Document:

Adaltis

LICENSE AND SUPPLY AGREEMENT

THIS MUTUAL LICENCE AND SUPPLY AGREEMENT (the “Agreement”) is entered into as of this 30th day of, August 2002 (the Effective Date), by and between Chembio Diagnostics Systems, Inc., a corporation organized and existing under the law of the State of New York, U.S.A. and having its principal place of business at 3661 Horseblock Rd., Medford, NY 11763 U.S.A. (“Chembio”) and Adaltis Inc., a corporation organized and existing under the laws of Canada, and having its principal place of business at 10900 Hamon Street, Montreal, P.Q., Canada H3M 3A2 (“Adaltis”) and shall replace any prior agreement between the Parties.

WHEREAS Adaltis has developed Peptides (as hereinafter defined) for use in diagnostic tests; 

WHEREAS Chembio is in the business of manufacturing and distributing diagnostic tests and is desirous of manufacturing and selling diagnostic tests using Peptides developed by Adaltis; 

WHEREAS Adaltis is willing to licence and supply Peptides to Chembio under the terms and conditions set in this Agreement;

NOW, THEREFORE, in consideration of the mutual covenants set forth herein, the Parties do agree as follows:

1. Definitions.       As used in this Agreement, the following terms, whether used in the singular or plural, shall have the respective meanings set forth below:

(a)“Affiliate” of a Party shall mean any individual or entity directly or indirectly controlling, controlled by or under common control with, that Party. For purposes of this Agreement, the direct or indirect ownership of over fifty percent (50%) of the outstanding voting securities of an entity, or the right to receive over fifty percent (50%) of the profits or earnings of an entity shall be deemed to constitute control. Such other relationship as in fact gives such individual or entity the power or ability to control the management, business and affairs of an entity shall also be deemed to constitute control. 

(b)“Information” shall mean the proprietary technology, know-how, and information, in whatever form and whether or not subject to any registration in any country or territory in the Territory, owned by, used by or licenced to either Party for the production, sale, and marketing of the diagnostic tests referred to in the Agreement. “Adaltis Information” shall mean Information, in whatever form and whether or not subject to any registration in any country or territory in the Territory, owned by, Adaltis (other than by Chembio) including, without limitation, all proprietary technology, know-how, and information relating to the Peptides. “Chembio Information” shall mean Information, in whatever form and whether or not subject to any registration in any country or territory in the Territory, owned by Chembio (other than by Adaltis), including, without limitation, all proprietary technology, know-how, and information relating to the diagnostic tests and components thereof manufactured by or on behalf of Chembio.

(c)“Party” shall mean Chembio or Adaltis and when used in the plural, shall mean Chembio and Adaltis.

(d)“Third Party” shall mean a Person other than the Parties and their respective Affiliates,

(e) “Patent Rights” shall mean the patents and patent applications as specified in Exhibit “A” hereto, any addition, division, continuation, continuation-in-part, or foreign counterpart of such applications, any patent issuing therefrom, any substitution, extension, or reissue thereof, and any other patent hereafter issued to Adaltis covering the Peptides or Licenced Products.

(f)“Peptides” shall mean the cyclic HIV-1 gp41 peptide BIOTIN-LYS-BCH-408 (BCH-2360), HIV-1 gp120 peptide BIOTIN-LYS-BCH-132 (BCH-2362) and/or HIV-2 gp36 peptide BIOTIN-LYS-BCH-202c[Lys-1] (BVH-2361) which are identified and specified in Exhibit “B” hereto. 

(g)“Person” shall mean an individual, partnership, corporation, business, trust, joint venture, or other entity of a similar nature.

(h)“Licenced Products” shall mean the HIV peptide sequences licenced to Chembio under this Agreement.

	
“ Chembio Products” shall mean those rapid in-vitro immuno-diagnostic test that: 

	
are to be used solely for the diagnosis of HIV (or HIV and another disease/condition), manufactured, marketed, distributed, and/or sold by or on behalf of Chembio; and 

	
contain, incorporate, or employ any of the Peptides. 

Chembio Products include, but are not limited to, those products described in Exhibit “C” hereto.

(j)“Prime” means a fluctuation rate of interest per annum equal to the rate published in the Wall Street Journal from time to time as the prime or base rate for loans to commercial borrowers. The prime rate will change at the same time and to the full extent of any changes in the prime rate as published in the Wall Street Journal.

(k)“Specifications” shall mean, when referring to Peptides, those specifications set forth in Exhibit “D”.

(l)“Territory” shall mean all countries and territories of the world with the exception of Canada.

(m)“Net Sales” shall mean the gross amount charged by Chembio and/or its Affiliates on sales of Chembio Products, including the gross amount of all revenues, receipts, monies and the fair market value of all other consideration directly or indirectly charged, collected or received, whether by way of cash or credit or nay barter, benefit, advantage or concession, less the following:

(i)    customary trade, quantity, and/or cash discounts, rebates and/or commissions to non-affiliated brokers or agents to the extent actually allowed and taken;

(ii)amounts actually repaid or credited by reason of rejection or return;

(iii)to the extent separately stated on purchase orders, invoiced or other documents of sale, any taxes or other governmental charges actually levied on the sale, transportation, delivery, or use of a Chembio Product which is paid by or on behalf of Chembio; and

(iv)outbound transportation costs actually prepaid or allowed by Chembio and the actual cost of insurance in transit paid by Chembio, not to exceed ten percent (10%) of the gross amount charged per invoice.

In cases of transfer of a Chembio Product to an Affiliate, Net Sales shall be based on the final sale of the Chembio Product to an independent third Person; it being understood that Net Sales shall not be calculated on any Chembio Products actually used by Chembio and/or its Affiliates in internal research and development, clinical trial and regulatory filing, to the extent Chembio and/or its Affiliates do not receive any consideration for such Chembio Products. In the event that Chembio or an Affiliate receives non-monetary consideration for any Chembio Product or otherwise transfers a Chembio Product for consideration that is less than fair market value, Net Sales shall be calculated based on the fair market value of such consideration. “Net Sales” shall also include any and all consideration received by Chembio in consideration for the grant of distribution rights in Chembio Products, which consideration shall include, without limitation, equity in a third Person (the value of which was not otherwise paid for by Chembio), distribution, fees, milestone fees, or other payments, regardless of how characterized. Any non-monetary compensation shall be afforded a net present value as a the time of receipt of such compensation, as calculated by the Parties, acting reasonably and in good faith, for the purpose of determining Net Sales hereunder. Without limiting the generality of the foregoing, consideration received by Chembio or its Affiliates from a distributor of Chembio Products shall include: 

	
the actual sale price of the Chembio Product (i.e., the price charged by Chembio or its Affiliate to the distributor, less the deductions provided for above): and

	
any distribution fee or other direct or indirect payments paid by the distributor to Chembio or its Affiliates for the right to distribute any Chembio Product.

(n)“Dollars” shall mean (and any reference to “$” herein shall be to) lawful currency of the United States of America.

2. Grant.   

(a) Adaltis hereby grants to Chembio a non-exclusive licence during the term of this Agreement, to possess and use the Peptides in order to make, have made, use, and sell Chembio Products throughout Chembio’s Territory, namely all countries and territories of the world with the exception of Canada. Chembio shall not have the right to sell or allow its distributors to sell Chembio Products in Canada, with Chembio’s label or any other label.

(b)Except as provided in Subsection 2(c), Chembio shall not have the right to extend or sublicence any rights granted hereunder, nor to possess or use the Peptides and/or Patent Rights for any reason other than as specifically granted hereunder in Subsection 2 (a).

(c)Chembio shall have the right to sublicence such rights solely to its Affiliates, if prior approved in writing by Adaltis, on a country-by-country basis. In case Chembio desired to grant a sublicence to any of its Affiliates, which has been previously approved in writing by Adaltis, the respective sublicencee will report separately to Adaltis and pay the royalty due directly to Adaltis.

(d)It is understood that Chembio bears sole and complete responsibility for proper product registration with regulatory authorities within any jurisdiction where it intends to manufacture, sell, distribute or appoint distributors. In obtaining such registration or in any promotion of its own products, Chembio will refrain from referring in any fashion to Adaltis product.

3. Supply and Purchase.    During the term of this Agreement,

(a)Adaltis shall supply the Peptides to Chembio on a continuous basis and Chembio shall purchase the Peptides from Adaltis under the terms and conditions set forth herein; 

(b)Subject to Subsection 6 (b) and to Section 7 hereof, Chembio shall purchase exclusively from Adaltis its total requirement of Peptides for use in Chembio Products, manufactured by or on behalf of Chembio. The Peptide purchase prices are stated in Exhibit “E” and may vary from time to time as provided for in such Exhibit “E”. 

(c)The Parties hereto acknowledge that money damages would be an inadequate remedy for any breach of Subsection 3 (b) and that such a breach may cause irreparable harm to the other Party. Therefore, in the event of a breach or threatened breach of this Subsection 3(b), a Party may, in addition to other rights and remedies that may be available to it under this Agreement, apply to any court of competent jurisdiction to obtain equitable and injunctive relief in order to enforce, or prevent any violations of, the provisions of this Subsection 3(b);

4. Forecast of Demand/Firm Order.

 

Within thirty (30) days after the Effective Date, Chembio shall provide Adaltis with its first non-binding annual forecast for Peptides. Subject to Subsection 7 (a) hereof, any order for Peptides hereunder shall be placed by Chembio at least three (3) months in advance of the desired delivery date for such Peptides. Once accepted by Adaltis, any order given hereunder shall become firm and binding on the Parties (an “Order”). The first Order of Peptides shall be accompanied by a rolling forecast for the following six (6) months, to be updated by Chembio on a quarterly basis. All Orders for Peptides shall be in writing and shall be subject to the terms hereof, and may not be altered by any additional or differing terms in Chembio’s purchase order or otherwise, without the prior written consent of the Parties.

5. Specifications, Testing Methods and Packaging.   The Peptides shall be prepared, tested, and packaged in accordance with the Specifications as set forth in Exhibits “D” (1), (2) and (3).

6. Payments and Reporting.

(a)Chembio will pay in full for Orders via wire transfer within forty-five (45) days of shipment by Adaltis. Payment shall be made by Chembio to the bank account designated herein by Adaltis, to wit:

       Royal Bank of Canada

       3100, Boulevard Le Carrefour

       Laval (Quebec) Canada

H7T 2K7

Bank # : 003

Acct. No. 407-881-2

Transit No. : 02301

Chase Manhattan Bank New York

Aba # : 021000021

Swift No.: ROYCCAT2

or to such other account as may be designated in writing by Adaltis from time to time. All Payments to be made pursuant to this Agreement shall be made by Chembio to Adaltis in US dollars in accordance with the procedures established in this Section 6. Late payments shall bear interest at Prime plus three percent (Prime +3%).

