10-K

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

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

Commission file number 000-16789

INVERNESS MEDICAL INNOVATIONS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	04-3565120
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
51 Sawyer Road, Suite 200, Waltham, Massachusetts	02453
(Address of principal executive offices)	(Zip Code)

(781) 647-3900
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934 (the "Exchange Act"):

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $0.001 per share par value	American Stock Exchange

Securities registered pursuant to Section 12(g) of the Exchange Act: None

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

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

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ý No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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

Large accelerated filer o                Accelerated filer ý                Non-accelerated filer o

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

        The aggregate market value of the voting common stock held by non-affiliates of the registrant based on the closing price of the registrant's stock on the American Stock Exchange on June 30, 2005 (the last business day of the registrant's most recently completed second fiscal quarter) was $525,155,522. For this computation, the registrant has excluded the market value of all shares of common stock reported as beneficially owned by executive officers and directors of the registrant; such exclusion shall not be deemed to constitute an admission that any such person is an affiliate of the registrant.

        As of March 14, 2006, the registrant had 31,287,885 shares of common stock, par value $0.001 per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

        Portions of the registrant's definitive Proxy Statement to be filed with the Securities and Exchange Commission on or prior to May 1, 2006 are incorporated by reference into Part III of this Form 10-K.

PART I

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You can identify these statements by forward-looking words such as "may," "could," "should," "would," "intend," "will," "expect," "anticipate," "believe," "estimate," "continue" or similar words. You should read statements that contain these words carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial condition or state other "forward-looking" information. We caution investors that all such forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from any projected results or expectations that we discuss in this report. You should therefore carefully review the risk factors and uncertainties discussed in Item 1A. entitled "Risk Factors," which begins on page 11 of this report, as well as those factors identified from time to time in our periodic filings with the Securities and Exchange Commission. We undertake no obligation to update any forward-looking statements.

Unless the context requires otherwise, references in this Annual Report on Form 10-K to "we," "us," "our," or "our company" refer to Inverness Medical Innovations, Inc. and its subsidiaries.

ITEM 1.    BUSINESS

GENERAL

        We are a leading global developer, manufacturer and marketer of in vitro diagnostic products for the over-the-counter pregnancy and fertility/ovulation test market and the professional rapid diagnostic test market. Our company, Inverness Medical Innovations, Inc., a Delaware corporation, was formed to acquire the women's health, nutritional supplements and professional diagnostics businesses of its predecessor, Inverness Medical Technology, Inc., through a split-off and merger transaction, which occurred in November 2001. We became an independent, publicly traded company immediately after the split-off and our common stock is listed on the American Stock Exchange under the symbol "IMA." Since the split-off, we have grown our businesses by leveraging our strong intellectual property portfolio and making selected strategic acquisitions. We are presently exploring new opportunities for our proprietary lateral flow, electrochemical and other technologies in a variety of professional diagnostic and consumer-oriented applications including immuno-diagnostics with a focus on women's health, cardiology and infectious disease.

        Our principal executive offices are located at 51 Sawyer Road, Suite 200, Waltham, Massachusetts 02453 and our telephone number is (781) 647-3900. Our web site is www.invmed.com and we make available through this site, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission. These reports may be accessed through our website's investor information page.

RECENT DEVELOPMENTS

Private Placement of 3,400,000 Shares

        On February 8 and 9, 2006, we sold 3,400,000 shares of our common stock to funds affiliated with 14 accredited institutional investors in a private placement at $24.41 per share. Net proceeds from the private placement were $79.3 million after subtracting aggregate placement fees and commissions of approximately $3.7 million.

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Agreement to Acquire Certain Assets from ACON Laboratories

        On February 24, 2006, we entered into a definitive agreement with ACON Laboratories, Inc. and certain affiliated entities to acquire (i) the assets of ACON's business of researching, developing, manufacturing, marketing and selling lateral flow immunoassay and directly-related products in the United States, Canada, Europe (excluding Russia, the former Soviet Republics that are not part of the European Union and Turkey), Israel, Australia, Japan and New Zealand and (ii) all of the capital stock of entities owning a newly-constructed manufacturing facility currently undergoing validation in Hangzhou, China.

        The aggregate purchase price for the acquired business, including the new manufacturing facility, will be between $140.0 million and $175.0 million based upon a multiple of revenue and pre-tax profits of the acquired business, though we have agreed to acquire up to $4.0 million in indebtedness related to the new manufacturing facility. The aggregate purchase price is expected to be paid based on completion of certain milestones related to achievement of functional manufacturing operations in certain territories. Such purchase price shall be paid by issuing an aggregate of up to $50.0 million of our common stock, but in no event more than 2,130,000 shares, with the remainder of the purchase price being paid in cash.

        The transaction is subject to the consent of our lenders and other ordinary and customary closing conditions, including certain regulatory approvals. The acquisition of the lateral flow business described above is expected to close in the first or second quarter of 2006 and the acquisition of the manufacturing facility is expected to close by the end of the second quarter of 2006.

Acquisition of CLONDIAG chip technologies GmbH

        On February 28, 2006, we acquired 67.45% of the capital stock of CLONDIAG chip technologies GmbH, a private company located in Jena in Germany which has developed a multiplexing technology for nucleic acid and immunoassay based diagnostics, in exchange for 218,502 shares of our common stock and approximately $3.1 million in cash. We also agreed to settle obligations totaling approximately $10.0 million during the first quarter of 2006, primarily using cash. Under our agreement with the CLONDIAG shareholders, we will acquire the remaining 32.55% of the capital stock of CLONDIAG on or about August 31, 2006 for an additional $4.9 million based on current exchange rates. The agreement also calls for contingent consideration totaling approximately $8.9 million consisting of 224,316 shares of common stock and approximately $3.0 million of cash or stock in the event that four specified products are developed on CLONDIAG's platform technology during the three years following the date of the initial stock purchase.

Segments

        Our major reportable segments are consumer diagnostic products, vitamins and nutritional supplements and professional diagnostic products. Below are discussions of each of these reportable segments. Financial information about our reportable segments is provided in Note 16 of the "Notes to Consolidated Financial Statements," which are included elsewhere in this report.

Products

        Consumer Diagnostic Products.    Our current consumer diagnostic products currently target the worldwide over-the-counter pregnancy and fertility/ovulation test market. There are numerous pregnancy self-tests on the market, which are typically urine-based tests and provide results in less than five minutes. Our pregnancy and fertility/ovulation tests display visual results in approximately one minute or three minutes depending on the product. Fertility/ovulation prediction tests inform women of the best time to conceive a baby by detecting the surge of the luteinizing hormone, which precedes ovulation. Fertility/ovulation prediction tests, which are generally disposable stick tests similar to

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pregnancy stick tests, are easy to use and are widely accepted for home use by professional fertility care providers and the general public. Our fertility/ovulation prediction test kits provide 24 to 48 hours notice of when ovulation is likely to occur. By identifying the days when a woman is most fertile, these products assist couples in planning conception.

        To serve these markets we offer premium branded products, value branded products and private label diagnostic products. Our premium branded Clearblue home pregnancy and fertility/ovulation prediction tests are global leaders in terms of both sales and technology. We also offer Clearblue Easy Digital pregnancy and fertility/ovulation prediction tests. Our Clearblue Easy Digital pregnancy test was launched in June 2003 as the first consumer pregnancy test to display test results in words, as opposed to displaying results with colored lines that require interpretation. To supplement our premium line of traditional Clearblue fertility/ovulation disposable stick tests, we also offer the Clearblue Easy Fertility Monitor, the only hormone-based reusable monitoring device available for home use to assist women attempting to conceive. This product, which is sold primarily in the United States and Canada, not only detects the surge of the luteinizing hormone, or LH, which causes ovulation, but it is also the only fertility/ovulation prediction device that identifies additional days when a woman may conceive by detecting a rise in estrogen levels that precedes the LH surge.

        Our Fact plus and Accu-Clear branded pregnancy and fertility/ovulation prediction products are marketed to value-oriented consumers. We are also a major U.S. supplier of private label home pregnancy detection and fertility/ovulation prediction products and we currently supply Pfizer with both the digital and non-digital versions of its e.p.t brand pregnancy tests. We also sell Persona, a diagnostic monitoring device that provides for a natural method of contraception by allowing the user to monitor her menstrual cycle, in foreign countries, primarily in Germany and the United Kingdom.

        Vitamins and Nutritional Supplements.    We also market a wide variety of vitamins and nutritional supplements primarily within the United States. Most growth in this market is attributed to new products that generate attention in the marketplace. Well-established market segments, where competition is greater and media commentary less frequent, are generally stable. Slow overall growth in the industry has resulted in retailers reducing shelf space for nutritional supplements and has forced many under-performing items out of distribution, including several broad product lines. Sales growth of private label products has generally outpaced the overall industry growth, as retailers continue to add to the number of private label nutritional products on their shelves.

        Our subsidiary, Inverness Medical Nutritionals Group, or IMN, is a national supplier of private label vitamin and nutritional products for major drug and food chains and also manufactures bulk vitamins, minerals, nutritional supplements and over-the-counter drug products under contract for unaffiliated brand name distributors. IMN also manufactures an assortment of vitamin, mineral and nutritional supplement products for sale under Inverness Medical brand names.

        Our Inverness Medical branded nutritional products are high quality products sold at moderate prices through national and regional drug stores, groceries and mass merchandisers. These branded products include Stresstabs, a B-complex vitamin with added antioxidants; Ferro-Sequels, a time-release iron supplement; Protegra, an antioxidant vitamin and mineral supplement; Posture-D, a calcium supplement; SoyCare, a soy supplement for menopause; ALLBEE, a line of B-complex vitamins; and Z-BEC, a zinc supplement with B-complex vitamins and added antioxidants.

        Professional Diagnostic Products.    Professional diagnostic products are designed to assist medical professionals in both preventative and interventional medicine. These products provide for qualitative or quantitative analysis of a patient's body fluids or tissue for evidence of a specific medical condition or disease state or to measure response to therapy. Our current professional diagnostic products consist primarily of laboratory and point-of-care tests in the areas of women's health, infectious disease, cardiovascular disease and drugs of abuse. The market for rapid diagnostic products consists primarily of small and medium sized, non-centralized laboratories and testing locations such as physician office

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laboratories, specialist mobile clinics, emergency rooms and some rapid-response laboratories in larger medical centers. We distinguish the professional point-of-care rapid diagnostic test market from clinical diagnostic markets that consist of large, centralized laboratories that offer a wide range of highly-automated laboratory services in hospital or related settings.

        We believe that the demand for infectious disease diagnostic products is growing faster than many other segments of the immunoassay market due to the increasing incidence of certain diseases or groups of diseases, including viral hepatitis, respiratory syncytial virus (RSV), influenza, tuberculosis, acquired immunodeficiency syndrome and other sexually transmitted diseases. We also believe that, in general, the ability to deliver faster, accurate results at reasonable prices drives demand for professional diagnostic products. This means that while there is certainly growing demand for faster, more efficient automated equipment from large hospitals and major reference testing laboratories, there is also growing demand by point-of-care facilities and smaller laboratories for fast, high-quality, inexpensive, self-contained diagnostic kits. As the speed and accuracy of such products improve, we believe that these products will play an increasingly important role in achieving early diagnosis, timely intervention and therapy-monitoring outside of acute medicine environments.

        Our professional diagnostics products, which are generally marketed under the trade name, Inverness Medical Professional Diagnostics, include:

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Rapid Membrane Test Products.  We develop and market a wide variety of rapid membrane tests for pregnancy, drugs of abuse, mononucleosis, strep throat, C.difficile, Lyme disease, chlamydia, H.pylori, fecal occult blood, D-dimer, RSV, Influenza A/B and rubella. Outside of the United States we also develop and market rapid HIV tests. Our rapid tests are qualitative, visually-interpreted rapid diagnostic tests that are used in point-of-care environments where a rapid response is desired or where the volume of testing is too low to warrant high-volume methods. Our rapid tests are sold under the brand names Clearview, Wampole, NOW, BinaxNOW, Acceava, BioStar OIA, SureStep, Signify and TestPack, and our HIV products, which are sold outside of the United States, are sold under our Determine, DainaScreen and Orgenics brand names.



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Ischemia Test.  Our Albumin Cobalt Binding, or ACB, test is a clinical chemistry assay that detects Ischemia Modified Albumin, or IMA, by measuring the cobalt binding capacity of albumin in a patient serum sample. IMA concentrations in blood rise quickly and remain elevated during an ischemic event, returning to normal level several hours after cessation of ischemia. IMA can be used in conjunction with electrocardiogram (ECG) and troponin as an aid to rule out acute coronary syndrome at presentation-saving time, resources and money. ACB test reagents are used by clinical laboratories in conjunction with clinical chemistry instruments sold by third parties, including Roche Diagnostics.



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ELISA Products.  We offer over 70 enzyme linked immunosorbent assays (ELISA) tests for a wide variety of infectious and autoimmune diseases, as well as a full line of automated instrumentation for processing ELISA assays. Our ELISA products are generally marketed under our Wampole brand.



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AtheNA Multi-Lyte Test System.  We are the exclusive U.S. distributor of the AtheNA Multi-Lyte Test System, which is capable of simultaneously performing multiple assays from a single patient sample in the areas of autoimmune and infectious disease. The AtheNA Multi-Lyte Test System provides improved clinical sensitivity and comparable clinical specificity to ELISA in a labor saving, automated user-friendly format.



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IFA/Serology Products.  We also offer a line of indirect fluorescent antibody, or IFA, assays for over 20 viral, bacterial and autoimmune diseases and a full line of serology diagnostic products covering a broad range of disease categories. Many of our kits are available in multiple formats

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including rapid membrane, latex, red cell and color-enhanced agglutination. These serology assays provide cost-effective testing alternatives and most offer results in two minutes or less.

Methods of Distribution

        Consumer Diagnostic Products.    We market and sell our consumer diagnostic products under our own brand names as well as under store brands. Our customers include retail drug stores, drug wholesalers, groceries and mass merchandisers in North America, Europe and Japan such as Walgreens, CVS, Wal-Mart and Boots. Our Clearblue brand pregnancy detection and fertility/ovulation prediction tests, which are marketed under the name Clearblue Easy in the United States, is a leading brand both in the United States and globally. We also sell Crystal Clear, the leading brand in Australia. Our Clearblue products are marketed as premium products and compete intensively with other premium brand name products. Persona is also marketed as a premium product in Europe. Marketing of premium branded products focuses on brand awareness as well as feature and performance differentiation. We achieve this through television and print advertising. Our Fact plus and Accu-Clear brand products are value-oriented brands which are not currently advertised. Our consumer diagnostic products are marketed in the United States, the United Kingdom and much of Western Europe using our own sales managers and a network of sales representatives. In other areas of the world, including Japan, Canada, Australia and the rest of Europe, our consumer diagnostic products are sold though distribution contracts. Private label and contract manufacturing arrangements accounted for 27% of our consumer diagnostics business' net product sales for 2005.

        Vitamins and Nutritional Supplements.    We primarily market and sell our vitamins and nutritional supplements in the United States through private label arrangements with retail drug stores, groceries, mass merchandisers and warehouse clubs who sell our products under their store brands. We also sell a variety of branded products to the retail drug stores, groceries and mass merchandisers. To a lesser extent, we provide contract manufacturing services to third parties. Our two largest customers during 2005, based on net product sales, together accounted for almost 61% of our net product sales for this segment and one of them, Walgreens, accounted for approximately 11% of our net product sales on a consolidated basis. Our rights to the trademarks Stresstabs, Ferro-Sequels, Posture-D, Protegra, ALLBEE and Z-BEC are limited to use in the United States, but we are not restricted from marketing the formulations sold under those brand names in other areas of the world.

        Professional Diagnostic Products.    In the United States, the United Kingdom, Spain, Germany and France, we distribute our professional diagnostic products to hospitals, reference laboratories, physician's offices and other point-of-care settings through our own sales forces and distribution networks. In all other major markets around the world we utilize third party distributors to sell our products. We also distribute products for other parties, primarily in Germany and, since October 2005, in Spain, through our subsidiaries, Inverness Medical Deutschland and Inverness Medical Iberica.

        Under the terms of our acquisition of the Determine/DainaScreen products from Abbott Laboratories in June 2005, Abbott distributes our Determine/DainaScreen products, which are sold outside of the United States, for up to 32 months in order to allow us time to obtain various marketing or sales licenses in the many countries where these products are sold. Abbott acts as our exclusive distributor, although we have certain rights to terminate the distribution arrangement on a country by country basis in the future. We also sell these products to Abbott as the exclusive supplier of its global "Access to HIV Care" program, through which Abbott provides free or low-cost testing products for HIV testing in underdeveloped countries around the world.

Manufacturing

        Consumer Diagnostic Products.    We manufacture nearly all of our disposable consumer diagnostic products at our facilities in Bedford, England; Shanghai, China and San Diego, California. These

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facilities are each ISO certified and registered with the United States Food and Drug Administration. We use our Bedford facility to manufacture the diagnostic test portion of our Clearblue Easy Digital products, and the non-digital and digital e.p.t pregnancy tests for Pfizer. We purchase the electronic portion of our digital pregnancy and ovulation prediction tests, our Clearblue Easy Fertility Monitor and Persona to our specifications from third party suppliers in Europe and China. Because most components of our consumer diagnostic products are produced to our specifications, some of our suppliers are single source suppliers with few, if any, alternative sources immediately available.

        Vitamins and Nutritional Supplements.    We manufacture substantially all of our vitamin and nutritional products at IMN's facilities in Freehold and Irvington, New Jersey. IMN internally manufactures substantially all of its softgel requirements at the Irvington facility. Our Freehold facility manufactures in full compliance with Good Manufacturing Practices, or GMP, standards recently proposed by the FDA for the dietary supplement industry. Our Irvington facility manufactures to GMP standards applicable to drug makers and is registered with both the United States Drug Enforcement Agency, or the DEA, and the FDA.

        Professional Diagnostic Products.    Approximately 44% of the professional diagnostic products that we sell, based on net product sales for the fiscal year ended December 31, 2005 were manufactured by third parties. We manufacture the remainder, including substantially all of our Clearview, NOW, BinaxNOW, BioStar OIA, SureStep, Signify and TestPack products, ourselves at our facilities in Shanghai, China; Bedford, UK; Yavne, Israel; Scarborough, Maine; Louisville, Colorado and San Diego, California. We also manufacture the Determine/DainaScreen HIV products that we acquired from Abbott in June 2005 at Abbott's facility in Matsudo, Japan in space rented from Abbott under a manufacturing and support services agreement entered into in connection with the acquisition.

Research and Development

        A significant portion our budget for research and development currently is allocated to the development of cardiovascular disease management products. On February 25, 2005, we entered into a co-development agreement with ITI Scotland Limited ("ITI"), whereby ITI agreed to provide us with approximately 30 million British Pounds Sterling (or $51.8 million at December 31, 2005) over three years to partially fund research and development programs focused on identifying novel biomarkers and near-patient and home use tests for cardiovascular and other diseases ("the programs"). We agreed to invest 37.5 million British Pounds Sterling (or $64.7 million at December 31, 2005) in the programs over the next three years. Through our subsidiary, Stirling Medical Innovations Limited ("Stirling"), we established a new research center in Stirling, Scotland, where we will consolidate many of our existing cardiology programs and ultimately commercialize products arising from the programs. ITI and Stirling will have exclusive rights to the developed technology in their respective fields of use.

        The remainder of our research and development efforts is focused on expanding our range of product offerings and enhanced features for our lines of consumer and professional diagnostic products. Most of our research and development activities are carried out in Stirling, Scotland and Bedford, England, but we also conduct research and development at our facilities in Scarborough, Maine; Yavne, Israel; Farum, Denmark and Jena, Germany. The Jena facility was acquired in February 2006 as part of our acquisition of CLONDIAG chip technologies GmbH.

Foreign Operations

        Our business relies heavily on our foreign operations. Four of our eight current manufacturing facilities are outside the United States, including our primary consumer diagnostic products manufacturing facilities in Bedford, England and Shanghai, China, and the manufacturing operation in Matsudo, Japan, which is conducted out of a facility owned by Abbott. Approximately 42% of our net revenues were generated from outside of the United States during 2005. Our Clearblue products, pregnancy tests in particular, have historically been much stronger brands outside the United States, with 68% of our net product sales of Clearblue products coming from outside the United States during 2005. Our TestPack and Determine/DainaScreen product lines are sold exclusively outside the United States.

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Competitive Conditions

        Consumer Diagnostic Products.    Competition in the pregnancy detection and fertility/ovulation prediction market is intense. Our competitors in the United States, and worldwide, are numerous and include, among others, large medical and consumer products companies with substantially greater resources than we have. However, we believe that we can continue to compete effectively in the consumer diagnostics market based on our research and development capabilities, advanced manufacturing expertise, diversified product positioning, global market presence and established wholesale and retail distribution networks. Our competitors for the sale of pregnancy test products worldwide include Church & Dwight, Pfizer, ACON Laboratories, Omega Pharma, Princeton BioMeditech, Arax, Rohto and Syntron Bioresearch, although we currently supply Pfizer with its pregnancy test products and we have agreed to acquire the lateral flow business of ACON Laboratories for most major markets and expect that acquisition to close during the first or second quarter of 2006. Our competitors for the sale of fertility/ovulation prediction tests include Church & Dwight, Princeton BioMeditech and Syntron. Competition among branded consumer diagnostic products is based on brand recognition and price. Products sold under well-established or "premium" brand names can demand higher prices and maintain high market shares due to brand loyalty. Our Clearblue brand qualifies as a premium brand worldwide with respect to both pregnancy tests and fertility/ovulation prediction products. Our Clearblue pregnancy tests are market leaders outside of the United States, as is our Crystal Clear brand in Australia, and our Clearblue fertility/ovulation prediction products are market leaders both in the United States and globally. Our Fact plus and Accu-Clear branded consumer products compete based on price and do not attempt to compete based on brand recognition. For private label manufacturers, competition is based primarily on the delivery of products at lower prices that have substantially the same features and performance as brand name products. The Clearblue Fertility Monitor and Persona are unique products and their competitors or markets are not easily defined.

        Vitamins and Nutritional Supplements.    The market for private label vitamins and nutritional supplements is extremely price sensitive, with quality, customer service and marketing support also being important. Many of the companies that mass market branded vitamins and nutritionals, including NBTY, Pharmavite, Leiner Health Products, and Bayer, also sell to private label customers and constitute our major competitors for private label business. In addition, there are several companies, such as Perrigo and Contract Pharmaca, that compete only in the private label business.

        In the branded nutritional supplements industry, competition is based upon brand name recognition, price, quality, customer service and marketing support. There are many companies, both small and large, selling vitamin products to retailers. A number of these companies, particularly manufacturers of nationally advertised brand name products, are substantially larger than we are and have greater financial resources. Among the major competitors of our branded products that are sold through groceries and other mass retailers are NBTY, Wyeth, Pharmavite, Leiner Health Products and GlaxoSmithKline.

        Professional Diagnostic Products.    In the rapid membrane market, our main competitors are Becton Dickinson, Quidel and ACON Laboratories, although we have agreed to acquire ACON's lateral flow business for most major markets and expect that acquisition to close during the first or second quarter of 2006. Some competitors in this market, such as Becton Dickinson are large companies with substantially greater resources than we have. Other competitors in some product segments, particularly drugs of abuse, are smaller yet aggressive companies. These competitors include Syntron Bioresearch, Princeton BioMeditech and Genzyme Diagnostics. Some automated immunoassay systems can be considered competitors when labor shortages force laboratories to automate or when the costs of such systems are lower. Such systems are provided by Abbott, Bayer, Roche Diagnostics, Beckman Coulter and other large diagnostic companies. In the infectious disease area, new technologies utilizing amplification techniques for analyzing molecular DNA gene sequences from

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companies such as Abbott, Roche and Gen-Probe are making in-roads into this market. Competition in this market is intense and is primarily based on price, breadth of line and distribution capabilities.

        Our competitors in the ELISA diagnostics market include large corporations, such as Abbott Laboratories and Diagnostic Products Corporation, which manufacture state-of-the-art automated immunoassay systems and a wide array of diagnostic products designed for processing on those systems. These entities benefit from economies of scale and have the resources to design and manufacture state-of-the-art automated equipment. Other competitors in this market, DiaSorin and Diamedics, in particular, are more similar in size to us and compete based on quality and service. In the United States and Canada, we focus on matching the instrumentation and product testing requirements of our customers by offering a wide selection of diagnostic products and test equipment.

        The markets for our serology and our IFA and microbiology products are mature, and competition is based primarily on price and customer service. Our main competitors in serology and microbiology testing include Remel and Biokit. Our main competitors in IFA testing are Bio-Rad Laboratories, INOVA Diagnostics, Immuno Concepts, The Binding Site and DiaSorin. However, products in these categories also compete to a large extent against rapid membrane and ELISA products, which are often easier to perform and read and can be more precise.

        We believe that our dedication to research and development and our strong intellectual property portfolio, coupled with our advanced manufacturing expertise, diversified product positioning, global market presence and established distribution networks, provide us with a competitive advantage in the point-of-care markets in which we compete.

Patents and Proprietary Technology; Trademarks

        We have built a strong intellectual property portfolio in the area of lateral flow immunoassays, the technology which underlies many rapid diagnostic test formats including most one step home pregnancy and fertility/ovulation tests and most of our rapid membrane products for the point-of-care marketplaces that we serve. By the judicious use of acquisition and strategic licensing, we have obtained rights to the major patent families in this area of technology. We believe that these intellectual property rights give us a distinct advantage over our competitors and underpin our continuing success in this area. In addition, our intellectual property portfolio also includes an increasing number of other patents, patent applications and licensed patents protecting our vision of the technologies and products of the future. Our intellectual property portfolio consists of patents that we own and, in some cases, licenses to patents or other proprietary rights of third parties which may be limited in terms of field of use, transferability or may require royalty payments.

        The medical products industry, including the diagnostic testing industry, historically has been characterized by extensive litigation regarding patents, licenses and other intellectual property rights. We believe that our recent successes in enforcing our intellectual property rights in the United States and abroad demonstrate our resolve in enforcing our intellectual property rights, the strength of our intellectual property portfolio and the competitive advantage that we have in this area. We have incurred substantial costs, both in asserting infringement claims against others and in defending ourselves against patent infringement claims, and we expect to incur substantial litigation costs as we continue to aggressively protect our technology and defend our proprietary rights.

        Finally, we believe that certain of our trademarks are valuable assets that are important to the marketing of both our consumer and professional products. Many of these trademarks have been registered with the United States Patent and Trademark Office or internationally, as appropriate.

        The medical products industry, including the diagnostic testing industry, places considerable importance on obtaining and enforcing patent and trade secret protection for new technologies, products and processes. Trademark protection is an important factor in the success of certain of our

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consumer and professional diagnostic product lines. Our success therefore depends, in part, on our abilities to obtain and enforce the patents and trademark registrations necessary to protect our products, to preserve our trade secrets and to avoid or neutralize threats to our proprietary rights from third parties. We cannot, however, guarantee our success in enforcing or maintaining our patent rights; in obtaining future patents or licensed patents in a timely manner or at all; or as to the breadth or degree of protection that our patents or trademark registrations or other intellectual property rights might afford us. For more information regarding the risks associated with our reliance on intellectual property rights see the risk factors discussed in Item 1A. entitled "Risk Factors" on pages 11 through 25 of this report.

Government Regulation

        Our research, development and clinical programs, as well as our manufacturing and marketing operations, are subject to extensive regulation in the United States and other countries. Most notably all of our products sold in the United States are subject to the Federal Food, Drug and Cosmetic Act, or the FDCA, as implemented and enforced by the U.S. Food and Drug Administration, or the FDA. All of our diagnostic products sold in the United States require FDA clearance to market under Section 510k of the FDCA, which may require pre-clinical and clinical trials. Foreign countries may require similar or more onerous approvals to manufacture or market these products. The marketing of our consumer diagnostic products is also subject to regulation by the U.S. Federal Trade Commission, or the FTC. In addition, we are required to meet regulatory requirements in countries outside the United States, which can change rapidly with relatively short notice.

        In March 2005, our ABI subsidiary was informed by the FDA that based on inspectional findings that included data integrity and design control issues, ABI had become subject to the FDA's Application Integrity Policy. As a result, the FDA is obligated to defer the review of any pending or future applications made by ABI until the FDA determines that ABI has resolved these issues. ABI currently has no applications pending. ABI is not restricted from introducing new tests outside of the United States, or from selling products in the United States based on any existing 510(k)s. However, ABI withdrew certain 510(k)s related to its drugs of abuse products and a Class III recall (based on our assessment that any hazard to the public health is unlikely) was undertaken for the corresponding products. ABI is in the final stages of both an internal and external audit, and is committed to taking any actions required by those audits in order to fulfill its regulatory obligations.

        The manufacturing, processing, formulation, packaging, labeling and advertising of our nutritional supplements are subject to regulation by one or more federal agencies, including the FDA, the U.S. Drug Enforcement Administration, or DEA, the FTC and the Consumer Product Safety Commission. These activities are also regulated by various agencies of the states, localities and foreign countries in which our nutritional supplements are now sold or may be sold in the future. In particular, the FDA regulates the safety, manufacturing, labeling and distribution of dietary supplements, including vitamins, minerals and herbs, as well as food additives, over-the-counter and prescription drugs and cosmetics. The GMP standards promulgated by the FDA are different for nutritional supplement, drug and device products. In addition, the FTC has jurisdiction along with the FDA to regulate the promotion and advertising of dietary supplements, over-the-counter drugs, cosmetics and foods.

Employees

        As of March 1, 2006, we had approximately 2,360 employees, of which 957 employees are located in the United States. In addition, we utilize the services of temporary employees, as well as a number of consultants specializing in areas such as research and development, risk management, regulatory compliance, strategic planning and marketing.

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ITEM 1A.    RISK FACTORS

The risk factors described below may materially impact your investment in our company or may in the future, and, in some cases already do, materially affect us and our business, financial condition and results of operations. You should carefully consider these factors with respect to your investment in our securities. This section includes or refers to certain forward-looking statements; you should read the explanation of the qualifications and limitations on such forward-looking statements beginning on pages 2 and 30 of this report.

Our business has substantial indebtedness, which could, among other things, make it more difficult for us to satisfy our debt obligations, require us to use a large portion of our cash flow from operations to repay and service our debt or otherwise create liquidity problems, limit our flexibility to adjust to market conditions, place us at a competitive disadvantage and expose us to interest rate fluctuations.

        We currently have, and we will likely continue to have, a substantial amount of indebtedness. As of December 31, 2005, we had approximately $262.5 million in aggregate principal indebtedness outstanding, of which $93.2 million is secured indebtedness, and $11.0 million of additional borrowing capacity under the revolving portions of our credit facilities. In addition, subject to restrictions in our credit facilities and the indenture governing our $150.0 million in outstanding 8³/4% senior subordinated notes, or the senior subordinated notes, we may incur additional indebtedness. During the fiscal years ended December 31, 2005 and 2004, we recorded $21.8 million and $22.1 million, respectively, of interest expense related to our indebtedness, which included $2.3 million and $4.2 million, respectively, in non-cash interest primarily related to amortization of debt origination costs.

        Our substantial indebtedness could affect our future operations in important ways. For example, it could:

•

make it more difficult to satisfy our obligations under the senior subordinated notes, our credit facilities and our other debt-related instruments;



•

require us to use a large portion of our cash flow from operations to pay principal and interest on our indebtedness, which would reduce the amount of cash available to finance our operations and other business activities and may require us, in order to meet our debt service obligations, to delay or reduce capital expenditures or the introduction of new products and/or forego business opportunities, including acquisitions, research and development projects or product design enhancements;



•

limit our flexibility to adjust to market conditions, leaving us vulnerable in a downturn in general economic conditions or in our business and less able to plan for, or react to, changes in our business and the industries in which we operate;



•

impair our ability to obtain additional financing;



•

place us at a competitive disadvantage compared to our competitors that have less debt; and



•

expose us to fluctuations in the interest rate environment with respect to our indebtedness that bears interest at variable rates.

        We expect to obtain the money to pay our expenses and to pay the principal and interest on the senior subordinated notes, our senior credit facility and our other debt from cash flow from our operations and from additional loans under our senior credit facility, subject to continued covenant compliance, and potentially from other debt or equity offerings. Our ability to meet our expenses thus depends on our future performance, which will be affected by financial, business, economic and other factors. We will not be able to control many of these factors, such as economic conditions in the markets in which we operate and pressure from competitors. We cannot be certain that our cash flow will be sufficient to allow us to pay principal and interest on our debt and meet our other obligations.

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If our cash flow and capital resources prove inadequate, we could face substantial liquidity problems and might be required to dispose of material assets or operations, restructure or refinance our debt, including the notes, seek additional equity capital or borrow more money. We cannot guarantee that we will be able to do so on terms acceptable to us. In addition, the terms of existing or future debt agreements, including the credit agreement governing our senior credit facility and the indenture governing the senior subordinated notes, may restrict us from adopting any of these alternatives.

We have entered into agreements governing our indebtedness that subject us to various restrictions that may limit our ability to pursue business opportunities.

        The agreements governing our indebtedness, including the credit agreement governing our senior credit facility and the indenture governing the senior subordinated notes, subject us to various restrictions on our ability to engage in certain activities, including, among other things, our ability to:

•

incur additional indebtedness;



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pay dividends or make distributions or repurchase or redeem our stock;



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acquire other businesses;



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make investments;



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make loans to or extend credit for the benefit of third parties or our subsidiaries;



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enter into transactions with affiliates;



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raise additional capital;



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make capital or finance lease expenditures;



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dispose of or encumber assets; and



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consolidate, merge or sell all or substantially all of our assets.

        These restrictions may limit our ability to pursue business opportunities or strategies that we would otherwise consider to be in our best interests. In particular, all acquisitions of other businesses, other than very small acquisitions, will require us to obtain our lenders' consent under our senior credit facility. We have been required to obtain, and have obtained, our lenders' consent under our senior credit facility in order to complete our acquisitions of the Wampole Division of MedPointe Inc., or Wampole, Ostex International, Inc., or Ostex, Applied Biotech, Inc., or ABI, the rapid diagnostics business that we acquired from Abbott Laboratories in 2003, or the 2003 Abbott rapid diagnostics business, Ischemia, Inc., or Ischemia, Binax, Inc., or Binax, the Determine/DainaScreen business that we acquired from Abbott Laboratories in 2005, or the Determine business, Thermo BioStar Inc, or BioStar, Innogenetics Diagnostica y Terapeutica S.A.U., or IDT, and CLONDIAG chip technologies GmbH, or Clondiag. In addition, we are required to obtain our lenders' consent in order to consummate our recently announced agreement to acquire certain assets from ACON Laboratories, or the ACON acquisition.

Our senior credit facilities contain certain financial covenants that we may not satisfy which, if not satisfied, could result in the acceleration of the amounts due under our credit facilities and the limitation of our ability to borrow additional funds in the future.

        As of December 31, 2005, we had approximately $89.0 million of indebtedness outstanding under our senior credit facility and approximately $11.0 million of additional borrowing capacity thereunder. The agreements governing this facility subject us to various financial and other covenants with which we must comply on an ongoing or periodic basis. These include covenants pertaining to fixed charge coverage, capital expenditures, various leverage ratios, minimum EBITDA and minimum cash

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requirements. If we violate any of these covenants, there may be a material adverse effect on us. Most notably, our outstanding debt under our senior credit facility could become immediately due and payable, our lenders could proceed against any collateral securing such indebtedness, and our ability to borrow additional funds in the future may be limited.

A default under any of our agreements governing our indebtedness could result in a default and acceleration of indebtedness under other agreements.

        The agreements governing our indebtedness, including our senior credit facility and the indenture governing the senior subordinated notes, contain cross-default provisions whereby a default under one agreement could result in a default and acceleration of our repayment obligations under other agreements. If a cross-default were to occur, we may not be able to pay our debts or borrow sufficient funds to refinance them. Even if new financing were available, it may not be on commercially reasonable terms or terms that are acceptable to us. If some or all of our indebtedness is in default for any reason, our business, financial condition and results of operations could be materially and adversely affected.

We may not be able to satisfy our debt obligations upon a change of control, which could limit our opportunity to enter into a change of control transaction.

        Upon the occurrence of a "change of control," as defined in the indenture governing the senior subordinated notes, each holder of our senior subordinated notes will have the right to require us to purchase the notes at a price equal to 101% of the principal amount, together with any accrued and unpaid interest. Our failure to purchase, or give notice of purchase of, the senior subordinated notes would be a default under the indenture, which would in turn be a default under our senior credit facility. In addition, a change of control may constitute an event of default under our senior credit facility. A default under our senior credit facility would result in an event of default under our 10% subordinated notes and, if the lenders accelerate the debt under our senior credit facility, the indenture governing the senior subordinated notes, and may result in the acceleration of any of our other indebtedness outstanding at the time. As a result, if we do not have enough cash to repay all of our indebtedness or to repurchase all of the senior subordinated notes, we may be limited in the change of control transactions that we may pursue.

Our acquisitions may not be profitable, and the integration of these businesses may be costly and difficult and may cause disruption to our business.

        We have, since commencing activities in November 2001, acquired and we have attempted to integrate, or we are in the process of integrating, into our operations Unipath Limited and its associated companies and assets, or the Unipath business, IVC Industries, Inc. (now doing business as Inverness Medical Nutritionals Group, or IMN), Wampole, Ostex, ABI, the 2003 Abbott rapid diagnostics business, Ischemia, Binax, the Determine business, BioStar, IDT and Clondiag. We have also made a number of smaller acquisitions. The ultimate success of all of our acquisitions depends, in part, on our ability to realize the anticipated synergies, cost savings and growth opportunities from integrating these businesses or assets into our existing businesses. However, the successful integration of independent businesses or assets is a complex, costly and time-consuming process. The difficulties of integrating companies and acquired assets include among others:

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consolidating manufacturing and research and development operations, where appropriate;



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integrating newly acquired businesses or product lines into a uniform financial reporting system;



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coordinating sales, distribution and marketing functions;

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establishing or expanding manufacturing, sales, distribution and marketing functions in order to accommodate newly acquired businesses or product lines;



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preserving the important licensing, research and development, manufacturing and supply, distribution, marketing, customer and other relationships;



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minimizing the diversion of management's attention from ongoing business concerns; and



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coordinating geographically separate organizations.

        We may not accomplish the integration of our acquisitions smoothly or successfully. The diversion of the attention of our management from our current operations to the integration effort and any difficulties encountered in combining operations could prevent us from realizing the full benefits anticipated to result from these acquisitions and adversely affect our other businesses. Additionally, the costs associated with the integration of our acquisitions can be substantial. To the extent that we incur integration costs that are not anticipated when we finance our acquisitions, these unexpected costs could adversely impact our liquidity or force us to borrow additional funds. Ultimately, the value of any business or asset that we have acquired may not be greater than or equal to its purchase price.

If we choose to acquire or invest in new and complementary businesses, products or technologies instead of developing them ourselves, such acquisitions or investments could disrupt our business and, depending on how we finance these acquisitions or investments, could result in the use of significant amounts of cash.

        Our success depends in part on our ability to continually enhance and broaden our product offerings in response to changing technologies, customer demands and competitive pressures. Accordingly, from time to time we may seek to acquire or invest in businesses, products or technologies instead of developing them ourselves. Acquisitions and investments involve numerous risks, including:

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the inability to complete the acquisition or investment;



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disruption of our ongoing businesses and diversion of management attention;



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difficulties in integrating the acquired entities, products or technologies;



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difficulties in operating the acquired business profitably;



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difficulties in transitioning key customer, distributor and supplier relationships;



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risks associated with entering markets in which we have no or limited prior experience; and



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unanticipated costs.

        In addition, any future acquisitions or investments may result in:

•

issuances of dilutive equity securities, which may be sold at a discount to market price;



•

use of significant amounts of cash;



•

the incurrence of debt;



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the assumption of significant liabilities;



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unfavorable financing terms;



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large one-time expenses; and



•

the creation of certain intangible assets, including goodwill, the write-down of which may result in significant charges to earnings.

        Any of these factors could materially harm our business or our operating results.

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If goodwill and/or other intangible assets that we have recorded in connection with our acquisitions of other businesses become impaired, we could have to take significant charges against earnings.

        In connection with the accounting for our acquisitions of the Unipath business, Wampole, Ostex, ABI, the 2003 Abbott rapid diagnostics product lines, Ischemia, Binax, the Determine business, BioStar, IDT and Clondiag, we have recorded, or expect to record, a significant amount of goodwill and other intangible assets. Under current accounting guidelines, we must assess, at least annually and potentially more frequently, whether the value of goodwill and other intangible assets has been impaired. Any reduction or impairment of the value of goodwill or other intangible assets will result in a charge against earnings which could materially adversely affect our reported results of operations in future periods.

We could experience significant manufacturing delays, disruptions to our ongoing research and development and increased production costs if Unilever is unable to successfully assign or sublease to us the lease for the multi-purpose facility that we currently use in Bedford, England.

        One of our primary operating facilities is located in Bedford, England. The Bedford facility is a multi-purpose facility that is registered with the FDA, contains state-of-the-art research laboratories and is equipped with specialized manufacturing equipment. This facility currently provides the manufacturing for most of our Clearblue and Clearview products, serves as our primary research and development center and serves as the administrative center for our European operations. We also use this facility to manufacture the digital and non-digital e.p.t pregnancy tests for Pfizer in connection with our supply arrangements with Pfizer for these products. We are currently using the Bedford facility pursuant to our acquisition agreement with Unilever relating to our acquisition of the Unipath business in late 2001. Unilever currently leases this facility from a third party landlord. Pursuant to the terms of Unilever's lease, Unilever cannot assign the lease or sublet the Bedford facility to us without first obtaining the landlord's consent. The landlord has not yet consented to, and may not in the future consent to, an assignment of the lease or a sublease to us. The terms of our acquisition agreement obligate Unilever to provide to us the benefit of its lease of the Bedford facility. If Unilever is unable to successfully acquire such consent or otherwise enable us to realize the benefit of Unilever's lease of the Bedford facility, or if its lease is terminated, we may be forced to renegotiate a lease of the Bedford facility on substantially less favorable terms or seek alternative means of producing our products, conducting our research and housing our European administrative staff. In either case, we may experience increased production costs or manufacturing delays, which could prevent us from meeting contractual supply obligations or jeopardize important customer relationships. We may also suffer disruptions to our ongoing research and development while we are resolving these issues. We cannot assure you that we will be able to renegotiate a lease for the Bedford facility on terms that are acceptable to us or find an acceptable replacement for this facility. Any one or more of these events may have a material adverse effect on us.

We may experience manufacturing problems or delays, which could result in decreased revenues or increased costs.

        Many of our manufacturing processes are complex and require specialized and expensive equipment. Replacement parts for our specialized equipment can be expensive and, in some cases, can require lead times of up to a year to acquire. In addition, our private label consumer diagnostic products business, and our private label and bulk nutritional supplements business in particular, rely on operational efficiency to mass produce products at low margins per unit. We also rely on numerous third parties to supply production materials and in some cases there may not be alternative sources immediately available.

        In addition, we currently rely on approximately ten significant third-party manufacturers, as well as numerous other less significant manufacturers, to produce many of our professional diagnostic products

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and certain components of our consumer diagnostic products. In addition, we manufacture the products acquired with the Determine business from a facility in Matsudo, Japan that is made available to us, and with support services provided by, Abbott Laboratories. Any event impacting our manufacturing facilities, our manufacturing systems or equipment, or our contract manufacturers or suppliers, including, without limitation, wars, terrorist activities, natural disasters and outbreaks of infectious disease, could delay or suspend shipments of products or the release of new products or could result in the delivery of inferior products. Our revenues from the affected products would decline or we could incur losses until such time as we were able to restore our production processes or put in place alternative contract manufacturers or suppliers. Even though we carry business interruption insurance policies, we may suffer losses as a result of business interruptions that exceed the coverage available under our insurance policies.

We may experience difficulties that may delay or prevent our development, introduction or marketing of new or enhanced products.

        We intend to continue to invest in product and technology development. The development of new or enhanced products is a complex and uncertain process. We may experience research and development, manufacturing, marketing and other difficulties that could delay or prevent our development, introduction or marketing of new products or enhancements. We cannot be certain that:

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any of the products under development will prove to be effective in clinical trials;



•

we will be able to obtain, in a timely manner or at all, regulatory approval to market any of our products that are in development or contemplated;



•

any of such products can be manufactured at acceptable cost and with appropriate quality; or



•

any such products, if and when approved, can be successfully marketed.

        The factors listed above, as well as manufacturing or distribution problems, or other factors beyond our control, could delay new product launches. In addition, we cannot assure you that the market will accept these products. Accordingly, there is no assurance that our overall revenues will increase if and when new products are launched.

Our failure to meet strict regulatory requirements could require us to pay fines, incur other costs or even close our facilities.

        Our facilities and manufacturing techniques generally must conform to standards that are established by government agencies, including those of European and other foreign governments, as well as the FDA, and, to a lesser extent, the U.S. Drug Enforcement Administration, or the DEA, and local health agencies. These regulatory agencies may conduct periodic audits of our facilities or our processes to monitor our compliance with applicable regulatory standards. If a regulatory agency finds that we fail to comply with the appropriate regulatory standards, it may impose fines on us, delay or withdraw pre-market clearances or other regulatory approvals or if such a regulatory agency determines that our non-compliance is severe, it may close our facilities. Any adverse action by an applicable regulatory agency could impair our ability to produce our products in a cost-effective and timely manner in order to meet our customers' demands. We may also be required to bear other costs or take other actions that may have a negative impact on our future sales and profits.

        In March 2005, our ABI subsidiary was informed by the FDA that based on inspectional findings that included data integrity and design control issues, ABI had become subject to the FDA's Application Integrity Policy. As a result, the FDA is obligated to defer the review of any pending or future applications made by ABI until the FDA determines that ABI has resolved these issues. ABI currently has no applications pending. ABI is not restricted from introducing new tests outside of the United States, or from selling products in the United States based on any existing 510(k)s. However,

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ABI withdrew certain 510(k)s related to its drugs of abuse products that were cited by the FDA, and a Class III recall (based on our assessment that any hazard to the public health is unlikely) was undertaken for the corresponding products. ABI is in the final stages of both an internal and external audit, and is committed to taking any actions required by those audits in order to fulfill its regulatory obligations. It is our understanding at this time that the FDA action applies only to ABI and does not otherwise restrict our ability, or the ability of our other subsidiaries, to submit applications to the FDA or commercialize products. However, the scope of the FDA action is uncertain, and may have a negative impact on our future sales and profits.

        Regulatory agencies may also impose new or enhanced standards that would increase our costs as well as the risks associated with non-compliance. For example, we anticipate that the FDA may soon finalize and implement "good manufacturing practice," or GMP, regulations for nutritional supplements. GMP regulations would require supplements to be prepared, packaged and held in compliance with certain rules, and might require quality control provisions similar to those in the GMP regulations for drugs. While our manufacturing facilities for nutritional supplements have been subjected to, and passed, third party inspections against anticipated GMP standards, the ongoing compliance required in the event that GMP regulations are adopted would involve additional costs and would present new risks associated with any failure to comply with the regulations in the future.

If we deliver products with defects, our credibility may be harmed, market acceptance of our products may decrease and we may be exposed to liability in excess of our product liability insurance coverage.

        The manufacturing and marketing of consumer and professional diagnostic products involve an inherent risk of product liability claims. In addition, our product development and production are extremely complex and could expose our products to defects. Any defects could harm our credibility and decrease market acceptance of our products. In addition, our marketing of vitamins and nutritional supplements may cause us to be subjected to various product liability claims, including, among others, claims that the vitamins and nutritional supplements have inadequate warnings concerning side effects and interactions with other substances. Potential product liability claims may exceed the amount of our insurance coverage or may be excluded from coverage under the terms of the policy. In the event that we are held liable for a claim for which we are not indemnified, or for damages exceeding the limits of our insurance coverage, that claim could materially damage our business and our financial condition.

Our sales of branded nutritional supplements have been trending downward since 1998 due to the maturity of the market segments they serve and the age of that product line and we may experience further declines in sales of those products.

        Our aggregate sales of all of our brand name nutritional products, including, among others, Ferro-Sequels, Stresstabs, Protegra, Posture, SoyCare, ALLBEE, and Z-BEC, have declined each year since 1998 through the year 2005, except in 2002 when they increased slightly as compared to 2001. We believe that these products have under-performed because they are, for the most part, aging brands with limited brand recognition that face increasing private label competition. The overall age of this product line means that we are subject to future distribution loss for under-performing brands, while our opportunities for new distribution on the existing product lines are limited. As a result we do not expect significant sales growth of our existing brand name nutritional products and we may experience further declines in overall sales of our brand name nutritional products in the future.

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Our sales of specific vitamins and nutritional supplements could be negatively impacted by media attention or other news developments that challenge the safety and effectiveness of those specific vitamins and nutritional supplements.

        Most growth in the vitamin and nutritional supplement industry is attributed to new products that tend to generate greater attention in the marketplace than do older products. Positive media attention resulting from new scientific studies or announcements can spur rapid growth in individual segments of the market, and also impact individual brands. Conversely, news that challenges individual segments or products can have a negative impact on the industry overall as well as on sales of the challenged segments or products. Most of our vitamin and nutritional supplements products serve well-established market segments and, absent unforeseen new developments or trends, are not expected to benefit from rapid growth. A few of our vitamin and nutritional products are newer products that are more likely to be the subject of new scientific studies or announcements, which could be either positive or negative. News or other developments that challenge the safety or effectiveness of these products could negatively impact the profitability of our vitamin and nutritional supplements business.

We could suffer monetary damages, incur substantial costs or be prevented from using technologies important to our products as a result of legal proceedings.

        We are involved in various legal proceedings arising out of our consumer diagnostics, nutritional supplements and professional diagnostics business. Because of the nature of our business, we may be subject at any particular time to commercial disputes, consumer product claims or various other lawsuits arising in the ordinary course of our business, including employment matters, and expect that this will continue to be the case in the future. Such lawsuits generally seek damages, sometimes in substantial amounts, for commercial or personal injuries allegedly suffered and can include claims for punitive or other special damages. An adverse ruling or rulings in one or more such lawsuits could, individually or in the aggregate, have a material adverse effect on our sales, operations or financial performance. In addition, we aggressively defend our patent and other intellectual property rights. This often involves bringing infringement or other commercial claims against third parties. These suits can be expensive and result in counterclaims challenging the validity of our patents and other rights. We cannot assure you that these lawsuits or any future lawsuits relating to our businesses will not have a material adverse effect on us.

The profitability of our consumer products businesses may suffer if we are unable to establish and maintain close working relationships with our customers.

        For the years ended December 31, 2005 and 2004, approximately 58% and 65%, respectively, of our net product sales were derived from our consumer products business, which consists of our consumer diagnostic products and vitamin and nutritional supplements segments. These businesses rely to a great extent on close working relationships with our customers rather than long-term exclusive contractual arrangements. Customer concentration in these businesses is relatively high, especially in our vitamin and nutritional supplements segment where two customers accounted for approximately 61% of sales during 2005. In addition, customers of our branded and private label consumer products businesses purchase products through purchase orders only and are not obligated to make future purchases. We therefore rely on our ability to deliver quality products on time in order to retain and generate customers. If we fail to meet our customers' needs or expectations, whether due to manufacturing issues that affect quality or capacity issues that result in late shipments, we will harm our reputation and customer relationships and likely lose customers. Additionally, if we are unable to maintain close working relationships with our customers, sales of all of our products and our ability to successfully launch new products could suffer. The loss of a major customer and the failure to generate new accounts could significantly reduce our revenues or prevent us from achieving projected growth.

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The profitability of our consumer products businesses may suffer if Pfizer Inc. is unable to successfully market and sell its e.p.t pregnancy tests.

        Under the terms of a manufacturing, packaging and supply agreement that we entered into with Pfizer Inc., through one of its wholly-owned subsidiaries, Pfizer purchases its non-digital e.p.t pregnancy tests from us through June 6, 2009. Additionally, pursuant to the terms of a five-year supply agreement entered into in December 2003, as amended on June 1, 2005, we currently supply Pfizer with a digital version of its e.p.t brand pregnancy tests on an exclusive basis. The amount of revenues or profits that we generate under these agreements will depend on the volume of orders that we receive from Pfizer. As a result, if Pfizer is unable to successfully market and sell its e.p.t pregnancy tests, or if other events adversely affect the volume of Pfizer's sales of its e.p.t pregnancy tests, then our future revenues and profit may be adversely affected.

Because sales of our private label nutritional supplements are generally made at low margins, the profitability of these products may suffer significantly as a result of relatively small increases in raw material or other manufacturing costs.

        Sales of our private label nutritional supplements, which for the years ended December 31, 2005 and 2004, provided approximately 16% and 17%, respectively, of our net product sales, generate low profit margins. We rely on our ability to efficiently mass produce nutritional supplements in order to make meaningful profits from these products. Changes in raw material or other manufacturing costs can drastically cut into or eliminate the profits generated from the sale of a particular product. For the most part, we do not have long-term supply contracts for our required raw materials and, as a result, our costs can increase with little notice. The private label nutritional supplements business is also highly competitive such that our ability to raise prices as a result of increased costs is limited. Customers generally purchase private label products via purchase order, not through long-term contracts, and they often purchase these products from the lowest bidder on a product by product basis. The internet has enhanced price competition among private label manufacturers through the advent of on-line auctions, where customers will auction off the right to manufacture a particular product to the lowest bidder. The resulting margin erosion in our nutritionals business has resulted in a reduction in our overall gross margin and contributed to our losses in 2005.

Our financial condition or results of operations may be adversely affected by international business risks.

        Approximately 42% and 40% of our net revenues were generated from outside the United States for the years ended December 31, 2005 and 2004, respectively. A significant number of our employees, including manufacturing, sales, support and research and development personnel, are located in foreign countries, including England, Japan, China, Ireland and Israel. Conducting business outside of the United States subjects us to numerous risks, including:

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increased costs or reduced revenue as a result of movements in foreign currency exchange rates;



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decreased liquidity resulting from longer accounts receivable collection cycles typical of foreign countries;



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lower productivity resulting from difficulties managing our sales, support and research and development operations across many countries;



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lost revenues resulting from difficulties associated with enforcing agreements and collecting receivables through foreign legal systems;



•

lost revenues resulting from the imposition by foreign governments of trade protection measures;



•

higher cost of sales resulting from import or export licensing requirements;

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•

lost revenues or other adverse affects as a result of economic or political instability in or affecting foreign countries in which we sell our products or operate; and



•

adverse effects resulting from changes in foreign regulatory or other laws affecting the sales of our products or our foreign operations.

Because our business relies heavily on foreign operations and revenues, changes in foreign currency exchange rates and our ability to convert currencies may negatively affect our financial condition and results of operations.

        Our business relies heavily on our foreign operations. Four of our manufacturing operations are conducted outside the United States, in Bedford, England; Shanghai, China; Matsudo, Japan and Yavne, Israel. We have consolidated much of our cardiovascular related research and development in Scotland and ultimately we intend to establish a significant manufacturing operation there. Approximately 42% and 40% of our net revenues were generated from outside the United States for the years ended December 31, 2005 and 2004, respectively. Our Clearblue pregnancy test product sales have historically been much stronger outside the United States, with 68% of net product sales of these products coming from outside the United States during the year ended December 31, 2005. In addition, the Abbott rapid diagnostics business, which we acquired on September 30, 2003, generates a majority of its sales outside the United States, and all of the revenues of the Determine business are derived outside of the United States. Because of our foreign operations and foreign sales, we face exposure to movements in foreign currency exchange rates. Our primary exposures are related to the operations of our European subsidiaries. With our recent acquisition of the Determine business and the establishment of our manufacturing facility in Shanghai, we anticipate that our currency exposures related to the yen and the Chinese yuan will become more significant to our results than in prior periods. Should it be consummated, our pending acquisition of the rapid diagnostic business of ACON Laboratories for most major markets, which includes the acquisition of a major manufacturing facility in China, will also increase our exposure to the Chinese yuan. These exposures may change over time as business practices evolve and could result in increased costs or reduced revenue and could impact our actual cash flow.

Intense competition could reduce our market share or limit our ability to increase market share, which could impair the sales of our products and harm our financial performance.

        The medical products industry is rapidly evolving and developments are expected to continue at a rapid pace. Competition in this industry, which includes both our consumer diagnostics and professional diagnostics businesses, is intense and expected to increase as new products and technologies become available and new competitors enter the market. Our competitors in the United States and abroad are numerous and include, among others, diagnostic testing and medical products companies, universities and other research institutions. Our future success depends upon maintaining a competitive position in the development of products and technologies in our areas of focus. Our competitors may:

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develop technologies and products that are more effective than our products or that render our technologies or products obsolete or noncompetitive;



•

obtain patent protection or other intellectual property rights that would prevent us from developing our potential products; or



•

obtain regulatory approval for the commercialization of their products more rapidly or effectively than we do.

        Also, the possibility of patent disputes with competitors holding foreign patent rights may limit or delay expansion possibilities for our diagnostics businesses in certain foreign jurisdictions. In addition, many of our existing or potential competitors have or may have substantially greater research and

20

development capabilities, clinical, manufacturing, regulatory and marketing experience and financial and managerial resources.

        The market for the sale of vitamins and nutritional supplements is also highly competitive. This competition is based principally upon price, quality of products, customer service and marketing support. There are numerous companies in the vitamins and nutritional supplements industry selling products to retailers such as mass merchandisers, drug store chains, independent drug stores, supermarkets, groceries and health food stores. As most of these companies are privately held, we are unable to obtain the information necessary to assess precisely the size and success of these competitors. However, we believe that a number of our competitors, particularly manufacturers of nationally advertised brand name products, are substantially larger than we are and have greater financial resources.

The rights we rely upon to protect the intellectual property underlying our products may not be adequate, which could enable third parties to use our technology and would reduce our ability to compete in the market.

        Our success will depend in part on our ability to develop or acquire commercially valuable patent rights and to protect our intellectual property. Our patent position is generally uncertain and involves complex legal and factual questions. The degree of present and future protection for our proprietary rights is uncertain.

        The risks and uncertainties that we face with respect to our patents and other proprietary rights include the following:

•

the pending patent applications we have filed or to which we have exclusive rights may not result in issued patents or may take longer than we expect to result in issued patents;



•

the claims of any patents which are issued may not provide meaningful protection;



•

we may not be able to develop additional proprietary technologies that are patentable;



•

the patents licensed or issued to us or our customers may not provide a competitive advantage;



•

other parties may challenge patents or patent applications licensed or issued to us or our customers;



•

patents issued to other companies may harm our ability to do business; and



•

other companies may design around technologies we have patented, licensed or developed.

        In addition to patents, we rely on a combination of trade secrets, nondisclosure agreements and other contractual provisions and technical measures to protect our intellectual property rights. Nevertheless, these measures may not be adequate to safeguard the technology underlying our products. If they do not protect our rights, third parties could use our technology and our ability to compete in the market would be reduced. In addition, employees, consultants and others who participate in the development of our products may breach their agreements with us regarding our intellectual property and we may not have adequate remedies for the breach. We also may not be able to effectively protect our intellectual property rights in some foreign countries. For a variety of reasons, we may decide not to file for patent, copyright or trademark protection or prosecute potential infringements of our patents. We also realize that our trade secrets may become known through other means not currently foreseen by us. Despite our efforts to protect our intellectual property, our competitors or customers may independently develop similar or alternative technologies or products that are equal or superior to our technology and products without infringing on any of our intellectual property rights or design around our proprietary technologies.

21

Claims by other companies that our products infringe on their proprietary rights could adversely affect our ability to sell our products and increase our costs.

        Substantial litigation over intellectual property rights exists in both the consumer and professional diagnostic industries. We expect that our products and products in these industries could be increasingly subject to third party infringement claims as the number of competitors grows and the functionality of products and technology in different industry segments overlaps. Third parties may currently have, or may eventually be issued, patents on which our products or technology may infringe. Any of these third parties might make a claim of infringement against us. Any litigation could result in the expenditure of significant financial resources and the diversion of management's time and resources. In addition, litigation in which we are accused of infringement may cause negative publicity, have an impact on prospective customers, cause product shipment delays or require us to develop non-infringing technology, make substantial payments to third parties, or enter into royalty or license agreements, which may not be available on acceptable terms, or at all. If a successful claim of infringement was made against us and we could not develop non-infringing technology or license the infringed or similar technology on a timely and cost-effective basis, our revenue may decrease and we could be exposed to legal actions by our customers.

We have initiated, and may need to further initiate, lawsuits to protect or enforce our patents and other intellectual property rights, which could be expensive and, if we lose, could cause us to lose some of our intellectual property rights, which would reduce our ability to compete in the market.

        We rely on patents to protect a portion of our intellectual property and our competitive position. In order to protect or enforce our patent rights, we may initiate patent litigation against third parties, such as infringement suits or interference proceedings. Litigation may be necessary to:

•

assert claims of infringement;



•

enforce our patents;



•

protect our trade secrets or know-how; or



•

determine the enforceability, scope and validity of the proprietary rights of others.

        Currently, we have initiated a number of lawsuits against competitors who we believe to be selling products that infringe our proprietary rights. These current lawsuits and any other lawsuits that we initiate could be expensive, take significant time and divert management's attention from other business concerns. Litigation also puts our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing. Additionally, we may provoke third parties to assert claims against us.

        Patent law relating to the scope of claims in the technology fields in which we operate is still evolving and, consequently, patent positions in our industry are generally uncertain. We may not prevail in any of these suits and the damages or other remedies awarded, if any, may not be commercially valuable. During the course of these suits, there may be public announcements of the results of hearings, motions and other interim proceedings or developments in the litigation. If securities analysts or investors perceive any of these results to be negative, our stock price could decline.

In December 2005, we learned that the Securities and Exchange Commission, or the SEC, had issued a formal order of investigation in connection with the previously disclosed revenue recognition matter at one of our diagnostic divisions. We cannot predict what the outcome of this investigation will be.

        In December 2005, we learned that the SEC had issued a formal order of investigation in connection with the previously disclosed revenue recognition matter at one of our diagnostic divisions, and we subsequently received a subpoena for documents. We believe that we fully responded to the

22

subpoena and we will continue to fully cooperate with the SEC's investigation. We cannot predict whether the SEC will seek additional information or what the outcome of its investigation will be.

Non-competition obligations and other restrictions will limit our ability to take full advantage of our management team, the technology we own or license and our research and development capabilities.

        Members of our management team have had significant experience in the diabetes field. In addition, technology we own or license may have potential applications to this field and our research and development capabilities could be applied to this field. However, in conjunction with our split-off from Inverness Medical Technology, Inc., or IMT, we agreed not to compete with IMT and Johnson & Johnson in the field of diabetes through 2011. In addition, Mr. Ron Zwanziger, our Chairman, Chief Executive Officer and President, and two of our senior scientists, Dr. David Scott and Dr. Jerry McAleer, have entered into consulting agreements with IMT that impose similar restrictions. Further, our license agreement with IMT prevents us from using any of the licensed technology in the field of diabetes. As a result of these restrictions, we cannot pursue opportunities in the field of diabetes.

Our operating results may fluctuate due to various factors and as a result period-to-period comparisons of our results of operations will not necessarily be meaningful.

        Factors relating to our business make our future operating results uncertain and may cause them to fluctuate from period to period. Such factors include:

•

the timing of new product announcements and introductions by us and our competitors;



•

market acceptance of new or enhanced versions of our products;



•

changes in manufacturing costs or other expenses;



•

competitive pricing pressures;



•

the gain or loss of significant distribution outlets or customers;



•

increased research and development expenses;



•

the timing of any future acquisitions;



•

general economic conditions; or



•

general stock market conditions or other economic or external factors.

        Because our operating results may fluctuate from quarter to quarter, it may be difficult for us or our investors to predict our future performance by viewing our historical operating results.

Period-to-period comparisons of our operating results may not be meaningful due to our acquisitions.

        We have engaged in a number of acquisitions in recent years which make it difficult to analyze our results and to compare them from period to period, including the acquisitions of the Unipath business in December 2001, IVC Industries, Inc. in March 2002, Wampole in September 2002, Ostex in June 2003, ABI in August 2003, the 2003 Abbott rapid diagnostics product lines in September 2003, Binax and Ischemia in March 2005, the Determine business in June 2005, BioStar and IDT in September 2005 and Clondiag in February 2006. Period-to-period comparisons of our results of operations may not be meaningful due to these acquisitions and are not indications of our future performance. Any future acquisitions will also make our results difficult to compare from period to period in the future.

23

Our stock price may fluctuate significantly and stockholders who buy or sell our common stock may lose all or part of the value of their investment, depending on the price of our common stock from time to time.

        Our common stock has only been listed on the American Stock Exchange since November 23, 2001 and we have a limited market capitalization. As a result, we are currently followed by only a few market analysts and a portion of the investment community. Limited trading of our common stock may therefore make it more difficult for you to sell your shares.

        In addition, our share price may be volatile due to our operating results, as well as factors beyond our control. During 2005, the sales price of our common stock ranged from $20.49 to $29.99, and during 2004, the sales price of our common stock ranged from $14.75 to $25.50. It is possible that in some future periods the results of our operations will be below the expectations of the public market. In any such event, the market price of our common stock could decline. Furthermore, the stock market may experience significant price and volume fluctuations, which may affect the market price of our common stock for reasons unrelated to our operating performance. The market price of our common stock may be highly volatile and may be affected by factors such as:

•

our quarterly and annual operating results, including our failure to meet the performance estimates of securities analysts;



•

changes in financial estimates of our revenues and operating results or buy/sell recommendations by securities analysts;



•

the timing of announcements by us or our competitors of significant products, contracts or acquisitions or publicity regarding actual or potential results or performance thereof;



•

changes in general conditions in the economy, the financial markets or the health care industry;



•

government regulation in the health care industry;



•

changes in other areas such as tax laws;



•

sales of substantial amounts of common stock or the perception that such sales could occur;



•

changes in investor perception of our industry, our businesses or our prospects;



•

the loss of key employees, officers or directors; or



•

other developments affecting us or our competitors.

Anti-takeover provisions in our organizational documents and Delaware law may limit the ability of our stockholders to control our policies and effect a change of control of our company and prevent attempts by our stockholders to replace or remove our current management, which may not be in your best interests.

        There are provisions in our certificate of incorporation and bylaws that may discourage a third party from making a proposal to acquire us, even if some of our stockholders might consider the proposal to be in their best interests, and prevent attempts by our stockholders to replace or remove our current management. These provisions include the following:

•

our certificate of incorporation provides for three classes of directors with the term of office of one class expiring each year, commonly referred to as a staggered board. By preventing stockholders from voting on the election of more than one class of directors at any annual meeting of stockholders, this provision may have the effect of keeping the current members of our board of directors in control for a longer period of time than stockholders may desire;

24

•

our certificate of incorporation authorizes our board of directors to issue shares of preferred stock without stockholder approval and to establish the preferences and rights of any preferred stock issued, which would allow the board to issue one or more classes or series of preferred stock that could discourage or delay a tender offer or change in control.



•

our certificate of incorporation prohibits our stockholders from filling board vacancies, calling special stockholder meetings or taking action by written consent;



•

our certificate of incorporation provides for the removal of a director only with cause and by the affirmative vote of the holders of 75% or more of the shares then entitled to vote at an election of our directors; and



•

our bylaws require advance written notice of stockholder proposals and director nominations.

        Additionally, we are subject to Section 203 of the Delaware General Corporation Law, which, in general, imposes restrictions upon acquirers of 15% or more of our stock. Finally, the board of directors may in the future adopt other protective measures, such as a stockholder rights plan, which could delay, deter or prevent a change of control.

Because we do not intend to pay dividends on our common stock, you will benefit from an investment in our common stock only if it appreciates in value.

        We currently intend to retain our future earnings, if any, to finance the expansion of our business and do not expect to pay any cash dividends on our common stock in the foreseeable future. In addition, our senior credit facility currently prohibits the payment of dividends and the indenture governing the terms of our senior subordinated notes restricts the amount of any dividends that we may pay. As a result, the success of your investment in our common stock will depend entirely upon any future appreciation. There is no guarantee that our common stock will appreciate in value or even maintain the price at which you purchased your shares.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

        None

ITEM 2.    DESCRIPTION OF PROPERTY

        Our principal corporate administrative office, together with the administrative office for most of our United States operations, is housed in approximately 22,600 square feet of leased space located at 51 Sawyer Road, Waltham, Massachusetts. Our lease of this facility expires on May 31, 2008.

        Our European operations are currently administered from a 150,000 square foot facility located in Bedford, England. We also manufacture products for both our consumer products segment and professional diagnostic products segment and conduct substantial research and development activity at the Bedford facility. We are currently using the Bedford facility pursuant to an agreement with Unilever entered into in connection with our acquisition of the Unipath business in 2001. Unilever currently leases this facility from a third party landlord. Pursuant to Unilever's lease, Unilever is not permitted to assign the lease to us or sublet the Bedford facility to us without obtaining the prior written consent of the landlord (which consent may not be unreasonably withheld). The landlord has indicated that it will not consent to an assignment of the lease to us, and we, Unilever and the landlord are therefore currently negotiating the terms of a sublease. The terms of our acquisition of the Unipath business obligate Unilever to use its best efforts to obtain the landlord's consent to assignment or a sublease and, if necessary, to pursue the assignment or sublease through the courts. Unilever has also agreed to permit us to use the Bedford facility until such time as the lease is assigned to us or the facility is subleased to us by Unilever for the remaining term of the lease, which expires on

25

December 11, 2021. Under the terms of this agreement, we are required to pay all amounts owed under the lease and otherwise comply with the terms of the lease.

        We also have manufacturing operations in Shanghai, China; Scarborough, Maine; Louisville, Colorado; San Diego, California; Yavne, Israel; Matsudo, Japan; Freehold, New Jersey and Irvington, New Jersey. We currently manufacture a portion of our consumer products out of approximately 25,000 square feet of space in Shanghai, China made available by our joint venture partner. We manufacture certain of our professional diagnostic products out of a 64,000 square foot facility that we lease in Scarborough, Maine, a 75,000 square foot facility that we lease in Louisville, Colorado, and a 40,000 square foot facility that we lease in San Diego, California. We house the development, manufacturing, administrative and marketing operations related to our Orgenics professional diagnostic products in a leased facility of approximately 10,000 square feet in Yavne, Israel. The products that we acquired from Abbott in June 2005 our manufactured by us in Matsudo, Japan in 19,000 square feet of space rented from Abbott under a manufacturing and support services agreement entered into in connection with the acquisition. We also own a 160,000 square foot manufacturing facility in Freehold, New Jersey and lease a 35,000 square foot facility in Irvington, New Jersey. These New Jersey facilities manufacture our vitamin and nutritional supplement products. Consistent with our previously announced timeline, we have recently ceased operations at our facility in Galway, Ireland and we have sold the building that we owned there.

        We also have leases or other arrangements for administrative offices, lab space and warehouses in New Jersey (Freehold, Springfield, Irvington and Princeton), California (San Diego), Scotland (Stirling), Canada (Boucherville), Denmark (Farum), Belgium (Sint-Niklaas), Germany (Jena, Cologne and Munich), France (Paris), Spain (Barcelona), Australia (Beaumaris) and Sweden (Lund), and our Orgenics products are sold through small sales offices in France, Brazil and several other countries.

ITEM 3.    LEGAL PROCEEDINGS

        We currently are not a party to any material pending legal proceedings.

        Because of the nature of our business, we may be subject at any particular time to consumer product claims or various other lawsuits arising in the ordinary course of our business, including employment matters, and expect that this will continue to be the case in the future. Such lawsuits generally seek damages, sometimes in substantial amounts, for personal injuries or other commercial or employment claims. In addition, we aggressively defend our patent and other intellectual property rights. This often involves bringing infringement or other commercial claims against third parties. These suits can be expensive and result in counterclaims challenging the validity of our patents and other rights.

        In addition, in December 2005, we learned that the SEC's Enforcement Division had issued a formal order of investigation in connection with the previously disclosed revenue recognition matter at one of our diagnostic divisions, and we subsequently received a subpoena for documents. We believe that we fully responded to the subpoena and we will continue to fully cooperate with the SEC's investigation. We cannot predict whether the SEC will seek additional information or what the outcome of its investigation will be.

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

        No matters were submitted to a vote of our security holders during the fourth quarter of the year ended December 31, 2005.

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY

        Our common stock trades on the American Stock Exchange (AMEX) under the symbol "IMA." The following table sets forth the high and low sales prices of our common stock on AMEX for each quarter during fiscal 2005 and 2004.

		High		Low
Fiscal 2005
	Fourth Quarter	$	27.01	$	21.90
	Third Quarter	$	29.51	$	24.70
	Second Quarter	$	29.99	$	21.25
	First Quarter	$	25.87	$	20.49
Fiscal 2004
	Fourth Quarter	$	25.50	$	18.10
	Third Quarter	$	22.60	$	14.75
	Second Quarter	$	22.00	$	16.90
	First Quarter	$	25.00	$	18.25

        On March 10, 2006, there were 638 holders of record of our common stock.

        We have never declared or paid any cash dividends on our common stock. We currently intend to retain earnings to support our growth strategy and do not anticipate paying cash dividends on our common stock in the foreseeable future. Payment of future dividends, if any, on our common stock will be at the discretion of our board of directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs and plans for expansion. In addition, restrictive covenants under our senior credit facility and the indenture governing the terms of the senior subordinated notes currently prohibit the payment of cash or stock dividends.

ITEM 6.    SELECTED CONSOLIDATED FINANCIAL DATA

        The following tables provide selected consolidated financial data of our company as of and for each of the years in the five-year period ended December 31, 2005 and should be read in conjunction with our consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K.

        The selected consolidated financial data as of December 31, 2005 and 2004 and for each of the three years in the period ended December 31, 2005 have been derived from our consolidated financial statements which are included elsewhere in this Annual Report on Form 10-K and were audited by BDO Seidman, LLP, independent registered public accounting firm. The selected consolidated financial data as of December 31, 2003 and 2002 have been derived from our consolidated financial statements not included herein, which were audited by BDO Seidman, LLP. The selected consolidated financial data as of December 31, 2001 has been derived from our consolidated financial statements not included herein, which were audited by Arthur Andersen LLP, independent public accountants.

        On November 21, 2001, our company was split-off as an independent public company as part of a split-off and merger transaction whereby Johnson & Johnson acquired our former parent company, Inverness Medical Technology, Inc., or IMT. As part of the split-off and merger, we acquired all rights to IMT's women's health, nutritional supplement and professional diagnostics businesses, as well as certain intellectual property. Because we had not historically been operated or accounted for as a stand-alone business, the financial results for the periods prior to the split-off on November 21, 2001, presented below in the selected consolidated financial data, are derived from consolidated financial statements of our businesses, which have been carved out of IMT's financial statements in accordance

27

with the requirements of accounting principles generally accepted in the United States of America, or GAAP. Because the financial results for the periods prior to the split-off have been carved out of IMT's past financial statements, they may not reflect what our results of operations and financial position would have been had we been a separate stand-alone entity during those periods or be indicative of our future performance. In addition, the acquisitions of the Unipath business in December 2001, IVC Industries, Inc. (now operating as Inverness Medical Nutritionals Group, or IMN) in March 2002, Wampole Laboratories in September 2002, Ostex International, Inc. in June 2003, Applied Biotech, Inc. in August 2003, the Abbott rapid diagnostics business in September 2003, Binax and Ischemia in March 2005, the Determine business in June 2005, and BioStar and IDT in September 2005 materially affected the comparability of the selected consolidated financial data. For a discussion of certain factors that materially affect the comparability of the selected consolidated financial data or cause the data reflected herein not to be indicative of our future results of operations or financial condition, see Item 1A. "Risk Factors" and Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations."

        We have previously restated our consolidated financial statements as of and for the years ended December 31, 2004 and 2003 and for the first quarter of 2005 to correct errors under GAAP relating to the recognition of revenue. We determined that certain customers of one of our diagnostics divisions were provided return or exchange rights in connection with the sale of certain products for which reliable estimates of return or exchange had not been made, as a result of which the revenue associated with those sales should not have been recognized upon shipment to the customers under GAAP. As a result, we recorded $4.5 million in net revenue reversal with a $3.4 million gross margin and corresponding net loss impact spread over the quarters of 2004 and 2003 and an increase in both revenues and gross profit of $0.3 million in the first quarter of 2005. For further discussion of the restatement, see Note 2(p) of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

			2005			2004			2003			2002(2)			2001
						(restated)			(restated)
			(in thousands, except per share data)
Statement of Operations Data:
Net product sales			$	406,457		$	365,432		$	285,430		$	200,399		$	47,268
License and royalty revenue				15,393			8,559			9,728			6,405			—
	Net revenue			421,850			373,991			295,158			206,804			47,268
Cost of sales				269,538			226,987			167,641			114,653			26,662
	Gross profit			152,312			147,004			127,517			92,151			20,606
Operating expenses:
	Purchased in-process research and development			—			—			—			—			6,980
	Research and development			30,992			31,954			24,280			14,471			1,810
	Sales and marketing			72,103			57,957			52,504			39,544			8,018
	General and administrative			59,821			52,707			35,452			28,066			11,702
	Charge related to asset impairment			—			—			—			12,682			—
	Stock-based compensation			169			—			447			10,625			10,441
		Total operating expenses		163,085			142,618			112,683			105,388			38,951
	Operating income (loss)			(10,773	)		4,386			14,834			(13,237	)		(18,345	)
Interest expense and other expenses, net				(1,617	)		(18,707	)		(3,270	)		(5,955	)		(4,310	)
	(Loss) income from continuing operations before provision for income taxes			(12,390	)		(14,321	)		11,564			(19,192	)		(22,655	)
Provision for income taxes				6,819			2,275			2,911			3,443			2,134
	(Loss) income from continuing operations		$	(19,209	)	$	(16,596	)	$	8,653		$	(22,635	)	$	(24,789	)
(Loss) income from continuing operations available to common stockholders—basic and diluted(1)			$	(19,209	)	$	(17,345	)	$	7,695		$	(34,583	)	$	(24,789	)
(Loss) income from continuing operations per common share(1):
	Basic(1)		$	(0.79	)	$	(0.87	)	$	0.49		$	(3.48	)	$	(3.89	)
	Diluted(1)		$	(0.79	)	$	(0.87	)	$	0.44		$	(3.48	)	$	(3.89	)

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	December 31,
	2005		2004		2003		2002		2001
			(restated)		(restated)
	(in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	34,270	$	16,756	$	24,622	$	30,668	$	52,024
Working capital		84,523		62,615		44,693		27,685		19,555
Total assets		791,166		568,269		540,529		356,495		278,521
Total debt		262,504		191,224		176,181		104,613		78,124
Redeemable convertible preferred stock		—		—		6,185		9,051		51,894
Total stockholders' equity		397,308		271,416		265,173		161,849		89,614

(1)

(Loss) income available to common stockholders and basic and diluted (loss) income per common share are computed as described in Notes 2(k) and 12 of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Further, for the year ended December 31, 2001, loss available to common stockholders and basic and diluted loss per common share are computed based upon the actual number of common shares issued and outstanding upon incorporation of our company in May 2001, adjusted for the fixed exchange ratio set forth in the merger agreement and related agreements and the related stock split as a result of the split-off and merger with Johnson & Johnson.

(2)

Upon the adoption of Statement of Financial Accounting Standards, or SFAS, No. 142, Goodwill and Other Intangible Assets, on January 1, 2002, we recorded an impairment charge of $12.1 million, or $1.22 per basic and diluted share, and accounted for the charge as a cumulative effect of a change in accounting principle which was subtracted from loss from continuing operations to arrive at net loss. Consequently, net loss available to common stockholders in 2002 was $46.7 million, or $4.70 per basic and diluted share.

Effect of the adoption of Statement of Financial Accounting Standard, or SFAS, No. 142, "Goodwill and Other Intangible Assets"

        On January 1, 2002, we adopted SFAS No. 142 and, accordingly, no longer amortize goodwill and other intangible assets with indefinite lives, but rather such assets are subject to annual impairment reviews or more frequently, if events or circumstances indicate that they may be impaired. During the first quarter of 2002, we completed the implementation review as required under SFAS No. 142 and recorded an impairment of goodwill related to our nutritional supplements reporting unit in the amount of $12.1 million, which we accounted for as a cumulative effect of a change in accounting principle in our consolidated statement of operations in that period. The following table presents the (loss) income from continuing operations data of our company, as if no amortization of goodwill was recorded under SFAS No. 142 for all periods presented.

		Year Ended December 31,
		2005			2004			2003		2002			2001
					(restated)			(restated)
		(in thousands, except per share data)
(Loss) income from continuing operations		$	(19,209	)	$	(16,596	)	$	8,653	$	(22,635	)	$	(24,789	)
Add back: Goodwill amortization, net of tax			—			—			—		—			398
Adjusted (loss) income from continuing operations		$	(19,209	)	$	(16,596	)	$	8,653	$	(22,635	)	$	(24,391	)
Adjusted (loss) income from continuing operations available to common stockholders—basic and diluted		$	(19,209	)	$	(17,345	)	$	7,695	$	(34,583	)	$	(24,391	)
Adjusted (loss) income from continuing operations per common share(1):
	Basic	$	(0.79	)	$	(0.87	)	$	0.49	$	(3.48	)	$	(3.83	)
	Diluted	$	(0.79	)	$	(0.87	)	$	0.44	$	(3.48	)	$	(3.83	)

(1)

(Loss) income available to common stockholders and basic and diluted (loss) income per share are computed as described in notes 2(k) and 12 of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Further, for the year ended December 31, 2001, loss available to common stockholders and basic and diluted loss per share are computed based upon the actual number of common shares issued and outstanding upon incorporation of our Company in May 2001, effected for the fixed exchange ratio set forth in the merger agreement and related agreements and the related stock split as a result of the split-off and merger with Johnson & Johnson.

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

Forward-Looking Statements

        This report, including this Item 7. contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You can identify these statements by forward-looking words such as "may," "could," "should," "would," "intend," "will," "expect," "anticipate," "believe," "estimate," "continue" or similar words. You should read statements that contain these words carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial condition or state other "forward-looking" information. Forward-looking statements in this Item 7. include, without limitation, statements regarding our expectations with respect to new product introductions, research and development expenditures, legal expenditures, our ability to deliver high quality products on an increasingly cost effective basis, anticipated growth in our professional diagnostics business, and our funding plans for our future working capital needs and commitments. Actual results or developments could differ materially from those projected in such statements as a result of numerous factors, including, without limitation, those risks and uncertainties set forth in Item 1A. entitled "Risk Factors," which begins on page 11 of this report, as well as those factors identified from time to time in our periodic filings with the Securities and Exchange Commission. We do not undertake any obligation to update any forward-looking statements. This report and, in particular, the following discussion and analysis of our financial condition and results of operations, should be read in light of those risks and uncertainties and in conjunction with our accompanying consolidated financial statements and notes thereto.

Financial Overview

        Net revenues in 2005 of $421.9 million increased by $47.9 million, or 13%, from $374.0 million in 2004 as a result of acquisitions completed during 2005 and from higher license revenue principally resulting from a settlement and licensing arrangement that we entered into in April 2005. The acquisitions that we completed during 2005 were principally within our professional diagnostics segment. These acquisitions, including Binax in March 2005, the Determine rapid diagnostics business in June 2005, and BioStar and IDT in September 2005, added market leading flu and HIV tests to our expanding portfolio of rapid diagnostic tests and, in the case of IDT, expanded our direct distribution capabilities in Spain and Portugal. In addition to these acquisitions, we also expanded our depth in cardiology with the March 2005 acquisition of Ischemia. Ischemia's product is the only FDA-cleared in vitro diagnostic test targeted to the diagnosis of cardiac ischemia.

        Gross profit increased by $5.3 million, or 4%, to $152.3 million in 2005 from $147.0 million in 2004 principally as a result of higher gross profit on increased license revenue and from gross profit earned on incremental revenues from acquired businesses. Offsetting these increases were a variety of charges discussed in more detail below totaling $8.1 million associated with the closing of one of our manufacturing facilities in 2005 and with charges associated with excess inventories and a product recall. Gross profit from our nutritional supplements business also decreased $6.0 million principally as a result of continuing pricing pressures in our private label nutritional supplements business. We will continue to evaluate opportunities to better integrate and utilize our existing and recently acquired or established manufacturing facilities in 2006 in an effort to continue to enhance our ability to deliver high quality products on an increasingly cost effective basis.

        We continue to invest aggressively in research and development of new products and technologies. While reported research and development expense decreased by $1.0 million in 2005 from 2004, our expenditures in 2005 are reported net of $17.2 million arising from the co-development funding arrangement that we entered into with ITI Scotland in February 2005. Research and development

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expense before considering the co-development funding was $48.2 million in 2005, an increase of $16.2 million from 2004. The increase in spending resulted in part from expenditures of $5.0 million in our professional diagnostics business associated with our acquisitions of Binax, BioStar and Ischemia. The remaining research and development spending primarily related to our continued significant investment in the development of products in the field of cardiology.

Results of Operations

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

        Net Product Sales.    Net product sales increased by $41.0 million, or 11%, to $406.5 million in 2005 from $365.4 million in 2004. Excluding the unfavorable impact of currency translation, net product sales in 2005 grew by approximately $41.8 million, or 11%, over 2004. Revenue increased as a result of our acquisitions in 2005: (i) Binax, acquired on March 31, 2005, contributed $18.4 million of such increase, (ii) the Determine rapid diagnostics business, acquired June 30, 2005, contributed revenues of $17.2 million, (iii) BioStar, acquired September 30, 2005, contributed revenues of $6.9 million, and (iv) various less significant acquisitions contributed an aggregate of $9.7 million of such increase.

        Net Product Sales by Business Segment.    Net product sales by business segment for 2005 and 2004 are as follows:

	2005		2004		% Increase (decrease)
(in thousands)	(restated)
Consumer diagnostic products	$	161,695	$	158,706	2	%
Vitamins and nutritional supplements		75,411		77,923	(3	)%
Professional diagnostic products		169,351		128,803	31	%
Total net product sales	$	406,457	$	365,432	11	%

        The currency adjusted increase in net product sales from our consumer diagnostic products was $3.5 million, or 2%, comparing 2005 to 2004. Of the currency adjusted increase, $1.9 million resulted from our acquisition of the consumer pregnancy test business of Advanced Clinical Systems Pty Ltd, or ACS, in January 2005. Organic growth, principally in the U.S., accounted for the remaining growth.

        Net product sales of our vitamins and nutritional supplements decreased by $2.5 million, or 3%, comparing 2005 to 2004. The decrease was primarily our brand name nutritional business. Our aggregate sales of all of our brand name nutritional products, including, among others, Ferro-Sequels, Stresstabs, Protegra, Posture, SoyCare, ALLBEE, and Z-BEC, have declined on an annual basis over the past several years. We believe that these products have under-performed because they are, for the most part, aging brands with limited brand recognition that face increasing private label competition.

        The currency adjusted increase in net product sales from our professional diagnostic products was $40.8 million, or 32%, comparing 2005 to 2004. Of the currency adjusted increase, revenue increased as a result of our acquisitions in 2005: (i) Binax contributed $18.4 million of such increase, (ii) the Determine rapid diagnostics business contributed revenues of $17.2 million, (iii) BioStar contributed revenues of $6.9 million, and (iv) various less significant acquisitions contributed an aggregate of $7.8 million of such increase.

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        Net Product Sales by Geographic Location.    Net product sales by geographic location for 2005 and 2004 are as follows:

	2005		2004		% Increase
(in thousands)	(restated)
United States	$	234,229	$	218,251	7	%
Europe		108,981		98,136	11	%
Other		63,247		49,045	29	%
Total net product sales	$	406,457	$	365,432	11	%

        The growth in net product sales in all geographic regions resulted from the various acquisitions discussed above.

        License and Royalty Revenue.    License and royalty revenue represents license and royalty fees from intellectual property license agreements with third-parties. License and royalty revenue increased by $6.8 million, or 80%, to $15.4 million in 2005 from $8.6 million in 2004. The increase primarily relates to royalty revenues received as a result of the settlement and licensing arrangement that we entered into with Quidel Corporation in April 2005.

        Gross Profit and Margin.    Gross profit increased by $5.3 million, or 4%, to $152.3 million in 2005 from $147.0 million in 2004. The increase in gross profit was attributable to higher gross margins on the increased license revenue discussed above. Offsetting this increase was: (i) the inclusion in cost of sales of a $4.1 million charge principally associated with our decision to close our CDIL manufacturing facility, (ii) a charge of $2.4 million associated with a reserve established during the second quarter of 2005 at our Wampole subsidiary for excess quantities of certain raw materials and finished goods, including certain finished goods held at distributors but subject to rights of return, and (iii) a $1.6 million provision for returns and inventory reserve which was established as a result of our recall of the drugs of abuse diagnostic products during the first quarter of 2005, offset in part by the gross profit earned on increased professional diagnostics products revenue, as discussed above. Gross profit from our nutritional supplements business decreased $6.0 million from $8.8 million in 2004 to $2.7 million in 2005. Our private label nutritional supplements business has suffered from excess capacity in the industry and increasing price competition.

        Overall gross margin was 36% in 2005 compared to 39% in 2004. Overall gross margin in 2005 was adversely affected by the $4.1 million charge associated with the CDIL closing, the $2.4 million Wampole inventory reserve, and the $1.6 million returns and inventory reserve associated with the drugs of abuse product recalls discussed above. Excluding these charges, gross margin was 38% for 2005.

        Gross Profit from Net Product Sales by Business Segment.    Gross profit from net product sales represents total gross profit less gross profit associated with license revenue. Gross profit from total net product sales decreased by $0.3 million to $141.5 million in 2005 from $141.8 million in 2004. Gross profit from net product sales by business segment for 2005 and 2004 are as follows:

	2005		2004		% Increase (decrease)
(in thousands)	(restated)
Consumer diagnostic products	$	76,515	$	82,909	(8	)%
Vitamins and nutritional supplements		2,738		8,775	(69	)%
Professional diagnostic products		62,252		50,079	24	%
Total gross profit from net product sales	$	141,505	$	141,763	0	%

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        Gross profit from our consumer diagnostic product sales decreased by $6.4 million, or 8%, comparing 2005 to 2004. Included in cost of sales, and adversely effecting gross profit, was a $4.1 million charge principally associated with our decision to close our CDIL manufacturing facility.

        Gross profit from our consumer diagnostic product sales was 47% for 2005 compared to 52% in 2004. Excluding the $4.1 million CDIL closure charge discussed above, gross margin from our consumer diagnostic products segment was 50% in 2005. The remaining decrease in gross margin from our consumer diagnostic product sales resulted from change in product mix.

        Gross profit in our vitamins and nutritional supplements business decreased by $6.0 million, or 69%, comparing 2005 to 2004. Our private label nutritional supplements business has suffered from excess capacity in the industry which led to increasing price competition and generally decreasing margins. Revenue decreases in our brand named nutritional products also contributed to lower gross profit in 2005 than 2004.

        Gross profit from our professional diagnostic products increased by $12.2 million, or 24%, comparing 2005 to 2004, principally as a result of gross profit earned on revenues from acquired businesses, as discussed above. Reducing gross margin for 2005 were a charge of $2.4 million associated with a reserve established during the second quarter of 2005 at our Wampole subsidiary for excess quantities of certain raw materials and finished goods, including certain finished goods held at distributors but subject to rights of return, and a $1.6 million provision for returns and inventory reserve which were established as a result of our recall of the drugs of abuse diagnostic products during the first quarter of 2005. Excluding these charges, gross profit from our professional diagnostic products segment increased by $16.2 million comparing 2005 to 2004.

        Gross margin from our professional diagnostic product sales was 37% in 2005, compared to 39% in 2004. Excluding the $2.4 million Wampole inventory reserve and the $1.6 million drugs of abuse charge discussed above, gross margin from our professional diagnostic product sales was 39% for 2005.

        Research and Development Expense.    Research and development expense decreased by $1.0 million, or 3%, to $31.0 million in 2005 from $32.0 million in 2004. Research and development expense in 2005 is reported net of co-development funding of $17.2 million arising from the co-development funding arrangement that we entered into with ITI Scotland in February 2005. Research and development expense before considering the co-development funding was $48.2 million in 2005, an increase of $16.2 million from 2004.

        The increase in spending resulted in part from expenditures of $5.0 million in our professional diagnostics business associated with our acquisitions of Binax, BioStar and Ischemia. The remaining research and development spending primarily related to our continued significant investment in the development of products in the field of cardiology.

        Sales and Marketing Expense.    Sales and marketing expense increased by $14.1 million, or 24%, to $72.1 million in 2005 from $58.0 million in 2004. Acquisitions completed during 2005 accounted for $8.3 million of the increase. Approximately $1.8 million of the increase in sales and marketing expense resulted from our increased advertising efforts to promote our premium consumer diagnostic products in 2005. The remaining increase in sales and marketing expense resulted from our expanded sales and marketing infrastructure to support the anticipated growth in our professional diagnostics business.

        Sales and marketing expense as a percentage of net product sales increased to 18% in 2005 from 16% in 2004. The increase in sales and marketing expense as a percentage of net product sales primarily resulted from our investment in advertising efforts for our premium consumer diagnostic products and sales and marketing infrastructure to support our anticipated growth in the professional diagnostics business.

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        General and Administrative Expense.    General and administrative expense increased by $7.3 million, or 14%, to $60.0 million in 2005 from $52.7 million in 2004. Acquisitions completed during 2005 accounted for $4.2 million of the increase. The remaining increase in general and administrative expense resulted from an increase in consulting and legal spending, due to the formal order of investigation in connection with the previously disclosed revenue recognition matter at Wampole and our active pursuits and defenses in litigations, including our lawsuits and settlements with Quidel and Princeton BioMeditech Corporation, or PBM. General and administrative expense as a percentage of net revenue was consistent in 2005 and 2004 at 14%.

        Interest Expense.    Interest expense includes interest charges, the write-off and amortization of deferred financing costs and the amortization of non-cash discounts associated with our debt issuances in 2004, and the change in market value of our interest rate swap agreement of $0.7 million which did not qualify as a hedge for accounting purposes. Interest expense decreased by $0.3 million, or 1%, to $21.8 million in 2005 from $22.1 million in 2004. In 2004, we recorded a charge of $3.8 million representing the write-off of deferred financing costs and prepayment fees and penalties related to the repayment of borrowings under our primary senior credit facility and certain subordinated notes with the proceeds from our $150.0 million bond offering in February 2004. Excluding such charge, interest expense increased $3.5 million in 2005. Such increase was primarily due to a higher average outstanding debt balance which was $215.3 million during 2005, compared to $194.4 million during 2004, primarily as a result of the borrowings to finance various acquisitions and operations, offset in part by funds raised from our sale of common stock in August 2005. Additionally, the 8.75% interest rate on the $150.0 million bonds, together with its 50 basis points interest penalty during a portion of the first quarter of 2005 due to the late registration of the related exchange offer, coupled with the impact of the increase in short-term interest rates which effected the borrowings under our senior credit facility, increased our average cash interest rate to 9.0% for 2005 from 8.8% for 2004. The bonds, which are due in 2012, provide us with a long-term fixed rate on a significant portion of our indebtedness, as compared to the variable rates under our senior credit facility.

        Other Income (Expense), Net.    Other income (expense), net, includes interest income, realized and unrealized foreign exchange gains and losses, and other income and expense. The components and the respective amounts of other income (expense), net, are summarized as follows:

(in thousands)	2005			2004
Interest income	$	1,035		$	1,050
Foreign exchange (losses) gains, net		(340	)		(720	)
Other		19,483			3,077
Total other income (expense), net	$	20,178		$	3,407

        Included in other income (expense), net, for 2005 are the following items: (i) $15.0 million in income, being the portion of our settlement with Quidel relating to periods prior to 2005, (ii) an $8.4 million gain from a legal settlement of class action suit against several raw material suppliers in our vitamins and nutritional supplements business (iii) $2.6 million of income related to the value of an option received under a licensing arrangement, (iv) a $2.7 million charge related to a legal settlement of a nutritional segment commercial dispute arising from a distribution arrangement entered into in September 1996, and (v) a $4.3 million charge related to a legal settlement with PBM.

