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Exhibit 10.4 Form of option (Non-Qualified)
 

THE SECURITIES REPRESENTED BY THIS DOCUMENT HAVE NOT BEEN REGISTERED WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE “1933 ACT”), AND ARE “RESTRICTED SECURITIES” AS THAT
TERM IS DEFINED IN RULE 144 UNDER THE 1933 ACT. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE 1933 ACT.
 
CHEMBIO DIAGNOSTICS, INC.
 
STOCK OPTION AGREEMENT
(Directors’ Non-Qualified Stock Option)
 
THIS STOCK OPTION AGREEMENT (this “Agreement”) is made and entered into as of
the _____________ day of _____________, ______________ by and between Chembio
Diagnostics, Inc., a Nevada corporation (the “Company”), and _________________
(the “Optionee”).
 
WITNESSETH:
 
WHEREAS, the Optionee has received a non-qualified option to purchase shares of
the Company’s common stock, par value $0.01 per share (the “Common Stock”),
pursuant to the Company’s 1999 Stock Option Plan (the “Plan”) in order to
provide the Optionee with an opportunity for investment in the Company and
additional incentive to pursue the success of the Company, and this option is to
be for the number of shares, at the price per share and on the other terms and
conditions set forth in this Agreement; and
 
WHEREAS, the Optionee desires to receive an option on the terms and conditions
set forth in this Agreement.
NOW, THEREFORE, the parties agree as follows:
 
1. Grant Of Option. The Company hereby grants to the Optionee the right and
option (the “Option”) to purchase all or any part of an aggregate of
______________ (________________) shares of the authorized and unissued Common
Stock (the “Option Shares”) pursuant to the terms and conditions set forth in
this Agreement and the Plan. In the event that the terms and conditions in this
Agreement are inconsistent with the terms and conditions in the Plan, the terms
and conditions in the Plan shall control.
 
2. Option Price. At any time that shares are to be purchased pursuant to the
Option, the purchase price for each Option Share shall be $________ (the “Option
Price”), subject to adjustment as provided in this Agreement.
 
3. Exercise Period. Unless terminated earlier as provided in this Agreement,
each portion of the Option will expire and terminate, if not exercised sooner,
at 5:00pm, New York City, New York time, on the date hereof. Notwithstanding the
foregoing, to the extent not earlier terminated, the Option shall terminate
three months after the date the Optionee no longer serves on the Board of
Directors of the Company.
 
 
 

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4. Vesting of Option. _________________ of the Options (the right to purchase
________________ Option Shares) shall be immediately exercisable and
__________________ of the Options shall become exercisable on _____________ of
each of __________ and _____________.
 
5. Exercise Of Option.
 
(a) The Option may be exercised in whole or in part by delivering to the
Treasurer of the Company (i) a Notice And Agreement Of Exercise Of Option,
substantially in the form attached hereto as Exhibit A, specifying the number of
Option Shares with respect to which the Option is exercised, and (ii) full
payment of the Option Price for such shares. Payment shall be made by certified
check or cleared funds. The Option may not be exercised in part unless the
purchase price for the Option Shares purchased is at least $1,000 or unless the
entire remaining portion of the Option is being exercised.
 
(b) Promptly upon receipt of the Notice And Agreement Of Exercise Of Option
together with the full payment of the Option Price, the Company shall deliver to
the Optionee a properly executed certificate or certificates representing the
Option Shares being purchased.
 
6. Withholding Taxes. The Company may take such steps as it deems necessary or
appropriate for the withholding of any taxes which the Company is required by
any law or regulation or any governmental authority, whether federal, state or
local, domestic or foreign, to withhold in connection with the Option,
including, but not limited to, the withholding of all or any portion of any
payment owed by the Company to the Optionee or the withholding of issuance of
Option Shares to be issued upon the exercise of the Option.
 