       

(b)Chembio acknowledges that the price of Peptides is subject to fluctuation and that consequently, the price set in Exhibit “E” may be adjusted from time to time. Any increase to Adaltis in the cost of the Peptides in comparison of such cost at the Effective date will be passed along to Chembio and translates into an equivalent increase in the price per milligram set in Exhibit “E”. It is understood that this increase is limited to direct cost increase and shall not include additional profit or administrative charges in favor of Adaltis. Such price adjustment will take effect immediately upon written notice given by Adaltis to Chembio and will apply to any Order placed by Chembio after such notice of price adjustment .

	
During the 10 year term of this Agreement, Chembio shall pay to Adaltis a royalty of ten percent (10%) of Net sales realized throughout the Territory.

	
The royalty due hereunder shall be payable to Adaltis within sixty (60) days from the end of December and the end of June of each calendar year. Together with each royalty payment Chembio shall submit to Adaltis a written statement indicating for each royalty period the Net Sales of Chembio Products and the royalty payable thereon to Adaltis.

	
Chembio shall keep such records as are required to accurately determine under generally accepted accounting principles the Net Sales of Chembio Products and the royalty due to Adaltis under this Agreement. In addition, Chembio shall maintain adequate records enabling the reconciliation of the sales records (in terms of units sold) of Chembio Products to the purchase from Adaltis (in terms of units of Peptides purchases) of the Licenced Products. Such records that relate to the Net Sales of Chembio Products shall be retained by Chembio and shall be made available for reasonable review and/or audit during business hours by Adaltis in accordance with the provisions of Section 8, by an independent certified public accountant appointed by Adaltis and reasonably acceptable to Chembio; for the purposes of verifying Chembio’s accounting reports hereunder and determining the correctness of such reports and payments to Adaltis. Said accountant shall protect the confidentiality of Chembio’s Information, execute any confidentiality agreement reasonably requested by Chembio, and abide by Chembio’s reasonable security regulations while on Chembio premises. Such records need not be retained more than one (1) year after the completion of an audit, nor more than five (5) years from the date of their origin, nor more than one (1) year after the date of termination of this Agreement. Royalty payments not audited within five (5) years shall be conclusively deemed correct and not subject to audit or adjustment.

	
All royalties and payments to be made pursuant to this Agreement shall be paid by Chembio to Adaltis in Dollars in accordance with the procedures established in this Section 6. Monetary conversions into US Dollars shall be made at the exchange rate in force on the last business day of the period for which the royalties are being paid as reported by the Wall Street Journal, or on another basis mutually agreed upon by the Parties in writing.

	
USA withholding taxes (if any) levied on account of royalties accruing under this Agreement shall be deducted from such royalty and shall be paid by Chembio to the proper taxing authority, with proof of payment being sent by Chembio to Adaltis. No other withholding payments for tax purposes or otherwise shall be made by Chembio.

 

7. Delivery. 

(a) All sales of Peptides shall be FOB (Incoterms, ICC ed. 2000) Adaltis’ Montreal location, or such alternative site of principal manufacture, located in Canada or the continental United States, as notified to Chembio by Adaltis in writing. Should Adaltis ship Peptides from any site outside the continental United States or Canada, Adaltis shall pay the difference in such shipping costs above and beyond the current shipping costs of the same volume of Peptides from the site of principal manufacture in the continental United States or Canada. Adaltis shall ship any Orders for quantities of Peptides that are less than or equal to twenty milligrams (20mg) within ninety (90) days of Adaltis’ acceptance of such Order. Adaltis shall ship any Order of Peptides that are greater than twenty milligrams (20mg) within ninety (90) to one hundred twenty (120) days of Adaltis’ acceptance of such Order.

	
If Adaltis cannot deliver any Order in full within the stipulated period, then it shall so notify Chembio and the Parties shall meet to negotiate a mutually satisfactory solution provided that Chembio may elect, if the stipulated delivery period has been exceeded by ten (10) days and if prior written notice is given to Adaltis, to purchase peptides from third Persons, or to use Chembio peptides, in each case, to make up any shortfall between the original, unfulfilled Order and the part of that original Order that was fulfilled for use in the Chembio Products. Adaltis shall not bring any infringement action against Chembio for any purchase, manufacture, or use of Chembio or third-party peptides provided that the purchase, manufacture, or use of the peptides is in accordance with this Subsection 7(b). 

	
Adaltis shall make the shipment of the Peptides in packaging suitable for transportation of products such as the Peptides.

(d)At the time of delivery of the Peptides, Adaltis shall provide Chembio with a certificate of analysis in the form set forth in Exhibit “F” hereto.

 

8. Audit.   Chembio shall maintain complete and accurate record to support and document the use of Peptides. Such records shall be retained for a period of at least five (5) years. Adaltis shall have the right to conduct, upon reasonable advance notice and during normal business hours, an audit of the appropriate records of Chembio to verify Chembio’s compliance with this Agreement. Said auditors shall protect the confidentiality of Chembio’s information. Such audit shall be conducted at Adaltis’ cost, unless any such audit indicated an underpayment equaling or exceeding ten percent (10%) of the payments due in respect of any given reporting period under the terms of Section 6, in which case Adaltis’ out-of-pocket costs of such inspection, along with the full amount of the underpayments and interest thereon at an annual rate of Prime plus three percent (Prime+3%), accruing from the date the payment was first due, shall be promptly paid by Chembio to Adaltis; provided however, that if Chembio objects to the results of the audit, the matter shall be resolved in the manner described in Section 25 of this Agreement.

	
Inspection and Testing; Records: Recall.

	
Each shipment of Peptides shall be subjected to a quality control inspection by Adaltis, as standard and customary for the industry. Adaltis shall number each shipment with an Adaltis lot number that is traceable to raw materials and/or components used in the manufacture of Peptides.

	
Upon receipt of the Peptides, Chembio shall inspect the quantity and appearance of said Peptides. Should Chembio find any defect in the appearance of the Peptides and/or quantity of the Peptides between the ordered and the delivered Peptides, Chembio shall notify Adaltis thereof, in writing, within ten (10) days after Chembio’s receipt of such Peptides. If Adaltis receives Chembio’s notice with regard to a shortage in quantities, weight or with regard to defects in Specifications, Adaltis shall promptly take measures to remedy the situation by, as the case may be, supplementing the initial shipment with sufficient Peptides so as to satisfy that initial order or substituting the non-conforming Peptides with Peptides that meet the Specifications.

	
Adaltis shall maintain adequate records of Peptide manufacture by batch and lot, including test and laboratory observation data, and will provide copies of such records to Chembio as requested, as reasonably necessary in connection with any Chembio Product recall.

	
Limited Warranty; Indemnification; etc. 

	
Adaltis warrants that the Peptides delivered to Chembio conform to the Specifications

	
at the time of delivery; and 

	
for the duration of the shelf life as stipulated in the Specifications, within the time frame allotted and if handled and stored in accordance with the Specifications and other instructions provided by Adaltis.

	
In the event that the Peptides do not conform to such Specifications and such failure does not result from the fault, negligence or wilful misconduct of Chembio or any of its Affiliates or their directors, officers, agents or employees, Adaltis shall replace them immediately upon written request by Chembio, as set forth in Section 9 above. In the event that there is a disagreement between the Parties as to the conformity of the Peptides to the Specifications, a neutral third Person, mutually agreed upon, shall test the Peptides. If the Parties are not able to agree on a neutral third Person within fifteen (15) days, such third Person shall be selected by the presiding judge of the trial court in the jurisdiction selected by the first Party to file an action requesting such selection. The Party whose assertion as to the conformity or non-conformity of the Peptides is not confirmed by such neutral review shall bear the costs of carrying out such review. Chembio shall return the non-conforming Peptides at its own cost, unless, upon review as outlined in the Subsection 10 (a), it is determined that the non-conforming Peptides do not meet Specifications. In such event, in addition to replacing the non-conforming Peptides Adaltis will reimburse Chembio for the costs of returning the non-conforming Peptides.

	
Chembio has the expertise and skill in the technical areas with respect to the Chembio Products to make (and has made) its own evaluation of the capabilities, safety, utility and commercial application of the Peptides in the Chembio Products. Accordingly, ADALTIS MAKES NO REPRESENTATION AND EXTENDS NO CONDITION OR WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO THE SUITABILITY OF THE PEPTIDES, FOR USE IN THE CHEMBIO PRODUCTS, OTHER THAN AS SPECIFICALLY PROVIDED IN THE IMMEDIATELY PRECEDING PARAGRAPH; AND EXPRESSLY DISCLAIMS ANY WARRANTIES OF MERCHANTABILITY, SATISFACTORY QUALITY, FITNESS FOR A PARTICULAR PURPOSE OR NONINFRINGEMENT OF THE INTELLLECTUAL PROPERTY RIGHTS OF THIRD PERSONS AND ANY OTHER IMPLIED WARRANTIES WITH RESPECT TO THE CAPABILITIES SAFETY, UTILITY OR COMMERCIAL APPLICATION OF THE PEPTIDES AND/OR THE PATENT RIGHTS. Without limiting the generality of the foregoing Adaltis does not warrant that any of the Patent Rights is or will be valid or that manufacture or dealing in the Peptides or the Chembio Products is not or will not in the future constitute an infringement of the proprietary rights of third Persons. Chembio shall not grant any warranty to any other Person that exceeds the warranty for the Peptides that Adaltis grants to Chembio hereunder without indemnifying Adaltis for such additional warranty.

	
Chembio shall indemnify and hold Adaltis, its directors, officers, agents or employees, or any of its Affiliates or their directors, officers, agents or employees (collectively, the “Adaltis Parties”; individually, a “Adaltis Party”) harmless from any and all liability, damage, loss, cost or expense resulting from any claims or suits brought against any Adaltis Party by any third person which arise solely from Chembio’s use of the Peptides and/or Chembio’s manufacture, handling or sale of Chembio Products incorporating the Peptides, unless such liability, damage, loss, cost or expense is directly attributable to any fault, negligence, or wilful misconduct of a Adaltis Party or to the failure of the Peptides to conform to Specifications or the warranties made in this Agreement.

	
In the event that the use of any Peptides in the Chembio Products infringes or would infringe any third Person patent rights, the Party first becoming aware of same shall notify the other and, subject to Subsection 10(c), the Parties shall discuss the matter and decide on a course of action. Should any such infringement claim or suit be made with regard to the Peptides, Adaltis shall repurchase from Chembio, at the Chembio’ peptide cost, all the Peptides currently in Chembio’s stock that have not been used in Chembio Products. Adaltis may then, at its sole discretion, elect to 

(i)    change the Peptides so as to make them non-infringing ; 

(ii)    obtain rights to the third Person peptides and make such rights available to Chembio; or

(iii)   if neither of the foregoing options is commercially feasible, terminate this Agreement.