        Included in other income (expense), net, for 2004 are the following items: (i) $0.5 million of royalties received attributable to periods prior to 2004 associated with a license arrangement that had historically been underpaid, (ii) $0.9 million in release of a pre-acquisition legal contingency reserve upon reaching and signing a settlement agreement, and (iii) $0.5 million in litigation settlement gain.

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        Provision for Income Taxes.    Provision for income taxes increased by $4.5 million, or 200%, to $6.8 million in 2005 from $2.3 million in 2004. The effective tax rate in 2005 was (55)%, compared to (16)% in 2004. The increase in the provision for income taxes from 2004 to 2005 is primarily related to taxes on foreign income. The primary components of the 2005 provision for income taxes related to the recognition of U.S. deferred tax liabilities for temporary differences between the book and tax bases of goodwill and certain intangible assets with indefinite lives and to taxes on foreign income. The amount related to the U.S. deferred tax liabilities is approximately $2.9 million. In 2004, we recognized $0.8 million of benefit from the reduction of the valuation allowance related to net operating loss, or NOL, carryforward of two of our foreign subsidiaries due to our assessment that we would more likely than not realize the benefit of these NOLs.

        Net (Loss) Income.    We incurred a net loss of $19.2 million in 2005, while we incurred a net loss of $16.6 million in 2004. After taking into account charges for redemption interest and amortization of a beneficial conversion feature related to our Series A redeemable convertible preferred stock, we had a net loss available to common stockholders of $17.3 million in 2004. Net loss per common share available to common stockholders was $0.79 per basic and diluted common share in 2005 as compared to net loss of $0.87 per basic and diluted common share in 2004. The net loss in 2005 and 2004 resulted from the various factors as discussed above. See Note 12 of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for the calculation of net (loss) income per share.

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

        Net Product Sales.    Net product sales increased by $80.0 million, or 28%, to $365.4 million in 2004 from $285.4 million in 2003. Excluding the favorable impact of currency translation, net product sales in 2004 grew by approximately $69.6 million, or 24%, over 2003. A significant portion of the revenue increase resulted from our acquisitions in 2003 and 2004: (i) ABI contributed $14.0 million of such increase, (ii) the rapid diagnostics business of Abbott contributed $28.1 million, and (iii) various less significant acquisitions contributed an aggregate of $5.6 million of such increase. The remaining currency adjusted net product sales increase of $21.9 million resulted from our organic growth, primarily due to the launch of our Clearblue Easy Digital pregnancy test in June 2003, the commencement of our supply of the digital version of Pfizer's e.p.t pregnancy test in December 2003 and the visual version of Pfizer's e.p.t pregnancy test in June 2004 and the launch of our Clearblue Easy Digital ovulation test in June 2004.

        Net Product Sales by Business Segment.    Net product sales by business segment for 2004 and 2003 are as follows:

	2004		2003		% Increase
(in thousands)	(restated)		(restated)
Consumer diagnostic products	$	158,706	$	127,056	25	%
Vitamins and nutritional supplements		77,923		71,637	9	%
Professional diagnostic products		128,803		86,737	49	%
Total net product sales	$	365,432	$	285,430	28	%

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        The currency adjusted increase in net product sales from our consumer diagnostic products was $23.6 million, or 19%, comparing 2004 to 2003. Of the currency adjusted increase, $1.2 million and $7.6 million resulted from the acquisition of ABI and Abbott's Fact plus line of consumer diagnostic pregnancy tests, respectively. The remaining currency adjusted increase of $14.8 million resulted from our organic growth, primarily due to the launch of our Clearblue Easy Digital pregnancy test in June 2003, the commencement of our supply of the digital version of Pfizer's e.p.t pregnancy test in December 2003 and the visual version of Pfizer's e.p.t pregnancy test in June 2004, and the launch of our Clearblue Easy Digital ovulation test in June 2004.

        Net product sales of our vitamins and nutritional supplements increased by $6.3 million, or 9%, comparing 2004 to 2003. The increase was primarily in our private label nutritional supplements sales.

        The currency adjusted increase in net product sales from our professional diagnostic products was $39.7 million, or 46%, comparing 2004 to 2003. Of the currency adjusted increase, $12.8 million resulted from the acquisition of ABI, $20.5 million resulted from the acquisition of the Abbott Testpack and Signify product lines and an aggregate of $5.6 million resulted from various less significant acquisitions. The remaining currency adjusted increase of $0.8 million resulted from our organic growth, primarily due to increased sales of our rapid diagnostic tests for the point of care market.

        Net Product Sales by Geographic Location.    Net product sales by geographic location for 2004 and 2003 are as follows:

	2004		2003		% Increase
(in thousands)	(restated)		(restated)
United States	$	218,251	$	181,026	21	%
Europe		98,136		69,594	41	%
Other		49,045		34,810	41	%
Total net product sales	$	365,432	$	285,430	28	%

        The growth in our US business resulted primarily from the full year effect of the 2003 acquisitions of ABI and the portion of the Abbott rapid diagnostic business distributed in the US, as well as the launch of our Clearblue Easy Digital pregnancy test in June 2003, the commencement of our supply of the digital version of Pfizer's e.p.t pregnancy test in December 2003 and the visual version of Pfizer's e.p.t pregnancy test in June 2004, and the launch of our Clearblue Easy Digital ovulation test in June 2004. Our growth in Europe and the rest of the world was primarily attributable to the portion of the Abbott rapid diagnostic business distributed in each geography, as well as, with respect to Europe, the sales contributions from various less significant acquisitions.

        License and Royalty Revenue.    License and royalty revenue represents license and royalty fees from intellectual property license agreements with third-parties. License revenue decreased by $1.1 million, or 11%, to $8.6 million in 2004 from $9.7 million in 2003. The decrease is a function of the net results of royalties collected under new licenses and a decrease in royalties under expired licenses.

        Gross Profit and Margin.    Gross profit increased by $19.5 million, or 15%, to $147.0 million in 2004 from $127.5 million in 2003. Included in cost of sales in 2004 was a $1.7 million restructuring charge covering all costs for severance, early retirement and outplacement services arising from a completed plan of termination at our manufacturing facility in Bedford, England. The total number of involuntarily terminated employees was 18, all of whom were terminated as of December 31, 2004. As of December 31, 2004, substantially all restructuring costs were paid. Excluding this charge, gross profit increased by $21.2 million, or 17%, comparing 2004 to 2003.

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        The gross profit increase of $21.2 million, comparing 2004 to 2003 and adjusted for the restructuring charge, as discussed above, primarily resulted from the businesses that we acquired in the second half of 2003. The acquisition of ABI contributed $4.3 million of such gross profit increase. The rapid diagnostics business we acquired from Abbott contributed $15.6 million of such gross profit increase and its gross margin increased to 51% in 2004 from 39% in 2003 as a result of our transitioning the manufacturing of a portion of the Signify and Fact plus products from a third-party manufacturer to our own manufacturing facility. The increased profitability arising from our transition of production of Signify to our own manufacturing is attributable to synergies that we expected to benefit from when we acquired the Abbott rapid diagnostics business. The remaining increase of $1.3 million in our gross profit, adjusted for the restructuring charge, as discussed above, was primarily a result of the launch of our Clearblue Easy Digital pregnancy and ovulation tests and the commencement of our supply of the Pfizer e.p.t products, offset by declining profits from our nutritional supplements business. Gross profit from our nutritional supplements business, principally the private label products, declined by $5.8 million, comparing 2004 to 2003, while its sales increased by $6.3 million. Our private label nutritional supplements business has suffered from excess capacity in the industry which has led to increased price competition.

        Overall gross margin was 39% in 2004, compared to 43% in 2003. The restructuring charge, as discussed above, had the effect of reducing gross margin by 46 basis points in 2004. Gross margin was also adversely impacted in 2004 by the continuing weak U.S. Dollar against the Euro and British Pounds Sterling. Such movements in foreign exchange currencies negatively impacted the gross margin percentage of our products manufactured at our European subsidiaries and sold in U.S. Dollars. This currency impact had the effect of reducing gross margins by 177 basis points, comparing 2004 to 2003. Further, as discussed above, due to competitive pricing in the nutritional supplements business, gross margin from our nutritional supplements sales, principally in our private label products, has declined significantly. Comparing 2004 to 2003, the margin erosion of the nutritional supplements business affected our overall gross margin by 188 basis points. Somewhat offsetting the negative impact on gross margin was the improved gross margin of the rapid diagnostic products of Abbott, as discussed above.

        Gross Profit from Net Product Sales by Business Segment.    Gross profit from net product sales represents total gross profits less gross profit associated with license revenue. Gross profit from total net product sales increased by $20.7 million, or 17%, to $141.8 million in 2004 from $121.1 million in 2003. Gross profit from net product sales by business segment for 2004 and 2003 are as follows:

	2004		2003		% Increase/ (decrease)
(in thousands)	(restated)
Consumer diagnostic products	$	82,909	$	70,910	17	%
Vitamins and nutritional supplements		8,775		14,577	(40	)%
Professional diagnostic products		50,079		35,562	41	%
Total gross profit from net product sales	$	141,763	$	121,049	17	%

        Gross profit from our consumer diagnostic product sales increased by $12.0 million, or 17%, comparing 2004 to 2003. Of the increase in gross profit from our consumer diagnostic product sales, $4.0 million resulted from our acquisition of the Fact plus line of consumer diagnostic pregnancy tests from Abbott in September 2003. Organic growth, primarily as a result of the launch of our Clearblue Easy Digital pregnancy and ovulation tests and the commencement of our supply of the e.p.t pregnancy tests to Pfizer, contributed to the remaining increase in our gross profit from our consumer diagnostic product sales.

        Gross margin from our consumer diagnostic product sales was 52% in 2004, compared to 56% in 2003. The restructuring charge, as discussed above, had the effect of reducing gross margin from our

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consumer diagnostic product sales by 109 basis points, comparing 2004 to 2003. The movements in foreign currencies, comparing 2004 to 2003, negatively impacted gross margin by 416 basis points for our consumer diagnostic products manufactured at our European subsidiaries and sold in U.S. Dollars. The negative margin impact of the restructuring charge and foreign currency movements was offset in part by the sales of our digital pregnancy tests, which, as state-of-the-art, first-to-market products are able to generate higher gross profit per unit sold than traditional pregnancy tests.

        Despite sales increase, as discussed above, gross profit from our nutritional supplements business, principally the private label products, declined by $5.8 million, or 40%, comparing 2004 to 2003, as a result of margin erosion due to pricing competition. This was evident by its gross margin of 11% in 2004, compared to 20% in 2003.

        The increase in gross profit from our professional diagnostic product sales of $14.5 million, comparing 2004 to 2003, primarily resulted from our acquisitions of the Abbott TestPack and Signify product lines and ABI. The Abbott professional diagnostic products contributed $11.7 million of the increase in gross profit, comparing 2004 to 2003. The acquisition of ABI contributed $4.3 million of the increase in gross profit from our professional diagnostic product sales.

        Gross margin from our professional diagnostic product sales was 39% in 2004, compared to 41% in 2003. The decline in gross margin of our professional diagnostic products primarily resulted from the ABI products which on average have been generating lower margins than our other professional diagnostic products.

        Research and Development Expense.    Research and development expense increased by $7.7 million, or 32%, to $32.0 million in 2004 from $24.3 million in 2003. A significant portion of our research and development spending occurs at our facilities in the United Kingdom. As a result, the weak U.S. Dollar against the British Pounds Sterling causes an increase in the dollar value of research and development expense at translation. Adjusted for the unfavorable impact of currency translation, research and development expense increased by $5.2 million, or 21%, when comparing 2004 to 2003. Our acquisition of ABI, primarily in the field of professional diagnostic testing, contributed $1.6 million of the currency adjusted increase in research and development expense. The remaining increase in research and development expense, comparing 2004 to 2003, resulted from an increase in our cardiology research and development expenditures from $11.3 million in 2003 to $17.9 million in 2004 (an increase of $4.7 million on a currency adjusted basis).

        Sales and Marketing Expense.    Sales and marketing expense increased by $5.5 million, or 10%, to $58.0 million in 2004 from $52.5 million in 2003. A significant portion of our sales and marketing spending takes place at our European subsidiaries. Accordingly, and as a result of the continued weak U.S. Dollar, the currency adjusted increase in sales and marketing expense, comparing 2004 to 2003, was $3.1 million, or 6%. Of the currency adjusted increase in sales and marketing expense, $2.4 million resulted from the amortization of customer related intangible assets which we acquired as part of our acquisition of the rapid diagnostics business of Abbott. The remaining currency adjusted increase in sales and marketing expense of $0.7 million resulted from our acquisition of ABI.

        Sales and marketing expense as a percentage of net product sales decreased to 16% in 2004, from 18% in 2003. The percentage decrease primarily resulted from the shift to our professional diagnostics business which generally incurs lower sales and marketing expense as a percentage of sales from our vitamins and nutritional supplements business. In addition, marketing synergies realized due to our integration of the Fact plus product line acquired from Abbott with only nominal increases in consumer sales and marketing infrastructure accounted for approximately 34 basis points of the reduction in sales and marketing expense as a percentage of sales from 2003 to 2004.

        General and Administrative Expense.    General and administrative expense increased by $17.2 million, or 48%, to $52.7 million in 2004 from $35.5 million in 2003. Excluding the impact of

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foreign currency translation, general and administrative expense increased $15.6 million, or 44%, when comparing 2004 to 2003. Included in general and administrative expense for 2004 was the establishment of a specific reserve for a doubtful accounts receivable balance of $1.4 million. Legal expenses in 2004 increased by $4.0 million, compared to 2003, due to our active pursuits and defenses in litigations, primarily related to intellectual property infringements. Our acquisitions since June 2003 contributed an additional $6.6 million to general and administrative expenses in 2004, compared to 2003. In 2004, we also spent an additional $1.7 million in audit and consulting costs associated with our preparation for compliance under the Sarbanes-Oxley Rule 404 regarding internal control over financial reporting. The remaining currency adjusted increase of $1.9 million in general and administrative expense from 2003 to 2004 resulted from investments in our infrastructure to support the growth of our business. For the factors discussed herein, general and administrative expense as a percentage of net revenue increased to 14% in 2004 from 12% in 2003.

        Interest Expense.    Interest expense includes interest charges, the write-off and amortization of deferred financing costs and the amortization of non-cash discounts associated with our debt issuances and the change in market value of our interest rate swap agreement which did not qualify as a hedge for accounting purposes. Interest expense increased by $12.4 million, or 128%, to $22.1 million in 2004 from $9.7 million in 2003. In 2004, we recorded a charge of $3.8 million representing the write-off of deferred financing costs and prepayment fees and penalties related to the repayment of borrowings under our primary senior credit facility and certain subordinated notes with the proceeds from our $150.0 million bond offering in February 2004. Excluding such charge, interest expense increased by $8.6 million, comparing 2004 to 2003. Such increase was primarily due to a higher average outstanding debt balance which was $194.4 million during 2004, compared to $140.4 million during 2003, primarily as a result of the borrowings to finance the acquisitions of ABI and the rapid diagnostics business from Abbott in the second half of 2003. Additionally, the 8.75% interest rate on the $150.0 million bonds increased our average cash interest rate to 8.8% as of December 31, 2004, compared to 6.1% as of December 31, 2003. The bonds, which are due in 2012, provide us with a long-term fixed rate on a significant portion of our indebtedness, as compared to the variable rates under our senior credit facilities.

        Other Income (Expense), Net.    Other income (expense), net, includes interest income, realized and unrealized foreign exchange gains and losses, and other income and expense. The components and the respective amounts of other income (expense), net, are summarized as follows:

(in thousands)	2004			2003
Interest income	$	1,050		$	1,043
Foreign exchange (losses) gains, net		(720	)		5
Other		3,077			5,393
Total other income (expense), net	$	3,407		$	6,441

        The foreign exchange loss of $0.7 million in 2004 primarily resulted from the continuing weakening U.S. Dollar against the British Pounds Sterling and the Euro, as certain receivables of our Irish and U.K. subsidiaries are denominated in U.S. Dollar while their functional currency is their respective local currency.

        Included in other income for 2004 are the following items: (i) $0.5 million of royalties received attributable to periods prior to 2004 associated with a license arrangement that had historically been underpaid, (ii) $0.9 million in release of a pre-acquisition legal contingency reserve upon reaching and signing a settlement agreement, and (iii) $0.5 million in litigation settlement gain. Included in other income for 2003 is $1.2 million of past royalties received as part of a patent infringement settlement and a one-time gain of $3.8 million recorded in connection with an agreement with Unilever Plc (the

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seller of the Unipath business) which resolved certain issues that arose out of our acquisition of the Unipath business.

        Provision for Income Taxes.    Provision for income taxes decreased by $0.6 million, or 21%, to $2.3 million in 2004 from $2.9 million in 2003. The effective tax rate in 2004 was (16)%, compared to 25% in 2003. The decrease in the provision for income taxes from 2003 to 2004 related to the recognition and benefit of certain current year losses and certain deferred tax assets. In 2004, we recognized $0.8 million of benefit from the reduction of the valuation allowance related to net operating loss, or NOL, carryforward of two of our foreign subsidiaries due to our assessment that we would more likely than not realize the benefit of these NOLs. The primary component of the 2004 provision for income taxes related to the recognition of a U.S. deferred tax liability for temporary differences between the book and tax bases of goodwill and certain intangible assets with indefinite lives.

        Net (Loss) Income.    We incurred a net loss of $16.6 million in 2004, while we generated net income of $8.7 million in 2003. After taking into account charges for redemption interest and amortization of a beneficial conversion feature related to our Series A redeemable convertible preferred stock, we had a net loss available to common stockholders of $17.3 million, or $0.87 per basic and diluted common share, in 2004, compared to net income available to common stockholders of $7.7 million, or $0.49 and $0.44 per basic and diluted common share, respectively, in 2003. The net loss in 2004 and net income in 2003 primarily resulted from the various factors as discussed above. See Note 12 of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for the calculation of net (loss) income per share.

Liquidity and Capital Resources

        Based upon our current working capital position, current operating plans and expected business conditions, we believe that our existing capital resources, credit facilities, expected funding resulting from our co-development funding agreement with ITI Scotland and the proceeds from our February 2006 equity offering will be adequate to fund our operations, including our outstanding debt and other commitments, as discussed below, for the next 12 months. In the long run, we expect to fund our working capital needs and other commitments primarily through the co-development funding program with ITI Scotland and through our operating cash flow, since we expect to grow our business through new product introductions and by continuing to leverage our strong intellectual property position. We also expect to rely on our credit facilities and the capital markets to fund a portion of our capital needs and other commitments.

        Our funding plans for our working capital needs and other commitments may be adversely impacted by unexpected costs associated with prosecuting and defending our existing lawsuits and/or unforeseen lawsuits against us, integrating the operations of Ischemia, Binax, BioStar, IDT and the Determine business and executing our cost savings strategies. We also cannot be certain that our underlying assumed levels of revenues and expenses will be realized. In addition, we intend to continue to make significant investments in our research and development efforts related to the substantial intellectual property portfolio we own. We may also choose to further expand our research and development efforts and may pursue the acquisition of new products and technologies through licensing arrangements, business acquisitions, or otherwise. We may also choose to make significant investment to pursue legal remedies against potential infringers of our intellectual property. If we decide to engage in such activities, or if our operating results fail to meet our expectations, we could be required to seek additional funding through public or private financings or other arrangements. In such event, adequate funds may not be available when needed, or, may be available only on terms which could have a negative impact on our business and results of operations. In addition, if we raise additional funds by issuing equity or convertible securities, dilution to then existing stockholders may result.

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Changes in Cash Position

        As of December 31, 2005, we had cash and cash equivalents of $34.3 million, a $17.5 million increase, or 105%, from December 31, 2004. Since our split-off from our former parent company in November 2001, we have funded our business through operating cash flows, proceeds from borrowings and the issuance of equity securities. During 2005, we generated cash of $26.6 million from our operating activities, which resulted from a net loss of $19.2 million, adjusted for non-cash items of $36.0 million and a net working capital increase, excluding the change in cash balance and adjusted for acquired assets, of $9.8 million. The increase in adjusted working capital primarily resulted from an increase in our inventory and prepaid assets, offset by a decrease in accounts receivable. A net payment of $17.0 million from Quidel under an infringement litigation settlement is included in our net loss for 2005. Our non-equity financing activities, primarily borrowings under our primary senior credit facility, net of various debt repayments and financing costs, provided us with cash of $66.4 million during the year ended December 31, 2005. In addition, we received $97.4 million in net proceeds from an equity offering and the exercises of common stock options during the year ended December 31, 2005.

        In 2005, we used cash of $170.8 million for investing activities which consisted of $149.0 million paid for transaction costs associated with previously acquired businesses and the 2005 acquisitions of ACS, Ischemia, Binax, the Determine business, BioStar and IDT. Additionally, we used cash to fund $20.0 million in capital expenditures, net of proceeds from sales of equipment and a $1.8 million increase in other non-current assets. Fluctuations in foreign currencies negatively impacted our cash balance by $2.1 million in 2005.

Investing Activities

        During the year ended December 31, 2005, we incurred $20.0 million in capital expenditures, net of proceeds from sales of equipment. Significant capital expenditures during the year ended December 31, 2005 included: $1.9 million in connection with upgrading one of our vitamins and nutritional supplements plants and machinery; $0.9 million in connection with the transition of the manufacturing of the TestPack product, which we acquired as part of the rapid diagnostics business from Abbott, to our facilities, $2.0 million related to equipment in support of our research and development efforts at our facility in Stirling, Scotland, and $1.4 million in connection with our manufacturing facility in Bedford, England related to expansion of our production capabilities. The remaining capital expenditures during the fiscal year ended December 31, 2005 were incurred for the purchase of additional or replacement equipment to support our organic growth and various research and development activities and to furnish our new facility in China.

        On January 24, 2005, we acquired the consumer pregnancy test business of ACS for an aggregate purchase price of $4.9 million which consisted of $4.6 million in cash and $0.3 million in estimated direct acquisition costs. In acquiring the business, we obtained the rights to the Crystal Clear brand. Crystal Clear is the leading consumer pregnancy test in Australia and has a leading position in New Zealand.

        On March 16, 2005, we acquired Ischemia, a privately held, venture-backed company that developed, manufactured and marketed the only FDA-cleared in vitro diagnostic test targeted on cardiac ischemia. The aggregate purchase price was $27.2 million, which consisted of 968,000 shares of our common stock with an aggregate fair value of $22.8 million, estimated exit costs of $1.5 million to vacate Ischemia's manufacturing and administrative facilities, estimated direct acquisition costs of $2.4 million and $0.5 million in assumed debt.

        On March 31, 2005, we acquired Binax, a privately held developer, manufacturer and distributor of rapid diagnostic products for infectious disease testing, primarily related to the respiratory system. The aggregate purchase price was $44.7 million, which consisted of $9.0 million in cash, 1,422,000 shares of our common stock with an aggregate fair value of $35.2 million and $0.5 million in estimated direct

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acquisition costs. The terms of the acquisition agreement also provide for $11.0 million of contingent cash consideration payable to the Binax shareholders upon the successful completion of certain new product developments during the five years following the acquisition.

        On June 30, 2005, we acquired the Determine business. The Determine business produces diagnostic tests that are designed to provide rapid qualitative results for detecting several diseases, including hepatitis, HIV 1/2 and syphilis. The aggregate purchase price was $58.1 million, which consisted of $56.5 million in cash and $1.6 million in estimated direct acquisition costs.

        On September 30, 2005, we acquired IDT, a Spanish distributor of diagnostic products. The aggregate purchase price was $20.3 million, which consisted of $11.7 million in cash, an $8.4 million working capital adjustment, which was paid during the fourth quarter of fiscal year 2005, and $0.2 million in estimated direct acquisition costs.

        On September 30, 2005, we acquired BioStar, a leading developer and manufacturer of high-performance, rapid diagnostic tests, including tests for the detection of infectious diseases. The aggregate purchase price was $53.7 million, which consisted of $53.1 million in cash, $0.5 million in estimated direct acquisition costs and $0.1 million in estimated exit costs.

Financing Activities

        On February 10, 2004, we completed the sale of $150.0 million of 8.75% senior subordinated notes, or bonds, due 2012 in a private placement to qualified institutional buyers. The proceeds from the bond issuance were used to repay certain of our then existing debt and provided us with additional funds for our operations. These bonds accrue interest from the date of their issuance, or February 10, 2004, at the rate of 8.75% per year. Interest on the bonds are payable semi-annually in arrears on each February 15 and August 15, which commenced on August 15, 2004. As we were unable to consummate the exchange offer until March 28, 2005, interest on the bonds increased by 0.25% point per year for the first 90-day period immediately following the default and an additional 0.25% point per year with respect to each subsequent 90-day period up to a maximum amount of additional interest of 1% point. As of December 31, 2005, accrued interest related to the bonds amounted to $5.4 million.

        The bonds are unsecured and are subordinated in right of payment to all of our existing and future senior debt, including our guarantee of all borrowings under our primary senior credit facility. The bonds are effectively subordinated to all existing and future liabilities, including trade payables, of those of our subsidiaries that do not guarantee the bonds.

        The bonds are guaranteed by all of our domestic subsidiaries that are guarantors or borrowers under our primary senior credit facility. The guarantees are general unsecured obligations of the guarantors and are subordinated in right of payment to all existing and future senior debt of the applicable guarantors, which includes their guarantees of, and borrowings under our primary senior credit facility.

        In August 2005, we sold 4,000,000 shares of common stock to funds affiliated with 3 accredited institutional investors in a private placement. Net proceeds from the private placement were approximately $92.8 million. Of this amount, we repaid principal and interest outstanding under our senior credit facility of $84.4 million, with the remainder of the net proceeds retained for general corporate purposes. $20.0 million of the repayment was used to permanently reduce the outstanding term loan balance under the senior credit facility.

        On February 8 and 9, 2006, we sold 3,400,000 shares of our common stock at $24.41 per share to funds affiliated with 14 accredited institutional investors in a private placement. Proceeds from the private placement were approximately $79.3 million, net of issuance costs of $3.7 million. Of this amount, we repaid principal and interest outstanding under our senior credit facility of $74.1 million, with the remainder of the net proceeds retained for general corporate purposes.

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        On February 28, 2006, we acquired 67.45% of the capital stock of CLONDIAG chip technologies GmbH, a private company located in Jena in Germany which has developed a multiplexing technology for nucleic acid and immunoassay based diagnostics, in exchange for 218,502 shares of our common stock and approximately $3.1 million in cash. We also agreed to settle obligations totaling approximately $10.0 million during the first quarter of 2006, primarily using cash. Under our agreement with the CLONDIAG shareholders, we will acquire the remaining 32.55% of the capital stock of CLONDIAG on or about August 31, 2006 for an additional $4.9 million based on current exchange rates. The agreement also calls for contingent consideration totaling approximately $8.9 million consisting of 224,316 shares of common stock and approximately $3.0 million of cash or stock in the event that four specified products are developed on CLONDIAG's platform technology during the three years following the date of the initial stock purchase.

        Our primary senior credit facility with a group of banks, as amended, currently provides us with revolving lines of credit in the aggregate amount of up to $100.0 million, subject to continuing covenant compliance. As of December 31, 2005, we had $89.0 million of outstanding borrowings under the revolving lines of credit. $73.6 million of the outstanding debt was used to fund the acquisitions of BioStar and IDT.

        We may repay any future borrowings under the revolving lines of credit at any time but in no event later than March 31, 2008. We are required to make mandatory prepayments under our primary senior credit facility if we meet certain cash flow thresholds, issue equity securities or subordinated debt, or sell assets not in the ordinary course of our business above certain thresholds.

        Borrowings under the revolving lines of credit bear interest at either (1) the London Interbank Offered Rate, or LIBOR, as defined in the credit agreement, plus applicable margins or, at our option, (2) a floating Index Rate, as defined in the credit agreement, plus applicable margins. Applicable margins if we choose to use the LIBOR or the Index Rate can range from 2.75% to 3.75% or 1.50% to 2.50%, respectively, depending on the quarterly adjustments that are based on our consolidated financial performance. As of December 31, 2005, the applicable interest rate under the revolving lines of credit, including the applicable margin, ranged from 6.84% to 9.25%.

        Borrowings under our primary senior credit facility are secured by the stock of our U.S. and European subsidiaries, substantially all of our intellectual property rights and the assets of our businesses in the U.S. and Europe, excluding those assets of Orgenics Ltd., our Israeli subsidiary, Inverness Medical Shanghai Co., Ltd., our subsidiary in China, Inverness Medical Australia Pty. Ltd., our Australian subsidiary, and Unipath Scandinavia AB, our Swedish subsidiary, and the stock of Orgenics and certain smaller subsidiaries. Under the senior credit agreement, as amended, we must comply with various financial and non-financial covenants. The primary financial covenants pertain to, among other things, fixed charge coverage ratio, capital expenditures, various leverage ratios, earnings before interest, taxes, depreciation and amortization, or EBITDA, and a minimum cash requirement. Additionally, the senior credit agreement currently prohibits us from paying dividends. We are currently in compliance with the covenants, as amended.

        On September 20, 2002, we sold units having an aggregate purchase price of $20.0 million to private investors to help finance our acquisition of Wampole Laboratories. The 10% subordinated notes accrue interest on the outstanding principal amount at 10% per annum, which is payable quarterly in arrears on the first day of each calendar quarter, which started on October 1, 2002. The 10% subordinated notes mature on September 20, 2008, subject to acceleration in certain circumstances, and we may prepay the 10% subordinated notes at any time, subject to certain prepayment penalties and the consent of our senior lenders. The 10% subordinated notes are expressly subordinated to up to $150.0 million of indebtedness for borrowed money incurred or guaranteed by our company plus any other indebtedness that we incur to finance or refinance an acquisition.

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        As of December 31, 2005, we had an aggregate of $1.7 million in outstanding capital lease obligations which are payable through 2009.

Income Taxes

        As of December 31, 2005, we had approximately $170.2 million and $26.0 million of domestic and foreign net operating loss, or NOL, carryforwards, respectively, which either expire on various dates through 2025 or can be carried forward indefinitely. The NOL carryforward for CDIL is approximately $14.7 million. The CDIL NOL is fully reserved and may never be realized, due to the closing of the facility. These losses are available to reduce federal and foreign taxable income, if any, in future years. These losses are also subject to review and possible adjustments by the applicable taxing authorities. In addition, the domestic operating loss carryforward amount at December 31, 2005 included approximately $71.2 million of pre-acquisition losses at IMN, Ischemia, Ostex and ADC. The future benefit of these losses will be applied first to reduce to zero any goodwill and other non-current intangible assets related to the acquisitions, prior to reducing our income tax expense. Also included in our domestic NOL carryforwards at December 31, 2005 was approximately $2.6 million resulting from the exercise of employee stock options, the tax benefit of which, when recognized, will be accounted for as a credit to additional paid-in capital rather than a reduction of income tax.

        Furthermore, all domestic losses are subject to the Internal Revenue Service Code Section 382 limitation and may be limited in the event of certain cumulative changes in ownership interests of significant shareholders over a three-year period in excess of 50%. Section 382 imposes an annual limitation on the use of these losses to an amount equal to the value of the company at the time of the ownership change multiplied by the long term tax exempt rate. We have recorded a valuation allowance against a portion of the deferred tax assets related to our net operating losses and certain of our other deferred tax assets to reflect uncertainties that might affect the realization of such deferred tax assets, as these assets can only be realized via profitable operations.

Off-Balance Sheet Arrangements

        We had no material off-balance sheet arrangements as of December 31, 2005.

Contractual Obligations

        The following table summarizes our principal contractual obligations as of December 31, 2005 and the effects such obligations are expected to have on our liquidity and cash flow in future periods.

	Payments Due by Period
Contractual Obligations
	Total		2006		2007-2008		2009-2010		Thereafter
	(in thousands)
Long-term debt obligations(1)	$	261,528	$	2,367	$	109,161	$	—	$	150,000
Capital lease obligations(2)		1,691		644		1,035		12		—
Operating lease obligations(3)		56,926		7,551		10,913		8,069		30,393
Long-term and other liabilities(4)		7,471		2,886		2,492		1,436		657
Minimum royalty obligations		280		220		40		20		—
Purchase obligations—capital expenditure		4,952		4,952		—		—		—
Purchase obligations—other(5)		35,769		35,769		—		—		—
Interest on debt(6)		85,711		15,150		29,728		26,250		14,583
Total	$	454,328	$	69,539	$	153,369	$	35,787	$	195,633

(1)

See description of various financing arrangements in this section and Note 6 of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

(2)

See Note 7 of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

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(3)

See Note 10(a) of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

(4)

Included in long-term and other liabilities are $1.5 million in technology license payment obligations and $6.0 million in pension obligations.

(5)

Other purchase obligations relate to inventory purchases and other operating expense commitments.

(6)

Amounts are based on $150.0 million senior subordinated notes and $20.0 million subordinated promissory notes. Amounts exclude interest on all other debt due to variable interest rates (Note 6).

Critical Accounting Policies

        The consolidated financial statements included elsewhere in this Annual Report on Form 10-K are prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The accounting policies discussed below are considered by our management and our audit committee to be critical to an understanding of our financial statements because their application depends on management's judgment, with financial reporting results relying on estimates and assumptions about the effect of matters that are inherently uncertain. Specific risks for these critical accounting policies are described in the following paragraphs. For all of these policies, management cautions that future events rarely develop exactly as forecast and the best estimates routinely require adjustment. In addition, the notes to our audited consolidated financial statements for the year ended December 31, 2005 included elsewhere in this Annual Report on Form 10-K include a comprehensive summary of the significant accounting policies and methods used in the preparation of our consolidated financial statements.

Revenue Recognition

        We primarily recognize revenue when the following four basic criteria have been met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and determinable; and (4) collection is reasonably assured.

        The majority of our revenues are derived from product sales. We recognize revenue upon title transfer of the products to third-party customers, less a reserve for estimated product returns and allowances. Determination of the reserve for estimated product returns and allowances is based on our management's analyses and judgments regarding certain conditions, as discussed below in the critical accounting policy "Use of Estimates for Sales Returns and Other Allowances and Allowance for Doubtful Accounts." Should future changes in conditions prove management's conclusions and judgments on previous analyses to be incorrect, revenue recognized for any reporting period could be adversely affected.

        In connection with the acquisitions of the rapid diagnostics business in September 2003 and the Determine business in June 2005 from Abbott, we entered into a transition services agreement with Abbott, whereby Abbott would continue to distribute certain of the acquired products for a period of up to 18 months following each acquisition. During the transition period, we recognized revenue on sales of the products when title transferred from Abbott to third party customers.

        We also receive license and royalty revenue from agreements with third-party licensees. Revenue from fixed fee license and royalty agreements are recognized on a straight-line basis over the obligation period of the related license agreements. License and royalty fees that the licensees calculate based on their sales, which we have the right to audit under most of our agreements, are generally recognized upon receipt of the license or royalty payments unless we are able to reasonably estimate the fees as they are earned. License and royalty fees that are determinable prior to the receipt thereof are recognized in the period they are earned.

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Use of Estimates for Sales Returns and Other Allowances and Allowance for Doubtful Accounts

        Certain sales arrangements require us to accept product returns. From time to time, we also enter into sales incentive arrangements with our retail customers, which generally reduce the sale prices of our products. As a result, we must establish allowances for potential future product returns and claims resulting from our sales incentive arrangements against product revenue recognized in any reporting period. Calculation of these allowances requires significant judgments and estimates. When evaluating the adequacy of the sales returns and other allowances, our management analyzes historical returns, current economic trends, and changes in customer and consumer demand and acceptance of our products. When such analysis is not available and a right of return exists, we record revenue when the right of return is no longer applicable. Material differences in the amount and timing of our product revenue for any reporting period may result if changes in conditions arise that would require management to make different judgments or utilize different estimates.

        Our total provision for sales returns and other allowances related to sales incentive arrangements amounted to $51.2 million, $55.2 million and $46.2 million, or 13%, 15% and 16% of net product sales in 2005, 2004 and 2003, respectively, which have been recorded against product sales to derive our net product sales.

        Similarly, our management must make estimates regarding uncollectible accounts receivable balances. When evaluating the adequacy of the allowance for doubtful accounts, management analyzes specific accounts receivable balances, historical bad debts, customer concentrations, customer credit-worthiness, current economic trends and changes in our customer payment terms and patterns. Our accounts receivable balance was $70.5 million and $61.3 million, net of allowances for doubtful accounts of $9.7 million and $9.4 million, as of December 31, 2005 and 2004, respectively.

Valuation of Inventories

        We state our inventories at the lower of the actual cost to purchase or manufacture the inventory or the estimated current market value of the inventory. In addition, we periodically review the inventory quantities on hand and record a provision for excess and obsolete inventory. This provision reduces the carrying value of our inventory and is calculated based primarily upon factors such as forecasts of our customers' demands, shelf lives of our products in inventory, loss of customers and manufacturing lead times. Evaluating these factors, particularly forecasting our customers' demands, requires management to make assumptions and estimates. Actual product sales may prove our forecasts to be inaccurate, in which case we may have underestimated or overestimated the provision required for excess and obsolete inventory. If, in future periods, our inventory is determined to be overvalued, we would be required to recognize the excess value as a charge to our cost of sales at the time of such determination. Likewise, if, in future periods, our inventory is determined to be undervalued, we would have over-reported our cost of sales, or understated our earnings, at the time we recorded the excess and obsolete provision. Our inventory balance was $71.2 million and $61.2 million, net of a provision for excess and obsolete inventory of $7.7 million and $4.1 million, as of December 31, 2005 and 2004, respectively.

Valuation of Goodwill and Other Long-Lived and Intangible Assets

        Our long-lived assets include (1) property, plant and equipment, (2) goodwill and (3) other intangible assets. As of December 31, 2005, the balances of property, plant and equipment, goodwill and other intangible assets, net of accumulated depreciation and amortization, were $72.2 million, $322.2 million and $188.3 million, respectively.

        Goodwill and other intangible assets are initially created as a result of business combinations or acquisitions of intellectual property. The values we record for goodwill and other intangible assets represent fair values calculated by accepted valuation methods. Such valuations require us to provide

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significant estimates and assumptions which are derived from information obtained from the management of the acquired businesses and our business plans for the acquired businesses or intellectual property. Critical estimates and assumptions used in the initial valuation of goodwill and other intangible assets include, but are not limited to: (i) future expected cash flows from product sales, customer contracts and acquired developed technologies and patents, (ii) expected costs to complete any in-process research and development projects and commercialize viable products and estimated cash flows from sales of such products, (iii) the acquired companies' brand awareness and market position, (iv) assumptions about the period of time over which we will continue to use the acquired brand, and (v) discount rates. These estimates and assumptions may be incomplete or inaccurate because unanticipated events and circumstances may occur. If estimates and assumptions used to initially value goodwill and intangible assets prove to be inaccurate, ongoing reviews of the carrying values of such goodwill and intangible assets, as discussed below, may indicate impairment which will require us to record an impairment charge in the period in which we identify the impairment.

        Where we believe that property, plant and equipment and intangible assets have finite lives, we depreciate and amortize those assets over their estimated useful lives. For purposes of determining whether there are any impairment losses, as further discussed below, our management has historically examined the carrying value of our identifiable long-lived tangible and intangible assets and goodwill, including their useful lives where we believe such assets have finite lives, when indicators of impairment are present. In addition, SFAS No. 142 requires that impairment reviews be performed on the carrying values of all goodwill on at least an annual basis. For all long-lived tangible and intangible assets and goodwill, if an impairment loss is identified based on the fair value of the asset, as compared to the carrying value of the asset, such loss would be charged to expense in the period we identify the impairment. Furthermore, if our review of the carrying values of the long-lived tangible and intangible assets with finite lives indicates impairment of such assets, we may determine that shorter estimated useful lives are more appropriate. In that event, we will be required to record additional depreciation and amortization in future periods, which will reduce our earnings.

Valuation of Goodwill

        We have goodwill balances related to our consumer diagnostics and professional diagnostics reporting units, which amounted to $85.7 million and $236.5 million, respectively, as of December 31, 2005. As of September 30, 2005, we performed our annual impairment review on the carrying values of such goodwill using the discounted cash flows approach. Based upon this review, we do not believe that the goodwill related to our consumer diagnostics and professional diagnostics reporting units were impaired. Because future cash flows and operating results used in the impairment review are based on management's projections and assumptions, future events can cause such projections to differ from those used at September 30, 2005, which could lead to significant impairment charges of goodwill in the future. No events or circumstances have occurred since our review as of September 30, 2005, that would require us to reassess whether the carrying values of our goodwill have been impaired.

Valuation of Other Long-Lived Tangible and Intangible Assets

        Factors we generally consider important which could trigger an impairment review on the carrying value of other long-lived tangible and intangible assets include the following: (1) significant underperformance relative to expected historical or projected future operating results; (2) significant changes in the manner of our use of acquired assets or the strategy for our overall business; (3) underutilization of our tangible assets; (4) discontinuance of product lines by ourselves or our customers; (5) significant negative industry or economic trends; (6) significant decline in our stock price for a sustained period; (7) significant decline in our market capitalization relative to net book value; and (8) goodwill impairment identified during an impairment review under SFAS No. 142. Although we

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believe that the carrying value of our long-lived tangible and intangible assets was realizable as of December 31, 2005, future events could cause us to conclude otherwise.

Accounting for Income Taxes

        As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves us estimating our actual current tax exposure and assessing temporary differences resulting from differing treatment of items, such as reserves and accruals and lives assigned to long-lived and intangible assets, for tax and accounting purposes. These differences result in deferred tax assets and liabilities. We must then assess the likelihood that our deferred tax assets will be recovered through future taxable income and, to the extent we believe that recovery is not likely, we must establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we must include an expense within our tax provision.

        Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. We have recorded a valuation allowance of $96.7 million as of December 31, 2005 due to uncertainties related to the future benefits, if any, from our deferred tax assets related primarily to our U.S. businesses and certain foreign net operating losses and tax credits. The valuation allowance is based on our estimates of taxable income by jurisdiction in which we operate and the period over which our deferred tax assets will be recoverable. In the event that actual results differ from these estimates or we adjust these estimates in future periods, we may need to establish an additional valuation allowance or reduce our current valuation allowance which could materially impact our tax provision.

        In accordance with SFAS No. 109, Accounting for Income Taxes, and SFAS No. 5, Accounting for Contingencies, we established reserves for tax contingencies that reflect our best estimate of the transactions and deductions that we may be unable to sustain or that we could be willing to concede as part of a broader tax settlement. We are currently undergoing routine tax examinations by various state and foreign jurisdictions. Tax authorities periodically challenge certain transactions and deductions we reported on our income tax returns. We do not expect the outcome of these examinations, either individually or in the aggregate, to have a material adverse effect on our financial position, results of operations, or cash flows.

        In October 2004, the American Jobs Creation Act of 2004, or the AJCA, was signed into law. The AJCA contains a series of provisions, several of which are pertinent to our company. The AJCA creates a temporary incentive for U.S. multinational corporations to repatriate accumulated income abroad by providing an 85% dividends received deduction for certain dividends from controlled foreign corporations. We did not repatriate any of our foreign earnings under this provision. It has been our company's practice to permanently reinvest all foreign earnings into foreign operations and we currently expect to continue to reinvest foreign earnings permanently into our foreign operations. Should we plan to repatriate any foreign earnings in the future, we will be required to establish an income tax expense and related tax liability on such earnings.

Legal Contingencies

        In the section of this Annual Report on Form 10-K titled "Item 3. Legal Proceedings," we have reported on material legal proceedings. In addition, because of the nature of our business, we may from time to time be subject to commercial disputes, consumer product claims or various other lawsuits arising in the ordinary course of our business, and we expect this will continue to be the case in the future. These lawsuits generally seek damages, sometimes in substantial amounts, for commercial or personal injuries allegedly suffered and can include claims for punitive or other special damages. In

48

addition, we aggressively defend our patent and other intellectual property rights. This often involves bringing infringement or other commercial claims against third parties, which can be expensive and can result in counterclaims against us.

        We do not accrue for potential losses on legal proceedings where our company is the defendant when we are not able to reasonably estimate our potential liability, if any, due to uncertainty as to the nature, extent and validity of the claims against us, uncertainty as to the nature and extent of the damages or other relief sought by the plaintiff and the complexity of the issues involved. Our potential liability, if any, in a particular case may become reasonably estimable and probable as the case progresses, in which case we will begin accruing for the expected loss.

Recently Issued Accounting Standards

        In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections," which replaces ABP Opinion No. 20, "Accounting Changes," and FASB Statement No. 3, "Reporting Accounting Changes in Interim Financial Statements," and changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS No. 154 requires retrospective application to prior periods' financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS No. 154 shall be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Early adoption is permitted for accounting changes and corrections of errors made in fiscal years beginning after the date SFAS No. 154 was issued. At the present time, we do not believe that adoption of SFAS No. 154 will have a material effect on our financial position, results of operations or cash flows.

        In March 2005, the FASB issued FASB Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations," which is an interpretation of FASB Statement No. 143, "Accounting for Asset Retirement Obligations." The interpretation requires a liability for the fair value of a conditional asset retirement obligation be recognized if the fair value of the liability can be reasonable estimated. The interpretation is effective for years ending after December 15, 2005. The interpretation is not expected to have a material impact on our results of operations or financial position.

        In December 2004, the FASB issued SFAS No. 153, Exchange of Nonmonetary Assets—an amendment of APB Opinion No. 29, "Accounting for Nonmonetary Transactions." SFAS No. 153 is based on the principle that exchange of nonmonetary assets should be measured based on the fair market value of the assets exchanged. SFAS No. 153 eliminates the exception of nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. SFAS 153 is effective for nonmonetary asset exchanges in fiscal periods beginning after June 15, 2005. We are currently evaluating the provisions of SFAS No. 153 and do not believe that the adoption of SFAS No. 153 will have a material impact on our consolidated financial statements.

        In December 2004, the FASB issued SFAS No. 123R which addresses the accounting for transactions in which a company receives employee services in exchange for (a) equity instruments of the company or (b) liabilities that are based on the fair value of the company's equity instruments or that may be settled by the issuance of such equity instruments. It eliminates the ability to account for share-based compensation transactions using APB Opinion No. 25, and generally requires that such transactions be accounted for using a fair-value-based method. As permitted by the current SFAS No. 123, Accounting for Stock-Based Compensation, we have been accounting for share-based compensation to employees using APB Opinion No. 25's intrinsic value method and, as such, we generally recognize no compensation cost for employee stock options. Under the original guidance of SFAS No. 123R, we were to adopt the statement's provisions for the interim period beginning after June 15, 2005. However, in April 2005, as a result of an action by the Securities and Exchange

49

Commission, companies were allowed to adopt the provisions of SFAS No. 123R at the beginning of their fiscal year that begins after June 15, 2005. Consequently, we adopted SFAS No. 123R on January 1, 2006. If we had adopted this standard in 2005, our net loss for 2005 would have been $6.2 million (or $0.25 per diluted share) higher than reported in 2005. While we expect that the requirement to expense stock options and other equity interests that have been or will be granted pursuant to our equity incentive program will significantly increase our operating expenses and result in lower earnings per share, the amount of the increase in operating expenses will depend on the level of future grants, the terms and fair values of such grants, and expected volatilities, among other factors, present at the grant dates. The adoption of SFAS No. 123R will have no impact on our cash flows.

        In November 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No. 151, Inventory Costs—an amendment of ARB No. 43, Chapter 4. SFAS No. 151 clarifies that abnormal amounts of idle facility expense, freight, handling costs and wasted material should be recognized as current period charges in all circumstances. Additionally, SFAS No. 151 requires that a facility's fixed production overhead be charged to inventory based on the normal capacity of the production facility. As required, we adopted SFAS No. 151 on January 1, 2006. We do not expect the adoption of SFAS No. 151 to have a material impact on our consolidated financial statements.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        The following discussion about our market risk disclosures involves forward-looking statements. Actual results could differ materially from those discussed in the forward-looking statements. We are exposed to market risk related to changes in interest rates and foreign currency exchange rates. We do not use derivative financial instruments for speculative or trading purposes.

Interest Rate Risk

        We are exposed to market risk from changes in interest rates primarily through our investing and financing activities. In addition, our ability to finance future acquisition transactions or fund working capital requirements may be impacted if we are not able to obtain appropriate financing at acceptable rates.

        Our investing strategy, to manage interest rate exposure, is to invest in short-term, highly liquid investments. Our investment policy also requires investment in approved instruments with an initial maximum allowable maturity of eighteen months and an average maturity of our portfolio that should not exceed six months, with at least $500,000 cash available at all times. Currently, our short-term investments are in money market funds with original maturities of 90 days or less. At December 31, 2005, our short-term investments approximated market value.

        At December 31, 2005, we had revolving lines of credit available to us of up to $100.0 million in the aggregate under our primary senior credit facility, against which $89.0 million was outstanding. We may repay any future borrowings under the revolving lines of credit at any time but in no event later than March 31, 2008. Borrowings under the revolving lines of credit bear interest at either (i) the London Interbank Offered Rate, or LIBOR, as defined in the credit agreement, plus applicable margins or, at our option, (ii) a floating Index Rate, as defined in the agreement, plus applicable margins. Applicable margins if we choose to use the LIBOR or the Index Rate can range from 2.75% to 3.75% or 1.50% to 2.50%, respectively, depending on the quarterly adjustments that are based on our consolidated financial performance.

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        As of December 31, 2005, the LIBOR and Index rates applicable under our primary senior credit facility were 4.37% and 7.25%, respectively. Assuming no changes in our leverage ratio, which would affect the margin of the interest rate under the senior credit agreement, the effect of interest rate fluctuations on outstanding borrowings under the revolving lines of credit as of December 31, 2005 over the next twelve months is quantified and summarized as follows:

(in thousands)	Interest Expense Increase
Interest rates increase by 1 basis point	$	890
Interest rates increase by 2 basis points	$	1,780

Foreign Currency Risk

        We face exposure to movements in foreign currency exchange rates whenever we, or any of our subsidiaries, enter into transactions with third parties that are denominated in currencies other than our, or its, functional currency. Intercompany transactions between entities that use different functional currencies also expose us to foreign currency risk. During 2005, the net impact of foreign currency changes on transactions was a loss of $0.3 million. Historically, we have not used derivative financial instruments or other financial instruments with original maturities in excess of three months to hedge such economic exposures. However, during 2005 we entered into forward exchange contracts totaling $24.9 million with monthly maturity dates of January 18, 2005 to February 15, 2006. Maturing forward exchange contracts were used to lock in U.S. dollar to British Pound Sterling (GBP) or U.S. dollar to Euro exchange rates and hedge anticipated intercompany sales. The change in value of the derivative was analyzed quarterly for changes in the spot and forward rates based on rates given by the issuing financial institution for each quarter end date. The effective portion of the gain or loss on the derivative is reported in other comprehensive income ("OCI") during the period prior to the forecasted purchase or sale. For forecasted sales on credit, the amount of income ascribed to each forecasted period was reclassified from OCI to income or expense on the date of the sale. The income or cost ascribed to each period encompassed within the periods of the recognized foreign-currency- denominated receivable or payable was reclassified from OCI to income or expense at the end of each reporting period. The changes in the derivative instrument's fair values from inception of the hedge were compared to the cumulative change in the hedged item's fair value attributable to the risk hedged. Effectiveness was based on the change in the spot rates. At December 31, 2005, we had two forward exchange contracts outstanding for $1.5 million each against the GBP. The contracts maturing during January and February 2006 effectively hedge existing receivables and therefore are considered fair value hedges and accordingly, as of December 31, 2005, the forward contracts remain effective against future exchange rate changes.

        Gross margins of products we manufacture at our European plants and sell in U.S. dollar are also affected by foreign currency exchange rate movements. Our gross margin on total net product sales was 34.8% in 2005. If the U.S. dollar had been stronger by 1%, 5% or 10%, compared to the actual rates during 2005, our gross margin on total net product sales would have been 34.9%, 35.4% and 36.0%, respectively.

        In addition, because a substantial portion of our earnings is generated by our foreign subsidiaries, whose functional currencies are other than the U.S. dollar (in which we report our consolidated financial results), our earnings could be materially impacted by movements in foreign currency exchange rates upon the translation of the earnings of such subsidiaries into the U.S. dollar. If the U.S. dollar had been stronger by 1%, 5% or 10%, compared to the actual average exchange rates used to

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translate the financial results of our foreign subsidiaries, our net revenue and net income would have been lower by approximately the following amounts:

(in thousands)		Approximate decrease in net revenue		Approximate increase in net loss
If during 2005, the U.S. dollar was stronger by:
	1%	$	1,277	$	13
	5%	$	6,385	$	63
	10%	$	12,770	$	126

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The financial statements and supplementary data, except for selected quarterly financial data which are summarized below, are listed under Item 15.(a) and have been filed as part of this report on the pages indicated.

        As discussed on page 27 of Item 6. "Selected Consolidated Financial Data" and in Note 2(p) of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we have previously restated our consolidated financial statements as of and for the year ended December 31, 2004 and the quarters therein and for the quarter ended March 31, 2005 to correct errors under GAAP relating to the recognition of revenue. We determined that certain customers of one of our diagnostics divisions were provided return or exchange rights in connection with the sale of certain products for which reliable estimates of return or exchange had not been made, as a result of which the revenue associated with those sales should not have been recognized upon shipment to the customers under GAAP. As a result, we recorded $2.6 million in net revenue reversal with a $2.1 million gross profit and corresponding net loss impact spread over each of the quarters of 2004 and the first quarter of 2005.

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        The following presents selected unaudited quarterly financial data for each of the quarters in the years ended December 31, 2005 and 2004.

	2005
	First Quarter(2)			Second Quarter(3)		Third Quarter(4)			Fourth Quarter(5)
	restated
	(in thousands, except per share data)
Net revenue	$	91,920		$	102,271	$	106,294		$	121,365
Gross profit	$	32,189		$	34,713	$	39,635		$	45,775
Net (loss) income	$	(7,802	)	$	2,503	$	(6,572	)	$	(7,338	)
Net (loss) income available to common stockholders—basic and diluted(1)	$	(7,802	)	$	2,503	$	(6,572	)	$	(7,338	)
Net (loss) income per common share—basic(1)	$	(0.37	)	$	0.11	$	(0.25	)	$	(0.27	)
Net (loss) income per common share—diluted(1)	$	(0.37	)	$	0.11	$	(0.25	)	$	(0.27	)

	2004
	First Quarter(6)			Second Quarter(7)			Third Quarter(8)			Fourth Quarter(9)
	restated			restated			restated			restated
Net revenue	$	91,108		$	89,143		$	96,677		$	97,063
Gross profit	$	37,197		$	35,328		$	37,716		$	36,763
Net loss	$	(3,383	)	$	(6,733	)	$	(2,880	)	$	(3,600	)
Net loss available to common stockholders—basic and diluted(1)	$	(4,132	)	$	(6,733	)	$	(2,880	)	$	(3,600	)
Net loss per common share—basic and diluted(1)	$	(0.22	)	$	(0.34	)	$	(0.14	)	$	(0.18	)

(1)

Net (loss) income available to common stockholders and basic and diluted net (loss) income per common share are computed as consistent with the annual per share calculations described in Notes 2(k) and 12 of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

(2)

Included in net loss in the first quarter of 2005 is a charge of $1.6 million associated with a recall of certain drugs of abuse products and an $8.4 million gain from a legal settlement in our nutritionals business.

(3)

Included in net income in the second quarter of 2005 is a charge of $2.4 million associated with a reserve for excess quantities of certain raw materials and finished goods, a charge of $3.5 million associated with our decision to cease operations at our facility in Galway, Ireland, a charge of $4.2 million related to a legal settlement with PBM, and a $15.0 million gain related to an intellectual property settlement with Quidel relating to periods prior to 2005.

(4)

Included in net loss in the third quarter of 2005 is a charge of $0.7 million associated with our decision to cease operations at our facility in Galway, Ireland.

(5)

Included in net loss in the fourth quarter of 2005 is a charge of $0.9 million principally associated with our decision to cease operations at our facility in Galway, Ireland.

(6)

Included in net loss in the first quarter of 2004 is a charge of $3.5 million in interest expense representing the write-off of deferred financing costs and prepayment fees and penalties related to the repayment of borrowings under our primary senior credit facility and certain subordinated notes with the proceeds from our $150.0 million bond offering in February 2004.

(7)

Included in net loss in the second quarter of 2004 is an additional charge of $0.3 million in interest expense representing the write-off of financing costs related to the repayment of borrowings under our primary senior credit facility with the proceeds from our $150.0 million bond offering in

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February 2004 and the establishment of a specific reserve for potential bad debt and unsaleable inventory totaling $1.5 million associated with a customer that failed to perform under the terms of our agreement and is currently subject to legal action.

(8)

Included in net loss in the third quarter of 2004 is a $1.7 million restructuring charge covering all expected severance, early retirement and outplacement services arising from a completed plan of termination at our manufacturing facility in Bedford, England.

(9)

Included in net loss in the fourth quarter of 2004 are: (i) $0.9 million in release of a pre-acquisition legal contingency reserve upon reaching and signing a settlement agreement, and (ii) $0.5 million in litigation settlement gain.

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

        Not applicable.

ITEM 9A.    CONTROLS AND PROCEDURES

Management's conclusions regarding the effectiveness of our disclosure controls and procedures

        Our management evaluated, with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this annual report on Form 10-K. Based on this evaluation, our management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective at that time. We and our management understand nonetheless that controls and procedures, no matter how well designed and operated, can provide only reasonable assurances of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating and implementing possible controls and procedures. In reaching their conclusions stated above regarding the effectiveness of our disclosure controls and procedures, our CEO and CFO concluded that such disclosure controls and procedures were effective as of such date at the "reasonable assurance" level.

Management's Annual Report on Internal Control Over Financial Reporting

        Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended. Our company's internal control over financial reporting is a process designed under the supervision of the CEO and CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

        (i)    pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

        (ii)   provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of our company are being made only in accordance with authorizations of our management and directors; and

        (iii)  provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements.

        There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal

54

controls can provide only reasonable assurances with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        Management assessed the effectiveness of our company's internal control over financial reporting as of December 31, 2005. In making this assessment, management used the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on management's assessment and those criteria, management determined that the Company maintained effective internal control over financial reporting as of December 31, 2005.

        In conducting management's evaluation of the effectiveness of our Company's internal control over financial reporting, management excluded the acquisitions of Binax, BioStar and IDT, which were completed in 2005. The contribution from these acquisitions represented approximately 3.8%, 1.6% and 0.9% of net revenues and 3.2%, 2.9% and 3.0% of total assets, respectively, as of and for the year ended December 31, 2005. Refer to Note 4 of the consolidated financial statements for further discussion of these acquisitions and other acquisitions and their impact on our consolidated financial statements.

        As indicated in its Attestation Report included below, BDO Seidman, LLP, the independent registered public accounting firm that audited the financial statements included in this report, has attested to our management's assessments regarding the effectiveness of our internal control over financial reporting as of December 31, 2005.

REPORT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of
Inverness Medical Innovations, Inc. and Subsidiaries:

        We have audited management's assessment, included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting appearing under Item 9a, that Inverness Medical Innovations, Inc. and subsidiaries maintained effective internal control over financial reporting as of December 31, 2005 based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Inverness Medical Innovations, Inc. and subsidiaries' management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management's assessment and an opinion on the effectiveness of Inverness Medical Innovations, Inc. and subsidiaries internal control over financial reporting based on our audit.

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

        A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are

55

recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

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

        As indicated in the accompanying Management's Report on Internal Control Over Financial Reporting, management's assessment of and conclusion on the effectiveness of annual internal control over financial reporting did not include the internal controls of Binax, BioStar and IDT, which are included in the 2005 consolidated financial statements of Inverness Medical Innovations, Inc. and subsidiaries and constituted approximately 3.8%, 1.6%, and 0.9% of consolidated net revenues and 3.2%, 2.9%, and 3.0% of consolidated total assets, respectively, as of and for the year ended December 31, 2005. Management did not assess the effectiveness of internal control over financial reporting at these entities because Inverness Medical Innovations, Inc. and subsidiaries acquired these entities during 2005. Refer to Note 4 to the consolidated financial statements for further discussion of these acquisitions and their impact on Inverness Medical Innovations, Inc. and subsidiaries consolidated financial statements. Our audit of internal control over financial reporting of Inverness Medical Innovations, Inc. and subsidiaries also did not include an evaluation of the internal control over financial reporting of the entities referred to above.

        In our opinion, management's assessment that Inverness Medical Innovations, Inc. and subsidiaries maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, is based on the criteria established in Internal Control—Integrated Framework issued by COSO. Also, in our opinion, Inverness Medical Innovations, Inc. and subsidiaries maintained effective internal control over financial reporting as of December 31, 2005, based on the criteria established in Internal Control—Integrated Framework issued by the COSO.

        We have also audited, in accordance with the standards of the Public Accounting Oversight Board (United States) the consolidated financial statements of Inverness Medical Innovations, Inc. and subsidiaries and our report therein dated March 14, 2006 expressed an unqualified opinion.

/s/ BDO Seidman, LLP

Boston, MA
March 14, 2006

Changes in internal control over financial reporting

        There was no change in our internal control over financial reporting that occurred during our fourth fiscal quarter of 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.    OTHER INFORMATION

        Not applicable.

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PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        The information regarding our directors and executive officers included in our definitive Proxy Statement to be filed pursuant to Regulation 14A in connection with our 2006 Annual Meeting of Shareholders (the Proxy Statement) is incorporated herein by reference.

ITEM 11.    EXECUTIVE COMPENSATION

        The information regarding executive compensation included in the Proxy Statement is incorporated herein by reference.

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

        The information regarding security ownership of certain beneficial owners and management and related stockholder matters included in the Proxy Statement is incorporated herein by reference.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        The information regarding certain relationships and related transactions included in the Proxy Statement is incorporated herein by reference.

ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES

        The information regarding principal accounting fees and services included in the Proxy Statement is incorporated herein by reference.

PART IV

ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES

        (a)   1. Financial Statements.

        The financial statements listed below have been filed as part of this report on the pages indicated:

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Statements of Operations for the Years Ended December 31, 2005, 2004 (restated) and 2003 (restated)	F-3
Consolidated Balance Sheets as of December 31, 2005 and 2004 (restated)	F-4
Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss) for the Years Ended December 31, 2005, 2004 (restated) and 2003 (restated)	F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2005, 2004 (restated) and 2003—(restated)	F-8
Notes to Consolidated Financial Statements	F-12

        2.     Financial Statement Schedules.

        All schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission have been omitted because they are inapplicable or the required information is shown in the consolidated financial statements, or the notes, thereto, included here in.

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        3.     Exhibits.

2.1	Sale Agreement, dated December 20, 2001, between Inverness Medical Innovations, Inc. (the "Company") and Unilever U.K. Holdings Limited (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K dated December 20, 2001)
2.2	Stock Purchase Agreement, dated as of July 30, 2003, by and among Inverness Medical Innovations, Inc., Applied Biotech, Inc. and Erie Scientific Company (incorporated by reference to Exhibit 2.1 to the Company's Current Report of Form 8-K dated August 27, 2003)
2.3	Asset Purchase Agreement, as of September 30, 2003, by and among Abbott Laboratories and Inverness Medical Innovations, Inc. and Inverness Medical Switzerland GmbH, Morpheus Acquisition Corp. and Morpheus Acquisition LLC. (incorporated by reference to Exhibit 2.1 to the Company's Current Report of Form 8-K dated September 30, 2003)
2.4	Agreement and Plan of Merger, dated February 8, 2005, by and among Inverness Medical Innovations, Inc., a Delaware corporation to be formed as a wholly-owned subsidiary of Inverness Medical Innovations, Inc., Binax, Inc., Roger N. Piasio and Myron C. Hamer, and Roger N. Piasio, as stockholder representative (incorporated by reference to Exhibit 99.1 to the Company's Current Report of Form 8-K dated February 9, 2005)
2.5	Agreement and Plan of Merger, dated February 15, 2005, by and among Inverness Medical Innovations, Inc., a Delaware corporation to be formed as a wholly-owned subsidiary of Inverness Medical Innovations, Inc., and Ischemia Technologies, Inc. (incorporated by reference to Exhibit 99.1 to the Company's current report on form 8-K dated February 15, 2005)
2.6	Asset Purchase Agreement, dated as of May 28, 2005 by and among Abbott Laboratories, Abbott Cardiovascular, Inc., Abbott Japan, Co., Ltd., Inverness Medical Innovations, Inc., Inverness Medical Switzerland GmbH and Inverness Medical Japan, Ltd. (incorporated by reference to Exhibit 2.1 to the Company's Current Report of Form 8-K dated June 30, 2005)
*2.7	Stock Purchase Agreement, dated September 16, 2005, by and between Inverness Medical Innovations, Inc., Thermo Electron Corporation and Thermo Bioanalysis Corporation
2.8	Acquisition Agreement, dated February 24, 2006, by and among Inverness Medical Innovations, Inc., ACON Laboratories, Inc., AZURE Institute, Inc., LBI, Inc., Oakville Hong Kong Co., Ltd., ACON Biotech (Hangzhou) Co., Ltd. And Karsson Overseas Ltd. (incorporated by reference to Exhibit 99.1 to the Company's Current Report of Form 8-K dated February 24, 2006)
*2.9	Share Purchase Agreement, dated February 28, 2006, by and between Inverness Medical Switzerland Gmbh, Inverness Medical Innovations, Inc., CLONDIAG Beteiligungs-Gesellschaft GmbH, Eugen Ermantraut, Dr. Stefan Wölfl, Dr. Torsten Schulz, Prof. Dr. Albert Hinnen, Karl Fusseis, Prof. Dr. Michael Köhler and Thomas Ellinger
3.1	Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2001)
3.2	Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock of the Company (incorporated by reference to Exhibit 99.2 to the Company's Current Report on Form 8-K dated December 20, 2001)
3.3	Amended and Restated By-laws of the Company (incorporated by reference to Exhibit 3.3 to the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2001)

58

4.1	Indenture, dated as of February 10, 2004, between Inverness Medical Innovations, Inc., the Guarantors named therein and U.S. Bank Trust National Association (incorporated by reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2004)
4.2	First Supplemental Indenture, dated as of June 15, 2004, among Inverness Medical Innovations, Inc., the Guarantors, Advantage Diagnostics Corporation and U.S. Bank Trust National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2004)
4.3	Second Supplemental Indenture, dated as of October 20, 2004, among Inverness Medical Innovations, Inc., the Guarantors, IVC Industries, Inc. and U.S. Bank Trust National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2004)
4.4	Third Supplement Indenture, dated as of March 16, 2005, among Inverness Medical Innovations, Inc., the Guarantors, Ischemia Technologies, Inc. and U.S. Bank Trust National Association as Trustee (incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the period ended March 31, 2005)
4.5	Fourth Supplement Indenture, dated as of March 31, 2005, among Inverness Medical Innovations, Inc., the Guarantors, Binax, Inc. and U.S. Bank Trust National Association, as Trustee (incorporated by reference to Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the period ended March 31, 2005)
4.6	Fifth Supplemental Indenture, dated as of September 30, 2005, among Inverness Medical Innovations, Inc., the Guarantors, Thermo BioStar Inc. and U.S. Bank Trust National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2005)
10.1	Post-Closing Covenants Agreement, dated as of November 21, 2001, by and among Johnson & Johnson, IMT, the Company, certain subsidiaries of IMT and certain subsidiaries of the Company (incorporated by reference to Exhibit 10.1 to the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2001)
10.2	Supply of Goods Agreement, dated July 28, 1998, between Schleicher & Schuell GmbH and Unipath Limited (incorporated by reference to Exhibit 10.3 to the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2001)
10.3	Inverness Medical Innovations, Inc. 2001 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company's Registration Statement on Form S-4, as amended (File No. 333-67392))
10.4	Inverness Medical Innovations, Inc. 2001 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.2 to the Company's Registration Statement on Form S-4, as amended (File No. 333-67392))
10.5	Inverness Medical Innovations, Inc. 2001 Employee Stock Purchase Plan—First Amendment (incorporated by reference to Exhibit 10.9 to the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2001)
*10.6	Inverness Medical Innovations, Inc. 2001 Employee Stock Purchase Plan—Second Amendment
10.7	Restricted Stock Agreement under the Inverness Medical Innovations, Inc. 2001 Stock Option and Incentive Plan, dated as of August 15, 2001, between the Company and Ron Zwanziger (incorporated by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2001)
10.8	Promissory Note, dated August 16, 2001, from Ron Zwanziger to the Company (incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2001)

59

10.9	Pledge Agreement, dated as of August 16, 2001, between Ron Zwanziger and the Company (incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2001)
10.10	Non-Qualified Stock Option Agreement under the Inverness Medical Innovations, Inc. 2001 Stock Option and Incentive Plan, dated as of August 15, 2001, between the Company and Jerry McAleer (incorporated by reference to Exhibit 10.3 to the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2001)
10.11	Promissory Note, dated December 4, 2001, from Jerry McAleer to the Company (incorporated by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2001)
10.12	Pledge Agreement, dated as of December 4, 2001, between Jerry McAleer and the Company (incorporated by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2001)
10.13	Non-Qualified Stock Option Agreement under the Inverness Medical Innovations, Inc. 2001 Stock Option and Incentive Plan, dated as of August 15, 2001, between the Company and David Scott (incorporated by reference to Exhibit 10.17 to the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2001)
10.14	Promissory Note, dated December 4, 2001, from David Scott to the Company (incorporated by reference to Exhibit 10.18 to the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2001)
10.15	Pledge Agreement, dated as of December 4, 2001, between David Scott and the Company (incorporated by reference to Exhibit 10.19 to the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2001)
10.16	Lease between WE 10 Southgate LLC and Binax, Inc. dated as of August 26, 2004 (incorporated by reference to Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2005)
+10.17	Research and Development Agreement, dated February 25, 2005, among ITI Scotland Limited and Inverness Medical Innovations, Inc., Stirling Medical Innovations Limited and Inverness Medical Switzerland GmbH (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the period ended March 31, 2005)
*10.18	Form of Stock Purchase Agreement, dated February 3, 2006, between the Company and the Investor named therein
10.19	Form of Warrant for the Purchase of Shares of Common Stock of the Company issued pursuant to the Note and Warrant Purchase Agreement dated as of December 14, 2001 (incorporated by reference to Exhibit 99.5 to the Company's Current Report on Form 8-K dated December 20, 2001)
10.20	Warrant for the Purchase of Shares of Common Stock of the Company, dated as of December 20, 2001, issued to Zwanziger Family Ventures, LLC (incorporated by reference to Exhibit 10.28 to the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2001)
10.21	Agreement, dated December 1, 1986, between Bernard Levere, Zelda Levere, Pioneer Pharmaceuticals, Inc. and Essex Chemical Corp. and Unconditional Guarantee by Essex Chemical Corp. (incorporated by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2001)
10.22	Option to Assume and Extend Lease, dated as of February __, 1995, between Bernard Levere, Zelda Levere and International Vitamin Corporation (incorporated by reference to Exhibit 10.34 to the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2001)

60

*10.23	Warrant for the Purchase of Shares of Common Stock of the Company, dated as of March 31, 2005, issued to Roger Piasio
10.24	Licensing Agreement, dated March 14, 1988, between Unilever Plc and Behringwerke AG (incorporated by reference to Exhibit 10.37 to the Company's Annual Report on Form 10-K, as amended, for the period ended December 31, 2001)
10.25	Supplemental Agreement, dated October 16, 1994, between Unilever Plc, Unilever NV and Behringwerke AG (incorporated by reference to Exhibit 10.38 to the Company's Annual Report on Form 10-K, as amended, for the period ended December 31, 2001)
10.26	Supply of Goods Agreement, dated December 19, 1994, between AFC Worldwide and Unipath Limited (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q, as amended, for the period ended March 30, 2002)
10.27	Amendment to Supply of Goods Agreement, dated March 14, 2002, between Schleicher & Schuell GmbH and Unipath Limited (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q, as amended, for the period ended March 30, 2002)
10.28	Amendment No. 1 to Inverness Medical Innovations, Inc. 2001 Stock Option and Incentive Plan (incorporated by reference to Exhibit 4.4 to the Company's Registration Statement on Form S-8 (File No. 333-90530))
10.29	Subordinated Note and Warrant Purchase Agreement dated as of September 20, 2002 between the Company and the investors named therein ("Note and Warrant Purchase Agreement") (incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K dated September 20, 2002)
10.30	Form of Subordinated Promissory Note issued pursuant to the Note and Warrant Purchase Agreement (incorporated by reference to Exhibit 99.2 to the Company's Current Report on Form 8-K dated September 20, 2002)
10.31	Form of Warrant Agreement issued pursuant to the Note and Warrant Purchase Agreement (incorporated by reference to Exhibit 99.3 to the Company's Current Report on Form 8-K dated September 20, 2002)
10.32	Third Amended and Restated Credit Agreement, dated as of June 30, 2005 by and among Wampole Laboratories, LLC and Inverness Parties Signatory thereto, as Credit Parties, the Lenders Signatory thereto from time to time, as Lenders, General Electric Capital Corporation, as administrative agent, Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as documentation agent, a co-syndication agent and a co-lead arranger, UBS Securities LLC, as a co-syndication agent and GECC Capital Markets Group, Inc., as a co-lead arranger (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, event date June 30, 2005, filed on July 7, 2005)
10.33	First Amendment and Consent to Third Amended and Restated Credit Agreement, dated as of September 29, 2005, to the Third Amended and Restated Credit Agreement, dated as of June 30, 2005, by and among General Electric Capital Corporation, as Agent, Inverness Medical Innovations, Inc., Wampole Laboratories, LLC and Inverness Medical (UK) Holdings Limited, as borrowers, the other Credit Parties signatory thereto, Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as documentation agent, a co-syndication agent and lender, UBS Securities LLC, as a co-syndication agent, and the lenders signatory thereto from time to time (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, event date September 29, 2005, filed on October 4, 2005)

61

10.34	Second Amendment to Third Amended and Restated Credit Agreement, dated as of November 8, 2005, to the Third Amended and Restated Credit Agreement, dated as of June 30, 2005, by and among General Electric Capital Corporation, as Agent, Inverness Medical Innovations, Inc., Wampole Laboratories, LLC and Inverness Medical (UK) Holdings Limited, as borrowers, the other Credit Parties signatory thereto, Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as documentation agent, a co-syndication agent and lender, UBS Securities LLC, as a co-syndication agent, and the lenders signatory thereto from time to time (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q, as amended, for the period ended September 30, 2005)
*10.35	Third Amendment to Third Amended and Restated Credit Agreement, dated as of November 22, 2005, to the Third Amended and Restated Credit Agreement, dated as of June 30, 2005, by and among General Electric Capital Corporation, as Agent, Inverness Medical Innovations, Inc., Wampole Laboratories, LLC and Inverness Medical (UK) Holdings Limited, as borrowers, the other Credit Parties signatory thereto, Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as documentation agent, a co-syndication agent and lender, UBS Securities LLC, as co-syndication agent, and the lenders signatory thereto from time to time
*10.36	Fourth Amendment and Consent to Third Amended and Restated Credit Agreement, dated as of February 27, 2006, to the Third Amended and Restated Credit Agreement, dated as of June 30, 2005, by and among General Electric Capital Corporation, as Agent, Inverness Medical Innovations, Inc., Wampole Laboratories, LLC and Inverness Medical (UK) Holdings Limited, as borrowers, the other Credit Parties signatory thereto, Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as documentation agent, a co-syndication agent and lender, UBS Securities LLC, as co-syndication agent, and the lenders signatory thereto from time to time
*10.37	Commercial lease, dated June 25, 2001, by and between Thermo BioStar, Inc. and The Park at CTC, LLC
*10.38	First Amendment to Lease, dated November __, 2002, between Thermo BioStar, Inc. and The Park at CTC, LLC.
10.39	Amendment No. 2 to Inverness Medical Innovations, Inc. 2001 Stock Option and Incentive Plan (incorporated by reference to Exhibit 4.6 to Company's Registration Statement on Form S-8, as amended (File No. 333-106996))
10.40	Amendment No. 3 to Inverness Medical Innovations, Inc. 2001 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.3 to Company's Quarterly Report on Form 10-Q, for the period ended June 30, 2005)
10.41	Rules of Inverness Medical Innovations, Inc. Inland Revenue Approved Option Plan (adopted as subplan to Inverness Medical Innovations, Inc. 2001 Stock Option and Incentive Plan) (incorporated by reference to Exhibit 10.2 to Company's Quarterly Report on Form 10-Q for the period ended June 30, 2005)
10.42	Form of Non-Qualified Stock Option Agreement for Non-Employee Directors under the Inverness Medical Innovations, Inc. 2001 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.4 to Company's Quarterly Report on Form 10-Q for the period ended June 30, 2005)
10.43	Form of Non-Qualified Stock Option Agreement for Senior Executives under the Inverness Medical Innovations, Inc. 2001 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.5 to Company's Quarterly Report on Form 10-Q for the period ended June 30, 2005)

62

10.44	Form of Incentive Stock Option Agreement for Senior Executives under the Inverness Medical Innovations, Inc. 2001 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.6 to Company's Quarterly Report on Form 10-Q for the period ended June 30, 2005)
+10.45	Manufacturing and Support Services Agreement, dated June 30, 2005, by and among Abbott Japan Co., Ltd., Abbott Laboratories, Inverness Medical Innovations, Inc., Inverness Medical Switzerland GmbH and Inverness Medical Japan, Ltd. (incorporated by reference to Exhibit 10.8 to Company's Quarterly Report on Form 10-Q for the period ended June 30, 2005)
10.46	Commercial Lease, dated August 1, 1998, by and between The Chang Family Trust and Applied Biotech, Inc. (incorporated by reference to Exhibit 10.43 to the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2004)
10.47	Amendment to Commercial Lease, dated April __, 2003, by and between The Chang Family Trust and Applied Biotech, Inc. (incorporated by reference to Exhibit 10.44 to the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2004)
+10.48	Manufacturing, Packaging and Supply Agreement, dated as of June 6, 2003, among Inverness Medical Innovations, Inc., Inverness Medical Switzerland GmbH, Unipath, Ltd. and Warner-Lambert Company LLC (incorporated by reference to Exhibit 10.45 to Amendment No. 2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004)
10.49	First Amendment to Subordinated Promissory Notes, dated as of November 14, 2003 (incorporated by reference to Exhibit 10.46 to the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2004)
+10.50	Reagent Supply Agreement, dated June 30, 2005, by and between Abbott Laboratories, Inverness Medical Innovations, Inc. and Inverness Medical Japan, Ltd (incorporated by reference to Exhibit 10.9 to Company's Quarterly Report on Form 10-Q for the period ended June 30, 2005).
14.50	Inverness Medical Innovations Business Conduct Guidelines (incorporated by reference to Exhibit 14.1 to the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2004)
*21.1	List of Subsidiaries of the Company as of March 15, 2006
*23.1	Consent of BDO Seidman, LLP
*31.1	Certification by Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
*31.2	Certification by Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
*32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act

*

Filed herewith.

+

We have omitted portions of this exhibit which have been granted confidential treatment.

63

SIGNATURES

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

	INVERNESS MEDICAL INNOVATIONS, INC.
Date: March 15, 2006	By:	/s/  RON ZWANZIGER Ron Zwanziger Chairman, Chief Executive Officer and President

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

Signature	Title	Date
/s/  RON ZWANZIGER Ron Zwanziger	Chief Executive Officer, President and Director (Principal Executive Officer)	March 15, 2006
/s/  CHRISTOPHER J. LINDOP Christopher J. Lindop	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	March 15, 2006
/s/  CAROL R. GOLDBERG Carol R. Goldberg	Director	March 15, 2006
/s/  ROBERT P. KHEDERIAN Robert P. Khederian	Director	March 15, 2006
/s/  JOHN F. LEVY John F. Levy	Director	March 15, 2006
/s/  JERRY MCALEER Jerry McAleer	Director	March 15, 2006
/s/  JOHN A. QUELCH John A. Quelch	Director	March 15, 2006
/s/  DAVID SCOTT David Scott	Director	March 15, 2006
/s/  PETER TOWNSEND Peter Townsend	Director	March 15, 2006
/s/  ALFRED M. ZEIEN Alfred M. Zeien	Director	March 15, 2006

64

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Statements of Operations for the Years Ended December 31, 2005, 2004 (restated) and 2003 (restated)	F-3
Consolidated Balance Sheets as of December 31, 2005 and 2004 (restated)	F-4
Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss) for the Years Ended December 31, 2005, 2004 (restated) and 2003 (restated)	F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2005, 2004 (restated) and 2003 (restated)	F-8
Notes to Consolidated Financial Statements	F-12

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of
Inverness Medical Innovations, Inc. and Subsidiaries:

        We have audited the accompanying consolidated balance sheets of Inverness Medical Innovations, Inc. and Subsidiaries (the "Company") as of December 31, 2005 and 2004, and the related consolidated statements of operations, stockholders' equity and comprehensive income (loss), and cash flows for each of the three years in the period ended December 31, 2005. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Inverness Medical Innovations, Inc. and Subsidiaries at December 31, 2005 and 2004, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

        As discussed in Note 2(p) of the consolidated financial statements, the Company has previously restated its financial statements as of and for the years ended December 31, 2004 and 2003 to account properly for previously unidentified return or exchange rights in connection with the sale of certain products for which reliable estimates of return or exchange had not been made, as a result of which the revenue associated with those sales should not have been recognized upon shipment.

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company's internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Our report dated March 14, 2006, expressed an unqualified opinion on management's assessment on the effectiveness of internal control over financial reporting and an unqualified opinion on the effectiveness of internal control over financial reporting.

/s/ BDO Seidman, LLP

Boston, Massachusetts
March 14, 2006

F-2

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

			2005			2004			2003
						(restated)			(restated)
Net product sales			$	406,457		$	365,432		$	285,430
License and royalty revenue				15,393			8,559			9,728
	Net revenue			421,850			373,991			295,158
Cost of sales				269,538			226,987			167,641
	Gross profit			152,312			147,004			127,517
Operating expenses:
	Research and development			30,992			31,954			24,280
	Sales and marketing			72,103			57,957			52,504
	General and administrative			59,821			52,707			35,452
	Stock-based compensation(1)			169			—			447
		Total operating expenses		163,085			142,618			112,683
	Operating (loss) income			(10,773	)		4,386			14,834
Interest expense, including amortization of discounts and write-off of deferred financing costs (Note 6)				(21,795	)		(22,114	)		(9,711	)
Other income, net				20,178			3,407			6,441
	(Loss) income before income taxes			(12,390	)		(14,321	)		11,564
Provision for income taxes				6,819			2,275			2,911
	Net (loss) income		$	(19,209	)	$	(16,596	)	$	8,653
Net (loss) income available to common stockholders—basic and diluted (Note 12)			$	(19,209	)	$	(17,345	)	$	7,695
Net (loss) income per common share—basic (Notes 2(k) and 12)			$	(0.79	)	$	(0.87	)	$	0.49
Net (loss) income per common share—diluted (Notes 2(k) and 12)			$	(0.79	)	$	(0.87	)	$	0.44
Weighted average shares—basic				24,358			19,969			15,711
Weighted average shares—diluted				24,358			19,969			17,490

(1)

Stock-based compensation expense by statement of operations classifications is as follows:

Research and development		$	—	$	—	$	87
Sales and marketing			—		—		—
General and administrative			169		—		360
	Total stock-based compensation	$	169	$	—	$	447

The accompanying notes are an integral part of these consolidated financial statements.

F-3

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

			December 31,
			2005			2004
						(restated)
ASSETS
Current assets:
	Cash and cash equivalents		$	34,270		$	16,756
	Accounts receivable, net of allowances of $9,748 and $9,359 at December 31, 2005 and 2004, respectively			70,476			61,347
	Inventories			71,209			61,234
	Deferred tax assets			844			2,819
	Prepaid expenses and other current assets			17,534			9,601
		Total current assets		194,333			151,757
Property, plant and equipment, net				72,211			66,780
Goodwill				322,210			221,155
Other intangible assets with indefinite lives				63,742			50,542
Core technology and patents, net				64,050			40,327
Other intangible assets, net				60,489			27,680
Deferred financing costs, net, and other non-current assets				13,469			9,156
Deferred tax assets				662			872
		Total assets	$	791,166		$	568,269
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Current portion of long-term debt		$	2,367		$	88
	Current portion of capital lease obligations			542			467
	Accounts payable			42,155			32,345
	Accrued expenses and other current liabilities			64,746			56,242
	Total current liabilities			109,810			89,142
Long-term liabilities:
	Long-term debt, net of current portion			258,617			189,268
	Capital lease obligations, net of current portion			978			1,401
	Deferred tax liabilities			18,881			12,596
	Other long-term liabilities			5,572			4,446
		Total long-term liabilities		284,048			207,711
Commitments and contingencies (Notes 7, 8 and 10)
Series A redeemable convertible preferred stock, $0.001 par value:
	Authorized: 2,667 shares
	Issued: 2,527 shares at December 31, 2005 and 2004
	Outstanding: none at December 31, 2005 and 2004			—			—
Stockholders' equity:
	Preferred stock, $0.001 par value
		Authorized: 2,333 shares
		Issued: none		—			—
	Common stock, $0.001 par value
		Authorized: 50,000 shares
		Issued and outstanding: 27,497 shares at December 31, 2005 and 20,711 shares at December 31, 2004		27			21
	Additional paid-in capital			515,147			359,583
	Notes receivable from stockholders			(14,691	)		(14,691	)
	Accumulated deficit			(110,227	)		(91,018	)
	Accumulated other comprehensive income			7,052			17,521
		Total stockholders' equity		397,308			271,416
		Total liabilities and stockholders' equity	$	791,166		$	568,269

The accompanying notes are an integral part of these consolidated financial statements.

F-4

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share amounts)

		Common Stock
							Notes Receivable from Stockholders									Accumulated Other Comprehensive Income
		Number of Shares	$0.001 Par Value		Additional Paid-in Capital					Deferred Compensation			Accumulated Deficit						Total Stockholders' Equity			Comprehensive Income (Loss)
BALANCE, DECEMBER 31, 2002		14,907	$	15	$	251,458	$	(14,691	)	$	(48	)	$	(81,369	)	$	6,484		$	161,849
Issuance of common stock in connection with acquisitions and purchase of intellectual property, net of issuance costs of $50		4,068		4		80,220		—			—			—			—			80,224
Exercise of common stock options and warrants and shares issued under employee stock purchase plan		435		1		4,051		—			—			—			—			4,052
Conversion of series A redeemable convertible preferred stock to common stock (Note 13(b))		230		—		3,824		—			—			(362	)		—			3,462
Dividends related to series A redeemable convertible preferred stock (Note 13(b))		—		—		—		—			—			(33	)		—			(33	)
Redemption interest and amortization of beneficial conversion feature related to series A redeemable convertible preferred stock (Note 13(b))		—		—		—		—			—			(562	)		—			(562	)
Fair value of assumed and fully-vested stock options and warrants related to acquisition of Ostex International, Inc. (Note 4(c))		—		—		1,752		—			—			—			—			1,752
Stock-based compensation related to grants of common stock options		—		—		399		—			—			—			—			399
Amortization of deferred compensation		—		—		—		—			48			—			—			48
Other (Note 14)		—		—		—		—			—			—			136			136		$	136
Pension liability adjustment (Note 8(b))		—		—		—		—			—			—			(434	)		(434	)		(434	)
Changes in cumulative translation adjustment		—		—		—		—			—			—			5,627			5,627			5,627
Net income		—		—		—		—			—			8,653			—			8,653			8,653
	Total comprehensive income																					$	13,982
BALANCE, DECEMBER 31, 2003		19,640	$	20	$	341,704	$	(14,691	)	$	—		$	(73,673	)	$	11,813		$	265,173

The accompanying notes are an integral part of these consolidated financial statements.

F-5

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)
(Continued)
(in thousands, except per share amounts)

		Common Stock
							Notes Receivable from Stockholders						Accumulated Other Comprehensive Income
		Number of Shares	$0.001 Par Value		Additional Paid-in Capital					Accumulated Deficit					Total Stockholders' Equity			Comprehensive Income (Loss)
										(restated)			(restated)		(restated)			(restated)
BALANCE, DECEMBER 31, 2003		19,640	$	20	$	341,704	$	(14,691	)	$	(73,673	)	$	11,813	$	265,173
Issuance of common stock in connection with acquisitions, net of issuance costs of $88		156		—		2,914		—			—			—		2,914
Exercise of common stock options and warrants and shares issued under employee stock purchase plan		153		—		1,998		—			—			—		1,998
Conversion of series A redeemable convertible preferred stock to common stock (Note 13(b))		416		1		6,933		—			(739	)		—		6,195
Redemption interest related to series A redeemable convertible preferred stock (Note 13(b))		—		—		—		—			(10	)		—		(10	)
Conversion of convertible subordinated promissory notes to common stock (Note 6(d))		346		—		6,034		—			—			—		6,034
Other (Note 14)		—		—		—		—			—			33		33		$	33
Pension liability adjustment (Note 8(b))		—		—		—		—			—			434		434			434
Changes in cumulative translation adjustment		—		—		—		—			—			5,241		5,241			5,241
Net loss		—		—		—		—			(16,596	)		—		(16,596	)		(16,596	)
	Total comprehensive loss																	$	(10,888	)
BALANCE, DECEMBER 31, 2004		20,711	$	21	$	359,583	$	(14,691	)	$	(91,018	)	$	17,521	$	271,416

The accompanying notes are an integral part of these consolidated financial statements.

F-6

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)
(Continued)
(in thousands, except per share amounts)

		Common Stock
							Notes Receivable from Stockholders						Accumulated Other Comprehensive Income
		Number of Shares	$0.001 Par Value		Additional Paid-in Capital					Accumulated Deficit						Total Stockholders; Equity			Comprehensive Income (Loss)
										(restated)]			(restated)			(restated)			(restated)
BALANCE, DECEMBER 31, 2004		20,711	$	21	$	359,583	$	(14,691	)	$	(91,018	)	$	17,521		$	271,416
Issuance of common stock in connection with acquisitions and equity offering, net of issuance costs of $2,481		6,391		6		150,210		—			—			—			150,216
Exercise of common stock options and warrants and shares issued under employee stock purchase plan		395		—		5,185		—			—			—			5,185
Stock-based compensation related to grants of common stock options		—		—		169		—			—			—			169
Changes in cumulative translation adjustment		—		—		—		—			—			(10,300	)		(10,300	)	$	(10,300	)
Reclassification of gain related to sale of available for sale securities		—		—		—		—			—			(169	)		(169	)		(169	)
Net loss		—		—		—		—			(19,209	)		—			(19,209	)		(19,209	)
	Total comprehensive loss																		$	(29,678	)
BALANCE, DECEMBER 31, 2005		27,497	$	27	$	515,147	$	(14,691	)	$	(110,227	)	$	7,052		$	397,308

The accompanying notes are an integral part of these consolidated financial statements.

F-7

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

			2005			2004			2003
						(restated)			(restated)
Cash Flows from Operating Activities:
Net (loss) income			$	(19,209	)	$	(16,596	)	$	8,653
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
	Interest expense related to amortization of non-cash original issue discount, non-cash beneficial conversion feature and deferred financing costs			2,345			4,929			1,565
	Non-cash loss (income) related to currency hedge and interest rate swap agreements			217			(695	)		(528	)
	Non-cash stock-based compensation expense			169			—			447
	Non-cash value on settlement of litigation			(2,593	)		(495	)		—
	Impairment of long-lived assets			1,740			—			—
	Loss on sale of fixed assets			263			—			—
	Depreciation and amortization			27,756			23,500			16,435
	Deferred income taxes			5,969			2,232			812
	Other non-cash items			141			(36	)		—
	Changes in assets and liabilities, net of acquisitions:
		Accounts receivable, net		10,404			(4,095	)		(9,592	)
		Inventories		(4,047	)		(11,073	)		(2,584	)
		Prepaid expenses and other current assets		(7,598	)		2,116			(4,102	)
		Accounts payable		6,201			(6,897	)		6,715
		Accrued expenses and other current liabilities		4,496			15,049			(8,020	)
		Other non-current liabilities		339			356			—
	Net cash provided by operating activities			26,593			8,295			9,801
Cash Flows from Investing Activities:
Purchases of property, plant and equipment				(20,233	)		(20,389	)		(11,135	)
Proceeds from sale of property, plant and equipment				241			385			152
Cash paid for purchase of assets from Abbott Laboratories				—			(1,634	)		(55,947	)
Cash paid for purchase of Applied Biotech, Inc., net of cash acquired				—			(530	)		(14,042	)
Cash paid for purchase of Ostex International, Inc., net of cash acquired				(141	)		(1,415	)		(1,903	)
Cash paid for purchase of the Wampole Division of MedPointe Inc.				—			—			(1,460	)
Cash paid for purchase of IVC Industries, Inc., net of cash acquired				(63	)		(256	)		(535	)
Cash paid for purchase of Unipath business, net of cash acquired				—			(50	)		(649	)
Cash paid for purchase of Advanced Clinical Systems Pty Ltd				(4,971	)		—			—
Cash paid for purchase of Ischemia Technologies, Inc., net of cash acquired				(4,096	)		—			—
Cash paid for purchase of Binax, Inc., net of cash acquired				(7,972	)		—			—
Cash paid for purchase of the Determine business				(58,102	)		—			—
Cash paid for purchase of Thermo BioStar, Inc.				(53,607	)		—			—
Cash paid for purchase of Innogenetics Diagnostica Y Terapeutica, S.A.U, net of cash acquired				(20,030	)		—			—
Cash paid for purchase of other businesses and intellectual property				—			(8,524	)		(4,007	)
(Increase) decrease in other assets				(1,787	)		(1,889	)		396
	Net cash used in investing activities			(170,761	)		(34,302	)		(89,130	)
Cash Flows from Financing Activities:
Cash paid for financing costs				(2,873	)		(5,671	)		(4,533	)
Proceeds from issuance of common stock, net of issuance costs				97,440			1,905			4,003
Net (repayment) proceeds under revolving line of credit				69,442			(30,830	)		19,331
Proceeds from issuance of senior subordinated notes				—			150,000			—
Proceeds from borrowings under notes payable				269			—			57,621
Repayments of notes payable				—			(97,830	)		(5,785	)
Principal payments of capital lease obligations				(501	)		(477	)		(651	)
	Net cash provided by financing activities			163,777			17,097			69,986
Foreign exchange effect on cash and cash equivalents				(2,095	)		1,044			3,297
	Net increase (decrease) in cash and cash equivalents			17,514			(7,866	)		(6,046	)
	Cash and cash equivalents, beginning of year			16,756			24,622			30,668
	Cash and cash equivalents, end of year		$	34,270		$	16,756		$	24,622

The accompanying notes are an integral part of these consolidated financial statements.

