<PAGE>
Exhibit 10.1
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (together with the attached Exhibits the
"AGREEMENT") is effective as of the 24th day of January, 2007
(the
"EFFECTIVE DATE"), between BIOLASE TECHNOLOGY, Inc.
(hereinafter
along with its AFFILIATES, referred to as "BIOLASE"), located at
4
Cromwell, Irvine, California 92618 and The Procter & Gamble
Company
(hereinafter along with its AFFILIATES, referred to as
"P&G")
located at One Procter & Gamble Plaza, Cincinnati, Ohio 45202.
P&G
and BIOLASE may each be referred to as a "PARTY" and collectively
as
the "PARTIES".
Whereas, P&G is engaged in the business of developing,
manufacturing, marketing, distributing, selling and supporting
a
range of consumer products;
Whereas, BIOLASE is the owner or has certain rights in certain
patents and technology as is more particularly set out in Exhibits
A
and B; and further, as is more particularly set out in Exhibit
C
(once Exhibit C is populated according to Section 6.2.1.1);
Whereas, P&G and BIOLASE entered into a Letter Agreement
(the
"LETTER") dated June 28th, 2006 setting forth the general terms
and
conditions for this AGREEMENT;
Whereas, P&G wishes to obtain, and BIOLASE is willing to grant
to
P&G, an exclusive license to the BIOLASE IP (as defined in
Section
1.2) and BIOLASE TECHNOLOGY (as defined in Section 1.5) according
to
the terms and conditions of this AGREEMENT;
Whereas, BIOLASE will retain certain rights to the BIOLASE
PATENTS
and BIOLASE TECHNOLOGY according to the terms and conditions of
this
AGREEMENT;
Now, therefore, in consideration of the foregoing and other
mutual
promises
hereinafter set forth and for other good and valuable
consideration, the PARTIES hereto agree as follows:
1.
DEFINITIONS
1.1.
"AFFILIATE" means any
corporation, limited liability company or
other legal entity which directly or indirectly controls, is
controlled by, or is under common control with P&G or
BIOLASE,
including any successor or assign of such an entity. "CONTROL",
with
respect to an AFFILIATE, shall mean the direct or indirect
ownership
of at least fifty percent (50%) of (i) the income, (ii) the
outstanding shares on a fully diluted basis or other voting
rights
of the subject entity to elect directors, or if not meeting the
preceding, any entity owned or controlled by or owning or
controlling at the maximum control or ownership right permitted
in
the country where such entity exists, or (iii) such other
arrangement as constitutes the direct or indirect ability to
direct
the management, affairs or actions of such entity.
1
<PAGE>
1.2.
"BIOLASE INTELLECTUAL
PROPERTY" (BIOLASE IP) means all present and
future: inventions, whether or not patentable; BIOLASE PATENTS;
copyrights; trade secrets; and any other rights or information
or
materials within the P&G FIELDS OF USE, whether confidential or
not,
owned by BIOLASE or in which BIOLASE has a transferable or
LICENSABLE INTEREST.
1.3.
"BIOLASE PATENTS"
means those present and future patents and patent
applications within the P&G FIELDS OF USE or within the
BIOLASE
TECHNOLOGY or the BIOLASE RETAINED FIELD to the extent
permitted
under Section 2.4 of this AGREEMENT, including but not limited
to:
i) the patents listed in Exhibits A, B, and C, and any parent
applications, continuations, continuations-in-part,
divisionals,
re-exams, reissues thereof, ii) any subsequent patents or
patent
applications having applicability in the P&G FIELDS OF USE in
which
BIOLASE has ownership or has a transferable or LICENSABLE
INTEREST,
and iii) any foreign equivalents of the foregoing
1.4.
"BIOLASE RETAINED
FIELD" means any and all fields of use and
products which are (a) currently, meaning as of the EFFECTIVE
DATE,
marketed by BIOLASE; and (b) other fields of use and products
intended to be used primarily in [* * * * * * * * * * * *
* * * * * * * * * ]. BIOLASE shall also retain all
rights to
the BIOLASE IP and BIOLASE TECHNOLOGY that are outside the
P&G
FIELDS OF USE. BIOLASE shall also retain and acquire all rights
to
products that are declined by P&G or revert to BIOLASE as
provided
herein.
The BIOLASE RETAINED FIELD also includes any and all fields of
use
which are primarily administered by a [* * * * * * * * * *
* * * * * * * * * * * * * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * * * * ]
The BIOLASE RETAINED FIELD also includes products, methods,
applications and services directly or indirectly using [*
* * *
* * * * * * * * * * * * * ]: (i) [* * * * ]; (ii) [*
* * * * * ]; (iii) [* * * * * * * * * * * * * ]; (v)
[*
* * ]; (vi) [* * ]; (vii) [* * * * ] and (viii) [* * ].
The BIOLASE RETAINED FIELD is applicable to products and methods
[*
* * * * * ]. For the avoidance of doubt,
products, methods,
applications and services within the PRIMARY P&G FIELD OF USE
that
relate to "(ii)", "(iii)", "(iv)", "(v)", "(vi)", and "(vii)"
herein
are
2
<PAGE>
not part of the BIOLASE RETAINED FIELD and are specifically
included
in the PRIMARY P&G FIELD OF USE.
For the avoidance of doubt, the BIOLASE RETAINED FIELD includes
the
Waterlase, the Waterlase MD, the DioLase Plus, the LaserSmile,
the
Oculase, all related consumables, accessories and related
products,
methods and all future generations and product line extensions
of
the aforementioned products.
