EX-10.1 2 dex101.htm LETTER AGREEMENT June 28, 2006 Jeffrey Jones President and Chief Executive Officer Biolase Technology, Inc. Irvine, CA 92618-1816 Dear Jeff:

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Dispute Resolution. In negotiating the Definitive Agreement(s), P&G and Biolase will attempt to settle any claim, controversy or deadlock through consultation and negotiation in good faith and a spirit of mutual cooperation. If such attempt fails, the Parties agree to submit to binding arbitration that will be governed by the rules and procedures of the American Arbitration Association, with the requirement that the decision being issued by a written decision and opinion signed by an independent three-person panel; provided, however, that any claim, controversy or deadlock arising out of a breach of the 2005 Confidential Disclosure Agreement, the 2006 Confidential Disclosure Agreement, or any other confidential disclosure agreement entered into by the parties that is intended to cover the disclosure of confidential information in connection with this Letter or the preparation

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of the Definitive Agreements, shall be governed by the terms and conditions contained in such agreement rather than by the terms of this Section 13.

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Very truly yours,

/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇

▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇

ACCEPTED AND AGREED TO

THIS 28 DAY OF June, 2006

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A.     Biolase shall retain the exclusive right to make, have made, use, import, export, sell, have sold, and offer for sale products that are: (a) currently marketed by Biolase;

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and (b) ****. 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.

B.     The Biolase Retained Field will be any and all fields of use which are primarily administered by a ****:

(i)          ****; and

(ii)        ****.

C.     The Biolase Retained Field also includes the following products, methods, applications and services ****. For the earlier of **** from the signing of the Definitive Agreement or **** from the signing of the Letter, Biolase will offer P&G the right of first refusal to develop consumer products within the following categories:

(i)          ****;

(ii)        ****;

(iii)       ****;

(iv)       ****;

(v)         ****;

(vi)       ****;

(vii)      ****; and

(viii)     ****.

The Biolase Retained Field is applicable to products and methods for ****.

For the avoidance of doubt, uses within the P&G Primary Field of Use that relate to “(ii)”, “(iii)”, “(iv)”, “(v)”, “(vi)”, and “(vii)” are not part of the Biolase Retained Field.

For the avoidance of doubt, the Biolase Retained Field includes the Waterlase, the Waterlase MD, the DioLase Plus, the LaserSmile, the Occulase, all related consumables, accessories and related products, methods and all future generations and product line extensions of the aforementioned products.

The Biolase Retained Field excludes the Primary P&G Field of Use.

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Products 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 and which, but for the right and license granted herein, would infringe or cause the inducement of an infringement or contribute to the infringement of any valid and enforceable Biolase IP. For the avoidance of doubt, any accessory, component, consumable, or **** composition that would contribute to or induce the infringement of valid and enforceable Biolase IP shall be considered a Product hereunder.

For example, if a valid and enforceable granted patent claim covers **** induces or contributes to the infringement of the granted, valid and enforceable patent claim. For example, if a valid and enforceable granted patent claim covers ****.

However, if the valid and enforceable granted patent claim covers ****. For example, if the valid and enforceable granted patent claim covers ****.

Unless otherwise agreed to between the Parties:

If, after **** from the signing of the Definitive Agreement(s) or within **** from the effective date of the Letter, whichever is sooner, P&G has not (i) initiated development of, or (ii) provided a plan to Biolase to develop

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(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 business categories included within the P&G Fields of Use (excluding the Primary P&G Field), then Biolase may terminate P&G’s exclusive license to Biolase IP and Biolase Technology in those P&G consumer product business categories as follows: Biolase may provide P&G with 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 consumer product business category(ies) (excluding the Primary P&G Field) will be terminated and removed from P&G’s Field of Use.

In the event P&G satisfies the requirements of “(i)” or “(ii)” of this Reversion of Certain Rights Section, P&G will retain said Biolase IP and Biolase Technology for ****. However, if after ****, P&G does not implement a **** commercial distribution related to said Biolase IP and Biolase Technology, but is actively developing or attempting to commercialize, P&G, in its sole discretion, may (a) pay Biolase a sum of **** ($****) within **** of the end of each **** time period beginning upon satisfaction of the requirements of “(i)” or “(ii)” of this Reversion of Certain Rights Section (each payment a “Secondary **** Payment”), **** of which shall be pre-paid royalties (**** credited against any Royalty Payment then owed) or (b) allow said Biolase IP and Biolase Technology to revert to Biolase, and owe nothing further to Biolase for said Biolase IP and Biolase Technology.

For the sake of clarity, P&G’s exclusive rights in the Primary P&G Field of Use are not subject to reversion to Biolase. Plan to be reasonably acceptable to both parties; neither party can unreasonably reject the plan. 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 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.

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The Parties have agreed that Biolase Technology and R&D capabilities may be useful to P&G in the development of products. After execution of the Definitive Agreement(s) and following a reasonable written request(s) from P&G, Biolase shall share or transfer relevant aspects of the Biolase Technology in the Primary P&G Field of Use to P&G and will reasonably make available to P&G for consultation those Biolase employees with substantive knowledge regarding the application of Biolase Technology in the P&G Fields of Use. P&G and Biolase agree to develop a procedure that is not overly burdensome for Biolase to effectuate the sharing of Biolase Technology 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 (a “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 (the “Services”). Unless mutually agreed otherwise by the Parties, the maximum cost of Services provided to P&G by Biolase shall not exceed $****.

The parties will meet at least annually to review progress on specific development projects within the P&G Fields of Use.