F-8

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in thousands)

				2005			2004		2003
							(restated)		(restated)
Supplemental Disclosure of Cash Flow Information:
	Interest paid			$	19,268		$	13,535	$	9,091
	Taxes paid			$	4,106		$	3,067	$	1,447
Supplemental Disclosure of Non-cash Activities:
	On September 30, 2005, we acquired Thermo BioStar, Inc. (Note 4 (a))—
		Accounts receivable		$	5,247		$	—	$	—
		Inventories			2,046			—		—
		Property, plant and equipment			1,510			—		—
		Other assets			795			—		—
		Intangible assets			49,083			—		—
		Accrued exit costs			(83	)		—		—
		Accounts payable and accrued expenses			(4,991	)		—		—
		Cash paid for purchase of Thermo BioStar, Inc.			(53,607	)		—		—
				$	—		$	—	$	—
On September 30, 2005, we acquired Innogenetics Diagnostica Y Terapeutica, S.A.U. (Note 4 (a))—
		Accounts receivable		$	10,913		$	—	$	—
		Inventories			520			—		—
		Property, plant and equipment			771			—		—
		Other assets			188			—		—
		Intangible assets			12,062			—		—
		Accrued acquisition costs			(210	)		—		—
		Accounts payable and accrued expenses			(3,164	)		—		—
		Deferred tax liability			(1,050	)		—		—
		Cash paid for purchase of Innogenetics Diagnostica Y Terapeutica, S.A.U., net of acquired cash			(20,030	)		—		—
				$	—		$	—	$	—
On June 30, 2005, we acquired the Determine business from Abbott Laboratories (Note 4 (a))—
		Inventories		$	3,412		$	—	$	—
		Property, plant and equipment			1,500			—		—
		Intangible assets			56,913			—		—
		Accrued expenses			(3,723	)		—		—
		Cash paid for purchase of the Determine business			(58,102	)		—		—
				$	—		$	—	$	—
On March 31, 2005, we acquired Binax, Inc. (Note 4 (a))—
		Accounts receivable		$	5,264		$	—	$	—
		Inventories			3,086			—		—
		Property, plant and equipment			2,421			—		—
		Other assets			688			—		—
		Intangible assets			35,596			—		—
		Accounts payable and accrued expenses			(2,076	)		—		—
		Deferred tax liability, net			(1,794	)
		Cash paid for purchase of Binax, Inc., net of cash acquired			(7,972	)		—		—
			Fair value of common stock issued	$	35,213		$	—	$	—

The accompanying notes are an integral part of these consolidated financial statements.

F-9

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in thousands)

			2005			2004			2003
						(restated)			(restated)
On March 16, 2005, we acquired Ischemia Technologies, Inc. (Note 4 (a))—
	Accounts receivable		$	58		$	—		$	—
	Inventories			40			—			—
	Property, plant and equipment			288			—			—
	Intangible assets			26,932			—			—
	Other assets			99			—			—
	Assumed liabilities			(50	)		—			—
	Accrued acquisition costs			(144	)		—			—
	Accounts payable and accrued expenses			(377	)		—			—
	Cash paid for purchase of Ischemia Technologies, Inc., net of cash acquired			(4,096	)		—			—
		Fair value of common stock issued	$	22,750		$	—		$	—
On September 30, 2003, we acquired certain assets from Abbott Laboratories (Note 4 (c))—
	Inventories		$	—		$	—		$	380
	Property, plant and equipment			—			—			1,310
	Intangible assets			—			94			93,297
	Accrued acquisition costs			—			1,540			(1,540	)
	Cash paid for purchase of certain assets from Abbott Laboratories			—			(1,634	)		(55,947	)
		Fair value of common stock issued	$	—		$	—		$	37,500
On August 27, 2003, we acquired Applied Biotech, Inc. (Note 4 (c))—
	Accounts receivable		$	—		$	—		$	6,368
	Inventories			—			—			6,056
	Property, plant and equipment			—			(1,051	)		5,352
	Intangible assets			—			1,143			15,615
	Other assets			—			—			117
	Accounts payable and accrued expenses			—			(92	)		(4,669	)
	Accrued acquisition costs			—			530			(530	)
	Cash paid for purchase of Applied Biotech, Inc., net of cash acquired			—			(530	)		(14,042	)
		Fair value of common stock issued	$	—		$	—		$	14,267
On June 30, 2003, we acquired Ostex International, Inc. (Note 4(c))—
	Accounts receivable		$	—		$	25		$	1,264
	Inventories			—			(39	)		506
	Property, plant and equipment			—			(25	)		629
	Intangible assets			—			352			31,468
	Other assets			—			(13	)		177
	Accounts payable and accrued expenses			—			(62	)		(1,891	)
	Long-term debt			—			—			(2,875	)
	Accrued acquisition costs			141			1,177			(2,086	)
	Cash paid for purchase of Ostex International, Inc., net of cash acquired			(141	)		(1,415	)		(1,903	)
			$	—		$	—		$	25,289
	Fair value of common stock issued		$	—		$	—		$	23,537
	Fair value of assumed and issued fully-vested stock options and warrants			—			—			1,752
		Total fair value of equity instruments issued	$	—		$	—		$	25,289
On September 20, 2002, we acquired the Wampole Division from MedPointe Inc.—
	Accounts receivable		$	—		$	—		$	(451	)
	Inventories			—			—			(75	)
	Other current assets			—			—			1
	Property and equipment			—			—			156
	Intangible assets			—			—			1,138
	Accounts payable and accrued expenses			—			—			(201	)
	Accrued acquisition costs			—			—			892
	Cash paid for purchase of the Wampole Division from MedPointe Inc.			—			—			(1,460	)
			$	—		$	—		$	—

The accompanying notes are an integral part of these consolidated financial statements.

F-10

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in thousands)

			2005			2004			2003
						(restated)			(restated)
On March 19, 2002, we acquired IVC Industries, Inc.—
	Accounts receivable		$	—		$	—		$	—
	Inventories			—			—			—
	Property and equipment			—			—			—
	Other assets			—			—			—
	Accounts payable and accrued expenses			—			—			—
	Other accrued acquisition costs			63			256			535
	Long-term debt			—			—			—
	Cash paid for purchase of IVC Industries, Inc., net of cash acquired			(63	)		(256	)		(535	)
			$	—		$	—		$	—
During 2005, 2004 and 2003, we acquired other businesses and intellectual property—
	Accounts receivable		$	—		$	471		$	116
	Inventories			—			914			—
	Property, plant and equipment			—			173			616
	Intangible assets			4,971			12,904			10,445
	Other assets			—			183			39
	Accounts payable and accrued expenses			—			(2,673	)		(356	)
	Net deferred tax liabilities			—			(446	)		(1,884	)
	Cash paid for purchase of other businesses and intellectual property			(4,971	)		(8,524	)		(4,007	)
		Fair value of common stock issued	$	—		$	3,002		$	4,969
Dividends, interest and amortization of beneficial conversion feature related to preferred stock (Notes 12 and 13(b))			$	—		$	749		$	958
Conversion of preferred stock to common stock (Note 13(b))			$	—		$	6,934		$	3,824
Conversion of subordinated notes to common stock (Note 6(d))			$	—		$	6,034		$	—

The accompanying notes are an integral part of these consolidated financial statements.

F-11

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Description of Business and Basis of Presentation

        Inverness Medical Innovations, Inc. and subsidiaries develop, manufacture and market in vitro diagnostic products for the over-the-counter pregnancy and fertility/ovulation test market and the professional rapid diagnostic test market worldwide. In addition, we manufacture a variety of vitamins and nutritional supplements that we market under our brands and those of private label retailers in the consumer market primarily in the United States.

        Our business is organized into three primary operating segments: (i) consumer diagnostic products, (ii) vitamins and nutritional supplements, and (iii) professional diagnostic products. The consumer diagnostic products segment includes our over-the-counter pregnancy and fertility/ovulation tests. The vitamins and nutritional supplements segment includes branded and private label vitamins and nutritional supplements that are sold over-the-counter. The professional diagnostic products segment includes an array of innovative rapid diagnostic test products and other in vitro diagnostic tests marketed to medical professionals and laboratories for detection of infectious diseases, drugs of abuse and pregnancy.

        Our company was incorporated on May 11, 2001 as a wholly-owned subsidiary of Inverness Medical Technology, Inc. ("IMT"). On November 21, 2001, pursuant to an Agreement and Plan of Split-Off and Merger dated May 23, 2001 (the "Merger Agreement"), Johnson & Johnson acquired IMT in a merger transaction and, simultaneously, our company, a then subsidiary of IMT, was split-off from IMT as a separate publicly traded company. Pursuant to the terms of the Merger Agreement and related agreements, immediately prior to the consummation of the transaction, IMT restructured its operations so that all of its non-diabetes businesses (women's health, nutritional supplements and professional diagnostics) were held by our company and our subsidiaries. At the closing of the transaction, all of the shares of our common stock held by IMT were split-off from IMT.

        Since the consummation of the split-off and merger described above, we have completed a number of acquisitions. During 2005, we acquired Thermo BioStar, Inc. ("BioStar") on September 30, 2005, Innogenetics Diagnostica Y Terapeutica, S.A.U. ("IDT") on September 30, 2005, the Determine/DainaScreen assets of Abbott Laboratories' rapid diagnostic business (the "Determine business") on June 30, 2005, Binax, Inc. ("Binax") on March 31, 2005, Ischemia Technologies, Inc. ("Ischemia") on March 16, 2005 and the consumer pregnancy test business of Advanced Clinical Systems Pty Ltd ("ACS") on January 24, 2005 (Note 4 (a)). BioStar develops and manufactures high-performance, rapid diagnostic tests, including tests for the detection of infectious diseases. IDT is a Spanish distributor of diagnostic products. The Determine business produces diagnostic tests that are designed to provide rapid qualitative results for detecting several diseases, including hepatitis, HIV 1/2 and syphilis. Binax is a developer, manufacturer and distributor of rapid diagnostic products for infectious disease testing, primarily related to the respiratory system. Ischemia was a privately held, venture-backed company that developed, manufactured and marketed the only FDA-cleared in vitro diagnostic test targeted on cardiac ischemia. In acquiring ACS, we obtained the rights to the Crystal Clear brand, the leading consumer pregnancy test in Australia, and a leading position in New Zealand.

        During 2004, we acquired Advantage Diagnostics Corporation ("ADC") on June 16, 2004 and Viva Diagnostika ("Viva") on June 2, 2004 (Note 4(b)). ADC was a closely held lateral flow diagnostic company that specializes in rapid test development and component manufacturing. Viva was a closely held distributor of professional diagnostic products to the German marketplace.

        During 2003, we acquired the rapid diagnostics business from Abbott Laboratories ("Abbott") on September 30, 2003 (the "Abbott business"), Applied Biotech, Inc. and subsidiary ("ABI") from

F-12

Apogent Technologies, Inc. on August 27, 2003 and Ostex International, Inc. ("Ostex") on June 30, 2003 (Note 4 (c)). The business acquired from Abbott in 2003 relates to consumer diagnostic pregnancy tests and various professional rapid diagnostic product lines, as well as certain transferred and licensed intellectual property related to these products. ABI is a developer, manufacturer and distributor of consumer diagnostic and professional diagnostic products in the areas of women's health, infectious disease and drugs of abuse testing. Ostex develops and commercializes osteoporosis diagnostics products and holds intellectual property rights in the field of osteoporosis diagnostics. In addition, we acquired a small research and development facility, Scandinavian Micro Biodevices ApS ("SMB"), on November 18, 2003.

        Acquisitions that occurred during 2002 and 2001 include our acquisition of the Wampole Division of MedPointe Inc. ("Wampole") on September 20, 2002, IVC Industries, Inc. (d/b/a Inverness Medical Nutritionals Group or "IMN") on March 19, 2002 and certain entities, businesses and intellectual property of Unilver Plc (the "Unipath business") on December 20, 2001. Wampole markets and distributes point-of-care and professional medical diagnostic products. IMN manufactures and distributes vitamins and nutritional supplements. The Unipath business develops, manufactures and distributes women's health and professional diagnostics products.

        The consolidated financial statements include the accounts of the entities contributed to us by IMT and the subsequently acquired entities and businesses since their respective acquisition dates, along with the assets, liabilities, revenues and expenses of the businesses. All intercompany accounts and transactions have been eliminated in consolidation. Our equity accounts for all periods presented reflect the par value of our stock at the date of incorporation, adjusted for the fixed exchange ratio set forth in the Merger Agreement and related agreements and the related stock split; the historical equity accounts of the legal entities that comprise our company are consolidated as if such subsidiaries and businesses were historically organized in a manner consistent with the restructuring set forth in the Merger Agreement and related agreements.

(2) Summary of Significant Accounting Policies

(a) Use of Estimates

        To prepare our financial statements in conformity with accounting principles generally accepted in the United States of America, our management must make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from such estimates.

(b) Foreign Currencies

        We follow the provisions of Statement of Financial Accounting Standards ("SFAS") No. 52, Foreign Currency Translation. In general, the functional currencies of our foreign subsidiaries are the local currencies. For purpose of consolidating the financial statements of our foreign subsidiaries, all assets and liabilities of the foreign subsidiaries are translated into U.S. dollars using the exchange rate at each balance sheet date while the stockholders' equity accounts are translated at historical exchange rates. Translation gains and losses that result from the conversion of the balance sheets of the foreign subsidiaries into U.S. dollars are recorded to cumulative translation adjustment which is a component of accumulated other comprehensive income within stockholders' equity (Note 13).

F-13

        The income and expense accounts of our foreign subsidiaries are translated using the average rates of exchange during each reporting period. Net realized and unrealized foreign currency exchange transaction losses of $0.3 million and $0.7 million during 2005 and 2004, respectively, and gain of $5,000 during 2003, are included as a component of other income, net, in the accompanying consolidated statements of operations.

(c) Cash and Cash Equivalents

        We consider all highly liquid investments purchased with original maturities of three months or less at the date of acquisition to be cash equivalents. Cash equivalents consisted of money market funds at December 31, 2005 and 2004.

(d) Inventories

        Inventories are stated at the lower of cost (first-in, first-out) or market and made up of raw material, work-in-process and finished goods. The costs elements of work-in-process and finished goods inventory consist of raw material, direct labor and manufacturing overhead. Where finished goods inventory is purchased from third-party manufacturers, the costs of such finished goods inventory represent the costs to acquire such inventory.

(e) Property, Plant and Equipment

        We record property, plant and equipment at historical cost or, in the case of a business combination, at fair value on the date of the business combination. Depreciation and amortization are computed using the straight-line method based on the following estimated useful lives of the related assets: machinery, laboratory equipment and tooling—3-10 years, buildings—20-39 years, leasehold improvements—lesser of remaining term of lease or estimated useful life of asset, computer software and equipment—3-5 years and furniture and fixtures—3-10 years. Land is not depreciated. Depreciation and amortization expense related to property, plant and equipment amounted to $14.9 million, $13.1 million and $10.1 million in 2005, 2004 and 2003, respectively. Expenditures for repairs and maintenance are expensed as incurred.

(f) Goodwill and Other Intangible Assets

        We review the valuation of goodwill in accordance with SFAS No. 142, Goodwill and Other Intangible Assets. Under the provisions of SFAS No. 142, goodwill is required to be tested for impairment annually, in lieu of being amortized, using a fair value approach at the reporting unit level. Furthermore, goodwill is required to be tested for impairment on an interim basis if an event or circumstance indicates that it is more likely than not an impairment loss has been incurred. An impairment loss shall be recognized to the extent that the carrying amount of goodwill exceeds its implied fair value. Impairment losses shall be recognized in operations. Our valuation methodology for assessing impairment requires management to make judgments and assumptions based on historical experience and projections of future operating performance. If these assumptions differ materially from future results, we may record impairment charges in the future. Our annual impairment review performed on September 30, 2005 did not indicate that goodwill related to our consumer diagnostic products or to our professional diagnostic products reporting units was impaired.

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(g) Impairment of Other Long-Lived Tangible and Intangible Assets

        We examine, in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, on a periodic basis the carrying value of our long-lived tangible and intangible assets to determine whether there are any impairment losses. If indicators of impairment were present with respect to long-lived tangible and intangible assets used in operations and undiscounted future cash flows were not expected to be sufficient to recover the assets' carrying amount, an impairment loss would be charged to expense in the period the impairment is identified based on the fair value of the asset. We believe that the carrying values of our other long-lived tangible and intangible assets were realizable as of December 31, 2005.

(h) Income Taxes

        We follow the provisions of SFAS No. 109, Accounting for Income Taxes, under which deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The provisions of SFAS No. 109 also require the recognition of future tax benefits such as net operating loss carry-forwards, to the extent that the realization of such benefits is more likely than not. To the extent that it is not likely that we will realize such benefits, we must establish a valuation allowance against the related deferred tax assets (Note 15).

(i) Revenue Recognition

        The majority of our revenues is derived from product sales. We recognize revenue when the following four basic criteria have been met: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services rendered, (3) the fee is fixed and determinable and (4) collection is reasonably assured. We recognize revenue upon title transfer of the products to third-party customers, less a reserve for estimated product returns and allowances. Certain sale arrangements require us to accept product returns. When a right of return exists, we record revenue when the right of return is no longer applicable. In connection with the acquisitions of the rapid diagnostic business in September 2003 (Note 4 (c)) and the Determine business in June 2005 (Note 4(a)) from Abbott, we entered into a transition services agreement with Abbott, whereby Abbott would continue to distribute certain of the acquired products sold for a period of up to 18 months following each acquisition. During the transition period, we recognized revenue on sales of the products when title transferred from Abbott to third-party customers.

        To a lesser extent, we also receive license and royalty revenue from agreements with third-party licensees. Revenue from fixed fee license and royalty agreements are recognized on a straight-line basis over the obligation period of the related license agreements. License and royalty fees that are calculated based on the licensees' sales are generally recognized upon receipt of the license or royalty payments, unless we are able to reasonably estimate the fees as they are earned. License and royalty fees that are determinable prior to the receipt thereof are recognized in the period they are earned.

(j) Employee Stock-Based Compensation Arrangements

        We adopted an employee stock option plan in 2001 (Note 13(c)). For all periods presented in the accompanying consolidated financial statements, we accounted for our employee stock-based

F-15

compensation arrangements using the intrinsic value method under the provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. We have elected to use the disclosure-only provisions of SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure.

        Had compensation expense for stock option grants to employees been determined based on the fair value method at the grant date for awards under the stock option plans consistent with the method prescribed by SFAS No. 123, our net (loss) income would have been (increased) decreased to the pro forma amounts indicated as follows:

		2005			2004			2003
					(restated)			(restated)
		(in thousands, except per share amounts)
Net (loss) income—as reported		$	(19,209	)	$	(16,596	)	$	8,653
Stock-based employee compensation—as reported(a)			139			—			397
Pro forma stock-based employee compensation			(6,366	)		(5,675	)		(6,161	)
Net (loss) income—pro forma		$	(25,436	)	$	(22,271	)	$	2,889
Net (loss) income per common share—basic
	Net (loss) income—as reported	$	(0.79	)	$	(0.87	)	$	0.49
	Stock-based employee compensation—as reported		0.01			—			0.02
	Pro forma stock-based employee compensation		(0.26	)		(0.28	)		(0.39	)
	Net (loss) income per share—pro forma	$	(1.04	)	$	(1.15	)	$	0.12
Net (loss) income per common share—diluted
	Net (loss) income—as reported	$	(0.79	)	$	(0.87	)	$	0.44
	Stock-based employee compensation—as reported		0.01			—			0.02
	Pro forma stock-based employee compensation		(0.26	)		(0.28	)		(0.35	)
	Net (loss) income per share—pro forma	$	(1.04	)	$	(1.15	)	$	0.11

(a)

Stock-based employee compensation expense, as reported, represents the amortization of deferred compensation of certain stock options and restricted stock that were granted to employees below fair market value and options granted in lieu of cash compensation.

        We have computed the pro forma disclosures for stock options granted to employees after January 1, 1995 using the Black-Scholes option pricing model prescribed by SFAS No. 123. The assumptions used during each of the three years ended December 31, 2005 were as follows:

	2005	2004	2003
Risk-free interest rate	3.58-4.46%	2.80-3.95%	2.33-3.49%
Expected dividend yield	—	—	—
Expected lives	5 years	5 years	5 years
Expected volatility	45%	47%	55%

F-16

        The weighted average fair value under the Black-Scholes option pricing model of options granted to employees during 2005, 2004 and 2003 was $11.85, $9.86 and $9.34, respectively. All options granted during these periods were granted at fair market value on date of grants.

        We are required to adopt SFAS No. 123 (revised 2004), Share-Based Payment ("SFAS No. 123R") at the beginning of the fiscal year that begins after June 15, 2005. Consequently, we adopted SFAS No. 123R on January 1, 2006. See Note 2(o) for further discussion.

(k) Net (Loss) Income per Common Share

        Net (loss) income per common share, computed in accordance with SFAS No. 128, Earnings per Share, is based upon the weighted average number of outstanding common shares and the dilutive effect of common share equivalents, such as options and warrants to purchase common stock, convertible preferred stock and convertible notes, if applicable, that are outstanding each year (Note 12).

(l) Other Operating Expenses

        We expense advertising costs as incurred. In 2005, 2004 and 2003, advertising costs amounted to $21.7 million, $19.9 million and $18.6 million, respectively, and are included in sales and marketing expenses in the accompanying consolidated statements of operations.

        Shipping and handling costs are included in cost of sales in the accompanying consolidated statements of operations. Additionally, to the extent that we charge our customers for shipping and handling costs, these costs are recorded as product revenues.

(m) Concentration of Credit Risk, Off-Balance Sheet Risks and Other Risks and Uncertainties

        Financial instruments that potentially subject us to concentration of credit risk primarily consist of cash and cash equivalents and accounts receivable. We invest our excess cash primarily in high quality securities and limit the amount of our credit exposure to any one financial institution. We do not require collateral or other securities to support customer receivables; however, we perform ongoing credit evaluations of our customers and maintain allowances for potential credit losses.

        There were no individual customer accounts receivable balances outstanding at December 31, 2005 and 2004 that were in excess of 10% of the gross accounts receivable balance on those dates. During 2005, 2004 and 2003, we had one customer that represented 10%, 11% and 11%, respectively, of our net revenues, who purchases both our consumer diagnostic products and vitamins and nutritional supplements.

        We rely on a number of third parties to manufacture certain of our products. If any of our third party manufacturers cannot, or will not, manufacture our products in the required volumes, on a cost-effective basis, in a timely manner, or at all, we will have to secure additional manufacturing capacity. Any interruption or delay in manufacturing could have a material adverse effect on our business and operating results.

F-17

(n) Financial Instruments and Fair Value of Financial Instruments

        Our primary financial instruments at December 31, 2005 and 2004 consisted of cash equivalents, accounts receivable, accounts payable and debt. The estimated fair value of these financial instruments approximates their carrying values at December 31, 2005 and 2004. The estimated fair values have been determined through information obtained from market sources. Additionally, our subsidiary in England enters into short-term foreign currency exchange forward contracts from time to time to minimize its exposure to foreign currency exchange fluctuations because a substantial portion of its business is transacted in currencies other than its functional currency. We account for our derivative instruments in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and related amendments, including SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. At December 31, 2005, we had outstanding foreign currency exchange forward contracts totaling $3.0 million. Changes of $217,000 in the market value of these contracts during 2005 were recorded to other income, net in our consolidated statements of operations.

(o) Recent Accounting Pronouncements

        In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections," which replaces ABP Opinion No. 20, "Accounting Changes," and FASB Statement No. 3, "Reporting Accounting Changes in Interim Financial Statements," and changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS No. 154 requires retrospective application to prior periods' financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS No. 154 shall be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Early adoption is permitted for accounting changes and corrections of errors made in fiscal years beginning after the date SFAS No. 154 was issued. We do not believe that adoption of SFAS No. 154 will have a material effect on our financial position, results of operations or cash flows.

        In March 2005, the FASB issued FASB Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations," which is an interpretation of FASB Statement No. 143, "Accounting for Asset Retirement Obligations." The interpretation requires a liability for the fair value of a conditional asset retirement obligation be recognized if the fair value of the liability can be reasonable estimated. The interpretation is effective for years ending after December 15, 2005. The interpretation is not expected to have a material impact on our results of operations or financial position.

        In December 2004, the FASB issued SFAS No. 153, Exchange of Nonmonetary Assets—an amendment of APB Opinion No. 29, "Accounting for Nonmonetary Transactions." SFAS No. 153 is based on the principle that exchange of nonmonetary assets should be measured based on the fair market value of the assets exchanged. SFAS No. 153 eliminates the exception of nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. SFAS 153 is effective for nonmonetary asset exchanges in fiscal periods beginning after June 15, 2005. We are currently evaluating the provisions of SFAS No. 153 and do not believe that the adoption of SFAS No. 153 will have a material impact on our consolidated financial statements.

        In December 2004, the FASB issued SFAS No. 123R which addresses the accounting for transactions in which a company receives employee services in exchange for (a) equity instruments of the company or (b) liabilities that are based on the fair value of the company's equity instruments or

F-18

that may be settled by the issuance of such equity instruments. It eliminates the ability to account for share-based compensation transactions using APB Opinion No. 25, and generally requires that such transactions be accounted for using a fair-value-based method. As permitted by the current SFAS No. 123, Accounting for Stock-BasedCompensation, we have been accounting for share-based compensation to employees using APB Opinion No. 25's intrinsic value method and, as such, we generally recognize no compensation cost for employee stock options. Under the original guidance of SFAS No. 123R, we were to adopt the statement's provisions for the interim period beginning after June 15, 2005. However, in April 2005, as a result of an action by the Securities and Exchange Commission, companies were allowed to adopt the provisions of SFAS No. 123R at the beginning of their fiscal year that begins after June 15, 2005. Consequently, we adopted SFAS No. 123R on January 1, 2006. If we had adopted this standard in 2005, our net loss for 2005 would have been $6.2 million (or $0.25 per diluted share) higher than reported in 2005. While we expect that the requirement to expense stock options and other equity interests that have been or will be granted pursuant to our equity incentive program will significantly increase our operating expenses and result in lower earnings per share, the amount of the increase in operating expenses will depend on the level of future grants, the terms and fair values of such grants, and expected volatilities, among other factors, present at the grant dates. The adoption of SFAS No. 123R will have no impact on our cash flows.

        In November 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No. 151, Inventory Costs—an amendment of ARB No. 43, Chapter 4. SFAS No. 151 clarifies that abnormal amounts of idle facility expense, freight, handling costs and wasted material should be recognized as current period charges in all circumstances. Additionally, SFAS No. 151 requires that a facility's fixed production overhead be charged to inventory based on the normal capacity of the production facility. As required, we adopted SFAS No. 151 on January 1, 2006. We do not expect the adoption of SFAS No. 151 to have a material impact on our consolidated financial statements.

(p) Restatements of 2004 and 2003 Financial Statements

        We previously restated our consolidated financial statements as of and for the years ended December 31, 2004 and 2003 and for the quarter ended March 31, 2005 to correct errors under GAAP relating to the recognition of revenue. During 2005, we determined that certain customers of one of our diagnostics divisions were provided return or exchange rights in connection with the sale of products, as a result of which the revenue associated with those sales should not have been recognized upon shipment to the customers under GAAP. As a result, we recorded $4.5 million in net revenue reversal with a $3.4 million gross margin and corresponding net loss impact spread over the quarters of 2004 and 2003 and an increase in both revenues and gross profit of $0.3 million in the first quarter of 2005. The restatements as a result of the errors relating to the recognition of revenue are reflected in the amounts below as "as restated on August 26, 2005."

        The following lists the accounts in the consolidated financial statements that were affected by the aforementioned restatements, with comparisons of the restated amounts to the reported amounts included in our 2004 Annual Report on Form 10-K, filed with the SEC on March 16, 2005 ("as reported") and the effect of such restatements on net (loss) income and net (loss) income per share.

F-19

All applicable amounts relating to the aforementioned restatements have been reflected in these consolidated financial statements and notes hereto.

	2004
	As restated on August 26, 2005			As reported
	(in thousands, except per share amounts)
Net product sales	$	365,432		$	368,351
Cost of sales		226,987			227,548
Net loss		(16,596	)		(14,238	)
Net loss per common share—basic and diluted	$	(0.87	)	$	(0.75	)

	December 31, 2004
	As restated on August 26, 2005			As reported
	(in thousands)
Inventories	$	61,234		$	60,145
Accrued expenses and other current liabilities	$	56,242		$	51,886
Accumulated deficit	$	(91,018	)	$	(87,752	)

	2003
	As restated on August 26, 2005		As reported
	(in thousands, except per share amounts)
Net product sales	$	285,430	$	286,984
Cost of sales	$	167,641	$	168,171
Provision for income taxes	$	2,911	$	3,028
Net income	$	8,653	$	9,560
Net income per common share—basic	$	0.49	$	0.55
Net income per common share—diluted	$	0.44	$	0.49

	December 31, 2003
	As restated on August 26, 2005			As reported
	(in thousands)
Inventories	$	47,953		$	47,423
Accrued expenses and other current liabilities	$	42,559		$	41,122
Accumulated deficit	$	(73,672	)	$	(72,765	)

F-20

(3) Other Balance Sheet Information

        Components of selected captions in the consolidated balance sheets consist of:

		December 31,
		2005			2004
					(restated)
		(in thousands)
Inventories:
	Raw materials	$	25,488		$	23,434
	Work-in-process		17,812			14,956
	Finished goods		27,909			22,844
		$	71,209		$	61,234
Property, plant and equipment, net:
	Machinery, laboratory equipment and tooling	$	78,559		$	67,650
	Land and buildings		8,942			9,053
	Leasehold improvements		18,980			12,037
	Computer software and equipment		8,811			7,358
	Furniture and fixtures		3,982			2,992
			119,274			99,090
	Less: Accumulated depreciation and amortization		(47,063	)		(32,310	)
		$	72,211		$	66,780
Accrued expenses and other current liabilities:
	Compensation and compensation-related	$	8,959		$	11,121
	Advertising and marketing		6,608			9,036
	Professional fees		5,649			5,615
	Interest payable		6,002			5,631
	Royalty obligations		4,001			5,342
	Deferred revenue		5,981			4,473
	Other		27,546			15,024
		$	64,746		$	56,242

(4) Business Combinations

        All of the acquisitions discussed below, with the exception of the acquisition of the consumer pregnancy test business of ACS (Note 4(a)) and of Biomar Diagnostic Systems GmbH ("Biomar") (Note 4(b)), resulted in the recognition of goodwill. Acquisitions are an important part of our growth strategy. When we acquire businesses, we seek to complement existing products and services, enhance or expand our product lines and/or expand our customer base. We determine what we are willing to pay for each acquisition partially based on our expectation that we can cost effectively integrate the products and services of the acquired companies into our existing infrastructure. In addition, we utilize existing infrastructure of the acquired companies to cost effectively introduce our products to new geographic areas. All these factors contributed to the acquisition prices of the acquired businesses discussed below, that were in excess of the fair value of net assets acquired and the resultant goodwill.

F-21

(a) Acquisitions in 2005

(i)

Acquisition of BioStar

        On September 30, 2005, we acquired BioStar, a leading developer and manufacturer of high-performance, rapid diagnostic tests, including tests for the detection of infectious diseases. The aggregate purchase price was $53.7 million, which consisted of $53.1 million in cash, $0.5 million in estimated direct acquisition costs and $0.1 million in estimated exit costs, which we recorded in accordance with Emerging Issues Task Force ("EITF") No. 95-3, Recognition of Liabilities in Connection with a Purchase Business Combination.

        The following is a summary of the allocation of the aggregate purchase price to the assets acquired and the liabilities assumed at the date of the acquisition:

	(in thousands)
Accounts receivable	$	5,247
Inventories		2,046
Property, plant and equipment		1,510
Goodwill		30,843
Core technology		4,550
Customer relationships		6,760
OIA trade name		2,730
Trademarks		4,200
Other assets		795
Accounts payable and accrued expenses		(4,991	)
Total consideration	$	53,690

        The acquisition of BioStar is accounted for as a purchase under SFAS No. 141, Business Combinations. Accordingly, the operating results of BioStar have been included in our consolidated financial statements of operations after the acquisition date as part of our professional diagnostic products reporting unit. We have assigned indefinite lives to the acquired goodwill and certain trademarks. The value of such goodwill is fully deductible for tax purposes over 15 years. The values allocated to the acquired core technology, customer relationships and OIA trade names are being amortized on a straight-line basis over their estimated useful lives of 10, 5 and 10 years, respectively. The weighted average amortization period for the acquired intangible assets with finite lives is 6.8 years. The trademarks, core technology, customer relationships and OIA trade name are allocated respectively to other intangible assets with indefinite lives, core technology and patents, net and other intangible assets, net on the accompanying consolidated balance sheet at December 31, 2005.

(ii)

Acquisition of IDT

        On September 30, 2005, we acquired IDT, a Spanish distributor of diagnostic products. The aggregate purchase price was $20.3 million, which consisted of $11.7 million in cash, an $8.4 million working capital adjustment, which was paid during the fourth quarter of fiscal year 2005, and $0.2 million in estimated direct acquisition costs.

F-22

        The following is a summary of the allocation of the aggregate purchase price to the assets acquired and the liabilities assumed at the date of the acquisition:

		(in thousands)
Cash and cash equivalents		$	76
Accounts receivable			10,913
Inventories			520
Property, plant and equipment			771
Goodwill			9,062
Customer relationships			3,000
Other assets			188
Accounts payable and accrued expenses			(3,164	)
Deferred tax liability			(1,050	)
	Total consideration	$	20,316

        The above values for the assets acquired and subsequent amortization and liabilities assumed are based on preliminary management estimates. Final purchase price allocation may differ from the above. Management is also in the process of determining the useful lives of the customer relationships as listed above. The estimated value allocated to the acquired customer relationships is being amortized on a straight-line basis over their estimated useful lives of 5 years. The customer relationships are included in other intangible assets, net, on the accompanying consolidated balance sheets.

        The acquisition of IDT is accounted for as a purchase under SFAS No. 141. Accordingly, the operating results of IDT have been included in our consolidated financial statements of operations after the acquisition date as part of our professional diagnostic products reporting unit. Goodwill resulting from this acquisition is deductible for tax purposes.

(iii)

Acquisition of Determine business

        On June 30, 2005, we acquired the Determine business which produces diagnostic tests that are designed to provide rapid qualitative results for detecting several diseases, including hepatitis, HIV 1/2 and syphilis. The aggregate purchase price was $58.1 million, which consisted of $56.5 million in cash and $1.6 million in estimated direct acquisition costs.

        The following is a summary of the allocation of the aggregate purchase price to the assets acquired and liabilities assumed at the date of the acquisition:

		(in thousands)
Inventories		$	3,412
Property, plant and equipment			1,500
Goodwill			40,913
Trademark			5,000
Customer relationships			7,500
Manufacturing know-how			3,500
Accrued expenses			(3,723	)
	Total consideration	$	58,102

F-23

        The above values for the assets acquired are based on preliminary management estimates due to the timing of the acquisition. Final purchase price allocation may differ from the above. Management is also in the process of determining the useful lives of the acquired intangibles as listed above. We have assigned indefinite lives to the acquired goodwill and trademark. Goodwill resulting from this acquisition is deductible for tax purposes over lives varying from 10 to 25 years, depending on the tax jurisdiction. We estimate the useful lives of the manufacturing know-how to be ten years and the customer relationships asset to be six years and included them in other intangible assets, net, in the accompanying consolidated balance sheets. The weighted average amortization period for the acquired intangible assets with finite lives is 6.9 years.

        The acquisition of the Determine business is accounted for as a purchase under SFAS No. 141. Accordingly, the operating results of the Determine business have been included in our consolidated statements of operations after the acquisition date as part of our professional diagnostic products reporting unit.

(iv)

Acquisition of Binax

        On March 31, 2005, we acquired Binax, a privately held developer, manufacturer and distributor of rapid diagnostic products for infectious disease testing, primarily related to the respiratory system. The aggregate purchase price was $44.7 million, which consisted of $9.0 million in cash, 1.4 million shares of our common stock with an aggregate fair value of $35.2 million and $0.5 million in estimated direct acquisition costs. The fair value of our common stock was determined based on the average market price of our common stock over the periods just prior to and following the date of the acquisition agreement, pursuant to EITF No. 99-12, Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in a Purchase Business Combination. The terms of the acquisition agreement also provide for $11.0 million of contingent cash consideration payable to the Binax shareholders upon the successful completion of certain new product developments during the five years following the acquisition. This contingent consideration will be accounted for as an increase in the aggregate purchase price if and when the contingency occurs.

F-24

        The following is a summary of the allocation of the aggregate purchase price to the assets acquired and the liabilities assumed at the date of the acquisition:

	(in thousands)
Cash and cash equivalents	$	1,556
Accounts receivable		5,264
Inventories		3,086
Property, plant and equipment		2,421
Goodwill		15,466
Product technology		3,900
Customer relationships		11,700
Trademark		4,500
Non-compete agreement		30
Other assets		688
Deferred tax asset		6,312
Accounts payable and accrued expenses		(2,076	)
Deferred tax liability		(8,106	)
	$	44,741

        We have assigned indefinite lives to the acquired goodwill and trademarks. Goodwill generated from this acquisition is not deductible for tax purposes. We estimate the useful lives of the product technology, customer relationships and the non-compete agreement to be 7, 13 and 7 years and have included them in core technology and patents, net, and other intangible assets, net, respectively, in the accompanying consolidated balance sheets. The weighted average amortization period for the acquired intangible assets with finite lives is 10.7 years.

        The acquisition of Binax is accounted for as a purchase under SFAS No. 141. Accordingly, the operating results of Binax have been included in our consolidated statement of operations since the acquisition date as part of our professional diagnostic products reporting unit.

(v)

Acquisition of Ischemia

        On March 16, 2005, we acquired Ischemia, a privately held, venture-backed company that has developed, manufactures and markets the only FDA-cleared in vitro diagnostic test targeted on cardiac ischemia. The aggregate purchase price was $27.2 million, which consisted of 968,000 shares of our common stock with an aggregate fair value of $22.8 million, estimated exit costs of $1.5 million to vacate Ischemia's manufacturing and administrative facilities, which we recorded in accordance with EITF No. 95-3, estimated direct acquisition costs of $2.4 million and $0.5 million in assumed debt. The fair value of our common stock was determined in accordance with EITF No. 99-12.

F-25

        The following is a summary of the allocation of the aggregate purchase price to the assets acquired and the liabilities assumed at the date of the acquisition:

	(in thousands)
Cash and cash equivalents	$	115
Accounts receivable		58
Inventories		40
Property, plant and equipment		288
Goodwill		7,532
Patents		19,200
Customer relationships		200
Other assets		99
Deferred tax asset		7,760
Accounts payable and accrued expenses		(377	)
Deferred tax liability		(7,760	)
	$	27,155

        We have assigned indefinite lives to the acquired goodwill. Goodwill generated from this acquisition is not deductible for tax purposes. We estimated the useful lives of the patents to be from 9 to 15 years and customer related intangible asset to be 11 years and included them in core technology and patents, net, and other intangible assets, net, respectively, in the accompanying consolidated balance sheets.

        The acquisition of Ischemia is accounted for as a purchase under SFAS No. 141. Accordingly, the operating results of Ischemia have been included in our consolidated statements of operations after the acquisition date as part of our professional diagnostic products reporting unit.

(vi)

Acquisition of ACS

        On January 24, 2005, we acquired the consumer pregnancy test business of ACS. In acquiring ACS, we obtained the rights to the Crystal Clear brand. Crystal Clear is the leading consumer pregnancy test in Australia and has a leading position in New Zealand. The purchase price of ACS consisted of $4.6 million in cash and estimated direct acquisition costs of $0.3 million. The majority of the purchase price of ACS is allocated to the intangible asset, trademarks, with an average useful life of 7 years.

        The acquisition of ACS is accounted for as a purchase under SFAS No. 141. Accordingly, the operating results for this business have been included in our consolidated statements of operations after the acquisition date as part of our consumer diagnostic product reporting unit.

(b) Acquisitions in 2004

(i)

Acquisition of Biomar

        On December 10, 2004, our subsidiary, Inverness Medical Switzerland GmbH ("IMS"), settled a patent infringement lawsuit in Germany against Biomar and its principal stockholder. We had alleged that Biomar's rapid diagnostic tests infringed on several of our patents. In advance of a court decision, we and Biomar agreed to settle the litigation under the terms of an agreement through which Biomar

F-26

agreed to transfer its rapid diagnostic business to us, including the use of the Biomar trade name, in exchange for a release of all past infringement claims. We accounted for this settlement in accordance with EITF No. 04-01, Accounting for Preexisting Relationships between the Parties to a Business Combination, and recorded the fair values of the assets acquired, aggregating $0.5 million, as a gain in other income, net, in the accompanying statement of operations of 2004.

        The acquisition of Biomar is accounted for as a purchase under SFAS No. 141. Accordingly, the operating results of Biomar have been included in our consolidated statements of operations after the acquisition date as part of our professional diagnostic products reporting unit.

(ii)

Acquisition of ADC

        On June 16, 2004, we acquired ADC, a closely held lateral flow diagnostic company that specializes in rapid test development and component manufacturing. The purchase price of ADC consisted of $2.4 million in cash and $0.2 million in assumed debt. The terms of the merger agreement, as amended, also provide for $1.5 million of contingent consideration payable to the ADC shareholders upon the successful completion of a new product under development by June 30, 2006. The payment of the contingent consideration, if any, will be recorded as an addition to the purchase price.

        The acquisition of ADC is accounted for as a purchase under SFAS No. 141. Accordingly, the operating results of ADC have been included in our consolidated statements of operations after the acquisition date as part of our professional diagnostic products reporting unit.

(iii)

Acquisition of Viva

        On June 2, 2004, we acquired Viva, a closely held distributor of professional diagnostic products to the German marketplace. The purchase price of Viva consisted of $2.6 million in cash, 0.2 million shares of our common stock with an aggregate fair value of $3.0 million and $0.3 million in assumed debt. We believe that Viva, with its established German distribution network, will provide us with expanded distribution channel for our professional diagnostic products, as well as for our cardiac products in development.

        The acquisition of Viva is accounted for as a purchase under SFAS No. 141. Accordingly, the operating results of Viva have been included in our consolidated statements of operations after the acquisition date as part of our professional diagnostic products reporting unit.

(c) Acquisitions in 2003

(i)

Acquisition of SMB

        On November 18, 2003, we acquired SMB, a developer and manufacturer of customized and standard devices for analysis of bio-molecules. The purchase price of SMB consisted of $3.0 million in cash, 0.1 million shares of our common stock with an aggregate fair value of $2.5 million and $0.1 million in assumed debt. Simultaneously with the acquisition, we acquired a technology license from SMB's former parent for $0.2 million. The acquisition of SMB provided us with access to SMB's intellectual property and research and development capabilities. The fair value of our common stock was determined in accordance with EITF No. 99-12.

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        The acquisition of the SMB is accounted for as a purchase under SFAS No. 141. Accordingly, the operating activities of SMB, which consist principally of research and development activities, have been included in our consolidated statements of operations after the acquisition date.

(ii)

Acquisition of 2003 Abbott Business

        On September 30, 2003, we acquired from Abbott certain assets related to Abbott's lines of consumer diagnostic pregnancy tests and professional rapid diagnostics for various testing needs, including strep throat, pregnancy and drugs of abuse. The acquired assets also include certain transferred and licensed intellectual property related to these products. This acquisition complements our consumer and professional diagnostic product portfolios, as well as helps to establish a larger global presence in which to facilitate the introduction of new products.

        The aggregate purchase price was $95.1 million, which consisted of $55.0 million in cash, $37.5 million in the form of 1.6 million shares of our common stock and direct acquisition costs of $2.6 million. The fair value of our common stock was determined in accordance with EITF No. 99-12. We financed the cash portion of the purchase price by obtaining loans under our amended senior credit facility (Note 6(a)).

        The aggregate purchase price was allocated to the assets acquired as follows:

	(in thousands)
Inventories	$	380
Property, plant and equipment		1,310
Goodwill		69,487
Trade name—Signify		6,400
Trade name—Fact plus		1,600
Trade name—TestPack		8,600
Patents		1,570
Customer related intangible assets		5,735
	$	95,082

        The acquisition of the Abbott business is accounted for as a purchase under SFAS No. 141, Business Combinations. Accordingly, the operating results of the Abbott business have been included in our consolidated statements of operations after the acquisition date as part of each of our consumer diagnostic products and professional diagnostic products reporting units. The acquired goodwill, all of which is deductible for tax purposes with varying lives of 15 to 25 years, depending on the tax jurisdiction, is allocated by business segment based on estimated future revenue of the acquired assets as follows: $18.8 million to consumer diagnostic products and $50.7 million to professional diagnostic products. We believe the Signify and TestPack trade names represent indefinite—lived intangible assets and estimate the useful life for the Fact plus trade name to be 5 years. The Signify and TestPack trade names and Fact plus trade name are included on the accompanying consolidated balance sheets in trademark and trade names with indefinite lives and other intangible assets, net, respectively. Patents, which values are included in core technology and patents, net, on the accompanying consolidated balance sheets are assigned useful lives ranging from 1 to 18 years. Customer related intangible assets, which values are included in other intangible assets, net, on the accompanying consolidated balance

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sheets are assigned useful lives ranging from 1.5 to 5 years. The weighted average amortization period for the acquired intangible assets with finite lives is approximately 5 years.

        This acquisition resulted in a significant amount of goodwill. Goodwill represents the premium paid in excess of the value we allocated to identifiable assets. Goodwill arose as a result of acquired going concern value, access to employees via the acquisition agreements and synergies. Because of the unique way in which the acquisition of the Abbott business was structured, access to the factors required for maintaining the continuity of the business was achieved through contractual arrangements with terms of up to two years to facilitate the rapid integration of the Abbott business into our infrastructure with minimal restructuring or exit costs required. For this reason, the vast majority of the goodwill associated with the acquisition was attributable to synergies arising from the application of our existing infrastructure to the acknowledged brands of the acquired business. The acquisition was also attractive because of the similarity in mode of operation between the Abbott products and our existing products.

(iii)

Acquisition of ABI

        On August 27, 2003, we acquired ABI from Apogent Technologies, Inc. ("Apogent"). ABI is a developer, manufacturer and distributor of rapid diagnostic products in the areas of women's health, infectious disease and drugs of abuse testing. In the transaction, we also acquired ABI's wholly-owned subsidiary, Forefront Diagnostics, Inc. ("Forefront"). Forefront develops, manufactures and distributes rapid diagnostic products for drugs of abuse testing. These products broaden our professional diagnostic product portfolio. ABI also provides us with additional manufacturing capabilities and new distribution channels for our professional diagnostic products.

        The aggregate purchase price of ABI was $28.8 million, which consisted of $13.4 million in cash, 0.7 million shares of our common stock with an aggregate fair value of $14.3 million and direct acquisition costs of $1.2 million. The fair value of our common stock was determined in accordance with EITF No. 99-12. We financed the cash portion of the purchase price by obtaining a loan under our amended senior credit facility (Note 6(a)).

        The following table summarizes the fair value of the assets acquired and liabilities assumed at the date of acquisition:

	(in thousands)
Cash and cash equivalents	$	1
Accounts receivable		6,368
Inventories		6,056
Property, plant and equipment		4,301
Goodwill		11,258
Customer related intangible asset		2,000
Manufacturing know-how		3,500
Other assets		117
Accounts payable and accrued expenses		(4,761	)
	$	28,840

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        The acquisition of ABI is accounted for as a purchase under SFAS No. 141. Accordingly, the operating results of ABI have been included in our consolidated statement of operations after the acquisition date as part of each of our consumer diagnostic products and professional diagnostic products reporting units. We have allocated goodwill of $2.2 million and $9.1 million to the consumer diagnostic products and professional diagnostic products business segments, respectively, based on estimated future revenue of the acquired businesses. Goodwill generated from this acquisition is not deductible for tax purposes. We estimate the useful lives of both intangible assets to be 15 years and have included them in other intangible assets, net in the accompanying consolidated balance sheets. The weighted average amortization period for the acquired intangible assets with finite lives is 15 years.

(iv)

Acquisition of Ostex

        On June 30, 2003, we acquired Ostex through a merger transaction. Ostex develops and commercializes osteoporosis diagnostic products. This acquisition also provides us with intellectual property rights in the field of osteoporosis diagnostics.

        The aggregate purchase price of Ostex was $33.7 million, which consisted of 1.6 million shares of our common stock with an aggregate fair value of $23.5 million, the assumption of fully-vested stock options and warrants to purchase an aggregate of 0.3 million shares of our common stock, which options and warrants have an aggregate fair value of $1.8 million, estimated exit costs of $3.9 million, which primarily consists of severance and costs to vacate Ostex's manufacturing and administrative facilities (Note 19(b)) in accordance with EITF No. 95-3, direct acquisition costs of $1.6 million and $2.9 million in assumed debt. The fair value of our common stock issued to acquire all of Ostex's outstanding common stock was determined based on the average market price of our common stock over the periods just prior to and following the date of the merger agreement, as amended, pursuant to EITF Issue No. 99-12. The fair value of the assumed fully-vested stock options and warrants was calculated using the Black-Scholes option pricing model.

        The following table summarizes the fair value of the assets acquired and liabilities assumed at the date of acquisition:

	(in thousands)
Cash and cash equivalents	$	1,271
Accounts receivable		1,289
Inventories		467
Property, plant and equipment		604
Goodwill		25,192
Core technology		5,532
Customer relationships		1,096
Other assets		164
Accounts payable and accrued expenses		(1,953	)
	$	33,662

        The acquisition of Ostex is accounted for as a purchase under SFAS No. 141. Accordingly, the results of Ostex have been included in our consolidated statement of operations after the acquisition date as part of our professional diagnostic products reporting unit. Goodwill generated from this acquisition is not deductible for tax purposes. We estimated the useful lives of both the core technology

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and customer relationships to be 15 years and have included them in core technology and patents, net and other intangible assets, net, respectively, in the accompanying consolidated balance sheets. The weighted average amortization period for the acquired intangible assets with finite lives is 15 years.

(d) Recent and Pending Acquisitions

        On February 28, 2006, we acquired 67.45% of the capital stock of CLONDIAG chip technologies GmbH ("CLONDIAG"), a privately held company located in Jena in Germany, which has developed a multiplexing technology for nucleic acid and immunoassay based diagnostics, in exchange for 218,502 shares of our common stock and approximately $3.1 million in cash. We also agreed to settle obligations totaling approximately $10.0 million during the first quarter of 2006, primarily using cash. Under our agreement with the CLONDIAG shareholders, we will acquire the remaining 32.55% of the capital stock of CLONDIAG on or about August 31, 2006 for an additional $4.9 million based on current exchange rates. The agreement also calls for contingent consideration totaling approximately $8.9 million consisting of 224,316 shares of our common stock and approximately $3.0 million of cash or stock in the event that four specified products are developed on CLONDIAG's platform technology during the three years following the date of the initial stock purchase.

        On February 24, 2006, we entered into a definitive agreement with ACON Laboratories, Inc. ("ACON") and certain of its affliliated entities to acquire (i) the assets of ACON's business of researching, developing, manufacturing, marketing and selling lateral flow immunoassay products in the United States, Canada, Europe (excluding Russia, the former Soviet Republics that are not part of the European Union and Turkey), Israel, Australia, Japan and New Zealand and (ii) all of the capital stock of entities owning a newly-constructed manufacturing facility currently undergoing validation in Hangzhou, China.

        The aggregate purchase price for the acquired business, including the manufacturing facility, will be between $140.0 million and $175.0 million based upon a multiple of revenues and pre-tax profits of the acquired business, though we have agreed to acquire up to $4.0 million in indebtedness related to the new manufacturing facility. The aggregate purchase price is expected to be based on completion of certain milestones related to achievement of functional manufacturing operations in certain territories. Such purchase price shall be paid by issuing an aggregate of up to $50.0 million of our common stock, but in no event more than 2,130,000 shares, with the remainder of the purchase price being paid in cash.

        The transaction is subject to the consent of our lenders and other ordinary and customary closing conditions, including certain regulatory approvals. The acquisition of the lateral flow business described above is expected to close in the first or second quarter of 2006 and the acquisition of the manufacturing facility is expected to close by the end of the second quarter of 2006.

(e) Pro Forma Financial Information

        The following table presents selected unaudited financial information of our company, including ADC, Viva, Ischemia, Binax, the Determine business, BioStar and IDT, as if the acquisitions of these businesses had occurred on January 1, 2004. Pro forma results exclude adjustments for ACS as the historical results of this acquisition do not materially affect our results of operations. The pro forma results are derived from the historical financial results of the acquired businesses for all periods

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presented and are not necessarily indicative of the results that would have occurred had the acquisitions been consummated on January 1, 2004.

	2005			2004
	(unaudited)
	(in thousands, except per share amounts)
Pro forma net revenues	$	477,239		$	464,285
Pro forma net loss		(18,387	)		(20,949	)
Pro forma net loss available to common stockholders—basic and diluted		(18,387	)		(21,698	)
Pro forma net loss per common share—basic and diluted(1)	$	(0.67	)	$	(0.83	)

(1)

Net loss per share amounts are computed as described in Note 12.

(5) Goodwill and Other Intangible Assets

        The following is a summary of goodwill and other intangible assets as of December 31, 2005:

					Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Useful Life
					(in thousands)
Amortized intangible assets:
	Core technology and patents				$	79,163	$	15,113	$	64,050	1-20 years
	Other intangible assets:
		Supplier relationships				11,020		3,616		7,404	10 years
		Trademarks and trade names				17,414		6,335		11,079	5-25 years
		License agreements				9,967		5,297		4,670	5-8.5 years
		Customer relationships				38,100		7,196		30,904	1.5-15 years
		Manufacturing know-how				7,000		720		6,280	10-15 years
		Other				490		338		152	2-7 years
			Total Other intangible assets			83,991		23,502		60,489
				Total intangible assets with finite lives	$	163,154	$	38,615	$	124,539
Intangible assets with indefinite lives:
	Goodwill				$	322,210	$	—	$	322,210
	Other intangible assets					63,742		—		63,742
		Total intangible assets with indefinite lives			$	385,952	$	—	$	385,952

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        The following is a summary of goodwill and other intangible assets as of December 31, 2004:

					Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Useful Life
					(in thousands)
Amortized intangible assets:
	Core technology and patents				$	50,347	$	10,020	$	40,327	1-20 years
	Other intangible assets:
		Supplier relationships				11,020		2,512		8,508	10 years
		Trademarks and trade names				9,978		5,133		4,845	5-25 years
		License agreements				9,747		3,912		5,835	7-8.5 years
		Customer related intangible assets				9,191		4,277		4,914	1.5-15 years
		Manufacturing know-how				3,500		311		3,189	15 years
		Other				530		141		389	2-3 years
			Total Other intangible assets			43,966		16,286		27,680
				Total intangible assets with finite lives	$	94,313	$	26,306	$	68,007
Intangible assets with indefinite lives:
	Goodwill				$	221,155	$	—	$	221,155
	Other intangible assets					50,542		—		50,542
				Total intangible assets with indefinite lives	$	271,697	$	—	$	271,697

        We amortize intangible assets with finite lives using primarily the straight-line method over the above estimated useful lives of the respective intangible asset. We believe that the straight-line method is appropriate, as it approximates the pattern in which economic benefits are consumed in circumstances where such patterns can be reliably determined. Amortization expense of intangible assets, which in the aggregate amounted to $12.9 million, $10.4 million and $6.3 million in 2005, 2004 and 2003, respectively, is included in cost of sales, research and development and sales and marketing in the accompanying consolidated statements of operations. The allocation of amortization expense to the expense categories is based on the intended usage and the expected benefits of the intangible assets in relation to the expense categories.

        The following is a summary of estimated aggregate amortization expense of intangible assets for each of the five succeeding fiscal years as of December 31, 2005:

	(in thousands)
2006	$	15,455
2007	$	15,316
2008	$	15,027
2009	$	13,369
2010	$	12,821

        In accordance with SFAS No. 142, we perform annual impairment tests of the carrying value of our goodwill by reporting unit. Our annual impairment review on September 30, 2005, did not indicate that goodwill related to our consumer diagnostic products and professional diagnostic products

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reporting units were impaired. The values assigned to the trade names that were acquired as part of our acquisition have been assigned indefinite lives and therefore, in accordance with SFAS No. 142 are not being amortized.

        We allocate goodwill by reporting unit based on the relative percentage of estimated future revenues generated for the respective reporting unit as of the acquisition date. Goodwill amounts allocated to our consumer diagnostic products and professional diagnostic products reporting units are summarized as follows:

		Consumer Diagnostic Products			Professional Diagnostic Products			Total
		(in thousands)
Goodwill, at December 31, 2003		$	86,676		$	130,057		$	216,733
	Acquisitions (Note 4 (b))		—			4,858			4,858
	Other(1)		(598	)		162			(436	)
Goodwill, at December 31, 2004			86,078			135,077			221,155
	Acquisitions (Note 4 (a))		—			103,815			103,815
	Other(1)		(904	)		(1,857	)		(2,760	)
Goodwill, at December 31, 2005		$	85,174		$	237,035		$	322,210

(1)

These amounts relate primarily to adjustments resulting from fluctuations in foreign currency exchange rates.

        We generally expense costs incurred to internally develop intangible assets, except for costs that are incurred to establish patents and trademarks, such as legal fees for initiating, filing and obtaining the patents and trademarks. As of December 31, 2005, we had approximately $2.0 million of costs capitalized in connection with establishing patents and trademarks which are included in other intangible assets, net, in the accompanying consolidated balance sheets. Upon the successful registration of the patents and trademarks, we commence amortization of such intangible assets over their estimated useful lives. Costs incurred to maintain the patents and trademarks are expensed as incurred.

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(6) Long-term Debt

        We had the following long-term debt balances outstanding:

	December 31,
	2005			2004
	(in thousands)
Senior credit facilities	$	89,000		$	20,053
8.75% Senior Subordinated notes		150,000			150,000
10% Subordinated notes		20,000			20,000
Line of credit		2,212			—
Other		316			47
		261,528			190,100
Less: Unamortized original issue discount		(544	)		(744	)
Less: Current portion		(2,367	)		(88	)
	$	258,617		$	189,268

        The following describes each of the above listed debt instruments:

(a) Senior Credit Facilities

        On November 14, 2002, we and certain of our subsidiaries entered into a senior credit agreement with a group of banks for credit facilities in the aggregate amount of up to $55.0 million, of which $44.1 million was used to prepay the outstanding principal balances and any accrued and unpaid interest on the term loans and line of credit under a series of former credit agreements. During 2003, to finance the cash portions of our acquisitions of ABI and the Abbott business (Note 4(c)), we amended the senior credit agreement, whereby the borrowing capacity under the credit facilities was increased to $135.0 million. The amended senior credit facilities of up to $135.0 million in borrowings consisted of two U.S. term loans, Term Loan A for $35.1 million and Term Loan B for $40.0 million, a European term loan for $9.9 million, a U.S. revolving line of credit of up to $25.0 million, and a European revolving line of credit of up to $25.0 million.

        On February 10, 2004, all outstanding borrowings and accrued and unpaid interest under the amended senior credit agreement, aggregating $125.0 million, were prepaid with the proceeds from our sale of $150.0 million of 8.75% senior subordinated notes (the "Bonds" or "Bond issuance") (Note 6(b)). We treated the prepayment of the outstanding borrowings under the senior credit facilities, using the proceeds from the Bond offering, as a refinancing in accordance with SFAS No. 6, Classification of Short-Term Obligations Expected to Be Refinanced. We retained the $50.0 million availability under the revolving lines of credit, subject to continued covenant compliance.

        On June 30, 2005, we amended and restated our existing senior credit facility. The amendment expanded our existing revolving credit facility capacity from $50.0 million to $80.0 million and added a $20.0 million term loan facility. Upon completion of the amendment, we borrowed $58.0 million to finance our acquisition of the Determine business. In August, 2005, we sold 4.0 million shares of our common stock to three accredited institutional investors in a private placement. Net proceeds from the private placement were approximately $92.8 million. Of this amount, we repaid principal and interest outstanding under senior credit facility of $84.4 million, with the remainder of the net proceeds retained for general corporate purposes. $20.0 million of the repayment was used to permanently reduce the outstanding term loan balance under the senior credit facility. The repayment of the term

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loan balance resulted in a non-cash write-off of deferred financing costs of $0.1 million during the third quarter of 2005. On September 29, 2005, we again amended the senior credit facility to increase the total amount of credit available to us under the senior credit facility, which consists of two revolving lines of credit, from $80.0 million to $100.0 million. As of December 31, 2005, $89.0 million of borrowings were outstanding under the lines, with $11.0 million available for future borrowings, subject to continued covenant compliance.

        Borrowings under the revolving lines of credit bear interest at either (i) the London Interbank Offered Rate ("LIBOR"), as defined in the agreement, plus applicable margins or, at our option or (ii) a floating Index Rate, as defined in the agreement, plus applicable margins. Applicable margins, if we choose to use the LIBOR or the Index Rate, can range from 2.75% to 3.75% or 1.50% to 2.50%, respectively, depending on the quarterly adjustments that are based on our consolidated financial performance, commencing with the quarter ending March 31, 2004. As of December 31, 2005, the interest rate under the revolving lines of credit, including the applicable margin, ranged from 6.84% to 9.25%. We recorded interest expense, including amortization of deferred financing costs, under these senior credit facilities in the aggregate amount of $2.3 million, $2.0 million and $4.6 million in 2005, 2004 and 2003, respectively. As of December 31, 2005, accrued interest related to the senior credit facility amounted to $0.5 million.

        On February 10, 2004, in connection with the prepayment of the outstanding balances under the senior credit agreement, we also recorded additional interest expense of $3.6 million relating to the write-off of the remaining related unamortized deferred financing costs of $3.1 million and a financing fee of $0.5 million paid to the banks.

        Borrowings under the senior credit facilities are secured by the stock of certain of our U.S. and European subsidiaries, substantially all of our intellectual property rights and the assets of our business in the U.S. and Europe, excluding those assets of Orgenics Ltd., our Israeli subsidiary, Inverness Medical Shanghai Co., Ltd., our subsidiary in China, Inverness Medical Australia Pty. Ltd., our Australian subsidiary and Unipath Scandinavia AB, our Swedish subsidiary, and the stock of Orgenics Ltd. and certain smaller subsidiaries. Under the senior credit agreement, as amended, we must comply with various financial and non-financial covenants. The primary financial covenants pertain to, among other things, fixed charge coverage ratio, capital expenditure, various leverage ratios, earnings before interest, taxes, depreciation and amortization ("EBITDA") and minimum cash requirement. Additionally, the senior credit agreement currently prohibits us from paying dividends. As of December 31, 2005, we were in compliance with the covenants.

(b) Senior Subordinated Notes, 8.75%, Principal Amount $150.0 million

        On February 10, 2004, we completed the sale of $150.0 million of 8.75% Bonds due 2012 in a private placement to qualified institutional buyers. Net proceeds from this offering amounted to $145.9 million, which was net of underwriters' commissions of $4.1 million. Of the net proceeds, we used $125.3 million to repay all of our outstanding indebtedness and related financing fees under our primary senior credit facility (Note 6(a)) and $9.2 million to prepay our outstanding 9% subordinated promissory notes and related prepayment penalties (Note 6(d)). The remaining $11.4 million of proceeds was used for Bond offering expenses and general corporate purposes.

        The Bonds accrue interest from the date of their issuance, or February 10, 2004, at the rate of 8.75% per year. Interest on the Bonds are payable semi-annually in arrears on each February 15 and

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August 15, which commenced on August 15, 2004. In addition, under the related registration rights agreement, we were to cause the registration statement with the SEC with respect to a registered exchange offer to exchange the notes underlying the Bonds for new notes, to be declared effective under the Securities Act of 1933, as amended, within 240 days after the date of the Bonds issuance and consummate the exchange offer within 270 days after the date of the Bonds issuance. As we were unable to consummate the exchange offer until March 28, 2005, interest on the bonds increased by 0.25% point per year for the first 90-day period immediately following the default (from November 7, 2004 to February 4, 2005) and an additional 0.25% point per year until March 28, 2005. As of December 31, 2005, accrued interest related to the bonds amounted to $4.9 million.

        We may redeem the Bonds, in whole or in part, at any time on or after February 15, 2008, at redemption price equal to 100% of the principal amount plus a premium declining ratably to par, plus accrued and unpaid interest. In addition, prior to February 15, 2007, we may redeem up to 35% of the aggregate principal amount of the Bonds issued with the proceeds of qualified equity offerings at a redemption price equal to 108.75% of the principal amount, plus accrued and unpaid interest. If we experience a change of control, we may be required to offer to purchase the Bonds at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest. We might not be able to pay the required price for Bonds presented to us at the time of a change of control because our primary senior credit facility or other indebtedness may prohibit payment or we might not have enough funds at that time.

        The Bonds are unsecured and are subordinated in right of payment to all of our existing and future senior debt, including the guarantee of all borrowings under our senior credit facilities. The Bonds are effectively subordinated to all existing and future liabilities, including trade payables, of those of our subsidiaries that do not guarantee the Bonds.

        The Bonds are guaranteed by all of our domestic subsidiaries that are guarantors or borrowers under our primary senior credit facility. The guarantees are general unsecured obligations of the guarantors and are subordinated in right of payment to all existing and future senior debt of the applicable guarantors, which includes their guarantees of, and borrowings under our primary senior credit facility. See Note 20 for guarantor financial information.

        The indenture governing the Bonds contains covenants that will limit our ability and the ability of our subsidiaries to, among other things, incur additional indebtedness in the aggregate, subject to our interest coverage ratio, pay dividends or make other distributions or repurchase or redeem our stock, make investments, sell assets, incur liens, enter into agreements restricting our subsidiaries' ability to pay dividends, enter into transactions with affiliates and consolidate, merge or sell all or substantially all of our assets. These covenants are subject to certain exceptions and qualifications.

(c) Subordinated Promissory Notes, 10%, Principal Amount $20.0 million

        On September 20, 2002, we sold units ("Units") having an aggregate purchase price of $20.0 million to private investors to help finance the Wampole acquisition. Each Unit consisted of (i) a 10% subordinated promissory note (a "10% Subordinated Note") in the principal amount of $50,000 and (ii) a warrant to acquire 0.4 shares of our common stock at an exercise price of $13.54 per share. In the aggregate, we issued fully vested warrants to purchase 0.2 million shares of our common stock, which may be exercised at any time on or prior to September 20, 2012. Interest accrues at 10% per annum, compounded daily, on the outstanding principal amount and is payable quarterly in arrears on

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the first day of each calendar quarter, which started on October 1, 2002. The 10% Subordinated Notes mature on September 20, 2008, subject to acceleration in certain circumstances, and we may prepay the 10% Subordinated Notes at any time, subject to certain prepayment penalties. We may, at our option, repay the 10% Subordinated Notes and pay any prepayment penalty, if applicable, in cash or in shares of our common stock valued at 95% of the average closing price of such stock over the ten consecutive trading days immediately preceding the payment date. The 10% Subordinated Notes are expressly subordinated to up to $150.0 million of indebtedness for borrowed money incurred or guaranteed by our company plus any other indebtedness that we incur to finance an acquisition. As of December 31, 2005, accrued interest related to the 10% Subordinated Notes amounted to $0.5 million. All warrants issued in relation to this debt have been classified in equity, pursuant to the provisions of EITF No. 00-19, Determination of Whether Share Settlement Is within the Control of the Issuer for Purposes of Applying EITF Issue No. 96-13, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock.

        Among the purchasers of the 10% Subordinated Notes were three directors and officers of our company and an entity controlled by our chief executive officer, who collectively purchased Units that aggregated $1.9 million in principal amount and warrants to purchase an aggregate of 15,000 shares of our common stock.

(d) Subordinated Promissory Notes, 9%, Principal Amount $9 million, and Convertible Subordinated Promissory Notes, 3%, Principal Amount $6 million

        On September 20, 2002, also in connection with the financing of the Wampole acquisition, we sold subordinated promissory notes in an aggregate principal amount of $9.0 million (the "9% Subordinated Notes") and subordinated convertible promissory notes in an aggregate principal amount of $6.0 million (the "3% Convertible Notes") to private investors. The 9% Subordinated Notes and 3% Convertible Notes bore interest at 9% and 3% per annum, respectively, on the outstanding principal balance. We recorded interest expense, including amortization of deferred financing costs, on these notes of $0.5 million and $1.0 million in 2004 and 2003, respectively.

        On February 10, 2004, we prepaid the 9% Subordinated Notes with the proceeds from the Bond issuance (Note 6(b)). The total payment made on the prepayment date aggregated $9.3 million, which represented the principal balance outstanding plus accrued and unpaid interest as well as a prepayment penalty of $0.2 million, which equated to 2% of the principal balance repaid. The prepayment penalty along with the remaining unamortized deferred financing cost write-off, aggregating $0.2 million, was charged to interest expense in February 2004.

        The 3% Convertible Notes were set to mature on September 20, 2008, subject to acceleration in certain circumstances. In addition, the outstanding principal amount and unpaid interest on the 3% convertible notes would automatically convert into common stock at a conversion price equal to $17.45 if, at any time after September 20, 2004, the average closing price of our common stock in any consecutive thirty day period was greater than $22.67, which event occurred on December 8, 2004. Consequently, on December 8, 2004, the 3% Convertible Notes and accrued and unpaid interest converted into 0.3 million shares of our common stock.

        An entity controlled by our chief executive officer purchased 3% Convertible Notes in the aggregate principal amount of $3.0 million.

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(e) IMN Credit Facilities

        In connection with the acquisition of IMN, we assumed IMN's borrowings under a senior credit agreement ("IMN Credit Agreement"). Pursuant to the IMN Credit Agreement, as amended, IMN could borrow up to $15.0 million under a revolving credit commitment and $4.2 million under a term loan commitment, subject to specified borrowing base limitations. In October 2004, we repaid the then outstanding borrowings under the IMN Credit Agreement of $14.2 million using borrowings under our senior credit facility (Note 6(a)) and terminated the IMN Credit Agreement. Interest expense, including amortization of deferred financing costs, related to borrowings under the IMN Credit Agreement amounted to $0.7 million and $0.8 million in 2004 and 2003, respectively. Upon repayment of borrowings under the IMN Credit Agreement, IMN became a U.S. credit party under our senior credit facility (Note 6(a)) and a guarantor under the Bonds (Notes 6(b) and 20).

(f) IMN Bonds Payable

        Also in connection with the acquisition of IMN, we assumed IMN's bonds payable ("IMN Bonds"). The bonds were payable in various installments through June 30, 2007 and the bonds payable balance bore interest at 6.90%. Interest expense, including amortization of deferred financing costs, related to the IMN Bonds amounted to $0.1 million during both 2004 and 2003. In October 2004, we prepaid the outstanding principal balances and any unpaid interest under the IMN Bonds Payable, aggregating $1.6 million, with borrowings from the senior credit facilities (Note 6(a)).

(g) Maturities of Long-term Debt

        The following is a summary of the maturities of long-term debt outstanding on December 31, 2005:

	(in thousands)
2006	$	2,367
2007		143
2008		109,018
2009		—
2010		—
Thereafter		150,000
		261,528
Less: Unamortized original issue discount		(544	)
	$	260,984

(7) Capital Leases

        Our subsidiary IMN maintains a capital lease for its warehouse and distribution facility, which expires in July 2008 and is renewable for two successive five-year periods. This lease was classified as a capital lease as a result of a sale-leaseback transaction that IMN entered into prior to our acquisition of IMN. In July 2005, the facility and the related capital lease were transferred to another subsidiary of ours, IMI Nutritionals. The aggregate monthly minimum payments remaining under this capital lease are $1.5 million as of December 31, 2005. In addition, we have various other capital leases for certain machinery and equipment and computer equipment that expire at various dates through 2009, with

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remaining aggregate monthly minimum payments of $0.2 million. The following is a schedule of the future minimum lease payments under the capital leases, together with the present value of such payments as of December 31, 2005:

	(in thousands)
2006	$	644
2007		643
2008		392
2009		12
2010		—
Total future minimum lease payments		1,691
Less: Imputed interest		(171	)
Present value of future minimum lease payments		1,520
Less: Current portion		(542	)
	$	978

        At December 31, 2005, the capitalized amounts of the building, machinery and equipment and computer equipment under the capital leases were as follows:

	(in thousands)
Machinery, laboratory equipment and tooling	$	198
Buildings		2,186
		2,384
Less: Accumulated amortization		(1,322	)
	$	1,062

        The amortization expense of assets recorded under capital leases is included in depreciation and amortization expense of property, plant and equipment.

(8) Postretirement Benefit Plans

(a) Employee Savings Plans

        Our company and several of our U.S. based subsidiaries sponsor various 401(k) savings plans, to which eligible domestic employees may voluntarily contribute a portion of their income, subject to statutory limitations. In addition to the participants' own contributions to these 401(k) savings plans, we match such contributions up to a designated level. Total matching contributions related to employee savings plans were $0.5 million, $0.4 million and $0.3 million in 2005, 2004 and 2003, respectively.

(b) UK Pension Plans

        Our subsidiary in England, Unipath Ltd. ("Unipath"), adopted a pension plan (the "Unipath Pension Scheme") in December 2002. The Unipath Pension Scheme consists of two parts: (i) the defined benefit section (the "Defined Benefit Plan"), and (ii) the defined contribution section (the

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"Defined Contribution Plan"). Employees of Unipath were allowed to join the Unipath Pension Scheme starting on December 1, 2002.

        As part of the purchase agreement of the Unipath business in December 2001, we agreed to establish a new defined benefit pension plan for the acquired employees based in England, who are former participants of the Unilever pension plan (the "Acquired UK Employees"), and to continue to accumulate benefits under such plan for a period of at least three years after the acquisition date of the Unipath business. Consequently, the Defined Benefit Plan was established as part of the Unipath Pension Scheme, which covers the Acquired UK Employees during the last two years of the three year post-acquisition period starting on December 1, 2002. During the first year of the three year post-acquisition period through November 2002, the Acquired UK Employees continued to accumulate benefits under the Unilever pension plan, to which Unipath contributed $1.9 million in that period.

        At the time of the acquisition, pursuant to SFAS No. 87, Employer's Accounting for Pensions, and SFAS No. 88, Employer's Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits, we recorded an unfunded pension liability of $3.7 million as part of the purchase price of the Unipath business (withdrawal obligation). Such unfunded pension liability represented the excess of the benefit obligation, or $20.5 million over the fair value of the plan assets, or $16.8 million, initially allocated by Unilever to the plan assets for the benefit of the Acquired UK Employees. As some of the Acquired UK Employees were terminated under our restructuring plan upon acquisition, the unfunded pension liability initially recorded by us, or $3.7 million, was reduced by the portion of these employees' severance pay-out that represented pension benefits, or $1.1 million, which was reclassified to severance costs for purposes of aggregating the purchase price of the Unipath business. The net remaining unfunded pension liability of $2.6 million is included in the benefit obligation in the tables which follow.

        Through November 2004, the Acquired UK Employees could elect, at their option, to transfer contributions and benefits from the Unilever pension plan to the Defined Benefit Plan. As required, we had established the Defined Benefit Plan and believed that the benefits available under this plan were no less favorable to the Acquired UK Employees than Unilever's plan and we maintained these benefits for the period required by the acquisition agreement. Nevertheless, we were engaged in a dispute with Unilever over the equity of benefits under the old and new plans.

        During May 2004, we entered into mediation with Unilever to resolve the differences over the relative levels of benefits in Unilever's Plan and the Defined Benefit Plan. The mediation produced a settlement agreement between Unilever and us dated August 17, 2004. This settlement agreement provided that we would match certain benefits available in the Unilever plan to ensure that the plan was viewed as being no less favorable than the Unilever plan for employees considering whether to transition in November of 2004. These changes increased the benefits available to a retiree under the Defined Benefit Plan to: (i) allow for retirees upon retirement to receive unreduced benefits at age 60 rather than age 65; and (ii) calculate the final pension benefit payable to retirees based on the retirees salary at the date on which pension benefits ceased accruing under the Unipath plan (December 2004) plus 1% over inflation for each year of service after December 2004 until retirement.

        In November 2004, the final number of employees who elected to transfer into the Defined Benefit Plan from the Unilever plan was determined. Substantially fewer Acquired UK Employees transferred into the Defined Benefit Plan than were previously anticipated to transfer when the

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unfunded pension liability was initially established in 2001. As a result, an actuarial gain of $1.8 million was recorded and deferred as a component of other comprehensive income in 2004.

        The following table sets forth an analysis of the changes in the benefit obligation, the plan assets and the funded status of the Defined Benefit Plan during 2005 and 2004:

			2005			2004
			(in thousands)
Change in projected benefit obligation
	Benefit obligation at beginning of year		$	11,646		$	5,003
	Service cost			—			1,712
	Interest cost			583			183
	Plan participants' contributions			—			577
	Plan amendments			—			4,926
	Actuarial (gain) loss			258			(1,315	)
	Benefits paid			(122	)		(128	)
	Foreign exchange impact			(1,221	)		688
		Benefit obligation at end of year	$	11,144		$	11,646
Change in accumulated benefit obligation
	Benefit obligation at beginning of year		$	8,304		$	5,003
	Service cost			—			1,712
	Interest cost			583			183
	Plan participants' contributions			—			577
	Plan amendments			—			1,740
	Actuarial (gain) loss			258			(1,315	)
	Benefits paid			(122	)		(128	)
	Foreign exchange impact			(882	)		532
		Benefit obligation at end of year	$	8,141		$	8,304
Change in plan assets
	Fair value of plan assets at beginning of year		$	5,327		$	1,964
	Actual return on plan assets			1,316			73
	Employer contribution			546			2,536
	Plan participants' contributions			—			577
	Benefits paid			(122	)		(128	)
	Foreign exchange impact			(631	)		305
		Fair value of plan assets at end of year	$	6,436		$	5,327
Funded status			$	(4,708	)	$	(6,319	)
Unrecognized net actuarial (gain) loss				(1,414	)		(780	)
Unrecognized prior service cost				5,967			6,642
		Net amount recognized	$	(155	)	$	(457	)

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        The net amount recognized in the accompanying consolidated balance sheet that relates to the Defined Benefit Plan during 2005 and 2004 consists of:

		2005			2004
		(in thousands)
Accrued benefit liability		$	(1,672	)	$	(3,085	)
Accumulated other comprehensive income			—			—
Intangible asset			1,517			2,628
	Net amount recognized	$	(155	)	$	(457	)

        The measurement date used to determine plan assets and benefit obligations for the Defined Benefit Plan was December 31, 2005 and 2004.

        The following table provides the weighted-average actuarial assumptions:

		2005		2004
Assumptions used to determine benefit obligations:
	Discount rate	4.80	%	5.30	%
	Rate of compensation increase	3.55	%	3.55	%
Assumptions used to determine net periodic benefit cost:
	Discount rate	5.30	%	5.50	%
	Expected return on plan assets	6.84	%	6.00	%
	Rate of compensation increase	3.55	%	4.25	%

        The actuarial assumptions are reviewed on an annual basis. The overall expected long-term rate of return on plan assets assumption was determined based on historical investment return rates on portfolios with a high proportion of equity securities.

        The annual cost of the Defined Benefit Plan is as follows:

		2005			2004
		(in thousands)
Service cost		$	—		$	1,712
Interest cost			583			183
Expected return on plan assets			(360	)		(183	)
Recognition of prior service cost			—			1,099
Amortization of net loss			54			24
	Net periodic benefit cost	$	277		$	2,835

        The plan assets of the Defined Benefit Plan comprise of a mix of stocks and fixed income securities and other investments. At December 31, 2005, these stocks and fixed income securities represented 70% and 30%, respectively, of the market value of the pension assets. We expect to contribute approximately 0.3 million British Pounds Sterling (or $0.5 million at December 31, 2005) to the Defined Benefit Plan in 2006. We expect benefits to be paid to plan participants of approximately $0.1 million per year for each of the next five years and for benefits totaling $0.2 million to be paid annually for the five years thereafter.

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        Unipath contributed $1.1 million, $0.3 million and $0.2 million to the Defined Contribution Plan, which was recognized as an expense in the accompanying consolidated statement of operations, in 2005, 2004 and 2003, respectively.

(9) Derivative Instrument

        We entered into an interest rate swap agreement with one of our lenders, effective February 25, 2002, which was intended to protect our long-term debt on which interest was charged at the LIBOR against fluctuation in such rate. Under the interest rate swap agreement, the LIBOR was set at a minimum of 3.36% and a maximum of 5.00%. Because the interest rate swap agreement did not qualify as a hedge for accounting purposes under SFAS No. 133 and related amendments, we recorded income of $0.7 million and $0.5 million during 2004 and 2003, respectively, to mark to market this interest rate swap agreement. The adjustment to fair value of the interest rate swap agreement was recorded as a component of interest expense in the accompanying consolidated statements of operations. The interest rate swap agreement expired on December 30, 2004.

        During 2005, we entered into forward exchange contracts totaling $24.9 million with monthly maturity dates of January 18, 2005 to February 15, 2006. Maturing forward exchange contracts were used to lock in U.S. dollar to British Pound Sterling (GBP) or U.S. dollar to Euro exchange rates and hedge anticipated intercompany sales.

        The change in value of the derivative was analyzed quarterly for changes in the spot and forward rates based on rates given by the issuing financial institution for each quarter end date. The effective portion of the gain or loss on the derivative is reported in other comprehensive income ("OCI") during the period prior to the forecasted purchase or sale. For forecasted sales on credit, the amount of income ascribed to each forecasted period was reclassified from OCI to income or expense on the date of the sale. The income or cost ascribed to each period encompassed within the periods of the recognized foreign-currency-denominated receivable or payable was reclassified from OCI to income or expense at the end of each reporting period. The changes in the derivative instrument's fair values from inception of the hedge were compared to the cumulative change in the hedged item's fair value attributable to the risk hedged. Effectiveness was based on the change in the spot rates.

        At December 31, 2005, we had two forward exchange contracts outstanding for $1.5 million each against the GBP. The contracts maturing during January and February 2006 effectively hedge existing receivables and therefore are considered fair value hedges and accordingly, as of December 31, 2005, the forward contracts remain effective against future exchange rate changes.

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(10) Commitments and Contingencies

(a) Operating Leases

        We have operating lease commitments for certain of our facilities and equipment that expire on various dates through 2021. The following schedule outlines future minimum annual rental payments under these leases at December 31, 2005:

	(in thousands)
2006	$	7,551
2007		6,140
2008		4,773
2009		4,281
2010		3,788
Thereafter		30,393
	$	56,926

        Rent expense relating to operating leases was approximately $10.0 million, $7.4 million and $5.8 million during 2005, 2004 and 2003, respectively.

        The operations of the Unipath business in England are currently housed in a 150,000 square foot manufacturing, research and office facility in Bedford, England. The lease of this facility is between Unilever and a third party landlord and the Unipath business in England continues to use the facility pursuant to an agreement with Unilever in connection with the acquisition. Future minimum annual rent payments under this facility lease range from 1.5 million British Pounds Sterling to 1.6 million British Pounds Sterling (approximately $2.6 million to $2.7 million) with upward adjustments every 5 years, but only to the extent the rent is below market rate. The lease expires in December 2021. Unilever has agreed to use its best efforts to obtain the landlord's consent, which consent is required under the lease agreement and cannot be unreasonably withheld, so it may assign the lease to us for our remaining term. Because we are required to pay all amounts owed under the lease, as agreed upon at the acquisition, we have included in the table above all future minimum lease payments under this facility lease. If Unilever is unable to successfully assign the lease to us or otherwise enable us to realize the benefit of our lease of the Bedford facility, we may be forced to renegotiate a lease of this facility on substantially less favorable terms, seek alternative, more costly means of producing our products or suffer other adverse effects to our business.

(b) Capital Expenditure Commitments

        At December 31, 2005, we had total outstanding non-cancelable equipment purchase commitments of $5.0 million.

(c) Legal Proceedings

        We currently are not a party to any material pending legal proceedings.

        Because of the nature of our business, we may be subject at any particular time to consumer product claims or various other lawsuits arising in the ordinary course of our business, including employment matters, and expect that this will continue to be the case in the future. Such lawsuits generally seek damages, sometimes in substantial amounts, for personal injuries or other commercial or

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employment claims. In addition, we aggressively defend our patent and other intellectual property rights. This often involves bringing infringement or other commercial claims against third parties. These suits can be expensive and result in counterclaims challenging the validity of our patents and other rights.

        In addition, in December 2005 we learned that the Enforcement Division of the Securities and Exchange Commission (SEC) had issued a formal order of investigation in connection with the previously disclosed revenue recognition matter at one of our diagnostic divisions, and we subsequently received a subpoena for documents. We believe that we fully responded to the subpoena and we will continue to fully cooperate with the SEC's investigation. We cannot predict whether the SEC will seek additional information or what the outcome of its investigation will be.

        On February 2, 2005, our IMN subsidiary received $8.4 million representing its pro rata share of the net funds which were disbursed in connection with the settlement of class action suits against several raw material suppliers. The class action suits alleged that certain defendants unlawfully agreed to fix prices of certain vitamin products sold in the United States. IMN's recovery represented 7.3% of its approved purchases from the settling parties during the period in which the price fixing was alleged. The $8.4 million is included in other income, net, in the accompanying consolidated statement of operations for the year ended December 31, 2005.

        On April 6, 2005, we entered into a binding settlement agreement of our pending litigation with Princeton BioMeditech Corporation ("PBM") pursuant to which we paid $2.5 million in resolution of all pending litigation with PBM. PBM also received an option to permanently settle certain claims against our ABI subsidiary, that are not part of any pending case in exchange for $1.8 million of collaborative research and development funding from us. In connection with this settlement arrangement, we recorded a $4.2 million charge which is included in other income, net, in the accompanying consolidated statement of operations for the year ended December 31, 2005.

        On April 27, 2005, we entered into a settlement agreement with Quidel Corporation ("Quidel") terminating all domestic and international intellectual property litigation with them. Under the settlement agreement, we received a net payment of $17.0 million and net future royalties from Quidel at 8.5%, in exchange for a license to all of our current and future patents which embody lateral flow technology for all diagnostic products other than for cardiology testing and for consumer/over-the-counter women's health (except that diagnostics for women's infectious diseases are within the licensed field of use). Quidel and its affiliates have granted a net royalty free cross-license of their current and future patents that embody lateral flow technology to us and all of our affiliates for all applications. The payment of $17.0 million is included in our financial results for the year ended December 31, 2005, of which $15.0 million related to periods prior to 2005 and has been included in other income, net, and the remainder has been recorded as license revenues.

        On June 16, 2005, we entered into a license arrangement with British BioCell International Limited ("British BioCell"). As part of this agreement, we licensed to them our lateral flow intellectual property for use in certain defined areas not competitive with existing businesses in return for royalties on future sales totaling between 10% and 25% of net revenues, depending on the amounts of revenue earned. As part of the arrangement, we also received an option to acquire 25% of British BioCell's parent company, BBI Holdings, PLC, a UK public company. We valued the option at $2.6 million using the Black-Scholes option pricing model and have included the value received in other income, net, for the year ended December 31, 2005. The investment, which is not readily convertible to cash, has been

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recorded at cost and will be evaluated at least annually for impairment, or more frequently, if events and circumstances indicate.

        On September 23, 2005, an arbitrator issued a final award against our IMN subsidiary in favor of Sunlight Distribution, Inc. for damages in the amount of $1.8 million plus interest, fees and costs arising out of a distribution arrangement dated September 1996. We have accrued $2.9 million as of December 31, 2005 to provide for the final award. The corresponding expenses were recorded in other income, net, for the year ended December 31, 2005.

(11) Other Arrangements

(a) Co-development Agreement with ITI Scotland Limited

        On February 25, 2005, we entered into a co-development agreement with ITI Scotland Limited ("ITI"), whereby ITI agreed to provide us with approximately 30 million British Pounds Sterling (or $51.8 million at December 31, 2005) over three years to partially fund research and development programs focused on identifying novel biomarkers and near-patient and home use tests for cardiovascular and other diseases ("the programs"). We agreed to invest 37.5 million British Pounds Sterling (or $64.7 million at December 31, 2005) in the programs over the next three years. Through our subsidiary, Stirling Medical Innovations Limited ("Stirling"), we established a new research center in Stirling, Scotland, where we will consolidate many of our existing cardiology programs and ultimately commercialize products arising from the programs. ITI and Stirling will have exclusive rights to the developed technology in their respective fields of use. As of December 31, 2005, we had received approximately $22.5 million in funding from ITI. As qualified expenditures are made under the co-development arrangement, we recognize the fee earned during the period as a reduction of our related expenses, subject to certain limitations. For the fiscal year ended December 31, 2005, we recognized $18.1 million of reimbursements, of which $17.2 million offset our research and development spending and $0.9 million reduced our general, administrative and marketing spending incurred by Stirling. Funds received from ITI in excess of amounts earned are included in accrued expenses and other current liabilities, the balance of which was $4.4 million as of December 31, 2005.

(b) Joint Venture in China

        In September 2004, we began manufacturing a small amount of product in China through a third party. In February 2005, we entered into a joint venture with this Chinese manufacturer and acquired controlling ownership of the manufacturing facility. We consolidate 100% of this entity.

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(12) (Loss) Income per Share

        The following table sets forth the computation of basic and diluted (loss) income per share:

		2005			2004			2003
					(restated)			(restated)
		(in thousands, except per share amounts)
Numerator:
Net (loss) income		$	(19,209	)	$	(16,596	)	$	8,653
Dividends, redemption interest and amortization of beneficial conversion feature related to Series A Preferred Stock (Note 13(b))			—			(749	)		(958	)
Net (loss) income available to common stockholders—basic and diluted		$	(19,209	)	$	(17,345	)	$	7,695
Denominator:
Denominator for basic (loss) income per share—weighted average shares			24,358			19,969			15,711
Effect of dilutive securities:
	Employee stock options		—			—			635
	Warrants		—			—			213
	Restricted stock and escrow shares		—			—			931
Potential dilutive common shares			—			—			1,779
Denominator for dilutive (loss) income per share—adjusted weighted average shares and assumed conversions			24,358			19,969			17,490
Net (loss) income per share—basic		$	(0.79	)	$	(0.87	)	$	0.49
Net (loss) income per share—diluted		$	(0.79	)	$	(0.87	)	$	0.44

        We had the following potential dilutive securities outstanding on December 31, 2005: (a) options and warrants to purchase an aggregate of 4.7 million shares of our common stock at a weighted average exercise price of $18.44 per share and (b) 104,000 shares of common stock held in escrow. Potential dilutive securities were not included in the computation of diluted loss per share in 2005 because the inclusion thereof would be antidilutive.

        We had the following potential dilutive securities outstanding on December 31, 2004: options and warrants to purchase an aggregate of 4.3 million shares of our common stock at a weighted average exercise price of $16.43 per share. Potential dilutive securities were not included in the computation of diluted loss per share in 2004 because the inclusion thereof would be antidilutive.

        We had the following potential dilutive securities outstanding on December 31, 2003: (a) options and warrants to purchase an aggregate of 0.8 million shares of our common stock at a weighted average exercise price of $22.87 per share, (b) 3% Convertible Notes convertible into an aggregate of 0.3 million shares of our common stock and (c) Series A Preferred Stock convertible into an aggregate of 0.4 million shares of our common stock. Such potential dilutive securities were not included in the calculation of diluted income per share in 2003 because the inclusion thereof, together with the add back of the related interest and dividends, would be antidilutive.

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(13) Stockholders' Equity

(a) Common Stock

        As of December 31, 2005, we had 50.0 million shares of common stock, $0.001 par value, authorized, of which approximately 27.5 million shares were issued and outstanding, 3.9 million shares were reserved for issuance upon grant and exercise of stock options under current stock option plans and 0.8 million shares were reserved for issuance upon exercise of outstanding warrants.

        On August 1, 2005, we sold 4.0 million shares of our common stock at $23.76 per share to funds affiliated with three accredited institutional investors in a private placement. Proceeds from the private placement were approximately $92.8 million, net of issuance costs of $2.5 million. Of this amount, we repaid principal and interest outstanding under our senior credit facility of $84.4 million, with the remainder of the net proceeds retained for general corporate purposes.

        On February 8 and 9, 2006, we sold 3.4 million shares of our common stock at $24.41 per share to funds affiliated with 14 accredited institutional investors in a private placement. Proceeds from the private placement were approximately $79.3 million, net of issuance costs of $3.7 million. Of this amount, we repaid principal and interest outstanding under our senior credit facility of $74.1 million, with the remainder of the net proceeds retained for general corporate purposes.

        In connection with the February 2006 private placements of common stock, we agreed to use commercially reasonable efforts to register the private placement shares prior to June 8, 2006. In the event that we are unable to take a registration statement effective prior to June 8, 2006, we will pay an illiquidity discount equal to 1% of the February 2006 offering proceeds per month until the earlier of (i) the date that the registration statement is declared effective or (ii) February 8, 2008.

(b) Preferred Stock

        As of December 31, 2005, we had 5.0 million shares of preferred stock, $0.001 par value, authorized, of which 2.7 million shares were designated as Series A Preferred Stock, $0.001 par value. On March 6, 2002, we sold to private investors 0.5 million shares of Series A Preferred Stock at $39.01 per share for gross proceeds of $20.8 million. On December 20, 2001, we sold to private investors 2.0 million shares of Series A Preferred Stock at $30.00 per share for gross proceeds of $59.9 million. During 2004, 2003 and 2002, 0.2 million, 0.1 million and 2.2 million shares of Series A Preferred Stock, respectively, were converted into 0.4 million, 0.2 million and 4.4 million shares of our common stock, respectively. No shares of Series A Preferred Stock were outstanding as of December 31, 2005.

        Each share of Series A Preferred Stock accrued dividends on a quarterly basis at $2.10 per annum, but only on those trading days when the closing price of our common stock was less than $15.00. As a result, we recorded dividends of $33,000 during 2003, which reduced earnings available to common stockholders in the computation of earnings per share (Note 12). No dividends were recorded in 2004, as our stock price did not close below $15.00 during the period in 2004 in which shares of Series A Preferred Stock were outstanding. Dividends accrued were payable only if declared by the Board of Directors. No dividends were declared by the Board of Directors prior to the conversion of any of the shares of Series A Preferred Stock.

        The effective purchase price for the shares of common stock underlying the Series A Preferred Stock issued on March 6, 2002 and December 20, 2001 represented a discount of $2.70 (or 12%) and $2.00 (or 11.8%), respectively, to the fair value of our common stock on the respective issuance dates. In accordance with EITF Issue No. 98-5 and EITF Issue No. 00-27, we recorded a beneficial

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conversion feature in the form of a discount on the two issuances of Series A Preferred Stock of $2.9 million and $8.0 million, respectively, which was being amortized to accumulated deficit over the redemption period, as discussed below. The amortization of this discount reduces earnings available to common stockholders in the computation of earnings per share. In 2005, 2004 and 2003, we amortized $0, $0.7 million and $0.5 million, respectively, of such discount, of which $0, $0.7 million, and $0.4 million, respectively, represented acceleration of amortization due to conversions of Series A Preferred Stock.

        Had the Series A Preferred Stock not been converted to common stock, the redemption price per share of Series A Preferred Stock would have been equal to $30.00 plus accrued redemption interest calculated at 5% per annum from the date of issuance. We recorded accrued redemption interest of $0, $10,000, and $0.4 million in 2005, 2004 and 2003, respectively, which reduced earnings available to common stockholders in the computation of earnings per share (Note 12).

(c) Stock Options and Awards

        In 2001, we adopted the 2001 Stock Option and Incentive Plan (the "2001 Plan") which allows for the issuance of up to 6.1 million shares of common stock and other awards, as amended. The 2001 Plan is administered by the Compensation Committee of the Board of Directors in order to select the individuals eligible to receive awards, determine or modify the terms and conditions of the awards granted, accelerate the vesting schedule of any award and generally administer and interpret the 2001 Plan. The key terms of the 2001 Plan permit the granting of incentive or nonqualified stock options with a term of up to ten years and the granting of stock appreciation rights, restricted stock awards, unrestricted stock awards, performance share awards and dividend equivalent rights. The 2001 Plan also provides for option grants to non-employee directors and automatic vesting acceleration of all options and stock appreciation rights upon a change in control, as defined by the 2001 Plan. As of December 31, 2005, there were 0.4 million shares available for future grant under the 2001 plan.