The BIOLASE RETAINED FIELD specifically excludes the PRIMARY
P&G
FIELD OF USE, as defined below.
1.5.
"BIOLASE TECHNOLOGY"
means any present or future information or
materials, whether confidential or not, in the possession of
BIOLASE, including know-how, developments, concepts, technical
knowledge, expertise, skill, practice, analytical methodology,
clinical data, manufacturing knowledge, drawings,
specifications,
processes, techniques, samples, specimens, prototypes, designs,
research and development results, safety and efficacy data, and
other technical and scientific information reasonably useful or
helpful to P&G for the development and marketing of
product(s)
within the P&G
FIELDS OF USE.
1.6.
"[* * * ] FIELD OF
USE" shall mean only those [* * ] products that
are in the form of a [* * ] and which, but for a license from
BIOLASE, would infringe a valid and enforceable claim of the
BIOLASE
[* * * ] Patents attached hereto as Exhibit B (such products
hereinafter "[* * * ] PRODUCTS"). For the avoidance of doubt, [* *
*
] Products shall not include any [* * ] devices or products that
are
not in the form of a
[* * ], and specifically shall not include [* *
* * * * * * * * * * ].
1.7.
"IMPROVEMENTS" shall
mean any and all technology or intellectual
property rights in and to any update, modification,
customization,
translation, upgrade, improvement, enhancement and/or
derivative
work whether or not developed under a JDA or SERVICES agreement
between the PARTIES.
1.8.
"LICENSABLE INTEREST"
shall mean any licensable interest, whether or
not royalty-bearing, that exists prior to the EFFECTIVE DATE,
or
that is licensed by BIOLASE from any third party after the
EFFECTIVE
DATE.
1.9.
[* * * * * * * * * * * * * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * ].
3
<PAGE>
1.10.
"PRODUCT" shall mean any method, system, product, device or
machine
(or component thereof), accessory, consumable, composition,
compound, ingredient, application, formulation, material, or
combinations thereof in the P&G FIELDS OF USE, or within the
BIOLASE
RETAINED FIELD to the extent permitted under Section 2.4 of
this
AGREEMENT, and which, but for the right and license granted
herein,
would infringe or cause the inducement of an infringement or
contribute to or induce the infringement of one or more valid
and
enforceable claims of one or more BIOLASE PATENTS.
1.10.1. For the avoidance of doubt, any accessory, component,
consumable, or [* *
* ] composition that
would contribute to
or induce the infringement of one or more valid and
enforceable claims of a BIOLASE PATENT shall be considered a
PRODUCT hereunder. For example, if a valid and enforceable
granted BIOLASE PATENT claim reads upon the [* * * * * *
* * * ] (and no valid and enforceable
claims cover [* *
*
* * * ], [* * * * * * * ] are PRODUCTS hereunder to
the extent [* *
* * * * * * * * * ] induces or
contributes to the infringement of the granted, valid and
enforceable BIOLASE PATENT claim. For example, if a valid and
enforceable granted BIOLASE PATENT claim reads upon the [*
*
* * * * * * * * * * ] (and no valid and
enforceable
claims read upon the [* * * * * * * * * ]), [* * *
* * * * * * * * * * * * * ].
1.10.2. However, if the valid and enforceable granted BIOLASE
PATENT
claim reads upon the [* * * * * * * * * * * * * *
* * * * * * ]. Further, if [* * * * * * * * * *
* * * * ]. For example, if the valid and
enforceable
granted BIOLASE PATENT claim reads upon the [* * * * * *
* * * * ] and does not read upon a [*
*], then the [*
* ]
is not a PRODUCT. Further, if the [* * * * * * * * * ]
and the [* *
* ], the [*
* ] is still not a
PRODUCT.
1.11.
"P&G FIELDS OF USE" means, being applicable to [* * * ], any and
all fields of use, including the PRIMARY P&G FIELD OF USE,
and
applications relating to or associated with [* * ] product [* * *
*
* * * * * * * * * * * * ] including, but not limited
to,
those [* * ] product
categories listed in attached Exhibit D. The
P&G FIELDS OF USE excludes the BIOLASE RETAINED FIELD. The
P&G
FIELDS OF USE also excludes the [* * * * ] FIELD OF USE, unless
P&G exercises its option to add the [* * * ] FIELD OF USE to the
PRIMARY P&G FIELD OF USE.
1.12.
"PRIMARY P&G FIELD OF USE" means [* * * ] products intended for
[* * * ] use, [* * * * * * * * * * ],
4
<PAGE>
including any products which are distributed through [*
* * * *]
for use by a [* *
* * * * * ]. Such [* * * ] products
include, but are not limited to, any and all products that may
provide one or more of the following benefits, either on a
stand-
alone basis or as a combination: [* * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * * * * *
* * * * ], the whole PRIMARY P&G
FIELD OF USE [* *
* * * *].
The PRIMARY P&G FIELD OF USE specifically excludes the
BIOLASE
RETAINED FIELD. The PRIMARY P&G FIELD OF USE also excludes the
[* *
* ] FIELD OF USE, unless P&G exercises its option to add the [*
*
* ] FIELD OF USE to the PRIMARY P&G FIELD OF USE.
1.13."QUARTER" means any one of the following four (4) time periods
within
a calendar year: i) January, February, and March ("JFM"); ii)
April,
May, and June ("AMJ"); iii) July, August and September ("JAS");
and
iv) October, November, and December ("OND").
2. LICENSE
GRANTS
2.1.