	
In the event that either Party determines that a third Person (other than a permitted licencee, transferee or distributor of either Party) is making, using, or selling a product or process that may infringe a Patent Right, it will promptly notify the other Party in writing.

	
Adaltis shall be responsible for, in its sole discretion, obtaining a discontinuance of any infringement or bringing suit against a third Person infringer with respect to any Patent Rights. Notwithstanding anything contained herein to the contrary, Adaltis shall have the right, but not the obligation, to bring such a suit. Adaltis shall bear all the expenses of any such suit brought by it and shall retain any and all recovery and damages therefrom. Chembio agrees to be named as a co-plaintiff if Adaltis brings suit and shall cooperate with Adaltis (with any reasonable, receipted out-of-pocket expenses being reimbursed to Chembio by Adaltis to the extent of such expenses to be previously approved in writing by Adaltis) in any such suit for infringement of a Patent Right brought by Adaltis against a third Person (which shall include providing any necessary assistance and executing any necessary documents), and shall have the right to consult with Adaltis and to participate in and be represented by independent counsel in such litigation at its own expense. Except as otherwise specifically provided herein, Adaltis shall have control over any such suit, and decisions as to settlement, methods and/or terms and conditions for resolving the suit shall be made by Adaltis (after consultation with Chembio, should Chembio be joined as a party to such suit). Adaltis shall incur no liability to Chembio as a consequence of such litigation or any unfavorable decision resulting therefrom. In the event Adaltis chooses not to prosecute an infringement as aforesaid within ninety (90) days after learning of the infringement. Chembio shall have the right to do so. In such event, Adaltis shall cooperate with Chembio (which shall include providing any necessary assistance and executing any necessary documents, with any reasonable, receipted out-of-pocket expenses being reimbursed to Adaltis by Chembio to the extent of such expenses to be previously approved in writing by Chembio) and Chembio shall retain any and all recovery and damages from such suit. No settlement, consent judgment or other voluntary final disposition of the suit may be entered into without the prior written consent of Adaltis.

	
With respect to any claim by a Party for indemnification, the Parties expressly agree that the liability of such Party to the other Party shall be limited by this Agreement or otherwise at law or equity to direct damages only and in no event shall a Party be liable for lost profits, cover damages, punitive, exemplary or consequential damages.

11. Insurance.   The Parties shall each procure and maintain in full force and effect during the Initial Term of this Agreement and any Renewal Term thereto, as defined in Section 13 hereof, a product liability insurance policy with a minimum coverage of five million dollars ($5,000,000 US) (a “Policy”) insuring against liability and claims for injury, death or property damage which arise out of or relate to the manufacture for sale to Chembio of Peptides (in the case of Adaltis) and which arise out of or relate to the manufacture and sale of Chembio Products by Chembio (in the case of Chembio). Proper evidence, in the form of an insurance certificate, clearly indicating terms and conditions of the Policy, shall be sent by each of the Party’s insurer and/or insurance broker, to the other Party. If the Policy of a Party is not renewed nor replaced within 30 days after the expiration or termination of such Policy, the Party whose Policy is not replaced nor renewed shall communicate, within 15 days after the 30 days previously mentioned, such event to the other Party, who will have the option of immediately terminating this Agreement.

 

12. Confidentiality. 

 

(a) The Parties acknowledge that, as the result of their performance of this Agreement, they will exchange Information as defined in Section 1 (b) herein. Each Party agrees that it shall hold confidential all such Information, in whatever form and whenever received, and whether or not the subject of any issued or pending patent, copyright or other registration, and shall use the Information solely to perform its obligations under this Agreement. Each party shall not otherwise use in any manner whatsoever or disclose to any third Persons the Information, with the exception of those employees, agents or third Persons who have a need to use the Information perform this Agreement, and then only after receiving a signed confidentiality agreement from said employees, agents or third Persons to keep the Information confidential to the same extent as required of each Party herein. Each Party shall take reasonable actions to insure that its employees or agents or any third Persons to whom such Information is disclosed do not breach their confidentiality agreements and that the Information is not otherwise used or disclosed in any manner inconsistent with its obligations pursuant to this Section 12. Each Party shall remain ultimately liable for any breach of this Section 12 by any of its employees or agents or third Persons to whom it discloses any Information, including any breach by any such employee, agent or third Person of its signed confidentiality agreement.

(b) The obligations imposed by this Section 12 shall not apply with respect to any Information received by either Party from the other which (i) was in the receiving Party’s possession prior to the execution of this Agreement and was not subject to an existing confidentiality obligation owed to a third Person; (ii) was publicly available prior to the execution of this Agreement or otherwise becomes publicly available thereafter through no fault of the receiving Party; (iii) is disclosed to the receiving Party in good faith by third Person who has the right to make such disclosure and who is not bound to keep such information confidential; (iv) is independently developed by an employee officer or agent of the receiving Party and who, prior to such development, did not have access to and did not receive the Information; provided that the Party claiming independent development shall have the burden of establishing such claim by clear and convincing evidence; or (v) the receiving Party is required by a court or other governmental authority of competent jurisdiction to disclose.

(c) Disclosure of certain of the Information in a publication, such as a patent, or by otherwise placing it in the public domain, shall not relieve either Party of its obligations hereunder with respect to any other portion of the Information not otherwise specifically disclosed in or fairly ascertainable from such publication or disclosure.

(d) This Section 12 shall survive the expiration or earlier termination of this Agreement and thereafter shall be binding upon the Parties to the maximum extent permitted by applicable law, until such time as the Information falls within one of the exceptions enumerated in Subsection 12 (b).

 

13.Term and Termination.

	
This Agreement shall commence as of the Effective Date and shall remain in effect for a period of the (10) years thereafter unless earlier terminated by either Party pursuant to this Section 13. This Agreement shall thereafter be renewed automatically for additional terms of 10 years each (the “Renewal Term” or “Terms”), unless either Party gives the other a least ninety (90) days prior written notice of its intent not to renew the Agreement upon the expiration of the Initial Term or any Renewal Term, as the case may be. Each Renewal Term shall be subject to the termination provisions of this Section 13.

	
Either Party may terminate this Agreement during the Initial Term or any Renewal Term for “cause”. Cause shall include, but shall not be limited to (i) a material breach of this Agreement which remains uncorrected for a period of thirty (30) days from the receipt by the breaching Party of written notice of such breach, said notice to contain details of the alleged breach; (ii) the insolvency of either Party, the filing of a voluntary or involuntary petition in bankruptcy or the assignment of substantially all of the assets of either Party for the benefit of its creditors; or (iii) a good faith decision by Chembio that the continued use of the peptides will violate a third Person’s patent or other intellectual property rights. Subject to Section 16, Adaltis may, at its sole discretion and upon simple notice, terminate this Agreement upon: (I) the “change of control” of Chembio as the term “control” is defined in Subsection 1 (a) where the change of control is effected between Chembio and a competitor of Adaltis; (II) the sale of all or substantially all of the assets of Chembio where such sale is effected between Chembio and a competitor of Adaltis. For purposes of this Subsection 13 (b), “competitor” shall mean a third Person whose commercial activities consist of the manufacturing, marketing and distribution of infectious disease in-vitro immuno-diagnostic test currently sold by Adaltis. 

14. Effect of Termination.    Upon expiration or termination of this Agreement pursuant to Section 13 hereof, all licences granted herein shall terminate immediately; provided that:

 

(a) Chembio may complete the manufacture and distribution of products that have been partially manufactured as of the date of termination; 

(b) Chembio may continue to sell from inventory any products in which the Peptides are incorporated, contained or employed as of the date of termination;

(c)Chembio shall return all unused Peptides not required for the purpose of Subsection 14 (a), as well as all copies of Adaltis Information, in whatever form, in Chembio’s possession or under its control, including any copies made after receipt of such Information. Adaltis shall refund the purchase price of such unused Peptides to Chembio provided that they have been properly stored by Chembio, are not damaged and have a remaining shelf life equivalent to at least fifty percent (50%) of the shelf life indicated in the Specifications. Chembio may retain one (1) copy of Adaltis Information for its legal advisors for the purpose of determining the extent of its continuing obligations and to complete the manufacture and distribution of any Chembio Products which were partially manufactured at the date of termination;

 

15. Relationship of the Parties.   This Agreement shall not be construed to make either Party (or its principals, officers, employees or agents) an agent of or joint venturer with the other Party. Neither Party shall have any right or authority whatsoever to incur any liability, obligation (express or implied) or otherwise act in any manner in the name or on behalf of the other, or to make any promise, warranty or representation binding on the other except as specifically permitted herein. 

 

16. Assignment. Except as otherwise specifically provided for herein, neither Party may assign its rights or delegate its duties hereunder without the express prior written approval of the other Party, and any attempted assignment of rights or delegation of duties in contradiction to this Section 16 shall be void and of no effect. Notwithstanding the foregoing, either Party may, without the consent of the other Party, assign any of its rights or delegate any of its duties pursuant to this Agreement, in whole or in part, to an Affiliate if :

	
in connection with the transfer or sale of all or substantially all of its assets related to the division or the subject business relation hereto, or 

	
in the event of a change in control of the said Party, as the term “control” is defined in Subsection 1(a), 

except, in all cases, where such assignment or delegation would be from Chembio to a “competitor” of Adaltis, as such term is defined and qualified in Subsection 13(b) hereof. This Agreement shall be binding upon and inure to the benefit of each Party and its permitted successors and assigns.

 

17. No Amendment; No Waiver. 

	
This Agreement may not be amended, modified or otherwise changed in any respect whatsoever without the prior written approval of both Parties hereto.

	
No delay or omission or failure to exercise any right or remedy provided for herein shall be deemed to be a waiver thereof or acquiescence in the event giving rise to such right or remedy, but every such right and remedy may be exercised from time to time and so often as may be deemed expedient by the Parties exercising such right or remedy.

18. Headings.       The Section headings herein are for convenience only and shall not be deemed to affect in any way the language of the provisions to which they refer.

 

19. Severability.    In the event that any of the terms of this Agreement are in conflict with any rule or law or statutory provision or otherwise are unenforceable under the laws or regulations of the government or subdivision thereof having jurisdiction over matters related to this Agreement, such terms shall be deemed stricken from this Agreement. Such invalidity or unenforceability, under reserve of Subsection 13 (c), shall not invalidate any of the other terms of this Agreement and this Agreement shall continue in full force and effect.