        On August 15, 2001, we sold to our chief executive officer 1.2 million shares of restricted common stock at a price of $9.13 per share. Two-thirds of the restricted stock, or 0.8 million shares, vest ratably over 36 months; the remaining one-third, or 0.4 million shares, vests ratably over 48 months. Except for the par value of the common stock, which was paid in cash, the chief executive officer purchased the restricted stock with a five-year promissory note, which, for accounting purposes, was treated as a non-recourse note. The total interest under the promissory note is fully recourse to our chief executive officer. The balance of the promissory note is recorded as a note receivable and is classified in stockholders' equity in the accompanying consolidated balance sheets. The note is due and payable on August 16, 2006 and bears interest at an annual rate of 4.99%. Interest income recorded under this note amounted to $0.5 million for each of the years ended December 31, 2005, 2004 and 2003. We accounted for this arrangement pursuant to FASB Interpretation ("FIN") No. 44, Accounting for Certain Transactions Involving Stock Compensation, EITF Issue No. 95-16, Accounting for Stock Compensation Arrangements with Employer Loan Features under APB Opinion No. 25, and EITF Issue No. 00-23, Issues Related to Accounting for Stock Compensation under APB Opinion No. 25 and FASB Interpretation No. 44. Accordingly, on November 20, 2001, the date on which this arrangement was approved by the stockholders, we measured total compensation expense to be approximately $10.6 million based on the intrinsic value of the stock on that date. The amount of compensation expense is deferred and amortized ratably over the vesting periods of the restricted stock because, under the terms of the original restricted stock agreement, we could repurchase unvested shares at cost

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in certain circumstances. In February 2002, the terms of the restricted stock agreement were amended, pursuant to which we may repurchase unvested shares at the then fair value in certain circumstances. Also, in connection with this amendment, the chief executive officer surrendered 50,000 shares of his nonqualified stock options. Because the repurchase rights on unvested shares are at fair value subsequent to the amendment in February 2002, we fully amortized the remaining portion of the deferred compensation expense associated with the restricted stock in 2002. Additionally, this amendment resulted in a new measurement date for this security. In the event that the employee ceases employment with our company prior to the full vesting of this security, additional compensation expense would be recorded.

        In August 2001, we granted two nonqualified stock options to purchase an aggregate of 0.8 million shares of common stock at an exercise price of $6.20 per share to two other key executive officers. These options were set to expire on January 31, 2002. In December 2001, the executive officers exercised these options (one fully; one partially) by paying cash in the amount of par value and delivering promissory notes for the difference, as permitted pursuant to the terms of the original grant. For accounting purposes, the promissory notes were treated as non-recourse notes. The balance of the promissory notes is recorded as a note receivable and classified in stockholders' equity in the accompanying consolidated balance sheets. The notes are due and payable on December 4, 2006 and bear interest at an annual rate of 3.97%, the applicable federal rate for a five-year note in effect during the month of exercise. Interest income recorded under these notes amounted to $0.2 million for each year ended December 31, 2005, 2004 and 2003, respectively. Shares issued upon exercise vest ratably over 36 months and are fully vested at December 31, 2004.

        Upon the split-off and merger in November 2001 (Note 1), each outstanding IMT stock option (the "IMT Options") was exchanged for an option to purchase shares of our common stock at an exchange ratio of 0.20 and an option to purchase shares of Johnson & Johnson common stock at an exchange ratio of 0.5395. The option split also required that the ratio of intrinsic value to market value for each option be the same. Consequently, the new exercise prices of our options and the Johnson and Johnson options were determined based on the relative fair values of our common stock and the Johnson & Johnson common stock on the first trading day immediately after the split-off and merger, taking into consideration the relative exchange ratios. Accordingly, the total number of shares of common stock underlying stock options that we issued in the split-off was 0.9 million. Concurrent with the option split, (1) the vesting for all our options was accelerated and (2) the period of exercisability for IMT employees who did not become employees of our company was extended. Such actions are deemed to be award modifications pursuant to FIN No. 44. Under FIN No. 44, we measured compensation at the date of the award modifications based on the intrinsic value of the option and recognized (or will recognize in the future) such compensation if, absent the modifications, the award would have been forfeited pursuant to the award's original terms. For IMT employees who did not become employees of our company, the recognition of this charge was immediate and recorded as stock-based compensation in 2001. For IMT employees who became our employees, we have measured this potential charge, a maximum of $1.2 million, at the date of the modification, but will not record any such compensation charge unless and until such time as these employees terminate their employment with us. At such time, the portion of the award that, absent the modification, would have been forfeited under the award's original terms would be recognized as compensation expense. During 2003, we recognized stock-based compensation expense related to certain of the IMT employees who

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became our employees in the amount of $2,000, as such employees terminated their employment with us. No such stock-based compensation charge was recognized in 2005 and 2004.

        The following summarizes all stock option activity during each of the years ended December 31:

		2005				2004				2003
		Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price
		(in thousands)				(in thousands)				(in thousands)
Outstanding at January 1		3,619		$	16.58	3,398		$	15.85	2,754		$	14.84
	Granted	809		$	26.67	394			21.75	1,090		$	18.71
	Exercised	(331	)	$	11.94	(90	)		10.40	(271	)	$	11.49
	Forfeited	(195	)	$	21.48	(83	)		18.12	(175	)	$	24.62
Outstanding at December 31		3,902		$	18.82	3,619		$	16.58	3,398		$	15.85
Exercisable at December 31		2,424		$	16.19	2,141		$	15.06	1,591		$	14.10

        The following represents additional information related to stock options outstanding and exercisable at December 31, 2005:

	Outstanding				Exercisable
Exercise Price	Number of Shares	Weighted Average Remaining Contract Life	Weighted Average Exercise Price		Number of Shares	Weighted Average Exercise Price
	(in thousands)	(in years)			(in thousands)
$1.25-$13.65	409	4.70	$	6.64	346	$	5.89
$14.58-$14.92	125	5.12	$	14.89	125	$	14.89
$15.35-$15.47	734	5.97	$	15.46	726	$	15.47
$15.55-$16.20	413	7.19	$	16.05	230	$	15.98
$16.46-$18.73	505	6.19	$	17.58	457	$	17.60
$19.55-$21.00	415	6.81	$	20.66	253	$	20.81
$21.15-$24.20	433	8.06	$	22.74	205	$	22.46
$24.25-$28.02	396	9.01	$	24.94	68	$	24.87
$28.03-$28.22	458	9.48	$	28.09	—	$	—
$29.41-$165.96	14	3.07	$	59.10	14	$	59.10
$1.25-$165.96	3,902	7.00	$	18.82	2,424	$	16.19

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(d) Warrants

        The following is a summary of all warrant activity during the three years ended December 31, 2005:

	Number of Shares		Exercise Price		Weighted Average Exercise Price
	(in thousands)
Warrants outstanding and exercisable, December 31, 2002	800		$	0.001-$21.28	$	13.98
Granted	10		$	9.89-$23.76	$	19.01
Exercised	(97	)	$	0.001-$22.57	$	2.46
Forfeited	(1	)	$	15.84	$	15.84
Warrants outstanding and exercisable, December 31, 2003	712		$	3.81-$23.76	$	15.62
Exercised	(9	)	$	11.55-$14.17	$	13.03
Forfeited	(4	)	$	9.89-$18.25	$	14.06
Warrants outstanding and exercisable, December 31, 2004	699		$	3.81-$23.76	$	15.66
Granted	75		$	24.00	$	24.00
Exercised	(7	)	$	5.50-$13.54	$	13.47
Forfeited	(9	)	$	14.15-$23.76	$	18.66
Warrants outstanding and exercisable, December 31, 2005	758		$	3.81-$24.00	$	16.47

        The following represents additional information related to warrants outstanding and exercisable at December 31, 2005:

	Outstanding and Exercisable
Exercise Price	Number of Shares	Weighted Average Remaining Contract Life	Weighted Average Exercise Price
	(in thousands)	(in years)
$3.81-$5.57	10	4.54	$	4.77
$7.37-$10.90	42	6.77	$	10.73
$13.54-$18.12	631	3.14	$	16.14
$24.00	75	9.25	$	24.00
	758	3.97	$	16.47

        The majority of the warrants included in the table above were issued in connection with debt and equity financings, or amendments thereto, of which warrants to purchase an aggregate of 0.5 million shares of our common stock were issued to officers and directors of our company or entities controlled by these officers and directors and were outstanding at December 31, 2005. The value of warrants

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issued in connection with debt financings has yielded original issue discounts and additional interest expense of $0.2 million for both 2005 and 2004. All outstanding warrants have been classified in equity, pursuant to the provisions of EITF No. 00-19.

(e) Employee Stock Purchase Plan

        In 2001, we adopted the 2001 Employee Stock Purchase Plan under which eligible employees are allowed to purchase shares of our common stock at a discount through periodic payroll deductions. Purchases may occur at the end of every six month offering period at a purchase price equal to 85% of the market value of our common stock at either the beginning or end of the offering period, whichever is lower. We may issue up to 0.5 million shares of common stock under this plan. At December 31, 2005, 0.2 million shares had been issued under this plan.

(f) Executive Bonus Plan

        In 2001, we adopted a stockholder approved executive bonus plan (the "Executive Bonus Plan") which was amended in February 2002. Pursuant to the Executive Bonus Plan, as amended, certain of our key executives were entitled to receive, on an annual basis, option grants to be awarded at fair value on date of grants if shares of our common stock attained certain targeted prices per share. Performance determinations were made at the end of each calendar year, starting with December 31, 2002 and ending with December 31, 2005. No performance targets were achieved as of December 31, 2005, the date on which this plan expired.

(14) Other Comprehensive Income

        SFAS No. 130, Reporting Comprehensive Income, establishes standards for the reporting and display of comprehensive income. In general, comprehensive income combines net income and other changes in equity during the year from non-owner sources. Accumulated other comprehensive income is recorded as a component of stockholders' equity. The following is a summary of the components of and

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changes in accumulated other comprehensive income as of December 31, 2005 and in each of the three years then ended:

		Cumulative Translation Adjustment (Note 2(b))			Pension Liability Adjustment (Note 8(b))			Other (i)			Accumulated Other Comprehensive Income (ii)
		(in thousands)
Balance at December 31, 2002		$	6,484		$	—		$	—		$	6,484
	Period change		5,627			(434	)		136			5,329
Balance at December 31, 2003			12,111			(434	)		136			11,813
	Period change		5,241			434			33			5,708
Balance at December 31, 2004			17,352			—			169			17,521
	Period change		(10,300	)		—			(169	)		(10,469	)
Balance at December 31, 2005		$	7,052		$	—		$	—		$	7,052

(i)

The $0.2 million included in other comprehensive income, represents unrealized gains on available-for-sales securities. The aggregate fair value of such securities was insignificant and was included in prepaid expenses and other current assets in the accompanying consolidated balance sheets. These securities were sold during fiscal year 2005.

(ii)

All of the components of accumulated other comprehensive income relate to our foreign subsidiaries. No adjustments for income taxes were recorded against other comprehensive income as we intend to permanently invest in our foreign subsidiaries in the foreseeable future.

(15) Income Taxes

        Our income tax provision in 2005, 2004 and 2003 mainly represents those recorded by us and certain of our U.S. subsidiaries and by our foreign subsidiaries Unipath Limited in the United Kingdom, Inverness Medical Eurasia in Ireland, Inverness Medical Japan in Japan, and Inverness Medical Switzerland GmbH in Switzerland. (Loss) income before income taxes consists of the following:

	2005			2004			2003
				(restated)			(restated)
	(in thousands)
United States	$	(40,582	)	$	(20,102	)	$	(817	)
Foreign		28,192			5,781		$	12,381
	$	(12,390	)	$	(14,321	)	$	11,564

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        Our primary temporary differences that give rise to the deferred tax asset and liability are net operating loss ("NOL") carryforwards, nondeductible reserves and accruals and differences in bases of the tangible and intangible assets. The income tax effects of these temporary differences are as follows:

				December 31,
				2005			2004
							(restated)
				(in thousands)
Deferred tax assets:
	NOL and capital loss carryforwards			$	71,926		$	46,758
	Tax credit carryforwards				833			833
	Nondeductible reserves				8,721			8,179
	Nondeductible accruals				10,199			10,312
	Difference between book and tax bases of tangible assets				932			212
	Difference between book and tax bases of intangible assets				5,616			19,004
		Gross deferred tax asset			98,227			85,298
			Less: Valuation allowance		(96,721	)		(81,607	)
Total deferred tax assets					1,506			3,691
Deferred tax liabilities:
	Difference between book and tax bases of tangible assets				2,171			2,382
	Difference between book and tax bases of intangible assets				16,710			10,214
		Total deferred tax liability			18,881			12,596
	Net deferred tax liability			$	17,375		$	8,905

        As of December 31, 2005, we had approximately $170.2 million of domestic NOL carryforwards and $26 million of foreign NOL and foreign capital loss carryforwards, which either expire on various dates through 2025 or can be carried forward indefinitely. These loss carryforwards are available to reduce future federal and foreign taxable income, if any. These loss carryforwards are subject to review and possible adjustment by the appropriate taxing authorities. Approximately $14.7 million of our foreign NOLs relate to CDIL. As a result of our closure of operations at CDIL, this NOL which is fully reserved at December 31, 2005, may never be realized. The domestic NOL carryforwards include approximately $71.2 million of pre-acquisition losses at IMN, Ischemia, Ostex and ADC. These pre-acquisition losses are subject to the Internal Revenue Service Code Section 382 limitation. Section 382 imposes an annual limitation on the use of these losses to an amount equal to the value of the company at the time of the ownership change multiplied by the long-term tax exempt rate. The valuation allowance relates to our U.S. NOLs and deferred tax assets and certain other foreign deferred tax assets and is recorded based upon the uncertainty surrounding their realizability, as these assets can only be realized via profitable operations in the respective tax jurisdictions.

        In accordance with SFAS No. 109, the accounting for the tax benefits of acquired deductible temporary differences and NOL carryforwards, which are not recognized at the acquisition date because a valuation allowance is established and which are recognized subsequent to the acquisitions, will be applied first to reduce to zero any goodwill and other non-current intangible assets related to the acquisitions. Any remaining benefits would be recognized as a reduction of income tax expense. As

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of December 31, 2005, $17.1 million of our deferred tax asset pertains to acquired companies, the future benefits of which will be applied first to reduce to zero any goodwill and other non-current intangible assets related to the acquisitions, prior to reducing our income tax expense. Included in the valuation allowance is approximately $2.6 million related to certain NOL carryforwards resulting from the exercise of employee stock options, the tax benefit of which, when recognized, will be accounted for as a credit to additional paid-in capital rather than a reduction of income tax.

        The estimated amount of undistributed earnings of our foreign subsidiaries is $41.4 million at December 31, 2005. No amount for U.S. income tax has been provided on undistributed earnings of our foreign subsidiaries because we consider such earnings to be indefinitely reinvested. In the event of distribution of those earnings in the form of dividends or otherwise, we would be subject to both U.S. income taxes, subject to an adjustment, if any, for foreign tax credits, and foreign withholding taxes payable to certain foreign tax authorities. Determination of the amount of U.S. income tax liability that would be incurred is not practicable because of the complexities associated with this hypothetical calculation, however, unrecognized foreign tax credit carryforwards may be available to reduce some portion of the U.S. tax liability, if any.

        In accordance with SFAS No. 109 and SFAS No. 5, Accounting for Contingencies, we established reserves for tax contingencies that reflect our best estimate of the transactions and deductions that we may be unable to sustain or that we could be willing to concede as part of a broader tax settlement. We are currently undergoing routine tax examinations by various state and foreign jurisdictions. Tax authorities periodically challenge certain transactions and deductions we reported on our income tax returns. We do not expect the outcome of these examinations, either individually or in the aggregate, to have a material adverse effect on our financial position, results of operations, or cash flows.

        On October 22, 2004, the American Jobs Creation Act of 2004 (the "Act") was signed into law. The Act contains a one-time foreign dividend repatriation provision, which provides for a special deduction with respect to certain qualifying dividends from foreign subsidiaries for a limited period. The deduction is subject to a number of limitations and uncertainty remains as to how to interpret numerous provisions in the Act. We did not repatriate any of our foreign earnings under the foreign dividend repatriation provision of the Act.

        The Act also provides a deduction for income from qualified domestic production activities, which will be phased in from 2005 through 2010. Under the guidance of FSP No. 109-1, the deduction will be treated as a "special deduction" as described in SFAS No. 109. Therefore, the special deduction has no effect on deferred tax assets and liabilities existing at the enactment date. The impact of this deduction will be reported in the period in which the deduction is claimed on our tax return. We expect that the effect of the phase in of this new deduction will result in no benefit to our effective tax rate until the U.S. NOL carryforwards are fully utilized.

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        The following table presents the components of our provision for income taxes:

		2005		2004			2003
				(restated)			(restated)
		(in thousands)
Current:
	State	$	256	$	404		$	302
	Foreign		575		(365	)		1,465
			831		39			1,767
Deferred:
	Federal		2,650		2,341			1,687
	State		247		209			172
	Foreign		3,091		(314	)		(715	)
			5,988		2,236			1,144
Total tax provision		$	6,819	$	2,275		$	2,911

        The following table presents reconciliation from the U.S. statutory tax rate to our effective tax rate:

	2005		2004		2003
			(restated)		(restated)
Statutory rate	35	%	35	%	35	%
Effect of losses and expenses not benefited	1		1		1
Rate differential on foreign earnings	55		12		(22	)
Research and development benefit	(12	)	8		(6	)
State income taxes, net of federal benefit	(2	)	(3	)	3
Deferred tax on indefinite-lived assets	(24	)	(21	)	1
Change in valuation allowance	(108	)	(48	)	13
Effective tax rate	(55	)%	(16	)%	25	%

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(16) Financial Information by Segment

        Under SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision making group is composed of the chief executive officer and members of senior management. Our reportable operating segments are Consumer Diagnostic Products, Vitamins and Nutritional Supplements, Professional Diagnostic Products, and Corporate and Other. Our allocation of certain expenditures benefiting multiple segments has been refined during 2005 and applied on a consistent basis for all period presented below. Included in the operating results of Corporate and Other are non-allocable corporate expenditures and expenses related to our research and development activities in the area of cardiology, the latter of which amounted to $16.8 million, $19.4 million and $12.8 million in 2005, 2004 and 2003, respectively. With respect to the cardiology expenditures in 2005, the amount included in Corporate and Other is net of $17.2 million of reimbursements received from ITI Scotland as part of the co-development arrangement that we entered into in February 2005. Total assets in the area of cardiology, which are included in Corporate and Other in the tables below, amounted to $41.2 million at December 31, 2005 and $8.6 million at December 31, 2004.

        The accounting policies of the segments are the same as those described in the summary of significant accounting policies. We evaluate performance of our operating segments based on revenue and operating income (loss). Revenues are attributed to geographic areas based on where the customer is located. Segment information for 2005, 2004, and 2003 are as follows:

2005	Consumer Diagnostic Products		Vitamins and Nutritional Supplements			Professional Diagnostic Products		Corporate and Other			Total
	(in thousands)
Net revenue to external customers	$	166,928	$	75,411		$	179,511	$	—		$	421,850
Operating income (loss)	$	25,117	$	(7,010	)	$	2,179	$	(31,059	)	$	(10,773	)
Depreciation and amortization	$	8,464	$	3,460		$	13,915	$	1,917		$	27,756
Restructuring charge	$	4,797	$	—		$	969	$	—		$	5,766
Stock-based compensation	$	—	$	—		$	—	$	169		$	169
Assets	$	253,063	$	52,967		$	434,796	$	50,340		$	791,166
Expenditures for property, plant and equipment	$	8,020	$	3,439		$	6,578	$	2,196		$	20,233

2004	Consumer Diagnostic Products		Vitamins and Nutritional Supplements			Professional Diagnostic Products		Corporate and Other			Total
						(restated)					(restated)
	(in thousands)
Net revenue to external customers	$	164,211	$	77,923		$	131,857	$	—		$	373,991
Operating income (loss)	$	29,160	$	(1,003	)	$	5,840	$	(29,611	)	$	4,386
Depreciation and amortization	$	9,642	$	3,686		$	9,430	$	742		$	23,500
Restructuring charge	$	1,725	$	—		$	—	$	—		$	1,725
Assets	$	243,001	$	48,072		$	264,260	$	12,936		$	568,269
Expenditures for property, plant and equipment	$	6,779	$	2,530		$	6,499	$	4,581		$	20,389

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2003	Consumer Diagnostic Products		Vitamins and Nutritional Supplements		Professional Diagnostic Products		Corporate and Other			Total
					(restated)					(restated)
	(in thousands)
Net revenue to external customers	$	134,877	$	71,637	$	88,644	$	—		$	295,158
Operating income (loss)	$	21,785	$	3,556	$	9,273	$	(19,780	)	$	14,834
Depreciation and amortization	$	7,349	$	3,632	$	5,288	$	166		$	16,435
Stock-based compensation	$	92	$	—	$	12	$	343		$	447
Assets	$	228,175	$	52,973	$	254,349	$	5,032		$	540,529
Expenditures for property, plant and equipment	$	5,912	$	1,496	$	3,084	$	643		$	11,135

	2005		2004		2003
			(restated)		(restated)
	(in thousands)
Revenue by Geographic Area:
United States	$	244,719	$	222,640	$	188,004
Europe		111,838		100,693		71,099
Other		65,293		50,658		36,055
	$	421,850	$	373,991	$	295,158

	December 31,
	2005		2004
	(in thousands)
Long-lived Tangible Assets by Geographic Area:
United States	$	33,810	$	29,946
United Kingdom		30,202		27,337
Ireland		1,114		5,897
Other		7,085		3,600
	$	72,211	$	66,780

(17) Transition Services Agreement with IMT

        Prior to the split-off from IMT (Note 1), we entered into transition services agreements, whereby we would provide certain transition services to IMT and IMT affiliates for an agreed-upon period of time and service fee. Transition services primarily included management services provided by our U.S. subsidiary, Inverness Medical, Inc. ("IMI") and product packaging services provided by our Irish subsidiary, Cambridge Diagnostics Ireland Ltd. ("CDIL") related to certain diabetes businesses and products. IMI charged approximately $0.2 million during 2003 in transition service fees to IMT, which it believes to approximate arm's-length costs. These fees reduced our general and administrative expenses during 2003. The transition services provided by IMI and CDIL terminated in February 2003 and July 2002, respectively.

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(18) Valuation and Qualifying Accounts

        We have established reserves against accounts receivable for doubtful accounts, product returns, discounts and other allowances. The activity in the table below includes all accounts receivable reserves. Provisions for doubtful accounts are recorded as a component of general and administrative expenses. Provisions for returns, discounts and other allowances are charged against net product sales. The following table sets forth activities in our accounts receivable reserve accounts:

	Balance at Beginning of Period		Provision		Amounts Charged Against Reserves			Balance at End of Period
	(in thousands)
Year ended December 31, 2003	$	7,538	$	19,617	$	(19,663	)	$	7,492
Year ended December 31, 2004	$	7,492	$	27,908	$	(26,041	)	$	9,359
Year ended December 31, 2005	$	9,359	$	25,015	$	(24,626	)	$	9,748

        We have established reserves against obsolete and slow-moving inventories. The activity in the table below includes all inventory reserves. Provisions for obsolete and slow-moving inventories are recorded as a component of costs of sales. The following table sets forth activities in our inventory reserve accounts:

	Balance at Beginning of Period		Provision		Amounts Charged Against Reserves			Balance at End of Period
	(in thousands)
Year ended December 31, 2003	$	1,275	$	1,810	$	(996	)	$	2,089
Year ended December 31, 2004	$	2,089	$	6,761	$	(4,724	)	$	4,126
Year ended December 31, 2005	$	4,126	$	10,057	$	(6,441	)	$	7,742

(19) Restructuring Activities

        In connection with our acquisitions of the Unipath business, IMN, Ostex, Ischemia and BioStar, we recorded restructuring costs as part of the respective aggregate purchase prices in accordance with EITF No. 95-3 (Note 4). During 2004, we completed a plan of restructuring at our manufacturing operations at Unipath. During 2005, we completed a plan of restructuring at our operations at Ischemia and committed to a restructuring plan for BioStar, which is expected to be completed by the third quarter of fiscal year 2006. The following table sets forth the aggregate restructuring costs and balances recorded in connection with the restructuring activities of the acquired businesses, the 2004 restructuring activities at Unipath and the 2005 restructuring activities at Ischemia and BioStar:

	Balance at Beginning of Period		Costs Included in Purchase Price		Amounts Paid			Other(i)			Balance at End of Period
	(in thousands)
Year ended December 31, 2003	$	2,272	$	3,632	$	(2,081	)	$	129		$	3,952
Year ended December 31, 2004	$	3,952	$	2,034	$	(3,467	)	$	107		$	2,626
Year ended December 31, 2005	$	2,626	$	2,246	$	(1,858	)	$	(147	)	$	2,867

(i)

Represents foreign currency translation adjustment.

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        The following describes our restructuring plans for which we had remaining obligations as of December 31, 2005:

(a) Recent Restructuring Plans

        On May 9, 2005, we committed to a plan to cease operations at our facility in Galway, Ireland. During 2005, we recorded a $5.1 million restructuring charge, of which $2.3 million related to severance, early retirement, outplacement services, $2.3 million related to impairment of fixed assets and inventory and $0.5 million related to facility closing costs relating primarily to this plan of termination.

        The total restructuring charge for the year ended December 31, 2005 consisted of $4.1 million charged to cost of goods sold, $0.5 million charged to research and development, $0.3 million charged to general and administrative and $0.2 million charged to other expense. Of this total restructuring charge, $4.8 million and $0.3 million was included in our consumer diagnostic products and professional diagnostic products business segments, respectively. The total number of employees to be involuntarily terminated is 113, of which 98 were terminated during 2005 and the remaining 15 will be terminated during the first quarter of 2006. As of December 31, 2005, of the $2.3 million related to severance, early retirement and outplacement services, $0.6 million remained unpaid. Of the $0.5 million in facility closing cost, $0.4 million remained unpaid as of December 31, 2005. Including the charges recorded during the year, we expect the total restructuring charge primarily related to the closure of CDIL to be approximately $5.2 million, with additional charges relating principally to severance and facility closing costs of $0.1 million expected to be recorded in the first quarter of 2006 within the consumer diagnostic products segment. Upon liquidation of CDIL's remaining net assets, which is anticipated to occur during the first quarter of 2006, we expect to record a gain of approximately $3.6 million based on foreign currency exchange rates as of December 31, 2005 as the result of a reclassification of the cumulative translation adjustment to other income, net.

        In the third quarter of 2004, we completed a plan of restructuring at our operations at Unipath, our manufacturing facility in Bedford, England, to reduce operating expenses and organizational complexities and increase overall accountability at Unipath. As a result, we recorded a $1.7 million restructuring charge in the third quarter of 2004, which is included in cost of sales in the accompanying statements of operations, to cover costs for severance, early retirement and outplacement services. The total number of involuntarily terminated employees was 18, all of whom were terminated as of December 31, 2005. As of December 31, 2005, all restructuring costs have been paid.

(b) Restructuring Plans Related to Business Combinations

        During the fourth quarter of 2005, we established a restructuring plan in connection with our acquisition of Biostar. We recorded a $0.5 million charge of which $0.4 million related to impairment of fixed assets and $0.1 million related to severance costs associated with a headcount reduction. The total number of employees to be involuntarily terminated is 12, of which none were terminated as of December 31, 2005. None of the costs recorded during 2005 were paid as of December 31, 2005. Although we believe our plan and estimated exit costs are reasonable, actual spending for exit activities may differ from current estimated exit costs, which might impact the final aggregate purchase price.

        In connection with our acquisition of Ischemia in the first quarter of 2005, we established a restructuring plan whereby we have exited the current facilities of Ischemia in Denver, Colorado, and

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combined its activities with our existing manufacturing and distribution facilities. Total severance costs associated with involuntarily terminated employees are estimated to be $1.6 million, of which $1.5 million has been paid as of December 31, 2005. We estimated costs to vacate the Ischemia facilities to be approximately $0.1 million, none of which has been paid as of December 31, 2005. We expect to pay the remaining costs during the first quarter of 2006. The total number of involuntarily terminated employees was 17, of which all were terminated as of December 31, 2005. Although we believe our plan and estimated exit costs are reasonable, actual spending for exit activities may differ from current estimated exit costs, which might impact the final aggregate purchase price.

        As a result of the merger with Ostex (Note 4(c)), we established a restructuring plan whereby we exited the facilities of Ostex in Seattle, Washington, and combined the activities of Ostex with our existing manufacturing and distribution facilities. The total number of employees to be terminated involuntarily under the restructuring plan was 38, of which all were terminated as of December 31, 2005. Total severance costs associated with employees to be terminated involuntarily was $1.6 million, of which substantially all has been paid as of December 31, 2005. Costs to vacate the Ostex facilities were $0.5 million, of which $0.1 million were paid as of December 31, 2005. Additionally, the remaining costs to exit operations, primarily facilities lease commitments, are $1.9 million, of which $1.6 million were paid as of December 31, 2005. Total unpaid exit costs amounted to $0.8 million as of December 31, 2005.

        Immediately after the close of the acquisition, we reorganized the business operations of IMN to improve efficiencies and eliminate redundant activities on a company-wide basis. The restructuring affected all cost centers within the organization, but most significantly responsibilities at the sales and executive levels, as such activities were combined with our existing business operations. Also as part of the restructuring plan, we relocated one of IMN's warehouses to a closer proximity of the manufacturing facility to improve efficiency. Of the $1.6 million in total exit costs, which include severance costs of involuntarily terminated employees and costs to vacate the warehouse, $0.1 million in restructuring costs remain unpaid as of December 31, 2005. The total number of involuntarily terminated employees was 47, all of which have been terminated as of December 31, 2003.

        As a result of the acquisition of the Unipath business from Unilever Plc in 2001, we reorganized the operations of the Unipath business for purposes of improving efficiencies and achieving economies of scale on a company-wide basis. Such reorganization affected all major cost centers at the operations in England. Additionally, most business activities of the U.S. division were merged into our existing U.S. businesses. The total number of involuntarily terminated employees was 65, all of which have been terminated as of December 31, 2002. Total exit costs, which primarily related to severance, were initially estimated at $2.3 million. During 2002, the Company finalized all restructuring activities and recorded an additional $1.8 million in exit costs. The additional exit costs were recorded as adjustments to the Unipath business purchase price. As of December 31, 2005, $1.3 million, adjusted for foreign exchange effect, in exit costs remained unpaid.

(20) Guarantor Financial Information

        We issued $150.0 million in Bonds to qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and outside the United States in compliance with Regulation S of the Securities Act (Note 6(b)). Our payment obligations under the Bonds are guaranteed by all of our domestic subsidiaries (the "Guarantor Subsidiaries") as of

F-63

December 31, 2005. The guarantee is full and unconditional. Separate financial statements of the Guarantor Subsidiaries are not presented because we have determined that they would not be material to investors in the Bonds. The following supplemental financial information sets forth, on a consolidating basis, the statements of operations and cash flows for each of the three years in the period ended December 31, 2005 and the balance sheets as of December 31, 2005 and 2004 for our company (the "Issuer"), the Guarantor Subsidiaries and our other subsidiaries (the "Non-Guarantor Subsidiaries"). The supplemental financial information reflects our investments and the Guarantor Subsidiaries' investments in the Guarantor and Non-Guarantor Subsidiaries using the equity method of accounting.

        We have extensive transactions and relationships between various members of the consolidated group. These transactions and relationships include inter-company pricing agreements, intellectual property royalty agreements and general and administrative and research and development cost sharing agreements. Because of these relationships, it is possible that the terms of these transactions are not the same as those that would result from transactions among wholly unrelated parties.

        On October 20, 2004, our subsidiary IMN became a Guarantor Subsidiary under the Bonds. Prior to this change, IMN was a Non-Guarantor Subsidiary. As a result, we have included the financial results of IMN in the results of the Guarantor Subsidiaries in the following supplemental financial information for all periods presented.

F-64

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 2005
(in thousands)

			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net product sales			$	23,811		$	235,141		$	207,431		$	(59,926	)	$	406,457
License revenue				—			259			15,134			—			15,393
	Net revenue			23,811			235,400			222,565			(59,926	)		421,850
Cost of sales				24,846			187,744			116,847			(59,899	)		269,538
	Gross profit			(1,035	)		47,656			105,718			(27	)		152,312
Operating expenses:
	Research and development			374			6,796			23,822			—			30,992
	Sales and marketing			2,849			35,761			33,493			—			72,103
	General and administrative			12,410			16,927			30,484			—			59,821
	Stock-based compensation			169			—			—			—			169
		Total operating expenses		15,802			59,484			87,799			—			163,085
	Operating (loss) income			(16,837	)		(11,828	)		17,919			(27	)		(10,773	)
Equity in earnings of subsidiaries, net of tax				13,537			—			—			(13,537	)		—
Interest expense, including amortization of discounts				(16,502	)		(2,941	)		(7,839	)		5,487			(21,795	)
Other income, net				1,461			6,762			17,442			(5,487	)		20,178
	(Loss) income before income taxes			(18,341	)		(8,007	)		27,522			(13,564	)		(12,390	)
Provision for income taxes				868			2,283			3,494			174			6,819
	Net (loss) income		$	(19,209	)	$	(10,290	)	$	24,028		$	(13,738	)	$	(19,209	)

F-65

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 2004
(restated)
(in thousands)

			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net product sales			$	20,842		$	214,132		$	180,685		$	(50,227	)	$	365,432
License revenue				—			114			8,445			—			8,559
	Net revenue			20,842			214,246			189,130			(50,227	)		373,991
Cost of sales				20,182			164,383			92,713			(50,291	)		226,987
	Gross profit			660			49,863			96,417			64			147,004
Operating expenses:
	Research and development			246			3,088			28,620			—			31,954
	Sales and marketing			1,899			25,377			30,681			—			57,957
	General and administrative			10,982			14,716			27,009			—			52,707
		Total operating expenses		13,127			43,181			86,310			—			142,618
	Operating (loss) income			(12,467	)		6,682			10,107			64			4,386
Equity in earnings of subsidiaries, net of tax				7,394			—			—			(7,394	)		—
Interest expense, including amortization of discounts				(15,345	)		(5,699	)		(5,893	)		4,823			(22,114	)
Other income, net				4,870			1,857			1,503			(4,823	)		3,407
	(Loss) income before income taxes			(15,548	)		2,840			5,717			(7,330	)		(14,321	)
Provision (benefit) for income taxes				1,048			1,276			(458	)		409			2,275
	Net (loss) income		$	(16,596	)	$	1,564		$	6,175		$	(7,739	)	$	(16,596	)

F-66

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 2003
(restated)
(in thousands)

			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net product sales			$	22,717		$	165,832		$	135,222		$	(38,341	)	$	285,430
License revenue				—			401			9,327			—			9,728
	Net revenue			22,717			166,233			144,549			(38,341	)		295,158
Cost of sales				19,964			120,631			64,220			(37,174	)		167,641
Gross profit				2,753			45,602			80,329			(1,167	)		127,517
Operating expenses:
	Research and development			486			1,652			22,142			—			24,280
	Sales and marketing			2,062			24,616			25,826			—			52,504
	General and administrative			7,397			10,101			17,954			—			35,452
	Stock-based compensation			447			—			—			—			447
		Total operating expenses		10,392			36,369			65,922			—			112,683
	Operating (loss) income			(7,639	)		9,233			14,407			(1,167	)		14,834
Equity in earnings of subsidiaries, net of tax				15,262			—			—			(15,262	)		—
Interest expense, including amortization of discounts				(3,711	)		(3,814	)		(3,264	)		1,078			(9,711	)
Other income, net				5,239			570			1,710			(1,078	)		6,441
	Income before income taxes			9,151			5,989			12,853			(16,429	)		11,564
Provision for income taxes				498			2,220			37			156			2,911
	Net income		$	8,653		$	3,769		$	12,816		$	(16,585	)	$	8,653

F-67

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
December 31, 2005
(in thousands)

			Issuer		Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current Assets:
	Cash and cash equivalents		$	1,196	$	8,080		$	24,994	$	—		$	34,270
	Accounts receivable, net of allowances			2,344		34,834			33,298		—			70,476
	Inventories			7,518		42,794			26,997		(6,100	)		71,209
	Deferred tax assets			—		—			844		—			844
	Prepaid expenses and other current assets			2,228		2,720			12,586		—			17,534
	Intercompany receivables			38,919		34,346			19,974		(93,239	)		—
		Total current assets		52,205		122,774			118,693		(99,339	)		194,333
	Property, plant and equipment, net			2,632		31,164			38,415		—			72,211
	Goodwill			72,787		109,637			139,786		—			322,210
	Other intangible assets with indefinite lives			8,700		12,420			42,622		—			63,742
	Core technology and patents, net			28,269		5,556			30,225		—			64,050
	Other intangible assets, net			20,321		18,429			21,739		—			60,489
	Deferred financing costs, net, and other non-current assets			6,696		2,347			4,426		—			13,469
	Deferred tax assets			—		—			662		—			662
	Investment in subsidiaries			297,607		(1,162	)		—		(296,445	)		—
	Intercompany notes receivable			130,001		43,066			—		(173,067	)		—
		Total assets	$	619,218	$	344,231		$	396,568	$	(568,851	)	$	791,166
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Current portion of long-term debt		$	—	$	—		$	2,367	$	—		$	2,367
	Current portion of capital lease obligations			—		508			34		—			542
	Accounts payable			1,549		25,438			15,168		—			42,155
	Accrued expenses and other current liabilities			12,935		22,939			28,872		—			64,746
	Intercompany payables			34,070		31,357			27,812		(93,239	)		—
		Total current liabilities		48,554		80,242			74,253		(93,239	)		109,810
Long-term liabilities:
	Long-term debt, net of current portion			169,456		60,000			29,161		—			258,617
	Capital lease obligations, net of current portion			—		914			64		—			978
	Deferred tax liabilities			3,900		5,964			8,889		128			18,881
	Other long-term liabilities			—		278			5,294		—			5,572
	Intercompany notes payable			—		42,331			130,736		(173,067	)		—
		Total long-term liabilities		173,356		109,487			174,144		(172,939	)		284,048
Stockholders' equity				397,308		154,502			148,171		(302,673	)		397,308
	Total liabilities and stockholders' equity		$	619,218	$	344,231		$	396,568	$	(568,851	)	$	791,166

F-68

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
December 31, 2004
(in thousands)

			Issuer		Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current Assets:
	Cash and cash equivalents		$	12	$	3,551		$	13,193	$	—		$	16,756
	Accounts receivable, net of allowances			2,660		36,273			22,414		—			61,347
	Inventories			6,340		41,152			19,815		(6,073	)		61,234
	Deferred tax assets			—		—			2,819		—			2,819
	Prepaid expenses and other current assets			1,278		2,034			6,289		—			9,601
	Intercompany receivables			54,358		10,015			14,145		(78,518	)		—
		Total current assets		64,648		93,025			78,675		(84,591	)		151,757
	Property, plant and equipment, net			2,808		27,591			36,381		—			66,780
	Goodwill			17,672		108,842			94,641		—			221,155
	Other intangible assets with indefinite lives			—		12,420			38,122		—			50,542
	Core technology and patents, net			2,533		6,009			31,785		—			40,327
	Other intangible assets, net			—		20,522			7,158		—			27,680
	Deferred financing costs, net, and other non-current assets			6,452		1,710			994		—			9,156
	Deferred tax assets			—		—			826		46			872
	Investment in subsidiaries			261,274		(966	)		—		(260,308	)		—
	Intercompany notes receivable			114,439		15,089			—		(129,528	)		—
		Total assets	$	469,826	$	284,242		$	288,582	$	(474,381	)	$	568,269
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Current portion of long-term debt		$	—	$	—		$	88	$	—		$	88
	Current portion of capital lease obligations			—		461			6		—			467
	Accounts payable			1,754		19,497			11,094		—			32,345
	Accrued expenses and other current liabilities			12,408		21,654			22,180		—			56,242
	Intercompany payables			13,640		15,964			48,914		(78,518	)		—
		Total current liabilities		27,802		57,576			82,282		(78,518	)		89,142
Long-term liabilities:
	Long-term debt, net of current portion.			169,256		20,000			12		—			189,268
	Capital lease obligations, net of current portion			—		1,397			4		—			1,401
	Deferred tax liabilities			1,352		3,821			7,423		—			12,596
	Other long-term liabilities			—		29			4,417		—			4,446
	Intercompany notes payable			—		53,221			76,307		(129,528	)		—
		Total long-term liabilities		170,608		78,468			88,163		(129,528	)		207,711
Stockholders' equity				271,416		148,198			118,137		(266,335	)		271,416
	Total liabilities and stockholders' equity		$	469,826	$	284,242		$	288,582	$	(474,381	)	$	568,269

F-69

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2005
(in thousands)

				Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash Flows from Operating Activities:
	Net (loss) income			$	(19,436	)	$	(10,290	)	$	24,028		$	(13,511	)	$	(19,209	)
	Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
		Equity in earnings of subsidiaries, net of tax			(13,310	)		—			—			13,310			—
		Interest expense related to amortization of non-cash original issue discount, non-cash beneficial conversion feature and deferred financing costs			1,181			665			499			—			2,345
		Non-cash loss related to currency hedge agreement			217			—			—			—			217
		Non-cash stock-based compensation expense			169			—			—			—			169
		Non-cash value of settlement of litigation			—			—			(2,593	)		—			(2,593	)
		Impairment of long-lived assets			—			—			1,740			—			1,740
		(Gain) loss on sale of fixed assets			—			(13	)		276			—			263
		Depreciation and amortization			3,877			10,178			13,701			—			27,756
		Deferred income taxes			665			2,231			2,899			174			5,969
		Other non-cash items			141			—			—			—			141
		Changes in assets and liabilities, net of acquisitions:
			Accounts receivable, net		316			12,039			(1,951	)		—			10,404
			Inventories		(1,558	)		3,530			(6,046	)		27			(4,047	)
			Prepaid expenses and other current assets		(950	)		815			(7,463	)		—			(7,598	)
			Intercompany payable (receivable)		3,390			(9,143	)		5,055			698			—
			Accounts payable		(3,066	)		4,914			4,353			—			6,201
			Accrued expenses and other current liabilities		(915	)		(2,092	)		7,503			—			4,496
			Other non-current liabilities		—			(3	)		342			—			339
Net cash (used in) provided by operating activities					(29,279	)		12,831			42,343			698			26,593

F-70

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS (Continued)
For the Year Ended December 31, 2005
(in thousands)

		Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash Flows from Investing Activities:
	Purchases of property, plant and equipment		(613	)		(6,851	)		(12,769	)		—			(20,233	)
	Proceeds from sale of property, plant and equipment		—			81			160			—			241
	Cash paid to acquire Ostex, Inc, net of cash received		—			(141	)		—			—			(141	)
	Cash paid to acquire IVC Industries, net of cash received		(63	)		—			—			—			(63	)
	Cash paid to acquire ACS business		—			—			(4,971	)		—			(4,971	)
	Cash paid to acquire Ischemia, net of cash received		(4,211	)		115			—			—			(4,096	)
	Cash paid to acquire Binax, net of cash received		(9,528	)		1,556			—			—			(7,972	)
	Cash paid to acquire the Determine business		(1,602	)		—			(56,500	)		—			(58,102	)
	Cash paid to acquire BioStar		(53,607	)		—			—			—			(53,607	)
	Cash paid to acquire IDT Spain, net of cash received		—			—			(20,030	)		—			(20,030	)
	(Increase) decrease in other assets		(128	)		(282	)		(1,377	)		—			(1,787	)
Net cash used in investing activities			(69,752	)		(5,522	)		(95,487	)		—			(170,761	)
Cash Flows from Financing Activities:
	Cash paid for financing costs		(148	)		(1,388	)		(1,337	)		—			(2,873	)
	Proceeds from issuance of common stock, net of issuance costs		97,440			—			—			—			97,440
	Net (repayments) proceeds under revolving line of credit		(77	)		40,000			29,519			—			69,442
	Proceeds from issuance of notes payable		—			—			269			—			269
	Principal payments of capital lease obligations		—			(488	)		(13	)		—			(501	)
	Intercompany notes payable (receivable)		3,000			(41,000	)		38,000			—			—
Net cash provided by (used in) financing activities			100,215			(2,876	)		66,438			—			163,777
Foreign exchange effect on cash and cash equivalents			—			96			(1,493	)		(698	)		(2,095	)
Net increase in cash and cash equivalents			1,184			4,529			11,801			—			17,514
Cash and cash equivalents, beginning of year			12			3,551			13,193			—			16,756
Cash and cash equivalents, end of year		$	1,196		$	8,080		$	24,994		$	—		$	34,270

F-71

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2004
(in thousands)

				Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash Flows from Operating Activities:
	Net (loss) income			$	(16,596	)	$	1,564		$	6,175		$	(7,739	)	$	(16,596	)
	Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
		Equity in earnings of subsidiaries, net of tax			(7,394	)		—			—			7,394			—
		Interest expense related to amortization of non-cash original issue discount, non-cash beneficial conversion feature and deferred financing costs			1,181			3,282			466			—			4,929
		Non-cash gain related to interest rate swap agreement			(695	)		—			—			—			(695	)
		Non-cash value on settlement of litigation			—			—			(495	)		—			(495	)
		Depreciation and amortization			1,051			8,884			13,565			—			23,500
		Deferred income taxes			1,056			1,497			(733	)		412			2,232
		Other noncash items			—			40			(76	)		—			(36	)
		Changes in assets and liabilities, net of acquisitions:
			Accounts receivable, net		1,255			(1,049	)		(4,301	)		—			(4,095	)
			Inventories		(1,497	)		(7,686	)		(1,826	)		(64	)		(11,073	)
			Prepaid expenses and other current assets		86			(54	)		2,084			—			2,116
			Intercompany payable (receivable)		10,082			(12,268	)		2,778			(592	)		—
			Accounts payable		(2,773	)		(283	)		(3,841	)		—			(6,897	)
			Accrued expenses and other current liabilities		6,925			2,903			5,221			—			15,049
			Other non-current liabilities		—			29			327			—			356
Net cash (used in) provided by operating activities					(7,319	)		(3,141	)		19,344			(589	)		8,295

F-72

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS (Continued)
For the Year Ended December 31, 2004
(restated)
(in thousands)

		Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Cash Flows from Investing Activities:
	Purchases of property, plant and equipment		(1,635	)		(7,836	)		(10,918	)		—		(20,389	)
	Proceeds from sale of property, plant and equipment		—			244			141			—		385
	Cash paid to acquire certain assets from Abbott		(1,566	)		—			(68	)		—		(1,634	)
	Cash paid to acquire ABI, net of cash received		(530	)		—			—			—		(530	)
	Cash paid to acquire Ostex, Inc, net of cash received		22			(1,437	)		—			—		(1,415	)
	Cash paid to acquire IVC Industries, net of cash received		(256	)		—			—			—		(256	)
	Cash paid to acquire Unipath, net of cash received		—			—			(50	)		—		(50	)
	Cash paid to acquire other businesses and intellectual property		(2,461	)		(187	)		(5,876	)		—		(8,524	)
	(Increase) decrease in other assets		(1,069	)		79			(899	)		—		(1,889	)
Net cash used in investing activities			(7,495	)		(9,137	)		(17,670	)		—		(34,302	)
Cash Flows from Financing Activities:
	Cash paid for financing costs		(5,055	)		(430	)		(186	)		—		(5,671	)
	Proceeds from issuance of common stock, net of issuance costs		1,905			—			—			—		1,905
	Net (repayments) proceeds under revolving line of credit		77			(7,682	)		(23,225	)		—		(30,830	)
	Proceeds from issuance of senior subordinated notes		150,000			—			—			—		150,000
	Repayments of notes payable		(9,000	)		(78,817	)		(10,013	)		—		(97,830	)
	Principal payments of capital lease obligations		—			(473	)		(4	)		—		(477	)
	Intercompany notes (receivable) payable		(124,809	)		91,949			32,860			—		—
Net cash provided by (used in) financing activities			13,118			4,547			(568	)		—		17,097
Foreign exchange effect on cash and cash equivalents			—			(33	)		488			589		1,044
Net (decrease) increase in cash and cash equivalents			(1,696	)		(7,764	)		1,594			—		(7,866	)
Cash and cash equivalents, beginning of year			1,708			11,315			11,599			—		24,622
Cash and cash equivalents, end of year		$	12		$	3,551		$	13,193		$	—	$	16,756

F-73

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2003
(restated)
(in thousands)

				Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash Flows from Operating Activities:
	Net income			$	8,653		$	3,769		$	12,816		$	(16,585	)	$	8,653
	Adjustments to reconcile net income to net cash (used in) provided by operating activities:
		Equity in earnings of subsidiaries, net of tax			(15,262	)		—			—			15,262			—
		Interest expense related to amortization of non-cash original issue discount, non cash beneficial conversion feature and deferred financing costs			454			587			524			—			1,565
		Non-cash gain related to interest rate swap agreement			(528	)		—			—			—			(528	)
		Non-cash stock-based compensation expense			447			—			—			—			447
		Depreciation and amortization			958			6,728			8,749			—			16,435
		Deferred income taxes			50			(120	)		725			157			812
		Changes in assets and liabilities, net of acquisitions:
			Accounts receivable, net		749			(8,760	)		(1,196	)		(385	)		(9,592	)
			Inventories		295			(2,174	)		(1,871	)		1,166			(2,584	)
			Prepaid expenses and other current assets		(336	)		(88	)		(3,678	)		—			(4,102	)
			Intercompany payable (receivable)		851			3,851			(4,764	)		62			—
			Accounts payable		(737	)		2,840			3,282			1,330			6,715
			Accrued expenses and other current liabilities		3,885			(5,439	)		(6,466	)		—			(8,020	)
Net cash (used in) provided by operating activities					(521	)		1,194			8,121			1,007			9,801

F-74

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS (Continued)
For the Year Ended December 31, 2003
(restated)
(in thousands)

		Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash Flows from Investing Activities:
	Purchases of property, plant and equipment		(497	)		(3,809	)		(6,829	)		—			(11,135	)
	Proceeds from sale of property, plant and equipment		—			72			80			—			152
	Cash paid to acquire certain assets from Abbott		—			(26,855	)		(29,092	)		—			(55,947	)
	Cash paid to acquire ABI, net of cash received		(14,043	)		1			—			—			(14,042	)
	Cash paid to acquire Ostex, Inc, net of cash received		(1,530	)		(373	)		—			—			(1,903	)
	Cash paid to acquire Wampole Divison of MedPoint Inc		(1,460	)		—			—			—			(1,460	)
	Cash paid to acquire IVC Industries, net of cash received		(535	)		—			—			—			(535	)
	Cash paid to acquire Unipath, net of cash received		—			—			(649	)		—			(649	)
	Cash paid to acquire other businesses and intellectual property		—			—			(4,007	)		—			(4,007	)
	Decrease (increase) in other assets		719			(402	)		79			—			396
Net cash used in investing activities			(17,346	)		(31,366	)		(40,418	)		—			(89,130	)
Cash Flows from Financing Activities:
	Cash paid for financing costs		(832	)		(3,652	)		(49	)		—			(4,533	)
	Proceeds from issuance of common stock, net of issuance costs		4,003			—			—			—			4,003
	Net proceeds from line of credit		—			19,149			182			—			19,331
	Proceeds from borrowings under notes payable		—			57,575			46			—			57,621
	Repayments of notes payable		—			(5,392	)		(393	)		—			(5,785	)
	Principal payments of capital lease obligations		—			(651	)		—			—			(651	)
	Intercompany notes payable (receivable)		13,400			(42,000	)		28,600			—			—
Net cash provided by financing activities			16,571			25,029			28,386			—			69,986
Foreign exchange effect on cash and cash equivalents			—			(196	)		4,500			(1,007	)		3,297
Net (decrease) increase in cash and cash equivalents			(1,296	)		(5,339	)		589			—			(6,046	)
Cash and cash equivalents, beginning of year			3,004			16,654			11,010			—			30,668
Cash and cash equivalents, end of year		$	1,708		$	11,315		$	11,599		$	—		$	24,622

F-75

QuickLinks

PART I

ITEM 1. BUSINESS

ITEM 1A. RISK FACTORS

ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2. DESCRIPTION OF PROPERTY
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES

REPORT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

ITEM 9B. OTHER INFORMATION

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

SIGNATURES
INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts)
INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts)
INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS) (in thousands, except per share amounts)
INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS For the Year Ended December 31, 2005 (in thousands)
INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS For the Year Ended December 31, 2004 (restated) (in thousands)
INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS For the Year Ended December 31, 2003 (restated) (in thousands)
INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET December 31, 2005 (in thousands)
INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET December 31, 2004 (in thousands)
INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES CONSOLIDATING STATEMENT OF CASH FLOWS For the Year Ended December 31, 2005 (in thousands)
INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES CONSOLIDATING STATEMENT OF CASH FLOWS (Continued) For the Year Ended December 31, 2005 (in thousands)
INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES CONSOLIDATING STATEMENT OF CASH FLOWS For the Year Ended December 31, 2004 (in thousands)
INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES CONSOLIDATING STATEMENT OF CASH FLOWS (Continued) For the Year Ended December 31, 2004 (restated) (in thousands)
INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES CONSOLIDATING STATEMENT OF CASH FLOWS For the Year Ended December 31, 2003 (restated) (in thousands)
INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES CONSOLIDATING STATEMENT OF CASH FLOWS (Continued) For the Year Ended December 31, 2003 (restated) (in thousands)

EX-2.7

EXECUTION COPY

Exhibit 2.7

STOCK PURCHASE AGREEMENT

BY AND BETWEEN

INVERNESS MEDICAL INNOVATIONS, INC.,

THERMO ELECTRON CORPORATION

AND

THERMO BIOANALYSIS CORPORATION

Dated: September 16, 2005

This STOCK PURCHASE AGREEMENT (this “Agreement”) is hereby entered into on September 16, 2005, by and among Inverness Medical Innovations, Inc., a Delaware corporation (“Buyer”), Thermo Electron Corporation, a Delaware Corporation (“Parent”) with respect to Articles IIIA, V, VII, VIII, X, XI, XII, XIII and XIV only, and Thermo BioAnalysis Corporation, a Delaware corporation and a subsidiary of Parent (“Seller” and together with Parent, the “Sellers”).  Buyer and Sellers are individually referred to herein as a “Party” and collectively as the “Parties.”

RECITALS:

WHEREAS, Seller owns all of the issued and outstanding shares of capital stock of Thermo BioStar, Inc., a Delaware corporation (hereinafter referred to as the “Business” or the “Company”); and

WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, in accordance with the provisions of this Agreement, the Business; and

WHEREAS, the Board of Directors and the stockholders of Seller have approved the sale of such Business by Seller pursuant to this Agreement; and

WHEREAS, the Board of Directors of Buyer has approved the acquisition of such Business by Buyer pursuant to this Agreement; and

NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements herein contained, the Parties hereto agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1 Definitions. For purposes of this Agreement, the term:

(a)           “Affiliate” means any corporation or other business entity controlled by, controlling, or under common control with Buyer or Seller, as the case may be.  For this purpose, “control” means direct or indirect beneficial ownership of at least fifty percent (50%) of the voting stock in the case of a corporation, or of the right to receive distributable net income in the case of any other business entity.

(b)           “Agreement” means this Stock Purchase Agreement and all Exhibits and Schedules annexed hereto, as the same may be amended, modified or supplemented from time to time.

(c)           “Business” has the meaning set forth in the preamble of this Agreement.

(d)           “Buyer” has the meaning set forth in the preamble of this Agreement.

(e)           “Closing” has the meaning set forth in Section 10.1.

2

(f)            “Closing Date” has the meaning set forth in Section 10.1.

(g)           “Code” means the Internal Revenue Code of 1986, as amended and in effect from time to time, and the rules and regulations promulgated thereunder.

(h)           “Company” has the meaning set forth in the first recital of this Agreement.

(i)            “Damages” has the meaning set forth in Section 11.1.

(j)            “Disclosure Schedule” means the Schedules referred to in Article III and attached to this Agreement.

(k)           “Employees” has the meaning set forth in Section 6.2.

(l)            “Employee Benefit Plans” has the meaning set forth in Section 3.8.

(m)          “Environmental Law” has the meaning set forth in Section 3.17.

(n)           “Financial Statements” has the meaning set forth in Section 3.6.

(o)           “Financial Statements Date” is July 2, 2005.

(p)           “Governmental Authority” means any nation or government, any state or other political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, that has jurisdiction over Seller or the Business.

(q)           “Hazardous Substances” has the meaning set forth in Section 3.17.

(r)            “Indebtedness” means, for any Person (a) obligations created, issued or incurred by such Person for borrowed money (including any indebtedness which is non-recourse to such Person but which is secured by a Lien on any asset of such Person) whether or not evidenced by a promissory note, bond, debenture or other written obligation to pay money; (b) obligations of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for account of such Person; (c) obligations of such Person to pay the deferred purchase or acquisition price of assets or services, except accrued royalty obligations reflected on the Financial Statements; (d) obligations of such Person to pay rent or other amounts under a lease (or other agreement conveying the right to use) of property, only to the extent such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP; (e) Indebtedness of others guaranteed by such Person; and (f) Indebtedness of others secured by a Lien on any asset of such Person, whether or not the Indebtedness so secured has been assumed by such Person.  Indebtedness does not include obligations for trade payables created in the ordinary course of business.

(s)           “Indemnified Party” has the meaning set forth in Section 11.3.

(t)            “Indemnifying Party” has the meaning set forth in Section 11.3.

3

(u)           “Intellectual Property Rights” has the meaning set forth in Section 3.19.

(v)           “Knowledge” of Seller means the actual knowledge of each of the officers and directors of the Company, Mark Jennings and his direct reports, Timothy Maynard, Lew Rosenblum, Mike Bono and Daniel Clift with no duty to inquire outside of the Seller and the Company and no duty to inquire below the general manager of the Business and his direct reports.

(w)          “Leased Real Property” has the meaning set forth in Section 3.13.

(x)            “Licenses” has the meaning set forth in Section 3.16.

(y)           “Liens” has the meaning set forth in Section 3.12.

(z)            “Material” or “Materially” means, when used with respect to any matter, any adverse effect on the business, operations, assets, prospects, or condition, financial or otherwise, of the Company, taken as a whole.

(aa)         “Material Adverse Effect” or “Material Adverse Change” means any effect or change that would be Materially adverse to the business of the Company, taken as a whole, or to the ability of any Party to consummate timely the transactions contemplated hereby; provided that none of the following shall be deemed to constitute, and none of the following shall be taken into account in determining whether there has been, a Material Adverse Effect or Material Adverse Change: (a) any adverse change, event, development, or effect arising from or relating to (1) general business or economic conditions in the United States, or any other country where the Company conducts business, (2) general business or economic conditions in the point of care diagnostics industry or any industry in which major suppliers or customers of the Company are engaged, (3) national or international political or social conditions, including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon the United States, or any of its territories, possessions, or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States, (4) financial, banking, or securities markets generally (including any disruption thereof and any decline in the price of any security or any market index, or any significant changes in relevant foreign exchange rates), (5) changes in United States generally accepted accounting principles, (6) changes in laws, rules, regulations, orders, or other binding directives issued by any Governmental Authority, or (7) the taking of any action contemplated by this Agreement and the other agreements contemplated hereby (provided, however, with respect to each of clauses (1) through (6) above, that such general conditions do not affect the Company in a materially disproportionate manner), and (b) any adverse change in or effect on the business of the Company that is cured by Seller before the Closing Date.

(bb)         “Parent” has the meaning set forth in the preamble of this Agreement.

(cc)         “Party” and “Parties” have the meaning ascribed them in the preamble of this Agreement.

4

(dd)         “Person” means an individual, corporation, partnership, joint venture, association, trust, unincorporated organization or, as applicable, any other entity.

(ee)         “Purchase Price” has the meaning set forth in Section 2.2(a).

(ff)           “Proposed Closing Statement of Working Capital” has the meaning set forth in Section 2.2(b).

(gg)         “Reference Statement of Working Capital” has the meaning set forth in Section 2.2(b).

(hh)         “Seller” and “Sellers” have the meanings set forth in the preamble to this Agreement.

(ii)           “Shares” means all of the issued and outstanding shares of capital stock of the Business.

(jj)           “Third Party Claim” has the meaning set forth in Section 11.4.

(kk)         “U.S. GAAP” means generally accepted accounting principles as practiced in the United States.

ARTICLE IIPURCHASE AND SALE OF THE SHARES

SECTION 2.1 Purchase and Sale.  Subject to and upon the terms set forth in this Agreement, at the Closing Seller hereby sells, conveys, grants, transfers, assigns and delivers to Buyer, and Buyer hereby purchases, acquires, assumes and accepts from Seller, the Shares free and clear of any Liens.

SECTION 2.2 Purchase Price.

(a)           The aggregate purchase price payable by Buyer shall be $52,500,000 (the “Purchase Price”) in cash. On the Closing Date, Buyer shall pay the Purchase Price by wire transfer of immediately available funds in United States dollars to such account or accounts as Seller shall have designated in writing at least two days prior to the Closing Date.

(b)           The Purchase Price set forth in Section 2.2(a) shall be subject to adjustment after the Closing Date as follows:

(i)            Within forty-five (45) days after the Closing Date, Seller shall deliver to Buyer a proposed Closing Statement of Working Capital as of the Closing Date prepared on a basis consistent with the Reference Statement of Working Capital (the “Proposed Closing Statement of Working Capital”). The Reference Statement of Working Capital shall be as of July 2, 2005 and is set forth in Schedule 2.2(b). The Buyer shall cooperate with the Seller, at no cost to the Seller, in the preparation of the Proposed Closing Statement of Working Capital, including

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but not limited to providing access to any appropriate work papers of the Business or to Buyer’s accountants and auditors.

(ii)           The Buyer shall deliver to the Seller within thirty (30) days after receiving the Proposed Closing Statement of Working Capital a detailed statement describing all of its objections (if any) thereto and sufficient details describing the basis therefor.  Failure of the Buyer to so object to the Proposed Closing Statement of Working Capital shall constitute acceptance thereof, whereupon such Proposed Closing Statement of Working Capital shall be deemed to be the Final Closing Statement of Working Capital. The Buyer and Seller shall use reasonable efforts to resolve any such objections, but if they do not reach a final resolution within thirty (30) days after the Seller has received the statement of objections, the Buyer and Seller shall select an independent accounting firm, other than their respective regular independent accounting firms, mutually acceptable to them (the “Neutral Auditors”) to resolve any remaining objections. If Buyer and Seller are unable to agree on the choice of Neutral Auditors, they shall select as Neutral Auditors an independent accounting firm by lot (after excluding their respective regular independent accounting firms). The Neutral Auditors shall determine, within sixty (60) days after their appointment, whether any of the objections raised by the Buyer are valid. The Proposed Closing Statement of Working Capital that is the subject of objections by the Buyer shall be adjusted in accordance with the Parties’ agreement or the Neutral Auditors’ determination, as the case may be, and, as so adjusted, shall be the Final Closing Statement of Working Capital. Such agreement by the Parties or determination by the Neutral Auditors, as the case may be, shall be conclusive and binding upon the Buyer and the Sellers. The Buyer and the Seller shall share equally the fees and expenses of the Neutral Auditors.

(iii)          If the Final Working Capital is less than the Reference Working Capital, as each is defined below, Seller shall be obligated to pay to Buyer, and shall pay to Buyer, by wire transfer in immediately available funds, within five business days after the date on which the Final Closing Statement of Working Capital is finally determined pursuant to this Section 2.2(b), an amount equal to such deficiency (plus interest thereon from the Closing Date at the interest rate equal to the six-month LIBOR rate as published from time to time in the Wall Street Journal).

(iv)          If the Final Working Capital is greater than the Reference Working Capital, the Buyer shall pay to the Seller, by wire transfer in immediately available funds, within five business days after the date on which the Final Closing Statement of Working Capital is finally determined pursuant to this Section 2.2(b), an amount equal to such excess (plus interest thereon from the Closing Date at the interest rate equal to the six-month LIBOR rate as published from time to time in the Wall Street Journal).  The foregoing notwithstanding, any payment pursuant to this subparagraph shall not exceed $599,999.

(v)           As used in this Section 2.2(b), “Reference Working Capital” and “Final Working Capital” shall mean the sum of the total current assets (excluding cash) less the sum of the total current liabilities (excluding any debt) of the Business as reflected on the Reference Statement of Working Capital and the Final Closing Statement of Working Capital, respectively. For the sake of clarification, the Reference Working Capital as reflected on the Reference Statement of Working Capital is $2,333,000.

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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller hereby represents and warrants to Buyer as set forth below in this Article III.

SECTION 3.1 Organization and Qualification. Each of the Seller and the Company is a corporation duly organized, validlyexisting and in good standing under the laws of Delaware, with all requisite corporate power and authority to own, operate and lease its properties and to carry on its business as it is now being conducted.  The Company is duly qualified or licensed to do business in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessaryexcept where the failure to be so qualified or licensed would not have a Material Adverse Effect on the Company.

The Seller and the Company have made available to the Buyer copies of the Certificate of Incorporation and Bylaws of the Company, and the Company is not in violation of the provisions of such organizational documents.  The Seller and the Company have made available to Buyer copies of the minute books of the Company, and such minute books contain, in all material respects, records of all meetings and consents in lieu of meetings of the Company’s board of directors and shareholders and are accurate in all material respects, and such records accurately reflect in all material respects all transactions referred to in such minutes and consents.  The Seller and the Company have  made available to Buyer copies of the stock records of the Company, and such records accurately reflect record ownership of the Company’s capital stock.  Schedule 3.1 sets forth a list of the directors and officers of the Company.

SECTION 3.2 Ownership of Shares.  The capitalization of Business is as set forth on Schedule 3.2.  The Shares have been duly authorized and are validly issued and outstanding, fully paid and non-assessable and constitute all of the issued and outstanding capital stock of Business.  Seller owns, beneficially and of record, and has good, valid and marketable title to, and the right to transfer to the Buyer, the Shares, free and clear of any and all Liens.  Concurrently herewith, Seller shall convey ownership of the Shares, and, after giving effect to the transactions contemplated herein, the Buyer will own, and have good, valid, and marketable title to, all of the issued and outstanding shares of capital stock of Business, free and clear of any and all Liens.  No Person other than the Buyer has any Contract, right or option to purchase or acquire from Seller any shares of capital stock or other securities of Business.  There are no outstanding or authorized options, warrants, purchase agreements, participation agreements, subscription rights, conversion rights, exchange rights or other securities or Contracts that could require Business to issue, sell or otherwise cause to become outstanding any of its authorized but unissued shares of capital stock or any securities convertible into, exchangeable for or carrying a right or option to purchase shares of capital stock or to create, authorize, issue, sell or otherwise cause to become outstanding any new class of capital stock.  There are no outstanding stockholders’ agreements, voting trusts or arrangements, registration rights agreements, rights of first refusal or other Contracts (other than this Agreement) pertaining to the capital stock of Business.  Parent owns of record and beneficially (directly and through its wholly owned subsidiary), all of the issued and outstanding capital stock of Seller.

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SECTION 3.3 Authorization. Seller has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Seller, the performance by Seller of its obligations hereunder, and the consummation by Seller of the transactions contemplated hereby, have been duly authorized by the Board of Directors and stockholders of Seller. No other corporate action on the part of Seller is necessary to authorize the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Seller and constitutes a valid and binding obligation of Seller, enforceable against it in accordance with its terms, except to the extent that such enforcement may be subject to (a) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors’ rights generally, (b) the remedy of specific performance, injunctive and other forms of equitable relief and equitable defenses, and (c) the discretion of the court before which any proceeding therefor may be brought.

SECTION 3.4 No Violation. Except as set forth in Schedule 3.4, neither the execution and delivery of this Agreement by Seller, nor the performance by Seller of its obligations hereunder, nor the consummation by Seller of the transactions contemplated hereby, will (a) violate, conflict with, or result in any breach of any organizational documents of Seller or the Company, (b) violate, conflict with or result in a violation or breach of, or constitute a default (with or without due notice or lapse of time or both) under the terms, conditions, or provisions of any Contract, note, bond, mortgage, indenture or deed of trust, or any material license, lease, or agreement to which Seller or the Company is a party or by which any of their respective businesses or assets and properties are bound, or (c) violate any order, writ, judgment, injunction, decree, statute, rule or regulation (collectively, “Laws and Regulations”) of any Governmental Authority applicable to Seller and the Company, in all cases except such violations, conflicts, breaches, or defaults that, in the aggregate, are not reasonably likely to be Material.

SECTION 3.5 Consents and Approvals. Except as set forth in Schedule 3.5, no filing or registration with, no notice to, and no permit, authorization, consent or approval of any Governmental Authority or Person is necessary for the consummation by Seller of the transactions contemplated by this Agreement, other than (a) those already obtained, and (b) consents, regulations, approvals, authorizations, permits, filings or notifications that, in the aggregate, if not obtained are not reasonably likely to result in a Material Adverse Effect.

SECTION 3.6 Financial Statements. Schedule 3.6 sets forth true and complete copies  (i) of the pro forma income statements of the Business for the fiscal years ended December 31, 2003  and  December 31, 2004 and for the six (6) month period ended July 2, 2005; (ii) the pro forma balance sheet of the Business as of July 2, 2005; and (iii) the notes to such financial statements (such financial statements and notes, individually and collectively, the “Financial Statements”). Except as set forth in the notes thereto, the Financial Statements have been prepared from the books and records of the Business in accordance with U.S. GAAP and the accounting polices and procedures of the Business consistently applied, and fairly present, in all material respects, the financial position and the results of operations of the Business as of the respective dates thereof and for the respective periods referred to therein.

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SECTION 3.7 Absence of Certain Changes. Except as set forth in Schedule 3.7 and except as is not reasonably expected to result in a Material Adverse Effect, since the Financial Statements Date (a) there has not been any Material Adverse Effect, and to Seller’s Knowledge no event, condition or state of facts has occurred or arisen that is reasonably likely to result in a Material Adverse Effect, (b) neither Seller nor the Business has suffered any damage, destruction or loss, whether or not covered by insurance, and (c) the Company has conducted its business only in the ordinary course.

SECTION 3.8 Employee Benefit Plans. Schedule 3.8(a) sets forth a true and complete list of each plan, program, policy or other arrangement providing for compensation, severance, termination pay, stock option, stock purchase, stock bonus, performance awards, membership interest or membership interest-related awards, retirement, health, life, disability insurance, dependent care, medical, fringe benefits or other employee benefits or remuneration of any kind, funded or unfunded, written or unwritten, that is or has within the last three (3) years been established or maintained by Seller, any Affiliate of Seller, or the Business for the benefit of any employees, officers or directors of the Business and pursuant to which Seller or the Business has or may have any material liability whether contingent or otherwise (collectively, “Employee Benefit Plans”). Each Employee Benefit Plan has been established and maintained, funded and administered in all material respects in accordance with its terms and all applicable Laws and Regulations.  Each Employee Benefit Plan that is intended to meet the requirements of a “qualified plan” under Code § 401(a) has received a determination from the Internal Revenue Service that such Employee Benefit Plan is so qualified, and neither Seller, nor any Seller Affiliate is aware of any facts or circumstances that could reasonably be expected to adversely affect the qualified status of any such Employee Benefit Plan.  Except as set forth in Schedule 3.8(b), none of Seller, any Seller Affiliate or the Business contributes to, has any obligation to contribute to, or has any material liability, with regard to any employee, officer or director of the Business, under or with respect to any “defined benefit plan” (as defined at ERISA § 3(35), or any “multiemployer plan” (as defined at ERISA § 3(37)).

There are no proceedings pending or, to Knowledge of Seller, threatened (other than routine claims for benefits) with respect to any Employee Benefit Plan or with respect to the assets of any Employee Benefit Plan.  Each Employee Benefit Plan can be amended, terminated or otherwise discontinued either before or after the Closing in accordance with its terms, without material liability to the Buyer, the Company or any of their respective Affiliates (other than ordinary administration expenses typically incurred in a termination event and benefits accrued through the date of termination).  There are no inquiries, investigations, audits or proceedings pending or, to Knowledge of Seller, threatened by any Governmental Entity with respect to any Employee Benefit Plan or any related trust.  Except as set forth in Schedule 3.8(c), the execution of this Agreement and the consummation of the transactions contemplated hereby will not (either alone or upon the occurrence of any additional or subsequent events) constitute an event under any Employee Benefit Plan, trust or loan that will or may result in any payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any employee, officer or director.

No payment or benefit which will or may be made by the Company or its Affiliates with respect to any employee, officer or director as a result of the transactions contemplated by this

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Agreement will be characterized as an “excess parachute payment,” within the meaning of Section 280G(b)(1) of the Code or will be treated as a nondeductible expense within the meaning of Section 162 of the Code.  No Employee Benefit Plan provides, or has any liability to provide, retiree life insurance, retiree health or other retiree welfare benefits to any person for any reason, except as may be required by applicable statute, and neither the Company nor any Seller has ever represented, promised or contracted in writing to any employee, officer or director (either individually or to employees as a group) that such person would be provided with retiree life insurance, retiree health or other retiree welfare benefit, except to the extent required by statute.

SECTION 3.9 Insurance.  Schedule 3.9(a) sets forth a list, as of the date hereof, of all material casualty, general liability and other insurance maintained by Seller or any Affiliates of Seller in respect of the Business (the “Insurance Policies”).  Each of the material Insurance Policies is in full force and effect and no written notice has been received by Seller, any Affiliates of Seller or the Business from any insurance carrier purporting to cancel coverage under any of the Insurance Policies, which cancellation would have, individually or in the aggregate, a Material Adverse Effect.  Schedule 3.9(b) sets forth a list of all pending material claims against any Insurance Policy, and to the Knowledge of Seller, there are no pending material claims against any Insurance Policy with respect to the Business as to which the insurers have denied liability.

SECTION 3.10 Contracts. Schedule 3.10 sets forth a list of all contracts to which the Company is a party or by which the Company, its business or its assets or properties are bound, or which are otherwise applicable to the Company or its business, except (a) any contract that does not require payment by any party thereto of more than $50,000, (b) any contract entered into after the date hereof and prior to Closing with Buyer or any Affiliate of Buyer in connection with any transaction contemplated by this Agreement, (c) any contract entered into in the ordinary course of business and in compliance with the terms of this Agreement after the date hereof and prior to the Closing, (d) purchase orders for goods and services entered into in the ordinary course of business, and (e) any contract specifically listed in any other Schedule to this Agreement. As used in this Section 3.10, the word “contract” means and includes every agreement, instrument or document of any kind which is legally enforceable by or against the Business to which the Company is a party or which relates to its business or assets or properties and excludes any contract whose terms and conditions have all expired. Each contract listed or required to be listed in Schedule 3.10 is referred to herein as a “Contract.”  Each of the Contracts is valid and in full force and effect, and, to the Knowledge of Seller, any other party to any Contract has not committed any breach or default thereunder that would have a Material Adverse Effect.

SECTION 3.11 Other Activities of the Seller. Except as set forth in Schedule 3.11, the Business does not own or have any investment in a corporation or other entity that does business with the Business or any Affiliate of the Business, and to the Knowledge of Seller no officer or director of the Business does business with the Business or owns or has any interest in a corporation or other entity that does business with the Business.

SECTION 3.12 Real Property. Schedule 3.12(a) sets forth a complete list of the property owned or leased by the Business (“Real Property”). Except as set forth on Schedule 3.12(b), all such leases are valid and in full force and effect, no breach or default exists under

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any such leases (or an event which with notice or lapse of time, or both, would constitute a breach or default), and the Business has, or will have at Closing, subject to such lease’s terms and conditions, a valid leasehold interest in all Real Property that is leased, free and clear of all other liens, pledges, hypothecations, security interests, infringements, interferences, options, rights of first refusal, preemptive rights, mortgages, claims, charges, easements, covenants, rights of way and community property interests or other encumbrances or restrictions of any type or nature, except (a) zoning and other similar restrictions, (b) easements, covenants, rights of way or other restrictions that do not have a Material Adverse Effect, (c) mechanics’, carriers’, workmen’s, repairmen’s or other like liens arising or incurred in the ordinary course of business, (d) liens for taxes, assessments and other governmental charges that are not due and payable, and (e) other liens, imperfections of title or encumbrances, if any, none of which liens, title imperfections or encumbrances are reasonably expected to have, individually or in the aggregate, a Material Adverse Effect (such encumbrances and restrictions subject to such exceptions herein referred to as “Liens”).

SECTION 3.13 Title to Personal Property. Except as described in Schedule 3.13, the Business has good and marketable title to, or a valid leasehold interest in, all of the tangible personal property used by it in the conduct of the Business free and clear of any Liens.

SECTION 3.14 Taxes.

(a)           The Business has filed all federal and state Income Tax Returns and all other material Tax Returns that it was required to file before the Closing Date. All such Tax Returns were correct and complete in all material respects. All Taxes due and owing by the Business (whether or not shown on any Tax Return) have been paid.  There are no Liens for Taxes (other than Taxes not yet due and payable) upon any of the assets of the Business.

(b)           Each affiliated group of which the Business has been a member has filed all income Tax Returns that it was required to file before the Closing Date  for each taxable period during which the Business was a member of the group. All such Tax Returns were correct and complete (A) in all respects in so far as they relate to the Business and (B) in all material respects in so far as they do not relate to the Business. All material income Taxes owed by any such affiliated group (whether or not shown on any Tax Return) have been paid for each taxable period during which the Business was a member of the group.

(c)           Except listed on Schedule 3.14(c), there is no material dispute or claim concerning any Tax liability of the Business or Seller either (A) claimed or raised by any authority in writing or (B) as to which any Seller has Knowledge based upon personal contact with any agent of such authority.

(d)           There is no dispute or claim concerning any material Tax liability of any affiliated group for any taxable period during which the Business was a member of the group and for which the Business could have liability under Reg. §1.1502-6 (or any similar provision of state, local, or foreign law).

(e)           Schedule 3.14(e) lists all federal, state, local, and foreign Tax Returns filed with respect to the Business for taxable periods ended on or after December 31, 2001, indicates those

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Tax Returns that have been audited, and indicates those Tax Returns that currently are the subject of audit. Seller has delivered to Buyer correct and complete copies of all federal income Tax Returns, examination reports, and statements of deficiencies assessed against, or agreed to by the Business since December 31, 2001.  Except as listed on Schedule 3.14(e), neither the Business nor any Seller (i) has waived any statute of limitations in respect of Taxes of or relating to the Business, nor (ii) agreed to any extension with respect to a Tax assessment or deficiency on or relating to the Business, nor (iii) is currently the beneficiary of any extension of time within which to file any Tax Return.

(f)            The Business is not a party to any agreement, contract, arrangement, or plan that has resulted or would result, separately or in the aggregate, in the payment of any “excess parachute payment” within the meaning of Code §280G (or any corresponding provision of state, local, or foreign Tax law). The Business has not been a United States real property holding corporation within the meaning of Code §897(c)(2) during the applicable period specified in Code §897(c)(1)(A)(ii). The Business is not a party to or bound by any tax allocation or sharing agreement. The Business has not been a member of an affiliated group filing a consolidated Tax Return other than a group the common parent of which is the Parent.  Seller has filed a consolidated federal income Tax Return with the Business for the taxable year immediately preceding the current taxable year and is eligible to make a Code section 338(h)(10) election.

(g)           The unpaid Taxes of the Business (A) did not, as of the most recent fiscal month end, exceed the reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on pro forma balance sheet as of July 2, 2005 (rather than in any notes thereto) and (B) will not exceed that reserve as adjusted for operations and transactions through the Closing Date in accordance with the past custom and practice of the Business in filing its Tax Returns.

(h)           The Business does not have any liability for the Taxes of any Person other than the Business (A) under Reg. §1.1502-6 (or any similar provision of state, local, or foreign law), (B) as a transferee or successor, (C) by contract, or (D) otherwise.

(i)            The Business will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any:

(i)            change in method of accounting for a taxable period ending on or prior to the Closing Date;

(ii)           “closing agreement” as described in Code §7121 (or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Closing Date;

(iii)          intercompany transactions or any excess loss account described in Treasury Regulations under Code §1502 (or any corresponding or similar provision of state, local or foreign income Tax law);

(iv)          installment sale or open transaction disposition made on or prior to the Closing Date; or

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(v)           prepaid amount received on or prior to the Closing Date.

(j)            The Business has not distributed stock of another Person, nor had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Code §355 or Code §361.

(k)           The contribution of intercompany Indebtedness by Seller to the Company on or prior to the Closing Date will be treated for Tax purposes as a contribution to capital described in Code section 108(e)(6), and will not result in taxable income to the Company for federal or state Tax purposes.  Seller’s adjusted Tax basis in such Indebtedness is equal to the amount of debt that will be so contributed.

SECTION 3.15 Litigation. Except as set forth in Schedule 3.15(a), there is no action, suit, or proceeding either pending or, to the Knowledge of Seller, threatened in writing against the Business, before any Governmental Authority or arbitrator.  Schedule 3.15(b) sets forth all pending actions, suits or proceedings brought by the Business against a third party before any Governmental Authority or arbitrator.

SECTION 3.16 Licenses. Except as set forth in Schedule 3.16(a), and except as are not reasonably likely to have a Material Adverse Effect, the Business holds each license, permit, or other governmental certificate, approval or authorization (hereinafter referred to as “Licenses”) that is required by it to own, lease or operate its assets and properties and carry on its business and operations (and all such Licenses are listed on Schedule 3.16(b)), and to the Knowledge of Seller no violations have occurred in respect of any such License and no action, proceeding or investigation is either pending or threatened that seeks to either revoke or limit any such License, nor there is a reasonable basis therefor.

SECTION 3.17 Environmental Matters. Except as set forth in Schedule 3.17, to the Knowledge of Seller: (i) the Business is not in Material violation of any Environmental Law and has not received written notice directly or indirectly from any Governmental Authority (other than notices that have been fully complied with or withdrawn and are listed on Schedule 3.17) that any such violation exists; (ii) the Business has not placed, deposited or released any toxic or hazardous substances or wastes, petroleum or petroleum products, asbestos or other pollutants, as defined under applicable Environmental Laws (collectively “Hazardous Substances”), except in compliance with Environmental Laws; and (iii) the Business has not received any written notice directly or indirectly from any Governmental Authority (other than notices that have been fully complied with or withdrawn and are listed on Schedule 3.17) requiring the removal of any alleged Hazardous Substances, or advising of any pending or contemplated search or investigation of activities of the Business.  To the Knowledge of Seller, there is no fact or circumstance which could reasonably be expected to involve the Company in any environmental litigation or impose upon the Company any environmental liability.  For purposes of this Section 3.17, the term “Environmental Law” means any law, order, judgment, injunction, award, decree, writ, settlement, consent agreement, license, certificate of occupancy, permit, order, approval or registration of or with any Governmental Authority applicable to the Business that relates to pollution or protection of the environment, including any of the foregoing that relate to emissions, discharges, releases or threatened releases of Hazardous Substances in the environment (including ambient air, surface water, groundwater

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or land), or that otherwise relate to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Substances.

SECTION 3.18 Compliance with Laws. Except as set forth in Schedule 3.18, and except as are not reasonably likely to have a Material Adverse Effect, the Business is and has been since November 12, 1998 in substantial compliance with all Laws and Regulations applicable to it, its assets or its operations, including laws for which compliance is a condition of engaging in any aspect of the Business, and the Business has received no written notice from any Governmental Authority (other than notices that have been fully complied with or withdrawn and are listed on Schedule 3.18) of any violation of any, Laws and Regulations applicable to it, its assets or its operations, including laws for which compliance is a condition of engaging in any aspect of the Business.

SECTION 3.19 Patents, Trademarks, Etc.  Except as set forth on Schedule 3.19(a), the Company owns, or is validly licensed to use, all patents, patent applications, trademarks, trademark applications, trade names, trade dress, domain names, service marks, service names, copyrights, copyright applications, and trade secrets and proprietary know-how and information used in the Business (collectively, the “Intellectual Property Rights”), free and clear of all Liens.  Schedule 3.19(b) sets forth a list, as of the date hereof, of all registered United States and foreign patents, trademarks, trade names, copyrights and applications therefor which are used or held for use by the Business.  The Business owns or possesses valid and enforceable licenses or other rights to use all material Intellectual Property Rights.  Except as set forth in Schedule 3.19(a), the conduct of the business of the Company does not infringe, and has not infringed, and neither any Seller nor the Company has received any notice alleging infringement of, any valid patents, trademarks, trade names, copyrights or other intellectual property rights, trade secrets or proprietary know-how or information of any third party in any way that, individually or in the aggregate, would have a Material Adverse Effect.  To the Knowledge of Seller, none of the Intellectual Property Rights is being infringed upon by any third party in any way that, individually or in the aggregate, would have a Material Adverse Effect.  Since November 12, 1998, each employee, officer, consultant or other Person who participated in the conception, reduction to practice, development, invention, discovery or design of any product of, or Intellectual Property Rights owned by, the Business has executed and is bound by an information and assignment of inventions agreement in substantially the form made available by Sellers to the Buyer, pursuant to which each such employee, officer, consultant or other Person has assigned his, her or its entire right, title and interest in and to such Intellectual Property Rights to the Company, and agreed to maintain confidentiality with respect to the same.  To the Knowledge of the Seller, no such employee, officer, consultant or other Person has used any facilities or received any remuneration from any academic or research institution or Governmental Authority attributable to such participation.

SECTION 3.20 Labor Matters. Except as set forth in Schedule 3.20(a), to the Knowledge of Seller, there are no pending or threatened labor organizing activities, election petitions, or proceedings, unfair labor practice complaints, slowdowns, or work stoppages between the Business and any of its or their employees.  Except as set forth on Schedule 3.20(b), the Company is not a party to any agreement (including, without limitation, any employment agreement or management retention agreement) with any employee, officer, director or consultant, and Seller has made available to the Buyer copies of all such

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agreements.  To the Knowledge of Seller, no employee of the Company has violated any employment contract, nondisclosure agreement or non-competition agreement by which such employee is bound due to such employee being employed by the Company and disclosing to the Company or using trade secrets or proprietary information of any other Person.

SECTION 3.21 Undisclosed Liabilities.  The Business does not have any liabilities of any nature that would be required by U.S. GAAP to be reflected on a balance sheet or in the notes thereto of the Business, other than (i) liabilities that are reflected in the Financial Statements; (ii) liabilities disclosed or referred to in the Disclosure Schedule (or the documents listed in the Disclosure Schedule); (iii) liabilities arising since July 2, 2005 in the ordinary course of business; and (iv) liabilities that, individually or in the aggregate, would not have a Material Adverse Effect.  At the Closing, the Company shall have no cash or cash equivalents and no Indebtedness.

SECTION 3.22 Brokers’ Fees and Commissions. Neither Seller nor any Affiliate of Seller has employed any investment banker, broker or finder in connection with the transactions contemplated hereby.

SECTION 3.23 Regulatory Matters.  The Seller and the Company have made available to the Buyer, and shall continue after the date hereof and through the Closing to make available to the Buyer, an index of all applications, approvals, registrations or licenses obtained by the Company from the U.S. Food and Drug Administration or similar Governmental Authorities (the “FDA”), or similar foreign Governmental Authorities (“Foreign Authorities”), required in connection with the conduct of the business of the Company as it is currently conducted and such index is included on  Schedule 3.23.  The Seller and the Company have made available to the Buyer, and shall continue after the date hereof and through the Closing to make available to the Buyer, all written communications and oral communications to the extent reduced to written form between the Seller or the Company, on the one hand, and the FDA or Foreign Authorities on the other hand, dated from August 1, 2000, through the date hereof.  To the Knowledge of Seller, no application, approval, report or other submission to the FDA or Foreign Authorities relating to the Company or its products contains a material false statement, or material omission.  The Company has not made any material false statements on, or omissions from, the applications, approvals, reports and other submissions to the FDA or Foreign Authorities relating to the Company or its products.  The Company has not committed any act, made any statement or failed to make any statement that would reasonably be expected to provide a basis for the FDA to invoke against the Company its policy with respect to “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities” set forth in 56 Fed. Reg. 46191 (September 10, 1991).  No product of the Company has been recalled, suspended or discontinued as a result of any action by the FDA or any Foreign Authority against the Company or, to the Knowledge of Seller, any licensee, distributor or marketer of any product of the Company.

SECTION 3.24 Warranty Matters.  Each product sold, leased, licensed or delivered by the Company has been in material conformity with all applicable product specifications and contractual commitments and all express warranties, and except as reflected on the Financial Statements, the Company has no liability, individually or in the aggregate (and to the Knowledge of Seller, there is no basis for any present or future action, suit, proceeding,

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hearing, investigation, charge, complaint, claim, or demand giving rise to any liability, individually or in the aggregate, that could reasonably be expected to result in a Material Adverse Effect) for replacement or repair thereof or other damages in connection therewith.  The Seller has made available to Buyer copies of the standard terms and conditions of sale for the Company (containing applicable warranty and indemnity provisions).  Except as disclosed in Schedule 3.24, no product sold, leased, licensed or delivered by the Company is subject to any contractual guaranty, warranty, or other indemnity beyond the applicable standard terms and conditions of sale and such other indemnities and warranties disclosed to Buyer.  To the Knowledge of Seller, there is no latent or overt design, manufacturing or other defect in any such product.

ARTICLE IIIA

REPRESENTATIONS AND WARRANTIES OF PARENT

Parent hereby represents and warrants to Buyer as set forth below in this Article IIIA.

SECTION 3A.1  Organization and Qualification. Parent is a corporation duly organized, validlyexisting and in good standing under the laws of Delaware, with all requisite corporate power and authority to own, operate and lease its properties and to carry on its business as it is now being conducted.

SECTION 3A.2  Authorization. Parent has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Parent, the performance by Parent of its obligations hereunder, and the consummation by Parent of the transactions contemplated hereby, have been duly authorized by the Board of Directors of Parent. No other corporate action on the part of Parent is necessary to authorize the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Parent and constitutes a valid and binding obligation of Parent, enforceable against it in accordance with its terms, except to the extent that such enforcement may be subject to (a) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors’ rights generally, (b) the remedy of specific performance, injunctive and other forms of equitable relief and equitable defenses, and (c) the discretion of the court before which any proceeding therefor may be brought.

SECTION 3A.3  No Violation. Neither the execution and delivery of this Agreement by Parent, nor the performance by Parent of its obligations hereunder, nor the consummation by Parent of the transactions contemplated hereby, will (a) violate, conflict with, or result in any breach of any organizational documents of Parent, (b) violate, conflict with or result in a violation or breach of, or constitute a default (with or without due notice or lapse of time or both) under the terms, conditions, or provisions of any contract, note, bond, mortgage, indenture or deed of trust, or any material license, lease, or agreement to which Parent is a party or by which any of its businesses or assets and properties are bound, or (c) violate any Laws and Regulations of any Governmental Authority applicable to Parent, in all cases except

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such violations, conflicts, breaches, or defaults that, in the aggregate, are not reasonably likely to be Material.

SECTION 3A.4  Consents and Approvals. No filing or registration with, no notice to, and no permit, authorization, consent or approval of any Governmental Authority or Person is necessary for the consummation by Parent of the transactions contemplated by this Agreement, other than (a) those already obtained, and (b) consents, regulations, approvals, authorizations, permits, filings or notifications that, in the aggregate, if not obtained are not reasonably likely to result in a Material Adverse Effect.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer hereby represents and warrants to Sellers as set forth below in this Article IV.

SECTION 4.1 Organization and Qualification. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, with all requisite corporate power and authority to own, lease and operate its properties and to carry on its businesses as now being conducted.

SECTION 4.2 Authorization. Buyer has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. No other corporate proceeding on the part of Buyer is necessary to authorize the execution and delivery of this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Buyer and constitutes a valid and binding obligation of Buyer, enforceable against it in accordance with its terms, except to the extent that such enforcement may be subject to (a) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors’ rights generally, (b) the remedy of specific performance, injunctive and other forms of equitable relief and equitable defenses, and (c) the discretion of the court before which any proceeding therefore may be brought.

SECTION 4.3 No Violation. Neither the execution and delivery of this Agreement by Buyer and the performance by Buyer of its obligations hereunder nor the consummation by Buyer of the transactions contemplated hereby will (a) violate, conflict with or result in any breach of any provision of the Certificate or Articles of Incorporation or Bylaws of Buyer, (b) violate, conflict with or result in a violation or breach of, or constitute a default (with or without due notice or lapse of time or both) under the terms, conditions or provisions of any note, bond, mortgage, indenture or deed of trust, or any material license, lease or agreement to which Buyer or any of Buyer’s subsidiaries is a party except for the Third Amended and Restated Credit Agreement, dated as of June 30, 2005, by and among Wampole Laboratories, LLC and Inverness Medical (UK) Holdings Limited, as borrowers, the other credit parties signatory thereto, as credit parties, the lenders signatory thereto from time to time, as lenders, General Electric Capital Corporation, as administrative agent, Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as documentation agent, a co-syndication agent and a co-lead arranger, UBS Securities LLC, as a co-syndication agent and GECC

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Capital Markets Group, Inc., as a co-lead arranger (the “Credit Agreement”) or (c) violate any order, writ, judgment, injunction, decree, statute, rule or regulation of any court or Governmental Authority applicable to Buyer or any of Buyer’s subsidiaries, except such defaults and violations which, in the aggregate, are not reasonably likely to be Material.

SECTION 4.4 Consents and Approvals. No filing or registration with, no notice to and no permit, authorization, consent or approval of any third party or any Governmental Authority or other Person is necessary for the consummation by Buyer of the transactions contemplated by this Agreement except for the consent required by the Credit Agreement.

SECTION 4.5 Brokers’ Fees and Commissions. Except for those whose fees will be paid by Buyer, neither Buyer nor any of its subsidiaries has employed any investment banker, broker, or finder in connection with the transactions contemplated hereby.

SECTION 4.6 Financing. Subject to receipt of the consent of its lenders referred to in Section 4.4, at the Closing the Buyer shall have, through a combination of cash on hand and borrowing capacity under the Credit Agreement, sufficient funds available to satisfy, among other things, the obligation to pay the Purchase Price and all expenses incurred by Buyer in connection with the transactions contemplated hereby.

SECTION 4.7 Investment Intent.  The Buyer is acquiring the Shares for its own account and not with a view to their distribution within the meaning of Section 2(11) of the Securities Act of 1933, as amended (the “Securities Act”).  The Buyer acknowledges that the Shares are not registered under the Securities Act or any U.S. or non-U.S. securities laws, and are being offered and sold in reliance on exemptions for transactions not involving any public offering.  The Buyer has had an opportunity to ask questions and receive answers from the Business regarding its operation, assets and financial condition; provided, however, that nothing in this Section 4.7 shall be deemed to vitiate or limit the representations, warranties and covenants of the Seller contained in this Agreement.

ARTICLE V

COVENANTS OF SELLERS

SECTION 5.1 Conduct of Business.

