EX-10.3
4
exhibit10_3nonexclusive.htm
EXHIBIT 10.3
NON-EXCLUSIVE LICENSE, MARKETING AND DISTRIBUTION AGREEMENT
Non-Exclusive
License, Marketing and Distribution Agreement
Execution
Version
Non-Exclusive
License, Marketing and Distribution Agreement
Dated
As Of
September
29, 2006
Between
Inverness
Medical Innovations, Inc.
And
Chembio
Diagnostic Systems, Inc.
Table
of Contents
|
1.
Definitions
|
1
|
|
1.1.
Certain Definitions
|
1
|
|
1.2.
Additional Definitions
|
6
|
|
2.
License Grants.
|
6
|
|
2.1.
Inverness License
|
6
|
|
2.2.
Non-Exclusive Right to Purchase and Exploit
|
7
|
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2.3.
Patent Marking
|
7
|
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2.4.
SDS Access
|
8
|
|
2.5.
Termination of Licenses Upon Challenge of Validity
|
8
|
|
3.
Royalties and Payments.
|
8
|
|
3.1.
Exclusive Payment Arrangements
|
8
|
|
3.2.
Pricing of Licensed Products
|
8
|
|
3.3.
Inverness Sale of Licensed Products - Division of Net
Sales
|
8
|
|
3.4.
Minimum Price
|
8
|
|
3.5.
Payment Mechanism for Licensed Products Sold by Inverness
|
8
|
|
3.6.
Royalties Payable by Chembio on Inverness Lateral Flow
Patents
|
9
|
|
3.7.
Payment by Inverness for Samples
|
10
|
|
3.8.
Reporting and Calculation of Payments.
|
10
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4.
Regulatory and License Matters.
|
12
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4.1.
Facility Registration/Inspections
|
12
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4.2.
Regulatory Filings
|
12
|
|
5.
Manufacture and Sale.
|
12
|
|
5.1.
Chembio Efforts
|
12
|
|
5.2.
Forecasts
|
12
|
|
5.3.
Purchase Orders
|
13
|
|
5.4.
Shipment Terms
|
13
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5.5.
Acceptance
|
13
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|
5.6.
Inverness Responsibilities; Rights
|
13
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|
6.
Trademarks
|
14
|
|
6.1.
Trademark License
|
14
|
|
6.2.
Compliance with Law; Registration
|
14
|
|
6.3.
Termination
|
14
|
|
6.4.
Labeling
|
14
|
|
7.
Prosecution and Enforcement of Licensed Intellectual
Property
|
14
|
|
7.1.
Prosecution
|
14
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|
7.2.
Enforcement of Licensed Patents
|
15
|
|
8.
Confidentiality
|
15
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8.1.
Limited Disclosure and Use
|
15
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8.2.
Exceptions
|
15
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|
8.3.
Use of Name; Disclosure of Terms of the Agreement
|
16
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8.4.
Effect of Termination
|
16
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|
8.5.
Survival
|
16
|
|
9.
Representations; Warranties
|
16
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|
9.1.
Corporate Power
|
16
|
|
9.2.
No Default or Violation
|
16
|
|
9.3.
Licensed Intellectual Property
|
17
|
|
9.4.
Regulatory Matters
|
17
|
|
9.5.
Product Quality
|
17
|
|
9.6.
Exclusion of Other Representations and Warranties
|
17
|
|
10.
Indemnification
|
18
|
|
10.1.
By Chembio as Manufacturer
|
18
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10.2.
By Sellers
|
18
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|
10.3.
Notice of Claims
|
18
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|
10.4.
Disputes
|
19
|
|
11.
Term and Termination
|
19
|
|
11.1.
Term of Agreement
|
19
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|
11.2.
Material Breach
|
19
|
|
11.3.
Section 365(n); Agreement to Deliver Embodiments
|
20
|
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11.4.
Effect of Termination for Breach
|
20
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11.5.
Survival
|
21
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|
12.
Limitation of Liability
|
21
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|
12.1.
Exclusion of Liability for Certain Damages
|
21
|
|
12.2.
Limitation on Liability for Direct Damages
|
21
|
|
13.
General
|
21
|
|
13.1.
Waivers and Amendments
|
21
|
|
13.2.
Entire Agreement
|
22
|
|
13.3.
Severability
|
22
|
|
13.4.
Relationship of the Parties
|
22
|
|
13.5.
No Election of Remedies
|
22
|
|
13.6.
Notices
|
22
|
|
13.7.
Governing Law
|
23
|
|
13.8.
Dispute Resolution
|
23
|
|
13.9.
Waiver of Jury Trial
|
23
|
|
13.10.
Counterparts
|
23
|
|
13.11.
Assignment
|
24
|
|
13.12.
Force Majeure
|
24
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13.13
Further Assurances
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24
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Non-Exclusive
License, Marketing and Distribution Agreement
PREAMBLE
This
Non-Exclusive License, Manufacturing and Distribution Agreement
(the
“Agreement”)
is
made as of September 29, 2006 (“Effective
Date”),
by
and between Chembio
Diagnostic Systems, Inc.,
a
Delaware
corporation
having its principal place of business at 0000 Xxxxxxxxxx Xxxx,
Xxxxxxx, Xxx
Xxxx 00000, (“Chembio”)
and
Inverness
Medical Innovations, Inc.,
a
Delaware corporation having its principal place of business at
00 Xxxxxx Xxxx,
Xxxxxxx, XX 00000 (“Inverness”).
RECITALS
Certain
capitalized terms used in these Recitals but not defined in the
Preamble or upon
first use are defined in Section 1.1.
Inverness,
among other activities, is in the business of developing, marketing
and selling
products used to diagnose various diseases, and owns or has rights
to grant
licenses to a number of patents pertaining to disease diagnosis,
including the
Inverness Lateral Flow Patents.
Chembio,
among other things, is in the business of developing, marketing
and selling
products used to diagnose various diseases, and has designed and
developed the
Licensed Products, which Chembio manufactures and sells throughout
the
world.
During
the Term, Inverness wishes to license the Inverness Lateral Flow
Patents to
Chembio for the purpose of allowing Chembio to manufacture and
sell the Licensed
Products, and Chembio wishes to obtain such licenses to the extent
such licenses
are necessary.
During
the Term, Inverness wishes to be a non-exclusive marketer and distributor
of the
Licensed Products worldwide, and Chembio wishes to grant Inverness
the
non-exclusive right to market and sell the Licensed Products
worldwide.
In
addition, the Parties are simultaneously entering into certain
other agreements,
licenses and covenants, including an agreement between the Parties
and StatSure
Diagnostic Systems, Inc. (“SDS”).
NOW,
THEREFORE, in consideration of the premises and the mutual promises,
covenants
and conditions hereinafter set forth, the receipt and adequacy
of which are
hereby acknowledged, Chembio and Inverness hereby agree as follows:
1.
Definitions.
1.1.
Certain
Definitions
.
For
purposes of this Agreement, in addition to the terms that are defined
on first
use herein, the following terms shall have the following meanings:
(a)
The
“Act”
shall
mean the Federal Food, Drug and Cosmetic Act, as amended, and all
relevant
federal regulations pertaining thereto.
1
(b)
“Affiliate”
shall
mean any Person that controls, is controlled by, or is under common
control with
a Party hereto. For purposes of this definition, “control” shall mean (i) in the
case of corporate entities, direct or indirect ownership of a majority
of the
stock or shares having the right to vote for the election of directors,
and (ii)
in the case of non-corporate entities, direct or indirect ownership
of a
majority of the equity interest with the power to direct the management
and
policies of such non-corporate entities.
(c)
“Audit”
shall
mean examination of each and every document relating to the licenses
and rights
granted herein, including but not limited to books, records, agreements,
communications, shipping records, purchase orders, invoices, credit
memos and
record of payments received or made, such audit to be conducted
by a nationally
recognized public accounting firm.
(d)
“Challenge”
means
to challenge the validity or enforceability of any Patent Rights,
including
without limitation by (i) filing a declaratory judgment action
in which Patent
Rights are alleged to be invalid or unenforceable; (ii) citing
prior art
pursuant to 35 U.S.C. Sec. 301, making a request for re-examination
of Patent
Rights pursuant to 35 U.S.C. Sec. 302 and/or 311, or provoking
or becoming party
to an interference with an application for Patent Rights pursuant
to 35 U.S.C.
Sec. 135; or (iii) filing or commencing any opposition, cancellation,
nullity or
similar proceedings against Patent Rights in any country.
(e)
“Chembio
IP”
shall
mean all proprietary rights and Intellectual Property Rights, including
but not
limited to Patent Rights, owned or Controlled by Chembio, which
are necessary or
useful for, or would be infringed by, the use, sale, distribution,
import or
export of the Licensed Products, whether now in existence or in
the future,
including but not limited to those as listed on Schedule A.
(f)
“Chembio
Listed Patents”
shall
mean the patents and patent applications listed on Schedule A.
(g)
“Chembio
Trademarks”
shall
mean the Trademarks listed on Schedule B.
(h)
“Confidential
Information”
shall
mean all Technology and ideas and information of any kind, whether
in written,
oral, graphical, machine-readable or other form, whether or not
marked or
identified as confidential or proprietary, which are transferred,
disclosed or
made available by any Party hereto to any other.