 

20. Notice.   Any notice or communication given under the provisions of this Agreement shall be made in writing by registered airmail, facsimile (fax) or hand delivery. Such notice shall be deemed given upon reception of a mailing or a facsimile, or when personally delivered in the case of hand delivery. Any notices and communications shall be given as follows:

 

If to Chembio:       Larry Siebert

President & CEO

Chembio Diagnostic Systems, Inc. 
3661 Horseblock Road

Medford, NY 11763

If to Adaltis:       Paulo Bouça

       Corporate VP Business Development

       Adaltis Inc

       10900, Hamon Street

       Montreal (Quebec), Canada H3M 3A2

       Fax: (514) 335-9919

            

21. Entirety.       This Agreement and the Exhibits hereto shall supersede and take the place of all other understandings and agreements if any, between the Parties with respect to the subject matter hereof. 

22. Force Majeure.    Failure of any party to perform its obligations under this Agreement (except the obligation to make payments when properly due) shall not subject such Party to any liability or place it in breach of any term or condition of this Agreement to the Party if such failure is caused by any cause beyond the reasonable control of such non-performing Party, including without limitation acts of God, fire, explosion, flood, drought, war, riot, sabotage, embargo, strikes or other labor trouble, failure in whole or in part of suppliers to deliver materials, equipment or machinery, interruption of or delay in transportation, a national health emergency or compliance with any order or regulation of any government entity acting with color of right; provided however, that the Party affected shall promptly notify the other Party for the condition constituting force majeure as defined herein and shall exert reasonable efforts to eliminate, cure and overcome any such causes and to resume performance of its obligations with all possible diligence. If a condition constituting force majeure as defined herein exists for more than ninety (90) consecutive days, the Parties shall meet to negotiate a mutually satisfactory solution to the problem, if practicable.

23. Continuing Obligations.    Termination of this Agreement shall not affect the rights or obligations of any Party that have accrued prior to the effective date of such termination. The provisions of Sections 6 (Payments and Reporting), 10 (Limited Warranty; Indemnification), 11 (Insurance), 12 (Confidentiality), 14 (Effect of Termination), 16 (Assignment) and this Section 23 shall survive termination of this Agreement.

24. Governing Law.   Subject to Section 25 hereof, this Agreement shall be governed by and construed in accordance with the laws of the Province of Quebec and the laws of Canada applicable therein.

25. Disputes.    The Parties shall mutually consult in good faith in an attempt to settle amicably in the spirit of co-operation any and all disputes arising out of or in connection with this Agreement or questions regarding the interpretation of the provisions hereof. Each dispute arising out of or in connection with this Agreement or question regarding the interpretation hereof which cannot be settled amicably within two (2) months from the date of notification of either Party to the other of such dispute or question, which notice shall specify the details of such dispute or question, shall be finally settled by binding arbitration, in English, in accordance with the Rules of the American Arbitration Association, by one (1) arbitrator appointed in accordance with such Rules. If the Parties cannot agree on the arbitrator to be so appointed, each Party shall be entitled to appoint one (1) arbitrator, and the two (2) arbitrators so appointed shall agree upon a third. The arbitrator(s) shall have the technical expertise required to understand and arbitrate the dispute. Such arbitration shall be held in Montreal, Quebec, if initiated by Chembio, and in Medford, New York, if initiated by Adaltis. The costs of any arbitration, including administrative and arbitrators’ fees, shall be shared equally by the Parties and each Party shall bear its own costs and attorneys’ and witness’ fees, provided however, that the prevailing Party, if determined by the arbitrator(s), shall be entitled to an award against the other Party in the amount of the prevailing Party’s costs (including arbitration costs) and reasonable attorneys’ fees. The arbitration carried out hereunder shall apply to the exclusion of regular legal means, provided that the rights of the Parties in urgent situations in which time is of the essence to obtain proper remedies in courts of Law or equity shall remain unimpaired. There shall be no appeal from the decision or findings of the arbitrator(s), which shall be final and binding upon the Parties and may be entered in any court having proper jurisdiction. 

26. Language.    The Parties have expressly required that this Agreement, all ancillary documents and all disclosures hereunder shall be in the English language. Les Parties aux présentes ont expressément demandé que ce contrat ainsi que tout document accessoire y afférant ainsi que toute divulgation de renseignements confidentiels soient rédigés en langue anglaise.

 

27. Publicity.    Neither Party shall issue any press release or other public announcement relating to this Agreement or any activities related hereto without the prior written consent of the other Party, except where such press release or public announcement may be required by law, in which event the Parties shall promptly co-operate in preparing and drafting such press release or public announcement to meet statutory requirements.

28. Counterparts.    This Agreement may be executed in counterparts. Delivery of a signed copy by fax will be deemed equivalent to delivery of a signed original.

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives as of the day and year first above written.

CHEMBIO DIAGNOSTIC SYSTEMS, INC       ADALTIS INC.

By:________________________        By:_________________________________   

Larry Siebert                     Paulo Bouça

President & CEO                  Corporate VP Business DevelopmentSSI

LICENSE AND SUPPLY AGREEMENT

This License and Supply Agreement (this ”Agreement”) is entered into as of February 3rd,, 2004 (the “Effective Date”) by and between Chembio Diagnostics Systems, Inc., and its Affiliates (“Chembio”) a corporation incorporated under the laws of Delaware and having its registered address at 3661 Horseblock Road, Medford, NY 11763, USA and Statens Serum Institut (“SSI”), a governmental enterprise under the laws of the Kingdom of Denmark with offices at 5, Artillerivej, 2300 Copenhagen S, Denmark.

RECITALS

WHEREAS, SSI possesses intellectual property rights to and has considerable know-how in the development and production of certain antigens to be used for the diagnosis of human and certain veterinary Tuberculosis;

WHEREAS, SSI is a manufacturer of biologicals and certain recombinant proteins to be used for diagnosis of human and certain veterinary Tuberculosis;

WHEREAS, Chembio wishes to further develop its Lateral Flow Immunoassay for the diagnosis of human and certain veterinary Tuberculosis;

WHEREAS, SSI desires to license certain intellectual property rights and know-how to Chembio, and Chembio is willing to receive and undertakes to utilize such license, for use in the diagnosis of human and certain veterinary Tuberculosis, on the terms and conditions set forth below;

WHEREAS, SSI desires to supply certain antigens to Chembio, and Chembio is willing to receive and undertakes to utilize such antigens for use in the diagnosis of human and certain veterinary Tuberculosis, on the terms and conditions set forth below;

WHEREAS, for reasons of quality assurance of Licensed Products, it is desirable that Chembio purchase said SSI antigens exclusively from SSI for use therein; 

WHEREAS, for reasons of quality assurance of Licensed Products, it is essential that SSI manufacture and supply to Chembio alpha-crystallin_MPT83, for use therein; 

NOW, THEREFORE, for and in consideration of the mutual observance of the covenants hereinafter set forth and other good and valuable consideration, the receipt of which is hereby acknowledged, SSI and Chembio agree in good faith as follows: 

1.DEFINITIONS

1.1.“Affiliate” shall mean any business entity that Controls, is controlled by, or is under common control with another corporation or other business entity. The direct or indirect ownership of at least fifty percent (50%) or, if smaller, the maximum allowed by applicable law, of the voting securities or an interest in the assets, profits or earnings of any such business entity, or the ability to dominate or direct decisions through management or directors or otherwise in any such business entity shall be deemed to constitute “Control” thereof.

1.2.“Field” shall mean in vitro diagnosis of Tuberculosis in humans, deer, badgers, and primates using a serological method as the diagnostic assay provided, however, that Field does not include any right by Chembio to undertake any form of composition of matter research or development related to any vaccine use of the Licensed Material known as CFP-10, or any right to undertake any composition of matter modification to CFP-10’s nucleic acid sequence or amino acid sequence.

1.3.“Governmental Approval” shall mean any approvals, licenses, registrations or authorizations of any inter- or supranational, national, regional, state or local regulatory agency, department, bureau or other government entity, foreign or domestic and CE-marking in the European Union, necessary for the use, development, testing, production, marketing, sale or distribution of the Licensed Materials or Licensed Product in a regulatory jurisdiction.

1.4.“SSI Know-How” shall mean all non-patented technical and other practical information, resulting from experience and testing, owned and/or controlled with the right to grant sublicenses, by SSI at any time during the term of this Agreement, that directly relates to the Licensed Material, and/or Licensed Patents, including but not limited to biotechnological, pharmacological, toxicological, clinical, assay, and quality control information regarding the Licensed Material and information necessary for the effective development and commercialisation of Licensed Products.

1.5.“Licensed Material” shall mean SSI’s proprietary hybrids and alpha_crystallin_MPT83 as listed in Annex A.

1.6.“Licensed Patents” shall mean (a) the patents and patent applications that are identified in Annex A, and (b) all other existing or future patents and patent applications owned or controlled by SSI, or licensed to SSI, with the right to grant sublicenses, at any time during the term of this Agreement covering the Licensed Material. Included within the definition of Licensed Patents are all continuations, continuations-in-part, divisions, patents of addition, reissues, renewals, extensions or governmental extensions of any of the patents and patent applications included in (a) and (b). 

1.7.“Licensed Product” shall mean the Lateral Flow Immunoassay diagnostic technology used by Chembio in the Field incorporating the Licensed Material or part of the Licensed Material for serological-based detection of Tuberculosis. 

1.8.“Net Sales” shall mean the gross amount invoiced by Chembio and its Affiliates for the sale or disposition of a Licensed Product to a Third Party less the following deductions for amounts actually paid, allowed or accrued by Chembio and its Affiliates related to such sale or other disposition:

(a) normal, customary trade discounts, including volume discounts, credits and rebates and documented allowances and adjustments for rejections, recalls, reasonable or contractually permitted, documented cancellations or returns;

(b) freight, insurance, sales, use, exercise, value-added and similar taxes or duties imposed on the sale and included in the gross amount charged.

Net Sales shall include any and all pre-approval sales allowed by regulatory authorities, including but not limited to named-patient sales. Sales between or among Chembio and its Affiliates shall be excluded from the computation of Net Sales except where the purchaser is an end user, that is, where there is no further sale or distribution of Licensed Product other than to a patient, but Net Sales shall include any subsequent final sales to a Third Party, other than a patient, by Chembio or its Affiliates. 

1.9.“Party” or “Parties” shall mean, in the singular Chembio or SSI and in the plural Chembio and SSI.

1.10.“Price Index” shall mean the Danish price index titled “Nettoprisindekset” issued by Statistics Denmark or in case issuance ceases a similar Danish index covering price increases of goods and labour. 