(a)           Except as set forth on Schedule 5.1 or as may be otherwise contemplated by this Agreement or required by any of the documents listed in the Disclosure Schedule and except as Buyer may otherwise consent to in writing (which consent shall not be unreasonably withheld or delayed), from the date hereof and prior to the Closing, Sellers shall cause the Company to:

(i)            conduct the Business only in the ordinary course;

(ii)           maintain the properties, machinery and equipment of the Business in sufficient operating condition and repair to enable it to conduct the Business in all material respects in the manner in which it is currently conducted, except for maintenance or repair required by reason of fire, flood, earthquake or other acts of God;

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(iii)          not issue any capital stock or other equity interest, or any options, warrants or other rights of any kind to purchase any capital stock or other equity interest, in the Business;

(iv)          not increase the rate or terms of compensation payable or to become payable by it to any of the employees or officers of the Business, and not increase the rate or terms of any bonus, pension or other employee benefit plan covering any of the employees or officers of the Business, except in each case increases occurring in the ordinary course of business in accordance with its customary practices (including normal periodic performance reviews and related compensation and benefit increases) or as required by law, rule or regulation or by any pre-existing Contract set forth in the Disclosure Schedule;

(v)           use its reasonable efforts to preserve its relationships with the material suppliers, customers, licensors and licensees of the Business and others having material business dealings with it such that the Business shall not be materially impaired;

(vi)          not make or change any election in respect of Taxes (other than in accordance with past practice), or adopt or request permission of any Tax authority to change any accounting method in respect of Taxes, or settle any claim or assessment in respect of Taxes, in each case to the extent such election, change or settlement would affect the Tax liabilities of Buyer (including the Business) after the Closing Date;

(vii)         not (A) enter into any Contract that, if entered into prior to the date hereof, would be a Contract (a “New Contract”), (B) terminate prior to its stated term any Contract or any New Contract, (C) make any material amendment to or waive any material right under any Contract or any New Contract, other than in the ordinary course of business consistent with past practice, or (D) take or omit to take any action that would constitute a material violation of or default under any Contract or any New Contract;

(viii)        not collect, or accelerate the collection of, any accounts receivable of the Business in a manner that is outside the ordinary course of business or not consistent with past practice;

(ix)           not acquire (A) by merging or consolidating with, or by purchasing all or a substantial portion of the assets or any capital stock or other equity interest of, or by any other manner, any business or any corporation, partnership, joint venture, limited liability company, association or other business organization or division thereof or (B) any assets that are material, in the aggregate, to the Business, except purchases of inventory, raw materials, supplies and components in the ordinary course of business;

(x)            not sell, lease, license or otherwise dispose of any of the properties or assets of any of the Business, except in the ordinary course of business consistent with past practice;

(xi)           not make any loans, advances (other than routine advances to employees of the Business in the ordinary course of business) or capital contributions to, or investment in, any Person, other than the Business and other than loans or advances of cash to Seller or any of its Affiliates pursuant to their existing cash management procedures which will be repaid in full or cancelled at or prior to the Closing;

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(xii)          not make any capital expenditures with respect to property, plant or equipment, other than pursuant to the capital expenditures budget set forth on Schedule 5.1(a)(xii);

(xiii)         not take any action that would result in a restructuring charge under U.S. GAAP;

(xiv)        grant any severance or termination pay to any officer or employee except pursuant to written agreements in effect, or policies existing, on the date hereof and as previously disclosed in writing to the Buyer, or adopt any new Employee Benefit Plan;

(xv)         cause, permit or propose any amendments to its Certificate of Incorporation or Bylaws;

(xvi)        not incur any Indebtedness; and

(xvii)       not agree in writing or otherwise enter into a binding commitment to take any of the foregoing actions.

SECTION 5.2 Proprietary Information.

(a)           From and after the Closing, the Sellers shall hold in confidence, and shall cause their employees, officers, directors, consultants, agents and Affiliates to hold in confidence, all knowledge, information, and documents of a confidential nature or not generally known to the public with respect to the Business acquired by the Buyer hereby (including, without limitation, the financial information, Intellectual Property, technical information or data relating to the materials, products or components sold, or the services offered, in connection with the Business and names of customers of the Business) (collectively, “Proprietary Information”) and shall not disclose or make use of, and shall cause their employees, officers, directors, consultants, agents and Affiliates not to disclose or make use of, Proprietary Information without the prior written consent of the Buyer, except that the Sellers may disclose that portion of the Proprietary Information that is legally required to be disclosed by them in order to comply with their obligations under applicable Laws and Regulations or under applicable stock exchange rules. The term “Proprietary Information” does not include knowledge, information, or documents that (i) become public knowledge other than through a breach of this Agreement by the Sellers, or any of their employees, officers, directors, consultants, agents and Affiliates or (ii) that become available to the Sellers on a non-confidential basis from a third party source, provided such source is not bound by a confidential, legal or fiduciary duty of confidentiality to the Buyer or any Affiliate thereof with respect to such knowledge, information, or document.  Notwithstanding the foregoing, in the event that disclosure by the Sellers or any of their Affiliates, of all or any portion of the Proprietary Information is required by a court or other body of competent jurisdiction (in which case the Seller shall give, and shall cause its Affiliates to give, the Buyer as much notice prior to the disclosure as possible of such required disclosure and shall take all steps reasonably requested by the Buyer to mitigate the extent of such disclosure), the Sellers or its Affiliates, as the case may be, may disclose only that portion of the Proprietary Information that they are advised by counsel is legally required to be disclosed.

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(b)           From the date hereof through the Closing, the Sellers shall, and shall cause the Company to, afford Buyer and its accountants, counsel and other representatives reasonable access to their properties, books, records and personnel of the Business to obtain such information concerning the business, including the status of product development efforts, properties, results of operations and personnel, as Buyer may reasonably request.

SECTION 5.3 Non-Competition.

(a)           For a period of five (5) years after the Closing Date, anywhere in the world where the Business is conducted during such period, the Sellers shall not, and shall cause their Affiliates not to, (i) either directly or indirectly as a stockholder, investor, partner, director, officer, employee, consultant or otherwise engage in a Competitive Business (as defined below); or (ii) divert or attempt to divert to any Competitive Business any customer of the Business.  For the purposes of this Agreement “Competitive Business” shall mean designing, developing, manufacturing, marketing, selling, performing or offering anywhere in the world (i) rapid diagnostic point of care tests for the detection of any analyte (including without limitation any chemical, biochemical, substance, protein or nucleic acid) in connection with the diagnosis of genetic disorders, infectious diseases and pregnancy and/or (ii) rapid diagnostic point of care urine tests.  Notwithstanding anything contained in this Section 5.3(a) to the contrary, the Sellers and their Affiliates shall not be prohibited from (A) manufacturing, marketing and selling any products (other than those of the Company) anywhere in the world that the Sellers and their Affiliates manufacture, market and sell as of the date of this Agreement; (B) continuing anywhere in the world in any type of business conducted by Sellers or their Affiliates on the date hereof which is not a Competitive Business; (C) entering into any relationship with a person or entity not owned, managed, operated or controlled by the Sellers or their Affiliates for purposes unrelated to and which do not involve a Competitive Business; (D) the ownership of a passive investment of not more than 5% of any class of debt or equity securities of any Person engaged in a Competitive Business, or (E) acquiring a Person partially engaged (directly or indirectly) in a Competitive Business if in the calendar year period prior to such acquisition, the revenues of such Person from its Competitive Business do not constitute more than 10% of the total revenues of such Person.

(b)           The Sellers agree that the scope, duration and geographic area of the non-competition provision set forth in this Section 5.3 are reasonable.  In the event that any court determines that the scope, duration or the geographic area, or any combination thereof, are unreasonable and that such provision is to that extent unenforceable, the Buyer and the Sellers agree that the provision shall remain in full force and effect for the greatest scope, the greatest time period and in the greatest area that would not render it unenforceable.  The Buyer and the Sellers intend that the non-competition provision set forth in this Section 5.3 shall be deemed to be a series of separate covenants, one for each and every county of each and every state or province of each and every country in which the provision is intended to be effective.

(c)           The Sellers shall, and shall cause their Affiliates to, refer all inquiries regarding the Business and its products and services to the Buyer and the Sellers shall not, and shall cause their Affiliates not to, independently pursue any such inquiries.  The Sellers shall inform their Affiliates promptly after the Closing that the Business has been sold to the Buyer and shall inform such Affiliates of the obligations requested of them under this Section 5.3(c).

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SECTION 5.4 Exclusivity.  From and after the date of this Agreement until the Closing or termination of this Agreement pursuant to its terms, the Sellers will not, nor will they authorize or permit the Company, or any of the Sellers’ or the Company’s officers, directors, employees or Affiliates, or any investment banker, attorney or other advisor or representative retained by any of them to, directly or indirectly, (i) solicit, initiate, encourage or induce the making, submission or announcement of any Acquisition Proposal, (ii) participate in any discussions or negotiations regarding, or furnish to any person any nonpublic information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Acquisition Proposal, (iii) engage in discussions with any person with respect to any Acquisition Proposal, except as to the existence of these provisions, (iv) approve, endorse or recommend any Acquisition Proposal or (v) enter into any letter of intent or similar document or any contract, agreement or commitment contemplating or otherwise relating to any Acquisition Proposal.  The Sellers will, and will cause the Company to, immediately cease any and all existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposal.  Without limiting the foregoing, it is understood that any violation of the restrictions set forth in the preceding two sentences by any officer, director or employee of the Sellers, the Company, or any of their Affiliates, or any investment banker, attorney or other advisor or representative of any Seller, the Company or any of their Affiliates shall be deemed to be a breach of this Section 5.4 by the Sellers.

                For purposes of this Agreement, “Acquisition Proposal” shall mean any offer or proposal (other than an offer or proposal by the Buyer) relating to, or involving: (A) any acquisition or purchase by any person or “group” (as defined under Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder) of more than a 15% beneficial ownership interest in the total outstanding voting securities of the Company; (B) any merger, consolidation, business combination or similar transaction involving the Company; (C) any sale, lease, exchange, transfer, license (other than in the ordinary course of business), acquisition, or disposition of any material assets of the Company; or (D) any liquidation or dissolution of the Company.

SECTION 5.5 Notice of Material Adverse Effect.  During the period from the date hereof until the earlier of the termination of this Agreement in accordance with its terms and the Closing, the Sellers shall promptly notify the Buyer of any Material Adverse Effect with respect to the Company.

SECTION 5.6  Exclusion of Certain Assets and Liabilities of the Business.  Prior to the Closing, Sellers shall cause the Company to transfer to the Seller or Parent, as the case may be,  all cash or cash equivalents of the Business and all intercompany Indebtedness of the Business.

ARTICLE VI

COVENANTS OF BUYER

SECTION 6.1 No Implied Representations or Warranties. Buyer hereby acknowledges and agrees that neither Sellers nor the Business are making any representation or warranty whatsoever, express or implied, except those representations and warranties of Sellers

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explicitly set forth in this Agreement or in the Disclosure Schedule or in any certificate contemplated hereby and delivered by Sellers in connection herewith on or prior to the Closing. Except as explicitly set forth herein or therein, neither Sellers nor the Business or any of their respective officers, directors, employees, Affiliates or representatives has made or is making any representation, express or implied, as to the value of any asset or business being so acquired, or any warranty of merchantability, suitability or fitness for a particular purpose or quality, with respect to any of the assets being so acquired, or as to the condition or workmanship thereof, or as to the absence of any defects therein, whether latent or patent.

SECTION 6.2 Employee Benefit Matters.

(a)           The Buyer acknowledges and agrees that immediately following the Closing, the Company’s employees’ participation in all Employee Benefit Plans shall terminate, and the Buyer shall enroll such Employees in employee benefit plans maintained or contributed to by the Buyer or an Affiliate of the Buyer, in accordance with the terms of such plans.

(b)           If Buyer does not already have a 401(k) plan, promptly following the Closing, Buyer shall, or shall cause the Business to, establish a 401(k) plan for the participation of all Company employees who are eligible to participate in the Seller’s 401(k) immediately prior to the Closing.  Buyer shall use its commercially reasonable efforts to permit such Company employees who participated in the Seller’s 401(k) plan immediately prior to the Closing to effect a direct rollover of their accounts in cash (including outstanding participant loans) to Buyer’s 401(k) plan; provided, however, that such roll-over shall only be permitted with respect to “eligible rollover distributions” within the meaning of Section 402(c) of the Code made with respect to such employees pursuant to the Seller’s 401(k) plan.  If the rollovers are to Buyer’s existing 401(k) plan, Buyer shall amend such plan if necessary to effect such rollovers.

(c)           The Buyer shall provide or cause the Company to provide the Company’s employees with benefits that are substantially the same as the benefits provided to similarly situated employees of the Buyer and its Affiliates (except as required by law, rule or regulation, and except that the foregoing shall not apply with respect to any equity incentive plan).  Schedule 6.2(c) lists the benefits to be offered by the Buyer to employees of the Business upon Closing.  To the extent permitted under applicable law and the relevant benefit plan, Buyer shall cause the Employees after the Closing Date to be granted credit for all service with Seller and its Affiliates and their respective predecessors prior to the Closing Date for purposes of employee benefits, and shall cause any pre-existing condition exclusions, actively-at-work requirements and waiting periods to be waived and shall cause any expenses incurred on or before the Closing Date by a Company employee or an employee’s covered dependents to be taken into account for purposes of satisfying applicable deductible, coinsurance, and maximum out-of-pocket provisions.

(d)           Buyer shall cause the Business to provide severance pay and other benefit entitlements that may be owing to any employee of the Business as of the Closing, whose employment is terminated by the Business on or after the Closing Date or by reason of the transactions contemplated hereby.  If such severance occurs on or within one year after the Closing Date or by reason of the transactions contemplated hereby, such severance pay and benefit entitlements shall be determined (on an employee by employee basis) in accordance with

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the severance policy applicable to such employee immediately prior to the Closing, if more favorable than the severance policy of the Seller, as applicable, in effect after the Closing.  The severence policies, if any, applicable to each employee of the Business immediately prior to the Closing are as set forth on Schedule 6.2(d).

(e)           Notwithstanding anything to the contrary contained in this Section 6.2, the provisions of this Section 6.2 shall apply with respect to each employee only as long as such employee continues to be employed by the Company, and nothing contained in this Section 6.2 shall be interpreted as obligating the Buyer (or the Company after the Closing) to continue to employ any Employee.

SECTION 6.3  Use of Name “Thermo”.  As soon as practicable, but in no event later than six (6) months following the Closing Date (unless a longer period of time is required under applicable law), the Buyer shall (i) have undertaken all steps necessary in order to change the name of the Company to a name that does not contain “Thermo,” (ii) discontinue the use of any fictitious business name, trade name or trademark containing the word “Thermo,” and (iii) use reasonable efforts to ensure that each of the Company’s customers and clients are aware that the Company is not owned by, and its services are no longer affiliated with, any of the Sellers or any of their Affiliates.  The Buyer agrees that it shall not adopt or use any corporate name, fictitious name, trade name or trademark that includes “Thermo” either alone or in combination with any other words.

ARTICLE VII

MUTUAL COVENANTS

SECTION 7.1 All Reasonable Efforts. Subject to the terms and conditions herein provided, each of the Parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper and advisable under applicable laws and regulations to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement. If at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, including, without limitation, the execution of additional instruments, the Parties to this Agreement shall take all such necessary action.

SECTION 7.2 Consents and Approvals. The Parties hereto each will cooperate with one another and use all reasonable efforts to prepare all necessary documentation to effect promptly all necessary filings and to obtain all necessary permits, consents, approvals, orders and authorizations of, or any exemptions by, all third parties and Governmental Authorities necessary to consummate the transactions contemplated by this Agreement. Each Party will keep the other Parties apprised of the status of any inquiries made of such Party by any Governmental Authority or members of their respective staffs with respect to this Agreement or the transactions contemplated hereby.

SECTION 7.3 Public Announcements. Buyer and Sellers will consult with each other and will mutually agree (the agreement of each Party not to be unreasonably withheld) upon the content and timing of any press release or other public statements with respect to the

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transactions contemplated by this Agreement and shall not issue any such press release or make any such public statement prior to such consultation and agreement, except as may be required by applicable law or by obligations pursuant to any listing agreement with any securities exchange or any stock exchange regulations; provided, however, that Buyer and Sellers will give reasonable prior notice to the other Party of the content and timing of any such press release or other public statement required by applicable law or by obligations pursuant to any listing agreement with any securities exchange or any stock exchange regulations.

SECTION 7.4 Sharing of Data.

(a)           The Sellers shall have the right for a period of seven years following the Closing Date to have reasonable access to such books, records and accounts, including financial and Tax information, correspondence, production records, employment records and other records of the Business to the extent they are related to the period prior to the Closing Date, for the limited purposes of complying with Sellers’ obligations under applicable securities, Tax, environmental, employment or other Laws and Regulations.  The Buyer shall have the right for a period of seven years following the Closing Date to have reasonable access to (i) those books, records and accounts, including financial and Tax information, correspondence, production records, employment records and other records that are retained by the Sellers pursuant to the terms of this Agreement as related to the Business, and (ii) the workpapers of the Sellers’ accountants relating to the operation of the Business prior to the Closing Date, in each case to the extent that any of the foregoing is needed by the Buyer for the purposes of conducting the Business after the Closing Date and for complying with its obligations under applicable securities, Tax, environmental, employment or other Laws and Regulations; provided, however, that the Seller may redact any information from such records that is not related to the Business.

(b)           In addition to all files and documents required to be provided pursuant to this Agreement, promptly upon request by the Buyer made at any time following the Closing Date, the Sellers shall authorize the release to the Buyer of all files or portions thereof pertaining to the Business or operations of the Business held by any federal, state, county or local authorities, agencies or instrumentalities.

SECTION 7.5 Cooperation in Litigation.  Without limiting the provisions of Article XI, from and after the Closing Date, the Buyer and the Sellers shall reasonably cooperate with the other Party in the defense or prosecution of any litigation or proceeding already instituted or which may be instituted hereafter against or by such other Party relating to or arising out of the conduct of the Business prior to or after the Closing Date (other than litigation among the Parties and/or their respective Affiliates arising out of the transactions contemplated by this Agreement.  The Party requesting such cooperation shall pay the reasonable out-of-pocket expenses incurred in providing such cooperation (including legal fees and disbursements) by the Party providing such cooperation and by its officers, directors, employees and agents, but shall not be responsible for reimbursing such Party or its officers, directors, employees and agents for their reasonable time spent in such cooperation.

SECTION 7.6 Transfer Taxes.  Notwithstanding any provision of law imposing the burden of Transfer Taxes (as hereinafter defined) on the Seller or the Buyer, as the case may

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be, any sales, use, stamp and other similar non-income tax Taxes imposed in connection with the consummation of the transactions contemplated by this Agreement (collectively, “Transfer Taxes”) shall be borne equally by the Buyer and the Seller.  The Sellers and the Buyer agree to cooperate in good faith with each other, and to use their commercially reasonable efforts, to minimize Transfer Taxes.

SECTION 7.7 Antitrust Filings.  If required under applicable law, Sellers and Buyer shall duly file with the Federal Trade Commission (“FTC”) and the Antitrust Division of the U.S. Department of Justice (the “DOJ”) the notification and report form (the “HSR Filing”) required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), with respect to the transactions contemplated hereby no later than the tenth business day following the date hereof and equally pay the filing fee.  The HSR Filing shall be in substantial compliance with the requirements of the HSR Act, and Sellers and Buyer shall request early termination of the waiting period required by the HSR Act and shall promptly provide any additional information reasonably requested by the FTC or the DOJ.  Each Party shall keep the other apprised of the status of any communications with, and any inquiries or requests for additional information from, any governmental authority with respect to the transactions contemplated by this Agreement.

ARTICLE VIII

CONDITIONS TO BUYER’S OBLIGATIONS

The obligations of Buyer to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction (or waiver, where permissible) at or prior to the Closing of all of the following conditions:

SECTION 8.1 Representations, Warranties and Covenants of Sellers.  Sellers shall have complied in all material respects with their agreements and covenants contained herein to be complied with on or prior to the Closing Date, and all the representations and warranties of Sellers contained herein shall be true in all material respects on and as of the Closing Date with the same effect as though made on and as of the Closing Date, except (i) as otherwise contemplated hereby, and (ii) to the extent that such representations and warranties were made as of a specified date and as to such representations and warranties the same shall continue on the Closing Date to have been true in all material respects as of the specified date.  Buyer shall have received a certificate executed by or on behalf of each Seller (the “Seller’s Certificate”), dated as of the Closing Date, certifying as to the fulfillment of the conditions set forth in this Section 8.1.

SECTION 8.2 Consents.  If applicable, the waiting period applicable to the consummation of the transactions contemplated hereby under the HSR Act shall have expired or been earlier terminated and all other consents of Governmental Authorities, the failure of which to obtain would, individually or in the aggregate, result in a Material Adverse Effect, shall have been made or obtained.

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SECTION 8.3 No Prohibitions.  No statute, rule or regulation or order of any court or governmental body in the United States shall be in effect which prohibits Buyer from consummating the transactions contemplated by this Agreement.

SECTION 8.4 FIRPTA.  Sellers shall have provided an affidavit, issued pursuant to and in compliance with Treasury Regulation 1.1445-2(b)(2) and dated as of the Closing Date, certifying that Sellers are not foreign persons.

SECTION 8.5 Transition Services Agreement.  Parent and Buyer shall have entered into a Transition Services Agreement in substantially the form attached hereto as Exhibit A.

SECTION 8.6 No Material Adverse Effect.  There shall have been no Material Adverse Effect.

SECTION 8.7 Consent of Lender.  The Buyer shall have received the consent required by the Credit Agreement.

ARTICLE IXCONDITIONS TO SELLERS’ OBLIGATIONS

The obligation of Sellers to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction (or waiver, where permissible) at or prior to the Closing of all of the following conditions:

SECTION 9.1 Representations, Warranties and Covenants of Buyer.  Buyer shall have complied in all material respects with its agreements and covenants contained herein to be complied with on or prior to the Closing Date, and the representations and warranties of Buyer contained herein shall be true in all material respects on and as of the Closing Date with the same effect as though made on and as of the Closing Date, except (i) as otherwise contemplated hereby, and (ii) to the extent that such representations and warranties were made as of a specified date and as to such representations and warranties the same shall continue on the Closing Date to have been true in all material respects as of the specified date.  Sellers shall have received a certificate executed by or on behalf of Buyer (the “Buyer’s Certificate”), dated as of the Closing Date, certifying as to the fulfillment of the conditions set forth in this Section 7.1.

SECTION 9.2 Consents.  If applicable, the waiting period applicable to the consummation of the transactions contemplated hereby under the HSR Act shall have expired or been earlier terminated and all other consents of Governmental Authorities, the failure of which to obtain would, individually or in the aggregate, result in a Material Adverse Effect, shall have been made or obtained.

SECTION 9.3 No Prohibitions.  No statute, rule or regulation or order of any court or governmental body in the United States shall be in effect which prohibits Seller from consummating the transactions contemplated by this Agreement.

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SECTION 9.4 Transition Services Agreement.  Parent and Buyer shall have entered into a Transition Services Agreement in substantially the form attached hereto as Exhibit A.

ARTICLE X

CLOSING

SECTION 10.1 Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Foley Hoag LLP, subject to the satisfaction or waiver of the conditions set forth in Articles VIII and IX, on September 29, 2005 or at such other time and place and on such other date as Buyer and Sellers shall agree (the “Closing Date”). The effective time of the closing for accounting and other purposes shall be 12:01 a.m. Eastern Time on the Closing Date.  At the Closing:

(a)           Sellers shall deliver or cause to be delivered to Buyer the following:

(i)            the share certificates representing Seller’s ownership in the Shares duly endorsed in blank or accompanied by appropriate stock powers duly executed in blank, with all stock transfer taxes paid for;

(ii)           the resignations of the directors and officers of the Company;

(iii)          such other customary agreements, instruments and documents as the Buyer and its counsel may reasonably request; and

(iv)          all other previously undelivered documents required to be delivered by Sellers to Buyer at or prior to the Closing pursuant to the terms of this Agreement.

(b)           Buyer shall deliver or cause to be delivered to Sellers (i) such other customary agreements, instruments and documents as Seller and its counsel may reasonably request, and (ii) all previously undelivered documents required to be delivered by Buyer to Sellers at or prior to the Closing pursuant to the terms of this Agreement.

(c)           Buyer shall pay to Seller the Purchase Price in accordance with Section 2.2.

ARTICLE XI

INDEMNIFICATION

SECTION 11.1 Indemnification by the Sellers.  The Sellers agree to indemnify the Buyer and its Affiliates (without any right to contribution from or indemnification by the Company) in respect of, and hold the Buyer and its Affiliates harmless against, any and all debts, obligations and other liabilities (whether absolute, accrued, contingent, fixed or otherwise, or whether known or unknown, or due or to become due or otherwise), monetary damages, fines, fees, penalties, interest obligations, deficiencies, diminutions in value of assets, losses and expenses (including, without limitation, amounts paid in settlement and other expenses of litigation) (“Damages”) incurred or suffered by the Buyer or any of its Affiliates resulting from, relating to, constituting or arising out of:

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(a)           any misrepresentation or breach of warranty by the Sellers contained in this Agreement, the Disclosure Schedule or in any certificate, document or instrument furnished by the Sellers pursuant to this Agreement or in connection with the transactions contemplated hereby; and

(b)           any failure to perform any covenant or agreement of the Sellers contained in this Agreement.

SECTION 11.2 Indemnification by Buyer.  The Buyer shall indemnify the Sellers and their Affiliates in respect of, and hold the Sellers and their Affiliates harmless against, any and all Damages incurred or suffered by the Sellers or any of their Affiliates resulting from, relating to, constituting or arising out of:

(a)           any misrepresentation or breach of warranty by the Buyer contained in this Agreement or in any certificate, document or instrument furnished by the Buyer pursuant to this Agreement or in connection with the transactions contemplated hereby; or

(b)           any failure to perform any covenant or agreement of the Buyer contained in this Agreement.

SECTION 11.3 Notice of Claim for Indemnification.  Any Party seeking to assert a claim for indemnification under this Article XI (the “Indemnified Party”) shall deliver to the Party from whom indemnification is sought (the “Indemnifying Party”) a written notice of such claim setting forth (a) the amount of claimed Damages or, in the event of a Third Party Claim, the amount or estimate of the amount of liability arising therefrom, to the extent known, and (b) the basis for such claim; provided, however, that no delay on the part of the Indemnified Party in notifying the Indemnifying Party shall relieve the Indemnifying Party from any liability or obligation hereunder except to the extent of any damage or liability caused by or arising out of such delay.

SECTION 11.4 Defense of Third Party Claims.

(a)           Subject to Section 11.4(d) below, in connection with any claim for indemnification hereunder resulting from or arising out of any action, suit, proceeding or demand by a third party (a “Third Party Claim”), the Indemnifying Party at its sole cost and expense may, upon written notice to the Indemnified Party within thirty (30) days after receipt of a notice of such claim by the Indemnified Party pursuant to Section 11.3 above, assume the defense of such Third Party Claim with counsel approved by the Indemnified Party (which such approval shall not be unreasonably withheld), if (A) the Indemnifying Party acknowledges to the Indemnified Party in writing the Indemnifying Party’s election to defend such Third Party Claim and that the Indemnifying Party has the financial resources to do so and shall fulfill its indemnification obligations hereunder with respect to all elements of such claim, (B) the third party seeks monetary damages only, and (C) if the Buyer is the Indemnified Party, an adverse resolution of the Third Party Claim would not have a material adverse effect on the goodwill or reputation of the Indemnified Party or the Business or the future conduct of the business of the Indemnified Party or the Business.

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(b)           In the event that the Indemnifying Party assumes the defense of a Third Party Claim pursuant to Section 11.4(a) above, the Indemnified Party shall be entitled to participate in (but not control) such defense, with its own counsel at its own expense; provided, however, that the Indemnifying Party shall be responsible for the reasonable fees and expenses of separate co-counsel to the extent the Indemnified Party reasonably concludes that the Indemnifying Party’s counsel has a conflict of interest.  Additionally, in the event that the Indemnifying Party so assumes such defense, it shall take all steps reasonably necessary in the defense or settlement thereof; provided, however, that the Indemnifying Party shall not consent to any settlement or to the entry of any judgment with respect to a Third Party Claim that does not include a complete release of the Indemnified Party from all liability with respect thereto or which imposes any liability or obligation on the Indemnified Party without the prior written consent of the Indemnified Party, which shall not be unreasonably withheld or delayed.

(c)           If the Indemnifying Party does not (or is not permitted under the terms hereof to) assume the defense of a Third Party Claim, (i) the Indemnified Party may defend against such Third Party Claim (with the Indemnifying Party responsible for the reasonable fees and expenses of counsel for the Indemnified Party) in such manner as it may deem appropriate, including, but not limited to, settling such Third Party Claim on such terms as the Indemnified Party may deem appropriate, and (ii) the Indemnifying Party shall be entitled to participate in (but not control) the defense of such Third Party Claim, with its counsel and at its own expense.

(d)           Notwithstanding anything contained in this Section 11.4 to the contrary, the Indemnified Party shall not settle or compromise any Third Party Claim for which it is seeking indemnification under this Article XI without the prior written consent of the Indemnifying Party (which consent shall not be unreasonably withheld or delayed).

SECTION 11.5 Procedures for Payment of Indemnification Obligation.  Subject to the limitations set forth in Section 11.7 hereof, all indemnification by any Indemnifying Party hereunder shall be effected by payment of cash, delivery of a cashier’s or certified check or wire transfer of immediately available funds in the amount of the indemnification liability.

SECTION 11.6 Treatment of Indemnity Payments.  Any payment made to the Buyer pursuant to this Article XI shall be treated and reported by the Buyer and the Sellers as a reduction in the Purchase Price.

SECTION 11.7 Limitations.

(a)           Except for liability for indemnification pursuant to any breach of the representations and warranties of the Sellers, or the Buyer set forth in Sections 3.1-3.3, 3A.1-3A.2 and 4.1-4.2, respectively, an Indemnifying Party shall have no liability for indemnification pursuant to Sections 11.1(a) or 11.2(a), above until the aggregate cumulative amount of Damages thereunder exceed $500,000, whereupon the Indemnified Party shall be entitled to be paid the excess of the aggregate cumulative amount of Damages over such amount, subject to the limitation on the maximum amount of recovery set forth in Section 11.7(b) below.  The foregoing notwithstanding, no individual claim or series of related claims for indemnification under Sections 11.1(a) or 11.2(a) shall be valid and assertable unless it is (or they are) for an

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amount in excess of $10,000 and any claim less than such amount shall not be included in the calculation of the limitation in this Section 11.7(a).

(b)           The aggregate amount of Damages payable by the Sellers for indemnification pursuant to Section 11.1(a), on the one hand, and by the Buyer, on the other, for indemnification pursuant to Section 11.2(a) shall not exceed $13,125,000, except for indemnification pursuant to any breach of the representations and warranties of the Seller and Parent set forth in Sections 3.1-3.3 and 3A.1-3A.2, respectively, for which the aggregate amount of Damages payable by the Sellers shall not exceed the Purchase Price.

(c)           No Indemnifying Party shall be liable for Damages pursuant to this Article XI unless a written claim for indemnification in accordance with Section 11.4 hereof is given by the Indemnified Party to the Indemnifying Party with respect thereto on or prior to the 18-month anniversary of the Closing Date; provided, however, that this time limitation shall not apply to any Damages related to, constituting, or arising out of (i) any claims for indemnification pursuant to Sections 11.1(b) or 11.2(b) as to which, in each case, no time limitation shall apply, and (ii) any Specified Claim (as defined below), as to which, in each case, the time limitation shall be ninety (90) days after the expiration of the applicable statute of limitations.  For the purposes of this Agreement, the term “Specified Claims” means Damages resulting from any breach of the representations and warranties of the Seller and Parent set forth in Sections 3.1-3.3, 3A.1-3A.2, 3.14 and 3.17, hereof, or of the Buyer set forth in Sections 4.1-4.2 hereof.

ARTICLE XII

TAX MATTERS

The following provisions shall govern the allocation of responsibility as between Sellers on the one hand and Buyer on the other for certain tax matters following the Closing Date:

SECTION 12.1 Tax Indemnification.  Sellers shall indemnify Buyer and its Affiliates and hold them harmless from and against any Damages attributable to (i) all Taxes (or the non-payment thereof) of the Business for all taxable periods ending on or before the Closing Date and the portion through the end of the Closing Date for any Straddle Period (“Pre-Closing Tax Period”), (ii) all Taxes for any full or partial Tax period ending on or before the Closing Date of any member of an affiliated, consolidated, combined or unitary group of which the Business (or any predecessor of any of the foregoing) is or was a member (and Buyer was not a member) on or prior to the Closing Date, and (iii) any and all Taxes of any Person (other than the Business) imposed on the Business as a transferee or successor (determined prior to the Closing), by contract or pursuant to any law, rule or regulation, which Taxes relate to an event or transaction occurring on or before the Closing Date (and not as a result of any action taken by Buyer or the Business after the Closing) net of any Tax benefits (as reasonably determined by Buyer, and taking into account any offsetting adjustments for any additional Tax liability of Buyer resulting from any payments by Seller) under this Article XII (the sum of such Taxes and costs being referred to as a “Tax Loss”).

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SECTION 12.2 Straddle Period.  In the case of any taxable period that includes (but does not end on) the Closing Date (a “Straddle Period”) the amount of any Taxes based on or measured by income or receipts of the Business for the Pre-Closing Tax Period shall be determined based on an interim closing of the books as of the close of business on the Closing Date (and for such purposes, the taxable period of any partnership or other pass-through entity in which the Business holds a beneficial interest shall be deemed to terminate at such time) and the amount of other Taxes of the Business for a Straddle Period which relate to the Pre-Closing Tax Period shall be deemed to be the amount of such Tax for the entire taxable period multiplied by a fraction the numerator of which is the number of days in the taxable period ending on the Closing Date and the denominator of which is the number of days in such Straddle Period.

SECTION 12.3 Payment.  Any payment by Sellers pursuant to this Section 12 shall be made not later than thirty (30) days after receipt by Sellers of written notice from Buyer (accompanied by reasonable, corroborating documentation) stating that a Tax Loss has been paid by Buyer or any of its Affiliates (including the Business following the Closing) and the amount thereof and of the indemnity payment requested.

SECTION 12.4 Responsibility for Filing Tax Returns.  Sellers shall, or shall cause the common parent of their affiliated group, include the income of the Business (including any deferred items triggered into income by Reg. §1.1502-13 and any excess loss account taken into income under Reg. §1.1502-19) on Sellers’ or such common parent’s consolidated federal income Tax Returns for all periods through the Closing Date and pay any federal income Taxes attributable to such income.  For all taxable periods ending on or before the Closing Date, Sellers shall cause the Business to join in Sellers’ or such common parent’s consolidated federal income tax return and, in jurisdictions requiring separate reporting from Sellers, to file separate company state and local income tax returns.  All such Tax Returns shall be prepared and filed in a manner consistent with prior practice, except as required by a change in applicable law.  Within 90 days after the Closing Date, Buyer shall cause the Business to furnish information (a completed tax package substantially in the form previously provided to Buyer by Sellers) to Sellers as reasonably requested by Sellers to allow Sellers to satisfy their obligations under this Section 12.4 in accordance with past custom and practice. The Business and Buyer shall consult and cooperate with Sellers as to any elections to be made on returns of the Business for periods ending on or before the Closing Date. Buyer shall cause the Business to file income Tax Returns, or shall include the Business in its combined or consolidated income Tax Returns, for all periods other than periods ending on or before the Closing Date, and shall refund to Sellers, promptly upon the receipt or credit thereof, any Tax refunds representing overpayments by the Business of Taxes for which Sellers are liable hereunder (including the applicable portion of Taxes for Straddle Periods), except to the extent constituting an asset set forth on the Final Balance Sheet.

SECTION 12.5 Cooperation on Tax Matters.

(a)           Buyer, Sellers and the Business shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with the filing of Tax Returns pursuant to this Article and any audit, litigation or other Proceeding with respect to Taxes.  Such cooperation shall include the retention and (upon the other party’s request) the provision of records and

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information that are reasonably relevant to any such audit, litigation or other Proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.  Buyer, Sellers and the Business shall (A) retain all books and records with respect to Tax matters pertinent to the Business relating to any taxable period beginning before the Closing Date until the expiration of the statute of limitations (and, to the extent notified by Buyer or Sellers, any extensions thereof) of the respective taxable periods, and to abide by all record retention agreements entered into with any taxing authority, and (B) to give the other party reasonable written notice prior to transferring, destroying, or discarding any such books and records and, if the other party so requests, Buyer, Sellers and the Business, as the case may be, shall allow the other party to take possession of such books and records.

(b)           Buyer, Sellers and the Business shall, upon request, use their commercially reasonable efforts to obtain any certificate or other document from any governmental authority or any other person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed (including, but not limited to, with respect to the transactions contemplated hereby).

SECTION 12.6 Contests.

(a)           After the Closing, Buyer shall promptly notify Sellers in writing of any written notice of a proposed assessment or claim in an audit or administrative or judicial proceeding of Buyer or the Business which, if determined adversely to the taxpayer, would be grounds for indemnification under this Article XII; provided, however, that a failure to give such notice will not affect Buyer’s rights to indemnification under this Article XII except to the extent that, but for such failure, Sellers or the Business could have avoided all or a portion of the Tax liability in question.

(b)           In the case of an audit or administrative or judicial proceeding that relates to periods ending on or before the Closing Date, provided that Sellers acknowledge in writing their liability under this Agreement to hold Buyer and the Business harmless against the full amount of any adjustment which may be made as a result of such audit or proceeding that relates to periods ending on or before the Closing Date (or, in the case of any taxable year that includes the Closing Date, against an adjustment allocable under Section 12.2 to the portion of such year ending on or before the Closing Date), Sellers shall have the right at their expense to participate in and control the conduct of such audit or proceeding but only to the extent that such audit or proceeding relates solely to a potential adjustment for which Sellers could be held liable hereunder; Buyer also may participate in any such audit or proceeding and, if Sellers do not assume the defense of any such audit or proceeding, Buyer may defend the same in such manner as it may deem appropriate, including, but not limited to, settling such audit or proceeding after giving ten (10) business days prior notice to Sellers setting forth the terms and conditions of settlement.

(c)           With respect to issues relating to a potential adjustment for which both Sellers and Buyer or the Business could be liable, each party may participate in the audit or proceeding; provided, however, that Buyer shall retain control over the conduct of such proceeding.

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(d)           The provisions of this Section 12.6 shall govern and control in the event of any inconsistency with the general indemnification procedures of Article XI.

SECTION 12.7 Election Under Section 338 (h)(10).

(a)           The Sellers shall join with the Buyer in making an election under Section  338(h)(10) of the Code (and any corresponding election under state, local, and foreign tax law) with respect to the purchase and sale of the Shares (collectively, a “§338(h)(10) Election”).  The Sellers shall include any income, gain, loss, deduction, or other Tax item resulting from the §338(h)(10) Election on its Tax Returns to the extent required by applicable law.

(b)           The Buyer shall be responsible for the preparation and filing of all forms and documents required in connection with the §338(h)(10) Election.  For the purpose of making the §338(h)(10) Election, on or prior to the Closing Date, the Buyer and the Seller each shall execute two copies of Internal Revenue Service Form 8023 (or any applicable successor form thereto).  The Sellers shall execute and deliver to the Buyer such additional documents or forms as are reasonably requested to complete the §338(h)(10) Election at least thirty (30) days prior to the date such §338(h)(10) Election is required to be filed.

(c)           Buyer and Sellers agree that the Purchase Price and the liabilities of the Business (plus other relevant items) will be allocated to the assets of the Business for all tax return purposes in a manner consistent with Code sections 338 and 1060 and the Treasury regulations thereunder and as described in the allocation schedule attached hereto.  Buyer, the Business and the Sellers shall file all Tax Returns (including amended returns and claims for refund) and information reports in a manner consistent with such allocation.

(d)           To the extent permitted by state, local or foreign Tax laws, the principles and procedures of this Section 12.7 shall also apply with respect to a §338(h)(10) Election or equivalent or comparable provision under state, local or  foreign law.  The Sellers shall make any election similar to a §338(h)(10) Election that is optional under any state, local or  foreign law and shall cooperate and join in any election made by the Business or the Buyer or its Affiliates to effect such election so as to treat the sale of the Shares contemplated herein as the sale of assets for state, local and foreign income Tax purposes.

SECTION 12.8 Tax Definitions.  For purposes of this Agreement:

“Tax” or “Taxes” means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code §59A), customs duties, capital stock, net worth, intangibles, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not;

“Proceeding” means any Tax audit or assessment, and any administrative or court proceeding with respect to such an audit or assessment; and

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“Tax Return” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

ARTICLE XIII

TERMINATION, AMENDMENT, AND WAIVER

SECTION 13.1 Termination.  This Agreement may be terminated prior to the Closing:

(a)           by the mutual written consent of Sellers and Buyer;

(b)           by Sellers if there has been a breach of any representation, warranty, covenant or agreement contained in this Agreement on the part of Buyer and such breach has not been cured within 10 business days after written notice to Buyer (provided, no Seller is in material breach of the terms of this Agreement, and provided further, that no cure period shall be required for a breach which by its nature cannot be cured) such that the conditions set forth in Section 9.1 will not be satisfied;

(c)           by Buyer if there has been a breach of any representation, warranty, covenant or agreement contained in this Agreement on the part of Sellers and such breach has not been cured within 10 business days after written notice to Sellers (provided, that Buyer is not in material breach of the terms of this Agreement, and provided further, that no cure period shall be required for a breach which by its nature cannot be cured) such that the conditions set forth in Section 8.1 will not be satisfied; or

(d)           by either Buyer, on the one hand, or Sellers, on the other hand, if the Closing shall not have occurred on or before the 60th day following the date hereof for any reason; provided, however, that the right to terminate this Agreement under this Section 13.1(d) shall not be available to any party whose action or failure to act has been a principal cause of or resulted in the failure of the Closing to occur on or before such date and such action or failure to act constitutes a breach of this Agreement.

SECTION 13.2 Effect on Obligations.  Termination of this Agreement pursuant to this Article XIII shall terminate all rights and obligations of the parties hereunder and none of the parties shall have any liability to the other party hereunder, except that the provisions of Sections 5.2 and 7.3, Article XI, this Section 13.2 and Article XIV and the Confidentiality Agreement between Parent and Buyer dated June 27, 2005 shall remain in effect, and provided that nothing herein shall relieve any party from liability for any breach of any covenant or agreement in this Agreement prior to such termination in any manner that shall have proximately contributed to the occurrence of the failure of the Closing to occur.

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ARTICLE XIV

MISCELLANEOUS PROVISIONS

SECTION 14.1 Amendment. This Agreement may be amended, modified or supplemented by a written instrument, specifically providing for such action, signed by all of the Parties hereto.

SECTION 14.2 Waiver of Compliance; Consents. Any failure of a Party to comply with any obligation, covenant, agreement or condition contained herein may be waived in writing by the other Party, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any other failure.

SECTION 14.3 Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect.

SECTION 14.4 Expenses and Obligations. Except as otherwise provided in this Agreement, all costs and expenses incurred in connection with the consummation of the transactions contemplated by this Agreement by Buyer shall be paid by Buyer, and all costs and expenses incurred in connection with the consummation of the transactions contemplated by this Agreement by Sellers or the Company shall be paid by Sellers.

SECTION 14.5 Parties in Interest. This Agreement shall be binding upon and, except as provided below, inure solely to the benefit of each Party hereto, and except as set forth in Article XI hereof, nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement.

SECTION 14.6 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given upon the earlier of delivery thereof if by hand or upon receipt if sent by mail (registered or certified, postage prepaid, return receipt requested) or on the second business day after deposit if sent by a recognized overnight delivery service or upon transmission if sent by telecopy or facsimile transmission (with request of assurance of receipt in a manner customary for communication of such type) as follows:

(a)           If to Buyer, to:

Inverness Medical Innovations, Inc.
51 Sawyer Road, Suite 200
Waltham, MA  02453
Attention:  Ron Zwanziger, Chairman and Chief Executive Officer and Paul T. Hempel, General Counsel
Facsimile No.:  (617) 647-3939

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with a copy to:

William R. Kolb, Esq.
Foley Hoag LLP
155 Seaport Boulevard
Boston, Massachusetts  02210
Facsimile No.:  (617) 832-7000

(b)           If to any Seller, to:

Thermo Electron Corporation

81 Wyman Street

Waltham, Massachusetts 02454

Attention:  Director, Corporate Development

Facsimile No.: (781) 768-6655

with a copy to:

Thermo Electron Corporation

81 Wyman Street

Waltham, Massachusetts 02454

Attention:  General Counsel

Facsimile No.: (781) 622-1283

SECTION 14.7 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts without regard to the conflicts-of-laws rules thereof.

SECTION 14.8 Counterparts. This Agreement may be executed and delivered by facsimile and in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement.

SECTION 14.9 Headings. The article and section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the Parties and shall not affect in any way the meaning or interpretation of this Agreement.

SECTION 14.10 Entire Agreement. This Agreement and the Disclosure Schedules and exhibits attached hereto embody the entire agreement and understanding of the Parties hereto in respect of the subject matter contained herein or therein. There are no agreements, representations, warranties or covenants other than those expressly set forth herein or therein. This Agreement and the Disclosure Schedules and exhibits attached hereto supersede all prior agreements and understandings between the Parties with respect to such subject matter.

SECTION 14.11 Assignment. This Agreement shall not be assigned by either Party by operation of law or otherwise without the prior written consent of the other Party; provided however, that the consent of the Sellers shall not be required for: (a) an assignment by the Buyer of any or all of its rights (but not obligations) hereunder to any one or more of its lenders; (b) an assignment by the Buyer of this Agreement and its rights and obligations

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hereunder to any one or more of its Affiliates, provided that (i) such Affiliate agrees in writing to assume and fulfill all of Buyer’s obligations under this Agreement, and (ii) Buyer shall remain liable and responsible for such fulfillment by its Affiliate; (c) an assignment by Buyer of this Agreement and its rights and obligations hereunder in connection with the sale, however effected (whether through a merger, sale of stock, sale of all or substantially all of the assets, or a similar business combination) of the Company or of Buyer’s point-of-care business, provided that (i) the acquiror agrees in writing to assume and fulfill all of Buyer’s obligations under this Agreement, and (ii) the Buyer shall remain liable and responsible for such fulfillment by the acquiror; and (d) an assignment by the Buyer of this Agreement and its rights and obligations hereunder in connection with the sale, however effected (whether through a merger, sale of stock, sale of all or substantially all of the assets, or a similar business combination) of all or substantially all of the stock or assets of the Buyer, provided that the acquiror agrees in writing to assume and fulfill the obligations of the Buyer under this Agreement.

SECTION 14.12 Binding Arbitration.

(a)           The Parties agree that when any claim or controversy that arises out of, or relates to, this Agreement, or the breach thereof arises, in lieu of litigation, they shall submit such claim, dispute, controversy, difference, or question to be finally settled under Rule 28, the “Final Offer for Baseball Arbitration Option,” of the Streamlined Arbitration Rules and Procedures (“Rules”) of the Judicial Arbitration and Mediation Service (“JAMS”) by an arbitral tribunal composed of one arbitrator, who must be experienced in relevant corporate transactions, appointed by agreement of the Parties in accordance with said Rules.  In the event the Parties fail to agree upon an arbitrator from the first list of potential arbitrators proposed by the JAMS, then JAMS will submit a second list of potential arbitrators in accordance with said Rules.  In the event the Parties shall have failed to agree upon an arbitrator from said second list, the arbitrator to be selected shall be appointed by the JAMS in accordance with said Rules.  If, at the time of the arbitration, the Parties agree in writing to submit the dispute to a single arbitrator, said single arbitrator shall be appointed by agreement of the Parties in accordance with the foregoing procedure, or, failing such agreement, by the JAMS in accordance with said Rules.  Any Party may commence the foregoing arbitration proceedings by notice to the other Party.

(b)           Each of the Parties hereby irrevocably and unconditionally waives their right to file claims in any court of law or equity (other than to enforce the award of the arbitrator) for any and all disputes arising out or from or relating to the transaction contemplated by this Agreement. Each of the Parties unconditionally consents to submit any and all such disputes to the exclusive jurisdiction of JAMS. The venue of such arbitration shall be Boston, Massachusetts.

(c)           The Parties hereby exclude and waive any right of appeal to any court on the merits of the dispute.  The provisions of this Section 14.12 may be enforced in any court having jurisdiction over the award or any of the Parties or any of their respective assets, and judgment on the award (including equitable remedies) granted in any arbitration hereunder may be entered in any such court.

(d)           In the event of a dispute between the Parties hereunder, Seller, on the one hand, and Buyer, on the other hand, shall each present an offer of settlement, which shall address all

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issues in dispute such that adoption of such offer of settlement would conclusively settle all items then in dispute.  The arbitral tribunal shall be limited in its decision to choosing one of the two offers of settlement presented to it.  The decision of the arbitral tribunal shall be final and binding on the Parties and non-appealable.  The Party whose offer of settlement is not chosen by the arbitral tribunal shall pay all of the reasonable expenses of the arbitration, including the reasonable attorney fees and other costs related to such arbitration proceeding.

SECTION 14.13 Terms and Usage. Whenever required by the context, any pronoun shall include the corresponding masculine, feminine and neuter forms, and the singular shall include the plural, and vice versa. The word “dollar” and the symbol “$” shall mean United States dollars. All accounting terms not defined herein shall have the meanings determined by applicable U.S. generally accepted accounting principles. All references herein to Sections or Schedules or Exhibits shall be deemed to refer to Sections of or Schedules to or Exhibits to this Agreement unless the context shall otherwise require. The words “hereof”, “herein” and “hereunder” and words of similar import shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation” and are intended by the Parties to be by way of example rather than limitation. Unless the context otherwise requires, the word “or” not preceded by the word “either” shall be an inclusive disjunctive (and/or), and the word “or” preceded by the word “either” shall be an exclusive disjunctive (either/or). References to a Person are also to its permitted successors and permitted assigns. Unless otherwise expressly provided herein, any agreement, instrument, or law defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or law as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of laws) by succession of comparable successor laws.

SECTION 14.14 Memorandum; Disclaimer of Projections. Sellers make no representation or warranty to Buyer except as specifically made in this Agreement. In particular, Sellers make no representation or warranty to Buyer with respect to the information set forth in the Confidential Information Memorandum or any other memoranda distributed in connection with the transactions contemplated hereby or with respect to any financial projection or forecast relating to Sellers. With respect to any such projection or forecast delivered by or on behalf of Sellers to Buyer, Buyer acknowledges that (a) there are uncertainties inherent in attempting to make such projections and forecasts, (b) it is familiar with such uncertainties, (c) it is taking full responsibility for making its own evaluation of the adequacy and accuracy of all such projections and forecasts so furnished to it and (d) it shall have no claim against Sellers with respect thereto.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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(Signature Page to Stock Purchase Agreement)

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first written above.

INVERNESS MEDICAL INNOVATIONS, INC.
By:	/s/ Ron Zwanziger
Name:	Ron Zwanziger
Title:	CEO
THERMO ELECTRON CORPORATION
By:	/s/ Kenneth J. Apicerno
Name:	Kenneth J. Apicerno
Title:	Treasurer
THERMO BIOANALYSIS CORPORATION
By:	/s/ Kenneth J. Apicerno
Name:	Kenneth J. Apicerno
Title:	President

40

EX-2.9

Exhibit 2.9

Notarial Deed Roll No. 48/2006

Recorded

in Frankfurt am Main on 28 February 2006

Before me, the undersigned notary public

Dr. Peter Böttcher

with his office in Frankfurt am Main, Gartenstraße 3-5, 60594 Frankfurt am Main, appeared today at the offices of Allen & Overy LLP, Taunustor 2, 60311 Frankfurt am Main, to which I came upon request of the parties to this deed,:

1.Mr. Klaus Mohr whose business address is c/o Allen & Overy LLP, Taunustor 2, 60311 Frankfurt am Main, personally known to the notary, acting not in his own name, but on behalf of

a)Inverness Medical Switzerland GmbH, Bundesplatz 1, 6300 Zug, Switzerland,

and

b)Inverness Medical Innovations Inc., 51 Sawyer Rd., Suite 200, Waltham, MA 02453, USA

by virtue of certified powers of attorney which were presented at the recording in original and copies of which are attached to this deed.

and

2.Prof. Dr. Albert Hinnen, born on 01.11.1946 in Zurich, residing at Wilhelmstraße 17, 35037 Marburg, Germany, personally known to the notary, acting

a)               in his own name

and as representative of the following parties:

b)CLONDIAG Beteiligungs-Gesellschaft mbH, Löbstedter Straße 103-105, 07749 Jena, Germany, as representative without power of attorney, subject to approval of the managing director of the company, Eugen Ermantraut, a certified copy which is to be attached to this deed,

c)Eugen Ermantraut, residing at Forstweg 33, 07749 Jena, Germany,

d)Dr. Stefan Wölfl, residing Im Langgewann 6a, 69221 Dossenheim-Schwabenheim, Germany,

e)Dr. Torsten Schulz, residing at August-Bebel-Straße 22, 07743 Jena, Germany,

f)Mr. Karl Fusseis, residing at Bahnhofstraße 63, 4910 Ried a. Inn, Austria,

g)Prof. Dr. Michael Köhler, residing at Untergasse 8, 07751 Golmsdorf, Germany, and

h)Mr. Thomas Ellinger, residing at Steubenstraße 6, 07743 Jena, Germany,

the originals of the powers of attorney were presented and certified copies of which are attached hereto.

2

The appearing persons first declared that they would like to have this notarial deed being recorded in the English language. The notary, who himself is fully capable of the English language, ascertained that the appearing persons are fully capable of it as well.

The notary public asked the persons appearing whether he or any other persons linked with him for the joint exercise of their profession had already acted or presently act in the following recorded matter other than in an official capacity. The persons appearing declared that this was not the case.

The persons appearing requested the recording of the following:

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Share Purchase Agreement

between

1.Inverness Medical Switzerland GmbH

Bundesplatz 1

6300 Zug

Switzerland

- Purchaser -

2.Inverness Medical Innovations Inc.,
51 Sawyer Rd., Suite 200,
Waltham, MA 02453
3448 USA

- IMI -

And

3.CLONDIAG Beteiligungs-Gesellschaft mbH

Löbstedter Straße 103-105

07749 Jena

- CBG -

4.Eugen Ermantraut

Forstweg 23

07745 Jena

4

5.Dr. Stefan Wölfl

Im Langgewann 6a

69221 Dossenheim-Schwabenheim

6.Dr. Torsten Schulz

August-Bebel-Straße 22

07743 Jena

7.Prof. Dr. Albert Hinnen

Wilhelmstraße 17

35037 Marburg

8.Karl Fusseis

Bahnhofstraße 63

4910 Ried a. Inn

Österreich

9.Prof. Dr. Michael Köhler

Untergasse 8

07751 Golmsdorf

10.Thomas Ellinger

Steubenstraße 6,

07743 Jena

- the parties 3. to 10. each a Seller and together the Sellers -

THE SHARES OF COMMON STOCK, PAR VALUE $.001 PER SHARE, OF INVERNESS MEDICAL INNOVATIONS, INC. OFFERED AND GIVEN AS CONSIDERATION PURSUANT TO THIS AGREEMENT (THE “IMI SHARES”) HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT

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OF 1933 (THE “SECURITIES ACT”) AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS UNLESS THE SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT, OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE. HEDGING TRANSACTIONS INVOLVING THE IMI SHARES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.

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the appearing persons declared:

RECITALS

WHEREAS Sellers are shareholders of CLONDIAG chip technologies GmbH (hereinafter also referred to as the “Company” or “CLONDIAG”), registered in the commercial register of the local court of Gera under HR B 7136;

WHEREAS Mr. Hinnen has concluded a Purchase Agreement with VCT Venture Capital Thüringen GmbH & Co. KG (“VCT”) dated December 21, 2005, pursuant to which Mr. Hinnen has acquired all of the shares  in CLONDIAG which VCT currently owns. Said agreement and in particular the sale and transfer of these shares from VCT to Mr Hinnen is under the condition precedent (the VCT Condition) of the complete payment of the purchase price and repayment of the silent participations by CLONDIAG until March,15, 2006;

WHEREAS Purchaser has expressed its interest to purchase all shares of the Company and to settle the purchase price and other obligations under this Agreement partly in cash and partly by Inverness Stock. “Inverness Stock” means shares of common stock, par value $.001 per share, of IMI, publicly traded on the American Stock Exchange. Inverness Stock are in this Agreement also referred to as “IMI Shares” or “IMI Share”;

WHEREAS Purchaser has been granted limited time to check financial, legal and other information (Due Diligence), which the Sellers have disclosed in the Data Room, and to discuss questions arising from such Due Diligence with the management of the Company.

NOW, THEREFORE, in consideration of the foregoing, the parties hereby conclude the following agreement (the Agreement):

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Article 1
Purchase and Sale of Shares

1.1Shares of the Company

The Company has a registered share capital of EUR 89,400.00 and the issued shares are held as follows:

-two shares with a nominal value of EUR 22,300.00 and EUR 7,200.00 by VCT; these shares are sold and transferred to Prof. Dr. Albert Hinnen upon satisfaction of the VCT Condition.

-one share with a nominal value of EUR 29,100.00 by CLONDIAG Beteiligungsgesellschaft mbH (“CBG”)

-one share with a nominal value of EUR 12,400.00 by Eugen Ermantraut

-one share with a nominal value of EUR 4,500.00 by Dr. Stefan Wölfl

-one share with a nominal value of EUR 4,500.00 by Dr. Torsten Schulz

-one share with a nominal value of EUR 3,600.00 by Prof. Dr. Albert Hinnen

-one share with a nominal value of EUR 3,700.00 by Karl Fusseis

-one share with a nominal value of EUR 1,400.00 by Prof. Dr. Michael Köhler, and

-one share with a nominal value of EUR 700,00 by Thomas Ellinger.

CBG and Messrs. Hinnen, Ermantraut, Wölfl, Schulz, Fusseis, Köhler and Ellinger are in the following referred to as “Sellers”, and each of them as a “Seller”.

1.2Sale and Assignment of Shares

Sellers herewith sell, transfer and assign their respective shares described in Article 1.1, in any case however all of their shares in CLONDIAG, with all rights pertaining thereto to Purchaser, and Purchaser purchases and accepts assignment subject to the terms and conditions of this Agreement.

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Attached to this deed as ANNEX 1.2 are copies of resolutions according to which (i) the sale and transfer of the shares from VCT to Mr Hinnen, and (ii) the sales and transfers of the shares as described for in this Agreement as well as a share pledge of Purchaser in favour of its financing bank are approved by the relevant shareholders. The Sellers are obliged upon demand of the Purchaser to pass together with the Purchaser a shareholders’ resolution at any time (on or prior or as from Completion) according to which the share sales and transfers as described in this Agreement are approved for precautionary reasons.

The Sellers on the one hand and the Purchaser on the other hand hereby enter into an agreement on the exercise of voting rights (Stimmbindungsvertrag) in relation to the shares in CLONDIAG as follows: As from Completion, the Purchaser shall control 100% of the voting rights of and in relation to CLONDIAG. Each of the Sellers therefore hereby undertakes to exercise its voting rights (Stimmrechte) as from Completion onwards (i) only in a way as directed (vorgegeben) by the Purchaser and (ii) immediately upon instruction of the Purchaser.

The Purchaser and the Sellers shall co-operate in good faith to ensure that Purchaser and/or, as the case may be, IMI may fulfil its obligations under its banking arrangements, including, but not limited to, shall at any time upon demand agree in either a shareholder’s meeting (to be convened under waiving any requirement as to form or time of calling and convening shareholders’ meetings) or pass, at the option of Purchaser, a resolution in written form permitting Purchaser to pledge its shares (for the avoidance of doubt, up to Completion II excluding the share sold and transferred by CBG pursuant to this Agreement) in CLONDIAG in favour of its and/or, as the case may be, IMI’s financing bank/s.

As the Purchaser wants to acquire the shares in CLONDIAG in two steps, the acquisition shall be contemplated as follows:

1.2.1Mr. Hinnen herewith sells, transfers and assigns the two shares (including, for the avoidance of doubt, his expectancy rights (Anwartschaftsrechte) in relation to the shares) with a nominal value of EUR 22,300.00 and EUR 7,200.00 in CLONDIAG with all rights pertaining thereto to Purchaser, and Purchaser purchases and accepts the assignment.

The sale, transfer and assignment of these shares by Mr. Hinnen to Purchaser is subject to the condition precedent of the complete payment of the respective purchase price pursuant to Art. 2.1.1 below.

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The transfer of the shares is also under the condition precedent that the Purchaser repays on behalf and for account of CLONDIAG all outstanding silent partnerships and other liabilities in the total amount of EUR 7,329,557.81 set out in the ANNEX 1.2.1. For such purpose, the parties agree that the Purchaser shall pay directly such amounts on such accounts as specified in ANNEX 1.2.1. Such payment shall constitute a contribution into the capital reserves (Kapitalrücklage) of CLONDIAG by Purchaser in the amount of the actual payment. Amongst the shareholders, the capital reserves built up by such contribution shall be exclusively for Purchaser’s account. The capital reserves shall not be dissolved without prior consent of the Purchaser. The parties to this Agreement shall undertake the necessary corporate actions to procure that the payment is accounted for accordingly.

1.2.2The shareholders set out below herewith sell, transfer and assign their respective shares, in any case however all of their shares, with all rights pertaining thereto to Purchaser as follows:

-Eugen Ermantraut one share with a nominal value of EUR 12,400.00

-Dr. Stefan Wölfl one share with a nominal value of EUR 4,500.00

-Dr. Torsten Schulz one share with a nominal value of EUR 4,500.00

-Prof. Dr. Albert Hinnen one share with a nominal value of EUR 3,600.00

-Karl Fusseis one share with a nominal value of EUR 3,700.00

-Prof. Dr. Michael Köhler one share with a nominal value of EUR 1,400.00, and

-Thomas Ellinger one share with a nominal value of EUR 700,00 .

Purchaser purchases and accepts the assignments.

The transfer of these shares by the Sellers to Purchaser is subject to the condition precedent of the (i) effectiveness of the transfer and assignment pursuant to Article 1.2.1 (for the avoidance of doubt, the satisfaction of the VCT Condition), and (ii) the handing over of the relevant IMI Shares to the Escrow Agent pursuant to Art. 2.1.2 below.

CBG herewith sells, transfers and assigns its share with a nominal value of EUR 29,100.00 in CLONDIAG with all rights pertaining thereto to Purchaser, and Purchaser purchases and accepts the assignment.

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The transfer of this share by CBG to Purchaser is subject to the condition precedent of the complete payment of the respective purchase price pursuant to Art. 2.1.3 below.

1.3Entitlement to Profits

The profit rights for the fiscal year 2006, including retained profits of preceding fiscal years, if any (i.e. profits carried forward and profits for which no resolution on their use has been adopted), shall belong to the Purchaser.

Article 2
Share Purchase Price

2.1Purchase Price

The respective purchase prices for the shares sold pursuant to Art. 1.2 are as follows:

2.1.1(a)             The purchase price for the shares sold pursuant to Art. 1.2.1 shall amount to EUR 2.64 million (in words: Euro two million six hundred fourty thousand) and is payable in cash (hereinafter referred to as the “Share Purchase Price I”).
The Share Purchase Price I shall be transferred to the following bank account of VCT:

VCT GmbH & Co.KG

IBAN: DE71820500003079091017

SWIFT-Code (BIC):

HELADEFF

(b)The amount required to repay the silent partnerships and other liabilities in the total amount of EUR 7,329,557.81 shall be paid to the bank accounts and in the amounts specified in ANNEX 1.2.1 .:

The Sellers shall procure that VCT and all other silent partners immediately after receipt of the funds acknowledge in writing the complete settlement of the purchase price (in relation to VCT) and the complete repayment of the silent partnerships (in relation to VCT and the other silent partners).

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2.1.2.The purchase price for the shares sold pursuant to Art. 1.2.2 shall be in total 218,502 (in words: Two Hundred Eighteen Thousand Five Hundred Two) of IMI Shares (hereinafter referred to as the “Share Purchase Price II”). The relevant IMI Shares shall be tradable as from 31 December, 2006 onwards. The relevant IMI Shares are allocated to the Sellers in such numbers as stated in ANNEX 2.1.2. The relevant IMI Shares for each relevant Seller shall be handed over to U.S. Bank Corporate Trust Services, 100 Wall Street, 16th floor, New York, NY 10005 or any other person the parties to this Agreement mutually agree to (the Escrow Agent). Upon handing of the relevant IMI Shares to the Escrow Agent, Purchaser’s obligations for settling the Share Purchase Price II are fulfilled.

If and to the extent that the value of the IMI Shares paid to Sellers as Share Purchase Price II falls short on 29 December, 2006 to the amount of EUR 4.87 Mio. (calculated based on the EUR / USD exchange rate of 29 December, 2006 12h00 noon Eastern Time as published in the Wall Street Journal and on the IMI Share price close of play, New York, 29 December, 2006, the Purchaser shall pay to the Sellers the amount of such shortfall in cash. Each of the Sellers shall be entitled to such payment in such a percentage as outlined in ANNEX 2.1.2.

For the avoidance of doubt: If the value of the IMI Shares paid to Sellers as Share Purchase Price II exceeds at 29 December, 2006 (as calculated in line with the above principles) the amount of EUR 4.87 Mio., no adjustment — neither in cash nor in IMI Shares — will take place.

2.1.3 The purchase price for the shares sold pursuant to Art. 1.2.3 shall amount to EUR 4.16 million (in words: Euro four million one hundred and sixty thousand) and is payable in cash (hereinafter referred to as the “Share Purchase Price III”).
The Share Purchase Price III shall be transferred to a bank account of CBGto be notified to Purchaser immediately following Completion by letter signed by the managing directors of CBG.. The Share Purchase Price III shall be due and payable on or before 31 August, 2006.

2.1.4 Share Purchase Price I — III shall be also referred to as “Share Purchase Price”.

2.2Set Off

The Purchaser is not entitled to set off any potential claims against, or to withhold, for any legal reason, the Share Purchase Price.

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2.3Earn-Out

In addition to the purchase prices set out above, an earn-out payment (the Earn Out Payment) shall be paid to the Management Team (as defined in Art. 7) of CLONDIAG according to the milestone plan attached hereto as ANNEX 2.3.a. The Earn Out Payment shall amount in total to (i) 224,316 of IMI Shares (Earn Out I) and (ii) at the option of Purchaser either EUR 2.5 Mio. in cash or IMI Shares representing a value of EUR 2.5 Mio. (as calculated at the relevant Earn-Out-Determination date; the calculation principles contained in Art. 2.1.2 shall apply mutatis mutandis ) (Earn Out II).

The milestone plan providesfor four milestones. 1/4 each of Earn-Out I and Earn Out II shall fall due at the relevant Earn-Out Determination date and shall be allocated to the relevant persons and in such portions as set out in ANNEX 2.3.b. Each milestone shall be considered separately and, for the avoidance of doubt, needs to be fulfilled on or prior to the relevant deadline set out in ANNEX 2.3.b to entitle the relevant persons to a payment of the relevant Earn Out Payment portion. If the Purchaser opts to settle a relevant Earn Out II with IMI Shares rather than with cash, each Seller may request that his portion of the relevant Earn Out II may be settled by a combination of cash and IMI Shares (instead by IMI Shares only) in accordance with the following: A seller may demand a cash payment up to such amount which is identical to the amount of tax that is triggered in relation to him by the relevant payment of Earn Out I and Earn Out II (Tax Amount). In such case, the relevant Seller shall receive a cash payment in the amount of the Tax Amount and IMI Shares representing the value of his portion of the Earn Out II less the Tax Amount.

Each Seller shall bear any and all personal taxes (including, for the avoidance of doubt, the employees part of social taxes, if any) caused by or in relation to the payment of the relevant Earn Out I and Earn Out II, and shall fully indemnify each of the Purchaser, IMI and CLONDIAG from any all of such personal taxes if such taxes are levied on either of Purchaser, IMI and CLONDIAG, or if either of the before mentioned is held liable for such taxes.

2.3.1The milestone plan is based on technical goals and specifications given in the attached ANNEX 2.3.a.

2.3.2[deliberately left free]

2.3.3The fulfilment of the agreed milestones shall be determined in each case as follows:

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·The Management Team shall notify the Purchaser on the fulfilment of the respective milestone (Fulfilment) and shall provide for reasonable information in relation to the Fulfilment (Notification).

·The Purchaser shall within a period of 4 weeks as from receipt of the Notification either acknowledge the Fulfilment (Acknowledgement) or —by giving reasonable information - reject the Notification (Rejection). If the Purchaser neither acknowledge nor reject the Notification within said period, non-rejection shall be deemed as Acknowledgement.

·In case of a Rejection, the parties shall try to amicably settle the dispute on the Fulfilment (Dispute) within a period of 4 weeks as from Rejection.

·If the parties cannot settle the Dispute within said period of 4 weeks, the Management Team may request (Request) within a period of further 4 weeks as from the end of the first four weeks period to refer the Dispute for decision to an Expert (Expert). If the Request is not submitted timely within said period of 4 weeks to the Purchaser, the relevant milestone shall irrevocably be deemed as not fulfilled.

·Upon submission of the Request, the Expert shall be determined either by the parties mutually, or, on request of either party, by the management board (Vorstand) of the Fraunhofer-Gesellschaft zur Förderung der angewandten Forschung e.V., München (Fraunhofer). If Fraunhofer is to determine the Expert, the following shall apply: Fraunhofer shall as soon as possible name —after having consulted the parties - three candidates being available to act as the Expert. If the Parties cannot agree on one of these candidates to be the Expert, Fraunhofer shall appoint one of the candidates as Expert. Such appointment shall be binding for the Parties.

·The Expert shall resolve the Dispute finally and binding by final arbitration judgement (rechtskräftiger Schiedsspruch) (Judgment) issued by the Expert as an arbitrator (Schiedsgutachter). The costs of Fraunhofer and the Expert shall be allocated to the parties in line with the principles of Sec. 91 German Civil Procedure Act (Zivilprozeßordnung).

·Either the Acknowledgement (including, for the avoidance of doubt, deemed Acknowledgement as consequence of non-rejection) or, if and to the extent stating a Fulfilment, the Judgement shall be deemed as “Earn-Out Determination”.

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2.3.4Purchaser shall provide its best efforts that the milestones could be fulfilled. Purchaser is in this context also obliged to fulfil its financial obligation under Sect. 4.2.

Article 3
Completion

3.1Completion

For purposes of this Purchase Agreement, the term “Completion” shall mean the date on which the condition precedent pursuant to Art. 11.9 below is fulfilled, and “Completion II” shall mean the date on which the shares currently owned by CBG are transferred to Purchaser in line with Article 1.2.3.

3.2Effective Date

The Purchaser takes over all economical chances and risks linked to the Company with effect as from Completion (“Effective Date”). All changes in the Company’s financial, profit or asset situation occurring after this Effective Date will be borne by the Purchaser, if this Agreement does not expressly provide otherwise.

Article 4
Partnership Agreement / Working Capital

4.1Partnership Agreements

All silent partnership agreements listed in ANNEX 1.2.1 shall be terminated and be repaid pursuant to the provisions of this Agreement.

4.2Working Capital

The Purchaser shall make available to the Company the agreed budgets for 2006 (EUR 5 million, comprising a maximum of EUR 3.185 million operating expenses and a maximum of EUR 1.815 million capital equipment) and 2007 (EUR 7 million, comprising a maximum of EUR 4.7 million

15

operating expenses and a maximum of EUR 2.3 million capital equipment) either in form of equity contributions or under R&D contracts. For 2006, the initial payment shall be in an amount of EUR 500,000 which shall be due on 15 March 2006. Further instalments shall be due on the 15^th day of each following month.. For the avoidance of doubt: The instalments shall be due on 15 April, 15 May, 15 June, 15 July, 15 August, 15 September, 15 October, 15 November and 15 December 2006, amount to EUR 500,000 each and (including the initial payment of EUR 500,000) up to the maximum amount of EUR 3.185 million in operating expenses and the maximum amount of EUR 1.815 million capital equipment . For 2007, a schedule for payments for 2007 will be agreed by Purchaser and the Company based on monthly instalments due on the 15^th of each month (of one twelfth of the total budget up to the maximum amount of the each of the operating expenses and the capital expenses set out in the first sentence of this para.).

The providing of funds by Purchaser to CLONDIAG in 2006 shall be along the following lines: Funding shall be up to EUR 500,000 monthly but only to a maximum of EUR 3.185 million allocated for operating expenses and EUR 1.815 million allocated for capital equipment. The funds made available are therefore not contributed as general cash which can be used in any manner but the expense and capital parts can only be used accordingly. In other word: Once the maximum amount of the payment for capital equipment or operating expenses has been reached, as the case may be, no further amount must be advanced by Purchaser unless there are available expenses of the other type. For the avoidance of doubt and by way of example, if the maximum amount of operating expenses has been reached and there are no capital equipment expenses available for expenditure at a given payment date, then no payment shall be made at such time, provided that a catch up payment may be made in a subsequent period up to December 31 of such year, if a capital equipment expense becomes available. For purposes of this section, a capital equipment expense generally means an expense for any fixed asset, including without limitation, laboratory equipment, pilot or production equipment, test equipment, plant and machinery which the Purchaser’s accountant determines may be treated as a capital expense.

4.3           Employee bonus plan

The Purchaser shall provide to CLONDIAG IMI-Shares  and a cash amount of a combined total value of EUR 1.1 Mio. (such IMI Shares and the cash amount together the “Incentive Funds”) by no later than 20 March 2006. The Incentive Funds shall be used to grant to the employees bonus payments The Incentive Funds include, for the avoidance of doubt, CLONDIAG’s portion of social taxes (Arbeitgeberanteil an den Sozialabgaben) triggered by all payments due under the Employee Bonus Plan.

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The number of IMI Shares to be made available as part of the Incentive Funds shall be calculated based on an IMI Share price of EUR 22.29 per IMI Share.

The relevant Incentive Funds shall be made available to (i) CLONDDIAG and (ii) by CLONDIAG to such employees and in such percentages as specified in ANNEX 4.3.a. Each employee shall receive as bonus payment (Bonus Payment) a combination of IMI Shares and cash calculated along the following principles:

·The cash portion for each relevant employee shall be identical to the amount of the personal wage tax (Lohnsteuer) plus employee’s social tax (Arbeitnehmeranteil an Sozialabgaben) triggered by the payment of his portion of the IMI Shares.

·CLONDIAG shall pay the total amount of wage tax and social taxes triggered by the bonus payment to the competent tax and social tax office in March 2006.

·The total amount of social taxes to be paid by CLONDIAG as employer’s part of the total social taxes (Arbeitgeberanteil an Sozialabgaben) shall be included in the amount of the Incentive Funds. Thus, the total value of Incentive Funds to be made available as direct payments to employees is reduced by the amount of social taxes to be paid by CLONDIAG as employer’s part of the social taxes.

The relevant IMI Shares shall be tradable as from 31 December 2006 onwards. The payment of the Incentive Funds to CLONDIAG by Purchaser shall be a contribution to the capital reserves of CLONDIAG. Amongst the shareholders, the capital reserves built up by such contribution shall be exclusively for Purchaser’s account. The capital reserves shall not be dissolved without prior consent of the Purchaser.

Each Employee shall be eligible to a bonus payment only if she/he signs the Acknowledgement and Certificate a draft of which is attached as ANNEX 4.3.b. The parties and CLONDIAG shall cooperate in good faith to set up the legal arrangements in relation to the above on or before 20 March 2006.

Article 5
Sellers’ Representations and Warranties

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5.1Representations and Warranties

The Sellers represent and warrant that the following statements (each of which shall also be referred to as a “Sellers’ Warranty”) are true and accurate as of Completion or as of any other date specified in this Article 5.1. The Representations and Warranties shall not be considered as “Condition Guarantees” (Beschaffenheitsgarantie) or “Durability Guarantees” (Haltbarkeitsgarantie) within the meaning of Sections 443 and 444 German Civil Code, but as an abstract guarantee within the meaning of Section 311 German Civil Code.

5.1.1The statements in the preamble (Recitals) of this Agreement in relation to the Sellers and the Company are complete and accurate.

5.1.2The Company is a company duly organised and existing (in accordance with its statutes) under the laws of the Federal Republic of Germany. The Company does not hold shares in any other company and is under no obligation to acquire any shares in other entities.

5.1.3The Sellers are or will be at Completion and, in relation to CBG, at Completion II the legal and beneficial owners of all respective shares of the Company (“Shares”). The Shares are free from any encumbrances and third party rights. The Sellers may freely dispose of the Shares and do not require any consent of a third party and a disposal does not result in any infringement of any third party rights with respect to the Shares. The Shares are fully paid up and the contributions have not been repaid. There are no obligations of the Sellers to make additional contributions.

5.1.4All facts relating to the Company that can be registered in the commercial register are actually registered in such register. There are no enterprise agreements (Unternehmensverträge) between the Company and the Sellers or any other third party according to sections 291 et seq. of the German Stock Corporation Act (Aktiengesetz) (for the avoidance of doubt, including silent partnership agreements) other than those listed in ANNEX 1.2.1. The total outstanding obligations of the Company under all silent partnership agreements do not (including interest) exceed EUR 7.54 Mio. There are no other liabilities vis-à-vis shareholders or silent partners other than those which are repaid in connection with this SPA.

5.1.5No insolvency proceedings have been applied for or instituted against the Company, neither has the institution of such proceedings been denied for the lack of assets or an application filed for such proceedings. There are no facts which justify the application for, or the institution of, insolvency proceedings in relation to the Company. The Purchaser

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acknowledges that the Company has a negative equity and does not consider such negative equity as relevant for the purposes of this clause. There are no circumstances which in accordance with applicable insolvency laws would justify the contestation or annulment of this Agreement. There are no circumstances which could justify the avoidance of the transfer of the Shares according to the provisions of the Insolvency Code (Insolvenzordnung) and/or the Avoidance Act (Anfechtungsgesetz).

5.1.6The annual reports (consisting of the balance sheet, profit and loss statement plus annex) on the economic status of the Company for the fiscal years 2004 and 2005 as attached hereto as ANNEX 5.1.6 have been prepared in accordance with German commercial law (HGB), German generally accepted accounting principles (Grundsätze ordnungsmäßiger Buchführung) and the due observation of the continuity of balance sheet preparation and asset valuation (formelle und materielle Bilanzkontinuität). They offer a true and fair view of the economic, financial and profit status of the Company in the relevant years (Sec. 264 para. 2 HGB).

The accounting principles applied up to now by the Company are described and explained in ANNEX 5.1.6.

5.1.7The business of the Company has been continued, from January 1, 2006 up until Completion within the ordinary course of business and substantially as previously conducted. In particular, the Company

(i)has not made any investments outside of its business purpose as defined in the articles of association;

(ii)has not acquired or sold any fixed assets except as in the ordinary course of business and at market conditions;

(iii)has not granted or extended any loans to third parties, or has not been granted or extended any loans from third parties, outside the ordinary course of business;

(iv)has not taken any steps to change its capital structure (Kapitalmaßnahmen);

(v)has not entered into any agreement or carried out any transaction relating to business assets that are considered as not essential for the business operations (nicht betriebsnotwendiges Vermögen);

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(vi)has not increased the total amount of its debts or changed its debts structure except as in the ordinary course of business.

5.1.8The Company is the owner or authorised user of all tangible fixed assets required to continue its business in a comparable manner as conducted up to the Signing Date. There are no obligations to sell these assets, to dispose of them or to grant any rights of use with regard to them, whether as a whole or in part.

5.1.9Intellectual Property, Software, Know-How

(i)ANNEX 5.1.9.a contains complete and correct lists of all patents, trademarks, domain names and other intellectual property rights owned by, or licensed to, the Company (“Intellectual Property Rights”). Except as listed in ANNEX 5.1.9.a the Intellectual Property Rights are not subject to any proceedings for opposition, cancellation, revocation or rectification which may negatively affect the Company’s business nor, to the best of Sellers’ Knowledge, being materially infringed by any third party. Except as listed in ANNEX 5.1.9.a, the Intellectual Property Rights owned by the Company are held exclusively and without limitation by the Company; they are free of any rights of third parties. Except as disclosed in ANNEX 5.1.9.a, the Intellectual Property Rights are not affected by the implementation of this Agreement. Except as disclosed in ANNEX 5.1.9.a, according to the best knowledge of the Sellers no third party is challenging any Intellectual Property Right. The payment of fees due, as well as all other measures necessary, to maintain the Intellectual Property Rights, have been undertaken completely and in good time. To the Sellers’ best Knowledge, the Company does not breach any third party intellectual property rights save in relation to such products currently distributed by the Company and that are being listed in ANNEX 5.1.9.b and in relation to which it cannot be ruled out that third party intellectual property rights are infringed although the Sellers do not consider that there is such an infringement.. The employees and managing directors have assigned to the Company all rights in relation to inventions and the Company owns all intellectual property rights which are related to (past) inventions of its employees and managing directors, and the provisions of the Act on Employee Inventions (Gesetz über Arbeitnehmererfindungen) are applied to its employees and — mutatis mutandis — its managing directors.

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(ii)To the Sellers’ best knowledge, the Company is the owner or authorized user of all material know-how required to continue its business in a comparable manner as conducted up to the signing of this Agreement. To the Sellers’ best knowledge, the material know how does not use or incorporate third party owned know-how except as set out in ANNEX 5.1.9.c and in any event, to the Sellers’ best knowledge, the material know-how is used with permission of the relevant third party as set out in ANNEX 5.1.9.c. The use of the know-how is royalty-free. To the Sellers’ best Knowledge, the use of the material know-how does not infringe any rights of third parties. The Company has taken appropriate measures to ensure that the material know-how is kept confidential vis-à-vis third parties. The material know-how is either sufficiently recorded in writing or available to the Company through the employees to continue the Company’s business in a comparable manner as conducted up to the Signing Date.

(iii)The Company is the lawful user of all material software required to continue its business in a comparable manner as conducted up to the Signing Date. The software licences are not affected by the implementation of this Agreement.

5.1.10Business Operations, Compliance with Laws and Permits

(i)The Company holds all permits, licences or approvals which are material for the operation of its business as presently conducted. The business is conducted in accordance with all material permits, licences or approvals, as well as in compliance with the applicable legal provisions of a material kind, including provisions on employment safety and environmental protection. At the time of the signing of this Agreement, there are, to the Sellers’ best Knowledge, no threats of a withdrawal, restriction or alteration (in particular by imposition of obligations) of the material permits and licenses. The material permits and licenses held by the Company are not affected by the implementation of this Agreement.

(ii)The products manufactured for sale by the Company are labelled as required from the Company under the laws of the country of manufacture or distribution, as the case may be (country of distribution to be any country into which the products are directly exported by the

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Company) and the material safety data sheets (Sicherheitsdatenblätter) are essentially complete and correct.

5.1.11Subsidies

Since 1 January 1999, the Company has applied for, received and used public subsidies only in accordance with the applicable legal provisions and in compliance with any public authority orders, conditions and obligations. No repayment of such subsidies will become necessary as a consequence of the implementation of this Agreement or by reason of other circumstances already existing with regard to the Company.

5.1.12Material Agreements

All Material Agreements are in force (bestehen als solche) and can be continued except as disclosed, and according to the Sellers’ best knowledge, there are no material breaches of such Material Agreements. “Material Agreement” for the purposes of this Clause shall be any and all agreements without which, alone or together, the business of the Company cannot be operated substantially as it has been up to Completion.

5.1.13Employees

(i)ANNEX 5.1.13 contains a schedule of all key employees of the Company (hereinafter jointly referred to as “Key Employees” and individually as “ Key Employee”). To the best knowledge of the Sellers, no Key Employee has given notice of termination of his employment. Signing and completion of this Agreement will not entitle any Key Employee to terminate employment or claim for compensation or any other special benefit, except as mentioned in ANNEX 5.1.13.

(ii)With regard to the Company, there is no pending (rechtshängig) litigation with current or former employees.

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(iii)The Company does not have a works council or any other body representing its employees.

(iv) Apart from the bonus payments to employees pursuant to the provisions of this Agreement, there are no further employee incentive programs or the like under which employees could claim bonus payments or the like.

5.1.14ANNEX 5.1.14 to this Agreement contains a list of all litigation, arbitration or administrative proceedings to which the Company is a party. No such proceedings have been threatened in writing to be filed against the Company. There are no indications that any further proceedings are imminent.

5.1.15As from Completion and the payments due under this Agreement, the Company does not have any other long term interest bearing financial debts vis-à-vis the Sellers.

5.1.16The Company has filed all Tax returns (“Steuererklärungen”), applications and documents relating to Taxes which were legally required to be filed with any Tax Authority. Such returns, applications and documents have been properly prepared in accordance with all applicable Tax laws and with all applicable Tax regulations (“Richtlinien”) and have been validly and timely made or provided to the appropriate Tax Authority. All such returns, applications and documents that the Company has supplied to a Tax Authority are true, complete and correct.

Except as disclosed in ANNEX 5.1.16, the Company has at all times paid all Taxes assessed by the appropriate Tax Authority when due on or before Completion. To the extent that Taxes have not yet been due at the last balance sheet date, they have been fully provided for in the relevant accounts (and such provisions have not been dissolved for any other purpose than the payment of the Tax for which they have been formed). No receivable for Tax shown in the accounts is overstated meaning in each case that the full amount of such receivables should be paid by the Tax Authorities to the Company as they will fall due.

All records which the Company is required to keep for Tax purposes or which would be reasonably necessary to substantiate any claim made or position taken in relation to Tax by the Company, have been duly kept and are available for inspection at the premises of the Company.

There is no ongoing audit, review, material disagreement or material dispute between the

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Company and any Tax Authority with regard to any Tax returns.

The Company has not received any written Tax ruling (“verbindliche Auskunft”) and did not enter into any written and legally binding agreement or is not currently under negotiation to enter into any such agreement with any Tax Authority which would affect the Tax situation of the Company in any time period after Completion.

There has not been any transaction to which the Company is a party that for Tax purposes qualifies to the Sellers best knowledge as a hidden distribution of profits or constructive dividend (“verdeckte Gewinnausschüttung”) and the Company has not deviated from the arm’s length standard as applied by the Tax authorities and the Tax courts (“Grundsatz des Fremdvergleichs und der klaren und vorherigen Vereinbarung”) when dealing with its shareholders or any other related party.

“Tax” or “Taxes” shall mean for the purposes of this clause any tax or other similar assessment or charge within the meaning of § 3 para. 1 of the General Tax Code (Abgabenordnung) imposed on the Company.

5.1.17Since 1 January 2002 no claims of more than EUR 100,000 for damages based on product liability or warranty claims have been asserted or threatened in writing against the Company nor, to the Sellers’ Knowledge, have any investigations under criminal law been instituted against employees, executives and/or corporate bodies of the Company based on personal injury or damage to property caused by defective products, and at the time of signing of this Agreement there are, to the Sellers’ Knowledge, no threats that such claims will be asserted, or investigations instituted, relating to the Company.

5.1.18Any Representations and/or Warranties to the Purchaser other than as provided in this Share Purchase Agreement are expressly excluded.

5.1.19All information (listed in ANNEX 5.1.19) provided to the Purchaser in the due diligence process is true, accurate and not misleading in all material respects. The Sellers have not hold back any information which has a material adverse effect on CLONDIAG. The Purchaser has at Completion no information on the existence of a Relevant Claim.

5.2Legal Consequences

In case of a breach of the Representations or Warranties set out in Article 5.1, the Sellers are entitled

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and obligated to establish the status that would exist if the statements had been true (Sec. 249 para. 1 German Civil Code). This must be completed within a reasonable period of time but no later than eight weeks following Purchaser’s request to do so.

In case the Sellers should not establish the status in compliance with this Purchase Agreement within a reasonable period of time, or should this not be possible, the Purchaser shall be entitled to seek damage compensation from the Sellers (Sec. 250 German Civil Code).

5.3Limitation of Sellers’ Liability

5.3.1The Sellers shall be liable vis-à-vis the Purchaser as joint and several debtors (Gesamtschuldner) in accordance with Sec. 421 German Civil Code.

5.3.2[deliberately left free]

5.3.3  “Relevant Claim” in this Article 5.3 means any claim in respect of any breach of Sellers’ Representation or Warranty according to this Article 5, excluding claims below the threshold set forth in Article 5.3.5

5.3.4  The Sellers shall not be liable for such claims as would not have arisen but for an act, omission, or transaction carried out by the Purchaser or any of the Company’s employees or agents, or their respective directors after Completion.

5.3.5  The Sellers shall have no liability in respect of any Relevant Claim the aggregate amount of liability of which falls short of EUR 10,000.

5.3.6  No liability shall attach to the Sellers in respect of any Relevant Claim unless the aggregate amount of all Relevant Claims exceeds EUR 100,000.00 in which event the Sellers shall be liable for the entire amount of the Relevant Claims.

5.3.7  The Sellers shall not be liable for any Relevant Claim in respect of any matter to the extent that such Relevant Claim arises or, such Relevant Claim having otherwise arisen is increased as a result of any changes made after Completion in any accounting or taxation policy or practice of the Company, of the Purchaser, or in any other company belonging to the Purchaser’s group of companies.

5.3.8  In case the Company or the Purchaser is entitled (whether by reason of insurance or payment discount or otherwise) to recover from any third party (including insurances) any sum in

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respect of any liability, loss or damage, which relates to a Relevant Claim against the Sellers or for which a Relevant Claim could be made, the Purchaser shall promptly notify the Sellers. The Purchaser shall provide such information as the Sellers may require relating to such liability or dispute and steps taken or to be taken by the Purchaser or the Company in connection therewith.

If it is reasonably likely that payments under such Relevant Claims will be made by such third party after the Purchaser or the Company has made all reasonable steps to obtain recovery, and if so required by the Sellers, the Purchaser as well as the Company shall first take all reasonable steps (whether by way of a claim against its insurers or otherwise) including, but without being limited to, proceedings as the Sellers may reasonably require to enforce such recovery, before seeking to recover any amount from the Sellers in respect of the Relevant Claim or potential Relevant Claim. The Purchaser shall keep the Sellers informed of the progress of any action taken. If it becomes apparent that payment will not be received from such third party within a period of 6 (six) months, the Purchaser is entitled to claim the damages directly from the Sellers, provided that the Purchaser or the Company is required to thereafter enforce the Relevant Claim against the third party for the account of the Sellers. If the Purchaser or the Company obtains recovery of the Relevant Claim from the third party, any claim against the Sellers shall be limited (in addition to the limitations on the liability of the Sellers referred to in this Article 5.3) to the amount by which the loss or damage suffered by the Purchaser as a result of such breach shall exceed the amount so recovered. To the extent that the Purchaser has retained or retains full recovery from the third party (after having received full recovery from the Sellers), the Purchaser shall transfer to the Sellers such amount. In the event the Purchaser does not attend to its duties according to this Article 5.3.8, the Sellers shall only be liable for a Relevant Claim if and as far as the Purchaser satisfactorily proves that in case it had attended to these duties no claims, or no claims exceeding the recovered claim, could have recovered from such third party.

Such actions under this Article 5.3.8 shall be undertaken at the Sellers’ cost and expenses and if the Sellers provide proper indemnities in respect of all costs and expenses to be incurred.

5.3.9  Without prejudice to the other provisions of this Section 5, the Purchaser declares to intend that it will primarily try to recover sums in context with Relevant Claims from a third party (if and to the extent that a third party should be available) rather than to claim such sums from the Sellers, and all parties agree that they and CLONDIAG shall co-operate in good faith and use best efforts in this context.

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5.3.10If the Sellers pay to the Purchaser an amount in discharge of a Relevant Claim and if the Purchaser or the Company subsequently recovers (whether by payment, discount or otherwise) from a third party a sum which is referable to the Relevant Claim, the Purchaser shall forthwith repay to the Sellers:

(a)an amount equal to the sum recovered from the third party less any reasonable out-of pocket costs and expenses incurred by the Purchaser or the Company in recovering the same; or

(b)if the figure resulting under lit. (a) above is higher than the amount paid by the Sellers to the Purchaser or the Company in respect of such Relevant Claim, such lesser amount as shall have been so paid by the Sellers, (or, as the case may be, shall procure that such payment is effected by the Company) so as to leave the Purchaser in no better or worse position than the Purchaser would have been in had the Relevant Claim not arisen in the first place.

5.3.11The Sellers shall not be liable in respect of any Relevant Claim to the extent that such Relevant Claim arises, or such Relevant Claim otherwise having arisen, is increased as a result of any legislation not in force at the date hereof or as a result to any change of law or administrative practice which takes effect retroactively or which occurs as a result of any increase in the rates of taxation in force at the date hereof.

5.3.12  The overall liability of all Sellers under Article 5 in respect of all Relevant Claims shall in no event exceed EUR 4 million.

The individual liability of each Seller shall in no event exceed the purchase price (which shall for the purposes of this clause not include any earn-out payment under Art. 2.3) actually paid to him for the sale of his shares.

5.3.13Nothing in this Purchase Agreement shall in any way restrict the general obligation at law of the Purchaser to mitigate any loss or damages which it may suffer in consequence of any breach by the Sellers of the terms of this Agreement or any fact, matter, event, or circumstance, giving rise to a claim.

5.3.14Except for mandatory provisions of German law, the Purchaser may assert only the aforementioned rights based on a breach of Representations and Warranties; other possible remedies or claims are excluded. In particular, the Purchaser shall not be entitled to rescind

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or terminate this Purchase Agreement in any circumstances whatsoever, except for cases of fraud.

5.4Prescription Period

5.4.1All Relevant Claims (save for the ones dealt with in Art. 5.4.2 below) shall lapse unless raised within a period of 15 months after the transfer of shares pursuant to Art. 1.2.3 above but in any case on 31 December 2007.

5.4.2The prescription period for lack of legal title of the sold shares shall be 5 years as from Completion or Completion II, as the case may be.

Article 6
Covenants

6.1Completion Efforts

Each of the Parties shall use its reasonable best efforts and shall take all actions and do all things necessary, proper or advisable, to consummate the transactions contemplated by this Purchase Agreement, including its reasonable best efforts, to ensure that the conditions to the obligations of the other parties to consummate the transactions contemplated by this Purchase Agreement are satisfied.

6.2Third Party Notices and Consent

Each Party shall use its reasonable best efforts to obtain, at its expense, all waivers, permits, consents, approvals or other authorisations and to effect all registrations, filings and notices with or to governmental entities (including, but not limited to, the relevant cartel office), as may be required for such party to consummate the transactions contemplated by this Agreement and to otherwise comply with all applicable laws and regulations in connection with the consummation of the transactions contemplated by this Agreement.

The Sellers shall use their reasonable best efforts to obtain, at their expense, all such waivers, consents, approvals or other authorisations from third parties.

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6.3Operation of Company’s Business

Except as contemplated by this Agreement, the Company shall conduct its operations in the ordinary course of business during the period from the Signing Date until the Completion Date.

The Sellers and the Company will use their best efforts to maintain the ten most important customer contracts as specified in ANNEX 6.3.

Article 7
Management Agreements

CLONDIAG and each of Prof. Dr. Albert Hinnen, Dr. Torsten Schulz, Thomas Ellinger and Eugen Ermantraut (“Management Team”) shall enter into managing director service agreements (and shall be appointed to the extent they are not already appointed as managing directors) in line with the key terms set out in ANNEX 7. Such service agreements (based on Allen & Overy LLP, Frankfurt standard forms and including the key terms) shall replace their existing agreements. Each of the members of the Management Team hereby agrees with the Purchaser to be bound as from Completion in favour of the Purchaser by the non compete set out in ANNEX 7.

Article 8Enforcement Clause

In relation to the purchase price payment obligation contained in Art. 2.1.3 (however without interest) the Purchaser hereby agrees to immediate enforcement of this deed (Käufer unterwirft sich der sofortigen Zwangsvollstreckung aus dieser Urkunde).

The notary shall issue the enforcement clause (Vollstreckungsklausel) to CBG at any time after 1 September, 2006 after having received an affidavit (eidestattliche Versicherung) signed by all managing directors of CBG according to which the managing directors certify (versichern) that CBG has (i) notified the Purchaser on the bank account pursuant to Article 2.1.3 and (ii) has not received the purchase price payment as stipulated in Art. 2.1.3.

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CBG shall issue against payment of the purchase price stipulated in Art. 2.1.3 a receipt declaration (Quittung) in writing and hand it over to the Purchaser. The notary may not issue an enforcement clause after having been provided with a receipt declaration.

Article 9
Guarantee

IMI hereby guarantees any and all obligations of the Purchaser arising from or in relation to this Agreement.