LICENSE GRANT TO
P&G. BIOLASE hereby grants to P&G an exclusive
(even as to BIOLASE), worldwide, transferable, right and
license
under all BIOLASE IP and BIOLASE TECHNOLOGY within the P&G
FIELDS OF
USE, with rights to sub-license, to make and have made, use,
import,
export, sell, have sold, and offer for sale PRODUCTS anywhere in
the
world.
2.2.
OPTION TO [*
* * * ] FIELD OF USE. P&G has the
option to add the
[* * ] FIELD OF USE to
the PRIMARY P&G FIELD OF USE for [ * * *
*] after the EFFECTIVE DATE of the AGREEMENT or for [* * * * ]
after the effective date of the LETTER, whichever is sooner, by
either:
i) the
payment of a one time sum of [* * * ] ($[* *
* ]); or
ii) providing a
written plan regarding [* * * * * ] of a
[* * * ] PRODUCT that is acceptable to
BIOLASE, the
acceptability of which shall not be unreasonably
withheld or delayed, together with a notice of P&G's
agreement to pay BIOLASE a) a quarterly sum of [* * * *
* * * ] ($[* * * ]) (each payment a "[*
* ]
QUARTERLY PAYMENT"), and b) a royalty rate of [* * *
* * * * * * * ], on [* * * ] PRODUCTS in
accordance with the royalty provision of this AGREEMENT.
The first [* *
5
<PAGE>
* ] QUARTERLY PAYMENT shall be due at the end of the
QUARTER in which P&G receives written notice from
BIOLASE accepting P&G's written plan for [* * * *
*]. Each successive [*
* * ] QUARTERLY
PAYMENT shall
be due on the last day of the subject QUARTER. The [* *
* * * ] QUARTERLY PAYMENTS shall cease
upon the [* *
* * ] distribution of
a [* * * ] PRODUCT in one of
the United States, Canada, or all or a portion of
Eastern or Western Europe. [* * * * * ] of all the
[*
* * * * ] QUARTERLY PAYMENTS shall be
treated as
prepaid royalties to be deducted from any subsequent
ROYALTY - PAYMENTS owed under this AGREEMENT.
2.2.1.A written plan shall be considered reasonably acceptable,
but
reasonable acceptability is not limited to, if the written
plan can be implemented within a commercially reasonable
period time, and it includes the planned commercial launch of
a product in at least one of the United States, Canada, or all
or a portion of Western or Eastern Europe.
2.2.2.In the event that P&G exercises its option to add the [*
*
* ] FIELD OF USE to the PRIMARY P&G FIELD OF USE, then the
[* * * * * ] FIELD OF USE shall be treated
as if
originally included within the exclusive rights and
obligations from BIOLASE to P&G under this AGREEMENT.
2.2.3.If P&G does not exercise its option to add the [*
* * ]
FIELD OF USE to the P&G FIELDS OF USE within the time
period
specified, the option will expire, and the [* * * ] FIELD OF
USE will be part of the BIOLASE RETAINED FIELD.
2.3.
REVERSION OF CERTAIN
RIGHTS TO BIOLASE WITHIN P&G FIELDS OF USE
(EXCLUDING THE PRIMARY P&G FIELD OF USE). Unless otherwise
agreed to
between the PARTIES, if, [* * ] has lapsed from the EFFECTIVE
DATE
of this AGREEMENT or [* * * * ] has lapsed from the
effective
date of the LETTER, whichever is sooner, and P&G has not:
(i) initiated
development of; or
(ii) provided a plan to BIOLASE to
develop (either itself or
via a licensee or via some other relationship with a
third party)
products utilizing BIOLASE IP or BIOLASE TECHNOLOGY in one or
more
of the P&G consumer product categories included within the
P&G
FIELDS OF USE (excluding the PRIMARY P&G FIELD OF USE), then
BIOLASE
may terminate P&G's exclusive license to BIOLASE IP and
BIOLASE
TECHNOLOGY in those particular P&G consumer product categories
as
follows: BIOLASE may provide P&G with written notice of its
intent
to terminate such exclusive license and if P&G fails to
provide
BIOLASE with a plan to initiate development within [* * * ]of
such
notice from BIOLASE, P&G's exclusive license in the identified
P&G
consumer product category(ies) (excluding the PRIMARY P&G FIELD
OF
USE) will be terminated and removed from P&G's FIELDS OF
USE.
6
<PAGE>
2.3.1.In the event P&G satisfies the requirements of "(i)" or
"(ii)"
of this Reversion of Certain Rights Section, P&G will
retain
its exclusive rights to said BIOLASE IP and BIOLASE TECHNOLOGY
within said P&G consumer product category for a period [* *
*
] beginning upon the satisfaction by P&G of 2.3(i) or
2.3(ii).