(i)
“Control”
or
“Controlled
by”
shall
mean, in the context of Patent Rights or other Intellectual Property
Rights,
possession of the ability on the part of a Party to grant access
to or a license
or sublicense as provided for herein without violating the terms
of any
agreement or other arrangement with any Third Party (other than
an Affiliate)
existing at the time such Party would be required hereunder to
grant another
Party such access or license or sublicense.
2
(j)
“Costs”
shall
mean Chembio’s costs, calculated in accordance with GAAP and attributed on a
per-unit-of-Licensed Product basis, of manufacturing and shipping
the Licensed
Products provided to Inverness hereunder, obtaining and maintaining
regulatory
approvals for the Licensed Products, and obtaining and maintaining
licenses from
any Third Parties to manufacture, market, distribute or sell the
Licensed
Products and the amortization over the period during which Licensed
Products are
sold to Inverness of the cost in procuring such licenses. The term
“Costs” shall
also include costs associated with (1) compliance, (2) complaint
handling and
(3) quality control. Such costs shall be restricted to costs incurred
by Chembio
after the Effective Date, except that license fees paid for those
licenses
listed in Schedule C obtained prior to the Effective Date will
be amortized as
set forth in Schedule C over the period during which Licensed Products
are sold
to Inverness.
(k)
“Developing
Countries” means
those countries listed on Schedule G.
(l)
“Dipstick
Product” means
Chembio’s HIV 1/2 STAT PAK(TM) Dipstick product.
(m)
“Distributor”
shall
mean any Third Party, other than an Affiliate of Inverness, to
which Inverness
or Chembio grants a limited sublicense under the rights granted
Inverness under
Section 2.2
or
granted Chembio under Section 2.1
for the
purpose of reselling or distributing Licensed Products.
(n)
“Exploit”
or
“Exploitation”
shall
mean to sell, offer for sale, import, export, transport, register,
distribute,
promote and market, together with other activities typically associated
with
maximizing the market penetration, profit margins and commercialization
of a
diagnostic medical product.
(o)
“FDA”
means
the U.S. Food and Drug Administration.
(p)
“First
Commercial Sale”
shall
mean, with respect to a product, the first sale to any
non-Affiliate.
(q)
“GAAP”
means
United States Generally Accepted Accounting Principles, as applicable
to the
Party in question.
(r)
“GMP”
means
current Good Manufacturing Practices as promulgated by the FDA.
(s)
“Intellectual
Property Rights”
shall
mean (i) Patent Rights; (ii) rights associated with works of
authorship including copyrights, copyright applications and copyright
registrations; and (iii) rights relating to the protection of trade
secrets, know-how and Confidential Information, but shall not include
any rights
to trade marks, trade names, or other distinctive brand names or
logos.
3
(t)
“Inverness
Lateral Flow Patents”
shall
mean any Patent Rights in the patents and patent applications identified
on
Schedule E.
(u)
“Inverness
Trademarks”
shall
mean the trademarks listed on Schedule F.
(v)
“Licensed
Products”
shall
mean (a) Chembio’s veterinary
tuberculosis and parvovirus products,
products
for the testing of Trypanasoma Cruzi, African Trypanasoma, human
tuberculosis,
Leishmaniasis, and Leptospirosis, as described on Schedule D; and
(b) the
Dipstick Product.
(w)
Net
Sales.
(i)
“Net
Sales”
shall
mean, with respect to any Licensed Product, the gross amount received
by the
seller or its Affiliates or permitted Sublicensees on bona fide
sales of such
Licensed Product to Third Parties, less the following items (to
the extent the
gross amount received by them otherwise reflects such items): (i) credits
and allowances for price adjustment, rejection, recall or return
of the Licensed
Product; (ii) amounts for transportation, insurance, handling or shipping
charges; (iii) taxes, duties and other governmental charges levied on or
measured by the sale of the Licensed Product, but not franchise
or income taxes
of any kind whatsoever; (iv) quantity and other trade discounts, credits or
allowances actually allowed and taken; (v) charge back payments and/or
rebates for the Licensed Product provided to managed health care
organizations,
international organizations, or federal, state, local or other
governments,
including, in the United States, Medicare and Medicaid; or (vi) license
fees, royalties or similar paid to Third Parties to allow the seller
or its
Affiliates to Exploit the relevant Licensed Product without infringement
of
Third Party (other than an Affiliate of the seller) Intellectual
Property
Rights.
Net
Sales shall not include any consideration received for demonstrations,
test
marketing, clinical trial purposes or compassionate or similar
use. All of the
amounts specified in the definition of Net Sales shall be determined
from the
books and records of seller of the Licensed Product and its Affiliates,
maintained in accordance with GAAP, consistently
applied.
(ii)
Bundling.
In the
event that any particular Licensed Product is sold as part of a
bundle or kit
with products other than such Licensed Product, the Net Sales allocated
to such
Licensed Product shall be determined by multiplying the net selling
price (that
is, the gross selling price less such applicable deductions as
are permitted in
the calculation of Net Sales) of the bundle or kit by the fraction
A ÷ (A + B)
where A is the average selling price during the period in question
in the
country in question in quantities similar to the sale in question
for the
Licensed Product sold separately and B is the average selling price
during the
period in question in the country in question in quantities similar
to the sale
in question for the remaining products in the bundle or kit, when
such products
are sold separately from the Licensed Product (in each case as
the average
selling price is documented by the seller or its Affiliates or
Sublicensees’
records). In the event that any products contained in the bundle
or kit are not
sold separately, the Net Sales from sales of such bundle or kit
allocated to
Licensed Products shall be determined in a fair and equitable manner
by mutual
agreement of the parties.
4
(iii)
Sales
to Distributors.
It is
understood and agreed that all sales of Licensed Product by the
seller, its
Affiliates and permitted Sub-licensees to any Distributor shall
be treated as
Net Sales hereunder, and that subsequent sale of Licensed Product
by any such
Distributor shall not be treated as Net Sales hereunder.
(x)
“Party”
or
“Parties”
shall
mean each of Inverness and Chembio (but not their Affiliates).
(y)
“Patent
Costs”
shall
mean the costs and expenses paid to outside legal counsel and other
Third
Parties, allocated in-house costs of legal counsel, and filing
and maintenance
expenses, incurred in connection with preparing, filing, prosecuting,
obtaining
and maintaining Patent Rights, including costs and expenses of
patent
interference, re-examination, reissue, opposition or similar
proceedings.
(z)
“Patent
Prosecution Action”
shall
mean any and all actions that may be taken in connection with preparing,
filing,
prosecuting, obtaining and maintaining throughout the world patent
protection
for Patent Rights licensed hereunder, including patent applications
and other
related material submissions and correspondence with any patent
authorities.
(aa)
“Patent
Rights”
shall
mean all patents, patent applications and inventions on which patent
applications are filed and all patents issuing therefrom worldwide,
all
disclosures of inventions, together with any extensions, registrations,
confirmations, reissues, continuations, divisionals, continuations,
continuations-in-part, reexamination certificates, substitutions
or renewals,
supplemental protection certificates, term extensions (under applicable
patent
law or other law), provisional rights and certificates of
inventions.
(bb)
“Person”
shall
mean an individual, corporation, partnership, limited partnership,
limited
liability company, unincorporated association, trust, joint venture
or other
organization or entity, including a governmental authority.
(cc)
“QSRs”
means
current Quality Systems Regulations as promulgated by the FDA.
(dd)
“Related
Documents”
shall
mean the
Settlement Agreement and HIV Barrel Product Commercialization Agreement
between
SDS and Chembio, the License and Distribution Agreement between
SDS and
Inverness, the HIV Cassette License, Marketing and Distribution
Agreement
between Chembio and Inverness, and the HIV Barrel License, Marketing
and
Distribution Agreement between Chembio and Inverness.
(ee)
“Rest
of the World”
means
worldwide, excluding the United States.
(ff)
“Specifications”
shall
mean the information contained in Schedule D regarding the Licensed
Product and
the together with any and all other related documentation or procedures
in
possession by Chembio that substantiate or support the information
contained
within Schedule D.
5
(gg)
“Sublicensee”
shall
mean any sublicensee of any of the rights granted to Inverness
under
Section 2.2,
other
than an Affiliate or a Distributor.
(hh)
“Technology”
shall
mean all techniques, inventions, practices, procedures, knowledge,
improvements,
designs, processes, protocols, compositions, products, methods,
works of
authorship, know-how, data, clinical data, preclinical data, research
and
creations (whether or not subject to protection by any Intellectual
Property
Rights).
(ii)
“Third
Party”
shall
mean any Person other than Inverness or Chembio.
(jj)
“United
States”
means
the United States of America and its territories and possessions,
including
without limitation Puerto Rico and the U.S. Virgin Islands.
(kk)
“Valid
Claim”
shall
mean a claim of an issued and unexpired patent that has not been
permanently revoked, held unenforceable or invalid by a final,
nonappealable decision of a court or other governmental agency
of competent
jurisdiction (the term “final, nonappealable decision” includes decisions that
become final through exhaustion of all permissible avenues for
rehearing or
review by a superior tribunal and decisions that become final through
expiration
of the time allowable for appeal), or admitted by the patentee to be
invalid or unenforceable through reissue, reexamination, disclaimer
or
otherwise.