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Article 10
US Private Placement

10.1Sellers’ Representations

Each Seller understands that following the consummation of the transactions contemplated hereby, he or she shall hold shares of stock in a Delaware corporation instead of shares of stock or other securities in a German company, and that certain differences exist between ownership of stock in a Delaware corporation and ownership of stock or other securities in a German company.  Each Seller has had the opportunity to consult with legal counsel regarding such differences.

Each Seller has consulted with his or its own advisors, including legal and tax advisors, with respect to the proposed investment in Inverness Stock, including, without limitation, the restrictions on resale under the Securities Act and the provisions of Section 10.2 hereof.  Each Seller declares to have obtained sufficient information on Inverness and Inverness Stock and that he/she neither requires nor wants to be provided with any further information relating thereto.  Each Seller explicitly declares to kindly decline the offer of the Purchaser to provide him/her with information on Inverness and the Inverness Stock.

Each Seller acknowledges to be aware of Inverness’ SEC filings, publicly available at: www.sec.gov/edgar/searchedgar/webusers.htm

http://www.sec.gov/edgar.shtml

Each Seller acknowledges and agrees that each Certificate shall bear restrictive legends to the effect that (i) transfer of the shares represented thereby is prohibited except in accordance with the provisions of Regulation S under the Securities Act, pursuant to registration under the Securities Act, or pursuant to an available exemption from registration; and that hedging transactions involving such may not be conducted unless in compliance with the Securities Act, (ii) the shares are restricted in accordance with the terms and conditions set forth in this Agreement.

10.2Restrictions on transfer of Inverness Stock

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Each Seller hereby (i) certifies that he or it is not a “U.S. person” as such term is defined in Rule 902(k) of Regulation S of the Securities Act (a “U.S. Person”) (the current provisions of which are summarized in ANNEX 10.2) and is not acquiring the Inverness Stock hereunder for the account or benefit of a “U.S. Person”; (ii) agrees that any resale of the shares shall be in accordance with the provisions of Regulation S of the Securities Act, pursuant to registration under the Act or pursuant to an available exemption from registration; (iii) agrees not to engage in any hedging transactions with regard to such shares unless in compliance with the Securities Act; and (iv) acknowledges and agrees, in accordance with Regulation S of the Act, that Inverness will refuse to register any transfer of shares of Inverness Stock unless such transfer is made in accordance with the provisions of Regulation S of the Act, pursuant to registration under the Securities Act or pursuant to an available exemption from registration.

For the purposes of this Agreement, the following definitions shall apply:

SEC means the United States Securities and Exchange Commission or any other federal agency administering the Securities Act at the time.

Securities Act and Regulation S means the relevant US laws (as amended from time to time).

Article 11
Miscellaneous

11.1Costs

Each party shall bear the costs of its own advisors retained. The costs of the notarisation and other notary fees arising from the conclusion and implementation of this Agreement shall be borne by the Purchaser. The Purchaser shall reimburse the Sellers for the costs of their attorney up to a maximum of EUR 40,000 net. Such amount shall be paid to the attention of such person as directed by the Sellers.

11.2Amendments

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All amendments or supplements to this Agreement, including this provision, shall be in writing, unless notarisation is required.

11.3Confidentiality

The Parties agree that they shall keep strictly confidential all knowledge obtained from each other (or from affiliated companies) during the process of due diligence, negotiation and conclusion of this Agreement.

11.4Announcements

Except as required by law or by the rules or requests of any stock exchange or governmental or other regulatory or supervisory body or authority of competent jurisdiction to whose rules the party making the announcement or disclosure is subject, whether or not having the force of law, no announcement nor circular nor disclosure in connection with the existence or subject matter of this Agreement shall be made or issued by or on behalf of the Sellers or the Purchaser without the prior written approval of the other party (such approval not to be unreasonably withheld or delayed). The aforementioned restriction shall not apply to information which the Sellers pass on to their shareholders.

Except in cases of urgency, the Parties will use their best endeavours to coordinate all announcements which are required by law or by any stock exchange at least 1 business day prior to publishing. If no agreement on the disclosure content can be reached, the disclosure by the Party required to disclose shall not constitute a breach of this Agreement.

11.5Notices

The authorised recipient for the service of writs or for services made in respect of pending litigation and for all notices that shall require full receipt for the validity shall be

For the Sellers:

Name:                    Eugen Ermantraut

Address:               c/o CLONDIAG chip technologies GmbH, Löbstädter Straße 103-105, 07749 Jena

Facsimile:              03641/594720

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With copy to:

Dr. Hubertus Kolster

c/o CMS Hasche Sigle

Barckhausstraße 12-16

D-60325 Frankfurt am Main

Fax: +49 (0) 69 7170 1-40 511

For the Purchaser:

Paul T. Hempel

General Counsel and managing director of Inverness Medical Switzerland GmbH

c/o Inverness Medical Innovations, Inc.

51 Sawyer Rd., Suite 200

Waltham, MA 02453, USA

Fax: 001 781 647-3939

With copy to:

Klaus Mohr

c/o Allen & Overy LLP

Taunustor 2

60311 Frankfurt/Main, Germany

Fax: 0049 69 2648 5800

11.6Validity

Should any individual provision of this Purchase Agreement prove to be entirely or partly invalid or unenforceable or to contain lacunae, this shall not affect the validity of the remaining provisions. The invalid or unenforceable provision shall be regarded as replaced by such valid and enforceable provision that as closely as possible reflects the economic purpose that the Parties hereto had pursued with the invalid or unenforceable provision. In the event of a lacuna, the Parties shall agree to a provision which reflects what would have been agreed according to the meaning and purpose of this agreement if the matter had been considered from the outset.

11.7Applicable Law

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This Agreement shall be governed by and interpreted in accordance with the laws of the Federal Republic of Germany.

All disputes arising in connection with this Agreement or its validity shall be referred to the ordinary courts. Place of venue shall be Frankfurt a. Main.

11.8Assignment

No party may assign or transfer all or any of its rights or obligations under this Purchase Agreement or dispose of any right or interest in this Agreement without the prior written consent of the other party, except for the assignment or transfer to a company belonging to the group (Konzern) of such party or, in case of the Purchaser, to its or IMI’s financing bank/s.

11.9       Condition Precedent

This entire Agreement and any and all obligations contained therein is subject to the condition precedent (the CP) of IMI’s senior lenders under IMI’s credit facilities approving this Agreement and the funding required to fulfil the obligations of the Purchaser and / or IMI, as the case may be, under this Agreement. The CP can only be fulfilled on or before 3 March 2006, 12h00 noon German time. If the CP is not fulfilled within the period set out in the preceding sentence, this Agreement shall have no effect with exception of Clause 11.1 which shall apply in such case.

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The Annexes

4.3.a                        Employees Shares

5.1.6                        Jahresabschluss 2004/2005

5.1.9.a                     Intellectual Property Rights

5.1.9.b                    Certain Products

5.1.9.c                     Know How

5.1.13                      Key Employees

5.1.19                      Due Diligence Disclosures

6.3                           Customers

were presented to the appearing persons according to Sec. 14 Beurkundungsgesetz, explained to them by the notary and approved and signed by them after the notary had instructed the appearing persons that such annexes do not need to be read aloud to them, provided they have renounced their right to have such annexes be read aloud. According to Sec. 14 Beurkundungsgesetz the appearing persons declared expressively not to request the notary to read aloud these annexes and expressly waived any right to have these annexes to be read aloud. All other annexes and this Deed were read aloud to the appeared persons, approved by them and signed by them and the notary with their own hands.

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EX-10.6

Exhibit 10.6

INVERNESS MEDICAL INNOVATIONS, INC.

2001 EMPLOYEE STOCK PURCHASE PLAN

Second Amendment

The Inverness Medical Innovations, Inc. 2001 Employee Stock Purchase Plan shall be amended as follows, effective as of the date hereof:

1.Insert the following sentence after the last full sentence of Section 2, Offerings:

The Board may also commence a special Offering for employees of Designated Subsidiaries who are eligible to participate in the Plan that will begin on the date that an acquired company is acquired or becomes a Designated Subsidiary, and will end on the next June 30 or December 31, which ever shall occur first.

2.Delete the text of Section 3, Eligibility, in its entirety and replace it with the following:

All employees of the Company (including employees who are also directors of the Company) and all employees of each Designated Subsidiary (as defined in Section 11) are eligible to participate in any one or more of the Offerings under the Plan, provided that as of the first day of the applicable Offering (the “Offering Date”) they are customarily employed by the Company or a Designated Subsidiary for more than 20 hours a week and have completed at least three (3) consecutive calendar months of employment with the Company or any Designated Subsidiary (including periods of employment with the Designated Subsidiary which pre-date such designation and/or the acquisition of the Designated Subsidiary by the Company or any subsidiary thereof).  To the extent that a subsidiary of the Company was made a Designated Subsidiary subsequent to an acquisition pursuant to which a substantial amount of assets was acquired by such Designated Subsidiary, whether via a merger, asset acquisition or otherwise, employment with any legal predecessor entity or any entity transferring assets to the Designated Subsidiary as part of such acquisition shall be counted as employment with the Designated Subsidiary.

3.To designate Inverness Medical - BioStar Inc. as a Designated Subsidiary under the Plan.

4.To designate Inverness Medical Iberica, S.A.U. as a Designated Subsidiary under the Plan.

5.Except as herein amended, the provisions of the Plan shall remain in full force and effect.

APPROVED BY THE BOARD OF DIRECTORS:  October 14, 2005

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EX-10.18

Exhibit 10.18

STOCK PURCHASE AGREEMENT

                THIS STOCK PURCHASE AGREEMENT (the “Agreement”), is made and entered into as of February 3, 2006, by and among Inverness Medical Innovations, Inc. a Delaware corporation (the “Company”), and the undersigned prospective investor (the “Investor”).

1.PURCHASE AND SALE OF SHARES; CLOSING.

1.1.          Purchase and Sale of Shares.

(a)   Subject to the terms and conditions of this Agreement, the Investor agrees to purchase from the Company the number of shares of common stock of the Company, par value $0.001 per share (the “Common Stock”), indicated on the Investor’s signature page to this Agreement (the “Subscription Amount”) at a purchase price of $24.41 per share (the “Share Price”) for an aggregate purchase price indicated on the signature page hereto (the “AggregatePurchase Price”).

(b)   The Investor shall pay the Aggregate Purchase Price by delivering immediately available good funds in United States Dollars by wire transfer no later than the Closing Date, as defined in Section 1.4(a) below, to the Company in accordance with the wire transfer instructions attached hereto as Exhibit A.

1.2.          Aggregate Number of Shares Offered. The Company is simultaneously entering into multiple agreements in substantially the same form as this Agreement with certain other investors (the “Other Investors”).  Pursuant to this Agreement and the agreements with the Other Investors, the Company is selling an aggregate of up to 3,400,000 shares of Common Stock (the “Shares”) at the Share Price (the “Offering”).

1.3.          Binding Effect of this Agreement. The Investor acknowledges and agrees that this Agreement shall be binding upon the Investor upon the submission to the Company of the Investor’s signed counterpart signature page to this Agreement (the “Subscription”); provided that, in the event the Closing Date, as defined in Section 1.4(a) below, shall not have occurred on or prior to February 13, 2006 (such date subject to extension by up to 15 days by the Company by written notice thereof to the Investor) (the “Termination Date”), this Agreement shall be terminated and be of no force and effect.  The Company, in its sole discretion, may terminate the Offering at any time prior to the Closing Date without penalty.  The execution of this Agreement by the Investor or solicitation of the investment contemplated hereby shall create no obligation on the part of the Company to accept any Subscription, in part or in full, or complete the Offering.  The Investor hereby acknowledges and agrees that the Subscription hereunder is irrevocable by the Investor, and that, except as required by law, the Investor is not entitled to cancel, terminate or revoke this Agreement or any agreements of the Investor hereunder and that if the Investor is an individual this Agreement shall survive the death or disability of the Investor and shall be binding upon and inure to the benefit of the parties and their heirs, executors, administrators, successors, legal representatives and permitted assigns.

1.4.          Delivery of Shares at Closing.

(a)   The completion of the purchase and sale of the Shares (the “Closing”) shall occur, subject to the satisfaction or waiver of the conditions set forth in Section 1.5 and Section 1.6 (other than those intended to be satisfied at Closing), at the offices of Foley Hoag LLP, World Trade Center West, 155 Seaport Boulevard, Boston, Massachusetts 02210.  The date upon which the Closing actually occurs is herein referred to as the “Closing Date”.

(b)   Prior to the Closing, the Company shall authorize its transfer agent to issue and the transfer agent shall issue to the Investor one or more stock certificates registered in the name of the Investor, or in such name of nominee(s) designated by the Investor in writing, representing in the aggregate a number of shares of Common Stock equal to the Subscription Amount divided by the Share Price.

1.5.          Conditions to the Company’s Obligation to Complete Purchase and Sale.  Upon acceptance of the Subscription, the Company’s obligation to issue and sell the Shares to the Investor at Closing is subject to the satisfaction, on or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion by providing the Investor with prior written notice thereof:

(a)   Payment of Aggregate Purchase Price. The Investor shall make payment to the Company by wire transfer of the Aggregate Purchase Price in accordance with Section 1.1(b); and

(b)   Representations and Warranties; Covenants. The representations and warranties of the Investor set forth in Article 3 hereof shall be true and correct as of the date hereof and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date (which shall be true and correct as of such date)), and the Investor shall have performed, satisfied and complied with in all material respects the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Investor on or prior to the Closing Date.

1.6.          Conditions to the Investor’s Obligation to Complete Purchase and Sale. The obligation of the Investor hereunder to purchase the Shares from the Company at the Closing is subject to the satisfaction, on or before the Closing Date, of each of the following conditions, provided that these conditions are for the Investor’s sole benefit and may be waived by the Investor at any time in its sole discretion by providing the Company with prior written notice thereof:

(a)   Opinion of Counsel. Receipt by the Investors of an opinion letter of Foley Hoag LLP, counsel to the Company, dated the Closing Date, in substantially the form attached hereto as Exhibit B;

(b)   Representations and Warranties; Covenants. The representations and warranties of the Company set forth in Article 2 hereof shall be true and correct in all material respects as of the date hereof and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date (which shall be true and correct in

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all material respects as of such date)), and the Company shall have performed, satisfied and complied with in all material respects the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company on or prior to the Closing Date;

(c)   Officer’s Certificate.  The Company shall have delivered a certificate, dated the Closing Date, duly executed on behalf of the Company by its Chief Executive Officer to the effect set forth in clause (b) above;

(d)   Secretary’s Certificate.  The Company shall have delivered a certificate, dated the Closing Date, duly executed by its Secretary or Assistant Secretary or other appropriate officer, certifying that the attached copies of the Company’s Certificate of Incorporation, Certificate of Designations (as defined below), by-laws and the resolutions of the Board of Directors or Executive Committee of the Board of Directors approving this Agreement and the transactions contemplated hereby, are all true, complete and correct and remain unamended and in full force and effect;

(e)   No Litigation.  On the Closing Date, no legal action, suit or proceeding shall be pending or overtly threatened which seeks to restrain or prohibit the transactions contemplated by this Agreement.

2.REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

                Except as set forth on the Schedule of Exceptions attached hereto as Schedule A or as set forth in the SEC Documents (as defined below), the Company hereby represents and warrants to the Investor as follows:

2.1.          Subsidiaries.  The Company has no direct or indirect subsidiaries (as defined by Rule 405 under the Securities Act of 1933, as amended (the “Securities Act”) other than as specified in the SEC Documents (the “Subsidiaries”).

2.2.          Organization and Qualification.  The Company and each of its Subsidiaries is duly organized and validly existing and is in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), except where the failure to be in good standing would not have a material adverse effect upon the business, assets, financial condition or results of operation of the Company and its Subsidiaries taken as a whole (a “Material Adverse Effect”).  The Company and each of its Subsidiaries has full corporate power and authority to own, operate and occupy its properties and to conduct its business as presently conducted and is registered or qualified to do business and in good standing in each jurisdiction in which it owns or leases property or transacts business and where the failure to be so qualified would have a Material Adverse Effect, and to the Company’s knowledge, no proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such power and authority or qualification.

2.3.          Due Authorization. The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement.  This Agreement has been duly authorized and validly executed and delivered by the Company and, assuming due

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authorization, execution and delivery by the other party hereto, constitutes a valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) to the extent rights to indemnity and contribution may be limited by state or federal securities laws or the public policy underlying such laws, (ii) enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar laws affecting creditors’ and contracting parties’ rights generally and (iii) enforceability may be limited by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

2.4.          Non-Contravention. The execution and delivery of this Agreement, the issuance and sale of the Shares to be sold by the Company under this Agreement, the performance by the Company of its obligations under this Agreement and the consummation of the transactions contemplated hereby will not (A) conflict with or constitute a violation of, or default (with or without the giving of notice or the passage of time or both) under, (i) any material bond, debenture, note or other evidence of indebtedness, or under any material lease, indenture, mortgage, deed of trust, loan agreement, joint venture or other agreement or instrument to which the Company is a party or by which it or its properties are bound, (ii) the Certificate of Incorporation or by-laws of the Company or any of its Subsidiaries, or (iii) any law, administrative regulation, ordinance or order of any court of competent jurisdiction or governmental agency, arbitration panel or authority applicable to the Company, any of its Subsidiaries or their respective properties, which conflict, violation or default would be likely to result in a Material Adverse Effect, or (B) result in the creation or imposition of any lien, encumbrance, claim, security interest or restriction whatsoever upon any of the material properties or assets of the Company or any of its Subsidiaries or an acceleration of indebtedness pursuant to any obligation, agreement or condition contained in any material bond, debenture, note or any other evidence of indebtedness or any material indenture, mortgage, deed of trust or any other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or to which any of the property or assets of the Company or any of its Subsidiaries is subject.  No consent, approval, authorization or other order of, or registration, qualification or filing with, any regulatory body, administrative agency, self-regulatory organization, stock exchange or market, or other governmental body in the United States is required for the execution and delivery of this Agreement, the valid issuance and sale of the Shares to be sold pursuant to this Agreement other than such as have been made or obtained, are disclosed in Schedule 2.4 or for any securities filings required to be made under federal or state securities laws.

2.5.          Reporting Status.  The Company has filed in a timely manner all documents that the Company was required to file under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), since January 1, 2003 (the “SEC Documents”).  The SEC Documents complied as to form in all material respects with the Securities and Exchange Commission’s (the “SEC”) requirements as of their respective filing dates, and the information contained therein as of the date thereof did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except to the extent that information contained in any such document has been revised or superseded by a later filed SEC Document.

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2.6.          Capitalization. Immediately prior to the Closing, the authorized capital stock of the Company consists of:

i.50,000,000 shares of Common Stock, $0.001 par value per share of which 27,652,889 shares are issued and outstanding at the close of business on January 31, 2006; and

ii.5,000,000 shares of Preferred Stock, $0.001 par value per share.  Each series of Preferred Stock designated by the Board of Directors is listed on Schedule 2.6 hereto.

All subscriptions, warrants, options, convertible securities, and other rights (contingent or other) to purchase or otherwise acquire equity securities of the Company issued and outstanding as of January 31, 2006, or contracts, commitments, understandings, or arrangements by which the Company or any of its subsidiaries is or may be obligated to issue shares of Common Stock, or securities or rights convertible or exchangeable for shares of Common Stock, are as set forth on Schedule 2.6 hereto.  Except as set forth on Schedule 2.6, or as a result of exercises of stock options pursuant to the Company’s stock option and incentive plan, no Common Stock nor any subscription, warrant, option, convertible security, or other right (contingent or other) to purchase or otherwise acquire equity securities of the Company is outstanding on the Closing Date.  The issued and outstanding shares of the Company’s capital stock have been duly authorized and validly issued, are fully paid and nonassessable, have been issued in compliance with all applicable federal and state securities laws, and were not issued in violation of or subject to any preemptive rights or other rights to subscribe for or purchase securities.  No holder of Common Stock is entitled to preemptive or similar rights.

2.7.          Legal Proceedings.  Except as disclosed in the SEC Documents, there is no action, suit or proceeding before any court, governmental agency or body, domestic or foreign, now pending or, to the actual knowledge of the Company or any of its Subsidiaries, threatened against the Company or its Subsidiaries wherein an unfavorable decision, ruling or finding would reasonably be expected to materially adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under this Agreement.

2.8.          No Violations.  Neither the Company nor any of its Subsidiaries is in violation of its Certificate of Incorporation or by-laws, or is in violation of any law, administrative regulation, ordinance or order of any court or governmental agency, arbitration panel or authority applicable to the Company or any of its Subsidiaries, which violation, individually or in the aggregate, would be reasonably likely to have a Material Adverse Effect, or is in default (and there exists no condition which, with or without the passage of time or giving of notice or both, would constitute a default) in any material respect in the performance of any bond, debenture, note or any other evidence of indebtedness in any indenture, mortgage, deed of trust or any other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or by which the properties of the Company are bound, which would be reasonably likely to have a Material Adverse Effect.

2.9.          Governmental Permits, Etc. The Company and its Subsidiaries possess all necessary franchises, licenses, certificates and other authorizations from any foreign, federal,

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state or local government or governmental agency, department or body that are currently necessary for the operation of their respective business as currently conducted, except where such failure to possess could not reasonably be expected to have a Material Adverse Effect.

2.10.        Intellectual Property. The Company and its Subsidiaries own or possess sufficient rights to use all patents, patent rights, trademarks, copyrights, licenses, inventions, trade secrets, trade names and know-how that are currently necessary for the conduct of their respective businesses as now conducted (the “Company Intellectual Property”), except where the failure to own or possess would not have a Material Adverse Effect.  Except as set forth in Schedule 2.10, (i) neither the Company nor any of its Subsidiaries has received any written notice of, or has any actual knowledge of, any infringement by the Company or its Subsidiaries of intellectual property rights of any third party that, individually or in the aggregate, would have a Material Adverse Effect and (ii) neither the Company nor any of its Subsidiaries has received any written notice of any infringement by a third party of any Company Intellectual Property that, individually or in the aggregate, would have a Material Adverse Effect.

2.11.        Financial Statements. The consolidated financial statements of the Company and its Subsidiaries and the related notes thereto included in the SEC Documents present fairly, in all material respects, the financial position of the Company as of the dates indicated and the results of its operations and cash flows for the periods therein specified subject, in the case of unaudited statements, to normal year-end audit adjustments.  Except as set forth in such financial statements (or the notes thereto), such financial statements (including the related notes) have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis throughout the periods therein specified.  The financial statements referred to in this Section 2.11 contain all certifications and statements required by Rule 13a-14 or 15d-14 under the Exchange Act, or 18 U.S.C. Section 1350 (Sections 302 and 906 of the Sarbanes-Oxley Act of 2002) with respect to the report relating thereto.  The formal investigation commenced by the Securities and Exchange Commission (the “SEC”) pursuant to its subpoena dated December 14, 2005 and publicly disclosed by the Company in its Current Report on Form 8-K filed on December 14, 2005 (the “SEC Investigation”) remains ongoing.

2.12.        No Material Adverse Change.. Except as set forth in Schedule 2.12 or as the Company may have publicly disclosed (and then solely to the extent so disclosed) in the SEC Documents, press releases or in other “public disclosures” as such term is defined in Section 101(e) of Regulation FD of the Exchange Act, in each case, filed or made through and including the date hereof, since October 1, 2005 there has not been (i) any material adverse change in the business, assets, financial condition or results of operation of the Company and its Subsidiaries, taken as whole or any material adverse development in the SEC Investigation, (ii) any obligation, direct or contingent, that is material to the Company and its Subsidiaries taken as a whole, incurred by the Company or any of its Subsidiaries, except obligations incurred in the ordinary course of business, (iii) any dividend or distribution of any kind declared, paid or made on the capital stock of the Company; or (iv) any loss or damage (whether or not insured) to the physical property of the Company or any of its Subsidiaries which has been sustained which has had a Material Adverse Effect.

2.13.        American Stock Exchange Listing. The Company’s Common Stock is registered pursuant to Section 12(g) of the Exchange Act and is listed on the American Stock Exchange

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(“AMEX”), and the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or terminating the listing of the Common Stock from the AMEX, nor to the Company’s knowledge is the AMEX currently contemplating terminating such listing.  The Company and the Common Stock meet the criteria for continued listing on the AMEX.

2.14.        No Manipulation of Stock. The Company has not taken and will not, in violation of applicable law, take, any action designed to or that might reasonably be expected to cause or result in stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the Shares.

2.15.        Insurance. The Company maintains and will continue to maintain insurance against loss or damage by fire or other casualty and such other insurance, including, but not limited to, product liability insurance, in such amounts and covering such risks as is believed to be prudent and customary, consistent with industry practice for the conduct of its and its Subsidiaries’ respective businesses and the value of their respective properties.

2.16.        Tax Matters. The Company and each of its Subsidiaries has timely filed all material federal, state, local and foreign income and franchise and other tax returns required to be filed by any jurisdiction to which it is subject and has paid all taxes due in accordance therewith, except where the failure to so timely file or pay would not be likely to result in a Material Adverse Effect, and no tax deficiency has been determined adversely to the Company or any of its Subsidiaries which has had, nor does the Company or any of its Subsidiaries have any knowledge of any tax deficiency which, if determined adversely to the Company or any of its Subsidiaries, would reasonably be expected to have, a Material Adverse Effect.

2.17.        Investment Company. The Company is not an “investment company” within the meaning of such term under the Investment Company Act of 1940 and the rules and regulations of the SEC thereunder.

2.18.        No Registration, Integration, etc. Assuming (i) the accuracy of the representations and warranties made by, and compliance with the covenants of, the Investor in Article 3 hereof and of all other Investors in their respective Stock Purchase Agreements, and (ii) that the Placement Agents (as defined in Section 3.9), have conducted all of their activities in relation to the Offering in a manner permitted by all applicable Federal and state securities or other applicable laws and in a manner consistent with the Company’s ability to rely upon the exemption from registration provided by Regulation D and Section 4(2) of the Securities Act, no registration of the Shares under the Securities Act is required in connection with the offer and sale of the Shares by the Company to the Investors as contemplated by this Agreement.  The Company is currently eligible to register the resale of Common Stock by the Investor pursuant to a registration statement on Form S-3 under the Securities Act.

2.19.        Transactions With Affiliates and Employees. Except as disclosed in the SEC Documents, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services

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to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.

2.20.        Disclosure. The Company understands and confirms that the Investor will rely on the foregoing representations and covenants in effecting transactions in the securities of the Company.  All disclosure provided to the Investor regarding the Company, its business and the transactions contemplated hereby furnished by or on behalf of the Company are true and correct and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

3.REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR.

The Investor represents, warrants and covenants to the Company as follows:

3.1.          Securities Law Representations and Warranties.

(a)   The Investor (i) is an “accredited investor” as defined in Regulation D under the Securities Act, (ii) has the knowledge, sophistication and experience necessary to make, and is qualified to make decisions with respect to, investments in securities presenting an investment decision like that involved in the purchase of investments in securities issued by the Company and investments in comparable companies, (iii) can bear the economic risk of a total loss of its investment in the Shares and (iv) has requested, received, reviewed and considered all information it deemed relevant in making an informed decision to purchase the Shares;

(b)   The Investor is acquiring the Shares for its own account for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof;

(c)   The Investor was not organized for the specific purpose of acquiring the Shares;

(d)   The Investor will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Shares except in compliance with the Securities Act, applicable state securities laws and the respective rules and regulations promulgated thereunder;

(e)   The Investor understands that the Shares are being offered and sold to it in reliance on specific exemptions from the registration requirements of the United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Investor’s compliance with, representations, warranties, agreements, acknowledgements and understandings of the Investor set forth herein in order to determine the availability of such exemptions and the eligibility of the Investor to acquire the Shares;

(f)    The Investor understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or

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endorsement of the Shares or the fairness or suitability of an investment in the Shares nor have such authorities passed upon or endorsed the merits of the Offering; and

(g)   The Investor acknowledges that the Company has represented that no action has been or will be taken in any jurisdiction outside the United States by the Company that would permit an offering of the Shares, or possession or distribution of offering materials in connection with the issue of the Shares, in any jurisdiction outside the United States where action for that purpose is required.  If the Investor is located or domiciled outside the United States it agrees to comply with all applicable laws and regulations in each foreign jurisdiction in which it purchases, offers, sells or delivers Shares or has in its possession or distributes any offering material, in all cases at its own expense.

(h)   The Investor has been furnished with all materials relating to the business, financial condition, results of operations, properties, management, operations and prospects of the Company and its Subsidiaries, including matters referred to in the Restatement Disclosure and materials relating to the terms and conditions of the offer and sale of the Shares which have been requested by the Investor.  The Investor has been afforded the opportunity to ask questions of the Company and has received answers from an authorized representative of the Company which are satisfactory to the Investor.  Notwithstanding the foregoing, in entering into this Agreement, the Investor represents that it is relying solely on the representations, warranties, covenants and agreements set forth in this Agreement, which document supersedes and replaces any other written or oral information communicated to the Investor.  Investor acknowledges that the SEC Investigation remains ongoing.

(i)    The Investor has independently evaluated the merits of its decision to purchase Shares pursuant to this agreement.

3.2.          Legends.

(a)   The Investor understands that, until the end of the applicable holding period under Rule 144(k) of the Securities Act (or any successor provision) with respect to the Shares, any stock certificate representing the Shares shall bear a legend in substantially the following form:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN EXEMPTION THEREFROM.

The legend set forth above shall be removed (i) if the Shares have been resold or transferred pursuant to the Registration Statement contemplated by Section 5 and the Registration Statement was effective at the time of such transfer, (ii) if, in connection with a sale transaction, such

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holder provides the Company with an opinion of counsel reasonably acceptable to the Company to the effect that a public sale, assignment or transfer of the Shares may be made without registration under the Securities Act, or (iii) upon expiration of the applicable two-year holding period under Rule 144(k) of the Securities Act (or any successor rule); provided that the Investor is not and has not been within three months prior to such date, an “affiliate” of the Company (as such term is defined in Rule 144 of the Securities Act).  The Company may make a notation on its records and/or provide instruction to its transfer agent regarding the Company’s stock transfer records, consistent with the provisions of this Section 3.2.

(b)   The Investor understands that, in the event Rule 144(k) as promulgated under the Securities Act (or any successor rule) is amended to change the two-year period under Rule 144(k) (or the corresponding period under any successor rule), (i) each reference in this Sections 3.2 of this Agreement to “two years” or the “two-year period” shall be deemed for all purposes of this Agreement to be references to such changed period, and (ii) all corresponding references in the Shares shall be deemed for all purposes to be references to the changed period, provided that such changes shall not become effective if they are otherwise prohibited by, or would otherwise cause a violation of, the then-applicable federal securities laws.

3.3.          Authorization; Enforcement; Validity. The Investor has full right, power, authority and capacity (corporate, statutory or otherwise) to enter into this Agreement and to consummate the transactions contemplated hereby and has taken all necessary action to authorize the execution, delivery and performance of this Agreement. This Agreement constitutes a valid and binding obligation of the Investor enforceable against the Investor in accordance with its terms, except (i) to the extent rights to indemnity and contribution may be limited by state or federal securities laws or the public policy underlying such laws, (ii) enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar laws affecting creditors’ and contracting parties’ rights generally and (iii) enforceability may be limited by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

3.4.          Certain Trading Limitations.  The Investor (i) represents that on and from the date the Investor first became aware of the Offering until the date hereof he, she or it has not and (ii) covenants that for the period commencing on the date hereof and ending on the public announcement of the Offering he, she or it will not, engage in any hedging or other transaction which is designed to or could reasonably be expected to lead to or result in, or be characterized as, a sale, an offer to sell, a solicitation of offers to buy, disposition of, loan, pledge or grant of any right with respect to (collectively, a “Disposition”) the Common Stock of the Company by the Investor or any other person or entity in violation of the Securities Act.  Such prohibited hedging or other transactions would include without limitation effecting any short sale or having in effect any short position (whether or not such sale or position is against the box and regardless of when such position was entered into) or any purchase, sale or grant of any right (including without limitation any put or call option) with respect to the Common Stock of the Company or with respect to any security (other than a broad-based market basket or index) that includes, relates to or derives any significant part of its value from the Common Stock of the Company.

3.5.          No Sale of Securities. The Investor hereby covenants with the Company not to make any sale of the Shares without (i) complying with the provisions of this Agreement,

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including Section 5.3 hereof or (ii) satisfying the requirements of the Securities Act and the rules and regulations promulgated thereunder, including, without limitation, causing the prospectus delivery requirement under the Securities Act to be satisfied, if applicable. The Investor acknowledges that there may occasionally be times when the Company, based on the advice of its counsel, determines that, subject to the limitations of Section 5.3, it must suspend the use of the prospectus forming a part of the Registration Statement until such time as an amendment to the Registration Statement has been filed by the Company and declared effective by the SEC or until the Company has amended or supplemented such prospectus.

3.6.          Registration Questionnaire. The Investor has completed or caused to be completed the Registration Questionnaire attached hereto as Exhibit C (or has otherwise provided in a written form the information requested in such Registration Questionnaire) and the signature page hereto, each for use in preparation of the Registration Statement, and the information contained in such completed Registration Questionnaire (or such other form provided by the Investor) and on such signature page are true and correct in all material respects as of the date of this Agreement and will be true and correct as of the effective date of the Registration Statement; provided that the Investor shall be entitled to update such information by providing written notice thereof to the Company prior to the effective date of the Registration Statement.

3.7.          No Advice. The Investor understands that nothing in this Agreement or any other materials presented to the Investor in connection with the purchase and sale of the Shares constitutes legal, tax or investment advice. The Investor has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of the Shares.

3.8.          NASD Compliance. The Investor acknowledges that if it is a Registered Representative (as defined by the NASD) of a National Association of Securities Dealers (“NASD”) member firm, the Investor must give such firm the notice required by the NASD’s Rules of Fair Practice, receipt of which must be acknowledged by such firm on the signature page hereof.

3.9.          Placement Agent Fees. The Investor acknowledges that (i) the Company has engaged and authorized Jefferies & Company, Inc. and UBS Securities LLC (Jefferies & Co. Inc. and UBS Securities LLC collectively referred to herein as the “Placement Agents”) in connection with the Offering and the transactions contemplated by this Agreement, (ii) the Company shall pay the Placement Agents a commission and reimburse the Placement Agents’ expenses and the Company shall indemnify and hold harmless the Investor from and against all fees, commissions or other payments owing by the Company to the Placement Agents or any other person or firm acting on behalf of the Company hereunder and (iii) registered representatives of the Placement Agents and/or their designees (including, without limitation, registered representatives of the Placement Agents and/or their designees who may participate in the Offering and sale of the securities sold in the Offering) may be paid a portion of the commissions paid to the Placement Agents.

3.10.        Treatment of Non-Public Information. The Investor agrees to hold the existence, terms and conditions of the Offering in confidence and not to disclose the same to any other

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person until such time as the Company files with the SEC a Current Report on Form 8-K disclosing the Offering or publicly announces the Offering.

3.11.        SEC Reports.  The Investor has reviewed copies of the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 (and any amendments thereto), the Company’s Proxy Statement for its 2005 Annual Meeting of Shareholders, the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2005, June 30, 2005 and September 30, 2005 (and any amendments thereto) and each of the Company’s Current Reports on Form 8-K filed since January 1, 2003 (and any amendments thereto).

4.COVENANTS.

4.1.          Trading Market. The Company shall use commercially reasonable efforts to comply with all requirements of the AMEX with respect to the issuance and listing of the Shares and the continued listing of its Common Stock (including the Shares).  The Company agrees that if the Company applies to have its Common Stock traded on any other trading market, it will use commercially reasonable efforts to cause the Shares to be listed or quoted on such other trading market.

4.2.          Certain Future Financings and Related Actions. Without the prior consent of the Investor, the Company shall not cause the Offering to be integrated with prior offerings by the Company in a manner that would require the registration under the Securities Act of the sale of the Shares to the Investor or in a manner that would require stockholder approval of the sale of the Shares to the Investor.

4.3.          Public Disclosure. The Company shall publicly announce the Offering promptly after the execution of this Agreement and make such other filings and notices in the manner and within the time required by the SEC.

4.4.          Use of Proceeds.  The Company will use the net proceeds from the sale of the Shares pursuant to this Agreement for general corporate purposes and/or acquisitions.

4.5.          Prospectus Delivery Requirements.  Investor covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with the sales of Registrable Securities, as defined in Section 5.1.

5.REGISTRATION OF SHARES AND COMPLIANCE WITH THE SECURITIES ACT.

5.1.          Registration Procedures and Expenses. The Company shall:

(a)   subject to receipt of necessary information from the Investors, including the information requested in the Registration Statement Questionnaire, use its commercially reasonable efforts to prepare and file with the SEC on or prior to the 30^th calendar day following the Closing Date hereof a registration statement (the “Registration Statement”) on Form S-3 (or such other form as may be required) to enable the resale by the Investor on a delayed or continuous basis under Rule 415 of the Securities Act of the shares of Common Stock issued pursuant to this Agreement and any shares of Common Stock issued or issuable in respect of the

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Shares by virtue of any stock split, stock dividend, recapitalization or similar event; provided, however, that if, during the period from the date hereof through the 30^th calendar day following the Closing Date, the acquisition of a business by the Company is consummated or becomes probable with respect to which the Company shall be required to file with the SEC a Current Report on Form 8-K (or an amendment to a Current Report on Form 8-K) containing audited and unaudited historical financial statements of the acquired business and pro forma financial information for the Company giving effect to the acquisition, the Company shall not be required to file the Registration Statement until the second business day following the date by which such historical financial statements and pro forma financial information shall be required to be filed;

(b)   use commercially reasonable efforts, subject to receipt of necessary information from the Investor, including the information requested in the Registration Statement Questionnaire, to cause the Registration Statement to become effective within 120 calendar days after the Closing Date;

(c)   as expeditiously as practicable, prepare and file with the SEC such amendments and supplements to the Registration Statement and the Prospectus (as defined in Section 5.4 below) used in connection therewith and take all such other actions as may be necessary to keep the Registration Statement current and effective for a period (the “Registration Period”) not exceeding, with respect to the Registrable Securities, the earlier of (i) the date on which all Registrable Securities then held by the Investor may be sold or transferred in compliance with Rule 144 under the Securities Act (or any other similar provisions then in force) without any volume or manner of sale restrictions thereunder, or (ii) such time as all Registrable Securities held by the Investor have been sold (A) pursuant to a registration statement, (B) to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, or (C) in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions and restrictive legends with respect thereto, if any, are removed upon the consummation of such sale;

(d)   promptly furnish to the Investor with respect to the Registrable Securities registered under the Registration Statement such reasonable number of copies of the Prospectus as the Investor may request, including any supplements to or amendments to the Prospectus, in order to facilitate the public sale or other disposition of all or any of the Registrable Securities by the Investor;

(e)   promptly take such action as may be necessary to qualify, or obtain, an exemption for the Registrable Securities under such of the state securities laws of United States jurisdictions as shall be necessary to qualify, or obtain an exemption for, the sale of the Registrable Securities in states specified in writing by the Investor; provided, however, that the Company shall not be required to qualify to do business or consent to service of process in any jurisdiction in which it is not now so qualified or has not so consented, subject itself to general taxation in any such jurisdiction or provide any undertakings that cause the Company undue expense or burden;

(f)    bear all expenses in connection with the procedures in paragraphs (a) through (e) and (g) of this Section 5.1 and the registration of the Registrable Securities pursuant to the

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Registration Statement, regardless of whether a Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses (including filings made with AMEX); (ii) fees and expenses of compliance with federal securities and state “blue sky” or securities laws; (iii) expenses of printing (including printing certificates for the Registrable Securities and Prospectuses); (iv) all application and filing fees, if any, in connection with listing of the Registrable Securities with AMEX; (v) all fees and disbursements of counsel of the Company and independent certified public accountants of the Company; and (vi) up to $5,000 in fees and disbursements of one counsel representing all investors in the Offering; provided, however, that the Investor shall be responsible for paying the underwriting commissions or brokerage fees, and taxes of any kind (including, without limitation, transfer taxes) applicable to any disposition, sale or transfer of the Investor’s Registrable Securities. The Company shall, in any event, bear its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties);

(g)   advise the Investor promptly, but in any event within two business days by e-mail, fax or other type of communication, and, if requested by such person, confirm such advice in writing: (i) after it shall receive notice or obtain knowledge of the issuance of any stop order by the SEC delaying or suspending the effectiveness of the Registration Statement or of the initiation or threat of any proceeding for that purpose, or any other order issued by any state securities commission or other regulatory authority suspending the qualification or exemption from qualification of such Registrable Securities under state securities or “blue sky” laws; and it will promptly use its commercially reasonable efforts to prevent the issuance of any stop order or other order or to obtain its withdrawal at the earliest possible moment if such stop order or other order should be issued; (ii) when the Prospectus or any supplements to or amendments of the Prospectus have been filed, and, with respect to the Registration Statement or any post-effective amendment thereto, when the same has become effective; and (iii) when the SEC notifies the Company whether there will be a “review” of such Registration Statement and whenever the SEC comments in writing on such Registration Statement (the Company shall provide true and complete copies thereof and all written responses thereto to the Investor that pertain to the Investor as a Selling Stockholder or to the Plan of Distribution, but not information which the Company believes would constitute material and non-public information);

(h)   except if otherwise required pursuant to written comments received from the SEC upon a review of such Registration Statement, include in the Registration Statement the “Plan of Distribution” attached hereto as Exhibit D;

(i)    unless otherwise agreed to by holders of a majority of the Registrable Securities held by the Investor and all Other Investors, neither the Company nor any of its securities holders may include securities of the Company (other than the Shares) in any Registration Statement filed pursuant to this Agreement and the Company shall not after the date hereof enter into any agreement in contravention of the foregoing;

(j)    if at any time during the Registration Period, there is not one or more effective Registration Statements covering the resale of all Registrable Securities and the Company shall determine to prepare and file with the SEC a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than of Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then

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equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans, then the Company shall send to the Investor written notice of such determination and if, within 20 days after receipt of such notice the Investor shall so request in writing, the Company shall include in such registration statement those Registrable Securities requested by the Investor to be so included and which are not otherwise covered by one or more effective Registration Statements;

(k)   not less than three business days prior to the filing of the Registration Statement or any related Prospectus or any amendment or supplement thereto, the Company shall furnish to the Investor copies of the “Selling Stockholders” section of such document, the “Plan of Distribution,” any risk factor contained in such document that addresses specifically this transaction or the Selling Stockholders, as proposed to be filed, which documents will be subject to the review and comment of the Investor and its counsel; provided that, the failure of any Investor or his, her or its counsel to respond to such proposed documents within two business days after receipt thereof shall be deemed approval of same; and provided, further, that no such review and comment shall inhibit the Company from filing the Registration Statement within 15 days after the Restatement Date or otherwise from complying with its obligations hereunder;

(l)    respond as promptly as practicable to any comments received from the SEC with respect to each Registration Statement or any amendment thereto and, as promptly as practicable provide the Investor true and complete copies of all correspondence from and to the SEC relating to such Registration Statement that would not result in the disclosure to the Investor of material and non-public information concerning the Company;

(m)  comply in all material respects with the provisions of the Securities Act, the Exchange Act and all rules of the SEC promulgated thereunder with respect to the Registration Statements and the disposition of all Registrable Securities covered by each Registration Statement;

(n)   Take all other steps necessary to effect the registration of the Registrable Securities; and

(o)   cooperate with the Investor to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to the Registration Statements, which certificates shall be free of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as the Investor may request; provided, that, the delivery of such certificates shall be subject to the payment by the Investor of any transfer taxes, if applicable.

5.2.          Delay in Effectiveness of Registration Statement. In the event the Registration Statement is not declared effective by the SEC within 120 calendar days after the Closing Date  in accordance with Section 5.1(b), the Company shall pay in cash to the Investor liquidated damages in the amount of 1.0% of the Aggregate Purchase Price per month thereafter (pro rata for any portion thereof) until the earlier of (i) the date on which the Registration Statement is first declared effective by the SEC or (ii) the second anniversary of the Closing Date, any such payments to be made monthly in arrears.

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5.3.          Transfer of Shares; Suspension.

(a)   The Investor agrees that it will not effect any Disposition of the Registrable Securities or its right to purchase the Registrable Securities that would constitute a sale within the meaning of the Securities Act, except as contemplated in the Registration Statement referred to in Section 5.1 or in accordance with the Securities Act, and that it will promptly notify the Company of any changes in the information set forth in the Registration Statement or the Registration Statement Questionnaire regarding the Investor or its plan of distribution. The Company shall not be required to include any Shares held by the Investor in the Registration Statement if the Investor fails to complete, or update as needed, the Registration Statement Questionnaire or provide the information requested in such Registration Statement Questionnaire in accordance with this Section 5.3.

(b)   Except in the event that paragraph (c) below applies, the Company shall use commercially reasonable efforts to, at all times during the Registration Period, promptly (i) prepare and file from time to time with the SEC a post-effective amendment to the Registration Statement or a supplement to the related Prospectus or a supplement or amendment to any document incorporated therein by reference or file any other required document so that such Registration Statement will not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading, and so that, as thereafter delivered to purchasers of the Registrable Securities being sold thereunder, such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (ii) provide the Investor copies of any documents filed pursuant to Section 5.3(b)(i); and (iii)inform the Investor that the Company has complied with its obligations in Section 5.3(b)(i) (or that, if the Company has filed a post-effective amendment to the Registration Statement which has not yet been declared effective, the Company will notify the Investor to that effect, will use its commercially reasonable efforts to secure the effectiveness of such post-effective amendment as promptly as possible and will promptly notify the Investor pursuant to Section 5.3(b)(iii) hereof when the amendment has become effective).

(c)   Subject to paragraph (d) below, in the event of (i) any request by the SEC or any other federal or state governmental authority during the period of effectiveness of the Registration Statement for amendments or supplements to a Registration Statement or related Prospectus or for additional information; (ii) the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose; (iii) the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; or (iv) any event or circumstance which necessitates the making of any changes in the Registration Statement or Prospectus, or any document incorporated or deemed to be incorporated therein by reference, so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, then the Company shall

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deliver a notice in writing to the Investor (the “Suspension Notice”) to the effect of the foregoing and, upon receipt of such Suspension Notice, the Investor will refrain from selling any Registrable Securities pursuant to the Registration Statement (a “Suspension”) until the Investor’s receipt of copies of a supplemented or amended Prospectus prepared and filed by the Company, or until it is advised in writing by the Company that the current Prospectus may be used. In the event of any Suspension, the Company will use its commercially reasonable efforts, consistent with the best interests of the Company and its stockholders, to cause the use of the Prospectus so suspended to be resumed as soon as reasonably practicable after the delivery of a Suspension Notice to the Investor.  In the event one or more Suspensions having an aggregate duration in excess of 90 days occur during any 12-month period (an “Event”), the Company shall pay in cash to the Investor liquidated damages in the amount of 1.0% of the Aggregate Purchase Price per month thereafter (pro rata for any portion thereof) until the earlier of (i) the first date after such Event on which the Investor either receives copies of a supplemented or amended Prospectus prepared and filed by the Company or is advised in writing by the Company that the current Prospectus may be used, or (ii) the second anniversary of the Closing Date, any such payments to be made monthly in arrears.

5.4.          Indemnification. For the purpose of this Section 5.4, the term “Registration Statement” shall include any preliminary or final prospectus, exhibit, supplement or amendment included in or relating to the Registration Statement referred to in Section 5.1 and the term “Rules and Regulations” means the rules and regulations promulgated under the Securities Act.

(a)   Indemnification by the Company. The Company agrees to indemnify, defend and hold harmless the Investor, its officers, directors, agents, investment advisors, partners, members, managers, stockholders, trustees and employees, and each person, if any, who controls the Investor (or any of such other persons) within the meaning of the Securities Act, against any losses, claims, damages, liabilities, costs or expenses to which the Investor or other person may become subject (including, without limitation, reasonable legal and other costs and expenses of preparing, investigating, defending, settling, compromising or paying such losses, claims, damages, liabilities, costs or expenses) (collectively, “Losses”), as incurred, under the Securities Act, the Exchange Act, or any other federal or state statutory law or regulation insofar as such losses arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, including the Prospectus, financial statements and schedules, and all other documents filed as a part thereof, as amended at the time of effectiveness of the Registration Statement, including any information deemed to be a part thereof as of the time of effectiveness pursuant to paragraph (b) of Rule 430A, or pursuant to Rule 434 of the Rules and Regulations, or the Prospectus, in the form first filed with the Commission pursuant to Rule 424(b) of the Regulations, or filed as part of the Registration Statement at the time of effectiveness if no Rule 424(b) filing is required (the “Prospectus”), or any amendment or supplement thereto, (ii) the omission or alleged omission to state in any of them a material fact required to be stated therein or necessary to make the statements in any of them, in light of the circumstances under which they were made, not misleading, (iii) any inaccuracy in the representations and warranties of the Company contained in this Agreement, or any failure of the Company to perform its obligations under this Agreement, or (iv) any violation or alleged violation by the Company of the Securities Act, the Securities Exchange Act of 1934, as amended, state (“blue sky”) securities laws or any rule or regulation promulgated thereunder; provided, however, that the Company will not be liable in any such case to the extent that any

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such Loss arises out of or is based upon (i) an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, the Prospectus or any amendment or supplement of the Registration Statement or Prospectus in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Investor expressly for use in the Registration Statement or the Prospectus, or to the extent that such information relates to such Investor or such Investor’s proposed method of distribution, or (ii) the failure of the Investor to comply with the covenants and agreements contained in Sections 3.5 or 5.3 of this Agreement respecting resale of Registrable Securities, or (iii) the inaccuracy of any representations made by the Investor in this Agreement or (iv) any untrue statement or omission of a material fact in any Prospectus that is corrected in any subsequent Prospectus that was delivered to the Investor before the pertinent sale or sales by the Investor.

(b)   Indemnification by the Investor. The Investor will indemnify, defend and hold harmless the Company, each of its directors, each of its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of the Securities Act, against any Losses to which the Company, each of its directors, each of its officers who sign the Registration Statement or such controlling person may become subject, as incurred, under the Securities Act, the Exchange Act, or any other federal or state statutory law or regulation insofar as such Losses arise out of or are based upon (i) any failure on the part of the Investor to comply with the covenants and agreements contained in Sections 3.5 or 5.3 of this Agreement respecting the sale of the Registrable Securities or (ii) the inaccuracy of any representation or warranty made by the Investor in this Agreement or (iii) any untrue statement of any material fact contained in the Registration Statement, the Prospectus, or any amendment or supplement to the Registration Statement or Prospectus, or the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or omission was made in the Registration Statement, the Prospectus, or any amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Investor expressly for use therein; provided, however, that the Investor shall not be liable for any such untrue statement or omission of which the Investor has delivered to the Company in writing a correction at least two business days before the occurrence of the transaction from which such loss was incurred.  Notwithstanding the provisions of this Section 5.4, the Investor shall not be liable for any indemnification obligation under this Agreement in excess of the amount of net proceeds received by the Investor from the sale of the Registrable Securities, unless such obligation has resulted from the gross negligence or willful misconduct of the Investor.

5.5.          Indemnification Procedure.

(a)   Promptly after receipt by an indemnified party under this Section 5.5 of notice of the threat or commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 5.5, promptly notify the indemnifying party in writing of the claim; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party for contribution or otherwise under the obligations to indemnify contained in Section 5.4 to the extent it is not materially prejudiced as a result of such failure.

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(b)   In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with all other indemnifying parties similarly notified, to assume the defense thereof; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there is a conflict between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of its election to assume the defense of such action, the indemnifying party will not be liable to such indemnified party under this Section 5.5 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless:

(i)the indemnified party shall have employed such counsel in connection with the assumption of legal defenses in accordance with the proviso to the preceding sentence in Section 5.5(b) above (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel in each jurisdiction where counsel is reasonably necessary, approved by such indemnifying party (such approval not to be unreasonably withheld) representing all of the indemnified parties who are parties to such action), or

(ii)the indemnifying party shall not have counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of action, in each of which cases the reasonable fees and expenses of counsel shall be at the expense of the indemnifying party.

(c)   Settlement.  The indemnifying party shall not be liable for any settlement of any action, claim, suit, investigation, inquiry or proceeding (including, without limitation, any shareholder or derivative action or arbitration proceeding, whether commenced or threatened (collectively, a “Proceeding”) effected without its written consent, which consent shall not be unreasonably withheld.  No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending Proceeding in respect of which any indemnified party is a party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such Proceeding.

(d)   Contribution. If a claim for indemnification under this Section 5.5 is unavailable to an indemnified party (by reason of public policy or otherwise), then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of any losses, claims, damages, liabilities or expenses referred to in this Agreement, in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified party in connection with the actions, statements or omissions that resulted in such losses, claims, damages, liabilities or expenses as

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well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such indemnifying party or indemnified party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any losses, claims, damages, liabilities or expenses shall be deemed to include, subject to the limitations set forth in this Section 5.5, any reasonable attorneys’ or other reasonable fees or expenses incurred by such party in connection with any proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms.

(e)   The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5.5 were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 5.5, no Investor shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds from the sale of Registrable Securities by the Investor exceeds the amount of any damages that the Investor has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No party to this Agreement guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any other party to this Agreement who was not guilty of such fraudulent misrepresentation.

5.6.          Termination of Conditions and Obligations. The restrictions imposed by Article 3 or Article 5 upon the transferability of the Registrable Securities shall cease and terminate as to any particular number of the Registrable Securities upon the termination of the Registration Period with respect to such Registrable Securities.

5.7.          Rule 144. At all times during which there are Registrable Securities outstanding which have not been previously (a) sold to or through a broker or dealer or underwriter in a public distribution, or (b) sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(l) thereof, in the case of either clause (a) or clause (b) in such a manner that, upon the consummation of such sale, all transfer restrictions and restrictive legends with respect to such shares are removed upon the consummation of such sale, the Company shall use commercially reasonable efforts to:

(a)   comply with the requirements of Rule 144(c) under the Securities Act with respect to current public information about the Company;

(b)   file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time it is subject to such reporting requirements); and

(c)   furnish to any holder of Registrable Securities promptly after receipt of a written request therefor (i) a written statement by the Company as to its compliance with the

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requirements of said Rule 144(c), and the reporting requirements of the Securities Act and the Exchange Act, (ii) a copy of the most recent annual or quarterly report of the Company, and (iii) such other reports and documents of the Company as such holder may reasonably request to avail itself of any similar rule or regulation of the SEC allowing it to sell any such securities without registration.

5.8.          Registration of Other Securities. Notwithstanding anything contained herein to the contrary and for the avoidance of doubt, the parties hereto acknowledge that (a) the Company has granted registration rights to Other Investors with respect to Registrable Securities, and (b) any Registration Statement prepared, filed and made effective under this Article 5 may also cover the resale of such other securities.

6.MISCELLANEOUS.

6.1.          Notices. Except as specifically permitted by Section 5.1(g), all notices, requests, consents and other communications hereunder shall be in writing, shall be mailed (b) if within the United States by first-class registered or certified airmail, or nationally recognized overnight express courier, postage prepaid, or by facsimile, or (b) if delivered from outside the United States, by International Federal Express or facsimile, and shall be deemed given (i) if delivered by first-class registered or certified mail domestic, three business days after so mailed, (ii) if delivered by nationally recognized overnight carrier, one business day after so mailed, (iii) if delivered by International Federal Express, two business days after so mailed, and (iv) if delivered by facsimile, upon electric confirmation of receipt if sent during the normal business hours of the recipient and, if not, on the next business day, and shall be delivered as addressed as follows:

if to the Company, to:

Jay McNamara, Esq.

Inverness Medical Innovations, Inc.

51 Sawyer Road

Suite 200

Waltham, Massachusetts

Tel: 781.647.3900

Fax: 781.647.3939

Email: jay.mcnamara@usa.invernessmedical.com

with a copy to:

John D. Patterson Jr., Esq.

Foley Hoag LLP

World Trade Center West

155 Seaport Boulevard

Boston, Massachusetts 02210

Tel: 617.832.1000

Fax: 617.832.7000

Email: jdp@foleyhoag.com

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if to the Investor, at its address on the signature page hereto, or at such other address or addresses as may have been furnished to the Company in writing.

6.2.          Changes.  This Agreement may not be modified or amended except pursuant to an instrument in writing signed by the Company and the Investor.

6.3.          Headings.  The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be part of this Agreement.

6.4.          Severability.  In case any provision contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.

6.5.          Survival of Representations, Warranties and Agreements.  Notwithstanding any investigation made by any party to this Agreement, all covenants, agreements, representations and warranties made by the Company and the Investor herein shall survive the execution of this Agreement, the delivery to the Investor of the Shares being purchased and the payment therefor unless otherwise stated herein.

6.6.          Governing Law.  This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York, without giving effect to the principles of conflicts of law.

6.7.          Entire Agreement.  This Agreement and the documents referenced herein constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein. This Agreement supersedes all prior agreements and understandings among the parties.

6.8.          Finders Fees.  Neither the Company nor the Investor nor any affiliate thereof has incurred any obligation which will result in the obligation of the other party to pay any finder’s fee or commission in connection with this transaction, except for fees payable by the Company to the Placement Agent.

6.9.          Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other party. Facsimile signatures shall be deemed originals for all purposes hereunder.

6.10.        Successors and Assigns.  This Agreement shall inure to the benefit of and be binding upon the successors, heirs, executors and administrators and permitted assigns of the parties hereto. With respect to transfers that are not made pursuant to the Registration Statement (or Rule 144 but are otherwise made in accordance with all applicable laws and the terms of this Agreement), the rights and obligations of the Investor under this Agreement shall be automatically assigned by the Investor to any transferee of all or any portion of the Investor’s Shares who is a Permitted Transferee (as defined below); provided, however, that within two

22

business days prior to the transfer, (i) the Company is provided written notice of the transfer including the name and address of the transferee and the number of Shares as applicable to be transferred; and (ii) that such transferee agrees in writing to be bound by the terms of this Agreement as if such transferee were the Investor. (For purposes of this Agreement, a “Permitted Transferee” shall mean any Person who (a) is an “accredited investor,” as that term is defined in Rule 501(a) of Regulation D under the Securities Act, (b) receives the Shares in a transaction which is in compliance with the Federal and applicable state securities law. Upon any transfer permitted by this Section 6.10, the Company shall be obligated to such transferee to perform all of its covenants under this Agreement as if such transferee was the Investor.

6.11.        Expenses.  The Company and the Investor shall bear its or his own expenses in connection with the preparation and negotiation of the Agreement.

6.12.        Third Party Rights.  Except as explicitly set forth in this Agreement, nothing in this Agreement shall create or be deemed to create any rights in any person or entity not a party to this Agreement.  Notwithstanding the foregoing, the Placement Agents shall be deemed to be third-party beneficiaries of the representations, warranties and covenants made by the Investor herein.

6.13.        No Waiver.  It is agreed that a waiver by either party of a breach of any provision of this Agreement shall not operate, or be construed, as a waiver of any subsequent breach by that same party.

6.14.        Further Assurances.  The parties agree to execute and deliver all such further documents, agreements and instruments and take such other and further action as may be necessary or appropriate to carry out the purposes and intent of this Agreement.

6.15.        Independent Nature of Investors’ Obligations and Rights.  The obligations of each of the Investor and the Other Investors that is participating in the Offering are several and not joint.  The decision of each of the Investor and the Other Investors to purchase Shares pursuant to this Agreement has been made by such Investor independently of any Other Investor.  Nothing contained herein and no action taken by Investor shall be deemed to constitute the Investor and the Other Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investor and the Other Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement.  Investor acknowledges that no Other Investor has acted as agent for such Investor in connection with making its investment hereunder and that no Other Investor will be acting as agent of such Investor in connection with monitoring its investment in the Shares or enforcing its rights under this Agreement.  Investor shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement and it shall not be necessary for any Other Investor to be joined as an additional party in any proceeding for such purpose.  The Company acknowledges that each of the Investor and the Other Investors has been provided with the agreement for the purpose of closing a transaction with multiple investors and not because it was required or requested to do so by the Investor or the Other Investors.

6.16.        Limitation on Liability.  A copy of the Agreement and Declaration of Trust of the Investor is on file with the Secretary of the Commonwealth of Massachusetts and notice is

23

hereby given that this Agreement is executed on behalf of the Trustees of the Investor as Trustees and not individually and that the obligations of this Agreement are not binding upon any of the Trustees, officers or stockholders of the Investor individually but are binding only upon the assets and property of the Investor.  The Company is expressly put on notice that the rights and obligations of each series of shares of the Investor under its Declaration of Trust are separate and distinct from those of any and all other series.

6.17         Publicity.  The Company agrees that it will not use in advertising or publicity the names of the Investor, Fidelity Management & Research Company, any of its partners or employees, any of the funds or accounts managed by it or any of its affiliates, or any trade name, trademark, trade device, service mark, symbol or any abbreviation, contraction or simulation thereof (collectively, the “Fidelity Investor Name”), in any case without the prior written consent of Fidelity Management & Research Company Investor; provided, however, that the Company shall be permitted to use the Fidelity Investor Name in the press release and/or other public disclosure contemplated in Section 4.3.

[SIGNATURE PAGES FOLLOW]

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COMPANY SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT

                IN WITNESS WHEREOF, the parties have caused this Stock Purchase Agreement to be duly executed as of the date first written above.

INVERNESS MEDICAL INNOVATIONS, INC.
By:
Name:
Title:
Amount of Subscription
Accepted	$

INVESTOR SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT

* SEE SCHEDULE OF INVESTORS BELOW

(print full legal name of Investor)

By:

(signature of authorized representative)

Name:

Its:

Address:

Telephone:

Email:

Tax I.D. or SSN:

Address where Shares should be sent (if different from above):

NUMBER OF SHARES SUBSCRIBED FOR:

AGGREGATE PURCHASE PRICE:

INVESTOR SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT (CONT.)

If Investor is a Registered Representative with an NASD member firm, have the following acknowledgment signed by the appropriate party:

The undersigned NASD member firm acknowledges receipt of the notice required by Rule 3040 of the NASD Conduct Rules.

Name of NASD Member

By:

Name:

Title:

Schedule of Investors

Investor	Number of Shares of Common Stock	Aggregate Purchase Price in US $
AG MM, LP	13,600	331,976
PHS Bay Colony Fund, LP	10,300	251,423
GAM Arbitrage Investments, Inc.	74,300	1,813,663
AG Super Fund International Partners, LP	52,700	1,286,407
Nutmeg Partners, LP	32,700	798,207
PHS Patriot Fund, LP	5,100	124,491
AG Princess, LP	10,300	251,423
AG Super Fund, LP	217,900	5,318,939
AG CNG Fund, LP	23,400	571,194
Commonfund Event-Driven Company	9,700	236,777
Fidelity Select Portfolios: Parmaceutical Portfolio	2,497	60,951.77
Fidelity Select Portfolios: Health Care Portfolio	42,205	1,030,224.05
Fidelity Advisor Series VII: Fidelity Advisor Health Care Fund	14,543	354,994.63
Variable Insurance Products Fund IV: Healthcare Portfolio	2,231	54,458.71
Fidelity Select Portfolios: Medical Equipment and Systems Portfolio	20,683	504,872.03
Fidelity Devonshire Trust: Fidelity Balanced Fund	324,908	7,931,004.28
Fidelity Focus Health Care Fund	3,440	83,970.40
Fidelity Investments International for and on behalf of Fidelity Funds SICAV Health Care Pool	7,994	195,133.54
Variable Insurance Products Fund III: Balanced Portfolio	6,471	157,957.11
Fidelity Advisor Series I: Fidelity Advisor Balanced Fund	25,028	610,933.48
Polygon	450,000	10,984,500
UBS O’Connor	75,000	1,830,750
Balyasny Asset Mgmt Atlas Master Fund, Ltd	15,678	382,700

Visium Long Bias Offshore Fund, Ltd	22,783	556,133
Visium Long Bias Fund, LP	4,699	114,703
Visium Balanced Offshore Fund, Ltd	27,888	680,746
Visium Balanced Fund, LP	28,952	706,718
Ramius Capital Group	100,000	2,441,000
Heights Capital Mgmt (Susquehanna)	100,000	2,441,000
Healthcor
Healthcor, LP	238,000	5,809,580
Healthcor Offshore, Ltd	462,000	11,277,420
Federated Kauffman	400,000	9,764,000
Manning & Napier	150,000	3,661,500
Chartwell	200,000	4,882,000
Amaranth
Amaranth, LLC	90,000	2,196,900
Amaranth Global Equieits Master Fund Limited	10,000	244,100
Apogee / Paradigm	100,000	2,441,000
Precept	25,000	610,250
TOTAL	3,400,000	$82,994,000

EX-10.23

                Exhibit 10.23

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR REGISTERED OR QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE TRANSFERRED UNLESS (A) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND REGISTERED OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS OR  (B) EXEMPTIONS FROM SUCH REGISTRATION OR QUALIFICATION REQUIREMENTS ARE AVAILABLE. AS A CONDITION TO PERMITTING ANY TRANSFER OF THESE SECURITIES, THE COMPANY MAY REQUIRE THAT IT BE FURNISHED WITH AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT NO REGISTRATION OR QUALIFICATION IS LEGALLY REQUIRED FOR SUCH TRANSFER.

WARRANT TO PURCHASE

SHARES OF COMMON STOCK

OF

INVERNESS MEDICAL INNOVATIONS, INC.

Issuance Date: March 31, 2005

Void after 5:00 p.m.., Eastern Standard Time, on March 31, 2015

This Warrant is executed and delivered by Inverness Medical Innovations, Inc., a Delaware corporation (the “Company”), pursuant to that certain Employment Agreement of even date herewith (the “Employment Agreement”) between the Company and Roger Piasio (“Piasio”), pursuant to which the Company has agreed to issue to Piasio a warrant to purchase up to 75,000 shares of Common Stock (as defined herein).  Capitalized terms used herein, and not otherwise defined herein, shall have the respective meanings given to such terms in the Employment Agreement.

                In consideration of the mutual promises, representations, warranties, covenants and conditions set forth in this Warrant and the Employment Agreement, the Company and Piasio agree as follows:

1.             The Warrant.  The Company hereby certifies that Roger Piasio, or his successors and permitted assigns (the “Registered Holder”), is entitled to purchase from the Company, subject to the terms and conditions of this Warrant, up to 75,000 shares (as such shares may be adjusted pursuant to the provisions of Section 6 hereof, the “Warrant Shares”) of common stock, par value $0.001 per share, of the Company (the “Common Stock”), at an exercise price of $24.00 per share (as such price may be adjusted pursuant to the provisions of Section 6 hereof, the “Exercise Price”), but only to the extent that such Warrant Shares have become Vested Shares (as defined in Section 2(b) hereof) and only prior to the Expiration Date (as defined below) applicable to such Vested Shares.  When used herein, the term “Expiration Date”

means, with respect to each Vested Share, the earlier of (a) the fifth anniversary of the date such share became a Vested Share and (b) March 31, 2015.

2.             Vesting of Warrant Shares.

(a)           The provisions of Sections 2.4.1, 2.4.2 and 2.4.6 of the Merger Agreement (as defined below) (including, without limitation, any references therein to Exhibits to the Merger Agreement) are hereby incorporated by reference to this Warrant and made and integral part hereof.  Any breach by the Company of the provisions of Section 2.4.2 of the Merger Agreement (as incorporated by reference to this Warrant), shall be deemed and constitute a breach by the Company of the provisions of this Warrant.  When used herein “Merger Agreement” means that certain Agreement and Plan of Merger dated February 8, 2005, by and among the Company, BNX Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of the Company, Binax, Inc., a Delaware corporation (“Binax”), certain Principal Stockholders of Binax, and Piasio in his capacity as Stockholder Representative, which provides for the merger of Binax with and into Merger Sub, the resulting entity to be a wholly-owned subsidiary of the Company.

(b)           Upon its issuance, this Warrant shall not be exercisable or vested with respect to any Warrant Shares.  This Warrant shall vest and become exercisable with respect to 25,000 Warrant Shares (up to an aggregate of 75,000 Warrant Shares) upon each occurrence of a Vesting Event (as such shares may be adjusted pursuant to the provisions of Section 6 hereof).  A “Vesting Event” shall occur upon the completion of a First Commercial Sale with respect to a Product (which First Commercial Sale must occur prior to the expiration of the Commercialization Period).  For purposes of clarity, a Vesting Event shall occur only once for a particular Product, regardless of how many times that Product may be altered, improved, redesigned, repackaged or reintroduced.  Warrant Shares with respect to which this Warrant becomes vested and exercisable in accordance with the terms hereof are referred to herein as “Vested Shares.”

For example, in the event that a First Commercial Sale is completed with respect to two Products during the Commercialization Product, and no First Commercial Sale is completed with respect to a third Product during the Commercialization Period, then, (i) 25,000 Warrant Shares shall vest and become Vested Shares on the date of the completion of the First Commercial Sale with respect to the first Product, (ii) 25,000 additional Warrant Shares shall become exercisable on the date of the completion of the First Commercial Sale with respect to the second Product, and (iii) with respect to the remaining 25,000 Warrant Shares, this Warrant shall expire and be of no further force and effect upon expiration of the Commercialization Period.

(c)           Notwithstanding anything to the contrary contained in this Warrant, the Company shall have the right, in its sole and absolute discretion, to terminate the R&D Activities (and, consequently, the applicability of the provisions of Section 2.4.2 of the Merger Agreement) with respect to any one or more Products during the Commercialization Period; provided, however, that for purposes of the vesting of the Warrant Shares hereunder, any such termination shall be deemed a Vesting Event for such Product or Products.

3.             Effect of Termination of Employment.

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(a)           In the event that during the Initial Term (as defined in the Employment Agreement), the Employment Agreement and the employment relationship created thereby are terminated (i) by the Company without Cause (as defined in the Employment Agreement), or (ii) by Piasio in accordance with Section 4(c)(iii) because of a material breach by the Company, the vesting under this Warrant shall accelerate such that all Warrant Shares that as of the date of such termination have not become Vested Shares, shall immediately vest and become Vested Shares for all purposes hereunder.

(b)           In the event that during the Initial Term, the employment of Roger Piasio with the Company is terminated because of his death or is terminated by the Company because of his Disability (as defined in the Employment Agreement), this Warrant shall remain in full force and effect and shall continue to vest subject to the terms and conditions thereof.

(c)           In the event that during the Initial Term, the employment of Roger Piasio with the Company is terminated under any circumstances not described in Sections 3(a) or 3(b) hereof, this Warrant shall terminate and be of no further force or effect with respect to any Warrant Shares which have not become Vested Shares prior to the date of such termination.

4.             Exercise.

(a)           This Warrant may be exercised by the Registered Holder with respect to all or any part of the Vested Shares, at any time prior to the Expiration Date applicable to such Vested Shares, by surrendering this Warrant with the Purchase Form attached as Exhibit A hereto duly executed by the Registered Holder, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full, as provided in Section 4(b) hereof, of the aggregate Exercise Price payable in respect of the number of Vested Shares purchased upon such exercise.

(b)           The aggregate Exercise Price may be paid, at the election of the Registered Holder (i) by cash (including by wire transfer of immediately available funds to an account designated by the Company) or certified or bank check in lawful money of the United States, or (ii) by exercise of the “net issuance” right described below in this Section 4(b) (“Net Issuance”).  If the Registered Holder elects the Net Issuance method, the Company will issue Warrant Shares to the Registered Holder upon exercise of this Warrant in accordance with the following formula:

X =  Y(A-B)

A

Where:X = the number of Warrant Shares that shall be issued to the Registered Holder.

Y = the number of Vested Shares requested to be purchased under this Warrant.

A = the current fair market value of one (1) share of Common Stock at the time of issuance of such Warrant Shares.

3

B = the Exercise Price in effect at the time of exercise.

For purposes of the above calculation, current fair market value of each share of Common Stock shall be determined as follows: (i) if the Common Stock is traded on the American Stock Exchange or another national securities exchange, the fair market value shall be deemed to be the average of the closing prices of the Common Stock over the 10 trading day period ending immediately prior to the day as of which the current fair market value of the Common Stock is being determined; or (ii) if the Common Stock is traded over-the-counter, the fair market value shall be deemed to be the average of the closing bid and asked prices of the Common Stock quoted on the NASDAQ System (or similar system) over the 10 trading day period ending immediately prior to the day as of which the current fair market value of the securities is being determined; or (iii) if at any time the Common Stock is not listed on any national securities exchange or quoted in the NASDAQ System (or similar system) or the over-the-counter market, the current fair market value of the Common Stock shall be as determined in good faith by the Board of Directors of the Company.  The Net Issuance method may only be used with respect to exercise of this Warrant if the current fair market value of one share of the Common Stock at the time of issuance of the Warrant Shares is greater than the Exercise Price then in effect.

(c)           Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant and the Purchase Form shall have been surrendered to the Company as provided in Section 4(b) hereof.  At such time, the person or persons in whose name or names any certificate(s) for Warrant Shares shall be issuable upon such exercise as provided in Section 4(d) hereof, shall be deemed to have become the holder or holders of record of the Warrant Shares represented by such certificates.

(d)           As soon as practicable after each exercise of this Warrant, and in any event within 30 days thereafter, the Company, at its expense, will cause to be issued in the name of, and delivered to, the Registered Holder, or, subject to the terms and conditions hereof, as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct: (i) a certificate or certificates for the number of full Warrant Shares to which such Registered Holder shall be entitled upon such exercise, and (ii) in case such exercise is in part only (whether because not all Warrant Shares have become Vested Shares, or because this Warrant is exercised only with respect to a portion of the Vested Shares, or otherwise), a new Warrant evidencing the number of Warrant Shares remaining unexercised.

(e)           To the extent not all Vested Shares are exercised prior to the Expiration Date applicable to such Vested Shares, and if the then fair market value of one share of the Common Stock is greater than the Exercise Price then in effect, this Warrant shall be deemed automatically exercised with respect to all such Vested Shares pursuant to the Net Issuance method as provided in Section 4(b) hereof (even if not surrendered) immediately before the Expiration Date applicable to such Vested Shares.  For purposes of such automatic Net Issuance exercise, the fair market value of one share of Common Stock shall be determined pursuant to the Net Issuance provisions of Section 4(b) hereof.  To the extent this Warrant is deemed automatically exercised pursuant to this Section 4(e), the Company shall promptly notify the Registered Holder of the number of Warrant Shares that the Registered Holder is to receive by reason of such automatic exercise.

4

5.             Rule 144.  With a view to making available the benefits of certain rules and regulations of the Securities and Exchange Commission (the “SEC”) which may at any time permit the sale of the Warrant Shares to the public without registration, the Company agrees to use its commercially reasonable best efforts to:

(a)           make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”);

(b)           file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and

(c)           furnish to the Registered Holder forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of such Rule 144 and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed by the Company as the Registered Holder may reasonably request in availing itself of any rule or regulation of the SEC allowing the Registered Holder to sell any Warrant Shares without registration.

6.             Adjustments.

(a)           If outstanding shares of Common Stock shall be subdivided into a greater number of shares or a dividend in Common Stock shall be paid in respect of Common Stock, the Exercise Price in effect immediately prior to such subdivision or at the record date of such dividend shall simultaneously with the effectiveness of such subdivision or immediately after the record date of such dividend be proportionately reduced.  If outstanding shares of the Common Stock shall be combined into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall, simultaneously with the effectiveness of such combination, be proportionately increased.  When any adjustment is required to be made in the Exercise Price pursuant to this Section 6(a), the number of Warrant Shares purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of Warrant Shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Exercise Price in effect immediately prior to such adjustment, by (ii) the Exercise Price in effect immediately after such adjustment.

(b)           If there shall occur any capital reorganization or reclassification of the Common Stock (other than a change in par value or a subdivision or combination as provided for in Section 6(a) above), then, as part of any such reorganization or reclassification, lawful provision shall be made so that the Registered Holder shall have the right thereafter to receive upon the exercise hereof the kind and amount of shares of stock or other securities or property which the Registered Holder would have been entitled to receive if, immediately prior to any such reorganization or reclassification, the Registered Holder had held the number of shares of Common Stock which were then purchasable upon the exercise of this Warrant.  In any such case, appropriate adjustment (as reasonably determined by the Board of Directors of the Company) shall be made in the application of the provisions set forth herein with respect to the rights and interests thereafter of the Registered Holders such that the provisions set forth in this Section 6 (including provisions with respect to adjustment of the Exercise Price) shall thereafter

5

be applicable, in as nearly equivalent a manner as may be practicable, in relation to any shares of stock or other securities or property thereafter deliverable upon the exercise this Warrant.

(c)           If there shall be a merger or consolidation of the Company with or into another corporation (other than a merger or reorganization involving only a change in the state of incorporation of the Company or the acquisition by the Company of other businesses where the Company survives as a going concern), or the sale of all or substantially all of the Company’s capital stock or assets to any other person, then as a part of such transaction, provision shall be made so that the Registered Holder shall thereafter be entitled to receive the number of shares of stock or other securities or property of the Company, or of the successor corporation or the parent of such successor corporation, as the case may be, resulting from the merger, consolidation or sale, to which the Registered Holder would have been entitled if the Registered Holder had exercised its rights pursuant to this Warrant immediately prior thereto.  In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 6 to the end that the provisions of this Warrant shall be applicable after that event in as nearly equivalent a manner as may be practicable.

(d)           When any adjustment is required to be made in the Exercise Price, the Company shall promptly mail to the Registered Holder a certificate setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.  Such certificate shall also set forth the kind and amount of stock or other securities or property into which this Warrant shall be exercisable following the occurrence of any of the events specified in this Section 6.

(e)           Notwithstanding anything in this Warrant to the contrary, in no event shall the Exercise Price be decreased to be less than $0.001.

7.             No Fractional Shares.  The Company shall not be required upon the exercise of this Warrant to issue any fractional shares, but shall make an adjustment therefor in cash on the basis of the fair market value of the Common Stock determined in accordance with Section 4(b) hereof.

8.             Reservation of Warrant Shares.  The Company will at all times reserve and keep available, solely for issuance and delivery upon the exercise of this Warrant, such Warrant Shares and other stock, securities and property, as from time to time shall be issuable upon the exercise of this Warrant.

9.             Representations, Warranties and Covenants of the Registered Holder.  By acceptance hereof, each Registered Holder represents, warrants, acknowledges and covenants  that:

(a)           This Warrant and the Warrant Shares have not been registered under the Securities Act, or any successor legislation, and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Shares issued upon its exercise unless (i) there is an effective registration statement under the Securities Act as to this Warrant or such Warrant Shares and this Warrant or such Warrant Shares have been registered or qualified under any applicable state securities or “blue sky” laws then in effect, (ii) the Company receives

6

an opinion of counsel, satisfactory to the Company, that such registration and qualification are not required, or (iii) upon the death of the Registered Holder, a transfer pursuant to such Registered Holder’s will or estate plan.  The reliance by the Company on exemptions under the Securities Act is predicated in part upon the truth and accuracy of the representation, warranties, acknowledgements and covenants of the Registered Holder.

(b)           Such Registered Holder (i) has been furnished with all information which such Registered Holder deems necessary to evaluate the merits and risks of the purchase of this Warrant; (ii) has had the opportunity to ask questions concerning the Common Stock and the Company and all questions posed have been answered to such Registered Holder’s satisfaction; (iii) has been given the opportunity to obtain any additional information such Registered Holder deems necessary to verify the accuracy of any information obtained concerning the Common Stock and the Company; and (iv) has such knowledge and experience in financial and business matters that such Registered Holder is able to evaluate the merits and risks of purchasing this Warrant and, upon exercise of this Warrant the Warrant Shares, and to make an informed investment decision relating thereto.

(c)           Such Registered Holder is an “accredited investor,” as such term is defined in Rule 501 promulgated by the SEC under the Securities Act.

(d)           Such Registered Holder is acquiring this Warrant, and upon exercise of this Warrant will acquire the Warrant Shares (unless the offering and sale of the Warrant Shares to be issued upon the particular exercise of this Warrant shall have been effectively registered under the Securities Act), for its own account for investment and not for, with a view to, or in connection with, the distribution or resale of all or any part of the Common Stock in violation of applicable federal or state securities laws.

(e)           Because this Warrant and the Warrant Shares have not been registered under the Securities Act, such Registered Holder must continue to bear the economic risk of the investment for an indefinite time and this Warrant and the Warrant Shares can not be sold unless this Warrant and the Warrant Shares are subsequently registered under applicable federal and state securities laws or an exemption from such registration is available.

(f)            Without limiting the generality of the foregoing, unless the offering and sale of the Warrant Shares to be issued upon the particular exercise of this Warrant shall have been effectively registered under the Securities Act, the Company shall be under no obligation to issue the Warrant Shares covered by such exercise unless and until the Registered Holder shall have executed an investment letter in form and substance satisfactory to the Company, including a warranty at the time of such exercise that such Registered Holder is acquiring such shares for such Registered Holder’s own account, for investment and not for, with a view to, or in connection with, the distribution or resale of any such shares, and a legend in substantially the following form shall be endorsed upon the certificate(s) evidencing the Warrant Shares issued pursuant to such exercise:

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR REGISTERED OR QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE TRANSFERRED UNLESS (A) COVERED BY AN EFFECTIVE REGISTRATION

7

STATEMENT UNDER THE SECURITIES ACT AND REGISTERED OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS OR  (B) EXEMPTIONS FROM SUCH REGISTRATION OR QUALIFICATION REQUIREMENTS ARE AVAILABLE. AS A CONDITION TO PERMITTING ANY TRANSFER OF THESE SECURITIES, THE COMPANY MAY REQUIRE THAT IT BE FURNISHED WITH AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT NO REGISTRATION OR QUALIFICATION IS LEGALLY REQUIRED FOR SUCH TRANSFER.”

(g)           Without limiting the generality of the foregoing, the Company may delay issuance of the Warrant Shares until completion of any action or obtaining of any consent, which the Company deems necessary under any applicable law (including, without limitation, state securities or “blue sky” laws).

10.           Replacement of Warrant.  Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor.

11.           Warrant Register; Transfers; Etc.

(a)           The Company will maintain a register containing the names and addresses of the Registered Holders.  Any Registered Holder may change its, his or her address as shown on the warrant register by written notice to the Company requesting such change.

(b)           In connection with any transfer of this Warrant, the Company may, as condition to such transfer, require that the transferor reimburse the Company for all expenses incurred in connection with the transfer.  Any attempted transfer, assignment, pledge, hypothecation or other disposition of this Warrant or of any rights granted thereunder contrary to the provisions of section 9 or this Section 11, or the levy of any attachment or similar process upon this Warrant or such rights, shall be null and void.

(c)           The Company may deem and treat the Registered Holder of this Warrant as the absolute owner(s) hereof (notwithstanding any notation of ownership or other writing thereon made by anyone), for all purposes, and shall not be affected by any notice to the contrary.

12.           Payment of Taxes.  The Company will pay all documentary stamp taxes attributable to the initial issuance of the Warrant Shares upon the exercise of  this Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance of any replacement Warrant or any certificates for Warrant Shares in a name other than that of the Registered Holder of this Warrant surrendered for registration of transfer or upon the exercise of this Warrant, and the Company shall not be required to issue or deliver a new Warrant or such certificate evidencing Warrant Shares unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the reasonable satisfaction of the Company that such tax has been paid.

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13.           No Rights as Stockholder.  Prior to the exercise of this Warrant (i) no Registered Holder, as such, shall be entitled to any of the rights of a holder of Common Stock, including, without limitation, the right to vote at or to receive any notice of any meetings of stockholders; (ii) the consent of any such Registered Holder shall not be required with respect to any action or proceeding of the Company; (iii) no such Registered Holder, by reason of the ownership or possession of this Warrant, shall have any right to receive any cash dividends, stock dividends, allotments or rights or other distributions paid, allotted or distributed or distributable to the stockholders of the Company prior to, or for which the relevant record date preceded, the date of the exercise of this Warrant; and (iv) no such Registered Holder shall have any right not expressly conferred by this Warrant.

14.           Dispute Resolution.

(a)           The Company and the Registered Holder recognize that from time to time a dispute may arise relating to a party’s rights or obligations under this Warrant, including whether a Vesting Event has occurred.  The parties agree that, subject to Section 14(o), any such dispute shall be resolved by the Alternative Dispute Resolution (“ADR”) provisions set forth in this Section 14, which shall be the sole and exclusive procedures for the resolution of any such disputes, and the result of which shall be binding upon the parties.

(b)           To begin the ADR process, either the Company or the Registered Holder, as the case may be, first must send written notice of the dispute to the other for attempted resolution by good faith negotiations between the Registered Holder and the Company (represented by an officer) within 30 days after such notice is received.  If the matter has not been resolved within 30 days of the notice of dispute, or if the Company and the Registered Holder fail to meet within such 30 days, either the Company or the Registered Holder may initiate an ADR proceeding as provided in this Section 14.  The Company and the Registered Holder shall have the right to be represented by counsel in such a proceeding.

(c)           To begin an ADR proceeding, the Company or the Registered Holder, as applicable, shall provide written notice to the other party of the issues to be resolved by ADR.  Within 14 days after its receipt of such notice, the non-initiating party may, by written notice to the party initiating the ADR, add additional issues to be resolved within the same ADR.

(d)           Within 21 days following receipt of the original ADR notice, the Company and the Registered Holder shall select a mutually acceptable neutral to preside in the resolution of any disputes in this ADR proceeding.  If the Company and the Registered Holder are unable to agree on a mutually acceptable neutral within such period, either the Company or the Registered Holder may request the President of the CPR Institute for Dispute Resolution (“CPR”), 366 Madison Avenue, 14th Floor, New York, New York 10017, to select a neutral pursuant to the following procedures:

(i)            The CPR shall submit to the Company and the Registered Holder a list of not less than five candidates within 14 days after receipt of the request, along with a Curriculum Vitae for each candidate.  Each candidate shall have at least five years of experience in the medical device manufacturing fields and shall have no conflict of interest in deciding disputes between the Company and the stockholders of the Company.  Such list shall include a

9

statement of disclosure by each candidate of any circumstances likely to affect his or her impartiality.

(ii)           Each of the Company and the Registered Holder shall number the candidates in order of preference (with the number one signifying the greatest preference) and shall deliver the list to the CPR within seven days following receipt of the list of candidates.  If either the Company or the Registered Holder believes a conflict of interest exists regarding any of the candidates, that party shall provide a written explanation of the conflict to the CPR along with its list showing its order of preference for the candidates.  Any party failing to return a list of preferences on time shall be deemed to have no order of preference.

(iii)          If the Company and the Registered Holder collectively have identified fewer than three candidates deemed to have conflicts, the CPR immediately shall designate as the neutral the candidate for whom the Company and the Registered Holder collectively have indicated the greatest preference.  If a tie should result between two candidates, the CPR may designate either candidate.  If the Company and the Registered Holder collectively have identified three or more candidates deemed to have conflicts, the CPR shall review the explanations regarding conflicts and, in its sole discretion, may either (A) immediately designate as the neutral the candidate for whom the Company and the Registered Holder together have indicated the greatest preference, or (B) issue a new list of not less than five candidates, in which case the procedures set forth in clauses (i) through (iii) of this Section 14(d) shall be repeated.

(e)           No earlier than 30 days or later than 60 days after selection, the neutral shall hold a hearing to resolve each of the issues identified by the Company and the Registered Holder.  The ADR proceeding shall take place in Boston, Massachusetts at a place agreed upon by the Company and the Registered Holder.  If the Company and the Registered Holder cannot agree, the neutral shall designate a place located in Boston, Massachusetts other than the principal place of business of either party or any of their subsidiaries or affiliates.

(f)            At least seven days prior to the hearing, each of the Company and the Registered Holder shall submit the following to the other party and the neutral:

(i)            a copy of all exhibits on which such party intends to rely in any oral or written presentation to the neutral;

(ii)           a list of any witnesses such party intends to call at the hearing, and a short summary of the anticipated testimony of each witness;

(iii)          a proposed ruling on each issue to be resolved, together with a request for a specific damage award or other remedy for each issue. The proposed rulings and remedies shall not contain any recitation of the facts or any legal arguments and shall not exceed one page per issue; and

(iv)          a brief in support of such party’s proposed rulings and remedies, provided that the brief shall not exceed 20 pages.  This page limitation shall apply regardless of the number of issues raised in the ADR proceeding.

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(g)           Each of the Company and the Registered Holder may conduct limited discovery of the other party only as follows:

(i)            Each party may request the other party to respond to a cumulative total of no more than 20 interrogatories, such interrogatories not having any subquestions and giving the other party at least 10 days to respond.

(ii)           Each party may request the other party to produce any documents identified or referred to by the answers to interrogatories, statement of issues or by witnesses in depositions, provided that such requests may not seek general categories of documents not otherwise identified and such requests must provide the other party at least 10 days to produce the documents.  General requests for document production is prohibited in the ADR contemplated by hereby.

(iii)          Each party may take the depositions of not more than four witnesses on not less than five business days prior notice, provided that no deposition may last more than four hours and witnesses shall be required to answer questions over objections except objections as to self-incrimination or attorney-client privilege, and further provided that each party shall make available for deposition if requested and within the above limits any person employed by them.

(iv)          To the extent any dispute arises between the parties regarding these limited discovery procedures, such disputes shall be fully and finally resolved by the neutral after a telephone conference with the parties or their legal counsel.

(v)           The neutral shall cooperate with the parties to schedule the merits hearing in such a way as to reasonably accommodate the requested discovery of the parties.

(h)           Except as expressly set forth in Sections 14(f) and 14(g) hereof, no discovery shall be required or permitted by any means, including depositions, interrogatories, requests for admissions, or production of documents.

(i)            The hearing shall be conducted on two consecutive days and shall be governed by the following rules:

(i)            Each of the Company and the Registered Holder shall be entitled to five hours of hearing time to present its case.  The neutral shall determine whether each party has had the five hours to which it is entitled.

(ii)           Each of the Company and the Registered Holder shall be entitled, but not required, to make an opening statement, to present regular and rebuttal testimony, documents or other evidence, to cross-examine witnesses, and to make a closing argument.  Cross-examination of witnesses shall occur immediately after their direct testimony, and cross-examination time shall be charged against the party conducting the cross-examination.

(iii)          The party initiating the ADR shall begin the hearing and, if it chooses to make an opening statement, shall address not only issues it raised but also any issues raised by the responding party.  The responding party, if it chooses to make an opening

11

statement, also shall address all issues raised in the ADR.  Thereafter, the presentation of regular and rebuttal testimony and documents, other evidence, and closing arguments shall proceed in the same sequence.

(iv)          Except when testifying, witnesses shall be excluded from the hearing until closing arguments.

(v)           Settlement negotiations, including any statements made therein, shall not be admissible under any circumstances.  Affidavits prepared for purposes of the ADR hearing also shall not be admissible.  As to all other matters, the neutral shall have sole discretion regarding the admissibility of any evidence.

(j)            Within seven days following completion of the hearing, each of the Company and the Registered Holder may submit to the other party and the neutral a post-hearing brief in support of such party’s proposed rulings and remedies, provided that such brief shall not contain or discuss any new evidence and shall not exceed 10 pages.  This page limitation shall apply regardless of the number of issues raised in the ADR proceeding.

(k)           The neutral shall rule within 14 days following completion of the hearing, with only a final award.  The neutral shall not issue any written opinion or otherwise explain the basis of the ruling.

(l)            The neutral shall be paid a reasonable fee plus expenses, and such fees and expenses and any other expenses relating to the ADR proceedings (other than the fees and expenses of the parties), such as for a court reporter and the hearing room, shall be paid one-half by each party.  In addition, each party shall bear its own legal and other fees and expenses (including attorney’s and expert witness fees and expenses) in connection with the ADR proceedings.  Notwithstanding the foregoing, in the event the neutral concludes that the ADR proceedings were frivolous or brought or prosecuted in bad faith, the neutral shall have the authority to rule that all such fees and expenses (including the legal fees and expenses of the prevailing party) shall be paid by the losing party.

(m)          The rulings of the neutral (and, if applicable, the allocation of fees and expenses) shall be binding, non-reviewable, and non-appealable, and may be entered as a final judgment in any court having jurisdiction.

(n)           Except as required by law, the existence of the dispute, any settlement negotiations, the ADR hearing, any submissions (including exhibits, testimony, proposed rulings, and briefs), and the rulings shall be deemed confidential information.  The neutral shall have the authority to impose sanctions for unauthorized disclosure of confidential information.

(o)           Notwithstanding the provisions of Section 14(a) hereof, either the Company or the Registered Holder may initiate an action in a court of competent jurisdiction and may seek temporary and preliminary injunctive relief as necessary to protect the interests of the Company or the stockholders of the Company pending the ADR.  In such case, the court shall be free to act on all requests for temporary and preliminary injunctive relief, but shall stay the action in all other respects pending the ADR (which the court may compel).  If any such action is still pending at the time of the neutral’s ruling, either the Company or the Registered Holder may

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apply to such court for entry of judgment on, and enforcement of, the neutral’s ruling, including without limitation any equitable relief awarded by the neutral.

15.           Miscellaneous.

(a)           This Warrant may be amended, modified, or supplemented, and any provision hereof maybe waived, by an instrument in writing signed by the Company and the Registered Holder.

(b)           This Warrant shall be governed by, and construed and enforced in accordance with, the substantive laws of The Commonwealth of Massachusetts, without regard to principles of conflicts of laws of The Commonwealth of Massachusetts or any other jurisdiction.

(c)           All notices and other communications hereunder shall be in writing and shall be deemed given if delivered by hand, sent by facsimile transmission with confirmation of receipt followed by confirmation by reputable courier service, sent via a reputable courier service with confirmation of receipt requested, or mailed by registered or certified mail (postage prepaid and return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice), and shall be deemed given on the date on which delivered by hand or otherwise on the date of receipt as confirmed (with respect to facsimile notices, it being understood however, that subject to receipt of the courier confirmation, the notice shall be deemed to have been given upon receipt of the facsimile notice as confirmed):

To the Company:
	Inverness Medical Innovations, Inc.
	51 Sawyer Road, Suite 200
	Waltham, MA 02453
	Attention:	Ron Zwanziger, Chairman and Chief Executive Officer and
		Paul T. Hempel, General Counsel
	Facsimile No.: 617-647-3939
with a copy to:
	William R. Kolb, Esq.
	Foley Hoag LLP
	155 Seaport Boulevard
	Boston, Massachusetts 02210
	Facsimile: (617) 832-7000
To the Registered Holder:
	To such Registered Holder’s address for notices as set forth
	in the transfer records of the Company

(d)           Nothing in this Warrant shall be construed to give to any person other than the Company and the Registered Holder any legal or equitable right, remedy or claim under this

13

Warrant; but this Warrant shall be for the sole and exclusive benefit of the Company and the Registered Holder.

(e)           This Warrant may be executed and delivered by facsimile and in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same document.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of the date first above written.

/s/ Roger N. Piasio	INVERNESS MEDICAL
ROGER N. PIASIO	INNOVATIONS, INC.
	By:	/s/ Anthony J. Bernardo
	Name:	Anthony J. Bernardo
	Title:	VP

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Exhibit A

PURCHASE FORM

INVERNESS MEDICAL INNOVATIONS, INC.

(To be executed upon exercise of this Warrant)

The undersigned hereby irrevocably elects to purchase                                        Vested Shares covered by the Warrant enclosed herewith, and purchase the whole number of Warrant Shares issuable upon the exercise of such Warrant and herewith tenders payment for such Warrant Shares as follows:

$                     in cash (including by wire transfer of immediately available funds to an account designated by the Company) or certified or bank check; or by surrender of Warrant Shares pursuant to a Net Issuance (as defined in the Warrant) for                                      Warrant Shares.