However, if after said [* * * ] time period, P&G has
not
implemented a [* *
* * * ] distribution of a PRODUCT
in
said P&G consumer product category, but is actively
developing
or attempting to commercialize within said P&G product
category, then P&G, in its sole discretion, may (a) pay
BIOLASE a QUARTERLY sum of [* * * * ] ($[* * * ]) (each
payment a "SECONDARY QUARTERLY PAYMENT") or (b) allow the
BIOLASE IP and BIOLASE TECHNOLOGY to revert to BIOLASE, and
owe nothing further to BIOLASE for the BIOLASE IP and BIOLASE
TECHNOLOGY with respect to such PRODUCT in said P&G
consumer
product category. If P&G elects to pay BIOLASE SECONDARY
QUARTERLY PAYMENTS, the first SECONDARY QUARTERLY PAYMENT
shall be due at the end of the QUARTER in which P&G
receives
written notice from BIOLASE accepting P&G's written plan
for
[* * * * * ]. Each successive SECONDARY
QUARTERLY PAYMENT
shall be due on the last day of the subject QUARTER. The
SECONDARY QUARTERLY PAYMENTS shall cease upon the [* * * *]
distribution of a PRODUCT in said product category in one of
the United States, Canada, or all or a portion of Eastern or
Western Europe. [* *
* * *] of all the SECONDARY
QUARTERLY
PAYMENTS shall be treated as pre-paid royalties that shall be
treated as prepaid royalties [* * * * * * * * * * *
* * * * ]. P&G may terminate the
SECONDARY QUARTERLY
PAYMENTS at any
time for any reason, in which event exclusive
rights under the BIOLASE IP and BIOLASE TECHNOLOGY relating to
said P&G consumer product category shall revert to BIOLASE.
2.3.2.For the sake of clarity, P&G's exclusive rights in the
PRIMARY
P&G FIELD OF USE of use are not subject to reversion to
BIOLASE.
2.3.3.A written plan shall be considered reasonably acceptable
to
both PARTIES, but reasonable acceptability is not limited to,
if the written plan is commercially reasonable and can be
implemented within a commercially reasonable time period, and
it includes the planned commercial launch of a product in at
least one of the United States, Canada, or all or a portion of
Western or Eastern Europe.
2.4.
POTENTIAL LICENSES TO
P&G WITHIN BIOLASE RETAINED FIELD.
2.4.1.For the time period encompassing [* * * ] from the Effective
Date of this AGREEMENT or [* * * ] from the effective date
of the LETTER, whichever time period ends sooner, BIOLASE will
offer P&G the right of first refusal to develop [* * ]
products within the following BIOLASE RETAINED FIELD
categories: (i) [* *
* * * * ] (ii) [* * * * * * *
* ]; (iii) [* *
* * * * * * * ]; (iv) [* * * * ];
(v) [* * * ]; (vi) [* * * ]; (vii) [* * * * * ]; and
(viii) [* *
* * ].
7
<PAGE>
2.5.
DECISION MAKING.
Within (i) the P&G FIELDS OF USE (including the [*
* * ] FIELD OF USE if P&G exercises its option to add the [* *
* * *
] FIELD OF USE to the PRIMARY P&G FIELD OF USE), (ii) P&G
consumer
product categories in the P&G FIELDS OF USE that have not
reverted
back to BIOLASE, and (iii) BIOLASE RETAINED FIELD categories
offered
to, and accepted by P&G under Section 2.4.1, P&G shall have
the full
and unrestricted right, but not the obligation, to make any and
all
decisions, in its sole discretion, surrounding its use of any
BIOLASE TECHNOLOGY and/or BIOLASE IP, including, without
limitation,
the development, testing, marketing, manufacture, sourcing,
packaging, sale, distribution, marketing and pricing of any
products
whatsoever in the P&G FIELDS OF USE, as well as whether or not
to
launch, market, promote, distribute and sell, or continue to
sell,
any Product whatsoever. In addition, P&G shall remain free to
work
with, contract with, subcontract with, conduct research and
development with, or work for any third party and other third
party
researchers, developers, manufacturers, suppliers, etc.
regarding
any products or PRODUCTS, subject to all confidentiality
obligations
owed to BIOLASE.
2.6.
CONVERSION TO
NON-EXCLUSIVE LICENSE. Excluding the [* * * * ]
FIELD OF USE, P&G may, in its sole discretion, convert, at any
time
after [* *
* ] from the EFFECTIVE
DATE of this AGREEMENT, its
exclusive license(s) under this AGREEMENT to non-exclusive
license(s), in which case P&G will no longer be obligated to
pay the
FIRST or SECOND PRODUCT SHIPMENT PAYMENTS, or QUARTERLY
PAYMENTS;
however, P&G will not be entitled to a refund of any
payments
previously paid.
2.6.1.In the event the exclusive license is converted to a
non-exclusive license, the royalty rates shall remain as
agreed to herein (at [* * * ]). However, if BIOLASE
enters
into a nonexclusive license with a third party at more
favorable terms than that granted to P&G, BIOLASE shall
offer
the same terms to P&G, which P&G may accept at its sole
discretion. For example, if BIOLASE grants a third party
rights at a lower royalty rate than that applicable to P&G,
P&G shall be offered the opportunity to convert its royalty
rate to the lower royalty rate granted to such third party,
with such lower rate to take effect upon execution of such
third party agreement.
3.
TECHNOLOGY TRANSFER
3.1.
LICENSED BIOLASE
TECHNOLOGY AND BIOLASE IP RELATED TO THE PRIMARY
P&G FIELD OF USE. Upon reasonable written (including
electronically)
request by P&G, BIOLASE shall share or transfer to P&G,
relevant
aspects of the BIOLASE TECHNOLOGY and BIOLASE IP licensed to
P&G in
the PRIMARY P&G FIELD OF USE, including, the patent
applications for
the BIOLASE PATENTS in Exhibits A (and Exhibit B in the event
P&G
exercises its option to add the [* * * ] FIELD OF
8
<PAGE>
USE to the PRIMARY P&G FIELD OF USE) and related patent
prosecution
information, including conception and reduction to practice
information, and will reasonably make available to P&G for
consultation those BIOLASE employees with substantive knowledge
regarding the application of BIOLASE TECHNOLOGY and BIOLASE IP
in
the PRIMARY P&G FIELD OF USE; provided, however, that BIOLASE
will
not be required to provide more than [* * * * ] of such
consultation time per quarter to P&G and no more than [*
* * * *
* * ] in [*
* ] consecutive
calendar quarters. P&G and BIOLASE
will appoint technical and patent liaisons who will serve as
designated points of contact to develop and coordinate a timely
process that is not overly burdensome for BIOLASE to effectuate
said
sharing of BIOLASE TECHNOLOGY and BIOLASE IP in the event
P&G
provides BIOLASE with a reasonable written request hereunder.