1.2.
Additional
Definitions
.
Certain
additional capitalized terms are defined below in the body of this
Agreement.
2.
License
Grants.
2.1.
Inverness
License
.
Inverness,
on and subject to the terms and conditions contained herein, hereby
grants to
Chembio and Chembio hereby accepts from Inverness, a non-transferable,
non-exclusive, royalty-bearing license, under the Inverness Lateral
Flow
Patents, for the Term to manufacture and to Exploit the Licensed
Products
worldwide, provided however that Chembio shall have no license
to Exploit the
Dipstick Product in the United States, but shall have a license
to export the
Dipstick Product from the United States (the “License”).
The
License may not be sublicensed. Chembio shall manufacture the Licensed
Products
itself or may subcontract the manufacture of the Licensed Products
to the extent
permitted by applicable law, but may not sublicense such manufacturing
right. If
Chembio subcontracts the manufacture of the Licensed Products,
Chembio shall
enter into a written agreement with any such manufacturer consistent
with the
terms of this Agreement and shall remain primarily liable for breach
of this
Agreement by the manufacturer. The License shall be deemed to include
a grant to
Chembio of the right to Exploit through any Affiliate of Chembio
and through
Distributors of Chembio or any Affiliate of Chembio.
6
(a)
Inverness and Chembio acknowledge that the license in this Section
2.1
is
subject to the limitation that the Charlton Lateral Flow Patents
(as described
on Schedule E) are not licensed for the Over-The-Counter market;
such Charlton
Lateral Flow Patents are licensed only with respect to products
for
sale
through any channels for use by licensed professional health-care
providers
(including hospitals, physicians acting as such and licensed professional
health-care centers).
(b)
Subject to the obligations contained in this Agreement or any Related
Document
to the contrary, the
parties acknowledge that: (a) the Licensed Products may be divided
into the
“Existing
Products”,
meaning the Licensed Products as they exists on the Effective Date,
and the
“Future
Products”,
meaning any Licensed Products not in existence on the Effective
Date, and any
modified or future versions of the Existing Products made after
the Effective
Date; and (b) the Inverness Lateral Flow Patents may be divided
into
“Current
Lateral Flow Patents”
and
“Future
Lateral Flow Patents”.
The
“Current
Lateral Flow Patents”
are:
(i) the patents and patent applications on Schedule E; (ii) any
continuations
and divisionals of the patents and patent applications on Schedule
E; (iii) any
continuations-in-part of the patents and patent applications on
Schedule E to
the extent the claims thereof are directed to subject matter specifically
described in (i) and (ii) above; and (iv) any foreign counterparts
of the
patents and patent applications described in (i), (ii) and (iii)
above. The
“Future
Lateral Flow Patents“
means
any continuation-in-part of the Current Lateral Flow Patents not
described in
(iii) above, and any foreign counterpart of such continuation-in-part.
All
licenses granted by Inverness in this Agreement grant licenses
to the Current
Lateral Flow Patents with respect to both Existing Products and
Future Products.
The licenses granted by Inverness in this Agreement grant licenses
to Future
Lateral Flow Patents: (a) for Existing Products; and (b) for Future
Products,
but only with respect to claims in the Future Lateral Flow Patents
that are
infringed by the making, using, selling or importing of any Existing
Product.
Otherwise, Inverness grants no right or license to any Future Lateral
Flow
Patents under this Agreement, including without limitation any
license to any
Future Lateral Flow Patent except as described in the foregoing
sentence.
2.2.
Non-Exclusive
Right to Purchase and Exploit
.
Chembio,
on and subject to the terms and conditions contained herein, hereby
grants to
Inverness and Inverness hereby accepts from Chembio the non-exclusive
right to
purchase from Chembio and to Exploit, worldwide, during the Term,
the Licensed
Products (other than the Dipstick Product) and may do so only utilizing
Inverness Trademarks.
This
right shall be deemed to include a grant to Inverness of the right
and license
to sell through any Affiliate of Inverness and through Distributors
of Inverness
or of any Affiliate of Inverness.
Chembio
acknowledges that Inverness is under no obligation to purchase
or Exploit any or
all of the Licensed Products.
2.3.
Patent
Marking
.
Chembio
will include the patent numbers of the Inverness Lateral Flow Patents
and
indicate Inverness’ and its licensors ownership of such patents on the packaging
for all Licensed Products.
7
2.4.
SDS
Access
.
It
is
understood by the Parties that SDS shall be entitled to receive
copies of this
agreement and any amendments if and when effected.
2.5.
Termination
of Licenses Upon Challenge of Validity
.
In all
jurisdictions where such agreement is permitted by law, and to
the maximum
extent so permitted: (a) Chembio agrees not to Challenge any Patent
Rights of
Inverness or its Affiliates in the Inverness Lateral Flow Patents
listed on
Schedule E; and (b) Inverness agrees not to Challenge the Patent
Rights in the
Chembio Listed Patents. In addition to the foregoing, and whether
or not the
foregoing prohibition is permissible or otherwise enforceable,
in the event that
Inverness Challenges any Patents Rights in any Chembio Listed Patents,
or
Chembio Challenges any Patent Rights in any Inverness Lateral Flow
Patents, the
Party whose right is Challenged shall have the right, in its sole
discretion and
immediately on written notice, to terminate this Agreement for
cause.
3.
Royalties
and Payments.
3.1.
Exclusive
Payment Arrangements
.
This
Article 3
describes the manner in which the Parties will share revenues derived
from the
sale of Licensed Products. No other fees, payments or royalties
are due from any
Party to any other Party with respect to the licenses and rights
set forth in
this Agreement.
3.2.
Pricing
of Licensed Products
.
Subject
to the limitations set forth in this Article 3,
each
Party that sells any Licensed Products hereunder may set the prices
at which it
sells such Licensed Products in its sole and absolute discretion.
3.3.
Inverness
Sale of Licensed Products - Division of Net Sales
.
Inverness shall retain 35% of Net Sales of Licensed Products made
by Inverness
and its Affiliates in Developing Countries, and 50% of Net Sales
of Licensed
Products made by Inverness and its Affiliates in the Rest of the
World. For the
purposes of this paragraph, Net Sales of Licensed Products are
“made” in a
particular region, such as a Developing Country, when a sale is
made to a
Distributor that is located in such region. The remaining percentage
of Net
Sales (the “Chembio
Share”)
shall
be paid to Chembio.
3.4.
Minimum
Price
.
Notwithstanding Sections 3.2
and
3.3,
Chembio
shall be under no obligation to supply Licensed Products to Inverness
for less
than 115% of Costs. As such, in the event that the Chembio Share
of Net Sales
for any Licensed Product in any particular country or countries
is less than
115% of Costs, Chembio may, by written notice, require Inverness
not to sell
such Licensed Product in such country.
3.5.
Payment
of Cost of Licensed Products
Sold by Inverness
.
Inverness
shall pay Chembio its Costs of Licensed Products in accordance
with the
following procedure:
(a)
Prior
to Inverness’ order for any Licensed Product, Chembio shall provide to Inverness
a reasonable, good faith estimate of the per-unit amount representing
Chembio’s
Cost for such Licensed Product (
(“Deemed
Cost”),
and
Inverness shall provide to Chembio the estimated per-unit amount
representing
Inverness’ Net Sales for such Licensed Product (“Deemed
Price”).
The
initial Deemed Cost and Deemed Price shall apply for the purposes
of
sub-paragraph (b) below from Inverness’ initial order until the end of the
calendar quarter immediately following the calendar quarter in
which the initial
order was placed. For the remainder of the Term, the Deemed Cost
shall be
adjusted each quarter based on the actual Cost of Licensed Products
in the
latest quarter for which actual Costs have been reported pursuant
to Section
3.8
8
(b)
Each
shipment of Licensed Products by Chembio shall be accompanied by
an invoice, in
a form reasonably satisfactory to Inverness, for the Licensed Products
in the
shipment at the then-current Deemed Cost (as hereinafter defined).
Within thirty
(30) days of receipt of a duly issued invoice for Licensed Product
shipped by
Chembio in accordance with this Agreement, Inverness shall pay
Chembio such
Deemed Cost and any additional Chembio Share.
(c)
Any
adjustments to actual Costs for overpayments or underpayments made
by Inverness
shall be made pursuant to the quarterly accountings set forth in
Section
3.8.
For
purposes of these calculations, Cost of Licensed Product will be
matched to
sales on a FIFO basis.
3.6.
Royalties
Payable by Chembio on Inverness Lateral Flow Patents
.