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P&G shall pay a one time payment in the amount of **** ($****), (the “Second Product Shipment Payment”) within **** of when a second Product covered by one or more valid and enforceable claims of a Biolase Patent (the “Second Product”) is first shipped for **** distribution in the United States. The Second Product Shipment Payment shall be **** credited against any Royalty Payments owed to Biolase by P&G for the Second Product hereunder.

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. Payments made under this paragraph are non-refundable.

For the sake of clarity, Biolase shall be entitled to only one Second Product Shipment Payment and under no circumstance shall there be another Second Product Shipment Payment.

For the sake a 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.

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quantity discounts, returns, listing fees, free goods, contests and offers, cash discounts and all other payments to consumers and trade. All deductions to sales of Product will be specific to Product sales activity.

The royalty rate shall be **** if the Product is in **** product category ****. For the avoidance of doubt, a **** shall be considered **** product category ****. The royalty rate shall be **** if the Product is in **** product category ****. **** does not dictate a **** royalty. Further, using **** does not dictate a **** royalty. For the avoidance of doubt, assuming that P&G ****, ****, then a **** that **** would be considered a product ****.

Royalties shall be paid on a **** basis from the date of first commercial sale of Product in such ****. No Royalty Payment will be due on Products sold in **** wherein no Biolase Patent exists.

To the extent that P&G would have owed royalties for a Product under this Agreement, sub-licenses from P&G to third parties will bear the same royalty rate as if P&G had made the sale. Thus, P&G agrees that the net effect of the sub-license to third parties shall not deprive Biolase of royalty payments.

In the event P&G enters any agreement, or transaction whereby royalties to Biolase are reduced or eliminated, then a fair value for same is to be computed and paid to Biolase. For example if a cross license is entered by P&G, to settle litigation, or avoid litigation, or allow another party to sell or manufacture a product, whereby a royalty or past damages would have been due to Biolase, then the amount which would have been due would be computed and paid to Biolase.

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Subject to the last paragraph of this Non-Compete Section, Biolase by itself or through third parties shall not directly or indirectly enter into the research, development, prototyping, testing, manufacture, supply, marketing, distribution, sale, promotion, or commercialization of any compounds, materials, or products in the P&G Fields of Use, including the Primary P&G Field of Use, and the **** Field (if P&G exercises its option) by: (i) developing, prototyping, conducting research on, manufacturing, supplying, marketing, selling or distributing any such products or products competing with such products to any third party other than P&G; (ii) licensing any intellectual property to any third party other than P&G for use in connection with the research, development, prototyping, testing, manufacture, supply, marketing, distribution, sale, promotion, or commercialization any such compounds, materials, or products; (iii) consulting with, supplying compounds, materials, or products to, cooperating with or providing services to, any third party other than P&G with respect to the research, development, prototyping, testing, manufacture, supply, marketing, distribution, sale, promotion, or commercialization of any such compounds, materials, or products; or (iv) investing in any third party, that engages in the research, development, prototyping, testing, manufacture, supply, marketing, distribution, sale, promotion, or commercialization of such products, (collectively, the “Restricted Business”); provided, however, that this restriction shall not apply to Biolase directly acquiring a non-controlling ownership interest of less than fifty percent (50%) of the equity of a public or private company that engages in a Restricted Business if Biolase acquires such equity stake in such company primarily in exchange for obtaining rights (either via an outright assignment or a license) access to technology owned by such company and that is unrelated to the Restricted Business and such company’s market cap does not exceed **** ($****). In addition, Biolase may acquire a less than **** equity stake in any publicly traded or private company that derives less than **** of its revenues from the Restricted Business.

The time periods of this Non-Compete Section shall apply to and be effective for/during the time period that P&G has license rights, or options thereto (excluding the categories which revert back to Biolase). The terms of this Section

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P&G may, in its sole discretion, terminate the Definitive Agreement(s) for an Uncured Material Breach by Biolase, including Biolase’s breach of the Representations and Warranties, and shall give Biolase **** notice of such termination. In the event P&G terminates the Definitive Agreement(s) for an Uncured Material Breach by Biolase, P&G may elect that Biolase shall refund all payments made by P&G to Biolase insofar as they specifically pertain to the Uncured Material Breach for the term including the **** preceding and up to the time of the Uncured Material Breach. Said refund shall include, but is not limited to, milestone payments, royalty payments, quarterly payments, and the Payment made under the Letter. However, if Biolase commits to an Uncured Material Breach, P&G may alternatively elect to retain its exclusive license(s) without the obligation to pay First or Second Shipment Payment(s), Quarterly Payments, milestones, royalties, or any other monies whatsoever, however, if P&G retains its exclusive license(s), it will not be entitled to a refund of monies previously paid.

Biolase may, in its sole discretion, terminate the Definitive Agreement(s) for an Uncured Material Breach by P&G.

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P&G and Biolase will attempt to settle any claim, controversy or deadlock, including alleged material breaches, through consultation and negotiation in good faith and a spirit of mutual cooperation, including involvement of senior management in resolving the dispute, claim, or controversy. In the event the Parties cannot resolve their dispute within ****, or such other time as mutually agreed to by the Parties, the Parties agree to submit to binding arbitration that will be governed by the rules and procedures of the American Arbitration Association, with the requirement that the decision being issued by a written decision and opinion signed by an independent three-person panel. In the event, the arbitration involves a material breach of the Definitive Agreements, the alleged breach shall become a Material Breach upon a decision by the arbitration panel that a material breach has occurred.

A breaching party shall have **** to cure a Material Breach of the Definitive Agreements. If the Material Breach is not cured within ****, it shall become an Uncured Material Breach.

If the binding arbitration involves a patent issue, a majority of the arbiters will be licensed patent attorneys.

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