The undersigned requests that a certificate representing such Warrant Shares be delivered to:

Full Name:

Address:

Name of Registered Holder:	Signature:
(PLEASE PRINT)
	Dated:
Address:	Tax Identification or Social
	or Social Security Number:

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EX-10.35

Exhibit 10.35

THIRD AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT

THIRD AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of November 22, 2005 (this “Amendment”), to the Third Amended and Restated Credit Agreement, dated as of June 30, 2005 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among General Electric Capital Corporation, as Agent (in such capacity, “Agent”), Inverness Medical Innovations, Inc. (“Innovations”), Wampole Laboratories, LLC and Inverness Medical (UK) Holdings Limited, as borrowers (“Borrowers”), the other Credit Parties signatory thereto, Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as documentation agent, co-syndication agent and lender, UBS Securities LLC, as co-syndication agent, and the lenders signatory thereto from time to time (collectively, the “Lenders”).

W I T N E S S E T H

WHEREAS, Agent and Requisite Lenders have agreed to amend the Credit Agreement in the manner, and on the terms and conditions, provided for herein.

NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.             Definitions.  Capitalized terms not otherwise defined herein (including in the Recitals) shall have the meanings ascribed to them in the Credit Agreement.

2.             Amendment to Credit Agreement.  The Credit Agreement is hereby amended as of the Effective Date (as hereinafter defined) as follows:

(a)           Section 6.6 of the Credit Agreement is hereby amended by deleting such provision in its entirety and inserting the following in lieu thereof:

“6.6         Guaranteed Indebtedness.  No Credit Party shall create, incur, assume or permit to exceed any Guaranteed Indebtedness except (a) by endorsement of instruments or items of payment for deposit to the general account of any Credit Party, (b) for Guaranteed Indebtedness incurred for the benefit of any other Credit Party if the primary obligation is expressly permitted by this Agreement, and (c) Innovations may guaranty obligations of Inverness Medical (Shanghai) Co., Ltd. to suppliers in the ordinary course of business; provided that all such guaranties are unsecured and the obligations guarantied by all such guaranties do not exceed (i) $4,000,0000 in the aggregate at any time less (ii) the value of all assets at such time, other than the value of Inverness Medical (Shanghai) Co., Ltd., owned by the Credit Parties or any of the Excluded Subsidiaries (other than Inverness Medical (Shanghai) Co., Ltd.) and located in China.”

(b)           Section 6.20 of the Credit Agreement is hereby amended by deleting the word “and” preceding clause (viii) in the first sentence thereof and inserting the following and the end of such sentence:

“(ix) providing guaranties to the extent permitted by Section 6.6 hereof; and (x) such other activities as may be consented to from time to time by Agent and Requisite Lenders in writing”.

(c)           Section 6.21 of the Credit Agreement is hereby amended by deleting such provision in its entirety and inserting the following in lieu thereof:

“6.21       Collateral in China.  At no time shall the aggregate value of all assets, other than the value of Inverness Medical (Shanghai) Co., Ltd., owned by the Credit Parties or any of the Excluded Subsidiaries (other than Inverness Medical (Shanghai) Co., Ltd. and located in China exceed (a) $4,000,000 in the aggregate at any time less (b) the aggregate value of any guaranties issued by Innovations pursuant to Section 6.6 hereof.”

(d)           Annex E of the Credit Agreement is hereby amended by inserting the following at the end of such Annex:

“(q)         Innovations Guaranties.  To Agent and Lenders, at the time of delivery of the quarterly financial statements pursuant to clause (b) of this Annex E, a schedule setting forth the amount of the obligations guarantied by Innovations as contemplated by Section 6.6(c) of the Credit Agreement as of the last day of the applicable Fiscal Quarter.”

3.             Remedies.  This Amendment shall constitute a Loan Document.  The breach by any Credit Party of any representation, warranty, covenant or agreement in this Amendment shall constitute an immediate Event of Default hereunder and under the other Loan Documents.

4.             Representations and Warranties.  To induce Agent and Requisite Lenders to enter into this Amendment, the Credit Parties hereby, jointly and severally, represent and warrant that:

(a)           The execution, delivery and performance by each Credit Party of this Amendment and the performance of the Credit Agreement, as amended by this Amendment (the “Amended Credit Agreement”): (i) are within such Person’s corporate, company or partnership power; (ii) have been (or will be prior to execution thereof) duly authorized by all necessary corporate, limited liability company or limited partnership action; (iii) do not contravene any provision of such Person’s charter, bylaws or equivalent constitutive documents or partnership or operating agreement, as applicable; (iv) do not violate any law or regulation, or any order or decree of any court or Governmental Authority; (v) do not conflict with or result in the breach or termination of, constitute a default under or accelerate or permit the acceleration of any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which such Person is a party or by which such Person or any of its property is bound; (vi) do not result in the creation or imposition of any Lien upon any of the property of such Person, other than a Lien in favor of Agent; and (vii) do not require the consent or approval of any Governmental Authority or any other Person except those which will have been duly obtained, made or complied with prior to the Effective Date.

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(b)           This Amendment has been duly executed and delivered by or on behalf of each of the Credit Parties.

(c)           This Amendment, the Amended Credit Agreement and each of the other Loan Documents constitutes a legal, valid and binding obligation of each of the Credit Parties, enforceable against each of them in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, fraudulent conveyance or transfer or other laws affecting creditors’ rights generally or by equitable principals of general applicability.

(d)           No Default or Event of Default has occurred and is continuing or would result after giving effect to the provisions of this Amendment.

(e)           No action, claim or proceeding is now pending or, to the knowledge of any Credit Party, threatened against such Credit Party, at law, in equity or otherwise, before any court, board, commission, agency or instrumentality of any foreign, federal, state, or local government or of any agency or subdivision thereof, or before any arbitrator or panel of arbitrators, which (i) challenges any Credit Party’s right or power to enter into or perform any of its obligations under this Amendment or any other Loan Document to which it is or will be, a party, or the validity or enforceability of this Amendment, the Amended Credit Agreement or any Loan Document or any action taken thereunder, or (ii) has a reasonable risk of being determined adversely to any Credit Party and that, if so determined, could reasonably be expected to have a Material Adverse Effect after giving effect to this Amendment.

(f)            The representations and warranties of the Credit Parties contained in the Amended Credit Agreement and each other Loan Document shall, after giving effect hereto, be true and correct on and as of (i) the date hereof, and (ii) the Effective Date, in each case, with the same effect as if such representations and warranties had been made on and as of such date, except that any such representation or warranty which is expressly made only as of a specified date need be true only as of such date.

5.             No Amendments/Waivers/Consents.  Except as expressly provided herein (a) the Credit Agreement and the other Loan Documents shall be unmodified and shall continue to be in full force and effect in accordance with their terms, and (b) this Amendment shall not be deemed a waiver of any term or condition of any Loan Document and shall not be deemed to prejudice any right or rights which Agent or any Lender may now have or may have in the future under or in connection with any Loan Document or any of the instruments or agreements referred to therein, as the same may be amended from time to time.

6.             Affirmation of Obligations.  Each of the Credit Parties hereby acknowledges, agrees and affirms (a) its obligations under the Credit Agreement and the other Loan Documents, including, without limitation, its guaranty obligations thereunder, (b) that such guaranty shall apply to the Obligations in accordance with the terms thereof, (c) the grant of the security interest in all of its assets pursuant to the Loan Documents and (d) that such liens and security interests created and granted are valid and continuing and secure the Obligations in accordance with the terms thereof.

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7.             Outstanding Indebtedness; Waiver of Claims.  Each of Borrowers and the other Credit Parties hereby acknowledges and agrees that as of November 21, 2005, (a) the outstanding balance of the European Revolving Loan is $29,000,000, (b) the outstanding balance of the US Revolving Loan is $60,000,000, (c) the outstanding balance of the US Term Loan is $0, and (d) the outstanding balance of European Term Loan is $0.  Borrowers and each other Credit Party hereby waive, release, remise and forever discharge Agent, Lenders and each other Indemnified Person from any and all claims, suits, actions, investigations, proceedings or demands arising out of or in connection with the Credit Agreement (collectively, “Claims”), whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law of any kind or character, known or unknown, which any Borrower or any other Credit Party ever had, now has or might hereafter have against Agent or Lenders which relates, directly or indirectly, to any acts or omissions of Agent, Lenders or any other Indemnified Person on or prior to the Effective Date, provided, that no Borrower nor any other Credit Party waives any Claim solely to the extent such Claim relates to Agent’s or any Lender’s gross negligence or willful misconduct.

8.             Fees and Expenses.  Borrowers hereby reconfirm their obligations pursuant to Section 11.3 of the Credit Agreement to pay and reimburse Agent for all reasonable costs and expenses (including, without limitation, reasonable fees of counsel) incurred in connection with the negotiation, preparation, execution and delivery of this Amendment and all other documents and instruments delivered in connection herewith..

9.             Effectiveness.  Upon satisfaction in full in the judgment of Agent of each of the following conditions, this Amendment shall be deemed effective as of November 22, 2005 (the “Effective Date”):

(a)           Amendment.  Agent shall have received signature pages to this Amendment, duly executed and delivered by Agent, Requisite Lenders, and each of the Credit Parties.

(b)           Payment of Fees and Expenses.  Borrowers shall have paid to Agent all costs, fees and expenses owing in connection with this Amendment and the other Loan Documents and due to Agent (including, without limitation, reasonable legal fees and expenses).

(c)           Representations and Warranties.  The representations and warranties of or on behalf of each of the Credit Parties in this Amendment shall be true and correct on and as of the date hereof and the Effective Date.

10.           GOVERNING LAW.  THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

11.           Counterparts.  This Amendment may be executed by the parties hereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

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IN WITNESS WHEREOF, this Amendment has been duly executed as of the date first written above.

	BORROWERS
	WAMPOLE LABORATORIES, LLC
\
	By:	/s/ Duane L. James
	Name:		Duane L. James
	Title:		Treasurer
	INVERNESS MEDICAL (UK) HOLDINGS LIMITED
	By:		/s/ Peter Welch
	Name:		Peter Welch
	Title:		Director

5

AGENT AND LENDERS

GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent and Lender
By:	/s/ Illegible
		Duly Authorized Signatory
MERRILL LYNCH CAPITAL, a division of Merrill Lynch Business Financial Services Inc.,
as a Lender
By:		/s/ Illegible
		Duly Authorized Signatory
UBS AG, CAYMAN ISLANDS BRANCH, as a Lender
By:		/s/ Richard L. Tavrow
		Duly Authorized Signatory
By:		/s/ Irja R. Otsa
		Duly Authorized Signatory

6

The following Persons are signatories to this Amendment in their capacity as Credit Parties and not as Borrowers.

APPLIED BIOTECH, INC.
ADVANTAGE DIAGNOSTICS CORPORATION
FOREFRONT DIAGNOSTICS, INC
INVERNESS MEDICAL INTERNATIONAL
HOLDING CORP.
INVERNESS MEDICAL INTERNATIONAL
HOLDING CORP.  II
INVERNESS MEDICAL, INC.
INNOVATIONS RESEARCH, LLC
ISCHEMIA TECHNOLOGIES, INC.
IVC INDUSTRIES, INC.
MORPHEUS ACQUISITION CORP.
OSTEX INTERNATIONAL, INC.
SELFCARE TECHNOLOGY, INC.
UNIPATH ONLINE, INC.
BINAX, INC.
INVERNESS MEDICAL — BIOSTAR, INC.
By:	/s/ Duane L. James
Name:		Duane L. James
Title:		Treasurer, Treasurer, Treasurer, Treasurer,
		Treasurer, Treasurer, Treasurer, Treasurer,
		Treasurer, Treasurer, Treasurer, Treasurer,
		Treasurer, Vice President, Treasurer,
		respectively

7

	CAMBRIDGE DIAGNOSTICS IRELAND LIMITED
	DMD, DIENSTLEISTUNGEN & VERTRIEB FÜR    MEDIZIN UND DIAGNOSTIK GMBH
	INVERNESS MEDICAL CANADA, INC.
	INVERNESS MEDICAL EURASIA LIMITED
	INVERNESS MEDICAL FRANCE SAS
	INVERNESS MEDICAL GERMANY GMBH
	ORGENICS INTERNATIONAL HOLDINGS BV
	SCANDINAVIAN MICRO BIODEVICES APS
	STIRLING MEDICAL INNOVATIONS LIMITED
	INVERNESS MEDICAL SWITZERLAND GMBH
	UNIPATH DIAGNOSTICS GMBH
	VIVA DIAGNOSTIKA - DIAGNOSTISCHE
	PRODUKTE GMBH
	INVERNESS MEDICAL JAPAN, LTD.
	INVERNESS MEDICAL INNOVATIONS, INC.
	INVERNESS MEDICAL IBERICA, S.A.
	BOSWELL INVESTMENTS, S.L.
	By:	/s/ Duane L. James
		Authorized Person, Authorized Person,
		Authorized Person, Authorized Person,
		Authorized Person, Authorized Person,
		Authorized Person, Authorized Person,
\		Authorized Person, Authorized Person,
		Authorized Person, Authorized Person,
		Authorized Person, Authorized Person,
		Treasurer, Authorized Person, Authorized
		Person respectively
	INVERNESS MEDICAL INVESTMENTS LLC
	By:	/s/ Jay McNamara
	Name:		Jay McNamara
	Title:		Assistant Secretary
	INVERNESS MEDICAL CANADA, INC.
	By:	/s/ Doug Shaffer
	Name:		Doug Shaffer
	Title:		President

8

UNIPATH LIMITED
By:	/s/ Peter Welch
Name:		Peter Welch
Title:		Managing Director

9

EX-10.36

Exhibit 10.36

FOURTH AMENDMENT AND CONSENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT

FOURTH AMENDMENT AND CONSENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of February 27, 2006 (this “Amendment”), to the Third Amended and Restated Credit Agreement, dated as of June 30, 2005 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among General Electric Capital Corporation, as Agent (in such capacity, “Agent”), Inverness Medical Innovations, Inc. (“Innovations”), Wampole Laboratories, LLC (“US Borrower”) and Inverness Medical (UK) Holdings Limited (“European Borrower”, together with US Borrower, collectively, “Borrowers”), the other Credit Parties signatory thereto, Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as documentation agent, co-syndication agent and lender, UBS Securities LLC, as co-syndication agent, and the lenders signatory thereto from time to time (collectively, the “Lenders”).

W I T N E S S E T H

WHEREAS, Borrowers have notified Agent that Inverness Medical Switzerland GmbH (“Swissco”) desires to acquire (the “Clondiag Stock Purchase”) one hundred percent (100%) of the issued and outstanding stock of Clondiag Chip Technologies GmbH, a corporation organized under the laws of Germany (“Clondiag”);

WHEREAS, the purchase price payable for the Clondiag Stock Purchase pursuant to that certain Share Purchase Agreement between Swissco, Innovations, Clondiag Beteiligungs-Gesellschaft GmbH (“CBG”) and the persons signatory thereto as sellers (such persons and CBG are collectively referred to herein as “Sellers”), dated as of February 28, 2006 (the “Purchase Agreement”) is contemplated to be paid as follows: (a) consideration consisting of €2.64 million in cash (the “Clondiag Closing Date Cash Consideration”) shall be payable on Completion (as defined in the Share Purchase Agreement) to certain Sellers; (b) consideration consisting of 218,502 shares of Innovations Stock (the “Clondiag Closing Date Share Consideration”, collectively with the Clondiag Closing Date Cash Consideration, the “Clondiag Closing Date Consideration”) shall be payable on Completion to certain Sellers; and (c) consideration consisting of €4.16 million in cash  (the “CBG Consideration”) shall be payable on Completion II (as defined in the Purchase Agreement) to CBG;

WHEREAS, in addition to the Clondiag Closing Date Consideration to be made on Completion, Swissco will, pursuant to Section 1.2.1 of the Purchase Agreement, repay outstanding indebtedness of Clondiag in the amount of €7,329,557.81 million (the “Outstanding Indebtedness”) on Completion (the “Clondiag Payoff Amount”);

WHEREAS, on or prior to March 31, 2006 pursuant to Section 1.2.2 of the Purchase Agreement, Swissco will (i) make a cash contribution to Clondiag (the “Clondiag Cash Contribution Payment”) to enable Clondiag to make certain payments in respect of taxes of employees of Clondiag and (ii) distribute shares of Innovations’ Stock to Clondiag for further

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distribution to employees of Clondiag (the “Clondiag Share Contribution Payment”, collectively with the Clondiag Cash Contribution Payment, the “Clondiag Working Capital Payments”);

WHEREAS, in the event that the value of the Clondiag Closing Date Share Consideration is less than €4.87 million on December 29, 2006, Swissco is required to make a cash payment to the Sellers receiving such Stock in an amount equal to (a)  €4.87 million less (b) the value of such Stock on December 29, 2006, as calculated in accordance with the Purchase Agreement (the “Make Whole Payment”);

WHEREAS, Swissco is required to pay the Earnout Payment (as defined in the Purchase Agreement) of up to €7,500,000 at such times, if any, as the conditions to such payment have been met as set forth in the Purchase Agreement;

WHEREAS, under Section 4.2 of the Purchase Agreement, Swissco is required to make available to Clondiag the agreed upon budget for 2006 in an amount not to exceed €5,000,000 (the “Budget Payment”);

WHEREAS, the Clondiag Stock Purchase is not a Permitted Acquisition and therefore is prohibited under Section 6.1 of the Credit Agreement;

WHEREAS, the issuance of Stock of Innovations (the “Stock Issuance”) as contemplated by the Purchase Agreement is prohibited under Section 6.5 of the Credit Agreement;

WHEREAS, Borrowers have requested that Agent and Requisite Lenders consent to the Clondiag Stock Purchase and the Stock Issuance on the terms and subject to the conditions set forth herein; and

WHEREAS, Borrowers and the other Credit Parties have also requested that Agent and the Requisite Lenders amend the Credit Agreement in the manner, and on the terms and conditions, provided for herein.

NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.             Definitions.  Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement.

2.             Amendments to Credit Agreement.  Annex F of the Credit Agreement is hereby amended as of the Financial Covenant Effective Date (as hereinafter defined) by:

(a)           Deleting the ratio set forth opposite “December 31, 2005” in clause (a) thereof in its entirety and replacing it with “.73”;

(b)           Deleting the number set forth opposite “December 31, 2005” in clause (b) thereof in its entirety and replacing it with “$42,516,000”; and

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(c)           Deleting the ratio set forth opposite “December 31, 2005” in clause (d) thereof in its entirety and replacing it with “5.95”.

3.             Clondiag Consent.  As of the Fourth Amendment Effective Date (as hereinafter defined), Agent and Requisite Lenders hereby consent to the consummation of the Clondiag Stock Purchase and the Stock Issuance in accordance with the Purchase Agreement and related documentation previously provided to and approved by Agent (the “Draft Purchase Documents”) and agree that the consummation of the Clondiag Stock Purchase and the other transactions contemplated by the Draft Purchase Documents, and the consummation of the Stock Issuance, in each case on or before March 3, 2006, shall not constitute a breach of the Credit Agreement or the other Loan Documents; provided, that, the Credit Parties do not expend any cash or other consideration in connection with the Clondiag Stock Purchase other than (i) for costs and expenses not to exceed $200,000 in the aggregate, and (ii) pursuant to the Purchase Agreement (A) the Clondiag Closing Date Consideration to be paid on Completion, (B) the CBG Consideration to be paid on Completion II, (C) the Clondiag Payoff Amount to be paid on Completion, (D) the Clondiag Working Capital Payments to be paid on or about March 20, 2006; provided, the Clondiag Working Capital Payments shall not exceed €1,100,000 in the aggregate and provided, further that the cash portion of the Clondiag Working Capital Payments shall not exceed an aggregate amount equal to the amount of personal wage taxes plus social taxes payable by the employees receiving the Clondiag Share Contribution Payment, (E) the amount of the Earnout Payment at the time the conditions to the payment of the Earnout Payment (or a portion thereof) have been met under the Purchase Agreement; provided, that such payments shall be payable solely in Stock of Innovations except as required pursuant to the second paragraph of Section 2.3 of the Purchase Agreement, (F) the Make Whole Payment, if any, to be paid on or about December 29, 2006, and (G) the Budget Payment to be paid in accordance with Section 4.2 of the Purchase Agreement.

4.             Agreement by Borrowers and Other Credit Parties Regarding Clondiag Stock Purchase.  The Borrowers and each of the other Credit Parties hereby acknowledge and agree that, on or prior to the Fourth Amendment Effective Date (or on or prior to such other date as may be expressly provided below):

(a)           Satisfaction of Conditions.  Agent shall have received evidence satisfactory to Agent that each of the conditions precedent to a Permitted Acquisition set forth in Section 6.1(ii) — (xv) of the Credit Agreement have been satisfied in connection with the Clondiag Stock Purchase (other than the conditions set forth in Sections 6.1(iv), (v), (ix) and (xv), which are hereby waived).

(b)           Joinder.  Within sixty (60) days of the Fourth Amendment Effective Date or such longer period as Agent shall consent to in its sole discretion, Agent shall have received a joinder agreement, in form and substance satisfactory to Agent, duly executed by

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Clondiag pursuant to which, inter alia, Clondiag joins the Credit Agreement and the other Loan Documents as a Credit Party.

(c)           Guaranty.  Within sixty (60) days of the Fourth Amendment Effective Date or such longer period as Agent shall consent to in its sole discretion, Agent shall have received a guaranty, in form and substance satisfactory to Agent, duly executed by Clondiag, pursuant to which Clondiag guaranties the Obligations of the European Credit Parties under the Loan Documents.

(d)           Pledge Agreement.  Agent shall have received (A) within sixty (60) days of the Fourth Amendment Effective Date or such longer period as Agent shall consent to in its sole discretion, a pledge of 67.45% of the issued and outstanding Stock of Clondiag (the “Clondiag Completion Stock”) pursuant to a pledge agreement to be entered into between Swissco and Lenders (the “Clondiag Pledge Agreement”) and (B) within fifteen (15) days of Completion II, a pledge of 32.55% of the issued and outstanding Stock of Clondiag (the “Clondiag Completion II Stock”) pursuant to an amendment to the Clondiag Pledge Agreement.

(e)           Security Interest and Code Filings.

(i)         Within sixty (60) days of the Fourth Amendment Effective Date or such longer period as Agent shall consent to in its sole discretion, Clondiag shall grant a first priority perfected security interest (subject to Permitted Encumbrances) in substantially all of its assets to secure the Obligations of the European Credit Parties and execute all documents and take all actions requested by Agent in connection therewith;

(ii)        Within sixty (60) days of the Fourth Amendment Effective Date or such longer period as Agent shall consent to in its sole discretion, Clondiag shall provide Control Letters from (A) all issuers of uncertificated securities and financial assets held by Clondiag, (B) all securities intermediaries with respect to all securities accounts and securities entitlements of Clondiag, and (C) all futures commission agents and clearing houses with respect to all commodities contracts and commodities accounts held by Clondiag.

(f)            Cash Management.  Within sixty (60) days of the Fourth Amendment Effective Date or such longer period as Agent shall consent to in its sole discretion, Agent shall have received a pledge of all bank accounts of Clondiag, in form and substance reasonably satisfactory to Agent, duly executed and delivered by Clondiag, in accordance with the requirements set forth in Section 1.8 and Annex C of the Credit Agreement.

(g)           Schedules.  Within sixty (60) days of the Fourth Amendment Effective Date or such longer period as Agent shall consent to in its sole discretion, Agent shall have received updated Schedules to the Credit Agreement and such other Loan Documents as may be required in connection with the joinder of Clondiag, to reflect the joinder of Clondiag to such agreements, in form and substance satisfactory to Agent; provided, that such schedules shall not include material information not previously disclosed to Agent in writing.

(h)           Organizational Documents and Good Standing.  Agent shall have received a copy of Clondiag’s (i) organizational documents and all amendments thereto and (ii) certificates of qualification to conduct business in each jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, each dated a recent date and certified by the applicable authorized Governmental Authority.

(i)            Resolutions.  Agent shall have received a copy of (i) resolutions of Swissco’s board of directors and, to the extent required under applicable law, stockholders, approving and authorizing the Clondiag Stock Purchase certified by an authorized officer of

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Swissco, and (ii) concurrently with Clondiag’s joinder to the Credit Agreement, resolutions of Clondiag’s board of directors approving and authorizing the execution, delivery and performance of the Loan Documents to which Clondiag is, or will be a party and the transactions to be consummated in connection therewith, in each case, certified by an authorized officer of Clondiag (after giving effect to the Clondiag Stock Purchase) as being in full force and effect without any modification or amendment as of the Fourth Amendment Effective Date or the date of joinder of Clondiag to the Credit Agreement.

(j)            Incumbency.  Concurrently with Clondiag’s joinder to the Credit Agreement, Agent shall have received a signature and incumbency certificate of the officers of Clondiag executing any Loan Document or Joinder thereto, certified by an officer of Clondiag as being true, accurate, correct and complete in all respects.

(k)           Clondiag Purchase Documents.  Agent shall have received (i) an executed copy of the Purchase Agreement, together with all amendments thereto, and all documentation delivered in connection therewith (all of which shall be in form and substance reasonably satisfactory to Agent), certified by an authorized officer of Innovations to be true and complete and in full force and effect as of the Fourth Amendment Effective Date and (ii) a certificate of an authorized officer of Innovations certifying as to the matters set forth in Exhibit A hereto.

(l)            Payoff Letter.  Within 5 Business Days of the Fourth Amendment Effective Date or such longer period as Agent shall consent to in its sole discretion, Agent shall receive evidence of the repayment of the Outstanding Indebtedness.

(m)          Collateral Assignment of Clondiag Stock Purchase Documents.  Upon Agent’s request, Agent shall have received a collateral assignment of the rights (but not the obligations) of Swissco and Innovations under the Purchase Agreement and other documentation executed in connection with the Clondiag Stock Purchase.

(n)           Appointment of Agent for Service of Process.  Within sixty (60) days of the Fourth Amendment Effective Date or such longer period as Agent shall consent to in its sole discretion, Agent shall have received evidence that the Connecticut office of CT Corporation has been appointed as agent for service of process for Clondiag.

The Borrowers and each of the other Credit Parties hereby acknowledge and agree that the failure to satisfy any of the deliveries or conditions set forth above in this Section 4 on or prior to the date required as set forth above in connection with each such delivery or condition, as applicable, shall constitute an immediate Event of Default under the Credit Agreement.

5.             Covenants.

(a)           Swissco shall acquire the shares of Clondiag held by CBG (the “CBG Purchase”) on or before August 31, 2006 and, at such time, shall own one hundred percent (100%) of the outstanding equity of Clondiag.

(b)           Until such time Swissco has consummated the CBG Purchase and owns 100% of the outstanding equity of Clondiag and notwithstanding Clondiag’s status as a

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Credit Party, no Credit Party shall (i) transfer any assets or other property or make any loans to, or on behalf of, Clondiag other than (A) as contemplated by Section 3 hereof, and (B) the Budget Payment, or (ii) enter into or be a party to any transaction with Clondiag unless the requirements of Section 6.4(a)(ii) of the Credit Agreement have been satisfied with respect to such transaction.

(c)           The Credit Parties shall not amend the Draft Purchase Documents or the executed Purchase Agreement, in each case in a manner which adversely affects the Lenders without the prior written consent of Agent.  Any failure of the Credit Parties to comply with this covenant (a) with respect to the Draft Purchase Documents shall result in this Amendment becoming immediately null and void and of no further force and effect and (b) with respect to the Purchase Agreement shall constitute an immediate Event of Default under the Credit Agreement.

6.             Remedies.  This Amendment shall constitute a Loan Document.  The breach by any Credit Party of any representation, warranty, covenant or agreement in this Amendment shall constitute an immediate Event of Default hereunder and under the other Loan Documents.

7.             Representations and Warranties.  To induce Agent and Requisite Lenders to enter into this Amendment, the Credit Parties hereby, jointly and severally, represent and warrant that:

(a)           The execution, delivery and performance by each Credit Party of this Amendment and the performance of the Credit Agreement, as amended by this Amendment (the “Amended Credit Agreement”): (i) are within such Person’s corporate, company or partnership power; (ii) have been (or will be prior to execution thereof) duly authorized by all necessary corporate, limited liability company or limited partnership action; (iii) do not contravene any provision of such Person’s charter, bylaws or equivalent constitutive documents or partnership or operating agreement, as applicable; (iv) do not violate any law or regulation, or any order or decree of any court or Governmental Authority; (v) do not conflict with or result in the breach or termination of, constitute a default under or accelerate or permit the acceleration of any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which such Person is a party or by which such Person or any of its property is bound; (vi) do not result in the creation or imposition of any Lien upon any of the property of such Person, other than a Lien in favor of Agent; and (vii) do not require the consent or approval of any Governmental Authority or any other Person except those which will have been duly obtained, made or complied with prior to the Fourth Amendment Effective Date.

(b)           This Amendment has been duly executed and delivered by or on behalf of each of the Credit Parties.

(c)           This Amendment and the Amended Credit Agreement constitutes a legal, valid and binding obligation of each of the Credit Parties, enforceable against each of them in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, fraudulent conveyance or transfer or other laws affecting creditors’ rights generally or by equitable principals of general applicability.

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(d)           No Default or Event of Default has occurred and is continuing or would result after giving effect to the provisions of this Amendment.

(e)           No action, claim or proceeding is now pending or, to the knowledge of any Credit Party, threatened against such Credit Party, at law, in equity or otherwise, before any court, board, commission, agency or instrumentality of any foreign, federal, state, or local government or of any agency or subdivision thereof, or before any arbitrator or panel of arbitrators, which (i) challenges any Credit Party’s right or power to enter into or perform any of its obligations under this Amendment or any other Loan Document to which it is or will be, a party, or the validity or enforceability of this Amendment, the Amended Credit Agreement or any Loan Document or any action taken thereunder, or (ii) has a reasonable risk of being determined adversely to any Credit Party and that, if so determined, could reasonably be expected to have a Material Adverse Effect after giving effect to this Amendment.

(f)            The representations and warranties of the Credit Parties contained in the Amended Credit Agreement and each other Loan Document shall, after giving effect hereto, be true and correct on and as of (i) the date hereof, and (ii) the Fourth Amendment Effective Date, in each case, with the same effect as if such representations and warranties had been made on and as of such date, except that any such representation or warranty which is expressly made only as of a specified date need be true only as of such date.

8.             No Amendments/Waivers/Consents.  Except as expressly provided herein (a) the Credit Agreement and the other Loan Documents shall be unmodified and shall continue to be in full force and effect in accordance with their terms, (b) the consents and agreements of the Agent and Requisite Lenders set forth herein shall be limited strictly as written and shall not constitute a consent or agreement to any transaction not specifically described in connection with any such consent and/or agreement, and (c) this Amendment shall not be deemed a waiver of any term or condition of any Loan Document and shall not be deemed to prejudice any right or rights which Agent or any Lender may now have or may have in the future under or in connection with any Loan Document or any of the instruments or agreements referred to therein, as the same may be amended from time to time.

9.             Affirmation of Obligations.  Each of the Credit Parties hereby acknowledges, agrees and affirms (a) its obligations under the Credit Agreement and the other Loan Documents, including, without limitation, its guaranty obligations thereunder, (b) that such guaranty shall apply to the Obligations in accordance with the terms thereof, (c) the grant of the security interest in all of its assets pursuant to the Loan Documents and (d) that such liens and security interests created and granted are valid and continuing and secure the Obligations in accordance with the terms thereof.

10.           Outstanding Indebtedness; Waiver of Claims.  Each of Borrowers and the other Credit Parties hereby acknowledges and agrees that as of February 24, 2006, (a) the outstanding balance of the European Revolving Loan is $15,000,000, (b) the outstanding balance of the US Revolving Loan is $0, (c) the outstanding balance of the US Term Loan is $0, and (d) the outstanding balance of European Term Loan is $0.  Borrowers and each other Credit Party hereby waive, release, remise and forever discharge Agent, Lenders and each other Indemnified Person from any and all claims, suits, actions, investigations, proceedings or demands arising out

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of or in connection with the Credit Agreement (collectively, “Claims”), whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law of any kind or character, known or unknown, which any Borrower or any other Credit Party ever had, now has or might hereafter have against Agent or Lenders which relates, directly or indirectly, to any acts or omissions of Agent, Lenders or any other Indemnified Person on or prior to the Fourth Amendment Effective Date, provided, that no Borrower nor any other Credit Party waives any Claim solely to the extent such Claim relates to Agent’s or any Lender’s gross negligence or willful misconduct.

11.           Expenses.  Borrowers hereby reconfirm their obligations pursuant to Section 11.3 of the Credit Agreement to pay and reimburse Agent for all reasonable costs and expenses (including, without limitation, reasonable fees of counsel) incurred in connection with the negotiation, preparation, execution and delivery of this Amendment and all other documents and instruments delivered in connection herewith.

12.           Effectiveness.

(a)           Upon satisfaction in full in the judgment of Agent of each of the following conditions, this Amendment shall be deemed effective as of December 31, 2005 (the “Financial Covenant Effective Date”)

(i)         Amendment.  Agent shall have received four (4) original signature pages to this Amendment, duly executed and delivered by Agent, Requisite Lenders, and each of the Credit Parties.

(ii)        Payment of Expenses.  Borrowers shall have paid to Agent all costs, fees and expenses owing in connection with this Amendment and the other Loan Documents and due to Agent (including, without limitation, reasonable legal fees and expenses).

(iii)       Representations and Warranties.  The representations and warranties of or on behalf of each of the Credit Parties in this Amendment shall be true and correct on and as of the date hereof.

(b)           Upon satisfaction in full in the judgment of Agent of each of the conditions set forth in subsection (a) above and each of the following conditions, the consents of Requisite Lenders set forth in Section 3 of this Amendment shall be deemed effective as of February 27, 2006 (the “Fourth Amendment Effective Date”):

(i)         Representations and Warranties.  The representations and warranties of or on behalf of each of the Credit Parties in this Amendment shall be true and correct on and as of the date hereof and the Fourth Amendment Effective Date.

(ii)        Due Diligence.  Agent shall have completed its business and legal due diligence with respect to the intellectual property of Clondiag with results reasonably satisfactory to Agent.

(iii)       Borrowers shall have complied with Section 4(a), (h), (k) and (m) of this Amendment.

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13.           GOVERNING LAW.  THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

14.           Counterparts.  This Amendment may be executed by the parties hereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

[SIGNATURE PAGES FOLLOW]

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IN WITNESS WHEREOF, this Amendment has been duly executed as of the date first written above.

BORROWERS
WAMPOLE LABORATORIES, LLC
By:	/s/ Duane L. James
Name:		Duane L. James
Title:		Treasurer
INVERNESS MEDICAL (UK) HOLDINGS LIMITED
By:	/s/ David Scott
Name:		David Scott
Title:		Chairman

	AGENT AND LENDERS
	GENERAL ELECTRIC CAPITAL
	CORPORATION, as Agent and Lender
By:	/s/ Andrew Cosgrove
	Duly Authorized Signatory
	MERRILL LYNCH CAPITAL, a division of Merrill Lynch Business Financial Services Inc., as a Lender
By:	/s/ Illegible
	Duly Authorized Signatory
	UBS AG, CAYMAN ISLANDS BRANCH, as a Lender
By:	/s/ Richard L. Tavrow
	Duly Authorized Signatory
By:	/s/ Irja R. Otsa
	Duly Authorized Signatory

The following Persons are signatories to this Amendment in their capacity as Credit Parties and not as Borrowers.

APPLIED BIOTECH, INC.
ADVANTAGE DIAGNOSTICS       CORPORATION
FOREFRONT DIAGNOSTICS, INC.
INVERNESS MEDICAL INTERNATIONAL
HOLDING CORP.
INVERNESS MEDICAL INTERNATIONAL
HOLDING CORP. II
INVERNESS MEDICAL, INC.
INNOVATIONS RESEARCH, LLC
ISCHEMIA TECHNOLOGIES, INC.
IVC INDUSTRIES, INC.
ALPHA US ACQUISITION CORP.
OSTEX INTERNATIONAL, INC.
SELFCARE TECHNOLOGY, INC.
UNIPATH ONLINE, INC.
BINAX, INC.
INVERNESS MEDICAL — BIOSTAR INC.
By:	/s/ Duane L. James
Name:		Duane L. James
Title:		Treasurer, Treasurer, Treasurer, Treasurer,
		Treasurer, Treasurer, Treasurer, Treasurer,
		Treasurer, Treasurer, Treasurer, Treasurer,
		Treasurer, Vice President, Treasurer,
		respectively

CAMBRIDGE DIAGNOSTICS IRELAND    LIMITED
DMD, DIENSTLEISTUNGEN & VERTRIEB FÜR    MEDIZIN UND DIAGNOSTIK GMBH
INVERNESS MEDICAL CANADA, INC.
INVERNESS MEDICAL EURASIA LIMITED
INVERNESS MEDICAL FRANCE SAS
INVERNESS MEDICAL GERMANY GMBH
ORGENICS INTERNATIONAL HOLDINGS BV
SCANDINAVIAN MICRO BIODEVICES APS
STIRLING MEDICAL INNOVATIONS LIMITED
INVERNESS MEDICAL SWITZERLAND GMBH
UNIPATH DIAGNOSTICS GMBH
VIVA DIAGNOSTIKA - DIAGNOSTISCHE    PRODUKTE GMBH
INVERNESS MEDICAL JAPAN, LTD.
INVERNESS MEDICAL INNOVATIONS, INC.
INVERNESS MEDICAL IBERICA, S.A.
BOSWELL INVESTMENTS, S.L.
By:	/s/ Duane L. James
Name:		Duane L. James
Title:		Authorized Person, Authorized Person,
		Authorized Person, Authorized Person,
		Authorized Person, Authorized Person,
		Authorized Person, Authorized Person,
		Authorized Person, Authorized Person,
		Authorized Person, Authorized Person,
		Authorized Person, Treasurer, Authorized
		Person , Authorized Person, respectively
INVERNESS MEDICAL INVESTMENTS, LLC
By:	/s/ Jay McNamara
Name:		Jay McNamara
Title:		Assistant Secretary
INVERNESS MEDICAL CANADA, INC.
By:	/s/ Doug Shaffer
Name:		Doug Shaffer
Title:		President
UNIPATH LIMITED
By:	/s/ David Scott
Name:		David Scott
Title:		Chairman

Exhibit A

No Credit Party and, to the Credit Parties’ knowledge, no other Person party thereto is in default in the performance or compliance with any provisions of the Purchase Agreement.  The Purchase Agreement complies with, and the Clondiag Stock Purchase has been consummated in accordance with, all applicable laws.  The Purchase Agreement is in full force and effect as of the date hereof and has not been terminated, rescinded or withdrawn.  All requisite approvals by Governmental Authorities having jurisdiction over any Credit Party and other Persons referenced therein with respect to the consummation of the Clondiag Stock Purchase have been obtained, and no such approvals impose any conditions to the consummation of the Clondiag Stock Purchase or, other than as described in the Purchase Agreement, to the conduct by any Credit Party of its business thereafter.  To the best of each Credit Party’s knowledge, none of the Clondiag Chip Technologies GmbH’s representations or warranties in the Purchase Agreement contain any untrue statement of a material fact or omit any fact necessary to make the statements therein not misleading.  Each of the representations and warranties given by each applicable Credit Party in the Purchase Agreement is true and correct in all material respects, and, notwithstanding anything contained in the Purchase Agreement to the contrary, such representations and warranties of the Credit Parties are incorporated into the Credit Agreement by delivery of this certificate and shall, solely for purposes of the Credit Agreement and the benefit of Agent and Lenders, survive the consummation of the Clondiag Stock Purchase; provided that a breach by any of the Credit Parties of any such representations and warranties so incorporated and as to which a similar representation and warranty is not independently made in the Credit Agreement shall not constitute a breach of the Credit Agreement unless such breach causes any such representation and warranty to be materially inaccurate.

EX-10.37

Exhibit 10.37

LEASE BETWEEN

THERMO BIOSTAR, INC., A DELAWARE COPRORATION

AND

THE PARK AT CTC, LLC, A COLORADO LIMITED LIABILITY COMPANY

TABLE OF CONTENTS

SECTION 1	USE
SECTION 2	TERM
SECTION 3	COMPLETION OF PREMISES
SECTION 4	RENT
SECTION 5	TAXES AND OPERATING COST ADJUSTMENT FORMULA
SECTION 6	HOLDING OVER
SECTION 7	BUILDING SERVICES
SECTION 8	CONDITION OF PREMISES AND BUILDING
SECTION 9	USE OF LEASED PREMISES
SECTION 10	COMPLIANCE WITH LAW
SECTION 11	ALTERATIONS AND REPAIRS
SECTION 12	ABANDONMENT
SECTION 13	ASSIGNMENT AND SUBLETTING
SECTION 14	SIGNS AND ADVERTISING
SECTION 15	DAMAGE TO PROPERTY, INJURY TO PERSONS
SECTION 16	TENANT’S INSURANCE
SECTION 17	DAMAGE OR DESTRUCTION
SECTION 18	ENTRY BY LANDLOR
SECTION 19	DEFAULT
SECTION 20	TAXES
SECTION 21	EMINENT DOMAIN
SECTION 22	SUBORDINATION TO MORTGAGES AND DEEDS OF TRUST

SECTION 23	WAIVER
SECTION 24	SUBROGATION
SECTION 25	PLATS AND RIDERS
SECITON 26	SALE BY LANDLORD
SECTION 27	RIGHT OF LANDLORD TO PERFORM
SECTION 28	ATTORNEY’S FEES
SECTION 29	ESTOPPEL CERTIFICATE
SECTION 30	NOTICE
SECTION 31	RIGHTS RESERVED
SECTION 32	REAL ESTATE BROKER
SECTION 33	MISCELLANEOUS PROVISIONS
SECTION 34	SUCCESSORS AND ASSIGNS
SECTION 35	QUIET ENJOYMENT
SECTION 36	RECORDING
SECTION 37	RELIANCE BY LANDLORD
SECITON 38	OPTION TO EXTEND
SECTION 39	SECURITY DEPOSIT
SECTION 40	REFERENCE TO RIDER
EXHIBIT A	COMMENCEMENT DATE AGREEMENT
EXHIBIT B-1	SITE PLAN
EXHIBIT B-2	INITIAL PREMISES & CONTIGUOUS PREMISES

EXHIBIT B-3	PLANS AND DRAWINGS
EXHIBIT C	BASE BUILDING CONDITIONS
EXHIBIT D	PROJECT SCHEDULE
EXHIBIT E	WORK LETTER
EXHIBIT F	GUARANTY

LEASE

THIS LEASE made this 25th day of June, 2001 (“Effective Date”), between Thermo BioStar, Inc., a Delaware corporation (“Tenant”), and The Park at CTC, LLC, a Colorado limited liability company (“Landlord”).

WITNESSETH:

DEMISE

Landlord hereby leases to Tenant and Tenant herby lessees from Landlord approximately 75,000 rentable square feet (the “Premises” or, alternative, the “Leased Premises”) to be located with that certain building to be constructed by Landlord, comprised of a total of approximately 105,000 rentable square feet as depicted on the site plan (“Site Plan”) attached as Exhibit B-1 hereto and made a part hereof, more commonly known as 331 South 104^th Ave., Louisville, CO 80027 (the “Building”). The Building will be situated on land described as Lots 3 & 4, block 3, The Park at CTC, City of Louisville, County of Boulder, State of Colorado (the “Property”). Landlord also grants to Tenant a non-exclusive right, subject to the provisions of this Lease, to use all appurtenances to the Property, including, but not limited to, any plazas, common areas, walks, parking areas, driveways, or other areas in the Building or on the Property designated by Landlord for the exclusive or non-exclusive use of the tenants of the Building.

On the Initial Premises Commencement Date (as defined in Section 2), the Premises will be comprised of approximately 60,000 rentable square feet (the “Initial Premises”), as shown on Exhibit B-2 attached hereto and made a part hereof. From and after the Contiguous Premises Commencement Date (as defined in Section 2), the Premises shall also include approximately 15,000 rentable square feet within the area which is cross-hatched on Exhibit B-2 (the “Contiguous Premises” or “Contiguous Space”). Landlord acknowledges and agrees that Tenant has not yet designated the exact area which is to comprise the Contiguous Space, and that Tenant shall have the right to designate which portion of the area shown as cross-hatched on Exhibit B-2 shall comprise the Contiguous Space by providing such designation to Landlord in writing no later than January 1, 2002. Until Tenant provides such written designation to Landlord, all portions which are designated as the Contiguous Space on the attached Exhibit B-2 (i.e., all portions which are cross-hatched) shall be included within any obligations of Landlord hereunder. Without limiting the foregoing, Section 3.4 shall apply to all areas which are shown as cross-hatched on Exhibit B-2.

Landlord has estimated the Rentable Square Fee (RSF) and Useable Square Feet (USF) as used in its Lease in good faith pursuant to building and site plans for the Property. Upon issuance of a Temporary Certificate of Occupancy for the Initial Premises, Landlord shall have the Building and the Premises measured at Landlord’s cost, and any changes to rentable square footage calculations shall be confirmed in Exhibit A, Lease Commencement Agreement, attached hereto and made a part hereof, subject to approval by Landlord and Tenant, and such calculations shall be the final calculations for the size of the Building and Premises. The measurement of the Building and Premises shall be in accordance with the standards of the Building Owners and Managers Association (BOMA), or other such industry standards as may be approved by Landlord and Tenant. It is also understood and agreed that there shall be no load factor or common area factor applied to the Premises (i.e., RSF = USF for the purposes of this Lease).

The Lease is upon and subject to the terms, conditions, and covenants set forth below and Landlord and Tenant covenant as a material part of the consideration for this Lease to keep and perform each and all of the terms, conditions, and covenants by it to be kept and performed and that this Lease is made upon the condition of such performance.

SECTION 1

USE

1.01Use of Premises. Tenant shall have the right to use the Premises for administrative offices, laboratory, research and development, operations, manufacturing, and uses incidental thereto, and for any other purpose allowed by law, provided that such uses comply with all zoning restrictions.

Landlord hereby represents and warrants that the Building and the Property comply with office/industrial zoning regulations in the Colorado Tech Center in Louisville, Colorado.

SECTION 2

TERM

2.01Term. The term (“Term”) of this Lease shall commence on the Initial Premises Commencement Date (as defined below) and shall expire on April 30, 2009 (“Expiration Date”).

2.02Commencement Date for Initial Premises. The commencement date of the Term with respect to the Initial Premises (“Initial Premises Commencement Date”) shall be on the date that is the later to occur of the following:  (i) the effective date of a Temporary Certificate of Occupancy of the Initial Premises, provided (a) Landlord has substantially completed the Base Building Conditions (as defined below), (b) Landlord has substantially completed the Tenant Improvements (as defined in the Work Letter attached as Exhibit E hereto and made a part hereof (“Work Letter”)), (c) all items required for a permanent Certificate of Occupancy are completed by landlord in a reasonable amount of time and said items do not materially impact Tenant’s occupancy, use, and enjoyment of the Building, Initial Premises or Property all as reasonably determined by Tenant, and (d) Tenant is able to commence its intended business operations within the Initial Premises, subject only to installation by Tenant of its personal property, or (ii) April 15, 2002.

(a)Damages for Delay. In the event the Initial Premises Commencement Date has not occurred on or before April 19, 2002 then, except as otherwise provided herein, from and after the Initial Premises Commencement Date, Tenant shall receive an abatement of Rent (as defined in Section 4.02) for the number of days equal to the number of days between April 19, 2002 and the Initial Premises Commencement Date. By way of example, if the Initial Premises Commencement Date occurs on April 25, 2002, then Tenant shall receive an abatement of Rent until May 1, 2002. The parties hereby agree that the amount of any rental abatement which Tenant shall receive pursuant to this section is a reasonable  estimation of costs and damages which will be incurred by Tenant in the event that the Initial Premises Commencement date has not occurred by April 19, 2002.

(b)Termination Right. Notwithstanding any provision of this Lease to the contrary, if the Initial Premises Commencement Date has not occurred on or before July 15, 2002 for any reason, then Tenant shall have the right to terminate this Lease by providing written notice to Landlord at no penalty or cots to Tenant. Upon Landlord’s receipt of Tenant’s notice, this Lease shall terminate, and Landlord shall promptly return to Tenant any sums previously deposited with Landlord.

(c)Tenant Delay. Should Tenant, through  the actions of Tenant, Tenant’s employees, agents, contractors, subcontractors, guests, licensees, or invitees, impede or delay Landlord’s completion of the Base Building or the Tenant Improvements (each, a “Tenant Delay”), then the Initial Premises Commencement Date shall be the date that the same would have occurred but for the Tenant Delay. If Landlord has a reasonable basis to believe there is a condition constituting a Tenant Delay, Landlord shall promptly provide written notice to Tenant setting forth in detail the basis for such belief, and any reasonable actions which Landlord believes should be taken by Tenant in order to cure the condition. If Tenant reasonably concurs with Landlord, then Tenant shall promptly perform the actions contained in Landlord’s notice. Tenant shall be given an opportunity to cure any alleged delay in Landlord’s construction of the Base building or Tenant Improvements. No action of failure to act by Tenant shall constitute a Tenant Delay as defined herein unless Landlord has provided the written notice as set forth above, and (i) Tenant has failed to perform any obligation within the time period specified in the Project Schedule (as defined below) or (ii) if no time period is specified in the Project Schedule for the relevant action item, then within ten (10) business days from written notice from Landlord detailing the action required of Tenant together with any documentation necessary to enable Tenant to perform the same.

(d)City Delay. If the Initial Premises Commencement Date is impeded or delayed due to a failure of the City of Louisville (the “City”) to act within the estimated timeframes set forth in the construction schedule (“Project Schedule”) attached as Exhibit D hereto and made a part hereof (each a “City Delay”), then the length in days of such City Delay shall be deducted from the number of days of any rental abatement which Tenant is otherwise entitled to under Section 2.02(a) hereof. By way of example, if there is a City Delay equal to three (3) days, and the Initial Premises Commencement Date occurs on April 25, 2002, then Tenant shall be entitled to an abatement of Rent pursuant to Section 2.03(a) until April 28, 2002 (i.e., abatement for six days for each day after April 19, 2002 that the Initial Premises

Commencement Date did not occur, reduced by three days for the City Delay). If Landlord has  a reasonable basis to believe there is a condition constituting a City Delay, Landlord shall promptly provide written notice to Tenant setting forth in detail the basis for such belief and evidence of Landlord’s efforts to compel the City to perform its duties within the time periods set forth in the Project Schedule. If Landlord has failed to submit to the City any plans or other documentation necessitated by the City within the time periods set forth in the Project Schedule, then Landlord shall not be entitled to claim there has been a City Delay. No City Delay shall have occurred as defined herein unless Tenant reasonably agrees in writing with the explanation and length of the alleged City Delay set forth in Landlord’s notice. If Tenant disagrees with Landlord’s notice of an alleged City Delay then Tenant shall use reasonable efforts to specify in writing the basis for such disagreement within ten (10) days of receipt of Landlord’s notice, and in any event, Tenant shall specify in writing the specific basis for any such disagreement within forty (40) days after receipt of Landlord’s notice. Notwithstanding the foregoing, if Tenant fails to respond to Landlords’ notice of an alleged City Delay within ten (10) business days of receipt of such notice stating whether or not Tenant agrees or disagrees as to the existence of any alleged City Delay, then Tenant shall be deemed to concur with Landlord’s notice.

(e)Early Occupancy. Tenant shall have the right to occupy the Initial Premises for thirty (30) days prior to the Initial Premises Commencement Date (“Initial Premises Early Occupancy Period”) for the purpose of installing its equipment, furniture and other personal property, and communications wiring. Landlord shall notify Tenant ion writing of the anticipated Initial Premises Commencement Date within sixty (60) days from such estimated date. During the Initial Premises Early Occupancy Period, Tenant shall have the right to occupy the Initial Premises without the obligation to pay Rent, but subject to all other terms and provisions of this Lease. Tenant agrees to reasonably cooperate with Landlord’s construction manager so as to not unreasonably interfere with the completion of the Tenant Improvements or the Base Building during the Initial Premises Early Occupancy Period. If Landlord reasonably believes that Tenant’s activities during the Early Occupancy Period are interfering with Landlord’s construction of the Base Building or the Tenant Improvements, then Landlord shall promptly notify Tenant thereof, and Tenant shall immediately adjust its activities within the Initial Premises to accommodate Landlord’s performance of the Tenant Improvements or Base Building, as applicable. If Tenant complies with this section, then in no event shall Tenant’s occupancy of the Initial Premises be deemed a Tenant Delay as defined in Section 2.02(c).

2.03Contiguous Space. In the event that Tenant has elected for Landlord to perform the Tenant Improvements within the Contiguous Space, then the commencement date of the Term with respect to the Contiguous Space shall be the later to occur of: (i) the date that Landlord delivers the Contiguous Space to tenant in a good and broom-clean condition with the Tenant Improvements for the Contiguous Space substantially completed in conformance with the Work Letter, or (ii) April 15, 2004 (“Contiguous Space Commencement Date”). Notwithstanding the forgoing, if Tenant elects to construct the Tenant Improvements as provided in Section 3.02, then the Contiguous Space Commencement Date shall be the later to occur of: (i) the date  that Landlord delivers the Contiguous Space in a good and broom-clean condition to Tenant, or (ii) March 1, 2004. If Tenant has elected to perform the Tenant Improvements for the Contiguous Space as provided in Section 3.02, then Tenant shall have the right to occupy the Contiguous Space for forty-five (45) days after the Contiguous Space Commencement Date without the obligation to pay Rent, but subject to all other terms and provisions of this Lease.

(a)Damages for Delay. In the event Tenant has elected that Landlord is to perform the Tenant Improvements in the Contiguous Space, and the Contiguous Space Commencement Date has not occurred on or before April 15, 2004, then from and after the Contiguous Space Commencement Date, Tenant shall receive an abatement of Rent attributable to the Contiguous Space for the number of days equal to the number of days between April 15, 2004 and the Contiguous Space Commencement Date. By way of example, if the Contiguous Space Commencement Date occurs on April 20, 2004, then Tenant shall receive an abatement of Rent until April 25, 2004. The parties hereby agree that the amount of any rental abatement which Tenant shall receive pursuant to this section is a reasonable estimation of costs and damages which will be incurred by Tenant in the event that Contiguous Space Commencement Date has not occurred by April 15, 2004 where Landlord is to perform the Tenant Improvements. In the alternative, if Tenant has elected to perform the Tenant improvements in the Contiguous Space, and the Contiguous Space Commencement Date has not occurred on or before March 1, 2004, then from and after the date that is forty-five (45) days after the Contiguous Space Commencement Date, Tenant shall receive an abatement of Rent attributable to the Contiguous Space for the number of days equal to the number of days between March 1, 2004 and the Contiguous Space Commencement Date. By way of example, if the Contiguous Space Commencement Date occurs on March 5, 2004, then Tenant shall receive an abatement of Rent until April 23, 2004 (i.e., forty-five days after the Contiguous Space Commencement Date plus four days for

each day after March 1, 2004 that the Contiguous Space Commencement Date has not occurred). The parties hereby agree that the amount of any rental abatement which Tenant shall receive pursuant to this section is a reasonable estimation of costs and damages which will be incurred by Tenant in the event that the Contiguous Space Commencement Date has not occurred by March 1, 2004 where Tenant is to perform the Tenant Improvements within the Contiguous Space.

(b)Termination Right. Notwithstanding any provision of this Lease to the contrary, if the Contiguous Space Commencement Date has not occurred on or before August 1, 2004 for any reason, then Tenant shall have the right to terminate its obligation to lease the Contiguous Space by providing written notice thereof to Landlord. Upon Landlord’s receipt of Tenant’s notice, Tenant’s obligation to lease the Contiguous Space shall terminate and be of no further force or effect. Landlord hereby acknowledges that its failure to deliver the Contiguous Space to Tenant as provided herein shall cause Tenant to incur damages, including costs and expenses associated with leasing a new facility comparable to the Contiguous Space. Therefore, if Tenant elects to terminate its obligation to lease the Contiguous Space as provided herein, then Landlord shall promptly pay to Tenant upon demand all costs incurred by Tenant in leasing and moving to an alternative space rather than the Contiguous Space, including, without limitation, brokers’ fees, reasonable attorneys’ fees, and any differential between the Base Rent for the Contiguous Space and the rental amount for the alternative space. The parties acknowledge and agree that such sums represent a reasonable estimation of Tenant’s damages due to Landlord’s failure to perform hereunder.

SECTION 3

COMPLETION OF THE PREMISES

3.01Base Building. Landlord shall complete all of the base building conditions (“Base Building Conditions”) described in Exhibit C attached hereto and made apart hereof on or before April 15, 2002. Landlord shall complete the remainder of the Building shell and all site improvements for the Property in conformance with the plans and drawings attached as Exhibit B-3 hereto and made a part hereof (“Site Improvements”) on or before July 1, 2002. The Base Building Conditions and Site Improvements are collectively defined herein as the “Base Building”. Landlord shall perform all work in connection with the Base Building in a good and workmanlike manner. In the event that Landlord has failed to substantially complete the Site Improvements by July 1, 2002, then Tenant shall receive an abatement of Rent until the date the Site improvements are substantially completed. Notwithstanding the provisions of this Lease regarding City Delay and other matters requiring City of Louisville approval, Landlord and Tenant acknowledge that the Colorado Tech Center General Improvement District (CTCGID), which the Building is included within, is required to install an upgraded lift station (“Lift Station”) for the purpose of pumping waste water/sewage away from the Property, prior to issuance of a Certificate of Occupancy by the City of Louisville. In the event the Lift Station is not under construction as of November 15, 2001, Landlord, at its sole cost, shall construct its own waste removal system on the Property (“Ejection System”) in order to obtain final approval – and, at a minimum, issuance of a Temporary Certificate of Occupancy from the City of Louisville in order to meet the Project Schedule (Exhibit D) and the planned occupancy date as otherwise described in this Lease. In the event the Initial Premises Commencement Date has not occurred on or before April 19, 2002 as a result of the failure to obtain a Temporary Certificate of Occupancy due to the lack of approval, construction, and/or completion of the Lift Station or the Ejection System as the case may be, then from and after the Initial Premises Commencement Date, Tenant shall receive two (2) days of abatement of Rent (as defined in Section 4.02) for the number of days equal to the number of days between April 19, 2002 and the Initial Premises Commencement Date. By way of example, if the Initial Premises Commencement Date occurs on April 25, 2002, then Tenant shall receive an abatement of Rent until May 7, 2002. The parties hereby agree that the amount of any rental abatement which Tenant shall receive pursuant to this section is a reasonable estimation of costs and damages which will be incurred by Tenant in the event that the Initial Premises Commencement Date has not occurred by April 91, 2002 as a result of the failure to complete the Lift Station or Ejection System. Notwithstanding any other provision of this Lease to the contrary, in no event shall any period of time related to processing governmental approvals of the Lift Station or Ejection System be categorized as a City Delay.

3.02Tenant Improvements. Landlord shall construct the Tenant Improvements in the Initial Premises in a good and workmanlike manner in conformance with the Work Letter. Tenant shall have the right to either (i) require Landlord to perform the Tenant Improvements in the Contiguous Space in which event the terms and provisions of the Work Letter shall apply to the performance of the same except that dates shall be adjusted per diem to reflect the dates then in effect for the Contiguous Space, or (ii) elect to perform the Tenant Improvements directly.

3.03Improvement Allowance. Landlord shall pay an improvement allowance (“Improvement Allowance”) totaling $35.10 per rentable square foot of the Premises. Upon mutual execution of this Lease, that portion of the Improvement Allowance based on the 60,000 rentable square feet of the Initial Premises (“Initial Premises Improvement Allowance”) shall be immediately available for use in the payment of the Tenant Improvements in the Initial Premises in conformance with the Work Letter. That portion of the Improvement Allowance based on the 15,000 rentable square feet of the Contiguous Space (“Contiguous Space Improvement Allowance”) shall be available for use in the payment of the Tenant Improvements in the Contiguous Space: (i) immediately if used in conformance with Section 3.04 hereof, (ii) in conformance with the timing (as adjusted per Section 3.02) set forth in the Work Letter if Tenant elects to require Landlord to construct the Tenant Improvements in the Contiguous Space, or (iii) upon the Contiguous Space Commencement Date as a direct payment to the Tenant as such costs are incurred by Tenant if Tenant elects to construct the Tenant Improvements in the Contiguous Space. The Improvement Allowance shall be in addition to work completed at Landlord’s cost for construction of the Base Building. There shall be no construction management and/or bonding fees charged against the Improvement Allowance on behalf of Landlord or Landlord’s employees, agents, or contractors. The Improvement Allowance includes programming, space planning, construction documentation, engineering, construction, change orders, cabling, consultants, project management, and other construction related costs. Tenant has engage CRESA Partners (“CRESA”) for project management for construction of the Tennant Improvements. CRESA’s fee will be paid from the Improvement Allowance, or is to be paid by Tenant, at Tenant’s discretion. Tenant retains the right to engage other consultants, architects, engineers, contractors, and vendors at its discretion, the cost of which, if within the above guidelines, may be deducted form the Improvement Allowance or paid separately by Tenant, in Tenant’s sole discretion.

3.04Lease of Contiguous Space to Third Party Tenants. Landlord shall have the right to lease the Contiguous Space to third party tenant(s) until February 28, 2004. While the Contiguous Space is leased to third parties it shall be separately demised from the Initial Premises and shall be accessible only by an entrance or entrances separate from the Initial Premises. Landlord shall implement reasonable safety precautions to insure that any tenants of the Contiguous Space have no right to access to the Initial Premises. Prior to entering into any lease agreement with any proposed tenant(s) of the Contiguous Space, Landlord shall obtain Tenant’s prior written consent to the layout, plans and proposed use for such tenant(s), which consent shall not be unreasonably conditioned, withheld or delayed. Landlord shall not lease any portion of the Contiguous Space to tenant(s) who are direct competitors of Tenant, or to entities whose use or occupancy may negatively impact the use of enjoyment of the Premises by Tenant, in Tenant’s reasonable discretion. Landlord shall not enter into any lease agreement with respect to the Contiguous Space with any third party tenant(s) where the term thereof expires on the date later than February 28, 2004.

(a)Tenant Improvements in Contiguous Space. Tenant agrees to allocate a portion of the Contiguous Space Improvement Allowance for tenant improvements within the Contiguous Space for third party tenants, subject to the terms and conditions of this section. Landlord shall submit all space plans and cost estimates for tenant improvements within the Contiguous Space for third party tenants to Tenant for Tenant’s prior review and approval. Tenant shall have the right to disapprove in its sole discretion any such improvements and any expenditure from the Contiguous Space Improvement Allowance where such improvements and/or design needs of Tenant for the Contiguous Space. All other costs associated with any lease by Landlord and/or use by third parties of the Contiguous Space, including but not limited to the cost of demising the Building for such purposes, construction of any common areas required for multi-tenant use (hallways, access, egress, bathrooms, etc.), improvements installed for such third parties and/or created for use and purposes, construction and/or demolition of improvements required within the Building or the Premises resulting from the design and construction of the Building and/or the Premises to accommodate Landlord and/or such intended third parties, and demolition and construction required to cause the Building, Premises, or Contiguous Space to be brought back to the condition and layout previously approved by Tenant in preparation for Tenant Improvements for Tenant within the Contiguous Space, shall be the sole cost, expense and obligation of Landlord.

SECTION 4

RENT

4.01Base Rent. Tenant agrees to pay Landlord Base Rent, applicable to the phased occupancy of the Premises, on a monthly basis according to the following rent schedule:

Month	Base Rent/RSF/YEAR
Initial Premises Commencement Date - Month 12	$	12.95
Mo. 13 – Mo 24	$	13.30
Mo. 25 – Mo. 36	$	13.92
Mo. 37 – Mo. 48	$	14.17
Mo. 49 – Mo. 60	$	14.50
Mo. 61 – Mo 72	$	16.28
Mo. 73 – Expiration Date	$	16.85

On or prior to the Initial Premises Commencement Date, Tenant shall pay Base Rent and estimated Operating Expenses for the first month of the Term.

4.02No Offsets. Except as otherwise provided herein, the Base Rent, Tenant’s Proportional Share of Taxes and Operating Costs, and all other sums or charges required by this Lease to be paid by Tenant to Landlord (all of which are sometimes collectively referred to herein as “Rent”) shall be paid to Landlord without deduction or offset, in lawful money of the United States of America, at the office of O’Connor Development 6685 Gunpark Drive, Suite 210, Boulder, Colorado 80301 or to such other person or at such other place as Landlord may from time to time designate in writing.

4.03Interest on Late payments. Any Rent or other amount due from Tenant to Landlord under this Lease not paid within five (5) days of when due shall bear interest from the date due, computed on a daily basis, until the date paid, at the rate of one and one-half percent  (1 ½%) per month until paid, but the payment of the interest shall not excuse nor cure any default by Tenant under this lease.

4.04Late Payment Charge. Further, and notwithstanding the interest charges provided for in the preceding subsection 4.03, if any Rent or other amounts owing hereunder are not paid within five (5) days of when due, Landlord and Tenant agree that Landlord will incur additional administrative and financial expenses and inconveniences, the amount of which will be difficult if not impossible to determine. Accordingly, Tenant shall pay to Landlord an additional one-time late charge for any late monthly payment in the amount of five percent (5%) of the amount of the payment; provided, however, that no one-time late charge shall apply until after ten (10) days written notice by Landlord delivered to Tenant pursuant to the notice provisions in Section 30 herein.

SECTION 5

TAXES AND OPERATING COST ADJUSTMENT FORMULA

5.01Taxes. The Rent payable by Tenant shall be increased by the amount of Tenant’s Proportional Share of the Taxes on the Property. “Tenant’s Proportional Share” as used in this Lease shall be calculated by dividing the number of rentable square feet of the Premises then occupied by Tenant by the number of rentable square feet of the Building. For example, on the Initial Premises Commencement Date, Tenant’s Proportional Share shall be approximately 57.14%, and on the Contiguous Space Commencement Date, Tenant’s Proportional Share shall be approximately 71.4%. In determining the amount of Taxes for any calendar year, the amount of special assessments to be included shall be limited to the amount of the installment (plus any interest payable thereon) of such special assessment which would have been required to have been paid during such calendar year if Landlord had elected to have the special assessment paid over the maximum period of time permitted by law, if the election is available to Landlord. All reference to Taxes “for” and “billed for” a particular calendar year shall be deemed to refer to Taxes levied, assessed, billed or otherwise imposed for such calendar year, without regard to the dates when any such Taxes are due and payable. Landlord’s good faith estimate of Taxes for the calendar year ending December 31, 2002 is $1.50/RSF based on the projected 2001 tax payment (2000 assessment year) for improved, like properties in the Colorado Tech Center. Tenant acknowledges, however, that in 2001 property valuations will be reassessed by Boulder County, which will increase property taxes.

(a)Definition. As used in this Lease, the term “Taxes” means any and all general and special taxes and impositions levied, assessed, or imposed upon, or with respect to, the Premises, any leasehold improvements, fixtures, installations, additions and equipment, whether owned by Landlord or Tenant, or either because of or in connection with Landlord’s ownership, Leasing and operation of the Building and the Property, including, without limitation, real estate taxes, personal property taxes for property used in connection with, and to the extent used on behalf of, the Property, general or special assessments, and duties or levies charged or levied upon or assessed against the Building and the Property

and personal property, or any tax or excise on rent or any other tax (however described) on account of rental received for use and occupancy of any or all of the Building and the Property, whether any such taxes are imposed by the United States, the State of Colorado, the County of Boulder, or any local governmental municipality, authority, or agency or any political subdivision. Taxes shall not include any net income, capital stock, succession, transfer, franchise, gift, estate or inheritance taxes.

(b)Payment. Commencing with the Initial Premises Commencement Date, Tenant shall pay to Landlord on the first day of each calendar month until the next upward adjustment date (which period between adjustment dates is herein called a “Tax Deposit Year”) one-twelfth of the estimated amount of the Taxes. Landlord shall estimate such amount prior to the beginning of each calendar year, and may adjust its estimate no more than one time per calendar year. No later than April 15 of each year, the amounts paid under this Subsection 5.01(b) in any Tax Deposit Year shall be reconciled with amounts actually billed to Landlord for the same Tax Deposit Year, and provided there is any surplus remaining after the credit to Tenant and provided that there is no uncured event of Tenant default beyond applicable notice and cure periods under any of the provisions of this lease, Landlord shall, at Landlord’s option, either refund the amount of the surplus to Tenant within thirty (30) days following the end of the Tax Deposit Year or apply the surplus amount against any other amounts then due, or future amounts due, from Tenant to Landlord. If upon the reconciliation there is any deficiency in the amount of Taxes paid by Tenant, Landlord shall bill Tenant and Tenant shall pay the additional amount within thirty (30) days after receipt of Landlord’s statement. Any amount of surplus or deficiency due at the expiration or earlier termination of this lease, shall be paid by the owing party to the other within thirty (30) days after such expiration/termination.

5.02(a) Inclusion in Operating Costs. Tenant shall pay Tenant’s Proportional Share of the Operating Costs for the Property. Landlord’s good faith estimate of Operating Costs as of November 15, 2000 is $.90 per rentable square foot of the Premises. As used in this lease, the term “Operating Costs” means any and all expenses, costs and disbursements (other than Taxes and those items excluded under section 5.02 (b) hereof), which are paid or accrued by Landlord in connection with the management, maintenance, operation or repair of the Building, including, without limitation:

(i)Costs of supplies;

(ii)Costs incurred in connection with obtaining and providing energy for the Building, including, but not limited to, costs of propane, butane, natural gas, steam, electricity, fuel oils, coal or any other energy sources, except if separately metered to the Leased Premises, in which case Tenant shall pay 100% of its metered amount;

(iii)Costs of water and sanitary sewer and storm drainage services;

(iv)Costs of general maintenance and repairs, including costs of repairing heating, ventilation and air conditioning systems and the cost of exterior building and roof maintenance and repairs;

(v)Cost of insurance;

(vi)Costs of maintenance and reasonable replacement of landscaping; and

(vii)Costs for professional management of the Property not to exceed 6% of Base Rent or the then current market management fee for like buildings in the area, whichever is less.

(b)Exclusion from Operating Costs. Notwithstanding the foregoing “Operating Costs” shall not include:

(i)Costs of repairs or other work occasioned by fire, windstorm or other insured casualty to the extent of insurance proceeds received;

(ii)Leasing commissions, advertising, advertising expenses, and other costs incurred in leasing space in the Building or other properties of Landlord;

(iii)Costs of repairs or building necessitated by condemnation;

(iv)Any interest on borrowed money or debt amortization, except as specifically set forth above;

(v)Depreciation on the Building;

(vi)Any settlement, payment or judgment incurred by Landlord or the Building manager due to the negligence or willful misconduct of Landlord, its employees, agents, or contractors;

(vii)Cost of any damage to the Building caused directly by the negligence or willful misconduct of Landlord, its employees, agents, or contractors;

(viii)Cost of structural repairs or reconstruction of any portion of the Building;

(ix)Costs of providing utility lines to the Building other than the utilities and services to be provided by Landlord pursuant to this Lease, or of repairing such lines if they break (but not if they are plugged by Tenant’s usage );

(x)Ground lease and debt service payment(s);

(xi)The cost of items which would, in accordance with generally accepted accounting principles (GAAP), be capitalized;

(xii)The cost of tenant improvements;

(xiii)The cost of repairing defects in construction workmanship or materials;

(xiv)Items for which the Landlord is reimbursed by insurance or otherwise;

(xv)Accounting, legal, or other professional fees related to new leases or disputes with current or past tenants;

(xvi)Leasing or brokerage commissions;

(xvii)Costs associated with replacement or material repairs of base building structure or systems, including but not limited to the foundation, structural components, roof, mechanical, electrical and plumbing systems, unless due to specific acts or omissions of Tenant;

(xviii)The cost of services exceeding the then current market costs for such services; and

(xix)All alterations, improvements, or additions and other capital expenditures for the Property.

(c)Warranties. Tenant shall be entitled to reimbursement for any amounts collected by Landlord under any manufacturer’s warranty on any systems or machinery used in the Building; provided that Tenant has previously paid to Landlord the repair expense relating to Landlord’s warranty claim.

(d)Payment. Beginning on the Initial Premises Commencement Date, Landlord shall supply Tenant with written notice of Landlord’s estimate of the Operating Costs that will be incurred or accrued during the current calendar year (the “Deposit Year”). On or before the first day of each month during such Deposit Year, Tenant shall pay to Landlord one-twelfth of Tenant’s Proportional Share of the estimated amount. For each subsequent Deposit Year, if the monthly deposit amount is not determined in time for Tenant to make the first payment on January 1 of the relevant Deposit Year, then the first monthly payment shall be due on the first day of the month immediately following the date Landlord supplies Tenant with notice of the amount. Landlord shall provide to Tenant the estimated amount prior to March 31 of such Deposit Year, and the first monthly payment(s) shall also include a payment equal to one-twelfth of such additional sum multiplied by the number of calendar months which have elapsed during the Deposit Year prior to the date Tenant makes its first payment, not to exceed three months of such additional sum. Landlord may adjust its estimate of Operating Costs no more than one time per calendar year. No later than April 15 of each year, the amounts paid under this Subsection 5.02 in any Deposit Year shall be reconciled with amounts actually billed to Landlord for the same Deposit Year, and provided there is any surplus remaining after the credit to Tenant and provided that there is no uncured event of Tenant default beyond

any applicable cure period under any of the provisions of this Lease, Landlord shall apply the surplus amount against any other amounts then due, or future amounts due, from Tenant to Landlord. If upon the reconciliation there is any deficiency in the amount of Operating Costs paid by Tenant, Landlord shall bill Tenant and Tenant shall pay the additional amount within thirty (30) days of receipt of Landlord’s statement. Any amount of surplus or deficiency due at the expiration or earlier termination of this Lease, shall be paid by the owing party to the other within thirty (30) days after such expiration/termination.

5.03Audit and Adjustment Procedures.

(a)The annual determination and statement of Taxes and Operating Costs shall be prepared by Landlord no later than April 15 of each year, in accordance with generally accepted accounting principles. In the event of any dispute as to any Rent due under this Lease, Tenant shall have the right to inspect Landlord’s accounting records, within two years of the applicable Deposit Year, relative to Taxes and Operating Costs at the office in which Landlord maintains its records in the Denver/Boulder metropolitan area, currently located at 6685 Gunpark Drive, Suite 210, in Boulder Colorado, during normal business hours at any time following the furnishing by Landlord to Tenant of the statement, and Landlord will cooperate in good faith for such examination/audit. If it is discovered that Tenant has been invoiced or has otherwise paid an amount in excess of Tenant’s Proportional Share of allowable Taxes and Operating Costs, Tenant shall deliver to Landlord copies of applicable audits, reports or other results from it examination, Landlord will pay to Tenant such excess amount within thirty (30) days after receipt of Tenant’s statement, and will modify applicable future Tax and Operating Cost charges. If Landlord has any objection or dispute with Tenant’s statement, Landlord shall provide written notice thereof to Tenant within thirty (30) days after receipt of Tenant’s statement, indicating in reasonable detail the particular objections or disputes made by Landlord. If any error or miscalculation discovered through Tenant’s examination is equal to or greater than five percent (5.0%) of the sum of Taxes and Operating Costs initially invoiced to and paid by Tenant, Landlord shall pay the reasonable cost of Tenant’s examination/audit. Notwithstanding the foregoing, there shall be no time limitations regarding payment to Tenant by Landlord for any material errors in the calculation, billing, or Tenant’s payment of Taxes or Operating Costs.

(b)If the Term of this Lease commences on any day other than the 1st day of a calendar year, or if the Term of this Lease ends on any day other than the last day of the last month of the term, any payment due to Landlord by reason of an increase in Taxes or Operating Costs shall be prorated on the basis by which the number of days in such partial year bears to 365.

SECTION 6

HOLDING OVER

6.01Rent Increase. Should Tenant hold over after the termination of this Lease, whether the termination occurs by lapse of time or otherwise, Tenant shall become a tenant from month to month upon each and all of the terms herein provided as may be applicable to such a tenancy, and any such tenancy shall not constitute an extension of this Lease; provided, however, during the period as a tenant from month to month, Tenant shall pay Base Rent at one hundred twenty five percent (125%) of the rate payable immediately preceding the date of termination of this Lease for the first six (6) months of such Hold Over period, and shall pay Base Rent at one hundred forty percent (140%) of the rate payable immediately preceding the date of termination of this Lease for any remainder of the Hold Over period. The provisions of this paragraph shall not exclude nor waive Landlord’s right of re-entry or any other right hereunder.

SECTION 7

BUILDING SERVICES

Landlord shall provide, as described below and as described in the Base Building Conditions, at its cost except as may be passed through to Tenant as an allowable component of Operating Costs, the

following services throughout the Term of the Lease (each, a “Building Service” and collectively, the “Building Services”):

(a)maintenance of the site, Building, parking lots, landscaping, and other components of the Property;

(b)installation and maintenance of landscaping;

(c)Utilities and other services, including but not limited to hot and cold running water, sewer and other related plumbing services, electricity, gas, and other sources of power acceptable to Tenant, delivered and installed at central point(s) and other locations acceptable to Tenant within the Building;

(d)Conduit for services such as telecommunications, data, and other services requiring wiring/conduit, such actual services to be provided by third party vendors;

(e)Heating, ventilation, and air conditioning for consistent and comfortable use of the Premises by Tenant;

(f)Passenger elevator services if the Building is greater than one floor. Tenant may utilize passenger elevators for freight unless a freight elevator is installed and designated by Landlord;

(g)Snow removal;

(h)Janitorial services for cleaning of the Premises, on each day other than weekends and standard business holidays; and

(i)Trash pickup and removal.

Unless due to the act or negligence of Tenant, or unless due to any temporary unavailability outside the control of Landlord, Landlord shall be responsible for maintaining the Building services throughout the term of this Lease. All Building Services provided by Landlord shall be consistent with the quality of such services in similar “flex” buildings in the Colorado Tech Center area.

Tenant shall have access to the Premises and the Building, and may utilize all Building Services at any time, on a 24 hours per day/7 days per week basis. The Premises will be separately metered for electrical power and gas as part of the Base Building Conditions.

7.01Interruption of Standard Services. Tenant agrees that Landlord shall not be liable for failure to supply any heating, air conditioning, janitorial services, electric current, or any other utility during any period when Landlord uses its best efforts to restore or to supply such services or utility. Landlord reserves the right to temporarily discontinue such services at times as may be necessary by reason of accident, repairs, alterations, or improvements, or by reason of strikes, lockouts, riots, acts of God, or any other happening or occurrence beyond the reasonable control of Landlord, provided such discontinuance does not substantially interfere with Tenant’s business operations. Notwithstanding the foregoing, Tenant shall receive a one (1) day abatement of Base Rent and Operating Costs for each day any Building Service is not available to the Premises, unless due to circumstances outside the control of Landlord or unless due to the negligence or misconduct of Tenant.

7.02Telephone. Tenant shall separately arrange with the applicable local public authorities or utilities, as the case may be, for the furnishing of and payment for all telephone services as may be required by Tenant in the use of the Premises, except for the conduit required for such services as described in Section 7.01 above which conduit shall be provided by Landlord as part of the Base Building Conditions. Tenant shall directly pay for such telephone services, including the establishment and connection thereof, at the rates charged for the services by the authority or utility, and the failure of Tenant to obtain or to continue to receive the services for reasons other than those specified herein shall not relieve Tenant of any of its obligations under this Lease. Landlord shall supply sufficient telephone and data lines into the Building for Tenant’s connection, including service entrance, and demark points at electrical and communications rooms, for voice services, and fiber. Landlord warrants that communications fiber is available to the Building.

7.03Above-Standard Service Requirements. If heat-generating machines or any equipment cause the temperature in the Premises, or any part, to exceed the temperatures that the Building’s air conditioning and other cooling systems would be able to maintain in the Premises according to the specifications described in the Base Building Conditions, were it not for the heat-generating equipment, then Tenant and Landlord reserve the right to install supplementary air conditioning units in the Premises, and the actual cost, including the cost of installation and the cost of operation and maintenance thereof, shall be paid by Tenant (to Landlord upon demand by Landlord if such costs are incurred by Landlord). Landlord shall not install supplemental air conditioning units in the Premises unless it has obtained Tenant’s request therefor or Tenant’s prior written consent thereto. If Tenant requires electric current, water, or any other energy in excess of that which is described in the Base Building Conditions, Tenant shall first procure the consent of Landlord, which consent of Landlord shall not be unreasonably withheld or delayed. If Landlord consents to such excess electric, water, or other energy requirements, Tenant shall, on demand, pay all costs of meter service and installation of facilities necessary to measure and/or furnish such excess capacity. Tenant shall also pay the entire cost of such additional electricity, water, or other energy used. Tenant may also install supplemental power, plumbing, HVAC, and venting equipment, and other base building improvements with Landlord’s prior, reasonable approval. Any service required by Tenant in excess of the specifications described in the Base Building Conditions shall be referred to as “Above Standard Services”. Landlord acknowledges that Tenant may require Above Standard Services, and may require to make other changes/improvements to the Base Building, and Landlord shall not withhold its consent based on consumption, usage, or non-material impact to the Building.

SECTION 8

CONDITION OF PREMISES AND BUILDING

8.01CONDITION OF PREMISES and Building

a.Acceptance Upon Possession. Tenant, by taking possession of the Premises, shall be deemed to have agreed that the Premises were, as of the date of taking possession, in good order, repair, and condition and satisfactorily completed in accordance with Landlord’s obligations under this Lease, subject to any latent defects and/or “punch list” items to be completed by Landlord resulting from Landlord’s obligations as set forth in the Work Letter.

b.Landlord agrees to construct, maintain, and manage the quality and image of the Building as a high quality “flex” building at all times, including the general professional environment of the Building. No use or operation by other parties or vendors which interferes with Tenant’s use and operations, including but not limited to any food preparation or storage, operations which cause noise, vibration, dust, or other environmental pollutants or discharge, or any use which adversely affects the Building structure or Building services, shall be allowed in any portion of the building or parking areas without the prior written consent of Tenant in its sole discretion. In addition, no competitor of Tenant shall be allowed to lease space in the Building without the prior written consent of Tenant in its sole and absolute discretion. A competitor of Tenant is defined as any entity engaged in the direct manufacturing, processing, and/or sale of medical diagnostics or testing devices.

SECTION 9

USE OF LEASED PREMISES

9.01Use. The Leased Premises shall not be used other than for the purpose set forth in Section 1 of this Lease. Tenant’s use shall at all times comply with all applicable laws, ordinances, regulations, or other governmental ordinances in existence.

9.02Hazardous Use. Notwithstanding anything to the contrary contained in this Lease, Landlord agrees to indemnify, defend and hold harmless Tenant, its parent, subsidiaries and affiliates, and their respective officers, directors, shareholders and employees, from and against any and all liabilities, losses, damages, suits, actions, causes of action, costs, expenses (including without limitation reasonable attorneys’ fees and disbursements and court costs), penalties, fines, demands, judgments, claims or liens (including without limitation claims or liens imposed under any so-called “Superfund” or other environmental legislation) arising from or in connection with the presence at the time of Tenant’s taking possession of the Premises of Hazardous Materials (as hereinafter defined) on, or the subsequent removal thereof from, the Property (including without limitation the Premises). Landlord shall have the right to assume exclusive controlof

the defense of any such suit, action or claim, and Tenant agrees to cooperate reasonably with Landlord in the performance by Landlord of its obligations under this Section.

Notwithstanding anything to the contrary contained in this Lease, Tenant agrees to indemnify, defend and hold harmless Landlord from and against any and all liabilities, losses, damages, suits, actions, causes of action, costs, expenses (including without limitation reasonable attorneys’ fees and disbursements and court costs), penalties, fines, demands, judgments, claims or liens (including without limitation claims or liens imposed under any so-called “Superfund” or other environmental legislation) arising from or in connection with the release or discharge of Hazardous Materials which are stored, generated or otherwise brought onto the Premises by or at the direction of Tenant. Tenant shall have the right to assume exclusive control of the defense of any such suit, action or claim, and Landlord agrees to cooperate reasonably with Tenant in the performance by Tenant of its obligations under this Section. Tenant shall have the right, at Tenant’s sole election and at Tenant’s sole cost and expense, to perform or cause to be performed, from time to time during the Term (as the same may be extended), environmental testing to determine the presence of Hazardous Materials on the Premises.

For purposes of this Section, the term “Hazardous Materials” shall include without limitation any petroleum product, any flammable, explosive or radioactive material, or any hazardous or toxic waste, substance or material, including without limitation substances defined as “hazardous substances”, “hazardous materials,” “solid waste” or “toxic substances” under any applicable laws relating to hazardous or toxic materials and substances, air pollution (including noise and odors), water pollution, liquid and solid waste, pesticides, drinking water, community and employee health, environmental land use management, stormwater, sediment control, nuisances, radiation, wetlands, endangered species, environmental permitting and petroleum products, which laws may include, but not be limited to, the Federal Insecticide, Fungicide, and Rodenticide Act, as amended; the Toxic Substances Control Act; the Clean Water Act; the National Environmental Policy Act, as amended; the Solid Waste Disposal Act, as amended; the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986; the Hazardous Materials Transportation Act, as amended; the Resource Conservation and Recovery Act, as amended; the Clean Air Act, as amended; the Emergency Planning and Community Right-to-Know Act, as amended; the Occupational Safety and Health Act, as amended; comparable state laws; and all rules and regulations promulgated pursuant to such laws and ordinances.

The provisions of this Section shall survive the expiration or earlier termination of this Lease.

9.03No Waste. Tenant shall not commit, suffer, nor permit any waste, damage, disfiguration, or injury to the Leased Premises or the Building’s common areas or the fixtures and equipment located in or on the Building, or permit or suffer any overloading of the floors and shall not place any safes or heavy business machinery in the Premises other than as specifically provided for in the Work Agreement and plans for the Tenant Improvements, without first obtaining the written consent of Landlord and, if required by Landlord, of Landlord’s architect, and shall not use or permit to be used any part of the Leased Premises for any dangerous, noxious, or offensive trade or business, and shall not cause or permit any nuisance, noise, or action in, at, or on the Leased Premises. Notwithstanding anything to the contrary contained herein, Landlord acknowledges and approves Tenant’s use of the Premises and Building, including but not limited to Tenant’s intent to store and use various substances and chemicals, including, without limitation, those identified on a list previously submitted and approved by Landlord, in compliance with laws and regulations governing such substances and chemicals and such use shall not be deemed a violation of the foregoing provisions of this Section 9.03.

a.Protection Against Insurance Cancellation. If any insurance policy on the Building or any part thereof shall be canceled or if cancellation shall be threatened, or if the coverage shall be reduced or be threatened to be reduced, in any way by reason of the use or occupation of the Leased Premises or any part thereof by Tenant, any assignee or subtenant of Tenant, or by anyone permitted by Tenant to be upon the Leased Premises, and if Tenant fails to take reasonable efforts to remedy the condition giving rise to the cancellation, threatened cancellation, reduction, or threatened reduction of coverage within forty-eight (48) hours after notice or to complete the remedy within ten (10) days after notice, Landlord may, at its option, enter upon the Leased Premises and attempt to remedy the condition, and Tenant shall forthwith pay the cost to Landlord as Rent. Landlord shall not be liable for any damage or injury caused to any property of Tenant or of others located on the Leased

Premises as a result of such entry unless such damage or injury is a result of the negligence or willful misconduct of Landlord or its employees, agents or contractors.

b.Use of Roof and Site by Tenant. Tenant may access and utilize the roof of the Building, or any area on the site of the Property subject to any applicable approval by governmental entities, to install and operate communications or other equipment throughout the Term and any extension thereof, with the prior written consent of Landlord, which consent shall not be unreasonably withheld, delayed or denied. Such access and use shall be at no additional cost to Tenant, with the exception of the cost of installation, maintenance, and removal of such equipment which shall be Tenant’s sole responsibility. Tenant may also, with Landlord’s written approval, install and utilize conduit for access/wiring of such equipment and connection of such equipment to the Premises.

SECTION 10

COMPLIANCE WITH LAW

10.01Compliance. Tenant shall not use the Premises or permit anything to be done in or about the Premises which will in any way conflict with any law, statute, ordinance, or governmental rule or regulation now in force or which may hereafter be enacted or promulgated. Tenant shall, at its sole cost and expense, promptly comply with all laws, statutes, ordinances, and governmental rules, regulations, or requirements now in force or which may hereafter be in force, and with the requirements of any board of fire underwriters or other similar body now or hereafter constituted relating to or affecting the condition, use, or occupancy of the Premises, but, however, excluding any required structural changes which are not related to or affected by Tenant’s improvements or acts.

Landlord warrants and represents that, as of the Initial Premises Commencement Date, (i) the Building and the Premises shall be in compliance with all applicable laws, codes, ordinances, orders, rules and regulations of any governmental or other public authority, (ii) all electrical, plumbing, lighting, fire protection and heating, ventilation and air conditioning systems shall be in good condition and repair, and (iii) there shall be no restrictions or other legal impediments, either imposed by law (including without limitation applicable zoning and building codes or ordinances) or by instrument, which would prevent the use of the Premises for the permitted uses hereunder. If at any time during the Term, as the same may be extended, applicable law shall not permit the use of the Premises in accordance with the original intended use designated in Section 1.01 of this Lease, then Tenant, without waiving any other right Tenant may have on account thereof, may terminate this Lease upon no less than thirty (30) days’ prior written notice to Landlord.

SECTION 11

ALTERATIONS AND REPAIRS

11.01Tenant to Maintain. Tenant shall, at its sole expense, keep the Premises in good repair and tenantable condition during the Term of this Lease. Tenant shall not, without the prior written consent of the Landlord, whose consent shall not be unreasonably withheld, make any alterations, improvements, or additions to the Premises (except for the Tenant Improvements, which shall be governed by the Work Letter), including, but not limited to, partitions, wall coverings, floor coverings, and special lighting or equipment installations. Notwithstanding the foregoing, Landlord’s approval shall not be required for any alterations, improvements or additions desired by Tenant which are nonstructural in nature and the cost of which does not exceed $50,000 in each instance. Prior to commencement of any alterations, improvements, or additions for which Tenant is required to obtain Landlord’s approval, Tenant shall submit to Landlord a set of fully detailed working drawings and specifications for the proposed alteration, prepared by a licensed architect or engineer reasonably approved by the Landlord. In particular, but not as a limitation, the working drawings must fully detail changes to mechanical, wiring, and electrical, lighting, plumbing, and HVAC systems to Landlord’s reasonable satisfaction. Landlord may require additional reasonable information for approval of the alterations because of the inadequacy of the drawings and specifications. Landlord shall notify Tenant at the time of granting its consent whether it shall require Tenant to remove any portion of the alterations at the expiration of the Term or other termination of this Lease. As a condition of approval for such alterations, Landlord shall have the right to require Tenant to furnish adequate bond or other security reasonably acceptable to Landlord for performance of and payment

for the work to be performed. All alterations, improvements, or additions, whether temporary or permanent in character, made by Landlord or Tenant in or upon the Premises shall become Landlord’s property and shall remain upon the Premises at the termination of this Lease by lapse of time or otherwise, without compensation to Tenant (excepting only Tenant’s movable office furniture, trade fixtures, and office and professional equipment or other personal property, whether or not attached to the Premises), Tenant shall, however, have the right to remove any of the Tenant Improvements which Tenant, at the time of submitting or approving the plans and specifications for the same in accordance with the Work Letter, identified as those which Tenant intends to remove at the termination or earlier expiration of this Lease. Landlord shall not unreasonably withhold or qualify approval of any such alterations, additions, or improvements based on the requirement of removal by Tenant. Tenant shall promptly pay to Tenant’s contractors, when due, the cost of all work and of all decorating, and upon completion, deliver to Landlord, if payment is made directly to Tenant’s contractors, evidence of payment and waivers of all liens for labor, services, or materials. Tenant shall defend and hold Landlord, the Premises, the Building, and the Property harmless from all costs, damages, liens for labor, services, or materials relating to the work, and shall defend and hold Landlord harmless from all costs, damages, liens, and expenses related to the work, unless such liens, services, materials, costs, damages, or expenses are the result of the act, omission, negligence, or misconduct of Landlord or its employees, agents, or contractors. If Landlord incurs any expenses in the removal of trash or cleaning as a result of Tenant’s contractor’s work, then Tenant agrees it shall reimburse Landlord within thirty (30) days of billing.

11.02Protection Against Liens. At least five (5) days prior to the commencement of any work on the Leased Premises by Tenant, Tenant shall notify Landlord of the names and addresses of the persons supplying labor and materials for the proposed work so that Landlord may avail itself of the provisions of statutes such as Section 38-22-105(2) of the Colorado Revised Statutes (1973), or any successor statutory provision. During the progress of any work on the Leased Premises, Landlord or its representatives shall have the right to post and keep posted thereon notices such as those provided for by Sections 38-22-105(2) (C.R.S. 1973) or to take any further action which Landlord may deem to be proper for the protection of Landlord’s interest in the Leased Premises.

11.03Condition on Surrender. Tenant shall, at the termination of this Lease, surrender the Premises to Landlord in as good condition and repair as reasonable and proper use will permit, loss by ordinary wear and tear, fire, and other casualty excepted, and in the state of broom cleanliness.

11.04Damage by Tenant. If any part of the Building or other improvements become damaged or are destroyed through the negligence, carelessness, or misuse of Tenant, its servants, agents, employees, or anyone permitted by Tenant to be inthe Building, or through Tenant or such parties, then the cost of necessary repairs, replacements, or alterations shall be borne by Tenant, who shall, on demand, forthwith pay the same to Landlord as Rent.

SECTION 12

ABANDONMENT

12.01Disposition of Personal Property. Tenant shall not vacate or abandon the Premises at any time during the Term without notice to Landlord and payment of rent, and if Tenant shall otherwise abandon, vacate, or surrender (whether at the end of the stated Term or otherwise) the Premises, or shall be dispossessed by process of law or otherwise, then any personal property belonging to Tenant left on the Premises shall be deemed abandoned and may be sold or otherwise disposed of by Landlord without any liability to Tenant whatsoever. Tenant shall not at any time remove Landlord’s property or any fixtures constituting property of Landlord from the Premises. Any removal of Landlord’s property from the Premises by Tenant shall constitute a material breach of this Lease and Landlord shall have the right to take all reasonable steps to stop or prevent such breach without such actions constituting a constructive eviction of Tenant.

SECTION 13

ASSIGNMENT AND SUBLETTING

13.01Limitation on Assignment or Subletting. Tenant shall not assign this Lease, or any interest therein, and shall not sublet the Premises, or any part thereof, or any right or privilege appurtenant

thereto, or shall not suffer any other person to occupy or use the Premises, or any portion thereof, without the written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. Neither this Lease nor any interest therein shall be assignable as to the interest of Tenant by operation of law without the written consent of Landlord, which consent may not be unreasonably withheld, conditioned or delayed. Any amount of rent received by Tenant for any such assignment or subletting to a third party (excluding any transferee under Section 13.02 below), which is in excess of the Base Rent and Operating Expenses passed through to Tenant, shall be divided equally between Tenant and Landlord after Tenant deducts from any such overage its reasonable costs incurred in completing the assignment or subletting, including but not limited to the cost of any rental abatement, improvements, commissions, legal fees and other such costs.

13.02Assignment or Subletting to a Parent, Affiliate, or Subsidiary. Notwithstanding anything to the contrary contained in this lease, Tenant shall have the right to make, without landlord’s consent, any assignment of this lease or subletting of all or any portion of the Premises, so long as Thermo Electron Corporation, a Delaware corporation remains the guarantor on this lease, to (a) a parent, subsidiary, affiliate or division of Tenant, (b) any entity with which or into which Tenant may consolidate or merge, or (c) any entity acquiring all or substantially all of the assets of Tenant.