1.11.“Third Party(ies)” shall mean any party other than a Party to this Agreement or an Affiliate of any of the foregoing.

2.LICENSE GRANT

2.1.Subject to the terms and conditions of this Agreement, SSI hereby grants to Chembio a worldwide, non-exclusive license, with no right to sublicense or transfer (except as specifically permitted in Sections 10.1 and 18.3 (c) herein), to the Licensed Patents and SSI Know-How, to use, undertake research in, and develop Licensed Material solely for use thereof in Licensed Product(s) in the Field, and under identical terms, to undertake research into, develop, use, market, sell, supply and otherwise commercialise such Licensed Products; provided that in no event shall the foregoing license grant to Chembio include any right to make or have made Licensed Material except as provided in section 5.1 or as otherwise expressly stated herein, or any right to undertake any form of composition of matter research or development related to any vaccine use of the Diagnostic Antigen known as CFP-10, or any right to undertake any composition of matter modification to CFP-10’s nucleic acid sequence or amino acid sequence.

2.2.For the sake of clarity and without prejudice to Chembio’s undertakings herein regarding payments due to SSI and to the sub-licensing prohibitions above, the grant of the license in Section 2.1 impose no restrictions on Chembio’s sale of Licensed Products in the Field.

 

3.Payments and Reports

3.1.Chembio shall, as partial consideration for the license granted above, pay to SSI the following fees in anticipation of, and for the use of the license granted above, all of which payments shall be nonrefundable and non-creditable, except as otherwise expressly stated herein:

a.Fifteen Thousand Euros (EUR 15,000.00), payable upon execution of this Agreement;

b.Annual payments of Ten Thousand Euros (EUR 10,000.00), due and payable on each anniversary of the Effective Date for the duration of the Agreement. Each such annual payment shall be creditable by Chembio against the sum of payments due pursuant to Sections 3.2 and 3.5 only for the applicable year;

3.2.As partial consideration for the continued use of the license granted by SSI to Chembio pursuant to this Agreement, Chembio shall pay to SSI six and one-half per cent (6.5%) royalty on all Net Sales of Licensed Products invoiced during each twelve (12) month period.

3.3.Chembio shall have the option to have the hybrid and patents listed in Annex B included in the definitions of Licensed Material and Licensed Patents, respectively. Said option expires four (4) months after the Effective Date or from receipt of said hybrid, whichever is longer. 

3.4.In the event Chembio exercises the option in Section 3.3, the royalty rate set forth in Section 3.2 shall be increased by one and one-fourth per cent point (1.25%). 

3.5.As partial consideration for the rights and licenses granted herein, Chembio shall also pay SSI royalty payments of 10% of any fees or other revenue (“Distributor Revenue”), in cash or otherwise, received by Chembio from any distributor of Licensed Products, other than revenue from Net Sales, including but not limited to upfront, milestone and annual or other periodic payments. Notwithstanding the preceding sentence, said royalty shall apply only to Distributor Revenue in excess of a one-time, single aggregate threshold of fifty thousand Euros (EUR 50,000.00), which, for the sake of clarity, is not an annual threshold. However said threshold shall not apply to Distributor Revenue from distributors with exclusive distribution rights for Licensed Products in USA, Canada, Europe, Japan, Australia and/or New Zealand, all of which Distributor Revenue shall in its entirety be subject to said 10% royalty.

3.6.Royalties payable herein shall be calculated on a calendar quarterly basis and shall be due and payable within forty-five (45) days after the end of such calendar quarter, commencing upon the completion of the first calendar quarter during which the first commercial sale occurs. Royalty of fees received by Chembio from any distributor of Licensed Products shall be payable within fifteen (15) days following receipt by Chembio.

3.7.Within twenty (20) days following the end of each calendar quarter during the term of this Agreement, Chembio shall furnish to SSI a written report that includes (a) the identity of the countries in which sales of Licensed Product have been made, (b) the Net Sales of each Licensed Product and the number thereof sold in each such country, and (c) the identity of each distributor of Licensed Products, as well as the amount of Distributor Fees and the total transfer price for supply of Licensed Product paid by each distributor to Chembio during such quarter. Such reports shall be due together with the royalty payments under Section 3.2 for each calendar quarter subsequent to launch of the Licensed Products. Such reports shall be made whether or not Chembio has engaged in any sales of Licensed Product during said quarter. All information provided by Chembio pursuant to this Section 3.5 shall be Confidential Information and subject to the terms of Section 14 hereto.

3.8.Chembio shall keep full, complete and accurate records and accounts of Net Sales of each Licensed Product and amounts of Licensed Products supplied to distributors hereunder in sufficient detail to enable the royalties payable to SSI to be determined. Upon reasonable notice to Chembio, SSI shall have the right to have an independent certified public accountant audit Chembio’s records pertaining to Licensed Products and manufacture and supply of Licensed Product during normal business hours to verify the royalties payable pursuant to this Agreement; provided, however that (a) such audit shall not take place more frequently than once a year, and (b) shall not cover such records for more than the preceding three (3) years. Such audits shall be at SSI’s expense unless such audit determines that Chembio has paid SSI less than ninety five percent (95%) of the amount determined to be due for a given time period, in which case such audit shall be at Chembio’s expense and Chembio shall pay to SSI the cost of such audit and any shortfall in payments due to SSI within thirty (30) days following SSI’s invoice to Chembio thereof. Chembio shall preserve and maintain all such records and accounts required for audit for a period of three (3) years after the calendar year to which such records and accounts apply.

3.9.All payments due hereunder shall be made in Euros by wire transfer of immediately available funds to the following account: 

Danske Bank 

Holmens Kanal 2-12

DK-1092 Copenhagen K

Swift code: DABADKKK

Account no.: 3001-3119-115507.

or to such other account as SSI may designate from time to time.

3.10.Any past due payments under this Agreement shall accrue interest until paid at twelve percent (12%) per annum, or the maximum rate permitted by law, whichever is less. Any payments received from Chembio by SSI shall be applied first to any unpaid, accrued interest and then to the satisfaction of any unpaid principal.

3.11.Currency conversions to Euros shall be calculated using an average rate of exchange. This average shall be computed using the rate of exchange quoted by the European Central Bank as of the end of the current month plus the rate of the end of the prior month and dividing by two. 

3.12.SSI shall pay all Danish taxes levied on account of all payments it received under this Agreement. Except for any withholding tax for which SSI receives a tax credit in the same amount, any withholding taxes imposed upon any payment due by Chembio to SSI shall not reduce the amount of any payment due SSI herein, and all such payments set forth herein are net of any such withholding tax. Provided, however, that if SSI’s tax status in the future is changed, such that it by law may deduct any such withholding tax from payment of its own taxes, it shall reimburse Chembio the amount the deduction allowed SSI, subject to documentation of Chembio’s payment of said withholding tax.

 

4.Withdrawal of ESAT6

4.1.SSI may withdraw ESAT6 from the Licensed Material for use in the portion of the Field relating to in vitro diagnosis of Tuberculosis in humans (but not deer, badgers and non-human primates) by giving Chembio six (6) month written notice of such withdrawal, provided, however, that ESAT6 being withdrawn from any licenses with any third party in the Field, and SSI not developing its own serological assay containing ESAT6 in the Field. 

4.2.Notwithstanding any other provision in this Agreement, Chembio shall NOT have the right, and hereby expressly waives any such right, to any compensation, including but not limited to reduced royalty payments, for SSI’s withdrawal of ESAT6 from the Licensed Material under Clause 4.1, subject to Chembio’s option rights under Section 3.3.

4.3.If Chembio at the time of SSI’s withdrawal of ESAT6 under Section 4.1 has already exercised the option under Section 3.3 to have the hybrid listed in Annex B included in Licensed Material, the Parties shall in good faith negotiate the terms on which an alternative replacement of ESAT6 can be provided.

5.Supply of Licensed Material

5.1.For reasons of quality assurance of all Licensed Products, SSI and Chembio agree as follows: for a period of five years from the execution hereof, Chembio shall purchase exclusively from SSI all Licensed Material that Chembio may reasonably require for Chembio’s development, production and commercialization of Licensed Products for use in the Field. 

5.2.Beginning as soon as reasonably possible but in no event later than six (6) months after the Effective Date and within the first five (5) calendar days of each calendar quarter during the Term, Chembio shall provide SSI with a forecast of Chembio's requirements for Licensed Material for each quarter during the twelve (12) month period commencing three (3) months after the date of such forecast (the "Firm Forecast"). Chembio shall simultaneously with each Firm Forecast provide SSI with a forecast of Chembio's requirements for Licensed Material for each of the four (4) consecutive quarters (the "Extended Forecast"), the first of which commences on the first day after the end of period forecasted by the Firm Forecast. By way of example, during the last five days of Q1, Chembio would provide SSI with Firm Forecasts for Q3-Q6 and Extended Forecasts for Q7-Q10.

5.3.The amount of Licensed Material forecast for the first three (3) months of each Firm Forecast (the "Ordered Amount"), shall be Chembio's firm and binding order therefore. Chembio may however within one (1) month after each Firm Forecast, by providing SSI with a written notice and by prepaying fifty percent (50%) of the price of the Ordered Amount, defer delivery of said order for up to 3 months. SSI shall, subject to the above mentioned right of deferred delivery, deliver the Licensed Material covered by such purchase order not more than ninety (90) days from receipt of such purchase order from Chembio, except in regard to the first purchase order, whereby delivery must take place not more than (180) days from receipt of said first purchase order; provided, however, if any purchase order exceeds the quantity previously forecasted for the applicable three (3) month period (even if such quantity falls within production capacities), SSI may at its sole discretion (but without any obligation to do so) deliver such excess quantity, and in such event SSI shall, subject to the above mentioned right to deferral of delivery, have up to one hundred thirty-five (135) days from the date of receipt of such purchase order to deliver said excess quantity. Furthermore the Ordered Amount shall always be divisible by ten (10) milligram.

5.4.Chembio shall purchase not less than sixty-five percent (65%) of the largest quantity of Licensed Material forecast for each of the following nine (9) months of each Firm Forecast. Further Chembio shall purchase not less than forty percent (40%) of the largest quantity of Licensed Material forecast in each Extended Forecast.

5.5.SSI shall use its reasonable commercial efforts to supply Chembio with all of its requirements of Licensed Material. 

5.6.SSI shall promptly notify Chembio if any order cannot be filled or if SSI believes that delivery will not occur within fifteen (15) days of the specified delivery date. In such case, SSI shall also provide Chembio with the reason for such delay and discuss with Chembio the means for promptly eliminating the delay. 