Chembio
shall pay Inverness royalties of five
percent (5%) of Net Sales of Licensed Products made by Chembio
and its
Affiliates in Developing Countries, and eight and one-half percent
(8.5%) of Net
Sales of Licensed Products made by Chembio and its Affiliates in
the Rest of the
World excluding Developing Countries (provided that no Dipstick
Products are
licensed for the United States). For the purposes of this paragraph,
sales of
Licensed Products are “made” in a particular region, such as a Developing
Country, when a sale is made to a Distributor that is located in
such region;
provided, however that Inverness reserves the right to charge the
higher royalty
rate if it can reasonably show that a Distributor located in a
Developing
Country is selling Licensed Products to an end-purchaser located
in a
non-Developing Country, and Chembio shall have the right to pay
the lower
royalty rate if it can reasonably show that a Distributor located
in a
non-Developing Country is selling Licensed Products to an end-purchaser
in a
Developing Country.
(a)
No
royalties shall be payable unless the Licensed Product infringes
a Valid Claim
of the Inverness Lateral Flow Patents in the country in which the
Licensed
Product is manufactured or the country in which
the
Licensed Product is sold.
(b)
Only
one royalty shall be due Inverness for any Licensed Product regardless
of the
number of Valid Claims of the Inverness Lateral Flow Patents that
would be
infringed.
(c)
The
obligation to pay royalties on Net Sales of Licensed Product shall
be imposed
only once with respect to each Licensed Product, even if such Licensed
Product
is sold more than once in the course of its transfer to the ultimate
end-user.
(d)
The
above
royalties on Licensed Products are not payable by Chembio with
respect to
Licensed Products distributed by Inverness, for which the revenue
sharing
arrangements set forth in Section 3.3
are the
sole and exclusive payment arrangements between the parties.
9
3.7.
Payment
by Inverness for Samples
.
Subject
to Inverness’ review of and acceptance of Chembio’s Costs, Inverness shall pay
Chembio 110% of the Costs associated with the manufacture by Chembio
of Licensed
Products that are used by Inverness for demonstrations, testing,
clinical
trials, sample and compassionate or similar use.
3.8.
Reporting
and Calculation of Payments.
(a)
For
any calendar quarter for which payments under Section 3.3
are due
to Chembio, Inverness shall deliver to Chembio, within sixty (60)
days after the
end of such calendar quarter, reasonably detailed written accountings
of Net
Sales of the Licensed Products during such calendar quarter. Such
report shall
indicate Net Sales on a country-by-country and Licensed Product-by-Licensed
Product basis (and not on an order-by-order basis).
(b)
Within seventy-five (75) days of the end of each calendar quarter
during the
Term, Chembio shall deliver to Inverness a complete and accurate
accounting of
all Costs and a determination of the cost per unit for all Licensed Products
sold to Inverness pursuant to this Agreement. The Costs reflected
shall be the
basis for payments to Chembio to be made by Inverness pursuant
to Section
3.3.
The
per-unit allocation of Costs to products sold shall be determined
on a FIFO
basis. Cost so determined shall remain in effect until the next
such accounting.
(c)
Within
ninety (90) days after the end of any calendar quarter for which
reports have
been delivered pursuant to sub-paragraphs (a) and (b) above, Inverness
shall
deliver Chembio a report showing the calculation of the amounts
due to Chembio
pursuant to Section
3.3,
and any
payments to be made hereunder. Such payments may be payable from
either
Inverness or Chembio, depending on whether Chembio has been underpaid
or
overpaid pursuant to the procedure set forth in Section 3.4,
and
shall be made no later than seven days after delivery of such report.
With
respect to Net Sales invoiced in a currency other than United States
Dollars,
Net Sales and royalties payable shall be expressed in their United
States dollar
equivalent, calculated using an average exchange rate for buying
United States
dollars published by The Wall Street Journal during the calendar
quarter. All
payments due to Chembio hereunder shall be made from the United
States in United
States dollars by transfer to such bank account as Chembio may
designate.
(d)
For
any
calendar quarter for which payments are due under this Agreement
to Inverness,
Chembio shall deliver Inverness, within sixty (60) days after the
end of such
calendar quarter, reasonably detailed written accountings of Net
Sales of the
Licensed Products during such calendar quarter. Such report shall
indicate Net
Sales on a country-by-country and Licensed Product-by-Licensed
Product basis,
and the calculation of the royalty due to Inverness, and any payments
to be made
hereunder. When Chembio delivers such accountings, it shall also
deliver all
payments due under this Agreement to Inverness for such calendar
quarter. With
respect to Net Sales invoiced in a currency other than United States
Dollars,
Net Sales and royalties payable shall be expressed in their United
States dollar
equivalent, calculated using an average exchange rate for buying
United States
dollars published by The Wall Street Journal during the calendar
quarter. All
payments due from Chembio hereunder shall be made from the United
States in
United States dollars by transfer to such bank account as Inverness
may
designate.
10
(e)
Chembio shall keep complete and accurate records of the latest
two (2) years of
Costs of Licensed Products sold to Inverness hereunder. For the
sole purpose of
verifying Costs to be reimbursed to Chembio, Inverness shall have
the right once
per calendar year to retain an independent certified public accountant,
selected
by Inverness and reasonably acceptable to Chembio, to conduct an
Audit in the
location(s) where such records are maintained upon twenty (20)
days prior
written notice and during regular business hours, with all information
disclosed
being deemed Confidential Information hereunder. The cost of the
Audit shall be
paid by Inverness. Such Audit shall be completed within fifteen
(15) business
days, subject to extension by the auditor if the auditor reasonably
determines
in good faith that data or information it requires is not available
and
identifies the data or information required. Results of such review
shall be
made available to Chembio and Inverness. Inverness shall recalculate
the
payments made to the Parties and any Party overpaid shall promptly
reimburse any
underpaid Party. If a recalculation of Costs is equal to or greater
than five
(5%) percent of the correctly-calculated Costs, Inverness shall
be entitled to
have Chembio pay the reasonable out-of-pocket costs incurred by
Inverness to
retain such independent certified public accountant to conduct
such
review.
(f)
Each
Party (“Payer”) shall keep complete and accurate records of the latest two (2)
years of sales of Licensed Products to which royalties or shares
of Net Sales to
the other Party (“Payee”) attach hereunder. For the sole purpose of verifying
payments due to a Payee, said Payee shall have the right, once
per calendar
year, to retain an independent certified public accountant, selected
by said
Payee and reasonably acceptable to the Payer, to conduct an Audit
in the
location(s) where such records are maintained upon twenty (20)
days prior
written notice and during regular business hours, with all information
disclosed
being deemed Confidential Information of the Payer. Such Audit
shall be
completed within fifteen (15) business days, subject to extension
by the auditor
if the auditor reasonably determines in good faith that data or
information it
requires is not available and identifies the data or information
required.
Whichever Party requests the Audit shall bear the costs thereof.
Results of such
review shall be made available to the Payer and the relevant Payee.
If the Audit
reflects an underpayment of amounts due, such underpayment shall
be promptly
remitted to the appropriate Payee by the Payer. If the underpayment
is equal to
or greater than five (5%) percent of the amount that was otherwise
due, the
Payee shall be entitled to have the Payer pay the reasonable out-of-pocket
costs
incurred by the Payee to retain such independent certified public
accountant to
conduct such review.
(g)
Whenever reports upon which payments are based are to be made by
any Party, they
shall be certified as correct by the Chief Financial Officer of
the Party. In
addition, to the extent required of a Party by the provisions of
the
Xxxxxxxx-Xxxxx Act, each of the Parties shall make available information
as may
be required for proper certification in accordance with Section
404 and any
rules promulgated thereunder.
11
4.
Regulatory
and License Matters.
4.1.
Facility
Registration/Inspections
.
Chembio
shall, if it has not done so prior to the Effective Date, register,
at its
expense, with FDA, in accordance with the Act, each establishment
in which it
intends to manufacture any Licensed Product and maintain, at its
expense, all
such establishment registrations during the term of this Agreement.
Chembio
shall permit FDA and Inverness to inspect each such establishment
for purposes
of verifying Chembio’s compliance with the Act, including GMPs and QSRs, and for
purposes of verifying that all items being manufactured by Chembio
for sale to
Inverness hereunder are being manufactured in accordance with the
applicable
Specifications; Inverness’ participation in such inspections shall be at
Inverness’ cost. Any such inspection by Inverness shall be conducted upon
reasonable advance notice to Chembio during the normal business
hours of the
facility to be inspected. Chembio acknowledges and agrees that
no inspection by
Inverness pursuant to this Section 4.1
shall
relieve or diminish any of Chembio’s obligations hereunder.
4.2.
Regulatory
Filings
.
Chembio
shall be responsible for (1) obtaining and maintaining, and (2)
paying for the
obtaining and maintaining of, regulatory approvals required for
the lawful
distribution and sale of Licensed Products in the applicable territories.
So
long as Chembio is in compliance with all applicable regulatory
requirements for
the Licensed Product in the territories that it chooses to market
such Licensed
Products, nothing herein shall require Chembio to obtain or maintain
regulatory
approvals in any jurisdiction if Chembio, in its sole discretion,
deems that it
is not commercially reasonable to do so.
5.
Manufacture
and Sale.
5.1.
Chembio
Efforts
.
Chembio
shall use commercially reasonable efforts to manufacture the Licensed
Product
and to supply all of Inverness’ requirements for such product, in accordance
with the published specifications for each such Licensed Product
(the
“Specifications”)
and
the supply requirements and limitations set forth in this Section
5.