13.03Acceptance of Performance; No Waiver. If the Premises or any part are sublet or occupied by anybody other than Tenant, Landlord may, upon default by Tenant beyond any applicable cure period, collect the rent from the subtenant or occupant and apply the net amount collected to the Rent. Upon assignment pursuant to the terms of this section, Tenant shall be relieved of further liability under this Lease as to the subleased premises. Consent by Landlord to anyone assignment or subletting shall not in any way be construed as relieving Tenant from obtaining the Landlord’s expressed written consent to any further assignment or subletting.

13.04Landlord to Approve Documents. All documents utilized by Tenant to evidence any subletting or assignment to which Landlord has consented shall be subject to prior approval by Landlord or its attorney, which approval shall not be unreasonably withheld or delayed. Tenant shall pay on demand all Landlord’s costs and expenses, including reasonable attorneys’ fees, incurred in determining whether or not to consent to any requested subletting or assignment and in reviewing and approving such documentation which shall not exceed $500.

SECTION 14

SIGNS AND ADVERTISING

14.01Tenant shall have the right to install or construct monument, directional, and building signage at its sole cost and expense subject to approval by the City of Louisville. Prior to installing or constructing any signage pursuant to this section, Tenant shall submit to Landlord for its reasonable review and approval drawings of the proposed signage, including size and dimensions. Landlord shall submit for Tenant’s approval, which approval shall not be unreasonably withheld, any signage proposed for any other tenants of the Property.

SECTION 15

DAMAGE TO PROPERTY, INJURY TO PERSONS

15.01Damage by Tenant. Tenant agrees to pay for all damage to the Building or the Premises, as well as all damage to tenants or occupants thereof caused by Tenant’s misuse or neglect of the Premises, its apparatus or appurtenances, or caused by any licensee, contractor, agent, or employee of Tenant. Notwithstanding anything to the contrary contained in this Lease, Landlord and Tenant each hereby waives all rights of recovery against the other party, and such other party’s insurance carrier (by way of subrogation or otherwise), for all losses or damages to the Premises, any improvements thereon or any personal property of either party therein, to the extent such waiver does not invalidate the insurance coverage of either party and to the extent such losses or damages are covered by insurance the damaged party is required to carry hereunder or otherwise elects to maintain; provided, however, that the foregoing waiver by either party shall not apply with respect to any loss or damage to the extent caused by the negligence or willful misconduct of the other party, its agents, employees, representatives or contractors.

15.02Tenant’s Property. Particularly, but not in limitation of the foregoing paragraph, all property belonging to Tenant, or any occupant of the Premises, that is in the Building or the Premises, shall

be there at the risk of Tenant or other person only, and Landlord or its agents or employees (except in the case of negligence or willful misconduct of Landlord or its agents, employees, licensees or contractors) shall not be liable for: (i) damage to or theft or misappropriation of such property; (ii) loss of or damage to any property by theft or otherwise, by any means whatsoever; (iii) any injury or damage to persons or property resulting from fire, explosion, falling plaster, steam, gas, electricity, snow, hail, water, or rain which may leak from any part of the Building or from the pipes, appliances, or plumbing works therein or from the roof, street, subsurface, or from any other place, or resulting from dampness or any other cause whatsoever, except any such injury or damage resulting fromfaulty or improper construction or installation of the Base Building or resulting fromlack of proper maintenance or repair by Landlord; or (iv) interference with the light, air, or other incorporeal hereditament. Tenant shall give prompt notice to Landlord in case of fire or accidents in the Premises or in the Building or of observed defects in the Building, its fixtures or equipment.

SECTION 16

TENANT’S INSURANCE

16.01Insurance. Tenant shall, during the entire Term of this Lease, at its sole cost and expense, obtain, maintain, and keep in full force and effect the following types of insurance:

(a)All risk coverage insurance, including endorsements for vandalism, malicious mischief, theft, sprinkler leakage, covering all of Tenant’s property, including, but not limited to, furniture, fittings, equipment, installations, alterations, additions, partitions, fixtures, and anything in the nature of a leasehold improvement (other than those belonging to Landlord hereunder) in an amount equal to the full replacement cost of such property without deduction for depreciation;

(b)Commercial general liability insurance, including bodily injury and property damage, personal injury, contractual liability with respect to all claims, demands, or actions by any person, firm, or corporation, inany way arising from, related to, or connected with the conduct and operation of Tenant’s business in the Premises or Tenant’s use of the Premises. Such policies shall be written on a comprehensive basis, with limits not less than $1,000,000.00, and such higher limits as Landlord or the mortgagees of Landlord may require from time to time, but may not be unreasonably required, subject to reasonable standards for insurance coverage and limits for similar uses, in like facilities, in the Colorado Tech Center area;

(c) Any other form or forms of insurance as the mortgagees of Landlord may reasonably require from time to time in form, in amounts and for insurance risks against which a prudent tenant would protect itself, subject to reasonable standards for insurance coverage and limits for similar uses, in like facilities, in the Colorado Tech Center area;

(d) Business interruption insurance in such amounts as will reimburse the Tenant for direct or indirect loss of earning attributable to all perils commonly insured against by prudent tenants or attributable to prevention of access to the Premises or to the Building as a result of such perils.

16.02Evidence. All policies shall be taken out with insurers reasonably acceptable to Landlord and in form reasonably satisfactory from time to time to Landlord. Tenant agrees that certificates of insurance will be delivered to Landlord as soon as practicable after the placing of the required insurance, but in no event later than five (5) days after Tenant takes possession of all or any part of the Leased Premises. All policies shall require that at least thirty (30) days’ prior written notice be delivered to Landlord by the insured prior to termination, cancellation, or material change in such insurance.

16.03Proceeds. Tenant agrees that in the event of damage or destruction to the leasehold improvements in the Leased Premises covered by insurance required to be taken out by Tenant pursuant to this Section, Tenant shall use the proceeds of the insurance for the purpose of building leasehold improvements as mutually agreed upon between Landlord and Tenant. If Landlord and Tenant cannot agree as to the new improvements within thirty (30) days, then Tenant shall replace the identical improvements that were destroyed. In the event of damage or destruction of the Building entitling the Landlord to terminate this Lease pursuant to Section 17, then, if the Leased Premises have also been damaged, Tenant will pay to Landlord all of its insurance proceeds relating to the leasehold improvements in the Leased Premises, and if the Leased Premises have not been damaged, Tenant will deliver to Landlord, in accordance with the provisions of this Lease, the leasehold improvements and the Leased Premises.

SECTION 17

DAMAGE OR DESTRUCTION

17.01Right to Terminate. If the Premises or the Building are damaged by fire or other insured casualty, and the insurance proceeds have been made available by the holder or holders of any mortgages or deeds of trust covering the Building, the damage shall be repaired by and at the expense of Landlord, provided such repairs can, in Landlord’s reasonable discretion, be completed within one hundred twenty (120) days after the occurrence of such damage, without the payment of overtime or other premiums. Until the repairs are completed, the Rent shall be abated in proportion to the part of the Premises which is unusable by Tenant in the conduct of its business. If repairs cannot, in Landlord’s reasonable discretion, be made within said one hundred twenty (120) day period, Landlord shall notify Tenant within thirty (30) days of the date of occurrence of the damage as to whether or not Landlord elects to make the repairs. If Landlord elects not to make the repairs, then either party may, by written notice to the other, cancel this lease as of the date of the occurrence of the damage. If Landlord elects to make such repairs, Landlord shall promptly repair such damage at its sole cost and expense, and shall complete such repairs not less than 180 days after the date of occurrence of the damage. If Landlord reasonably estimates that it will require more than 180 days to complete such repairs, then either party may terminate this Lease by providing written notice to the other. Except as provided in this Section 17, there shall be no abatement of Rent and no liability of Landlord by reason of any injury, inconvenience, temporary limitation of access or interference to or with Tenant’s business or property arising from the making of any necessary repairs, or any alterations or improvements in or to any portion of the Building or the Premises, or in or to fixtures, appurtenances, and equipment therein necessitated by the damage. Tenant understands that Landlord will not carry insurance of any kind on Tenant’s furniture and furnishings or on any fixtures or equipment removable by Tenant under the provision of this Lease, and that Landlord shall not be required to repair any injury or damage caused by fire or other cause, or to make any repairs or replacements to or of improvements installed in the Premises by or for Tenant at Tenant’s cost.

17.02Landlord’s Insurance. Landlord covenants and agrees that, throughout the Term, it will insure the Building (excluding non-insurable items) and the machinery, boilers, and equipment contained therein owned by Landlord (excluding any property with respect to which Tenant is obliged to insure pursuant to the provisions of Section 16 thereof) against damage by fire and extended perils coverage in such reasonable amounts as would be carried by a prudent owner of a similar property in the same locale. Landlord will also, throughout the Term, carry commercial general liability, property damage and loss of rent insurance with respect to the operation of the Premises in reasonable amounts as would be carried by a prudent owner of a similar property in the same locale. Landlord may, but shall not be obligated to, take out and carry any other form or forms of insurance as it or the mortgagees of Landlord may reasonably determine to be advisable. Tenant shall pay for all such insurance carried by Landlord as an Operating Cost, provided that such insurance is not duplicative of the insurance obtained pursuant to Section 16.01. Notwithstanding any contribution by Tenant to the cost of insurance premiums, Tenant acknowledges that it has no right to receive any proceeds from the insurance policies carried by Landlord, and that the insurance will be for the sole benefit of Landlord, with no coverage for Tenant for any risk insured against.

SECTION 18

ENTRY BY LANDLORD

18.01Landlord and its agents, upon giving 24 hours notice to Tenant’s management personnel at the Premises, shall have the right to enter the Premises during normal business hours for the purpose of examining or inspecting the same, to supply any services to be provided by Landlord to Tenant hereunder, to show same to prospective purchasers (or during the last nine (9) months of the Lease term to prospective tenants of the Premises), and to make such alterations, repairs, improvements, or additions, whether structural or otherwise, to the Premises or to the Building as Landlord may deem necessary or desirable. Landlord shall not make any such alterations, repairs, improvements, or additions which materially affect Tenant’s use or enjoyment of the Premises/Building/Property, and any such alterations, repairs, improvements, or additions made by Landlord shall to the best of Landlord’s ability be completed after Tenant’s business hours. Tenant shall have the right to have a representative present during any entry by Landlord. In the event said alterations, repairs, improvements, or additions are required during business hours, Landlord will work with Tenant to minimize the impact of Tenant’s use and enjoyment of the Premises. In the event of emergency and in the event Tenant’s employees are not at the Premises at the time of Landlord’s entry, Landlord may enter by means of a master key, without liability to Tenant except for any failure to exercise due care for Tenant’s property, and without affecting this Lease. Landlord shall

use reasonable efforts on any such entry not to unreasonably interrupt or interfere with Tenant’s use and occupancy of the Premises. Landlord may enter the Premises at any time in the case of an emergency.

SECTION 19

DEFAULT

19.01Events of Tenant Default. Each one of the following events is referred to as an “Event of Tenant Default”:

(a)Tenant shall fail to make due and punctual payment of Rent or another amounts payable hereunder, and such failure shall continue for fifteen (15) days after receipt of written notice from Landlord.

(b) Tenant shall vacate the Premises without payment of Rent and notice to Landlord, or abandon the Premises, or remove leasehold improvements or fixtures constituting property of Landlord;

(c) This Lease shall be transferred to or shall pass to or devolve upon any other person or party except in the manner set forth in Section 13;

(d) This Lease or the Premises or any part thereof shall be taken upon execution or by other process of law directed against Tenant, or shall be taken upon or subject to any attachment at the instance of any creditor of, or claimant against Tenant, and said attachment shall not be discharged or disposed of within thirty (30) days after the levy;

(e) The filing of any petition or the commencement of any case or proceeding by the Tenant under any provision or chapter of the Federal Bankruptcy Act, the Federal Bankruptcy Code or any other federal or state law relating to insolvency, bankruptcy or reorganization; or the adjudication that the Tenant is insolvent or bankrupt, or the entry of an order for relief under the Federal Bankruptcy Code with respect to Tenant;

(f) The filing of any petition or the commencement of any case or proceeding described in Subsection (e) above against the Tenant, unless the petition and all proceedings initiated thereby are dismissed within sixty (60) days from the date of the filing; the filing of an answer by Tenant admitting the allegations of any such petition; or the appointment of or taking possession by a custodian, trustee or receiver for all or any assets of the Tenant, unless such appointment is vacated or dismissed within sixty (60) days from the date of such appointment or taking of such possession.

(g) Tenant shall fail to take possession of the Premises thirty (30) days following the Commencement Date without payment of Rent.

(h) Tenant shall fail to deliver an Estoppel Certificate in accordance with the last sentence of Section 29 of this Lease.

(j)Tenant shall fail to perform any of the other agreements, terms, covenants or conditions of this Lease on Tenant’s part to be performed, and such non-performance shall continue for a period of thirty (30) days after written notice by Landlord to Tenant, or if such performance cannot be reasonably had within such thirty (30) day period, Tenant shall not in good faith have commenced such performance within such thirty (30) day period and shall not thereafter diligently proceed to completion.

19.02Remedies of Landlord. If any one or more Events of Tenant Default shall happen, then Landlord shall have the right at Landlord’s election, or at any time thereafter without demand or notice, to reenter and take possession of the Premises or any part thereof and repossess the same as Landlord’s former estate and expel Tenant and those claiming through or under Tenant, and remove the effects of both or either, without being deemed guilty of any manner of trespass, and without prejudice to any remedies for arrears of rent or breach of covenants or prior conditions and without terminating this Lease. Should Landlord elect to reenter as provided in this Subsection, or should Landlord take possession pursuant to legal proceedings or pursuant to any notice provided for by law including a proceeding for possession pursuant to Colorado’s Forcible Entry and unlawful Detainer Statutes, Landlord may, from time to time, without terminating this Lease either;

(a)  (i)  Relet the Premises or any part thereof in Landlord’s or Tenant’s name, but for the account

of Tenant, for a term or terms (which may be greater or less than the period which would otherwise have constituted the balance of the term of this Lease) and on conditions and upon other terms (which may include concessions of free rent and alteration and repair of the Premises) as Landlord, in its sole discretion, may determine, and Landlord may collect and receive the rents. Landlord shall use reasonable efforts to relet the Premises and maximize the income generated by the Premises. No reentry or taking possession of the Premises by Landlord shall be construed as an election on Landlord’s part to terminate this Lease unless a written notice of such intention be given to Tenant. No notice from Landlord hereunder or under a forcible entry and unlawful detainer statute or similar law shall constitute an election by Landlord to terminate this Lease unless such notice specifically so states. Landlord reserves the right following any  reentry and/or reletting to exercise its right to terminate this Lease by giving Tenant written notice, in which event the Lease will terminate as specific in the notice.

(ii)If Landlord elects to take possession of the Premises as provided in this Subsection (a) without terminating the Lease, Tenant shall pay to Landlord (1) the Rent and other sums due under this Lease which would be payable  if repossession had not occurred, less (2) the net proceeds, if any, of any reletting of the Premises after deducting all Landlord’s expenses in connection with the reletting, including, but without limitation, all repossession costs, brokerage commissions, legal expenses, attorneys’ fees, expenses of employees, alteration, remodeling and repair costs and expenses of preparation of the reletting. If, in connection with any reletting, the new lease terms extends beyond the existing term, or the premises covered include other premises not part of the Premises, a fair apportionment of the rent received from the reletting and the expenses incurred in connection with the reletting will be made in determining the net proceeds received from reletting. In addition, in determining the net proceeds from reletting, any rent concession will be apportioned over the term of the new Lease; or

(b)  To give Tenant written notice of intention to terminate this Lease on the date of the notice, or on any later date specified in the notice. Tenant’s right to possession of the Premises shall cease and the Lease shall thereupon be terminated, except as to Tenant’s liability under this Lease, as if the expiration of the term fixed in the notice were the end of the term originally demised, including as extended by the exercise of any options granted to Tenant. If this Lease is terminated pursuant to the provisions of this Subsection (b), or terminated pursuant to a proceeding for possession under the Colorado Forcible Entry and Unlawful Detainer Statutes, Tenant shall remain liable to Landlord for damages in an amount equal to the Rent and other sums which would have been owing by Tenant under this Lease for the balance of the Term had this Lease not been terminated, less the net proceeds, if any, of any reletting of the Premises by Landlord subsequent to the termination, after deducting all Landlord’s expenses in connection with such reletting, including, but without limitation, the expenses enumerated in Subsection (a) above. Landlord shall be entitled to collect damages from Tenant monthly on the days on which the Rent and other amounts would have been payable if this Lease had not been terminated.

19.03Cumulative Remedies. Suit or suits for the recovery of the Rent and other amounts and damages may be brought by Landlord, from time to time, at Landlord’s election, and nothing in this Lease shall be deemed to require Landlord to await the date when this Lease or its Term would have expired by limitation had there been no default by Tenant, or no termination, as the case may be. Each right and remedy provided for in this Lease shall be cumulative and shall be in addition to every other right or remedy provided for in this Lease or now or hereafter existing at law or in equity or by statute or otherwise including but not limited to suits for injunctive relief and specific performance. The exercise or beginning of the exercise by Landlord of any one or more of the rights or remedies provided for in this Lease or now or hereafter existing at law or in equity by statute or otherwise shall not preclude the simultaneous or later exercise by Landlord of any or all rights or remedies provided for in this Lease or now or hereafter existing at law or in equity or by statute or otherwise. All such rights and remedies shall be considered cumulative and non-exclusive. All costs incurred by Landlord in connection with collecting any Rent or other amounts and damages owing by Tenant pursuant to the provisions of this Lease, or to enforce any provision of this Lease, including reasonable attorney’s fees from the date such matter is turned over to an attorney, whether or not one or more actions are commenced by Landlord, shall also be paid by Tenant to Landlord

19.04No Waiver. No failure by Landlord to insist upon the strict performance of any agreement, term, covenant or condition of this Lease or to exercise any right or remedy consequent upon a breach, and no acceptance of full or partial payment of Rent during the continuance of any breach, shall constitute a waiver of any breach or of the agreement to be performed or complied with by Tenant, and no breach shall be waived, altered or modified except by written instrument executed by Landlord. No waiver of any breach shall affect or alter this Lease, but each and every agreement, term, covenant and condition shall continue in full force and effect with respect to any other then existing or subsequent breach. Notwithstanding any termination of this Lease, the same shall continue in force and effect as to any

provisions which require observance or performance by Landlord or Tenant subsequent to such termination.

19.05Bankruptcy. Nothing contained in this Section 18 shall limit or prejudice the right of Landlord to prove and obtain as liquidated damages in any bankruptcy, insolvency, receivership, reorganization or dissolution proceeding, an amount equal to the maximum allowed by any statute or rule of law governing such a proceeding, and in effect at the time when such damages are to be proved, whether or not the amount is greater, equal to or less than the amounts recoverable, either as damages or Rent, referred to in any of the preceding provisions of this Section. Notwithstanding anything contained in this Section to the contrary, any such proceeding or action involving bankruptcy, insolvency, reorganization, arrangement. assignment for the benefit of creditors, or appointment of a receiver or trustee, as set forth above, shall be considered to be an event of default only when the proceeding, action or remedy shall be taken or brought by or against the then holder of the leasehold estate under this Lease.

19.06Landlord Default. Each one of the following events is referred to as an “Event of Landlord Default”:

(a)Landlord shall fail to make due and punctual payment of amounts payable hereunder, and such failure shall continue for fifteen (15) days after receipt of written notice from Tenant.

(b)Landlord shall fail to perform any of the other agreements, terms, covenants or conditions of this Lease on Landlord’s part to be performed, and such non-performance shall continue for a period of thirty (30) days after written notice by Tenant to Landlord, or if such performance cannot be reasonably had within such thirty (30) day period, Landlord shall not in good faith have commenced such performance within such thirty (30) day period and shall not thereafter diligently proceed to completion. Notwithstanding the foregoing, Landlord shall commence repair/provisions of any Building Services which are discontinued within 24 hours after loss or discontinuance of such services and notice from Tenant, and shall diligently proceed with such repair/provision until complete.

19.07Remedies of Tenant. If any one or more events of Landlord Default shall happen, then Tenant shall have the right, upon written notice to Landlord pursuant to the time frames described in Section 19.06 above, to cure such Landlord Default, repair and replace any service of item, or conduct any reasonable task required of Landlord pursuant to this Lease and necessary for Tenant’s intended use of the Premises and Building. If Landlord does not make payment of any amount due Tenant within fifteen (15) days after receipt of Tenant’s notice., or if Landlord does not reimburse Tenant for any costs incurred by Tenant in completing Landlord’s obligations within thirty (30) days after receipt of Tenant’s notice, Tenant may deduct/offset such amounts due, plus interest, against future payments of Rent until fully recaptured by Tenant. The Provisions of this Section 19.07 shall not act to eliminate or otherwise reduce any and all other remedies available to Tenant by Law.

SECTION 20

TAXES

20.01During the Term hereof, Tenant shall pay, prior to delinquency, all business and other taxes, charges, notes, duties and assessments levied, and rates or fees imposed, charged, or assessed against or in respect of Tenant’s occupancy of the Leased Premises or in respect of the personal property, trade fixtures, furnishings, equipment, and all other personal property of Tenant contained in the Premises, and shall hold Landlord harmless from and against all payment of such taxes, charges, notes, duties, assessments, rates,. and fees, and against all loss, costs, charges, and expenses occasioned by or arising from any and all such taxes, charges, notes, duties, assessments, rates and fees. Tenant shall cause the fixtures, furnishings, equipment and other personal property to be assessed and billed separately from the real and personal property of Landlord. If any or all of Tenant’s fixtures, furnishing, equipment, and other personal property shall be assessed and taxes with Landlord’s real property, Tenant shall pay to Landlord Tenant’s share of such taxes within thirty (30) days after delivery to Tenant by Landlord of a statement in writing setting forth the amount of such taxes applicable to Tenant’s property. All of the above documents shall be considered confidential and only disclosed or used for Landlord’s appropriate business purposes.

SECTION 21

EMINENT DOMAIN

21.01If the Building, or a substantial part thereof, or a substantial part of the Premises, shall be lawfully taken or condemned (or conveyed under threat of such taking or condemnation) for any public or quasi-public use or purpose, the Term of this Lease shall end upon, and not before, the date of the taking of possession by the condemning authority. Tenant hereby assigns to Landlord Tenant’s interest if any, in the award. Current Rent shall be apportioned as of the date of termination. Ifany part of the Building, other than the Premises or not constituting a substantial part of the Premises, shall be so taken or condemned (or conveyed under threat of such taking or condemnation), or if the grade of any street adjacent to the Building is changed by any competent authority and such taking or change of grade makes it necessary or desirable to substantially remodel or restore the Building, Landlord shall have the right to cancel this Lease upon not less than sixty (60) days’ notice prior to the date of cancellation designated in the notice. No money or other consideration shall be payable by Landlord to Tenant for the right of cancellation, and Tenant shall have no right to share in any condemnation award, or in any judgment for damages, or in any proceeds of any sale made under any threat of condemnation of taking. Nothing in this Section shall prevent Tenant from making and pursuing a claim against the condemning authority in its own right for termination of its leasehold interest. If this Lease is not canceled, the Lease shall continue in full force and effect, with abatement or reduction of Rent equal to the rentable square footage affected.

SECTION 22

SUBORDINATION TO MORTGAGES AND DEEDS OF TRUST

22.01Lease Subordinate to Mortgages.

(a)Subject to the terms hereof, this Lease and the rights of Tenant shall be and are hereby made subject and subordinate to the lien of any mortgages or deeds of trust now or hereafter existing against the Building, the Property or both, and to all renewals, modifications, consolidations, replacements and extensions thereof and to all advances made now or in the future. Tenant, or its successors in interest, shall upon Landlord’s request, execute and deliver upon the demand of Landlord any and all instruments desired by Landlord, subordinating this Lease to any mortgage or deed of trust within ten (10) business days after notice from Landlord demanding their execution. The notice may be given in the manner provided for giving notice below.

(b)The subordination of this Lease to any future mortgage(s) and/or deed(s) of trust shall be conditioned upon the holder thereof executing a non-disturbance agreement (a “Non-Disturbance Agreement”), in recordable form, by the terms of which such holder agrees not to disturb the possession and other rights of Tenant under or pursuant to this Lease during the Term, as the same may be extended, so long as Tenant is not in default hereunder beyond the expiration of all applicable notice and cure periods, and in the event of acquisition of title, or coming into possession, by said holder through foreclosure proceedings or otherwise, to accept Tenant as tenant of the Premises under the terms and conditions of this Lease and to assume and perform all of Landlord’s obligations hereunder. If at the time of delivery of possession of the Premises to Tenant there shall be any mortgage or deed of trust encumbering the Premises, Landlord shall obtain and deliver to Tenant, within thirty (30) days after the date of such delivery of possession, a Non-Disturbance Agreement in the form and containing the terms referenced above.

22.02Tenant’s Notices. In the event of any act or omission by Landlord under this Lease which would give Tenant the right to terminate this Lease, or to claim a partial or total eviction, Tenant will not exercise any such right until it has given written notice (by United States certified or registered mail, postage prepaid) of such act or omission to the holder of any mortgage or deed of trust on the Property (whose names and addresses Landlord agrees will be furnished to Tenant on request) with a copy to Joel C. Davis, Dietze & Davis, P.C., P.O. Box 1530, Boulder, Colorado 80306; and O’Connor Development, 6685 Gunpark Drive, Suite 210, Boulder, Colorado 80301.

SECTION 23

WAIVER

23.01The waiver by Landlord of any breach of any term, covenant, or condition in this Lease shall not be deemed to be a waiver of the term, covenant, or condition, or any subsequent breach of the same or any other term, covenant or conditions. The acceptance of Rent hereunder shall not be construed to be a waiver of any breach by Tenant of any term, covenant, or condition of this Lease, it being understood and agreed that the remedies given to Landlord shall be cumulative, and the exercise of any one remedy by Landlord shall not be to the exclusion of any other remedy.

SECTION 24

Intentionally omitted

SECTION 25

PLATS AND RIDERS

25.01Appendices, clauses, plats, and riders, if any, referred to in this Lease and signed or initialed by Landlord and Tenant and affixed to this Lease are hereby incorporated in and made a part of this Lease.

SECTION 26

SALE BY LANDLORD

26.01In the event of a sale or conveyance or transfer by Landlord of its interest in the Property and/or in the Building containing the Premises, and/or in this Lease, the same shall operate to release Landlord from any future liability upon any of the covenants or conditions, expressed or implied, contained in favor of Tenant, and in that event, Tenant agrees to look solely to the responsibility of the successor in interest of Landlord in and to this Lease. This Lease shall not be affected by any such conveyance or transfer, and Tenant agrees to attorn to such purchaser or transferee.

SECTION 27

RIGHT OF LANDLORD TO PERFORM

27.01All covenants and agreements to be performed by Tenant under any of the terms of this Lease shall be performed by Tenant at Tenant’s sole cost and expense, and without any abatement of Rent. If Tenant shall fail to pay any sum of money, other than Rent, required to be paid by it, or shall fail to perform any other act on its part to be performed, and the failure shall continue for thirty (30) days after written notice by Landlord unless the performance of the same requires a longer period of time to perform, in which case Tenant shall have a reasonable amount of time to perform the same, so long as Tenant commences to cure within said thirty (30) day period and thereafter diligently prosecutes the same to completion, Landlord may, but shall not be obligated to do so, and without waiving or releasing Tenant from any obligations of Tenant, make any payment or perform any other act on Tenant’s part to be made or performed as in this Lease provided. All sums so paid by Landlord and all necessary incidental costs, together with interest at the rate of one and one-half percent (1-1/2%) per month from the date of a payment by Landlord, shall be payable to Landlord on demand, and Tenant covenants to pay any such sums, and Landlord shall have (in addition to any other right or remedy of Landlord) the same rights and remedies in the event of the non-payment thereof by Tenant, as in the case of default by Tenant in the payment of Rent.

SECTION 28

ATTORNEY’S FEES

28.01In the event of any litigation or arbitration between Tenant and Landlord to enforce any provision of this Lease or any right of either party, the unsuccessful party to such litigation or arbitration shall pay to the successful party all costs and expenses, including reasonable attorney’s fees, incurred. Moreover, if Landlord, without fault, is made a party to any litigation instituted by or against Tenant,

Tenant shall indemnify Landlord against, and protect, defend, and save it harmless from, all costs and expenses, including attorney’s fees, incurred by Landlord. To the extent permitted by law, Landlord and Tenant hereby waive the right to a jury trial in any legal action or proceeding relating to this Lease.

SECTION 29

ESTOPPEL CERTIFICATE

29.01Tenant shall, at any time and from time to time, upon not less than ten (10) business days’ prior written notice from Landlord, execute, acknowledge, and deliver to Landlord a statement in writing certifying that this Lease is unmodified and in full force and effect (or if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect) and the dates to which the Rent and other charges are paid, and acknowledging that Tenant is paying Rent on a current basis with no offsets or claims, and there are not, to Tenant’s knowledge, any uncured defaults on the part of Landlord hereunder (or specifying the offsets, claims, or defaults, if any are claimed). It is expressly understood and agreed that any such statement may be relied upon by any prospective purchaser or encumbrance of all or any portion of the Building or by any other person to whom it is delivered. If Tenant fails to deliver the statement within the aforesaid ten (10) business day period, and such failure is not cured within five (5) business days after written notice thereof is given by Landlord to Tenant, Tenant’s failure to so deliver the statement shall constitute an Event of Tenant Default under this Lease.

SECTION 30

NOTICE

30.01Any notice from Landlord to Tenant or from Tenant to Landlord shall be in writing and may be served personally or by mail. If served by mail, notices shall be mailed by registered or certified mail, return receipt requested, addressed as follows:

If to Tenant:

(Prior to the Initial Premises Commencement Date):

Thermo BioStar, Inc.

6655 Lookout Road

Boulder, CO 80301

Attn: Facilities Director

With copy to:

Thermo Electron Corporation

81Wyman Street, Waltham, MA 02454

Attn: General Counsel

With copy to:

CRESA Partners

7979 E. Tufts Avenue Parkway, Suite 810

Denver, CO 80237

Attn: Bruce Glass and Jim Cloud

(After the Initial Premises Commencement Date):

At the Premises

Attn: Facilities Manager

With copy to:

Thermo Electron Corporation

81 Lyman Street, Waltham, MA 02454

attn: General Counsel

If to Landlord:

At the address designated in Section 4.02, or as from time to time established for the payment of Rent. (With copy to Landlord’s mortgagee, if applicable, pursuant to Section 22.02).

Notices shall be effective when delivered, if served personally, or three (3) days after mailing, if mailed. If no one at the Premises is available to accept the notice, then it shall be deemed effective upon the second refusal or uncompleted mail delivery attempt. Additional notice requirements are contained in Section 22.02.

SECTION 31

RIGHTS RESERVED

31.01Landlord reserves the following rights, exercisable without notice and without liability to Tenant for damage or injury to property, person, or business, and without effecting an eviction, constructive or actual, or disturbance of Tenant’s use or possession, or giving rise to any claim for set-off or abatement of rent:

(a) To change the Building’s name or street address, Landlord shall pay all reasonable costs incurred by Tenant resulting from any such change of name or address;

(b) To install, affix, and maintain any and all signs on the exterior and interior of the Building, but not the interior of the Premises;

(c) To retain at all times, and to use in appropriate instances as specifically set forth herein, keys to all doors within and into the Premises. No locks or bolts shall be altered, changed, or added without the prior written consent of Landlord;

(d) To have and retain a paramount title to the Premises, free and clear of any act of Tenant.

SECTION 32

REAL ESTATE BROKER

32.01Tenant represents that Tenant has dealt directly with Corporate Facility Consulting, Inc., dba CRESA Partners in connection with this Lease, and that insofar as Tenant knows, no other broker

negotiated or participated in the negotiations of this Lease, or submitted or showed the Premises, or is entitled to any commission in connection herewith. Landlord acknowledges prior notice that CRESA Partners has acted on behalf of Tenant as Tenant’s Agent. Payment of a Cooperating Brokerage Commission for services relative to this Lease shall be the responsibility of the Landlord, pursuant to separate written agreement between Landlord and CRESA Partners, and is a material condition of the Lease. Any failure to pay the Cooperating Brokerage Commission to CRESA Partners, as and when due, shall be a condition of Landlord Default.

SECTION 33

MISCELLANEOUS PROVISIONS

33.01(a) The words “re-enter”, or “re-entry”, as used in this Lease, are not restricted to their technical legal meaning. The term “Landlord”, as used in this Lease, means only the Landlord from time to time, and upon conveying or transferring its interest, to a successor accepting all obligations and liability of Landlord upon such transfer, Landlord shall be relieved from any further obligation or liability pursuant to Section 27.

(b) Time is of the essence of this Lease and of each and all of its provisions.

(c) Submission of this instrument for examination or signature by Tenant does not constitute a reservation of or an option for lease, and it is not effective as a lease or otherwise until execution by both Landlord and Tenant.

(d) The invalidity or unenforceability of any provision in this Lease shall not affect or impair any other provisions.

(e) This Lease shall be governed by and construed pursuant to the laws of the State of Colorado.

(f)  Should any mortgagee or beneficiary under a deed of trust require a reasonable modification of this lease, which modification will not bring about any increased cost or expense to Tenant or will not in any other way substantially or materially change the rights and obligations of Tenant or otherwise negatively impact Tenant’s use and enjoyment of the Premises, Building, and Property hereunder, then and in such event, Tenant agrees that this Lease may be so modified.

(g) All rights and remedies of Landlord under this Lease, or those which may be provided by law, may be exercised by Landlord in its own name individually, or in its name by its agent, and all legal proceedings for the enforcement of any rights or remedies, including distress for rent, unlawful detainer, and any other legal or equitable proceedings, may be commenced and prosecuted to final judgment and be executed by Landlord in its own name individually or in its name by its agent. Landlord and Tenant each represent to the other that each has full power and authority to execute this Lease and to make and perform the agreements herein contained, and Tenant expressly stipulates that any rights or remedies available to Landlord, either by the provisions of this Lease or otherwise, may be enforced by Landlord in its own name individually or in its name by its agent or principal.

(h) The marginal headings and titles to the paragraphs of this Lease are not a part of this Lease and shall have no effect upon the construction or interpretation of any part hereof.

(i) Tenant and Landlord acknowledge that there are no covenants, representations, warranties, agreements, or conditions, expressed or implied, collateral or otherwise, forming part of or in any way effecting or relating to this Lease except as expressly set out in this Lease and the attachments and exhibits to this Lease, and that the terms and provisions of this Lease may not be modified or amended except by written instrument by both Landlord and Tenant.

(j) Landlord shall not change the name of the Building, nor shall Landlord materially modify the Site, Building, or Premises, without Tenant’s prior written consent, at Tenant’s discretion, which consent shall not be unreasonably withheld or delayed. Landlord shall not name the Property, Project, or Building after any competitor of Tenant.

SECTION 34

SUCCESSORS AND ASSIGNS

34.01Subject to the terms and provisions of Section 27, the covenants and conditions contained in this Lease shall apply to and bind the respective heirs, successors, executors, administrators, and assignees of the parties hereto, and the terms “Landlord” and “Tenant” shall include the successors and assignees of either such party, whether immediate or remote.

SECTION 35

QUIET ENJOYMENT

35.01Subject to the terms and provisions of this Lease, Landlord covenants and agrees that Tenant, upon complying with all of the obligations of Tenant under this Lease, shall peaceably and quietly enjoy the Premises and Tenant’s rights under this Lease during its Term, without hindrance by Landlord or any persons claiming under Landlord.

SECTION 36

RECORDING

36.01This Lease shall not be recorded by Landlord or Tenant.

SECTION 37

RELIANCE BY LANDLORD

37.01As of the date of executing this Lease, the Premises consist of unimproved real property. Landlord shall proceed with construction of the Building and Premises in reliance upon Tenant’s covenants, obligations and representations contained in this Lease. Tenant hereby acknowledges and accepts Landlord’s reliance in this regard. As additional consideration from Tenant to Landlord, Tenant hereby agrees to provide, after proper written notice from Landlord, updated business financial statements then available to the general public.

SECTION 38

OPTION TO EXTEND

38.01(a) Option to Extend Primary Term. Tenant shall have two options to extend the term of this Lease (each an “Option to Extend”) for an additional five years each (each an “Extended Term”) upon all the same terms and conditions of this Lease, excepting only that Base Rent shall be determined as provided in paragraph (b) below.

(b)Base Rent during each Extended Term.

(i)The monthly Base Rent payable during the each Extended Term, as applicable, shall be Fair Market Rent. For purposes hereof, “Fair Market Rent” shall mean the effective base rental rates (including periodic adjustments to such base rental rates) and shall reflect an arms length transaction with then current market economics including rent, expense treatment, allowances, and other costs/inducements then being received for premises of similar size and quality to the Premises, located in similar “flex” buildings in the Colorado Tech Center area which are similar in size and quality to the Property, leased for terms of approximately five years, and otherwise subject to leases containing substantially similar terms as those contained in this Lease. “Fair Market Rent” shall not include any rental value attributable to improvements, alterations, fixtures, equipment, and personal property installed in the Premises at Tenant’s expense.

(ii)Each Option to Extend shall be exercised by Tenant’s giving notice of such exercise to Landlord not less than one year prior to the expiration of the term then in effect (i.e. the Initial Term or the first Extended Term). Landlord will then provide written notice to Tenant specifying Landlord’s proposed terms for extension of the term of the Lease for the applicable Extended Term, no less than eleven (11) months prior to the expiration of the term then in effect. Tenant shall then have no less than thirty (30) days to notify Landlord in writing of its desire to negotiate terms for extension. If, eight (8) months prior to the expiration of the term then in effect, the parties have not reached agreement, each party

shall appoint an Appraiser (hereinafter defined) and shall give notice to the other party of the identity of the Appraiser no later than seven and one half (71/2) months prior to the expiration of the term then in effect. For purposes hereof, “Appraiser” means a real estate broker or MAl designated appraiser, in either case with not less than 5 years of full time commercial appraisal or brokerage experience in the Louisville, Colorado area and with no prior business dealings with the party appointing such Appraiser.

If either party fails to timely appoint an Appraiser, the sole Appraiser appointed shall determine the Base Rent to be charged during the applicable Extended Term, based on the criteria described in paragraph (b)(i) above. If two Appraisers are appointed, they shall  immediately meet and attempt to agree upon such Base Rent. If they are unable to do so within 15 days after their first meeting, they shall jointly appoint a third Appraiser and the third Appraiser shall make such determination within 10 days of his/her appointment.

The determination of Base Rent as provided herein shall be binding upon the parties hereto. Promptly upon such determination, the parties shall execute an amendment specifying the Base Rent payable during the applicable Extended Term.

If Tenant elects to exercise Tenant’s second Option to Extend then costs excluded from Operating Costs as described at 5.03(b)(xi) and 5.03(b)(xvii) of this Lease shall be included as operating expense and recovered from Tenant as follows:

1) Such costs shall be amortized over the extended useful life of asset;

2) Monthly amortization will be recovered by Landlord from Tenant over the remaining extended term of the Lease.

SECTION 39

Intentionally omitted.

SECTION 40

REFERENCE TO RIDER

The Rider attached hereto and made a part hereof contains additional provisions of this Lease.

IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the respective dates set forth below with the intent to be legally bound thereby as of the Effective Date of this Lease first above set forth,

			LANDLORD
			THE PARK AT CTC, LLC, a Colorado limited
			Liability company,
Date:	June 25	, 2001	By:	/s/Donald J. Marcotte
			Name:	Donald J. Marcotte
			Its:	Managing Member
			TENANT
			Thermo BioStar, Inc., a Delaware Corporation
Date:	June 25	, 2001	By:	/s/Noel Doheny
			Name:	Noel Doheny
			Its:	President

This Rider is attached to the lease between Thermo BioStar, Inc., a Delaware corporation, and The Park at CTC,LLC, a Colorado limited liability company dated the 25^th day of June, 2001 (“Lease”). In the event of any conflict between the provisions of the body of the Lease and the provisions of this Rider, the provisions of this Rider shall control.

1. Corporate Guaranty. The Lease shall be guaranteed by the credit of Thermo Electron Corporation, a Delaware corporation, according to the terms – and provisions of Exhibit F attached to and made a part of the Lease.

2. Expansion. Inaddition to Tenant’s fixed growth into the Contiguous Space as described in the Lease, Tenant shall have the option to lease additional space within the Building, as follows:

The Building will be designed, planned, and approved for construction at a total capacity of approximately 105,000 usable/rentable square feet. The space in the Building totaling approximately 30,000 usable/rentable square feet, adjacent to but not a part of the Initial Premises and the Contiguous Space, shall be referred to herein as “Expansion Space” as shown on Exhibit B-2. Tenant shall have the first right to expand into the Expansion Space pursuant to the terms described below. Tenant’s right to lease the Expansion Space shall be ongoing; available to Tenant at any time throughout the term of the Lease.

In the event the Expansion Space, or any portion thereof, is unencumbered by lease to third party tenant(s), and Tenant provides written notice to Landlord on or prior to the last day of the second (2nd) year of the initial Term, indicating its desire to lease any portion of the then unencumbered Expansion Space, Tenant shall have the right to lease such portion or all of the Expansion Space and the terms for such expansion by Tenant shall be the same as those for the Premises pursuant to the Lease, including the Expiration Date of the Lease. Base Rent for such expansion space will be the then current Base Rent as stated in the Lease for the Premises (per rentable square foot), and the Improvement Allowance stated in the Lease will apply to the Expansion Space but will be prorated to reflect the then remaining term of the Lease. Landlord shall be responsible for completion and payment of construction of the Base Building Conditions for the Expansion Space as described in the Base Building Conditions attached to the Lease. Tenant shall then utilize its applicable Improvement Allowance for construction of improvements within the Expansion Space.

In the event Tenant initiates expansion after the second (2nd) year of the initial Term, the Base Rent for the expansion space shall be in Fair Market Rent, as such term is defined in Section 38 of the Lease, and shall be determined using the same method set forth in such section. The other terms for such expansion shall be subject to good faith negotiation between Landlord and Tenant, and shall include appropriate Improvement Allowances, and other terms and concessions pursuant to the then current commercial office market for like space, and may include negotiation of any applicable extension of the initial Lease Term desired by both parties at that time. Any expansion of the Premises during the last year of the initial Lease Term will require extension of the Lease for the entire Premises, subject to the determination of Base Rent during such extended term in accordance with Section 38 of the Lease.

In the event Tenant desires expansion space which cannot be reasonably accommodated in Expansion Space, Landlord agrees to use commercially reasonable efforts to provide such expansion space in other building(s) owned or controlled by Landlord within close proximity to the Building, including other building(s) in similar commercial office parks owned or controlled by Landlord. This may include good faith discussion and negotiations for construction of a new facility by Landlord for expansion or possibly for relocation of the entire Premises to a location acceptable to Tenant. Any such expansion into other building(s) will be subject to agreement by both parties in writing, to which neither party will be obligated, but for which both parties agree to discuss and negotiate in good faith.

Any expansion by Tenant initiated during the first three (3) years of the initial Term shall include a pro-rated cooperating brokerage commission to CRESA Partners, payable by Landlord. Any expansion by Tenant initiated after the first three (3) years of the initial Term shall include a cooperating brokerage commission to CRESA Partners, payable by Landlord, if Tenant engages CRESA for assistance with its expansion requirements at that time.

3. Parking. Landlord will provide for Tenant’s use, at no additional cost throughout the Term including any Extended Term no less than 3.3 parking spaces per 1,000 rentable square feet of the Premises. Such parking spaces shall be provided on the surface lot adjacent to the Building, as shown on

the final parking layout attached as Exhibit B-2. The number of Tenant parking spaces will increase with any expansion of Tenant’s Premises into the Contiguous Space and any Expansion Space, at the same ratio as the original parking allotment. Landlord shall designate “visitor” parking spaces near the front entry/access to the Premises in sufficient amounts to allow easy access for all visitors of Tenant. All parking for the Building will be on a first-come/first-served basis unless Tenant desires to designate any reserved spaces which Tenant may so designate with Landlord’s reasonable approval. Landlord shall use commercially reasonable efforts to prevent any parties other than Tenant (or other tenant(s) leasing space in the Building and lawfully parking on the Property at the same ratio as Tenant’s parking ratio) from parking in the lot adjacent to the Building. In the event other tenant(s) or third parties consistently utilize Tenant’s parking areas in a manner other than described herein, Landlord shall use commercially reasonable efforts to cause such parties to comply with parking restrictions in order to allow Tenant access and use of its parking spaces as described herein.

4. Lease Assumption. Landlord acknowledges that Tenant has a current and remaining lease obligation for 6655 Lookout Road in Boulder, Colorado under that certain Net Lease Agreement dated September 10, 1992 between Nationwide Life Insurance Company, as lessor, and BioStar, Inc., as lessee, which was modified and extended pursuant to that First Amendment to Net Lease Agreement dated March 4, 1998 (the “Lookout Road Lease”), and Landlord is aware of the terms of the Lookout Road Lease through lease documentation provided to Landlord by Tenant. Each of Tenant’s obligations under the Lookout Road Lease is referred to herein as a “Lease Obligation” and collectively as the “Lease Obligations”. Tenant and Landlord shall work in good faith to eliminate or dispose of the Lease Obligations via lease termination and/or via assignment or subletting of the Lookout Road Lease prior to the expiration of the term of the Lookout Road Lease which is August 31, 2003 (the “Disposition”). The terms of such Disposition shall be approved in writing by both Landlord and Tenant, and such approval shall not be unreasonably withheld, provided that such Disposition shall contain a full and complete release of Tenant from all Lease Obligations. In the event Landlord is successful in negotiating a Disposition of the Lease Obligations prior to the date that is six (6) months after the Initial Premises Commencement Date (“Disposition Date”), Tenant shall pay the reasonable costs incurred by Landlord in obtaining the Disposition, including concessions, allowances, brokerage commissions and other standard marketing costs, and reasonable attorney fees, not to exceed the amount Tenant would have otherwise paid as Base Rent under the Lookout Road Lease for the period beginning on the effective date of the Disposition through the Disposition Date. All other costs in obtaining the Disposition shall be paid by Landlord. Landlord acknowledges that Tenant may reject any such Disposition, or may require modification of the terms for any such Disposition, if in the reasonable opinion of Tenant such Disposition creates a burden, risk, or cost to Tenant in excess of the burden/risk/cost created by Landlord’s assumption of the Lease Obligation as described in the following paragraph.

In any event and without regard to whether Landlord has succeeded in negotiating an acceptable Disposition, the Lease Obligations from and after the Disposition Date shall be the obligation of Landlord as if Landlord were the tenant under the Lookout Road Lease, subject to the rights of any third party tenant then subleasing any or all of such space. Landlord shall make payments and shall assume all other of Tenant’s responsibilities according to the Lookout Road Lease as of the Disposition Date, and shall indemnify and hold Tenant harmless from and against any liability or cost arising from the Lookout Road Lease and the Lease Obligations other than such liability or costs due to the negligence or misconduct of Tenant, its agents, employees, or contractors.

Notwithstanding the foregoing, if Landlord is not successful in negotiating a successful Disposition prior to the Disposition Date, then the Lease Obligations up to and including the Disposition Date shall remain the obligation of Tenant.

5. Purchase Option. Tenant shall have a right and option to purchase the Property, including the Building and all improvements to the site (“Purchase Option”) in accordance with the terms and conditions of this section. Tenant shall exercise its Purchase Option, if at all, by providing written notice thereof (“Purchase Notice”) to Landlord not later than three (3) months prior to the fifth (5th) anniversary of the initial Term. If Tenant delivers the Purchase Notice to Landlord within the required time period, the Property shall be sold to Tenant for a purchase price equal to $168.00 per rentable square foot of the Building (“Purchase Price”) to be paid at the Closing (as defined herein). The terms, covenants and conditions of such purchase and sale shall be set forth in a Purchase and Sale Agreement (“PSA”) to be entered into by Landlord and Tenant prior to the fifth (5th) anniversary of the initial Term. The PSA shall contain terms reasonably acceptable to both Landlord, as seller, and Tenant, as purchaser, but shall at a minimum contain the following provisions: (i) reasonable periods of time for Tenant to conduct its due diligence review of title and inspections of the Property, including obtaining an updated ALTA survey for

the Property, (ii) a requirement for the issuance of an ALTA owner’s policy of title insurance to Tenant  in form and substance acceptable to Tenant, including the appearance or deletion of exceptions and issuance of endorsements as acceptable to Tenant, at the closing of the purchase and sale (“Closing”), (iii) a representation by Landlord regarding hazardous materials compliance, zoning compliance, and compliance with other laws relating to the Property, (iv) an agreement by Landlord to cooperate with any §1031 exchange by Tenant, and (v) a requirement that Landlord provide Tenant with tenant estoppel certificates in form and substance reasonably acceptable to Tenant from all other tenants of the Property. Landlord agrees that the Closing may be coordinated in order to facilitate Tenant’s §1031 exchange, provided, however, that the Closing shall not occur later than one hundred eighty (180) days after the fifth (5th) anniversary of the initial Term.

[Remainder of page intentionally left blank.]

IN WITNESS WHEREOF, Landlord and Tenant have executed this Rider as of the respective dates set forth below with the intent to be legally bound thereby as of the Effective Date of this Lease first above set forth,

			LANDLORD
			THE PARK AT CTC, LLC, a Colorado limited
			Liability company,
Date:	June 25	, 2001	By:	/s/Donald J. Marcotte
			Name:	Donald J. Marcotte
			Its:	Managing Member
			TENANT
			Thermo BioStar, Inc., a Delaware Corporation
Date:	June 25	, 2001	By:	/s/Noel Doheny
			Name:	Noel Doheny
			Its:	President

EXHIBIT A

Commencement Date Agreement

EXHIBIT “A”

To the to the lease between Thermo BioStar, Inc., a Delaware corporation and The Park at CTC, LLC, a Colorado limited liability company dated the 25^th day of June, (“Lease”).

LEASE COMMENCEMENT AGREEMENT

This Lease Commencement Agreement, referenced in and attached to the Lease, is dated this                day of                             , 2001.

Landlord and Tenant acknowledge and agree to the following:

1.The actual Commencement Date of the Lease is the              day of                 , 200    .

2.The Expiration Date of the Lease is the April 30, 2009.

3.The size of the Building is          rentable/usable square feet.

4.The size of the Initial Premises is             rentable/usable square feet.

5.The size of the Contiguous Space is                rentable/usable square feet.

6.Tenant’s Proportional Share for the Initial Premises is                          %

7.Tenant’s Proportional Share for the entire Premises, upon occupancy of the Contiguous Space, is                            %

8.Base Rent is as shown on the attached schedule.

9.Tenant’s Initial Improvement Allowance applicable to the Initial Premises, based on $35.10 Per rentable square foot of the Initial Premises is $                       .

10.Tenant’s Contiguous Improvement Allowance, applicable to the Contiguous Space, based on $35.10 per rentable square foot of the Contiguous Space, is $            .

11.The portion of the Contiguous Improvement Allowance allocated for improvements by Landlord within the Contiguous Space, is $      per rentable square foot of the Contiguous Space, for a total of $                        .The remainder of the Contiguous Improvement Allowance to be provided by Landlord to Tenant on the date specified in the Lease, is $                                  per rentable square foot of the Contiguous Space, for a total of $                                   .

Acknowledged and Agreed:

Landlord:	The Park at CTC, LLC,	Tenant: Thermo BioStar, Inc.,
	a Colorado limited	a Delaware corporation
	liability company
(Authorized Signature)		(Authorized Signature)
(Title)		(Title)
(Date)		(Date)

EXHIBIT B-3

Plans and Drawings for the Building and site improvements

EXHIBIT C

Base Building Conditions

EXHIBIT “C”

To the lease between Thermo BioStar, Inc., a Delaware corporation and the Park at CTC, LLC, a Colorado limited liability company dated the 25^th day of June, 2001 (“Lease”)

BASE BUILDING

For the purpose of completing the Base Building and preparing the Building for improvements within the Premises, Landlord shall provide, at Landlord’s sole cost, the following Base Building Conditions, applicable to the entire Premises of approximately 75,000 rentable/usable square feet.

•Structure: Concrete tilt up walls, steel columns, trusses and barjoist with metal roof deck

•Floors leveled to a tolerance of not more than ¼’ variance over 12’. Construction of the concrete slab/floor shall include isolation of, and reasonable reinforcement OF, a small portion of the floor (approximately 250 square feet), for compliance with specifications of specified equipment of Tenant, to be located as determined by Tenant prior to construction. Tenant shall submit specifications to Landlord for such floor isolation/reinforcement, subject to review and reasonable approval of Landlord.

•Elevators, if required by code or other regulations for use of any mezzanine or above ground level of the Premises/Building. Landlord shall install one elevator for the use by Tenant and one elevator for the use of other tenant(s) of the Building.

•Partitions demising the Premises from any “common areas” of the Building (such as main hallways, lobbies, bathrooms, etc), partitions demising the Premises from the Contiguous Space, and all partitions, ceilings, and flooring for completion of any common areas, including but not limited to any common area hallway partitions required to meet code. All partitions installed as part of the Base Building shall be finished on the Premises side. The common area/lobby side shall be painted/treated by Landlord according to the final design for such areas. The demising walls for the Contiguous Space shall be furred by Landlord, at Landlord’s cost, in preparation for finish by Tenant to be paid from the Improvement Allowance.

•Heating, ventilation, and cooling systems, to include an average of 350 sf/ton throughout the Premises. Distribution and balancing will be paid from the Improvement Allowance. Tenant may supplement the HVAC systems upon reasonable approval of Landlord, to be paid from the Improvement Allowance

•2000 amp, 277/480 volt, 3-phased power supplied to Tenant’s Operations areas, plus minimum 8 Watts/RSF supplied within Tenant’s Office/Laboratory areas, the total supplied by no more than five (5) points within the Premises. Distribution of power within the Premises will be paid fRom the Improvement Allowance. Tenant may supplement the power supply upon reasonable approval of Landlord, to be paid from the Improvement Allowance.

•Metering for electrical and gas services supplied to the Building.

•Plumbing systems, to include minimum of three inch (3”) water supply and four inch (4”) waste system throughout, including a minimum of six (6) floor drains/sinks. Location of floor drains/sinks shall be determined by Tenant. Landlord agrees to coordinate and complete the Base Building slab/foundation/plumbing systems in a manner consistent with Tenant’s plumbing plans in order to reduce Tenants costs associated with drains, floor sinks, and general distribution of plumbing. Tenant may supplement the plumbing systems upon reasonable approval of Landlord, paid from the Improvement Allowance. If Landlord and Tenant agree that less than a 3” line water supply will meet Tenant’s current and future requirements then such reduced water supply will be used. Any construction cost savings resulting from reducing water supply will be credited to Tenant.

•Ceiling height at a minimum of 9 feet clear in Office/Laboratory areas, a minimum of 9 feet clear in the Operations areas, and a minimum of 16 feet clear in up to 8,000 RSF of warehouse/shipping areas.

•Site and Building infrastructure, including but not limited to curb and gutter, paving, ingress/egress, landscaping, automobile parking, truck and trailer access/turning/parking, parking striping and signage, other exterior signage (pursuant to city approval and permit), drainage, and any other code related requirements.

•Two sets of mens/women’s restrooms (one set within the Office/Laboratory area and one set within the Operations area) with adequate fixtures for Tenant’s intended use, as determined by Tenant in its reasonable discretion, in compliance with all codes and regulations.

•ESFR sprinkler systems in the warehouse and standard sprinkler system throughout the core/shell and interior spaces, distributed according to final Plans and Specifications.

•Communications infrastructure including service entrance, and demark points at electrical and communications rooms, for  voice services, and fiber. Landlord warrants that communications fiber is available to the Building at no cost to Tenant other than the specific monthly/usage charges pursuant to contract(s) between Tenant and such service providers.

•Exterior lighting of the Site, Building, and parking lot.

•Power lighting, on one face of the Building for Tenant’s signage, and a monument sign adjacent to the Building (also powered/lit) for exclusive use by Tenant and any other tenant within the Building. Graphics and lettering for such signage are to be provided by Tenant, subject to separate city approval and permits, to be paid from the Improvement Allowance. Tenant shall have exclusive rights to Building and monument signage.

•Any additional costs associated with increased standard floor loads for the second floor of Tenant’s Premises in excess of the standard 40 lb. loading shall be paid for by Tenant.

Tenant may install a security system for Tenant’s specific use, to be paid from the Improvement Allowance or direct by Tenant, at Tenant’s discretion.

All portions of the Site, Building, and Premises are to be constructed in a good and workmanlike manner with new, high quality materials, and are to be constructed in compliance with all applicable national and local codes including but not limited to ADA, fire and safety, environmental, and other regulations having jurisdiction over the project, as part of the Base Building Conditions.

EXHIBIT D

PROJECT SCHEDULE

EXHIBIT E

Work Letter

EXHIBIT E

WORK LETTER

This Work Letter, dated June 25, 2001, referenced in the Lease of even date herewith (the “Lease”) wherein Thermo BioStar, Inc., a Delaware corporation (“Tenant”) has agreed to lease certain office space from The Park at CTC, LLC, a Colorado limited liability company (“Landlord”) at property known as The Park at CTC, Louisville, Colorado, and more fully described in said Lease. Unless otherwise defined herein, all capitalized terms used herein shall have the respective meanings assigned in the Lease.

1.Tenant Improvements.

(a)Any improvements to be made within the Premises for the benefit of Tenant, whether within the Initial Premises, Contiguous Space or Expansion Space, which are not a part of the Base Building, shall be referred to herein and in the Lease as the “Tenant Improvements”. The parties hereto expressly acknowledge and agree that the Tenant Improvements within the Initial Premises are to be constructed by Landlord pursuant to the terms and conditions of this Work Letter. Where Tenant elects in conformance with the Lease to require Landlord to perform the Tenant Improvements within the Contiguous Space or Expansion Space, then this Work Letter shall be applicable to the performance of the same, except that Landlord shall generate a new Project Schedule for Tenant’s approval.

(b)Within the time period set forth in the Project Schedule, Landlord shall cause its architect (“Landlord’s Architect”, which for purposes of the Initial Premises shall be Intergroup Architects) to prepare drawings for the Tenant Improvements (“Tenant Improvement Drawings”) contemplated by Tenant, and the same shall include (i) details of space occupancy; (ii) sprinkler locations; (iii) reflected ceiling plans; (iv) partition and door locations; (v) electrical and mechanical plans and components, including details of capacity, location and configuration; (vi) telephone plans noting any special requirements; (vii) fire safety and security systems; (viii) detail plans; and (ix) finish plans and schedules. Tenant shall have the right to approve all aspects of the Tenant Improvement Drawings. Landlord’s Architect shall prepare and revise the Tenant Improvement Drawings pursuant to Tenant’s comments and requirements and shall deliver to Landlord and Tenant such revised documents, noting any changes from previous versions for Landlord’s and Tenant’s approval. Review and revision of the Tenant Improvement Drawings shall continue until the Tenant Improvement Drawings are approved by Landlord and Tenant, which approval shall not be unreasonably withheld or delayed. Both Landlord and Tenant shall work in good faith and shall coordinate their respective efforts in order to complete the drawings at the earliest reasonable time. The final Tenant Improvement Drawings, when approved, by Landlord and Tenant, are referred to herein as the “Final Plans”. Landlord or Tenant, as applicable, shall construct the Tenant Improvements in a good and workmanlike manner in conformance with the Final Plans.

2.Cost and Performance of Tenant Improvements.

(a)Work Cost Estimate and Statement. Prior to the commencement of construction of any of the Tenant Improvements shown on the Final Plans, Landlord will submit to Tenant a written estimate of the cost to complete the Tenant Improvements, which written estimate will be based on the Final Plans and a guaranteed maximum price construction contract, taking into account any modifications which may be required to reflect changes in the Final Plans required by the City or County in which the Premises are located (the “Work Cost Estimate”). Tenant will either approve the Work Cost Estimate or disapprove specific items and submit to Landlord revisions to the Final Plans to reflect deletions of and/or substitutions for such disapproved items. Submission and approval of the Work Cost Estimate will proceed in accordance with the Project Schedule. Upon Tenant’s approval of the Work Cost Estimate, the same shall be hereinafter known as the “Work Cost Statement”.

(b)Tenant will pay the cost of the Tenant Improvements set forth in the Work Cost Statement, including but not limited to actual costs incurred for all design and planning by Landlord’s Architect, design or engineering firms, and the costs of construction, including labor, Tenant’s project management, supervision, and cleanup costs. Landlord shall apply the Improvement Allowance to the cost of the Tenant Improvements in conformance with Section 3 of the Lease. If the cost of the Tenant Improvements exceeds the Improvement Allowance, then Tenant shall pay the difference to Landlord within thirty (30) days from written notice from Landlord, which notice shall be accompanied in each instance by an invoice or other evidence of the relevant work cost item. Tenant shall have the right to audit the books and records of Landlord at any time during the construction of the Tenant Improvements or within thirty (30) days of any demand by Landlord for payment of excess costs above the Improvement

Allowance for the purpose of determining whether Landlord has appropriately and duly incurred any cost item applied towards the cost of the Tenant Improvements. If Tenant’s audit reveals that a work cost item was inappropriately charged against the cost of the Tenant Improvements, then such work cost items shall be deducted from the total cost of the Tenant Improvements, and reimbursed to Tenant if previously paid.

(c)Before commencing any work relating to the Tenant Improvements, Landlord shall seek competitive bids from not less than three (3) general contractors for the guaranteed maximum price construction contract. Tenant shall have the right to approve of the general contractor selected. Tenant shall also have the right to approve of all cost components of the construction contract to the extent they vary from the Work Cost Statement. Subject to Tenant’s right to select an alternate contractor, and subject to Landlord’s reasonable approval of any alternate contractor, the parties have tentatively selected Golden Triangle Construction as the general contractor for the construction of the Tenant Improvements within the Initial Premises. The final general contractor selected by the parties shall request not less than three (3) competitive bids for all subcontract work to be performed, except where otherwise agreed between Tenant and Landlord, and will provide to Tenant a breakdown of all costs prior to the commencement of any work.

(d)Notwithstanding any other provision of this Work Letter, Tenant shall have the right to approve of all plans, specifications, and costs prior to commencement of any and all Tenant Improvements, and Landlord shall fully inform Tenant of any other expenses related to the Tenant Improvements, whether from the Improvement Allowance or to be paid directly by Tenant, including but not limited to any change orders, prior to the commencement of such work.

(e)The cost of Tenant Improvements to be paid from (and to the extent of) the Improvement Allowance, shall include any and all costs/fees associated with construction related activities for completion of the Tenant Improvements which are approved by Tenant’s Project Manager, including but not limited to (i) preparation and modification of the Tenant Improvement Drawings by architect, design, or engineering firms, (ii) labor, supplies, and other associated costs for physical construction of the Tenant Improvements, (iii) consultant’s and vendor’s fees, (iv) Project Management fees to Tenant’s Project Manager as described below, (v) cabling within the Premises, and (vi) signage other than that which is provided by Landlord as part of Landlord’s Work or which is otherwise normally provided by Landlord at no cost to tenants of the Building, and (vii), all additional costs or expenses attributable to any change in the Tenant Improvement Drawings. The Improvement Allowance will not be used to pay for any bonding, or other costs charged by, at the insistence of, or on behalf of Landlord, its employees, or agents.

(f)Landlord shall cause the general contractor to perform the Tenant Improvements in accordance with the Final Plans and in a good and workmanlike manner.

(g)For purposes of this Work Letter and the Lease, the term “substantially complete” shall mean when the general contractor certifies in writing to Landlord and Tenant that Landlord has substantially completed all of the Tenant Improvements or Base Building, as applicable, other than decoration and minor “punch list” type items and adjustments which do not materially interfere with Tenant’s access or use of the Premises.

3.Acceptance of Base Building and Tenant Improvements.

(a)Base Building. Tenant’s Project Manager or other representative authorized by Tenant shall conduct an inspection of the Base Building with Landlord or Landlord’s authorized representative within twenty one (21) days after written notification to Tenant’s Project Manager that Landlord deems that the Base Building is substantially complete, and shall provide Landlord with a “punch list” of all items to be completed and/or corrected. Any items not on such “punch list” shall be deemed accepted by Tenant, except for latent defects. Landlord shall correct any “punch list” item or latent defect at its sole cost and expense within a reasonable period of time thereafter, and in any event shall commence completion of the “punch list” items and/or correction of a latent defect within three (3) days of receipt of Tenant’s notice, and shall complete the “punch list” item or correction of the latent defect no later than ten (10) days after such notification, unless such completion or correction requires more than ten (10) days, and Landlord has commenced the completion or correction within the three (3) day period and diligently performs the same to completion. In the event Landlord and Tenant do not agree on as to the completion or correction of any particular “punch list” item, Landlord’s Architect shall make the final determination as to whether the same has been completed or corrected.

(b)Tenant Improvements. Landlord shall provide Tenant with ten (10) days prior written notice of the date on which the Tenant Improvements shall be substantially completed by Landlord.

Tenant’s Project Manager or other representative authorized by Tenant’s Project Manager shall then conduct an inspection of the Premises with Landlord or Landlord’s representative within seven (7) days of the date of substantial completion. Within said seven (7) day period, a “punch list” will be prepared by Tenant’s Project Manager or another authorized representative of Tenant, describing “punch list” items to be completed and/or corrected by Landlord. Any items not on such “punch list” shall be deemed accepted by Tenant, except for any latent defects. Landlord shall correct any “punch list” item or latent defect at its sole cost and expense within a reasonable period of time thereafter, and in any event shall commence completion of the “punch list” items and/or correction of a latent defect within three (3) days of receipt of Tenant’s notice, and shall complete the “punch list” item or correction of the latent defect no later than ten (10) days after such notification, unless such completion or correction requires more than ten (10) days, and Landlord has commenced the completion or correction within the three (3) day period and diligently performs the same to completion. In the event Landlord and Tenant do not agree on as to the completion or correction of any particular “punch list” item, Landlord’s Architect shall make the final determination as to whether the same has been completed or corrected.

(c)Latent Defect. A “latent defect” is a defect in the condition of the Base Building or Premises discovered within the first twelve (12) months from the Commencement Date which defect is not observed during the relevant walk-through inspection.

4.Miscellaneous.

(a)Landlord and Tenant shall work in good faith for completion of construction of the Base Building and Tenant Improvements at the lowest practical cost and at the earliest reasonable time consistent with the intended scope, image, and budget/schedule for the project, subject to the terms and provisions outlined in this Work Letter and the Lease. Landlord acknowledges that this may include, but is not limited to, the possibility of staged construction and/or temporary permits for construction and occupancy of all or a portion of the Premises as of April 15, 2002.

(b)This Work Letter is being executed in conjunction with the Lease and is subject to each and every term and condition thereof, including, without limitation, the limitations of Landlord’s and Tenant’s liability set forth therein.

( c)Landlord’s Architect and the general contractor selected shall be responsible for determining all physical dimensions of the Premises and the Building which affects any work to be performed by or for Tenant hereunder.

(d)Tenant’s Project Manager is CRESA Partners. Tenant’s Project Manager shall approve all plans and costs for Tenant Improvements, in writing, prior to commencement of such work, shall approve all change orders, in writing, prior to commencement of work related to any such change orders, and shall approve all invoices and payment requests prior to disbursement by Landlord ofany related funds from the Improvement Allowance.

Dated this 25^th day of June, 2001.

Landlord:		Tenant:
The Park at CTC, LLC,		Thermo BioStar, Inc., a Delaware corporation
A Colorado limited liability
Company
By:	/s/Donald J. Marcotte	By:	/s/Noel Doheny
Name:	Donald J. Marcotte	Name:	Noel Doheny
Title:	Managing Director	Title:	President
Date:	6/25/01	Date:	6.25.01

EXHIBIT F

Guaranty

Exhibit F

GUARANTY

Thermo Electron Corporation, a Delaware corporation (“Guarantor”), hereby guarantees the payment and/or performance to The Park at CTC, LLC, a Colorado limited liability company, and/or assigns (“Obligee”) of any and all obligations of Thermo BioStar, Inc., a Delaware corporation (“Thermo BioStar”), under that certain Lease dated June 25, 2001 by and between Obligee, as landlord, and Thermo BioStar, as tenant, together with any extensions, modifications or novations thereof.

GENERAL TERMS

The Guarantor waives diligence by Obligee in collection of any indebtedness or other obligation guaranteed herein; notice of nonpayment, protest, notice of protest or other such notice.

The Obligee may:

Grant renewals, extensions or modifications of the obligation or indebtedness, with prior approval of Guarantor; surrender or release any and all security or collateral; release co-guarantors if any; all without affecting the Guarantor’s obligations herein.

The Obligee shall not have to:

First institute suit against Thermo BioStar prior to demanding payment under this guaranty; exhaust any remedies it may have against Thermo BioStar; give notice of acceptance of this guarantee; and may in its discretion seek to enforce this guarantee solely against Guarantor; provided, however, that Obligee shall first be required to apply any security deposit then held by Obligee to the performance of Thermo BioStar’s obligations guaranteed hereunder;

This is the entire agreement by guarantor and this agreement may be modified only by a written agreement executed by Guarantor.

Dated:			June 25, 2001
Guarantor
Thermo Electron Corporation,
a Delaware corporation
By:	Theo Melas-Kynazi
Name:		Theo Melas-Kynazi
Its:			CFO

EX-10.38

Exhibit 10.38

FIRST AMENDMENT TO LEASE

This FIRST AMENDMEN TTO LEASE (this “Amendment”) is entered into this                 day of November, 2002, between Thermo Biostar, Inc., a Delaware corporation (“Tenant”) and The Park at CTC, LLC, a Colorado limited liability company (“Landlord”).

RECITALS

WHEREAS, Tenant and Landlord entered into a Lease dated June 25, 2001 (the “Lease”) for premises in that certain building commonly known as and numbered 331 South 104^th Street, Louisville, Colorado;

WHEREAS, Pursuant to the second paragraph on page 1 of the Lease Tenant has designated a portion of the Contiguous Space (as defined in the Lease) located on the first floor of said building (the “Original First Floor Contiguous Space”); and

WHEREAS, Landlord and Tenant wish to amend the Lease by replacing the Original First Floor Contiguous Space with new space on the first floor of said building, all as more particularly set forth herein.

AGREEMENT

NOW, THEREFORE, in consideration of the Recitals, which shall be deemed to be a substantive part of this Amendment, and the mutual covenants, promises and agreements contained in this Agreement, the parties hereto do hereby covenant, promise and agree as follows:

1.Contiguous Space.

a.New First Floor Contiguous Space and Second Floor Contiguous Space

From and after the date of this Amendment the “Contiguous Space” under the Lease shall be comprised of:  (i) 9,390 rentable square feet in the southwest corner of the first floor of the Building (the “New First Floor Contiguous Space”), and (ii) approximately 4,200 rentable square feet on the second floor of the Building (the “Second Floor Contiguous Space”). The Original First Floor Contiguous Space shown on Exhibit A attached hereto is hereby replaced with the New First Floor Contiguous Space. The New First Floor Contiguous Space and the Second Floor Contiguous Space are shown on Exhibit A-1 attached hereto. Exhibit B-2 of the Lease is hereby deleted and replaced with Exhibit A-1 attached hereto. The final rentable square feet area of the Second Floor Contiguous Space shall be determined as set forth in third paragraph on page one of the Lease prior to Tenant’s taking possession thereof as set forth below. Upon acceptance of possession of the Second Floor Contiguous Space by Tenant the total Premises area shall be no more than approximately 75,000 rentable square feet.

From and after the date of this Amendment: (i) Tenant shall have no rights or  obligations with respect to the Original First Floor Contiguous Space; (ii) all references to “Contiguous Space” in the Lease shall be deemed to refer collectively to the New First Floor Contiguous Space and the Second Floor Contiguous Space, except that the terms and conditions of this Amendment shall control with respect to all matters concerning the construction of Tenant Improvements in the New First Floor Contiguous Space; and (iii) Landlord hereby releases and indemnifies and agrees to hold Tenant harmless from and against all claims, liabilities, demands, actions, causes of action, costs and expenses of any kind whatsoever arising from or in connection with

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the Original First Floor Contiguous Space. Upon the New First Floor Contiguous Space Commencement Date, the New First Floor Contiguous Space shall be subject to the terms of the Lease, as amended hereunder. Until Landlord delivers possession of the Second Floor Contiguous Space under the Lease, Tenant shall have no obligations under the Lease with respect to the Second Floor Contiguous Space. The immediately preceding sentence shall not be deemed to limit Tenant’s obligation under the Lease to take possession of the Second Floor Contiguous Space as set forth in the Lease.

All of the provisions in the Lease concerning Tenant Improvements to be made to the Contiguous Space, including without limitation, Sections 2.03, 3.02, 3.03, and 3.04 of the Lease shall remain in full force and effect and are hereby ratified, provided, however, that from and after the date of this Amendment all such provisions shall apply only to the Second Floor Contiguous Space.

2.             Commencement Date:  The commencement date of the Term with respect to the New First Floor Contiguous Space shall be January 1, 2003 (the “New First Floor Contiguous Space Commencement Date”) provided that:  (i) the Tenant Improvements to be constructed by Landlord in the New First Floor Contiguous Space are “substantially complete” (as defined in Section 2(g) of the Work Letter attached to the Lease as Exhibit E and attached to this Amendment as Exhibit B (the “Work Letter”)) (ii) Tenant has received a temporary certificate of occupancy which permits Tenant’s use of the New First Floor Contiguous Space for Tenant’s intended use; (iii) the incompletion of items required for a permanent unconditional Certificate of Occupancy will not materially impact Tenant’s occupancy, use, and enjoyment of the New First Floor Contiguous Space, all as reasonably determined by Tenant; and (iv) Tenant is able to commence its intended business operations within the New First Floor Contiguous Space, subject only to the installation by Tenant of its personal property. Landlord shall deliver possession of the New First Floor Contiguous Space to Tenant on the New First Floor Contiguous Space Commencement Date with the New First Floor Contiguous Space Improvements completed, as required in this Amendment, and free of all tenants and occupants, if any, and their personal property, fixtures, and equipment, broom clean, in good working order and condition and in compliance with all applicable laws, codes, ordinances, rules and regulations. Expiration of the term for the lease of the New First Floor Contiguous Space shall be as set forth in Section 2.01 of the Lease. Landlord and Tenant shall execute a certificate memorializing the New First Floor Contiguous Space Commencement Date promptly upon determination of such date. Landlord and Tenant shall work in good faith for completion of construction of the New First Floor Contiguous Space Tenant Improvements at the lowest practical cost and at the earliest reasonable time consistent with the intended scope, image and budget/schedule for such Tenant Improvements, subject to the terms and provisions of this Amendment.

3              Base Rent. Rent payments for the New First Floor Contiguous Space shall commence on the New First Floor Contiguous Space Commencement Date. Base Rent for the New First Floor Contiguous Space shall be calculated based on the dollar per rentable square foot amount set forth in Section 4.01 of the Lease in effect on the New First Floor Contiguous Space Commencement Date and shall increase thereafter on the same dates as the Initial Premises Base Rent increases as set forth in Section 4.01, provided, however, that Rent shall be prorated on a per diem basis for any partial year and month during the term of the New First Floor Contiguous Space.

4.Improvement Allowance.

a. New First Floor Contiguous Space Improvement Allowance. The provisions of this Section 4 shall control as to the payment by Landlord and application by Tenant of an improvement allowance (the “New First Floor Contiguous Space Improvement Allowance”) for use in completing the Tenant Improvements in the New First Floor Contiguous Space. The New First Floor Contiguous Space Improvement Allowance shall be $230,154.00. The total New First Floor Contiguous Space Improvement Allowance shall be made available to Tenant upon execution of this Amendment.

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b. Tenant Improvements. The Tenant Improvements in the New First Floor Contiguous Space shall be completed pursuant to final, approved construction documents, based on the preliminary specifications and plans attached to the proposal request dated September 30, 2002, delivered by Tenant to Landlord on said date. Within five (5) business days after the date of this Amendment Landlord shall submit a Project Schedule to Tenant for Tenant’s approval, based on such preliminary specifications and plans. Landlord and Tenant shall diligently work together in good faith to agree on a Project Schedule and to finalize the specifications and plans for the New First Floor Contiguous Space Tenant Improvements (such final specifications and plans are hereinafter referred to as the “Final Plans”). Landlord shall construct or cause to be constructed the New First Floor Contiguous Space Tenant Improvements. Section 2 (with the exception of the requirement in Section 2(c) that Landlord seek competitive bids from not less than three general contractors and the second sentence of Section 2(b) and Sections 3(b) and 3(c) of the Work Letter are incorporated herein by reference and shall control with respect to the New First Floor Contiguous Space Tenant Improvements, including, without limitation, (i) the determination of the costs of the New First Floor Contiguous Space Tenant Improvements and the application thereto of the New First Floor Contiguous Space Improvement Allowance; (ii) the performance of the construction of such Tenant Improvements by Landlord; and (iii) Tenant’s acceptance of such Tenant Improvements. Landlord shall enter into a cost-plus a fixed fee and guaranteed maximum price contract with Golden Triangle Construction (“GTC”), subject to Tenant’s written approval (the “GTC Contract”). Such contract shall obligate GTC to obtain competitive bids for the construction of the New First Floor Contiguous Space Tenant Improvements, with final bids for all aspects of such Tenant Improvements to be approved by Tenant’s project manager prior to acceptance by GTC. Landlord, GTC nor any subcontractor shall make any changes to the scope and/or cost of such Tenant Improvement work, as set forth in any such accepted bids or the GTC Contract, without Tenant’s prior written approval. In addition to such Work Letter provisions, Tenant may apply the New First Floor Contiguous Space Improvement Allowance to all costs and expenses incurred by Tenant in connection with the preparation of the preliminary specifications and plans and the Final Plans. Tenant’s Project Manager shall be Robert Fraley. Tenant may designate a new Project Manager upon written notice to Landlord.

c.             Construction Costs. In the event the actual costs and expenses for planning and construction of the New First Floor Contiguous Space Tenant Improvements is less than the total New First Floor Contiguous Space Improvement Allowance, the excess amount shall be credited to Tenant in the form of abatement of Base Rent, beginning as of the first date of the month following reconciliation of all improvement costs and the New First Floor Contiguous Space Improvement Allowance and continuing until the entire excess is utilized.

5.             Agency. Tenant acknowledges that PointSource Corporate Real Estate Solutions, Inc. (“PointSource”) is acting as Tenant’s agent and that payment of a commission to PointSource related to this  Amendment is the responsibility of Tenant. Tenant warrants and agrees to save and hold Landlord harmless from any and all leasing commissions, costs and liabilities, including reasonable attorneys’ fees, with respect to this Amendment for which Tenant is responsible.

6.             Miscellaneous.

a.             Notwithstanding any provision in the Lease to the contrary, including Section 5.01, upon the New First Floor Contiguous Space Commencement Date, “Tenant’s Proportional Share” under the Lease shall be 66.6%.

7.             Definitions. Capitalized terms used without definition herein shall have the meanings assigned to them in the Lease.

8.             Full Force and Effect. To the extent not amended or modified herein, the Lease shall remain in full force and effect and is hereby ratified.

9.             Counterparts. This Amendment may be executed in one or more counterparts, each of which shall be considered an original and all of which together shall constitute one and the same Amendment.

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IN WITNESS WHEREOF, Landlord and Tenant have caused this Amendment to be duly and properly executed as of the date first set forth above.

		THE PARK AT CTC, LLC,
		A Colorado limited liability company
		By:	/s/Donald J. Marcotte 12/27/02
			Donald J. Marcotte,
			Managing Member
		THERMO BIOSTAR, INC.,
		A Delaware corporation
		By:	/s/Noel Doheny	12-9-02
			Noel Deheny, President
Accepted and acknowledged:
THERMO ELECTRON CORPORATION,
A Delaware corporation,
Guarantor of the Lease
By:	/s/Thomas J. Burke
Name:	Thomas J. Burke
Tile:	VP, Global Business Services
Date:	December 11, 2002

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EXHIBIT A

(Original First Floor Contiguous Space Floor Plan)

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6

EXHIBIT A-1

(New First Floor Contiguous Space and Second Floor Contiguous Space Floor Plans)

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8

9

EXHIBIT B

(Work Letter)

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EXHIBIT E

WORK LETTER

This Work Letter, dated June 25, 2001, referenced in the Lease of even date herewith (the “Lease”) wherein Thermo BioStar, Inc., a Delaware corporation (“Tenant”) has agreed to lease certain office space from The Park at CTC, LLC, a Colorado limited liability company (“Landlord”) at property known as The Park at CTC, Louisville, Colorado, and more fully described in said Lease. Unless otherwise defined herein, all capitalized terms used herein shall have the respective meanings assigned in the Lease.

1.             Tenant Improvements.

(a)           Any improvements to be made within the Premises for the benefit of Tenant, whether within the Initial Premises, Contiguous Space or Expansion Space, which are not a part of the Base Building, shall be referred to herein and in the Lease as the “Tenant Improvements”. The parties hereto expressly acknowledge and agree that the Tenant Improvements within the Initial Premises are to be constructed by Landlord pursuant to the terms and conditions of this Work Letter. Where Tenant elects in conformance with the Lease to require Landlord to perform the Tenant Improvements within the Contiguous Space or Expansion Space, then this Work Letter shall be applicable to the performance of the same, except that Landlord shall generate a new Project Schedule for Tenant’s approval.

(b)            Within the time period set forth in the Project Schedule, Landlord shall cause its architect (“Landlord’s Architect”, which for purposes of the Initial Premises shall be Intergroup Architects) to prepare drawings for the Tenant Improvements (“Tenant Improvement Drawings”) contemplated by Tenant, and the same shall include (i) details of space occupancy; (ii) sprinkler locations; (iii) reflected ceiling plans; (iv) partition and door locations; (v) electrical and mechanical plans and components, including details of capacity, location and configuration; (vi) telephone plans noting any special requirements; (vii) fire safety and security systems; (viii) detail plans; and (ix) finish plans and schedules. Tenant shall have the right to approve all aspects of the Tenant Improvement Drawings. Landlord’s Architect shall prepare and revise the Tenant Improvement Drawings pursuant to Tenant’s comments and requirements and shall deliver to Landlord and Tenant such revised documents, noting any changes from previous versions for Landlord’s and Tenant’s approval. Review and revision of the Tenant Improvement Drawings shall continue until the Tenant Improvement Drawings are approved by Landlord and Tenant, which approval shall not be unreasonably withheld or delayed. Both Landlord and Tenant shall work in good faith and shall coordinate their respective efforts in order to complete the drawings at the earliest reasonable time. The final Tenant Improvement Drawings, when approved, by Landlord and Tenant, are referred to herein as the “Final Plans”. Landlord or Tenant, as applicable, shall construct the Tenant Improvements in a good and workmanlike manner in conformance with the Final Plans.

2.             Cost and Performance of Tenant Improvements.

(a)           Work Cost Estimate and Statement. Prior to the commencement of construction of any of the Tenant Improvements shown on the Final Plans, Landlord will submit to Tenant a written estimate of the cost to complete the Tenant Improvements, which written estimate will be based on the Final Plans and a guaranteed maximum price construction contract, taking into account any modifications which may be required to reflect changes in the Final Plans required by the City or County in which the Premises are located (the “Work Cost Estimate”). Tenant will either approve the Work Cost Estimate or disapprove specific items and submit to Landlord revisions to the Final Plans to reflect deletions of and/or substitutions for such disapproved items. Submission and approval of the Work Cost Estimate will proceed in accordance with the Project Schedule. Upon Tenant’s approval of the Work Cost Estimate, the same shall be hereinafter known as the “Work Cost Statement”.

(b)           Tenant will pay the cost of the Tenant Improvements set forth in the Work Cost Statement, including but not limited to actual costs incurred for all design and planning by Landlord’s Architect, design or engineering firms, and the costs of construction, including labor, Tenant’s project management, supervision, and cleanup costs. Landlord shall apply the Improvement Allowance to the cost

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of the Tenant Improvements in conformance with Section 3 of the Lease. If the cost of the Tenant Improvements exceeds the Improvement Allowance, then Tenant shall pay the difference to Landlord within thirty (30) days from written notice from Landlord, which notice shall be accompanied in each instance by an invoice or other evidence of the relevant work cost item. Tenant shall have the right to audit the books and records of Landlord at any time during the construction of the Tenant Improvements or within thirty (30) days of any demand by Landlord for payment of excess costs above the Improvement Allowance for the purpose of determining whether Landlord has appropriately and duly incurred any cost item applied towards the cost of the Tenant Improvements. If Tenant’s audit reveals that a work cost item was inappropriately charged against the cost of the Tenant Improvements, then such work cost items shall be deducted from the total cost of the Tenant Improvements, and reimbursed to Tenant if previously paid.

(c)            Before commencing any work relating to the Tenant Improvements, Landlord shall seek competitive bids from not less than three (3) general contractors for the guaranteed maximum price construction contract. Tenant shall have the right to approve of the general contractor selected. Tenant shall also have the right to approve of all cost components of the construction contract to the extent they vary from the Work Cost Statement. Subject to Tenant’s right to select an alternate contractor, and subject to Landlord’s reasonable approval of any alternate contractor, the parties have tentatively selected Golden Triangle Construction as the general contractor for the construction of the Tenant Improvements within the Initial Premises. The final general contractor selected by the parties shall request not less than three (3) competitive bids for all subcontract work to be performed, except where otherwise agreed between Tenant and Landlord, and will provide to Tenant a breakdown of all costs prior to the commencement of any work.

(d)            Notwithstanding any other provision of this Work Letter, Tenant shall have the right to approve of all plans, specifications, and costs prior to commencement of any and all Tenant Improvements, and Landlord shall fully inform Tenant of any other expenses related to the Tenant Improvements, whether from the Improvement Allowance or to be paid directly by Tenant, including but not limited to any change orders, prior to the commencement of such work.

(e)            The cost of Tenant Improvements to be paid from (and to the extent of) the Improvement Allowance, shall include any and all costs/fees associated with construction related activities for completion of the Tenant Improvements which are approved by Tenant’s Project Manager, including but not limited to (i) preparation and modification of the Tenant Improvement Drawings by architect, design, or engineering firms, (ii) labor, supplies, and other associated costs for physical construction of the Tenant Improvements, (iii) consultant’s and vendor’s fees, (iv) Project Management fees to Tenant’s Project Manager as described below, (v) cabling within the Premises, and (vi) signage other than that which is provided by Landlord as part of Landlord’s Work or which is otherwise normally provided by Landlord at no cost to tenants of the Building, and (vii), all additional costs or expenses attributable to any change in the Tenant Improvement Drawings. The Improvement Allowance will not be used to pay for any bonding, or other costs charged by, at the insistence of, or on behalf of Landlord, its employees, or agents.

(f)            Landlord shall cause the general contractor to perform the Tenant Improvements in accordance with the Final Plans and in a good and workmanlike manner.

(g)           For purposes of this Work Letter and the Lease, the term “substantially complete” shall mean when the general contractor certifies in writing to Landlord and Tenant that Landlord has substantially completed all of the Tenant Improvements or Base Building, as applicable, other than decoration and minor “punch list” type items and adjustments which do not materially interfere with Tenant’s access or use of the Premises.

3.             Acceptance of Base Building and Tenant Improvements.

(a)           Base Building. Tenant’s Project Manager or other representative authorized by Tenant shall conduct an inspection of the Base Building with Landlord or Landlord’s authorized representative within twenty one (21) days after written notification to Tenant’s Project Manager that Landlord deems that the Base Building is substantially complete, and shall provide Landlord with a “punch list” of all items to be completed and/or corrected. Any items not on such “punch list” shall be deemed accepted by Tenant,

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except for latent defects. Landlord shall correct any “punch list” item or latent defect at its sole cost and expense within a reasonable period of time thereafter, and in any event shall commence completion of the “punch list” items and/or correction of a latent defect within three (3) days of receipt of Tenant’s notice, and shall complete the “punch list” item or correction of the latent defect no later than ten (10) days after such notification, unless such completion or correction requires more than ten (10) days, and Landlord has commenced the completion or correction within the three (3) day period and diligently performs the same to completion. In the event Landlord and Tenant do not agree on as to the completion or correction of any particular “punch list” item, Landlord’s Architect shall make the final determination as to whether the same has been completed or corrected.

(b)            Tenant Improvements. Landlord shall provide Tenant with ten (10) days prior written notice of the date on which the Tenant Improvements shall be substantially completed by Landlord. Tenant’s Project Manager or other representative authorized by Tenant’s Project Manager shall then conduct an inspection of the Premises with Landlord or Landlord’s representative within seven (7) days of the date of substantial completion. Within said seven (7) day period, a “punch list” will be prepared by Tenant’s Project Manager or another authorized representative of Tenant, describing “punch list” items to be completed and/or corrected by Landlord. Any items not on such “punch list” shall be deemed accepted by Tenant, except for any latent defects. Landlord shall correct any “punch list” item or latent defect at its sole cost and expense within a reasonable period of time thereafter, and in any event shall commence completion of the “punch list” items and/or correction of a latent defect within three (3) days of receipt of Tenant’s notice, and shall complete the “punch list” item or correction of the latent defect no later than ten (10) days after such notification, unless such completion or correction requires more than ten (10) days, and Landlord has commenced the completion or correction within the three (3) day period and diligently performs the same to completion. In the event Landlord and Tenant do not agree on as to the completion or correction of any particular “punch list” item, Landlord’s Architect shall make the final determination as to whether the same has been completed or corrected.

(c)            Latent Defect. A “latent defect” is a defect in the condition of the Base Building or Premises discovered within the first twelve (12) months from the Commencement Date which defect is not observed during the relevant walk-through inspection.

4.             Miscellaneous.

(a)           Landlord and Tenant shall work in good faith for completion of construction of the Base Building and Tenant Improvements at the lowest practical cost and at the earliest reasonable time consistent with the intended scope, image, and budget/schedule for the project, subject to the terms and provisions outlined in this Work Letter and the Lease. Landlord acknowledges that this may include, but is not limited to, the possibility of staged construction and/or temporary permits for construction and occupancy of all or a portion of the Premises as of April 15, 2002.

(b)            This Work Letter is being executed in conjunction with the Lease and is subject to each and every term and condition thereof, including, without limitation, the limitations of Landlord’s and Tenant’s liability set forth therein.

( c)           Landlord’s Architect and the general contractor selected shall be responsible for determining all physical dimensions of the Premises and the Building which affects any work to be performed by or for Tenant hereunder.

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(d)            Tenant’s Project Manager is CRESA Partners. Tenant’s Project Manager shall approve all plans and costs for Tenant Improvements, in writing, prior to commencement of such work, shall approve all change orders, in writing, prior to commencement of work related to any such change orders, and shall approve all invoices and payment requests prior to disbursement by Landlord ofany related funds from the Improvement Allowance.

Dated this 21^st day of June, 2001.

Landlord:		Tenant:
The Park at CTC, LLC,		Thermo BioStar, Inc., a Delaware corporation
A Colorado limited liability
company
By:	/s/Donald J. Marcotte	By:	/s/Noel Doheny
Name:	Donald J. Marcotte	Name:	Noel Doheny
Title:	Managing Director	Title:	President
Date:	6/25/01	Date:	6.21.01

14

EX-21.1

Exhibit 21.1

LIST OF SUBSIDIARIES
AS OF MARCH 15, 2006

Name of Subsidiary	State or Jurisdiction of Incorporation	% of Ownership
Advantage Diagnostics Corporation	Delaware	100	%
Alpha US Acquisition Corp.	Delaware	100	%
Applied Biotech, Inc.	California	100	%
Binax Inc.	Delaware	100	%
Cambridge Diagnostics Ireland Limited	Ireland	100	%
CLONDIAG chip technologies GmbH	Germany	67.45	%
DMD — GmbH	Germany	100	%
Forefront Diagnostics, Inc.	California	100	%
Innovations Research, LLC	Delaware	100	%
Inverness Medical Australia Pty, Ltd.	Australia	100	%
Inverness Medical Benelux BVBA (1)	Belgium	100	%
Inverness Medical — BioStar Inc.	Delaware	100	%
Inverness Medical Canada, Inc.	Canada	100	%
Inverness Medical Eurasia, Ltd.	Ireland	100	%
Inverness Medical France SAS	France	100	%
Inverness Medical Germany GmbH	Germany	100	%
Inverness Medical Iberica, S.A.U.	Spain	100	%
Inverness Medical, Inc.	Delaware	100	%
Inverness Medical International Holding Corp. I	Delaware	100	%
Inverness Medical International Holding Corp. II	Delaware	100	%
Inverness Medical Investments LLC	Delaware	100	%
Inverness Medical Japan, Ltd.	Japan	100	%
Inverness Medical (Shanghai) Co., Ltd.	China	60	%
Inverness Medical Spain, S.L.	Spain	100	%
Inverness Medical Switzerland GmbH	Switzerland	100	%
Inverness Medical (UK) Holdings, Ltd.	United Kingdom	100	%
Ischemia Technologies, Inc.	Delaware	100	%
IVC Industries, Inc.(2)	Delaware	100	%
Orgenics International Holdings BV	Netherlands	100	%
Orgenics Ltd.(3)	Israel	100	%
Ostex International, Inc.	Washington	100	%
Pregymed GmbH	Germany	100	%
Scandinavian Micro Biodevices ApS	Denmark	100	%
Selfcare Technology, Inc.	Delaware	100	%
Stirling Medical Innovations Ltd.	Scotland	100	%
Unipath B.V.	The Netherlands	100	%
Unipath Diagnostics GmbH	Germany	100	%
Unipath Limited	United Kingdom	100	%
Unipath Management Limited	United Kingdom	100	%
Unipath Online, Inc.	Massachusetts	100	%
Unipath Scandinavia AB	Sweden	100	%
Inverness Medical Deutschland GmbH	Germany	100	%
Wampole Laboratories, LLC	Delaware	100	%

(1)Formerly known as Bvba Selfcare Benelux sprl.

(2)Doing business as Inverness Medical Nutritionals and Inverness Medical Nutritionals Group.

(3) Orgenics, Ltd. has six (6) wholly owned subsidiaries and two majority controlled joint ventures, all operating outside of the United States.

2

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

Inverness Medical Innovations, Inc. and subsidiaries

Waltham, Massachusetts

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-124461 and 333-128017), and Form S-8 (No. 333-128937) of Inverness Medical Innovations, Inc. and subsidiaries of our reports dated March 14, 2006, relating to the consolidated financial statements and the effectiveness of Inverness Medical Innovations, Inc. and subsidiaries’ internal control over financial reporting, which is incorporated in this Annual Report on Form 10-K for the fiscal year ended December 31, 2005.

/s/ BDO Seidman, LLP

Boston, Massachusetts

March 14, 2006

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Ron Zwanziger, certify that:

1.     I have reviewed this annual report on Form 10-K of Inverness Medical Innovations, Inc.;

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

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

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

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

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

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

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

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

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

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

Date: March 15, 2006	/s/ Ron Zwanziger
	Ron Zwanziger Chairman, President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Christopher J. Lindop, certify that:

1.     I have reviewed this annual report on Form 10-K of Inverness Medical Innovations, Inc.;

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

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

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

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

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

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

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

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

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

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

Date: March 15, 2006	/s/ Christopher J. Lindop
	Christopher J. Lindop Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

Each of the undersigned officers of Inverness Medical Innovations, Inc. (the “Company”) hereby certifies, to his knowledge, that the Company’s Quarterly Report on Form 10-K for the fiscal year ended December 31, 2005 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certification is being furnished as an exhibit to the Report pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. This certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing, except to the extent that the Company specifically incorporates this certification by reference.

Date: March 15, 2006	/s/ Ron Zwanziger
	Ron Zwanziger
	Chief Executive Officer
Date: March 15, 2006	/s/ Christopher J. Lindop
	Christopher J. Lindop
	Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.