7. Securities Laws Requirements. No Option Shares shall be issued unless and
until, in the opinion of the Company, there has been full compliance with, or an
exemption from, any applicable registration requirements of the Securities Act
of 1933, as amended (the “1933 Act”), any applicable listing requirements of any
securities exchange on which stock of the same class has been listed, and any
other requirements of law or any regulatory bodies having jurisdiction over such
issuance and delivery, or applicable exemptions are available and have been
complied with. Pursuant to the terms of the Notice And Agreement Of Exercise Of
Option (Exhibit A) that shall be delivered to the Company upon each exercise of
the Option, the Optionee shall acknowledge, represent, warrant and agree as
follows:
 
(a) Optionee is acquiring the Option Shares for investment purposes only and the
Option Shares that Optionee is acquiring will be held by Optionee without sale,
transfer or other disposition for an indefinite period unless the transfer of
those securities is subsequently registered under the federal securities laws or
unless exemptions from registration are available;
 
(b) Optionee’s overall commitment to investments that are not readily marketable
is not disproportionate to Optionee’s net worth and Optionee’s investment in the
Option Shares will not cause such overall commitments to become excessive;
 
(c) Optionee’s financial condition is such that Optionee is under no present or
contemplated future need to dispose of any portion of the Option Shares to
satisfy any existing or contemplated undertaking, need or indebtedness;
 
 
 

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(d) Optionee has sufficient knowledge and experience in business and financial
matters to evaluate, and Optionee has evaluated, the merits and risks of an
investment in the Option Shares;
 
(e) The address set forth on the signature page to this Agreement is Optionee’s
true and correct residence, and Optionee has no present intention of becoming a
resident of any other state or jurisdiction;
 
(f) Optionee confirms that all documents, records and books pertaining to an
investment in the Option and the Option Shares that have been requested by
Optionee have been made available or delivered to Optionee. Without limiting the
foregoing, Optionee has received and reviewed the Company’s periodic reports as
filed with the Securities and Exchange Commission, and Optionee has had the
opportunity to discuss the acquisition of the Option and the Option Shares with
the Company, and Optionee has obtained or been given access to all information
concerning the Company that Optionee has requested;
 
(g) Optionee has had the opportunity to ask questions of, and receive the
answers from, the Company concerning the terms of the investment in the Option
Shares and to receive additional information necessary to verify the accuracy of
the information delivered to Optionee, to the extent that the Company possesses
such information or can acquire it without unreasonable effort or expense;
 
(h) Optionee understands that the Options have not been, and the Option Shares
issuable upon exercise of the Options will not be, registered under the 1933 Act
or any state securities laws in reliance on an exemption for private offerings,
and no federal or state agency has made any finding or determination as to the
fairness of this investment or any recommendation or endorsement of the sale of
the Option Shares;
 
(i) The Option Shares that Optionee is acquiring will be solely for Optionee’s
own account, for investment, and are not being purchased with a view to or for
the resale, distribution, subdivision or fractionalization thereof. Optionee has
no agreement or arrangement for any such resale, distribution, subdivision or
fractionalization thereof;
 
(j) Optionee acknowledges and is aware of the following:
 
(i) The Company has a history of losses. The Option Shares constitute a
speculative investment and involve a high degree of risk of loss by Optionee of
Optionee’s total investment in the Option Shares.
 
(ii) There are substantial restrictions on the transferability of the Option
Shares. The Option is not transferable except by will or the laws of descent and
distribu-tion, and any attempt to do so shall void the Option. The Option Shares
cannot be transferred, pledged, hypothecated, sold or otherwise disposed of
unless they are registered under the 1933 Act or an exemption from such
registration is available and established to the satisfaction of the Company;
investors in the Company have no rights to require that the Option Shares be
registered; there is no right of presentment of the Option Shares and there is
no obligation by the Company to repurchase any of the Option Shares; and,
accordingly, Optionee may have to hold the Option Shares indefinitely and it may
not be possible for Optionee to liquidate Optionee’s investment in the Company.
 
(iii) Unless the issuance of the Option Shares is registered, each certificate
issued representing the Option Shares shall be imprinted with a legend that sets
forth a description of the restrictions on transferability of those securities,
which legend will read substantially as follows:
 
 
 

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“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE “1933 ACT”), AND ARE ‘RESTRICTED SECURITIES’ AS
THAT TERM IS DEFINED IN RULE 144 UNDER THE 1933 ACT. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE 1933 ACT.”
 
The restrictions described in this Section 6, or notice thereof, may be placed
on the certificates representing the Option Shares purchased pursuant to the
Option, and the Company may refuse to issue the certificates or to transfer the
shares on its books unless it is satisfied that no violation of such
restrictions will occur.
 