In
the
event of any supply constraints which prevent Chembio from supplying
all of
Inverness’ requirements for Licensed Products, Chembio shall treat Inverness
no
less favorably than other distributors of Licensed Products and
shall ensure
that Inverness receives at least its pro rata share of available
products (based
on Inverness’ average pro rata share of sales over the four (4) most recent
calendar quarters).
5.2.
Forecasts
.
During
the Term, Inverness shall provide Chembio, on a quarterly basis,
with forecasts
of Inverness’s anticipated orders for the Licensed Product during the succeeding
three (3) quarters. The initial forecast shall be produced and
delivered by
Inverness to Chembio promptly after the Effective Date. Chembio
hereby
acknowledges and agrees that Inverness shall have the right to
revise any
quarterly forecast issued pursuant to this Section at any time
upon notice given
to Chembio not less than three months before the forecast delivery
date for any
products; any forecasts for delivery less than three months from
the forecast
date shall be binding on both parties. Inverness
shall issue purchase orders and accept delivery of not less than
ninety (90%)
percent of the forecast quantity. Chembio shall not be required
to timely
deliver more than one hundred and twenty-five (125%) percent of
the forecast
quantity, but shall deliver not less than 100% of the quantity
required by
Inverness’ binding forecasts.
12
5.3.
Purchase
Orders
.
All
sales
and purchases of the Licensed Product, if any, hereunder shall
be initiated
pursuant to Inverness’s purchase order for the same placed with Chembio. Such
purchase orders shall include relevant details of the order such
as quantity,
the current Costs of each Licensed Product, destination, billing
and shipping
information, and requested delivery date(s) (a “Purchase
Order”).
Chembio shall accept Purchase Orders by written notice to Inverness
within five
(5) days of receipt. In the event that Chembio cannot comply with
a delivery
date requested by Inverness in any Purchase Order, Chembio may
request an
alternative delivery date, which shall be not more than forty-five
(45) days
after the date requested by Inverness. Any terms and conditions
contained in any
Purchase Order or written acceptance of a Purchase Order, invoice
or other
writing delivered by Chembio to Inverness or by Inverness to Chembio
that are
inconsistent with the terms and conditions of this Agreement shall
be null and
void and of no effect unless agreed to in a writing executed by
an authorized
representative of Inverness and Chembio. At
any
time up to ten (10) days prior to the delivery date set forth in
any Purchase
Order, Inverness may issue an alteration to a Purchase Order in
order to
(i) change a location for delivery, (ii) correct typographical or
clerical errors, or (iii) reschedule a delivery. In such event, Inverness
shall reimburse Chembio for all reasonable resulting costs incurred
by Chembio
and notified by Chembio to Inverness within seven (7) days after
alteration of
the purchase order.
5.4.
Shipment
Terms
.
Licensed Product ordered by Inverness shall be shipped FOB, point
of
manufacture, with the carrier and to the destination specified
in the Purchase
Order.
5.5.
Acceptance
.
Within
twenty (20) days after receipt of any Licensed Products, Inverness
shall inspect
and, in its discretion, test the Licensed Products to determine
whether they
conform in all material respects to the Specifications. In the
event an Licensed
Product does not so conform, Inverness may within such twenty (20)
day period
(i) continue to test the Licensed Product, or (ii) return the
non-conforming Licensed Product to Chembio, at Chembio’s expense, and any
amounts paid by Inverness for the Licensed Product returned shall
be refunded by
Chembio to Inverness. If Inverness does not return a non-conforming
Licensed
Product within such twenty (20) day period, it is deemed accepted.
5.6.
Inverness
Responsibilities; Rights
.
In
connection with its distribution, marketing and sales of the Licensed
Products
(as permitted in this Agreement), Inverness shall provide all sales
force
(including, without limitation, sales administration and training),
order entry,
customer service, reimbursement management, medical affairs, medical
information, marketing (including all advertising and promotional
expenditures),
warehousing, physical distribution, invoicing, credit and collections,
production forecasting and other related facilities and services
as it deems
necessary or desirable for such distribution, marketing and sales.
13
6.
Trademarks
6.1.
Trademark
License
.
Inverness shall Exploit the Licensed Products (other than the Dipstick
Product)
under the Inverness Trademarks. Accordingly, Chembio hereby grants
Inverness, to
the extent that Chembio possesses such rights, a worldwide, royalty-free
license
during the Term to use the Chembio Trademarks but only for the
purpose of
indicating that the Licensed Products are manufactured by Chembio
for Inverness.
All such use of the Chembio Trademarks shall inure to the benefit
of Chembio.
Inverness hereby grants Chembio a non-exclusive, non-transferable
license to use
the Inverness Trademarks, but only for the purpose of labeling
and packaging the
Licensed Products for sale to Inverness in the event that Inverness
elects to
xxxx the Licensed Products with Inverness Trademarks. All such
use of the
Inverness Trademarks shall inure to the benefit of Inverness. Neither
party
shall use or alter such marks in a manner which may jeopardize
or diminish the
other party’s rights to use them, and all notices of rights therein and all
notices of any patent and/or patent pending rights to the Licensed
Products
shall be clearly designated in all written materials in which such
marks are
used.
6.2.
Compliance
with Law; Registration
.
Each
Party, in using the other Party’s trademarks, shall use such marks and/or names
only in such manner as will comply with the provisions of applicable
trademark
laws. Any and all trademark applications which are filed in any
jurisdiction for
a Party’s trademarks shall be filed by that Party and that Party shall
bear all
costs incurred in connection with such trademark applications and
registrations.
No trademark costs incurred by Chembio shall be included in Costs.
6.3.
Termination
.
The
licenses granted under Section 6.1
shall
terminate upon any termination of this Agreement, and thereafter
neither party
shall use the other party’s trade names, service marks, or trademarks except in
connection with sale by Inverness of Licensed Products purchased
prior to the
termination of this Agreement.
6.4.
Labeling
.
Inverness
shall develop, produce and provide all labeling for such Licensed
Product,
subject to Chembio’s approval, such approval not to be unreasonably withheld.
All materials referring or relating to the Licensed Products shall
include the
following in legible font: “Manufactured by Chembio Diagnostic Systems, Inc.,
Medford, NY for Inverness Medical Innovations under [patents no.s
of Inverness
Lateral Flow Patents] owned or licensed by Inverness Medical Innovations,
Inc.”.
7.
Prosecution
and Enforcement of Licensed Intellectual Property.
7.1.
Prosecution
.
The
owner or Controller of Intellectual Property Rights (the “Patent
Owner”)
(for
example, Inverness in the case of the Inverness Lateral Flow Patents
and Chembio
in the case of the Chembio IP) shall have the sole right to prepare,
file,
prosecute, obtain and maintain throughout the world, and otherwise
take all
Patent Prosecution Actions with respect to its Intellectual Property
Rights as
such Patent Owner shall deem to be appropriate in its discretion.
Each Patent
Owner shall pay all Patent Costs incurred by it in connection with
the foregoing
activities and such Patent Costs shall not be deemed Costs hereunder.
If it
becomes necessary or desirable, the
other
Parties shall fully cooperate with the Patent Owner, at the Patent
Owner’s
request and expense, in connection with all Patent Prosecution
Actions; provided
that no Party shall be obligated to provide such cooperation if,
in its
reasonable business judgment, such cooperation would be adverse
to its interests
outside this Agreement.
14
7.2.
Enforcement
of Licensed Patents
.
The
Patent Owner shall have the sole right to enforce and defend any
of its
Intellectual Property Rights licensed hereunder, at its own expense.
Notwithstanding the foregoing, each of the Parties shall inform
the other
Parties promptly in writing of any alleged infringement, misuse
or
misappropriation by any Person of any Intellectual Property Rights
licensed
hereunder that affects the Exploitation of Licensed Products or
other products
licensed hereunder, and the Parties shall reasonably consult with
each other
with respect to the strategy to resolve the alleged infringement,
misuse or
misappropriation. In the event that a Patent Owner shall initiate
an
infringement action or defend an action in accordance with this
Section, the
other Parties shall fully cooperate and supply such assistance
as reasonably
requested by the Patent Owner; provided that no Party shall be
obligated to
provide such cooperation if, in its reasonable business judgment,
such
cooperation would be adverse to its interests outside this Agreement.
8.
Confidentiality.
8.1.
Limited
Disclosure and Use
.
Each of
Inverness and Chembio shall hold in confidence any Confidential
Information
disclosed by any other Party or otherwise obtained by such Party
from any other
as a result of this Agreement, and each of Inverness and Chembio
shall protect
the confidentiality thereof with the same degree of care that it
exercises with
respect to its own information of a like nature, but in no event
less than
reasonable care. Without the prior written consent of the disclosing
Party, a
receiving Party shall not use, disclose, or distribute any Confidential
Information, in whole or in part, except as required to perform
such Party’s
obligations or exercise such Party’s rights hereunder. Access to the disclosing
Party’s Confidential Information shall be restricted to the receiving
Party’s
employees and agents, who, in each case, need to have access to
carry out a
permitted use and are bound in writing to maintain the confidentiality
of such
Confidential Information.
8.2.
Exceptions
.
