(d), 5.7, 8.3, 9,
10, 12, 13.3, 13.4, 13.5, 13.6, 14 and 15  shall survive and shall continue in
full force and effect in accordance with their respective terms.
 
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14. Limitation of Liability.
 
14.1. Exclusion of Liability for Certain Damages
 
. EXCEPT FOR BREACHES OF ITS CONFIDENTIALITY OBLIGATIONS HEREUNDER AND FOR
VIOLATIONS OF ANOTHER PARTY’S INTELLECTUAL PROPERTY RIGHTS AND FOR DAMAGES
CAUSED BY A PARTY’S GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT, IN NO EVENT
SHALL A PARTY BE LIABLE TO ANY OTHER PARTY FOR SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT LIMITATION, DAMAGES RESULTING FROM
LOSS OF USE, PROFITS, BUSINESS OR GOODWILL, WHETHER OR NOT THE PARTY ALLEGEDLY
CAUSING THE DAMAGE HAS BEEN ADVISED OF THE POSSIBILITY THEREOF. THIS SECTION 14
SHALL NOT BE CONSTRUED TO LIMIT ANY PARTY’S INDEMNIFICATION OBLIGATIONS UNDER
SECTION 12 HEREOF.
 
14.2. Limitation on Liability for Direct Damages
 
. EXCEPT FOR BREACHES OF ITS CONFIDENTIALITY OBLIGATIONS HEREUNDER AND FOR
VIOLATIONS OF ANOTHER PARTY’S INTELLECTUAL PROPERTY RIGHTS, FOR DAMAGES CAUSED
BY A PARTY’S GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT, OR FOR ANY PARTY’S
INDEMNIFICATION OBLIGATIONS UNDER SECTION 12 HEREOF, EACH PARTY’S MAXIMUM
AGGREGATE LIABILITY TO ALL OTHER PARTIES OTHER THAN FOR PAYMENTS DUE HEREUNDER
SHALL IN NO EVENT EXCEED THE AMOUNT OF $1 MILLION, WHETHER SUCH DAMAGES ARISE IN
CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE.
 
15. General.
 
15.1. Waivers and Amendments.
 
(a) This Agreement may be amended, modified or supplemented only by a written
instrument executed by the Parties hereto.
 
(b) No waiver of any provision of this Agreement, or consent to any departure
from the terms hereof, shall be effective unless the same shall be in writing
and signed by the Party waiving or consenting thereto. No failure on the part of
any Party to exercise, and no delay in exercising, any right or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or remedy by such Party preclude any other or further exercise
thereof or the exercise of any other right or remedy. The waiver by any Party
hereto of a breach of any provision of this Agreement shall not operate as a
waiver of any subsequent breach. All rights and remedies hereunder are
cumulative and are in addition to and not exclusive of any other rights and
remedies provided by law.
 
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15.2. Entire Agreement
 
. This Agreement, the Schedules hereto and the Related Documents constitute the
entire agreement among the Parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings, whether written or
oral, among the Parties, or any of the Parties, in connection with such subject
matter.
 
15.3. Severability
 
. If any provision of this Agreement is found invalid or unenforceable by a
court of competent jurisdiction, such provision shall be enforced to the maximum
extent permissible by law and the other provisions of this Agreement shall
remain in full force and effect.
 
15.4. Relationship of the Parties
 
. This Agreement shall not constitute any Party the agent or legal
representative of any other Party for any purpose whatsoever, and no Party shall
hold itself out as an agent of any other Party. This Agreement creates no
relationship of joint venturers, partners, associates, employment or principal
and agent between or among the Parties, and each of the Parties is acting as an
independent contractor. No Party is granted herein any right or authority to,
and shall not attempt to, assume or create any obligation or responsibility for
or on behalf of any other Party. No Party shall have any authority to bind any
other Party to any contract, whether of employment or otherwise, and each Party
shall bear all of their respective expenses for its operations, including,
without limitation, the compensation of its employees and salespersons and the
maintenance of its offices, service and warehouse facilities. Each Party shall
each be solely responsible for its own employees and salespersons and for their
acts and the things done by them.
 
15.5. No Election of Remedies
 
. The rights and remedies accorded herein are cumulative and in addition to
those provided by law, and may be exercised separately, concurrently, or
successively.
 
15.6. Notices
 
. All notices and other communications hereunder shall be in writing and shall
be deemed given if delivered personally, telecopied (with confirmation) or
mailed by registered or certified mail (return receipt requested) or delivered
by recognized courier service providing evidence of delivery to the Parties at
the following addresses:
 
(a) if to Chembio, to:
 
Chembio Diagnostic Systems, Inc.
3661 Horseblock Road
Medford, New York 11763

Attention: Lawrence A. Siebert, President
Telecopier No.: (631) 924-6033

 
with a copy to:
 
Ruskin Moscou Faltischek, P.C.
1425 Reckson Plaza
15th Floor, East Tower
Uniondale, New York 11556

Attention: Michael L. Faltischek, Esq.,
Telecopier No.: (516) 663-6640
 
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(b) if to SDS, to:
 
StatSure Diagnostic Systems, Inc.
One Clark’s Hill
Framingham, MA 01702
Attention: Chief Executive Officer
Telecopier No.: (508) 872-2728
 
with a copy to:
 
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Attention: Jeffrey M. Wiesen, Esq.
Telecopier No.: 617-542-2241

(c) if to Inverness, to:
 
Inverness Medical Innovations, Inc.
51 Sawyer Road,
Waltham MA 02454
Attention: General Counsel’s office

or at such other address for a Party as shall be specified by like notice.
 