8. Adjustment By Stock Split, Stock Dividend, Etc. If at any time the Company
increases or decreases the number of its outstanding shares of common stock, or
changes in any way the rights and privileges of such shares, by means of the
payment of a stock dividend or the making of any other distribution on such
shares payable in its common stock, or through a stock split or subdivision of
shares, or a consolidation or combination of shares, or through a
reclassification or recapitalization involving its common stock, the numbers,
rights and privileges of the shares of common stock included in the Option shall
be in-creased, decreased or changed in like manner as if such shares had been
issued and outstanding, fully paid and nonassessable at the time of such
occurrence and the Option Price shall be correspondingly decreased, increased or
otherwise changed. Whenever the number or kind of shares comprising the Option
Shares or the Option Price is adjusted, the Company shall promptly give written
notice to each holder of record of the outstanding Options, stating that such an
adjustment has been effected and setting forth the number and kind of shares
purchasable and the amount of the then-current Option Price, and stating in
reasonable detail the facts requiring such adjustment and the calculation of
such adjustment.
 
9. Reorganization And Reclassification. In case of any capital reorganization or
any reclassification of the capital stock of the Company while the Options
remain outstanding, the holder of the Options shall thereafter be entitled to
purchase pursuant to the Options (in lieu of the kind and number of shares of
Common Stock comprising Option Shares that such holder would have been entitled
to purchase or acquire immediately before such reorganization or
reclassification) the kind and number of shares of stock of any class or classes
or other securities or property for or into which such shares of Common Stock
would have been exchanged, converted, or reclassified if the Option Shares had
been purchased immediately before such reorganization or reclassification. In
case of any such reorganization or reclassification, appropriate provision (as
determined by resolutions of the Board of Directors of the Company) shall be
made with respect to the rights and interest thereafter of the holder of the
Options, to the end that all the provisions of this Option Agreement (including
adjustment provisions) shall thereafter be applicable, as nearly as reasonably
practicable, in relation to such stock or other securities or property.
 
10. Registration Rights. Optionee shall have no registration rights unless
otherwise agreed by the Company.
 
 
 

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11. Common Stock To Be Received Upon Exercise. Optionee understands that (a) the
Company is under no obligation to register the issuance of the Option Shares,
and (b) in the absence of any such registration, the Option Shares cannot be
sold unless they are sold pursuant to an exemption from registration under the
1933 Act. The Company is under no obligation to comply, or to assist the
Optionee in complying, with any exemption from the registration requirement of
the 1933 Act, including supplying the Optionee with any information necessary to
permit routine sales of the Common Stock under Rule 144 of the Securities and
Exchange Commission. Optionee also understands that routine sales of securities
made in reliance upon Rule 144 can be made only in limited amounts in accordance
with the terms and conditions of the Rule, and that in cases in which the Rule
is inapplicable, compliance with another exemption under the 1933 Act will be
required. Thus, the Option Shares will have to be held indefinitely in the
absence of registration under the 1933 Act or an exemption from registration.
 
Furthermore, the Optionee fully understands that issuance of the Option Shares
will not be registered under the 1933 Act and that, because the issuance of the
Option Shares will not be registered, the Option Shares will be issued in
reliance upon an exemption which is available only if Optionee acquires such
shares for investment and not with a view to distribution. Optionee is familiar
with the phrase “acquired for investment and not with a view to distribution” as
it relates to the 1933 Act and the special meaning given to such term in various
releases of the Securities and Exchange Commission.
 
12. Privilege Of Ownership. Optionee shall not have any of the rights of a
stockholder with respect to the shares covered by the Option except to the
extent that one or more certificates for those shares shall be delivered to him
upon exercise of the Option.
 
13. Relationship To Employment. Nothing contained in this Agreement (i) shall
confer upon the Optionee any right with respect to continuance of Optionee’s
employment by, or affiliation with, or relationship to, the Company, or (ii)
shall interfere in any way with the right of the Company at any time to
terminate the Optionee’s employment by, position or affiliation with, or
relationship to, the Company.
 