The
obligations set forth in Section 8.1
shall
not apply to any portion of the Confidential Information that the
receiving
Party can demonstrate by legally sufficient evidence: (i) now or hereafter,
through no act or failure to act on the part of the receiving Party,
is or
becomes generally available; (ii) is known to the receiving Party at the
time of receiving such Confidential Information and not subject
to an obligation
of confidentiality to a Third Party; (iii) is hereafter furnished to the
receiving Party by a Third Party as a matter of right (and without
violating any
agreement with the disclosing Party) without restriction on use
or disclosure;
or (iv) is independently developed by the receiving Party without use of
any Confidential Information received from the other
Party.
In addition, each receiving Party may disclose Confidential Information
to the
extent such disclosure is reasonably necessary to protect Intellectual
Property
Rights to which such Party has a license hereunder, to prosecute
or defend
litigation, to comply with applicable law or regulation, to obtain
necessary or
desirable regulatory approvals, to respond to a valid order of
a court or other
governmental body or any political subdivision thereof, or to conduct
preclinical or clinical trials, provided that, other than with
respect to
disclosure for protecting Intellectual Property Rights, the receiving
Party
shall use reasonable efforts to secure confidential treatment of
such
Confidential Information required to be disclosed.
15
8.3.
Use
of Name; Disclosure of Terms of the Agreement
.
Except
as authorized in Section 6
hereof
or otherwise required by applicable law, regulation or the rules
of any
securities exchange on which such Party’s securities are listed, no Party shall
use the names of the other Parties in any publicity or advertising
without the
prior written approval of the other Parties, except that any Party
may disclose
that they have entered into this Agreement. Except as may be required
by
applicable law, regulation or the rules of any securities exchange
on which such
Party’s securities are listed, no Party shall disclose any terms or conditions
of this Agreement without the prior written consent of the other
Parties,
provided that a Party may disclose such terms and conditions to
any Third Party
with whom such Party has entered into or proposes to enter into
a business
relationship (including any transaction that would result in a
permitted
assignment in accordance with the terms and conditions of
Section 13.11),
provided any such Third Party is informed of the confidentiality
restrictions
herein with respect to such terms and conditions and agrees to
abide by such
restrictions.
8.4.
Effect
of Termination
.
Each
Party shall, upon termination of this Agreement, immediately discontinue
use of
the other’s Confidential Information. Within
a
reasonable time after termination of this Agreement, but in no
event later than
thirty (30) days thereafter, all materials containing such Confidential
Information shall be returned by the receiving Party or (with the
disclosing
Party’s prior written consent) destroyed.
8.5.
Survival
.
The
confidentiality obligations set forth in this Section 8
shall
survive any termination or expiration of this Agreement in perpetuity
.
9.
Representations;
Warranties.
9.1.
Corporate
Power
.
Each
Party represents to the other Parties that it has full corporate
power and
authority to enter into this Agreement and to carry out the provisions
hereof.
Each Party represents to the other that this Agreement constitutes
a valid and
binding agreement, enforceable against it in accordance with its
terms.
9.2.
No
Default or Violation
.
Each
Party represents and warrants to the other Parties that the execution,
delivery
and performance of this Agreement does not (i) violate or require
any
registration, qualification, consent, approval, or filing under, (1) any
law, statute, ordinance, rule or regulation, or (2) any judgment,
injunction, order, writ or decree of any court, arbitrator, or
governmental
entity by which such Party or any of its assets or properties may
be bound or
(ii) conflict with, require any consent, approval, or filing under,
result in
the breach or termination of any provision of, constitute a default
under,
result in the acceleration of the performance of any obligations
under, result
in the vesting or enhancement of any other Person’s rights under, or result in
the creation of any lien upon any of such Party’s properties, assets, or
businesses pursuant to (x) its organizing documents or By-Laws
or (y) any
material indenture, mortgage, deed of trust, license, permit, approval,
consent,
franchise, lease, contract, or other instrument or agreement to
which such Party
is a Party or by which such Party or any of such Party’s properties or assets is
bound.
16
9.3.
Licensed
Intellectual Property
.
Each Party licensing any Intellectual Property
Rights (a “Licensor”)
to any
other Party hereunder (a “Licensee”)
represents and warrants to each such Licensee that: (a) it has
the full
right,
title
and
authority to grant to Licensee the licenses granted hereunder;
and (b) to the
best of the Licensor’s knowledge and except as otherwise disclosed to the
Licensee, all such licensed Patent Rights existing as of the Effective
Date are
valid and enforceable, and all patents, if any, issuing on any
of the pending
patent applications of the Patent Rights existing as of the Effective
Date will
be valid and enforceable. Inverness represents and warrants that
the Inverness
Lateral Flow Patents constitute all Patent Rights claiming lateral
flow
technology that Inverness has the right to sublicense.
9.4.
Regulatory Matters
.
Chembio
represents and warrants that, with respect to the manufacture of
the Licensed
Products, Chembio will comply with the requirements of the Act,
and to the best
of its knowledge, all other applicable federal and state laws.
9.5.
Product
Quality
.
Chembio
represents and warrants that:
(a)
Each
unit of Licensed Product sold to Inverness hereunder shall be manufactured
in
accordance with and shall comply, at the time of delivery to Inverness,
in all
material respects with the applicable Specifications therefor,
shall perform as
intended in all material respects, and shall otherwise be free
from defects in
material and workmanship; and each unit of Licensed Product sold
to Inverness
hereunder will not, at the time of delivery, be adulterated or
misbranded within
the meaning of the Act or within the meaning of any jurisdiction
in which the
definitions of misbranding and adulteration are substantially the
same as in the
Act, nor will any such unit of Licensed Product, at the time of
delivery to
Inverness, be an article which may not, under the Act, be introduced
into
interstate commerce.
(b)
In
the event any unit(s) of Licensed Product does not conform with
a warranty set
forth in Section 9.5(a)
applicable thereto, Inverness or an Affiliate of Inverness may
return such
unit(s) of Licensed Product within twenty (20 days of its receipt
to Chembio
and, in the event Inverness or an Affiliate of Inverness does so,
Chembio,
within thirty (30) days of its receipt of the return, shall either;
(a) refund or credit Inverness’s account in an amount equal to the purchase
price paid by Inverness for such unit(s) of non-conforming Licensed
Product, as
the case may be, plus freight and insurance charges incurred by
Inverness and/or
its Affiliate incident to the original and return shipment, as
documented by
Inverness, or (b) replace, without charge, the non-conforming unit(s) of
Licensed Product, as the case may be, with an equivalent number
of like unit(s)
Licensed Product, as the case may be, conforming with the applicable
warranties
set forth in Section 9.5(a)
and
refund or credit Inverness’s account in an amount equal to said original and
return freight and insurance charges incurred as documented by
Inverness. The
cost of returned units and freight and insurance charges hereunder
shall not be
included in Costs.
9.6.
Exclusion
of Other Representations and Warranties
.
EXCEPT
AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NO PARTY MAKES ANY REPRESENTATIONS
OR
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY
REPRESENTATIONS
OR WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE
OR
NON-INFRINGEMENT. NO PARTY WARRANTS THAT THE OTHER PARTIES WILL
RECEIVE ANY
PARTICULAR AMOUNT, OR ANY, REVENUES OR PROFITS AS A RESULT OF ENTERING
INTO THE
BUSINESS ARRANGEMENTS DESCRIBED IN THIS AGREEMENT.
17
10.
Indemnification
10.1.
By
Chembio
as Manufacturer
.
Chembio
hereby agrees to indemnify, defend (using counsel selected by Chembio
which is
reasonably acceptable to Inverness) and hold harmless Inverness,
its Affiliates
and their respective Distributors and customers, from and against
any and all
liabilities, losses, (exclusive of lost profits) damages, costs
and expenses
(including, without limitation, reasonable attorneys’ fees, court costs, and
out-of pocket expenses) suffered or incurred which arise or result
from: (i) the
material breach of any warranty or representation of Chembio contained
in this
Agreement; (ii) any third party claim of personal injury (including
death) or
property damage arising in connection with any Licensed Product
manufactured by
or for Chembio; (iii) any material failure by Chembio to perform
any of the
covenants, agreements or obligations of Chembio contained in this
Agreement; or
(iv) any third party claim alleging that the manufacture, use,
sale, offer for
sale, import or export of the Licensed Products manufactured by
or for Chembio
infringes the proprietary rights of the third party claimant.
10.2.
By
Sellers
.
Each
seller of any Licensed Product hereunder (a “Seller”)
hereby
agrees to indemnify, defend (using counsel selected by the Seller
which is
reasonably acceptable to the other Party) and hold harmless the
other Party from
and against any and all liabilities, losses (exclusive of lost
profits),
damages, costs, and expenses (including, without limitation, reasonable
attorneys’ fees, court costs, and out-of pocket expenses) suffered or incurred
by the other Party which arise or result from: (i) the material
breach of any
warranty or any representation of the Seller contained in this
Agreement; (ii)
any material failure by the Seller to perform any of its covenants,
agreements,
or obligations contained in this Agreement; or (iii) the promotion
and sale by
the Seller or any Affiliate or Distributor of the Seller of any
Licensed
Product, except to the extent covered by the Manufacturer’s defense and
indemnification obligations under Section 10.1.