15.7. Governing Law
 
. This Agreement shall be governed by, and construed and enforced in accordance
with, the substantive laws of the State of New York , without giving effect to
its conflicts of laws rules. 
 
15.8. Dispute Resolution
 
. In the event of any dispute or disagreement between or among any of the
Parties as to the interpretation of any provision of this Agreement or the
performance of any obligations hereunder, the matter, upon written request of
any Party, shall be referred to mediation and arbitration in accordance with the
procedures set forth in Schedule  L to this Agreement.
 
15.9. Waiver of Jury Trial
 
. The Parties each hereby irrevocably and unconditionally waives all rights to
trial by jury in any legal action, proceeding or counterclaim with respect to
any matter whatsoever arising out of or in connection with or related to this
Agreement or the enforcement thereof.
 
15.10. Counterparts
 
. This Agreement may be executed in two or more counterparts, all of which shall
be considered one and the same agreement and shall become effective when two or
more counterparts have been signed by each of the Parties and delivered to the
other Parties, it being understood that all Parties need not sign the same
counterpart. Facsimile execution and delivery of this Agreement by any of the
Parties shall be legal, valid and binding execution and delivery of such
document for all purposes.
 
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15.11. Assignment
 
. This Agreement is personal to each of the Parties, and no Party shall assign
any of its rights or delegate any of its obligations hereunder, including
without limitation by operation of law, Change of Control or otherwise, without
the prior written consent of the affected other Party or Parties, which consent
shall not be unreasonably withheld or delayed, provided, however, that without
the consent of the other Parties, Inverness may (i) assign its rights under this
Agreement and delegate its obligations hereunder, in whole or in part, to any
Person that shall acquire the business of Inverness to which this Agreement
relates, or to any Affiliate of such Party, if the assignee shall assume
Inverness’ obligations hereunder in writing, and (ii) assign this Agreement in
connection with a sale or transfer of substantially all of the assets of, or a
majority interest in the voting shares of, Inverness or its corporate parent to,
or the merger or consolidation of Inverness or its corporate parent with or
into, any other Person. In this paragraph, “Change of Control” means any sale of
the equity securities of a Party following which the equity holders of such
Party immediately prior to such sale own, directly or indirectly, less than 50%
of the combined voting power of the outstanding voting securities of such Party,
other than in a transaction involving a sale of equity securities for the
purpose of raising capital to a group of financial investors in which not less
than 50% of such equity securities are purchased by a recognized venture capital
or private equity fund or funds and where the management of the selling Party
before the financing is substantially the same as the management of such Party
after the financing.
 
15.12. Force Majeure
 
. No Party shall be liable for failure to perform any of its obligations under
this Agreement when such failure is due to fire, flood, strikes, labor troubles
or other industrial disturbances, legal restriction, riot, insurrection, or any
other cause beyond the reasonable ability of the Party affected thereby to
foresee and avoid, and without such Party’s fault or negligence (“Force
Majeure”), provided that any Party claiming the existence of Force Majeure shall
give notice to the other parties not more than seven (7) days after the
commencement of the event of Force Majeure, and shall use prompt and diligent
efforts to mitigate the effects of Force Majeure. In the event that any event of
Force Majeure prevents performance for sixty (60) days or more, any other Party
may terminate this Agreement on written notice to all parties.
 
15.13. Further Assurances
 
. Each Party hereto will, upon the request of any other Party and without
further consideration, execute and deliver such other instruments, and take such
other actions, as such other Party may reasonably request, and at the other
Party’s expense, to more effectively and efficiently carry out the covenants,
licenses and agreements of the Parties set forth in this Agreement and
consummate the transactions contemplated by this Agreement. Without limitation
of the foregoing, each exclusive licensee of rights granted hereunder shall have
the right, at its sole cost and expense, to register, record and otherwise
document such exclusive license in any country where there are any pending or
issued Patent Rights. Such licensee may require that the other Party execute a
“short form” license in order to effect the foregoing registration, recordal or
other documentation in any such country, and may record such short form license,
but no short form license shall in any way alter or otherwise affect the rights
and obligations of the Parties hereunder.
 

 
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* * *
IN WITNESS WHEREOF, the Parties have executed, or caused their duly authorized
representatives to execute, this Agreement under seal as of the date first
written above.
 
Chembio Diagnostic Systems, Inc.
 
By: 
Title: 
 
StatSure Diagnostic Systems, Inc.
 
By: 
Title: 
 
Inverness Medical Innovations, Inc.
 
By: 
Title: 
 
[Signature page to HIV Barrel Marketing and Distribution Agreement]

 

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