5.7.If SSI, subject to the right to deferral of delivery set forth in Section 5.3 of this Agreement, does not supply the Licensed Material to Chembio within two hundred and ten (210) days of receipt of the first purchase order and one hundred and twenty (120) days of receipt of any subsequent purchase order from Chembio, SSI shall pay Chembio liquidated damages equal to one tenth of one percent (0.1%) of the price of the delayed Licensed Material for each day that delivery of the Licensed Material does not occur after said periods, up to a maximum of ten percent (10.0%) of the total price of the delayed Licensed Material. All such liquidated damages are fully creditable against and to be deducted from any additional recovery that Chembio receives under this Agreement arising from or related to said delay. 

5.8.SSI shall, beginning as soon as reasonably possible, but in no event later than three (3) months prior to Chembio’s expected Governmental Approval for commercial sale of the first (1st) Licensed Product as indicated in the annual report according to Section 6.1, and within ninety (90) days of receipt of any Firm Forecast from Chembio, ensure that it maintains a stock of Licensed Material of not less than sixty-five percent (65%) of the amount specified in the Firm Forecast, provided however, that if the stability of the Licensed Material precludes storage (including storage at temperatures below minus seventy (-70) centigrade) for more than one (1) year, SSI and Chembio shall use all reasonable endeavors to ensure that the stock provisions of this clause are met by other mechanisms. Where Chembio orders Licensed Material in volumes exceeding those detailed in the Firm Forecast (the “Excess Volume”), the amount of stock to be held by SSI shall, for a period of three (3) months following the supply of the Excess Volume by SSI, be reduced by the amount of the Excess Volume. 

5.9.At the time of delivery, SSI shall provide a certificate of analysis in accordance with the specifications in Annex C for each batch comprising such delivery. Licensed Material delivered to Chembio shall be manufactured in accordance with the specifications in Annex C. SSI shall include with each delivery of Licensed Material, solely for Chembio’s use in performing quality control analysis, a sample of the Licensed Material delivered. 

5.10.Chembio may, upon its written documentation to SSI that the delivered Licensed Material do not meet the release specifications in Annex C, return or, if SSI so requests, shall destroy, all Licensed Material delivered by SSI that does not meet the release specifications in Annex C. SSI shall i) bear all shipping costs or costs of destroying Licensed Material pursuant to this Section 5.10, ii) within seven (7) calendar days inform Chembio how and when a substitute delivery will take place, and iii) upon the receipt of the batch for destruction or the certification of the destruction hereof, issue a credit note to Chembio in the amount of the invoiced price of the destroyed or returned batch. Upon the second delivery in one twelve (12) month period by SSI of Licensed Material which does not meet the release specifications in Annex C, the Parties will meet and discuss appropriate measures to secure the supply of Licensed Material to Chembio which comply with the release specifications (including the possibility of giving Chembio priority over any other of SSI’s obligations to supply Third Parties with Licensed Material or identifying and securing an alternative supply source). Subject to Sections 5.18 and 5.19, the relief provided by this Section 5.10 shall be the sole and complete remedy available to Chembio with respect to such nonconforming Licensed Material, provided, however, that any direct costs incurred by Chembio as a result of the nonconforming supply shall result in a corresponding diminution of Chembio’s payment obligations in this Agreement, but in no event more than 10% of the price of the non-conforming Licensed Material.

5.11.The transfer price for all quantities of Licensed Material sold by SSI to Chembio in a bulk format hereunder shall be seventy-five thousand Euros (75,000.00) per gram, or seventy-five Euros (€75) per milligram, which may only be purchased in quantities divisible by ten (10) milligrams.

5.12.On each 1 January beginning twelve (12) months after the Effective Date, SSI may increase the transfer price in Section 5.11 for the immediately following twelve (12) month period in an amount not to exceed the increase in the Price Index as of July in the previous year. The price in Section 5.11 is based on the Price Index of July 2002 being 104.8.

5.13.If Chembio later requests Licensed Material in an alternative physical form or vehicle or changes the specifications in Annex C, the parties recognize and agree it may be necessary to amend the price in Section 5.11 and the time limits in Sections 5.3 and 5.7 as necessary to reflect all said changes.

5.14.Chembio shall carry out all finished packaging of Licensed Material and Licensed Product(s) at its expense, including all packaging and labeling for commercial sales of Licensed Product(s). 

5.15.Delivery of Licensed Material shall be Ex Works (INCOTERMS 2000), SSI’s facility, 5 Artillerivej, 2300 København S, Denmark. Title to and risk for Licensed Material shall pass to Chembio upon delivery to the freight carrier. In the absence of express, written and timely carrier and/or delivery instructions from Chembio, SSI may make such arrangements it deems reasonably appropriate and Chembio agrees to such arrangements. 

5.16.Chembio shall obtain all necessary import and/or export licenses or permits and for the payment of all import and/or export fees, taxes or duties, etc., in connection with the purchase and/or delivery of Licensed Material hereunder. 

5.17.The transfer price for Licensed Material supplied by SSI to Chembio hereunder is due and payable net thirty (30) calendar days of date of invoice for the delivery of the Licensed Material by SSI. 

5.18.Chembio shall not be obliged to pay for Licensed Material that is returned or destroyed in accordance with Section 5.10. If Chembio has paid for such Licensed Material, SSI shall refund or extend a credit to Chembio for the full amount paid by Chembio for such Licensed Material. 

5.19.In the event SSI on three (3) or more occasions during any rolling twelve (12) month period i) fails to supply Chembio with Licensed Material complying with the release specifications in Annex C, or ii) fails to supply complying Licensed Material within the time limits of Section 5.3 of this Agreement Chembio may, at its own cost and without the right of recovery, procure the manufacture and supply of Licensed Material, solely for the use in a Licensed Product, from a Third Party selected by Chembio, until such time as SSI reasonably demonstrates to Chembio that it is capable of supplying Licensed Material to Chembio in a timely manner and in compliance with the release specifications in Annex C.

5.20.Chembio shall in addition to the royalty obligations in Section 3, above, pay a royalty in the amount of ten percent (10.0%) on all amounts invoiced Chembio for the Licensed Material manufactured and supplied by a Third Party during the period in which SSI can not deliver the Licensed Material. 

5.21.SSI will provide Chembio with all assistance, consents, licenses and documentation reasonably required by Chembio solely for the purpose of enabling Chembio to exercise its rights under section 5.19.

5.22.The Parties recognizes that as of the Effective Date the commercially relevant composition of, the technical specifications for and the preferred method of manufacture of the Licensed Material are not known to the Parties. Each Party shall, as soon as reasonably possible, provide the other Party with all such unknown or unavailable information when it becomes known and/or available, and the Parties agree to meet and, as may be necessary to accommodate such change, to renegotiate in good faith and acting reasonably the terms and conditions of this Paragraph 5 if the obligations undertaken by this Paragraph prove unduly burdensome to either Party, provided however, that such burden at the time of execution of this Agreement was not nor should have been foreseeable. 

5.23.For the sake of clarity, SSI may without restriction and in any Field use alpha_crystallin_MPT83 in any format, including but not limited to MPT83 and/or alpha-crystalline as single antigens and/or in fusions with other antigens, for its own purposes and/or in any collaboration with Third Parties in any type of commercialization. Further, Chembio expressly waives all rights to challenge SSI’s use and commercialization of the alpha_crystallin_MPT83, as described in this section 5.24, including but not limited to waiving its rights based on any purported or actual intellectual property rights and/or know-how.

6.Diligence; Performance Obligations.

6.1.Commercial Development. Chembio shall use its commercially reasonable efforts to develop and market Licensed Products within the Field. Chembio shall in good faith use commercially reasonable efforts to keep SSI generally informed of development and marketing plans for Licensed Products. Chembio shall submit an annual written report to SSI that summarizes Chembio’s efforts toward development and commercialization of Licensed Products, including but not limited to expected Governmental Approvals. Such report shall be due within ten (10) days of the end of each calendar year until first commercial sale. 

6.2.Notice of Governmental Approvals. Within fifteen (15) days following receipt, Chembio shall promptly provide SSI with notice of all Governmental Approvals for commercial sales received by Chembio regarding Licensed Product.

6.3.Patents. SSI shall, at its own expense, use diligent efforts to prepare, file, prosecute and maintain the Licensed Patents in accordance with SSI’s standard practice and the judgment of SSI’s in-house and/or external patent counsel. SSI shall use all reasonable commercial efforts to pursue a rapid issuance of patents with claims covering the diagnostic use of the Licensed Material in the Field in at least the United States and at least two (2) of the major countries in the European Union. 

6.4.Marking. Upon SSI’s request, Chembio will include on all labels and other packaging material of the Licensed Product(s) as well as in any of its sales promoting materials, including but not limited to materials displayed in an electronic format, a reference to SSI as the provider of the Licensed Material, the patent numbers of the Licensed Patents in accordance with SSI’s reasonable guidelines, and if SSI desires, a potential SSI trademark. Notwithstanding the above Chembio shall in case of change of ownership negotiate with SSI in good faith terms on which a reference to SSI as the provider of the Licensed Material, the patent numbers of the Licensed Patents, and a potential SSI trademark are to be included on all labels and other packaging material of the Licensed Product(s) as well as in any of its sales promoting materials, including but not limited to materials displayed in an electronic format.

7.Governmental Approvals.

Chembio shall obtain all Government Approvals in any country where Licensed Materials and/or Licensed Product shall be manufactured or sold or otherwise distributed. SSI agrees to provide Chembio, at Chembio’s expense, with any assistance reasonably requested by Chembio, in obtaining such Governmental Approvals.

8.Publications.

Neither Party shall publish or disclose the terms or existence of this Agreement without the prior written consent of the other Party. Chembio shall not publish or present any scientific information relating to any aspect of the Licensed Materials, including, but not limited to, the development or manufacture of the Licensed Materials, without providing SSI the opportunity for prior review. Chembio shall provide to SSI at least (i) forty-five (45) days prior to each submission for publication of any detailed proposed publication such as manuscripts or other articles and (ii) twenty (20) business days prior to each submission of publication of any proposed limited publication such as abstracts, posters or revised submissions (provided that all revisions must be clearly marked or any such revised submission shall be subject to subsection 8(i)), relating to any aspect of the Licensed Materials and Chembio shall not proceed with such publication or presentation (a) to the extent SSI demonstrates that SSI’s Confidential Information would be disclosed and (b) until SSI has had the opportunity to secure any necessary patent protection for a period of no more than ninety (90) days from Chembio’s notice. SSI will use its commercially diligent efforts to inform Chembio (x) within thirty (30) days after receipt of scientific information for publication in category (i) whether SSI will use its forty-five (45) days review period, (y) within ten (10) business days after receipt of scientific information for publication in category (ii) whether SSI will use its twenty (20) business days review period and (z) whether SSI believes that a further period for patent protection will be needed.