In the event that such consultation leads P&G to determine
that
direct involvement of BIOLASE employees and R&D resources will
be
beneficial to the development of products using the BIOLASE
TECHNOLOGY, P&G and BIOLASE may also enter into a joint
development
agreement ("JDA"), or other agreement, pursuant to which
BIOLASE
shall provide P&G with the specified testing, research,
development,
prototyping, production, manufacturing services or other
assistance
requested by P&G, to test, develop, produce and manufacture
prototype PRODUCTS and such other products using the BIOLASE
TECHNOLOGY as P&G may request ("SERVICES").
As applicable, the PARTIES will meet at least annually to
review
progress on specific development projects within the P&G FIELDS
OF
USE.
3.2.
LICENSED BIOLASE
TECHNOLOGY AND BIOLASE IP IN P&G FIELDS OF USE
(EXCLUDING THE PRIMARY P&G FIELD OF USE). Upon reasonable
written
request from P&G, BIOLASE will share the information
reasonably
necessary for P&G to determine whether P&G has an interest
in
developing and commercializing a BIOLASE TECHNOLOGY or BIOLASE
IP
within the P&G FIELDS OF USE (excluding the PRIMARY P&G
FIELD OF
USE). Should P&G have an interest in evaluating or
commercializing
BIOLASE TECHNOLOGY or BIOLASE IP disclosed under this Section
3.2,
BIOLASE shall disclose information to P&G which is
reasonably
related to P&G's interest (including development and
manufacturing
information), within a commercially reasonable period of time
of
P&G's request to BIOLASE.
4.
PAYMENTS
4.1.
QUARTERLY PAYMENTS TO
BIOLASE UNTIL SHIPMENT OF A FIRST PRODUCT. P&G
shall pay BIOLASE a QUARTERLY sum of [* * * * * * * ] ($[* *
* ]) (each payment a "QUARTERLY PAYMENT"). The first QUARTERLY
PAYMENT shall be due at [* * * * * ] in which the EFFECTIVE
DATE
of this AGREEMENT occurs or [* * * * * * ] from the effective
date of the LETTER, whichever is sooner. Each successive
QUARTERLY
PAYMENT shall be due on the [* * * * * * * * ] (See Section
4.4.1). QUARTERLY PAYMENTS shall cease upon [*
9
<PAGE>
* * ] distribution in
the United States of the first Product. [* *
* ] of each QUARTERLY PAYMENT is payment for services provided
by
BIOLASE to P&G. [*
* * * * ] of each Quarterly Payment
shall be
treated as pre-paid royalties [* * * * * * * * * * * *
* ]). Payments made under this Section 4.1 are non-refundable
except
as otherwise provided herein.
4.2.
MILESTONE PAYMENTS FOR
FIRST PRODUCT AND SECOND PRODUCT
4.2.1. FIRST PRODUCT SHIPMENT PAYMENT. P&G shall pay BIOLASE
a
product launch milestone payment in the amount of [* * * *]
($[* * * ]) on the terms and subject to
the conditions set
forth here below (the "FIRST PRODUCT SHIPMENT PAYMENT").
4.2.1.1. The FIRST PRODUCT SHIPMENT PAYMENT shall be due when
the first PRODUCT covered by one or more valid and
enforceable claims of one or more United States BIOLASE
PATENT(S) is first shipped for [* * * * ]
distribution in the United States.
4.2.1.2. Payments made under this Section 4.2.1 are
non-refundable except as otherwise provided herein. For
the
sake of clarity, BIOLASE shall be entitled to only
one FIRST PRODUCT SHIPMENT PAYMENT and under no
circumstance shall there be another FIRST PRODUCT
SHIPMENT PAYMENT.
4.2.2. SECOND PRODUCT SHIPMENT PAYMENT. P&G shall pay BIOLASE
a
second product launch milestone payment in the amount of [*
*
* * * ] ($[* * * ]) on the terms and subject to
the
conditions set forth here below (the "SECOND PRODUCT SHIPMENT
PAYMENT").
4.2.2.1. The SECOND PRODUCT SHIPMENT PAYMENT shall be due when
the second PRODUCT covered by one or more valid and
enforceable claims of one or more United States BIOLASE
PATENT(S) is first shipped for [* * * * * ]
distribution in the United States.
4.2.2.2. The SECOND PRODUCT SHIPMENT PAYMENT shall be treated
as prepaid royalties [* * * * * * * * * * * *
* * * ]. The second PRODUCT shall not
include
cosmetic changes or minor improvements (refreshes) which
do not fundamentally change the benefit delivered by the
first PRODUCT. The second PRODUCT is one that is largely
unique and different from the first PRODUCT. For the
avoidance of doubt,
some non-limiting examples of a
PRODUCT that does not differ significantly from the
first PRODUCT are PRODUCTS that incorporate only
packaging changes; artwork changes; bonus packs;
marketing promotions; changes to the size, color or
shape of the PRODUCT; the addition or elimination of
minor [* * * ], and combinations thereof. Payments made
under this Section 4.2.2 are non-refundable except as
otherwise provided herein. For the sake of clarity,
BIOLASE shall be entitled to only one SECOND PRODUCT
SHIPMENT
10
<PAGE>
PAYMENT and under no circumstance shall there be another
Second PRODUCT SHIPMENT PAYMENT. For the sake of clarity
and to serve as an example, if a first PRODUCT is a [*
* ], the second Product may or may not be a [* * * ].