10.3.
Notice
of Claims
.
Within
thirty (30) days after a Person seeking indemnification hereunder
(hereinafter
the “Indemnified
Party”)
has
received notice of or has acquired knowledge of any claim by any
Person not a
Party to this Agreement of the commencement or threatened commencement
of any
action or proceeding by any Person not a Party to this Agreement
(“third
party claim”)
or has
acquired knowledge of any other claim hereunder against another
Party hereto
(“first
party claim”)
the
Indemnified Party shall, if such claim is indemnifiable by the
other Party
pursuant hereto (hereinafter the “Indemnifying
Party”),
give
the Indemnifying Party written notice of such claim and the commencement
or
threatened commencement of such action or proceeding, if any. Such
notice shall
state the nature and basis of such claim, and, if ascertainable,
the amount
thereof. Notwithstanding the foregoing, the failure of the Indemnified
Party to
give such notice shall not excuse the Indemnifying Party’s obligation to
indemnify and, in the case of a third party claim, defend the Indemnified
Party,
except to the extent the Indemnifying Party has suffered damage
or prejudice by
reason of the Indemnified Party’s failure to give or delay in giving such
notice. Within ten (10) business days of receipt of any notice
issued by the
Indemnified Party pursuant to this Section 10.3,
the
Indemnifying Party shall notify the Indemnified Party whether the
Indemnifying
Party acknowledges its indemnification obligation and, in the case
of a third
party claim, its defense obligation with respect to the claim which
was the
subject of the Indemnified Party’s notice or whether it disclaims such
obligations. In the event the Indemnifying Party disclaims or fails
to timely
acknowledge its obligations with respect to any claim by the Indemnified
Party
relating to any third party claim, the Indemnified Party shall
have the right to
defend such claim, with counsel of its own selection, and compromise
such claim
without prejudice to its right to indemnification hereunder. In
the event the
Indemnifying Party timely acknowledges its obligations hereunder
with respect to
any third party claim, the Indemnifying Party shall defend the
same with counsel
in accordance with this Section. Where the Indemnifying Party shall
have
acknowledged in writing its obligations hereunder with respect
to any third
party claim, the Indemnified Party may, at its expense, participate
in the
defense of such third party claim and no such third party claim
shall be settled
by the Indemnified Party without the prior written consent of the
Indemnifying
Party which consent shall not be unreasonably withheld or delayed.
At any time
after the Indemnifying Party acknowledges its obligations hereunder
with respect
to any third party claim, the Indemnifying Party may request the
Indemnified
Party to agree in writing to the payment or compromise of such
third party claim
(provided such payment or compromise has been previously approved
in writing by
the third party claimant), and, in the event the Indemnifying Party
does so, the
Indemnified Party shall promptly agree in writing to such settlement,
unless
such settlement would involve a remedy or remedies, other than
the payment of
money damages by the Indemnifying Party, to which the Indemnified
Party
reasonably objects.
18
10.4.
Disputes
.
In
the
event any party to this Agreement makes a claim against another
Party under this
Section 10
or in
any way relating to or arising under this Agreement and further
in the event the
Party receiving notice of such claim fails to timely acknowledge
its obligations
hereunder with respect to such claim or disclaims such obligations,
the relevant
Parties, within forty (40) days of the date of issuance of notice
by the Party
making such claim, shall meet and attempt to resolve in good faith
the dispute
between or among the Parties with respect to such claim. If the
Parties fail to
resolve such dispute within seventy-five (75) days of the date
of issuance of
notice by the Party making such claim, the Party making such claim
may
thereafter commence to arbitrate the claim in accordance with the
provisions set
forth in Section 13.8.
Upon
resolution of any claim referred to in this Section 10,
whether
by agreement between the Parties to this Agreement or the rendering
of a final
arbitration award, the appropriate Party under such agreement or
the Party
against which the arbitration award is rendered shall, within ten
(10) days of
such resolution, pay over and deliver to the other Party funds
in the amount of
any claim as resolved.
11.
Term
and Termination.
11.1.
Term
of Agreement
.
Unless
otherwise terminated as expressly provided herein or with respect
to any
perpetual licenses granted herein, with respect to each Licensed
Product, the
licenses granted and appointments made hereunder shall commence
on the Effective
Date and continue until May 31, 2016 (the “Term”).
11.2.
Material
Breach
.
If a
Party:
(a)
materially breaches this Agreement in a manner which cannot be
cured;
(b)
materially breaches this Agreement in a manner that can be cured
and a Party has
failed to take steps to begin to cure within ninety (90) days following
written
notice of breach by the Party or Parties affected by the breach
or is not
diligently pursuing a cure thereafter; or
(c)
is
subject to a petition for relief under any bankruptcy legislation,
or makes an
assignment for the benefit of creditors, or is subject to the appointment
of a
receiver for all or a substantial part of the Party’s assets, and such petition,
assignment or appointment is not dismissed or vacated within ninety
(90)
days,
19
then,
on
each such occasion, the non-breaching Party shall have the right
to exercise one
or more of the following remedies: (x) upon written notice by the
non-breaching Party to the breaching Party within thirty (30) days
of the end of
the applicable cure period (if any) (assuming that the non-breaching
Party has
not already given such a notice upon the occurrence of a prior
material, uncured
breach by the breaching Party), the non-breaching Party shall have
the right to
seek monetary damages for such material breach within the limitations
set forth
in Section 12
hereof
and/or equitable relief to prevent such material breach from continuing
or
occurring again in the future; and, at its option, the non-breaching
Party shall
have the right to terminate this Agreement. Notwithstanding
the foregoing, if Chembio shall be enjoined from supplying Licensed
Products to
Inverness because of a lawsuit regarding Intellectual Property
Rights of a Third
Party, or Inverness shall be enjoined from selling Licensed Products
because of
a lawsuit regarding Intellectual Property Rights of a Third Party,
and such
injunction shall in either case cause a material breach of this
Agreement, the
non-breaching Party shall not have the right to seek monetary damages
for such
material breach. Whenever a breach occurs and such breach can be
cured in a
timely manner, the non-breaching Party shall cooperate with the
Party in breach
and take reasonable steps (at the cost of the breaching Party)
to allow the
breaching Party to cure the breach.
11.3.
Section
365(n); Agreement to Deliver Embodiments
.
All
rights and licenses granted under or pursuant to this Agreement
are, and shall
otherwise be deemed to be, for purposes of Section 365(n) of Title
11, U.S. Code
(the “Bankruptcy
Code”),
licenses of rights to “intellectual property” as defined in the Bankruptcy Code.
The Parties agree that the licensee of such rights shall retain
and may fully
exercise all of its rights and elections under the Bankruptcy Code.
All rights,
powers and remedies of the licensee provided under this
Section 11.3
are in
addition to and not in substitution for any and all other rights,
powers and
remedies now or hereafter existing at law or in equity in the event
of any such
commencement of a bankruptcy proceeding by or against the licensor.
11.4.
Effect
of Termination for Breach
.
Upon
any
termination of this Agreement:
(a)
The
license grants contained in Section 2.1
and
2.2
shall
terminate;
(b)
subject to Sections 3.3
and
3.4,
Inverness may sell any inventory of Licensed Products in its possession
at the
effective date of termination, but shall have no further right
to Exploit the
Licensed Products; and
20
(c)
subject to the payment of royalties to Inverness pursuant to Section
3.6,
Chembio
may Exploit any inventory of Licensed Products in its possession
as at the
effective date of termination, but Chembio shall have no license
rights to
manufacture or Exploit any further Licensed Products.
11.5.
Survival
.
No
expiration or termination of this Agreement shall affect any rights
or
liabilities of the Parties which may have accrued prior to the
date of
expiration or termination. Notwithstanding anything herein to the
contrary, upon
any expiration or termination of this Agreement, in addition to
any provisions
that by their terms survive, the provisions of Sections 3.8,
7,
8,
9.5(b),
10,
11.4,
12
and
13
shall survive and shall continue in full force and effect in accordance
with
their respective terms.
12.
Limitation
of Liability.
12.1.
Exclusion
of Liability for Certain Damages
.
EXCEPT
FOR BREACHES OF ITS CONFIDENTIALITY OBLIGATIONS HEREUNDER AND FOR
VIOLATIONS OF
ANOTHER PARTY’S INTELLECTUAL PROPERTY RIGHTS AND FOR DAMAGES CAUSED BY A PARTY’S
GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT, IN NO EVENT SHALL A
PARTY BE LIABLE
TO THE OTHER PARTY FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES,
INCLUDING,
WITHOUT LIMITATION, DAMAGES RESULTING FROM LOSS OF USE, PROFITS,
BUSINESS OR
GOODWILL, WHETHER OR NOT THE PARTY ALLEGEDLY CAUSING THE DAMAGE
HAS BEEN ADVISED
OF THE POSSIBILITY THEREOF. THIS SECTION 12
SHALL
NOT BE CONSTRUED TO LIMIT ANY PARTY’S INDEMNIFICATION OBLIGATIONS UNDER SECTION
10
HEREOF.
12.2.
Limitation
on Liability for Direct Damages
.