9.Ownership of Inventions

9.1.All rights, title to and interest in SSI patents or patent applications of or related to the Licensed Material, including but not limited to pat-ents or patent applications licensed by SSI, as well as all SSI Know-How existing at any time, are and shall remain exclusively SSI’s. 

9.2.Any Invention made arising from the Parties joint development of Licensed Products, other than the Inventions the ownership of which is described in Section 9.1 hereof, shall be owned jointly by the Parties, in proportion to the financial, commercial and scientific and technical contribution made to said joint development, provided, however, that scientific and technical contributions must be substantial and quantifiable and must involve a substantial degree of scientific or technical efforts. Neither Party shall have the right to commercially exploit such Inventions without the prior written agreement of the other Party, such agreement to be negotiated in good faith. This Section 9.2 shall survive the expiration or termination of this Agreement for the life of all patents claiming such Inventions, or for ten (10) years in the event a patent never issues, unless the Parties otherwise agree in writing. 

9.3.All rights, title and interests to any improvement made by a Party to the other Party’s intellectual property rights, Know-How or Materials, or to any joint Invention, made through the exercise of the licenses granted herein, shall vest exclusively in the improving Party, which shall, however, grant the other Party a non-exclusive license to any said improvement on terms and conditions identical to those in this Agreement. Provided, however, that an improvement must involve substantial and quantifiable scientific or technical effort; otherwise, any said improvement shall vest exclusively in the Party possessing the original intellectual property rights, Know-How, or Materials, or, in the case of a joint Invention, in the Parties jointly, based on the ownership rights set forth in section 9.2.

10.Representations and Warranties.

10.1.Nontransfer. Chembio represents and warrants that it will not transfer the Licensed Material, other than as part of the Licensed Products, to any of its Affiliates, or to any Third Party, including but not limited to distributors, without the prior written consent of SSI which consent shall not be unreasonably withheld.

10.2.Compliance with Law. Chembio represents and warrants that all Licensed Material and Licensed Products manufactured by or for Chembio shall be manufactured in accordance with all applicable laws, rules and regulations of the country of manufacture or sale of such Licensed Material or Licensed Products, as applicable. Chembio further represents and warrants that all aspects of the Licensed Products made, used or sold by Chembio, its Affiliates and distributors hereunder shall be in compliance with this Agreement and with all applicable federal, state and local laws and regulations.

10.3.No Conflict. Each Party hereby warrants that it is authorized to enter into this Agreement and that this Agreement does not, to the best of each Party’s knowledge, create a conflict with any other right or obligation provided under any other agreement or obligation that a Party has with any Third Party.

10.4.Patent and Trademark rights. SSI hereby warrants that, to the best of its knowledge as of the Effective Date, it has full ownership, title and interests in the Licensed Patents and, as of the Effective Date, is not aware of any pending or threatened claim of infringement that would invalidate, limit, or otherwise impact the validity or enforceability of the Licensed Patents for the intended purposes of the Agreement or which would require additional Patent Rights in order to enter into this Agreement. SSI does not give any warranty regarding the validity or enforceability in any jurisdiction of any SSI trademark.

11.Indemnification

11.1.Chembio hereby undertakes to indemnify, defend and hold harmless SSI from and against all claims, actions, proceedings, liabilities or losses, and reasonable legal expenses and costs, including but not limited to attorney fees (collectively, “Losses”), arising from or related to (a) any material breach of this Agreement by Chembio, (b) any manufacturing of Licensed Material or Licensed Product by Chembio or its affiliates, or (c) any use, marketing or sales of Licensed Material or Licensed Product; provided, however, that Chembio shall have no obligation to indemnify SSI to the extent that such Losses are the result of SSI’s material breach of this Agreement or negligence.

11.2.SSI hereby agrees to indemnify, defend and hold harmless Chembio from and against all Losses arising from or related to SSI’s material breach of this Agreement or negligence.

11.3.Insurance. Chembio undertakes to maintain, and shall, upon written request, provide evidence of same to SSI, the following insurance or self-insurance necessary to meet its liability obligations under this Agreement and satisfactory to SSI in amounts no less than that specified for each type:

(i)    general liability insurance with combined limits of not less than Two Million Euros (€2,000,000) per occurrence and Five Million Euros (€5,000,000) aggregate for bodily injury including death and property damage; and

(ii)    professional liability coverage, including death and bodily injury, for the employees, contractors and agents providing services under this Agreement with limits not less than Two Million Euros (€2,000,000) per occurrence and Five Million Euros (€5,000,000) aggregate; and

(iii)   Worker's Compensation Insurance in the amount required by law.

11.4.Insurance required by subsection 11.3 shall be maintained during the performance of this Agreement and, if on a "claims made" basis, for five (5) years thereafter. There shall be a thirty (30) day notice of cancellation with respect to the insurance coverage required hereunder, and the provision that SSI shall be notified in the event of any cancellation, intention of insurer not to renew or any material change in the insurance contract or coverages afforded. Chembio shall be solely responsible for the payment of any deductible or self-insured retention under any such policy.

12.Limitation of Liability

NOTWITHSTANDING ANY OTHER PROVISION IN THIS AGREEMENT OR AT LAW, INCLUDING BUT NOT LIMITED TO THE CONVENTION FOR THE INTERNATIONAL SALE OF GOODS, NEITHER PARTY SHALL BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR (i) ANY INCIDENTAL, SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES, OR LOST PROFITS OR (ii) COST OF PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY OR SERVICES. NEITHER PARTY SHALL HAVE ANY LIABILITY FOR ANY FAILURE OR DELAY DUE TO FORCE MAJEURE EVENTS. THE FOREGOING RESTRICTION SHALL NOT APPLY TO LOSSES AND DAMAGES ARISING FROM AWARDS INVOLVING PAIN AND SUFFERING IN ANY CLAIM FOR DEATH OR BODILY INJURY.

13.Disclaimer of Warranties

WITHOUT PREJUDICE TO SECTION 10.4 SSI HEREBY DISCLAIMS ANY AND ALL REPRESENTATIONS AND WARRANTIES WITH REGARD TO THE LICENSED MATERIAL, THE LICENSED PRODUCTS AND THE LICENSED PATENTS, EXPRESS OR IMPLIED, AND SPECIFICALLY DISCLAIMS ALL OTHER EXPRESS OR IMPLIED WARRANTIES, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE OR USE, AND ALL OTHER STATUTORY WARRANTIES, AS WELL AS ALL WARRANTIES OF PATENTABILITY OR NON-INFRINGEMENT.

14. Confidentiality

14.1.Confidential Information. “Confidential Information” shall mean all information, whether patentable or not, including but not limited to all know-how and trade secrets, disclosed by a Party to the other Party in connection with this Agreement, either in writing, orally, electronically or visually, unless the information is expressly designated as non-confidential or that by its nature clearly is not confidential, and provided that if information is disclosed visually or orally, the disclosing party shall, within thirty (30) days of said disclosure, confirm in writing to the other Party the material elements of the disclosure. For the term of this Agreement and five (5) years from the date of expiration or termination, each Party (a) shall treat as confidential all Confidential Information provided by the other Party, (b) shall not use such Confidential Information except as expressly permitted under the terms of this Agreement and for the express pur-poses set forth herein, (c) shall implement reasonable procedures to prohibit the disclosure, unauthorized duplication, misuse or removal of such Confidential Information, and (d) shall not disclose such Confidential Information to any Third Party. Without limiting the foregoing, each of the parties undertakes to use at least the same procedures and degree of care to prevent the disclosure of Confidential Information as it uses to prevent the disclosure of its own confidential information of like importance, and in any event to use no less than reasonable procedures and a reasonable degree of care, including but not limited to limiting access to said confidential information to its employees, officers, directors and legal and financial advisors on a strictly need-to-know basis, and to keeping all said information only in secured places. 

14.2.Exceptions. Notwithstanding the above, neither Party shall have liability to the other with regard to any Confidential Information that:

(a) was generally known and available to the public domain at the time it was disclosed, or becomes generally known and available to the public domain through no fault of the receiver;

(b) was known to the receiving Party at the time of disclosure as shown by the written records in existence at the time of disclosure;

(c) is disclosed with the prior written approval of the disclosing Party;

(d) becomes known to the receiving Party from a source other than the disclosing Party without breach of this Agreement by the receiving Party and in a manner which is otherwise not in violation of the disclosing Party's rights; 

(e) is developed at any point in time by a Party without any use of any part of the other Party’s confidential information; or,

(f) is disclosed pursuant to the order or requirement of a court, administrative agency, or other governmental body; provided, that the receiving Party shall provide reasonable advance notice to enable the disclosing Party to seek a protective order or otherwise prevent such disclosure.

15.Infringement.

15.1.(a) If any patent infringement action is brought against Chembio, its Affiliates or any of their suppliers, distributors, or customers because of actual or anticipated manufacture, use or sale of Licensed Material or a Licensed Product and such action claims that such manufacture, use, or sale infringes the intellectual property rights of a Third Party, Chembio shall promptly notify SSI and send SSI copies of all papers that have been served. SSI shall have the first right to decide and control the defence of such action at its own expense and Chembio shall at all times cooperate with SSI and continue to pay amounts due under Section 3 and 5 hereof during the pendancy of such action and any appeals. All costs and expenses incurred by SSI, including settlement costs, damages assessed against SSI or Chembio, and reasonable attorney fees, shall be paid by SSI, except that Chembio shall reimburse SSI for said costs, damages and attorney fees attributable to Chembio’s material breach of this Agreement or negligence. 

(b) If SSI fails to agree to defend such infringement action within sixty (60) days of Chembio’s notification, Chembio shall have the right, but not the obligation, to defend the action itself. If Chembio does undertake such defence, SSI shall cooperate with Chembio and Chembio shall be entitled to select legal counsel of its choice. All costs and expenses attributable to Chembio’s material breach of this Agreement or negligence, including settlement costs, damages assessed against Chembio, and reasonable attorney fees, shall be paid by Chembio. All reasonable costs and expenses incurred by Chembio under this Section 15.1(b) other than costs and expenses attributable to Chembio’s material breach of this Agreement or negligence may be offset against the royalties payable to SSI under this Agreement; provided, however, that such offset shall occur on a quarterly basis; and provided, further that in no event shall SSI receive in any quarter, as a result of such offset, less than fifty percent (50%) of the royalties otherwise payable hereunder for such quarter.