Further, if a first PRODUCT is a [* * ] and a second
PRODUCT is
a [* * * ], the [* * ] will be a second
PRODUCT.
4.2.3. For the sake of clarity, in no circumstance will there be
a
third product shipment payment.
4.3.
ROYALTY PAYMENTS ON
PRODUCT SALES
4.3.1. P&G will make royalty payments (the "ROYALTY PAYMENTS")
to
BIOLASE based on the NOS of such PRODUCTS. The ROYALTY PAYMENT
shall be equal to the [* * * * * * * * ]. ROYALTY
PAYMENTS may be reduced by [* * * * * * * * * * *
* ].
4.3.2. The royalty rate shall be [* ] if the PRODUCT is in a [*
*
*] product category where [* * * * * * * * * * * ]
(see Exhibit D for a non-exhaustive list). For the avoidance
of doubt, a [* *
* * * * * * * * * * * * * * *
* ] shall be considered a product category where [* * * *
*
* * * * * ] and shall be only subject to a
[* ] royalty
in the event a royalty is applicable. The royalty rate shall
be [* ] if the PRODUCT is in a product category where [*
* *
* * * * * * * * ]. [* * * * * * * * * * ] which [* *
* * ] shall not trigger a [* * ] royalty. Further, using [*
*
* * * * * * * * * * * * ] shall not trigger a [*
*
] royalty. For the avoidance of doubt, [* * * * * * * *
* ], but only [* *
* ], then a [*
* * * ] or [* * ] that
[* * ] would be
considered a product in a category where [*
* * * * * * * * * * *].
4.3.3. The amount of ROYALTY PAYMENTS due shall be calculated on
[*
* * ] basis from the
date of [* *
* * ] of PRODUCT in such
[* * ]. ROYALTY
PAYMENTS shall only be due for sales in those
[*
* ] where commercial
sale of a PRODUCT (as defined in
Section 1.10) is covered by one or more [* * * * * * * ]
claims covering said PRODUCT. ROYALTY PAYMENTS shall be paid
on a QUARTERLY basis and shall be due on the [* * ] of the
subject QUARTER. P&G may elect to combine ROYALTY PAYMENTS
into a single payment mechanism (e.g., a single wire
transfer).
4.3.4. P&G Sublicenses to Third Parties
11
<PAGE>
4.3.4.1. P&G Sublicenses Comprising Only BIOLASE PATENTS. To
the
extent that P&G would have owed ROYALTY PAYMENTS for a
PRODUCT
under this AGREEMENT, sub-licenses (comprising only BIOLASE
PATENTS) from P&G to third parties will bear [* * ] royalty rate
[ * * * * * ]. [ * * * * * * * * * * * * * * *
* * * * * * * * * * *].
4.3.4.2. P&G Sublicenses Comprising BIOLASE PATENTS and
P&G
Intellectual Property. In the event P&G enters any agreement
with
a third party that includes P&G intellectual property and a
grant
under BIOLASE PATENTS as part of that agreement, wherein said
grant to such third party to sell products under BIOLASE
PATENTS
and said sale would have been subject to ROYALTY PAYMENTS by
P&G
to BIOLASE if P&G were selling such products, P&G and
BIOLASE
shall mutually agree to [* * * * * * * * * * * * * *
* * * * * * * * * * * * * * * ], and P&G shall pay
[ * * * ] to BIOLASE. For example, if
P&G elected to license a
third party rights under both BIOLASE PATENTS and P&G
intellectual property, and [* * * * *] obligated the third
party to pay P&G an [* *] to maintain such license then
BIOLASE
would receive [* *
* * * * * * * * * * * * * * *
* *].
4.3.4.2.1. The [* *
*] under this Section
4.3.4.2 shall be [*
* * * * * * * * * * * * * * * * * * * *
* * * * * *]. It is foreseeable that
BIOLASE, only as
applicable to this Section 4.3.4.2 may receive [* *]
compensation, according to the [* * * * * * * * *
* * * * *], for BIOLASE PATENTS than they
otherwise
would have under this Agreement. In no event, however,
shall the [* *
*] owed to BIOLASE
exceed the equivalent
of a
[* * ] ROYALTY
PAYMENT, as would otherwise be
applicable under this Agreement.
4.3.5. P&G shall deliver to BIOLASE a written report of all NOS
of
PRODUCTS, [* * ] in
all countries where royalty payments are due
on Products sold, the applicable royalty rate, the amount of
earned royalty, and the calculation of the ROYALTY PAYMENT due
to
Biolase after deduction of the current total amount of payments
hereunder that [* *
* * ]. Said royalty report shall
be
delivered by P&G within [* * * * *] of the last day of the
Quarter in which they are earned.
4.3.6. P&G shall keep accurate and complete records for
Products
marketed pursuant to this AGREEMENT of: (i) its calculation of
NOS for Products (as defined herein); and (ii) all royalties
paid
and payable hereunder (hereinafter such
12
<PAGE>
reports shall collectively be referred to as "SALES AND ROYALTY
RECORDS"). Such Sales and Royalty Records will be kept with
sufficient detail to enable an independent auditor to verify
such
figures and to calculate NOS and total royalties paid and
payable
hereunder and shall be retained for the TERM and for at least
[* * * ] subsequent to expiration of the TERM or termination.