14. Notices. All notices, requests, demands, directions and other communications
(“Notices”) concerning this Agreement shall be in writing and shall be mailed or
delivered personally or sent by telecopier or facsimile to the applicable party
at the address of such party set forth below in this Section 13. When mailed,
each such Notice shall be sent by first class, certified mail, return receipt
requested, enclosed in a postage prepaid wrapper, and shall be effective on the
fifth business day after it has been deposited in the mail. When delivered
personal-ly, each such Notice shall be effective when delivered to the address
for the respective party set forth in this Section 13, provided that it is
delivered on a business day and further provided that it is delivered prior to
5:00 p.m., local time of the party to whom the notice is being delivered, on
that business day; otherwise, each such Notice shall be effective on the first
business day occurring after the date on which the Notice is delivered. When
sent by telecopier or facsimile, each such Notice shall be effective on the day
on which it is sent provided that it is sent on a business day and further
provided that it is sent prior to 5:00 p.m., local time of the party to whom the
Notice is being sent, on that business day; otherwise, each such Notice shall be
effective on the first business day occurring after the date on which the Notice
is sent. Each Notice shall be addressed to the party to be notified as shown
below:
 
(a) if to the Company: Chembio Diagnostics, Inc.
3661 Horseblock Road  
Medford, New York, 11763
Facsimile No. (631) 924-6033
Attention: Larry Siebert
 
(b) if to the Optionee: ______________________
______________________
______________________
 
Either party may change its respective address for purposes of this Section 13
by giving the other party Notice of the new address in the manner set forth
above.
 
 
 

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15. General Provisions. This instrument (a) contains the entire agreement
between the parties, (b) may not be amended nor may any rights hereunder be
waived except by an instrument in writing signed by the party sought to be
charged with such amendment or waiver, (c) shall be construed in accordance
with, and governed by the laws of New York, and (d) shall be binding upon and
shall inure to the benefit of the parties and their respective personal
representatives and assigns, except as above set forth. All pronouns contained
herein and any variations thereof shall be deemed to refer to the masculine,
feminine or neuter, singular or plural as the identity of the parties hereto may
require.
 
IN WITNESS WHEREOF, the parties have executed this Agreement on the dates set
forth below to be effective on the date set forth in the first paragraph of this
Agreement.

CHEMBIO DIAGNOSTICS, INC.

Date: ____________________    By: ___________________________

 
______________________________
Name and Title

OPTIONEE
 
Date: ____________________    ______________________________
Signature
 
______________________________
Name and Title
 
______________________________
Address
 
______________________________
City, State and Zip Code
 

 
 

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EXHIBIT A
(To Chembio Diagnostics, Inc.
Stock Option Agreement)
 
CHEMBIO DIAGNOSTICS, INC.
 
NOTICE AND AGREEMENT OF EXERCISE OF OPTION
 
The undersigned, ________________ (the “Optionee”), hereby exercises the
Optionee’s Option pursuant to the Stock Option Agreement (the “Option
Agreement”) dated as of _________________ between Optionee and Chembio
Diagnostics, Inc. (the “Company”) as to ________ shares of the $.01 par value
common stock (the “Option Shares”) of the Company at a purchase price of
$_________ per share. The total exercise price for these Option Shares is
$________.
 
Enclosed is the payment specified in Section 4 of the Option Agreement.

The Optionee understands that no Option Shares will be issued unless and until,
in the opinion of the Company, there has been full compli-ance with, or an
exemption from, any applicable registration requirements of the Securities Act
of 1933, as amended (the “1933 Act”), any applicable listing requirements of any
securities exchange on which stock of the same class is then listed, and any
other requirements of law or any regulatory bodies having jurisdiction over such
issuance and delivery. The undersigned Optionee hereby acknowledges represents
warrants and agrees to and with the Company as follows:
 
(a) The Optionee is acquiring the Option Shares for investment purposes only and
the Option Shares that Optionee is acquiring will be held by Optionee without
sale, transfer or other disposition for an indefinite period unless the transfer
of those securities is subsequently registered under the federal securities laws
or unless exemptions from registration are available;
 
(b) Optionee’s overall commitment to investments that are not readily marketable
is not disproportionate to Optionee’s net worth and Optionee’s investment in the
Option Shares will not cause such overall commitments to become excessive;
 
(c) Optionee’s financial condition is such that Optionee is under no present or
contemplated future need to dispose of any portion of the Option Shares to
satisfy any existing or contemplated undertaking, need or indebtedness;
 
(d) Optionee has sufficient knowledge and experience in business and financial
matters to evaluate, and Optionee has evaluated, the merits and risks of an
investment in the Option Shares;
 