(c) In the event of termination of this Agreement by Chembio pursuant to Section 17.2 for SSI’s material breach or pursuant to Section 17.5 for SSI’s bankruptcy, any outstanding amounts owed to Chembio under this Article 15 shall be immediately paid in full by SSI upon the effective date of the termination of this Agreement thereunder. If both SSI and Chembio are joined as defendants in any such action, they shall share said costs and expenses based upon the share of liability attributable to each and any costs and expenses of Chembio determined to be attributable to SSI’s liability may be recovered by Chembio in accordance with the offset mechanism set forth in Section 15.1(b).

15.2.Neither Party shall be permitted to settle a legal action within the scope of this Section 15 relating to the licensed Patents without the prior written consent of the other Party, which consent shall not be unreasonably withheld.

16.Enforcement.

16.1.If during the term of this Agreement, either Party becomes aware of a Third Party infringement or threatened infringement of any Licensed Patents, the following provisions shall apply:

(a) The Party having such knowledge shall promptly give notice to the other Party, with all available details.

(b) SSI shall have the right, but not the obligation, to bring suit in its name at its own expense to restrain such infringement and to recover profits and damages. Chembio agrees at SSI's request to be joined as a party plaintiff and to cooperate in the prosecution thereof, as is reasonably necessary, at SSI's expense. If SSI decides to undertake such suit, then SSI shall have the sole right to control prosecution and shall retain all proceeds therefrom.

(c) If SSI fails to commence a substantive legal action within hundred and twenty (120) days after becoming aware of such infringement (or a shorter period of time, if the legal rules of the jurisdiction in which the Third Party infringement require quicker action) and said legal action would have been within the scope of this Agreement, in the first instance or by notice from Chembio, then Chembio, at any time prior to SSI thereafter filing an action, shall have the right, but not the obligation to take such action in its own name. SSI shall cooperate with Chembio, at Chembio's expense, as is reasonably necessary in any such action brought by Chembio. If Chembio brings legal action, Chembio shall have the sole right to control prosecution and shall retain all proceeds therefrom. Notwithstanding the foregoing, Chembio may commence an action for injunctive relief at any time it reasonably believes such an action is necessary to protect its interests, but it shall suspend said action if requested by SSI when SSI has agreed to take action as set forth in section 16.1(b).

(d) In the event of a cooperative legal action involving both SSI and Chembio (including as set forth in art. 16.1(b) and a monetary recovery in connection with such action is obtained, such recovery shall be applied in the following priority: (i) to reimburse SSI and Chembio by proportion and up to the extent of their actual out-of-pocket expenses (including reasonable attorney fees) in prosecuting such infringement, (ii) to be shared by the proportion and up to the extent of any damages established, including but not limited to Chembio's lost profits and SSI's lost royalties, and (iii) the balance, if any, to be shared one-half by SSI and one-half by Chembio.

17.Term and Termination.

17.1.Term. The term of this Agreement shall be one (1) year after the last to expire of the Licensed Patents.

17.2.Termination for Material Breach. Upon any material breach of this Agreement by either Party, the non-breaching Party may terminate this Agreement upon thirty (30) days written notice to the breaching Party. The notice shall become effective at the end of the thirty (30) day period unless the breaching Party has undertaken substantial measures to cure such breach within such period. For purposes of this Agreement, material breach shall be deemed to include without limitation (a) distribution of Licensed Material other than as a part of Licensed Products (b) failure to pay any of the amounts payable under Section 3 and 5, and (c) failure to comply with the publication obligations under Section 8, including the obligation to provide SSI thirty (30) days prior notice of any such publication.

17.3.Termination by Mutual Agreement. The parties may mutually agree in writing to terminate this Agreement effective ninety (90) days following the date of such written agreement.

17.4.Termination by Chembio. Chembio may terminate this Agreement by giving SSI 48 months’ written notice hereof. 

17.5.Bankruptcy. Either Party may terminate this Agreement by giving thirty (30) days written notice to the other Party if such other Party (a) files a petition of bankruptcy or has any such petition filed against such other Party; (b) goes into compulsory liquidation; (c) has its business placed, as a result of its financial situation, in the possession of a receiver, a government or a government agency; (d) makes an assignment for the benefit of creditors; (e) is subject to a dissolution or winding up, or (f) if the senior management or board of directors or other governing body of such other Party takes any decision initiating any of the foregoing events.

17.6.Effects of Termination. Neither expiration nor termination shall relieve either Party of its obligations under Sections 3.8 through 3.12, 8 through 16 and 18. Further, Chembio shall make all reports and payments as are required for the final quarter. Upon expiration or termination hereof, at SSI’s option, Chembio shall return or destroy, and certify destruction of, any Licensed Material in Chembio’s possession or control. Moreover, without prejudice to SSI’s other rights herein and at law and equity, immediately upon any event or decision set forth in Section 17.5, all licenses granted herein to Chembio shall terminate, and Chembio undertakes to take all actions necessary to facilitate said termination, to cease the use of any Licensed Patent, SSI Know-How and Licensed Materials, and to transfer possession of these back to SSI.

17.7.Change of Ownership. Chembio shall give written notice to SSI of any likely change of ownership, control or management of Chembio, and in any such case, SSI may terminate this Agreement with immediate effect if a major competitor of SSI appears likely to assume control of or have a substantial influence over, Chembio or its successors.

18.General Provisions

18.1.Independent Contractors. SSI and Chembio shall be independent contractors and shall not be deemed to be partners, joint venturers or each other's agents, and neither Party shall have the right to act on behalf of the other except as is expressly set forth in this Agreement.

18.2.Entire Agreement; Amendment. This Agreement sets forth the entire agreement and understanding between the parties and supersedes all previous agreements, promises, representations, understandings, and negotiations, whether written or oral between the parties with respect to the subject matter hereof. There shall be no amendments or modifications to this Agreement, except by a written document signed by both parties.

18.3.Assignment. Neither this Agreement nor any interest hereunder shall be assignable by either Party without the written consent of the other, provided however that:

(a) SSI may assign this Agreement together with those intellectual property rights, including but not limited to Licensed Patents, and that know-how, necessary for the performance of SSI’s duties herein, without obtaining Chembio’s consent to any corporation or other entity with which SSI may merge or consolidate, and/or to any corporation or other entity to which SSI may transfer all or substantially all of SSI’s assets;

(b) SSI may freely assign any Licensed Patents, provided, however, that such assignment does not prejudice the rights of Chembio herein;

(c) Chembio may assign this Agreement with SSI’s prior written consent, which consent will not be unreasonably withheld or delayed. Chembio shall, as regard to this section 18, be deemed to be Chembio Diagnostics Systems, Inc., as set forth in the introductory Paragraph of this Agreement, and any assignment by Chembio to any of its Affiliates shall require SSI’s consent, which will not unreasonably withheld or delayed. 

(d) this Agreement shall annure to and be binding upon the successors to each Party.

18.4.SSI is permitted by law to change its legal status to become a limited company in accordance with the Danish Company’s Act (APS or A/S) provided, however, that no such change shall alter, amend or affect its obligations and liabilities under the Agreement. 

18.5.Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the Kingdom of Denmark, without giving effect to its or any other jurisdiction’s principles of conflicts of law. 

18.6.Dispute Resolution. Prior to engaging in any formal dispute resolution with respect to any dispute, controversy or claim arising out of or in relation to this Agreement or the breach, termination or invalidity thereof (each, a “Dispute”), the Chief Executive Officers of the respective parties shall attempt for a period not less than sixty (60) days to resolve such Dispute. Any Dispute that cannot be settled amicably by agreement of the parties pursuant to the preceding sentence, the exclusive venue for resolving all said disputes shall be the courts of Copenhagen; provided however, that proceedings may not be instituted until the Party alleging breach of this Agreement by the other Party has given the other Party not less than sixty (60) days notice (or in the case of non-payment pursuant to section 3 and 5 then fourteen (14) days notice) to remedy any alleged breach and the other Party has failed to do so. 

18.7.Injunctive Relief. Nothing in this Agreement shall be deemed as preventing either Party form seeking injunctive relief (or any other provisional remedy) from any court having jurisdiction over the Parties and the subject matter of the dispute as necessary to protect either Party’s name, proprietary information, trade secrets, know-how or any other proprietary rights. Judgement upon the award may be entered in any court having jurisdiction, or application may be made to such court for judicial acceptance of the award and/or an order of enforcement as the case may be. 

18.8.Severability. If any provision of this Agreement is finally held to be invalid, illegal or unenforceable by a court of competent jurisdiction, the validity, legality and enforceability of the remaining provisions shall not be affected or impaired in any way.

18.9.Waiver. Any delay or failure in enforcing a Party's rights under this Agreement or any waiver as to a particular default or other matter shall not constitute a waiver of a Party's right to the future enforcement of its rights under this Agreement.

18.10.Notice. Any notice required or permitted by this Agreement to be given to either Party shall be in writing and shall be deemed given when delivered personally, by confirmed telecopy to a fax number designated in writing by the Party to whom notice is given, or by registered, recorded or certified mail, return receipt requested, and addressed to the Party to whom such notice is directed, at:

If to Statens Serum Institut:

Statens Serum Institut

Artillerivej 5

2300 København S

Denmark

Attention: Administrerende Direktør

Copy: Virksomhedsjurist 

Facsimile: +45 3268 3868

If to Chembio:

Chembio Diagnostic Systems, Inc.

3661 Horseblock Road

Medford, NY 11763

Attention: President

Copy: Director of R&D

Facsimile:US:631-924-6033

or at such other address or telecopy number as such Party to whom notice is directed may designate to the other Party in writing.

18.11.Force Majeure. If the performance of this Agreement or any obligations hereunder is prevented, restricted or interfered with by reason of fire or other casualty or accident, strikes or labour disputes, war or other violence, any law, order, proclamation, ordinance, demand or requirement of any government agency, or any other act or condition beyond the control of the Parties hereto, the Party so affected, upon giving prompt notice to the other Party shall be excused from such performance (other than the obligation to pay money) during such prevention, restriction or interference.

18.12.Headings. The section headings appearing in this Agreement are inserted only as a matter of convenience and in no way define, limit, construe or describe the scope or extent of such section or in any way affect such section.

18.13.Counterparts. This Agreement may be signed in counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

IN WITNESS WHEREOF, each of the Parties hereto has caused this License and Supply Agreement to be executed by its duly authorized officer as the date first written above.

	
STATENS SERUM INSTITUT

 

by:

 

 

 
	
 
	
CHEMBIO DIAGNOSTICS SYSTEMS, INC.

by:

	
 

Nils Strandberg Pedersen,

President and CEO
	
 
	
 

Lawrence A. Siebert

President

	

		

	
 

by:

 

 

 
	
 
	
 

by:

	
 

Pia Lading,

Executive Vice President

Division of Vaccine

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00067-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00067-of-00352.parquet"}]]