4.3.7. All payments due to BIOLASE under this Article shall be made
in
U.S. Dollars via wire transfer to an account designated by
BIOLASE. P&G shall notify BIOLASE as indicated below prior
to
sending any such wire transfers.
4.3.8. Any SALES AND ROYALTY REPORT(S) and notification of any
wire
transfer(s) shall be delivered to: BIOLASE TECHNOLOGY, Inc., 4
Cromwell, Irvine CA 92618, attention Richard Harrison, Chief
Financial Officer and Secretary, or to his designee or
successor.
4.3.9. At any time prior to the expiration of [* * *] following the
end of any calendar year, BIOLASE shall have the right to audit
P&G's SALES AND ROYALTY RECORDS RELATIVE to this AGREEMENT,
said
auditor being independent, having no past relationship with
BIOLASE. The purpose of such audit shall be to verify the
calculation of gross sales for such year, NOS for such year and
the royalties paid and payable hereunder for such year. BIOLASE
shall provide at least [* * * * *] advance written notice
before each such audit. P&G shall cooperate in such audit
by
allowing BIOLASE access (during P&G's normal business hours
at
the locations where such SALES AND ROYALTY RECORDS are kept)
solely to P&G's SALES AND ROYALTY RECORDS. Upon request by
P&G,
the BIOLASE auditor may be required, as a condition of being
granted access to P&G's SALES AND ROYALTY RECORDS hereunder,
to
agree to maintain any information reviewed (including, but not
limited to the
Auditor's Reports (defined in Section 4.3.11)
submitted to the PARTIES pursuant to 4.3.11 below) in
confidence.
Notwithstanding anything herein to the contrary, BIOLASE may
only
cause an audit once in any calendar year and only once with
respect to each calendar year.
4.3.10.At the conclusion of the auditor's audit pursuant to
Section
4.3.9 above, the auditor shall submit a written report (herein
"AUDITOR'S REPORT") to the PARTIES setting forth the auditor's
findings with respect to the correct gross sales, NOS and total
royalties paid and payable for the quarter(s) in question. If
the
AUDITOR'S REPORT results in findings as to gross sales, NOS or
royalties which are different from those originally reported or
paid by P&G, then the AUDITOR'S REPORT shall include a
reconciliation of the original figures with those found to be
correct by the auditor and the source of such difference(s).
The
Auditor's Report and its content shall be treated as
confidential
pursuant to Section 11. If there is no challenge to the
AUDITOR'S
REPORT within [* *
*] after receipt of
the report by P&G, and
it shows an underpayment of royalties, then P&G shall pay
to
BIOLASE within [* * ]
of expiration of the [* * ] challenge
period an amount sufficient to remedy the amount of any under
reporting
13
<PAGE>
or underpayment of royalties found by the auditor plus interest
calculated at the then current prime rate from the date such
payment is due. If the AUDITOR'S REPORT shows an overpayment of
royalties, such overpayment shall be creditable against any
future royalties payable in subsequent royalty periods. The
cost
and expense of any audit conducted hereunder shall be borne by
BIOLASE unless the AUDITOR'S REPORT finds an error in BIOLASE's
favor of at least [* *
* ] of the royalties
originally paid by
P&G, in which case P&G shall bear such cost and expense,
subject
to the outcome of the audit dispute resolution process
specified
in following section.
4.3.11.The PARTIES agree to work together with the auditor in
good
faith to resolve any disputes arising out of or relating to the
numbers verified and the results reported in an AUDITOR'S
REPORT
in a timely, professional and non-adversarial manner. If the
PARTIES and the auditor cannot so resolve a dispute, then
either
Party may submit such dispute for binding arbitration
(hereinafter referred to as "ROYALTY ARBITRATION") to a panel
of
three (3) arbitrators. Such Royalty Arbitration shall be
conducted in Cincinnati, Ohio, if brought by BIOLASE and in
Irvine, California if brought by P&G. The arbitrators shall
be
selected and the arbitration shall be conducted in accordance
with the Commercial Arbitration Rules of the American
Arbitration
Association except that the only issue for arbitration in the
ROYALTY ARBITRATION shall be the accuracy of the reporting and
calculation of the values for gross sales, NOS, and royalties
paid and payable hereunder. The arbitrators shall not have
power
to add to, subtract from or modify any of the terms or
conditions
of this AGREEMENT. Any award rendered in such arbitration may
be
enforced by either PARTY in the courts of the State of New
York,
to whose jurisdiction each PARTY hereby irrevocably consents
and
submits for such purpose. Each PARTY shall bear its own expense
associated with the ROYALTY ARBITRATION. The losing party shall
bear the cost of the arbitration itself and will also be
required
to pay the other party's attorneys' fees associated with the
ROYALTY ARBITRATION. In the event that the outcome of the
arbitration is such that there is not a clear losing party,
then
the PARTIES agree to share the costs for the arbitration in a
manner consistent with the decision of the arbitrators.
4.3.12.WITHHOLDING. If a law or regulation of any country in
which
PRODUCTS are sold requires withholding of taxes of any type,
levies or other charges with respect to any amounts payable
hereunder to BIOLASE, P&G shall promptly pay such tax, levy
or
charge for and on behalf of BIOLASE to the proper governmental
authority, and shall promptly furnish BIOLASE with receipt of
such payment. P&G shall have the right to deduct any such
tax,
levy or charge actually paid from payment due BIOLASE or be
promptly reimbursed by BIOLASE if no further payments are due
BIOLASE. P&G agrees to assist BIOLASE in claiming exemption
from
such deductions or withholdings under double taxation or
similar
agreement or treaty from time to time in force and shall use
reasonable efforts to minimize the amount required to be so
withheld or deducted.