EXCEPT
FOR BREACHES OF ITS CONFIDENTIALITY OBLIGATIONS HEREUNDER AND FOR
VIOLATIONS OF
ANOTHER PARTY’S INTELLECTUAL PROPERTY RIGHTS, FOR DAMAGES CAUSED BY A PARTY’S
GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT, OR FOR ANY PARTY’S INDEMNIFICATION
OBLIGATIONS UNDER SECTION 10
HEREOF,
EACH PARTY’S MAXIMUM AGGREGATE LIABILITY TO THE OTHER PARTY, OTHER THAN FOR
PAYMENTS DUE HEREUNDER, SHALL IN NO EVENT EXCEED THE AMOUNT OF
$1 MILLION,
WHETHER SUCH DAMAGES ARISE IN CONTRACT, TORT (INCLUDING NEGLIGENCE),
STRICT
LIABILITY OR OTHERWISE.
13.
General.
13.1.
Waivers
and Amendments.
(a)
This
Agreement may be amended, modified or supplemented only by a written
instrument
executed by the Parties hereto.
(b)
No
waiver of any provision of this Agreement, or consent to any departure
from the
terms hereof, shall be effective unless the same shall be in writing
and signed
by the Party waiving or consenting thereto. No failure on the part
of any Party
to exercise, and no delay in exercising, any right or remedy hereunder
shall
operate as a waiver thereof, nor shall any single or partial exercise
of any
such right or remedy by such Party preclude any other or further
exercise
thereof or the exercise of any other right or remedy. The waiver
by any Party
hereto of a breach of any provision of this Agreement shall not
operate as a
waiver of any subsequent breach. All rights and remedies hereunder
are
cumulative and are in addition to and not exclusive of any other
rights and
remedies provided by law.
21
13.2.
Entire
Agreement
.
This
Agreement, the Schedules hereto and the Related Documents constitute
the entire
agreement among the Parties hereto with respect to the subject
matter hereof and
supersede all prior agreements and understandings, whether written
or oral,
among the Parties, or any of the Parties, in connection with such
subject
matter.
13.3.
Severability
.
If any
provision of this Agreement is found invalid or unenforceable by
a court of
competent jurisdiction, such provision shall be enforced to the
maximum extent
permissible by law and the other provisions of this Agreement shall
remain in
full force and effect.
13.4.
Relationship
of the Parties
.
This
Agreement shall not constitute any Party the agent or legal representative
of
any other Party for any purpose whatsoever, and no Party shall
hold itself out
as an agent of any other Party. This Agreement creates no relationship
of joint
venturers, partners, associates, employment or principal and agent
between or
among the Parties, and each of the Parties is acting as an independent
contractor. No Party is granted herein any right or authority to,
and shall not
attempt to, assume or create any obligation or responsibility for
or on behalf
of any other Party. No Party shall have any authority to bind any
other Party to
any contract, whether of employment or otherwise, and each Party
shall bear all
of their respective expenses for its operations, including, without
limitation,
the compensation of its employees and salespersons and the maintenance
of its
offices, service and warehouse facilities. Each Party shall each
be solely
responsible for its own employees and salespersons and for their
acts and the
things done by them.
13.5.
No
Election of Remedies
.
The
rights and remedies accorded herein are cumulative and in addition
to those
provided by law, and may be exercised separately, concurrently,
or
successively.
13.6.
Notices
.
All
notices and other communications hereunder shall be in writing
and shall be
deemed given if delivered personally, telecopied (with confirmation)
or mailed
by registered or certified mail (return receipt requested) or delivered
by
recognized courier service providing evidence of delivery to the
Parties at the
following addresses:
(a)
if to
Chembio, to:
Chembio
Diagnostic Systems, Inc.
0000
Xxxxxxxxxx Xxxx
Xxxxxxx,
Xxx Xxxx 00000
Attention:
Xxxxxxxx X. Xxxxxxx, President
Telecopier
No.: (000) 000-0000
with
a
copy to:
Ruskin
Moscou Faltischek, P.C.
0000
Xxxxxxx Xxxxx
00xx
Xxxxx,
Xxxx Xxxxx
Xxxxxxxxx,
Xxx Xxxx 00000
Attention:
Xxxxxxx X. Xxxxxxxxxx, Esq.,
Telecopier
No.: (000) 000-0000
22
(b)
if to
Inverness, to:
Inverness
Medical Innovations, Inc.
00
Xxxxxx
Xxxx,
Xxxxxxx
XX 00000
Attention:
General Counsel’s office
Telecopier:
(000) 000 0000
or
at
such other address for a Party as shall be specified by like
notice.
13.7.
Governing
Law
.
This
Agreement shall be governed by, and construed and enforced in accordance
with,
the substantive laws of the State of
New York , without giving
effect to its
conflicts of laws rules.
13.8.
Dispute
Resolution
.
In
the
event of any dispute or disagreement between or among any of the
Parties as to
the interpretation of any provision of this Agreement or the performance
of any
obligations hereunder, the matter, upon written request of any
Party, shall be
referred to mediation and arbitration in accordance with the procedures
set
forth in Schedule G to this Agreement.
13.9.
Waiver
of Jury Trial
.
The
Parties each hereby irrevocably and unconditionally waives all
rights to trial
by jury in any legal action, proceeding or counterclaim with respect
to any
matter whatsoever arising out of or in connection with or related
to this
Agreement or the enforcement thereof.
13.10.
Counterparts
.
This
Agreement may be executed in two or more counterparts, all of which
shall be
considered one and the same agreement and shall become effective
when two or
more counterparts have been signed by each of the Parties and delivered
to the
other Parties, it being understood that all Parties need not sign
the same
counterpart. Facsimile execution and delivery of this Agreement
by any of the
Parties shall be legal, valid and binding execution and delivery
of such
document for all purposes.
23
13.11.
Assignment
.
This
Agreement is personal to each of the Parties, and no Party shall
assign any of
its rights or delegate any of its obligations hereunder, including
without
limitation by operation of law, Change of Control, or otherwise,
without the
prior written consent of the affected other Party or Parties, which
consent
shall not be unreasonably withheld or delayed, provided,
however, that without
the consent of the other Parties, Inverness may (i) assign its
rights under this
Agreement and delegate its obligations hereunder, in whole or in
part, to any
Person that shall acquire the business of Inverness to which this
Agreement
relates, or to any Affiliate of such Party, if the assignee shall
assume
Inverness’ obligations hereunder in writing, and (ii) assign this Agreement
in
connection with a sale or transfer of substantially all of the
assets of, or a
majority interest in the voting shares of, Inverness or its corporate
parent to,
or the merger or consolidation of Inverness or its corporate parent
with or
into, any other Person. In this paragraph, “Change of Control” means any sale of
the equity securities of a Party following which the equity holders
of such
Party immediately prior to such sale own, directly or indirectly,
less than 50%
of the combined voting power of the outstanding voting securities
of such Party,
other than in a transaction involving a sale of equity securities
for the
purpose of raising capital to a group of financial investors in
which not less
than 50% of such equity securities are purchased by a recognized
venture capital
or private equity fund or funds and where the management of the
selling Party
before the financing is substantially the same as the management
of such Party
after the financing..
13.12.
Force
Majeure
.
No
Party shall be liable for failure to perform any of its obligations
under this
Agreement when such failure is due to fire, flood, strikes, labor
troubles or
other industrial disturbances, legal restriction, riot, insurrection,
or any
other cause beyond the reasonable ability of the Party affected
thereby to
foresee and avoid, and without such party’s fault or negligence (“Force
Majeure”), provided that any Party claiming the existence of Force Majeure
shall
give notice to the other parties not more than seven (7) days after
the
commencement of the event of Force Majeure, and shall use prompt
and diligent
efforts to mitigate the effects of Force Majeure. In the event
that any event of
Force Majeure prevents performance for sixty (60) days or more,
any other party
may terminate this Agreement on written notice to all parties.
13.13.
Further
Assurances
.
Each
Party hereto will, upon the request of the other Party and without
further
consideration, execute and deliver such other instruments, and
take such other
actions, as such other Party may reasonably request, and at the
other Party’s
expense, to more effectively and efficiently carry out the covenants,
licenses
and agreements of the Parties set forth in this Agreement and consummate
the
transactions contemplated by this Agreement. Without limitation
of the
foregoing, each exclusive licensee of rights granted hereunder
shall have the
right, at its sole cost and expense, to register, record and otherwise
document
such exclusive license in any country where there are any pending
or issued
Patent Rights. Such licensee may require that the other Party execute
a “short
form” license in order to effect the foregoing registration, recordal
or other
documentation in any such country, and may record such short form
license, but
no short form license shall in any way alter or otherwise affect
the rights and
obligations of the Parties hereunder.
[remainder
of this page intentionally left blank]
24
*
*
*
IN
WITNESS WHEREOF, the Parties have executed, or caused their duly
authorized
representatives to execute, this Agreement under seal as of the
date first
written above.
Chembio
Diagnostic Systems, Inc.
By:
Title:
Inverness
Medical Innovations, Inc.
By:
Title:
[Signature
page to
Non-Exclusive License, Marketing and Distribution
Agreement]