(e) The address set forth on the signature page of this Notice is Optionee’s
true and correct residence, and Optionee has no present intention of becoming a
resident of any other state or jurisdiction;
 
(f) Optionee confirms that all documents, records and books pertaining to an
investment in the Option Shares that have been requested by Optionee have been
made available or delivered to Optionee. Without limiting the foregoing,
Optionee has received and reviewed the Company’s periodic reports as filed with
the Securities and Exchange Commission, and Optionee has had the opportunity to
discuss the acquisition of the Option and the Option Shares with the Company,
and Optionee has obtained or been given access to all information concerning the
Company that Optionee has requested;
 
 
 

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(g) Optionee has had the opportunity to ask questions of, and receive the
answers from, the Company concerning the terms of the investment in the Option
Shares and to receive additional information necessary to verify the accuracy of
the information delivered to Optionee, to the extent that the Company possesses
such information or can acquire it without unreasonable effort or expense;
 
(h) Optionee understands that the Options have not been, and the Option Shares
issuable upon exercise of the Options will not be, registered under the 1933 Act
or any state securities laws in reliance on an exemption for private offerings,
and no federal or state agency has made any finding or determination as to the
fairness of this investment or any recommendation or endorsement of the sale of
the Option Shares;
 
(i) The Option Shares that Optionee is acquiring will be solely for Optionee’s
own account, for investment, and are not being purchased with a view to or for
the resale, distribution, subdivision or fractionalization thereof. Optionee has
no agreement or arrangement for any such resale, distribution, subdivision or
fractionalization thereof;
 
(j) Optionee acknowledges and is aware of the following:
 
(i) The Company has a history of losses. The Option Shares constitute a
speculative investment and involve a high degree of risk of loss by Optionee of
Optionee’s total investment in the Option Shares.
 
(ii) There are substantial restrictions on the transferability of the Option
Shares. The Option Shares cannot be transferred, pledged, hypothecated, sold or
otherwise disposed of unless they are registered under the 1933 Act or an
exemption from such registration is available and established to the
satisfaction of the Company; investors in the Company have no rights to require
that the Option Shares be registered; there is no right of presentment of the
Option Shares and there is no obligation by the Company to repurchase any of the
Option Shares; and, accordingly, Optionee may have to hold the Option Shares
indefinitely and it may not be possible for Optionee to liquidate Optionee’s
investment in the Company.
 
(iii) Unless the issuance of the Option Shares is registered, each certificate
issued representing the Option Shares shall be imprinted with a legend that sets
forth a description of the restrictions on transferability of those securities,
which legend will read substantially as follows:
 
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE “1933 ACT”), AND ARE ‘RESTRICTED SECURITIES’ AS
THAT TERM IS DEFINED IN RULE 144 UNDER THE 1933 ACT. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE 1933 ACT.”
 
 
 

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(k) The Optionee shall report all sales of Option Shares to the Company in
writing on a form prescribed by the Company;

(l) The Optionee will not sell or dispose of Optionee’s Option Shares in
violation of the 1933 Act, or of any other applicable federal or state
securities laws; and

(m) The Optionee agrees that the Company may, without liability for its good
faith actions, place legend restrictions upon Optionee’s Option Shares and issue
“stop transfer” instructions requiring compliance with applicable securities
laws and the terms of the Option Agreement.

(n) If and so long as Optionee is subject to reporting requirements under
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “1934
Act”), Optionee recognizes that any sale by Optionee or Optionee’s immediate
family of the Company’s $.01 par value common stock may create liability for
Optionee under Section 16(b) of the 1934 Act (“Section 16(b)”). Therefore,
Optionee has consulted with Optionee’s counsel regarding the application of
Section 16(b) to this exercise of Optionee’s Option.

(o) Optionee will consult with Optionee’s counsel regarding the application of
Section 16(b) before Optionee can make any sale of the Company’s $.01 par value
common stock, including the Option Shares, and Optionee will furnish the Company
with a copy of each Form 4 filed by Optionee and will timely file all reports
that Optionee may be required to file under the federal securities laws.
The number of Option Shares specified above are to be issued in the name or
names set forth below in the left-hand column.
 

                                                          
 (Print Your Name)        Signature of Optionee

                                                          
(Optionee - Print Name of Spouse       Address
if you wish joint registration)   
                                     
                              City, State and Zip Code

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