14
<PAGE>
4.4.
PAYMENT DUE DATES. Except for the payment of first QUARTERLY
PAYMENT
due [* * ] the
EFFECTIVE DATE of this AGREEMENT (the "INITIAL
QUARTERLY PAYMENT"), any payment, including but not limited to
any
QUARTERLY PAYMENT, ROYALTY PAYMENTS, FIRST PRODUCT SHIPMENT
PAYMENT,
SECOND PRODUCT SHIPMENT PAYMENT, etc., due under this AGREEMENT
shall
be paid within [* *]
days of its due date. In the event the payor
does not make the payment in full by the [* * * ] day after the due
date, the payee shall be entitled to interest in the amount of
the
then current [* *
* * * *] on any unpaid amount, from the
[* *]
following the due date until such time as the payor pays the
payee
the amount owed.
4.4.1. The INITIAL QUARTERLY PAYMENT shall be paid within [*
* * ]
after the EFFECTIVE DATE of this AGREEMENT. For the avoidance
of
doubt, if the EFFECTIVE DATE of this AGREEMENT is January 24,
2007, then the INITIAL QUARTERLY PAYMENT shall be paid on or
before [* *
* ] and the next
QUARTERLY PAYMENT shall be paid on
or before [* *
* * ], and still
further, the third QUARTERLY
PAYMENT shall be paid on or before [* * * ]. In the event the
payor does not make the INITIAL QUARTERLY PAYMENT in full by
the
[* * * ] after execution of this
AGREEMENT, the payee shall be
entitled to interest in the amount of the then current prime
rate
plus [* * *] on any unpaid amount, from the
[* * * *]
following the EFFECTIVE DATE of this AGREEMENT until such time
as the payor pays the payee the amount owed.
4.4.2. Any QUARTERLY PAYMENT that accrues after the beginning of
a
QUARTER shall be pro-rated to deduct a portion of the QUARTERLY
PAYMENT associated with the period of time between the
beginning
of the QUARTER and the accrual date of the payment within the
QUARTER.
5. INTELLECTUAL
PROPERTY OWNERSHIP
5.1.
BACKGROUND INTELLECTUAL PROPERTY. All IP developed, conceived
or
reduced to practice prior to the EFFECTIVE DATE of this
AGREEMENT
shall continue to be owned by the respective PARTY that
developed,
conceived or reduced it to practice.
5.2.
OWNERSHIP BY P&G. All Improvements made solely by P&G shall
be owned
and retained by P&G, including IMPROVEMENTS to BIOLASE
TECHNOLOGY
invented or developed solely by P&G. Further, IMPROVEMENTS made
solely
by P&G, including patent applications comprising only such
IMPROVEMENTS, are not subject to this AGREEMENT.
5.3.
OWNERSHIP BY BIOLASE. BIOLASE shall continue to own BIOLASE
TECHNOLOGY
and BIOLASE IP and, except as set forth herein, no other rights
or
licenses to the BIOLASE TECHNOLOGY or BIOLASE IP shall be granted
to
P&G, and BIOLASE shall own any IMPROVEMENTS to the BIOLASE
TECHNOLOGY
that it solely develops, conceives or reduces to practice,
provided,
however, that such IMPROVEMENTS shall be licensed to P&G in
accordance
with the terms of this AGREEMENT.
15
<PAGE>
5.3.1. While P&G has the right to file on BIOLASE IMPROVEMENTS
(e.g.,
continuations-in-part under Exhibit A) under Section 6.1 below,
it is understood that BIOLASE shall retain ownership of said
BIOLASE IMPROVEMENTS and said BIOLASE PATENTS.
5.4.
JOINT OWNERSHIP. The PARTIES shall jointly own any IP that is
jointly
conceived under this AGREEMENT. Any jointly owned IP shall be
licensed
to P&G by BIOLASE in accordance with the terms of this
AGREEMENT.
5.4.1. Pursuant to Section 3.1 above, the PARTIES may agree to
enter
into a JDA or SERVICES agreement. Terms and conditions for a
JDA
or
SERVICES agreement shall be agreed to at the time P&G and
BIOLASE mutually agree to enter into such an arrangement.
6. PREPARATION
AND PROSECUTION OF PATENT APPLICATIONS AND PATENT COSTS
6.1 LICENSED BIOLASE
PATENTS OF EXHIBITS A AND B. Upon the Effective
Date of this AGREEMENT and written notification from P&G,
P&G
will have the right, but not the obligation, to take control of
the BIOLASE PATENTS listed in Exhibit A (and Exhibit B, if
P&G
exercises its option to add the [* * *] FIELD OF USE to the
PRIMARY P&G FIELD OF USE) and patent applications
comprising
BIOLASE IMPROVEMENTS in the PRIMARY P&G FIELD OF USE and
P&G/BIOLASE joint IMPROVEMENTS to the BIOLASE TECHNOLOGY in
the
PRIMARY P&G FIELD OF USE. P&G's right to take control
as
discussed above in this Section 6.1 shall mean to have sole
responsibility and decision making authority for the
preparation,
filing (including the filing of continuations,
continuations-in-part, divisionals, reissues, and
reexaminations), prosecution, and maintenance of the BIOLASE
PAT
